NESTA Annual report a-w low res

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NESTA annual report 2003/2004

NESTA awardees Starbridge aredeveloping technology which willenable diabetics to receive insulinthrough a tiny pump, worn on theskin like a plaster. UK innovation.

Annual report and accounts 2003/04

UK innovation

NATIONAL LOTTERY ETC. ACT 1993

Accounts, prepared pursuant to Section 35(3) of the National Lottery etc. Act, (as amendedby the National Lottery Act 1998), the Accounts of the National Endowment for Science,Technology and the Arts for the year ended 31 March 2004, together with the Report of the Comptroller and Auditor General thereon.

Presented pursuant to the National Lottery etc. Act 1993 (as amended by the National Lottery Act 1998), s. 35(3).

Ordered by the House of Commons to be printed 30 November 2004.

Laid before the Scottish Parliament by the Scottish Ministers.

HC 23SE/2004/160 £16.60London: The Stationery Office

NESTA Creative Pioneer Programme

This year NESTA set up and managed The Academy. This intensive coursedevelops the entrepreneurial skills of creative individuals who want todevelop a new type of business, andprovides ongoing support for attendees.

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NESTA annual report 2003/04 April ’03

Chris Dunn, Scala Technology LtdInvention and Innovation£70,000, London

To develop, for commercialrelease, coding that willmake high quality soundmore readily available overalready congested Internetconnections.

Martin Lowson, AdvancedTransport Systems LtdInvention and Innovation£125,000, South West

A further award to supportthe business developmentof a new type of energy-and cost-efficient urbantransport, successfullytested in Cardiff in January 2003.

British Antarctic SurveyLearning£7,000, London

To work with NESTALearning awardees,VJs.net, to provide anexciting hands-onopportunity to create music and visuals inspiredby Antarctic science.

May ’03

Richard Barker, Ashe Morris LtdInvention and Innovation £100,000, London

To develop a prototype and commercialise abreakthrough in heattransfer technology whichoffers more precise andfast temperature control,improving productivity in industries such aspharmaceuticals and fine chemicals.

Dr Wei Jen Lo, Orthogem LtdInvention and Innovation£90,000, East Midlands

To develop a new, poroussynthetic bone substitutefor use in orthopaedicprocedures, which willremove the need for bonegrafts, saving hospitalsmoney, surgeons time and patients discomfort.

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Introducing NESTA 2

Learning and sharing; NESTA’s year 4Jeremy Newton, Chief Executive

Looking ahead 7Chris Powell, Chairman

NESTA’s strategic priorities 8Our progress in 2003/04 and our ambitions for 2004/05

Supporting outstanding talent 10Our Fellowship programme in 2003/04

Investing in innovation 16Our Invention and Innovation (I&I) programme in 2003/04

Developing entrepreneurship 18Our new Creative Pioneer programme

Pioneering creative learning 20Our Learning programme in 2003/04

Transforming the learning landscape 22NESTA Futurelab in 2003/04

Increasing our reach 24Our competitions and sponsorships in 2003/04

What we aimed to do in 2003/04 26And how far we succeeded

Full awards listing 30

Facts, figures and financial highlights 38

Financial statements for the year 40ended March 2004

NESTA’s organisational structure 63

In last year’s annual report, we said that NESTA was starting to get results.

To be more specific, we explained how ourunique role as a risk-taking provider of funding and support for UK innovation wasbeginning to deliver real benefits for the nation – whether economic, social or cultural.

This year, the story we have to tell is slightly different.

NESTA’s role has continued to evolve, as we have become increasingly aware of theurgent need not just to support individuals with groundbreaking new ideas, but to worktowards a completely new climate for innovation in this country.

In short, over the last 12 months, we’verecognised that our influence can be every bit as valuable as our investment.

The National Endowment for Science,Technology and the Arts exists to pioneerways of supporting and promoting talent,innovation and creativity across science,technology and the arts.

NESTA has three main aims:

> To help talented individuals (or groups of individuals) achieve their potential.

> To help people turn inventions or ideas into products or services whichsuccessfully reach their markets.

> To contribute to public knowledge andappreciation of science, technology and the arts.

We do this through a range of pioneeringprogrammes. But we’re much more than asource of funding. Another equally importantaspect of our distinctive role is working toimprove the climate for creativity in thiscountry.

We are passionate advocates for the economic and cultural value of innovation,aiming to achieve changes in both attitudesand practice.

To this end, NESTA acts as a catalyst. We’recommitted to sharing our learning; workingcollaboratively with other interested partiesand thinking imaginatively about how best to remove the obstacles that have prevented this country’s innovative potential from being fulfilled.

Introducing NESTA

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Learning and sharing; NESTA’s year Jeremy Newton, Chief Executive

Nurturing the next creative generation

There was another important strategicshift in emphasis over the last year: amajor effort to focus NESTA’s efforts on a younger target audience.

The rationale for this couldn’t be simpler.The sooner we can start to nurture andinspire the next generation of creativeentrepreneurs and innovators, the soonerthey will be able to make a real impacton this country’s wealth and well-being.And two exciting new programmes,introduced last year, demonstrate howserious we are about this.

You’ll find details of Ignite!, a projectdesigned to kindle creativity in talentedyoung people from the age of 10upwards, on page 13; while our newCreative Pioneer programme – a kind ofFame Academy for young people withpromising ideas for creative businesses– is featured on pages 18 and 19.

Are we delivering?

Before I highlight a few of our specificachievements in 2003/04, I mustmention the rigorous externalassessment to which NESTA wassubjected last year.

Five years into our existence, theNational Audit Office (NAO) carried out a comprehensive review of ourprogrammes and activities. Alongsidethis, a MORI survey tested customersatisfaction among 150 plus awardees.And finally, the NAO also conductedresearch among other stakeholdergroups – including both partnerorganisations and competitors – to find out what they felt about NESTA, and our impact on UK innovation.

I’m pleased to say we came through this wide-ranging scrutiny very well.Our awardees were mostly happy withthe support they have received from us. We are pleased that stakeholdersgenerally welcomed our approach tocrossing traditional boundaries betweendisciplines, and also to taking informedrisks with experimental projects – withour Learning programme being singledout for special praise.

Of course, there were ideas forimprovement. But, more than mostorganisations, NESTA has always been happy to learn from its failures, as well as its successes. The NAO’smain recommendations were in theareas of performance indicators,broadening the Fellowship programme,social inclusion and regionaldistribution. On the first of these, wehave amended the presentation ofinformation in this annual report andaccounts. On the remainder of these,our Trustees have agreed detailedstrategies for implementation – theeffects of these will be reported from2004/05 onwards.

Adding value to our programmes

As you’ve read, this has been a year in which NESTA’s distinctive role hascontinued to evolve; but that doesn’tmean that we have neglected ourexisting programmes. On the contrary,we’ve taken important steps to addvalue to them.

In particular, we’ve focused onmentoring. We’ve always known that, in many cases, the money we provide is less valuable to our awardees than the expert advice and practical supportsupplied by the mentors we appoint to work with them. Over the last year,we’ve been exploring ways to exploit this resource even more effectively, inparticular by bringing our network ofmentors together, to share their ideasand learn from each other’s experiences.In some cases, co-mentoring is nowenabling awardees to benefit from two complementary sets of skills and expertise.

The increase in our funding that wereceived in 2002/03 has also hadbeneficial effects. For example, we’vebeen able to expand our Invention andInnovation programme. Probably theUK’s biggest source of early stage riskcapital, NESTA now has the resourcesto remain involved in some projectsthrough to the second round fundingstage, greatly improving their chancesof success.

We’re building on what we’ve learned in our Fellowship programme too. Todate, Fellowship has attracted more

innovators in the arts than those at the cutting edge of science. So, as anextension to the programme, we’repiloting Crucible, an open applicationinitiative that targets early careerscientists. Through a series ofresidential workshops they can gettogether to discuss issues relating to the interface between science andmodern life, and I’m pleased to say they have been very well received.

Enjoying the first fruits of our investment

We’ve always made a point of sayingthat NESTA takes a long-term view ofits investment in innovation. But, at this stage in the organisation’s life, it’sexciting for us to see our awardeesstarting to make real headway in theirincredibly diverse fields.

Among our inventors (just after thefinancial year closed), Tideway’srevolutionary new software conceptreceived the backing of one of Europe’sleading venture capital firms, to thetune of well over £3 million, and looksto be on the brink of major commercialsuccess.

Jeremy Newton looks back at a year in which wefocused on NESTA’s role as a catalyst for innovationand went in search of the next creative generation…

For an organisation that deals ingroundbreaking ideas and radical newapproaches, it may not sound veryexciting to start my review of the year by talking about NESTA’s three yearstrategic plan, which we introduced at the beginning of 2003/04.

But for us – and for UK innovation – it’s important news. Based squarely onwhat we’ve learned over the last fiveyears, the new plan is a clear statementof our belief that NESTA has a vital roleto play as a catalyst for creativity in thiscountry; influencing policy and practicein the wider world, at the same time asseeking out excellence and supportingindividuals of exceptional talent.

So, turning to last year’s key events, we were delighted when Chris Powelljoined us as our new chairman, inOctober 2003. It was, of course, a hugechallenge for us to find a successor forLord Puttnam, who has been such a keyfigure in the story of NESTA since thevery start. But with his distinguishedbackground in both private and publicsector campaigning, Chris is incrediblywell equipped to help us widen NESTA’sinfluence.

Crucible, an open application initiativetargeting early career scientists.

Sue Riddlestone,BioRegional Minimills UK LtdInvention and Innovation£90,500, South East

To develop technologies to safely and cheaplymanufacture paper fromstraw, reducing pressureon the world’s forests and rivers.

Channel 4/Media 19Learning£110,000, UK-wide

To run Bedroom Britain, a campaign to identify and celebrate new, young creative andentrepreneurial talent from across the nation,using television, online,education and a series of key events in major cities around the UK.

Glasgow School of ArtLearning£95,104, Scotland

To enable the DigitalDesign Studios to use thelatest 3-D technology todevelop a new model forlearning, which developsdesign and art skills instudents with an aptitudefor science and technology.

Hi8usLearning£10,000, West Midlands

A further award, following a series of successful pilots in schools, to helpcommercialise ‘e-drama’,which aims to develop theemerging talents of youngpeople at risk of socialexclusion.

Mark MiodownikFellowship£69,000, London

A materials scientist who will develop a unique lab space andintroduce new avenues to traditional methods of scientific research.

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A very unusual project called Room 13has gained enormous recognition forour Learning programme. Run by thepupils of a primary school in Scotland,it’s a visual arts studio which has hadwork exhibited at Tate Modern, and beenfeatured in a Channel 4 documentary(made largely by the childrenthemselves). Thanks to NESTA fundingthe project has expanded into two newschools, one in Lochyside and anotherin Hareclive, a district of Bristol.

Another particularly successfulcollaboration was with PAL (PerformingArts Lab). Originally set up in order togive successful writers an opportunityto experiment and push back theboundaries of their talent, the PAL labconcept has, with NESTA’s support,been developed to encompass a verywide range of disciplines. From danceto animation, food to multimedia, PAL labs have enabled more talentedindividuals from across the creativelandscape to test themselves and learn from each other.

Forming partnerships to reach a wider audience

To fulfil our aim of fostering publicknowledge and appreciation of science,technology and the arts, we need to beinnovative in finding ways to reach – andinspire – the widest possible audience.

An excellent example is the leading role we’ve played in the BBC’s verysuccessful new inventors’ competitionseries, Innovation Nation. As sponsorsand co-developers, we were involvedfrom the very start, collaboratingclosely with the BBC to develop aprogramme that has caused a real stir among the nation’s inventors, and attracted millions of viewers.

Similarly, over the last year, we’veworked as partners with Channel 4 ontheir new Bedroom Britain series foryoung inventors, and we’ve sponsoredthe Visions of Science photographycompetition, which has receivedextensive press coverage.

Campaigning for a better creative climate

Our first major issue-based campaign,about removing barriers to investmentin the Creative Industries, was launchedin February 2004. Since NESTA started,we’ve become aware just how hard it is to get creative businesses off theground. We’ve carried out research tofind out exactly what problems need to be overcome, in order to create aclimate where people with radical newideas have the best possible chance offinding the support and encouragementthey need.

So far, we’ve organised threeconferences at which we’ve shared our findings and our understanding of this important issue, as a first steptowards the development of proposalsfor change in policy and practice.

For me, it’s an excellent example of themore influential role NESTA is playing.

Room 13, an autonomous arts studio managed by the pupils of Caol Primary School.


Looking aheadChris Powell, Chairman

Chris Powell joined us as Chairman inOctober 2003. He answers questions abouthis first impressions and how he sees thefuture for NESTA…

Are you enjoying the new job?

Very much. I’ve always been painfullyaware of the traditional British problem:bucket-loads of talent, but less successin nurturing and capitalising upon it.And, having spent much of my career in advertising, I’m fascinated by theprocess of using creativity to achievecommercial objectives. So for me,NESTA is pretty much a dream role.

What are your first impressions?

Two main ones. First, the incrediblerange of activities and programmesNESTA is engaged in, from testing newapproaches and backing innovators, toinfluencing change. And second, thethoroughness and rigour with which allNESTA’s undertakings are conducted.Having built such a vast and robustedifice from scratch in just five yearsseems to me a truly remarkableachievement.

Anything else?

Yes, the calibre of the people. TheNESTA Trustees provide us with anexceptional wealth of experience andexpertise, which we draw upon veryfreely. And our in-house team arefantastic, too – incredibly committedand full of an almost evangelical fervour for promoting the cause of UK innovation.

How do you see the future for NESTA?

I’m very much looking forward tobuilding on the many achievements ofmy predecessor, Lord Puttnam, whosevision, energy and commitment hasserved NESTA so well.

In the immediate future – the currentyear, in fact – I see a very importantperiod of evaluation. In Jeremy’s review of last year, he talks about theassessments and research carried outby the NAO in 2003/04. Next year, we’replanning to dig a lot deeper. We want toarrive at a really detailed ‘qualitative’evaluation of NESTA’s performance overour first five years. What’s worked, andwhat hasn’t; and, above all, what we’velearned and how best we can share it.

It’s our big project for 2004/05, and we’ll be mobilising all our resources tomake it as thorough and far-reachingas possible, through a combination ofinternal and independent expertassessment.

And after that?

When the evaluation is complete, and we have some really fresh newinsights into the most effective ways of nurturing UK innovation, I think it will then be the right time for NESTA tomake a big push in terms of improvingawareness of who we are and what wedo – so that what we have learned canhave the fullest impact.

Until now, NESTA has deliberately kepta fairly low profile. But from next yearonwards, I think we’ll be ready to startmaking our presence much more widelyfelt, and exerting some real influence.

Other major developments?

One more that’s certainly worth amention. Since NESTA started, theawards we’ve made have beendisproportionately weighted towardsLondon, with Scotland and Wales being proportionate to their population.Northern Ireland, the West Midlands,Yorkshire and Humberside have beenidentified as areas to target forincreasing awareness of NESTA.

In the current year, we’re starting to put that right, having very recentlyappointed national developmentmanagers responsible for local talent-spotting and spreading the word aboutNESTA in Wales and Northern Ireland;and we also have plans in hand toensure coverage of the English regions.When we talk about it being our aim to help enrich the nation, we mean the whole nation.

Lord Puttnam, whose tenure asNESTA’s Chairman ended in October2003, is a passionate believer in UK talent and innovation. His drivehelped to get us up and running,accelerated our development andincreased our profile. In his 5-yearChairmanship he worked tirelesslyon our behalf and we owe him animmense debt.

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NESTA annual report 2003/04 June ’03

Nick Clarke, Addictive Television LtdInvention and Innovation£50,000, South East

To produce a series of DVDs to bring visually-ledmusic into the mainstream,helping to make the UK a hotbed of imaginativerecording talent.

Carl Griffiths, OpticalReference Systems LtdInvention and Innovation£60,000, Wales

To develop a new way of monitoring andcontrolling the productionof semiconductors which are at the heart of allelectronic goods, frommobile phones to PCs.

Mary Walters, St Nicholas Special SchoolLearning£9,000, Scotland

To explore ways ofencouraging creativity inyoung people with learningdifficulties by using digitaltechnology, rather thanlanguage, as a primarycommunication tool.

Children’s PalacesLearning£20,735, June 2003Yorkshire and Humberside

To establish the demand for a Children’s Palaceconcept in Yorkshire and to identify and consult with potential providers in the Yorkshire region.

July ’03

See Lip Sim, Iles LtdInvention and Innovation£62,000, South East

To support a company that markets high quality,affordable and energy-efficient light switches, andto develop the technologyfor a dimmable, fluorescentlight batten and fitting.

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NESTA’s strategic priorities: our progress in 2003/04 and our ambitions for 2004/05

1. To improve our current support for people, ideas and projects.

Progress in 2003/04

> We significantly increased thenumber and value of our awards,provided follow on funding to several existing awardees andbegan a funding scheme to supportpartnerships between awardeesfrom different programmes.

> We developed, throughcomprehensive surveys, a deeperunderstanding of the needs ofawardees and stakeholders. We responded by introducing anumber of changes to our policyand practice.

> We greatly enhanced the ‘addedvalue’ support linked to our funding, particularly in the areas of mentoring, marketing andpromotion.

> We recruited new representatives inWales and Northern Ireland, as wellas a Head of Nations and Regions,to work alongside our existingScottish Development Manager, todevelop our activity in the nationsand regions, identifying potentialnew awardees, supporting existingones and developing new projectsand partnerships.

How we will increase impact in 2004/05

> We will further develop our ‘addedvalue’ support in areas such asnetworking, management support,brokering of relations with otherpotential funders and exit strategiesfor Fellows nearing the end of their funding period.

> We will extend our regionalrepresentation in England.

2. To develop new approaches to, and areas for, supporting creativity.

Progress in 2003/04

> We piloted Ignite!, a young people’s version of our Fellowshipprogramme, to research and testthe scope for creative developmentin 10-21 year olds.

> We launched the Graduate Pioneerprogramme (now re-named CreativePioneer programme), to help artand design graduates to form newcreative businesses.

> We built on the previous year’s pilot of Dream Time Fellowships to support the development ofexceptional achievers.

> We developed an element of ourLearning programme devoted toenterprise education.


> We will build on the successfulpilots of Ignite! and the CreativePioneer programme to broadentheir range and impact.

> We will launch an Innovation inInterpretation strand of theLearning programme, aimed atmuseums and science centres.

> We will explore new entry routes to the Fellowship programme tobroaden its reach and impact.

3. To influence the activity of practitioners, funders and policymakers.

Progress in 2003/04

> We devised and commencedimplementation of a comprehensiveevaluation framework for ourindividual projects and forprogrammes as a whole, in order to capture fully all the importantlearning from our various fundingand investment activities, to feedinto future policy development.

> We undertook severalgroundbreaking research projects aimed at developing ourunderstanding of fields such asinvestment in the CreativeIndustries, the creative processitself and, through NESTA Futurelab, a range of issues related to ICT in education.

> We began to share the fruits of thisresearch and evaluation programmewith Government departments,public sector agencies, privatesector institutions and the widercommunities of practitioners suchas teachers, artists and scientists(through publications, seminars,conferences etc).


> We will publish, promote anddisseminate findings from ourresearch and evaluation, focusing in particular on areas such as ICT in Learning through NESTAFuturelab, Creative Industries,Science Education, and a NationalInvention Strategy.

> We will complete the evaluations of our Fellowship and Invention and Innovation programmes, andcommence evaluation of theLearning programme.

4. To promote the value of creativity and innovation.

Progress in 2003/04

> We sponsored or promoted a widerange of networking events aimed at generating greater awareness of and debate about the potentialimpact of creativity and innovationon UK cultural and economicdevelopment.

> We allocated substantial resourcesfrom our Learning programme tosupport projects aimed at engagingthe public in creative learning.


> We will develop our campaign on the specific needs and problems of the Creative Industries.

> We will actively promote NESTA as a source of expertise on creativityand innovation.

5. To strengthen NESTA as an organisation.

Progress in 2003/04

> We invested greatly increasedresources in the training anddevelopment of NESTA’s staff team.

> We wound up our subsidiarycompany (NESTA Enterprises Ltd)and integrated its two DFES-fundedprojects (NESTA Futurelab andPlanet Science, the Science Yearlegacy programme) into our coreactivities and structure.

> We reviewed and revised our seniorstaff structure and set in train anumber of initiatives to streamlineour processes, increase delegationand improve knowledgemanagement and sharing.

> We raised our profile substantiallywith politicians, opinion formers,partner agencies, the broaderconstituencies we serve and thegeneral public.

> We implemented a new long-terminvestment strategy to enhance ourability to plan for a financially stableand sustainable future.


> We will submit to DCMS an outlineof our long-term strategic aims and their resource implications.

> We will complete design andconstruction of a new AwardsInformation Management System.

> We will complete theimplementation of our structural review.

Dr Johannes Zanker,Holvitz LtdInvention and Innovation£60,000, South East

To enable the early-stagedevelopment and afeasibility study for a newtype of 3-D X-ray securityscanner, which will revealhidden or obscured objectsin baggage.

Cape Farewell, Cape Farewell Ocean LtdLearning£119,660, London

Using film taken during a voyage to the Antarctic to develop and pilot aneducational resource for14-16 year olds studying for Geography GCSEs (key stage 4).

Dream Ireland LtdLearning£82,500, Northern Ireland

To support DreamlabGeneration, which will teach digital technology and offer‘insider knowledge’ of the creative industries to schoolchildren.

Neston Primary SchoolLearning£35,057, South West

To encourage pupils’interest in science andengineering, by developingthe school’s Nestonautsprogramme and buildingthe Moonbase learningfacility in their playground.

Special StepsLearning£80,000, South West

To support the Living with Science researchproject, which aims to offer guidance on theeffective use of Informationand CommunicationTechnology (ICT) in sciencelessons for students withspecial needs.

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NESTA Fellowship programme

Campbell McAllister Animator; £82,500 for 30 months, from October 2002

Having won a BAFTA for his shortanimated film How the Sea was Salt,Campbell McAllister was ready to tackle a more ambitious project. But his relativelack of experience as an animator, and his desire to push back the boundaries of the form, were making it very hard forhim to find the backing he needed.

Enter NESTA. With our support, Campbellis exploring his vision of achieving a newbalance between technological innovationin computer animation and traditionalstory-telling by developing a 30 minutefilm called Roux County.

And he has bigger plans still: “Now I canimprove myself as a director, using RouxCounty as a template to work around. I want to use it to try and move towards a feature length animation.”

Supporting outstanding talent Our Fellowship programme in 2003/04

It’s been a fruitful year for ourFellowship programme. Our Fellowscontinued to astound us with thefreshness of their thinking and thechallenging diversity of their work.Meanwhile, as we explain overleaf, our open application opportunity,Dream Time, has taken off, after being successfully piloted in 2002/03.And we’ve further expanded theFellowship programme in two veryimportant ways in order to extend its reach and influence.

What’s the NESTA Fellowshipprogramme all about?

We have now made more than 155awards, and it would be hard to imaginea more diverse group of people – NESTAFellows range from poets to architects,fashion designers to engineers,filmmakers to astrophysicists.

Two things, however, they all have in common: outstanding talent andoriginality in their respective fields and the potential to ‘take the next step’.Often working at the intersection ofdifferent conventional disciplines, theseare the individuals who – given the timeand resources – have the capacity tobreak new ground, to develop radicalnew approaches, to show us our worldin a new light.

NESTA’s Fellowship programme existsto make that possible. Following arigorous selection process, we makeawards, usually up to £75,000, to fund a period of intensive research, study or creative exploration. In addition, we provide each Fellow with tailoredsupport and a dedicated NESTAprogramme manager – as well as a mentor, if they wish.

Peter BeardArchitect; £52,950 over three years,from September 2003

Peter Beard is an architect who believesthat the past should never be neglectedwhen designing the future. Much of hiswork has focused on how old industrialor military sites, long disused, can bedeveloped in a way that shows respectfor their history, while meeting theneeds of the present day.

Working in collaboration with a Germanlandscape architecture practice, he’srecently won a major commission from the London Development Agency,scoping the potential of the Inner

Thames Marshes as a newpublic park for London.

“It’s a major step towards the realisation of my designapproach,” says Peter. “And my NESTA Fellowship has givenme the time to pursue it.”

Bernardine Evaristo Author; £74,974 over three years from September 2003

“There are a lot of histories that haven’tbeen recorded yet. And to place aspectsof black history in places where youwouldn’t expect to find them is awonderful adventure.”

That’s Bernardine Evaristo explaining her unique creative mission, which shefirst set out to achieve in her criticallyacclaimed novel-in-verse, The Emperor’sBabe, the story of a young black girlliving in Roman London.

Now, with a fresh fusion of poetry, fiction and history, she plans to exploreblack experience among the Vikinginhabitants of Europe’s most northerlylands. And, among other things, herNESTA Fellowship has enabled her totravel extensively through Scandinavia, toenrich her creative capacity and increaseher repertoire of imagery and inspiration.

The making of a NESTA Fellow

As you would expect, becoming a Fellowis not easy. Potential awardees are putforward by a nationwide network ofexpert nominators, with an in-depthknowledge of what is going on in theirrespective fields, and where the mostoriginal talent is surfacing.

To widen the net still further, we havedeveloped new ways of identifyingpotential Fellows – for example, our‘talent scouts’ initiative. Along withorganisations acting as nominators, our scouts look for outstanding talent,working at the grass roots.

All applications were subjected to theclosest scrutiny including externalassessment, with our selection panel looking not just for evidence of exceptional talent, but also ofcommitment, promise and originality.

In all, 42 new awards were made in2003/04; and we very much hope thatthe latest crop of NESTA Fellows willget as much out of the programme,personally and professionally, as those who have preceded them.

The year our Fellowshipprogramme came of age

The first NESTA Fellows wereannounced in May 2000. And sinceFellowships can last up to five years,that means we’re just starting to see the first leaving the programme. In fact, 14 NESTA Fellowships came to an end in 2003/04.

What that also means, of course, is thatwe are beginning to learn more aboutthe impact of our support and to getanswers to the question, ‘what happenswhen you give a highly creative personthe time, support and resources topursue their vision?’ The steady streamof groundbreaking achievements bothfrom our alumni and our currentFellows is encouraging.

In addition to the three featured onthese pages, we were especially excitedby Bob Bloomfield, the scientist andnatural history communicator, who has been retracing the Pacific voyage of Captain Cook, to assess how thathistoric expedition’s scientific findingsare relevant to the modern world; thepoet Lavinia Greenlaw, whose latestvolume, Minsk, was shortlisted for the Whitbread prize; and CarolineWilkinson, who made importantheadway in her efforts to develop acomputer-based forensic tool formaking facial reconstruction morelifelike.

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NESTA annual report 2003/04 Allan McRobieFellowship£74,750, East of England

A structural engineer andacademic who is exploringthe connections betweenengineering, maths,emotions, imagination and the humanities.

August ’03

Mark O’Connell, Probe Scientific LtdInvention and Innovation£98,989, East of England

To develop a newmonitoring device whichsamples blood withoutremoving it from the body,enabling automatic andcontinuous analysis of apatient’s blood chemistry.

Artefact ProjectsLearning£31,820, North West

To support Explore, Expand,Exchange, a programme for artists and academicsto work together to attractnew audiences to museumsin Manchester.

ArtsworkLearning£217,058, South East

To support the FutureSomething programme,which nurtures youngpeople’s creative desires, combining new technologies withtraditional concepts of professionalapprenticeships.

Centre for Astronomy and Science EducationLearning£33,056, Wales

To stage a series ofconferences where schoolchildren use science fiction to stimulate theirimaginations and learnmore about science.

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NESTA Fellowship programme

Supporting outstanding talent Extending the reach of our Fellowship programme in 2003/04

As you’ve read, the core NESTAFellowship programme is open bynomination to individuals who havedemonstrated exceptional talent and originality.

We’re now extending the programme to accelerate outstanding creativity,wherever in the UK it may be found. In their different ways, our Dream TimeFellowships, and our new Ignite! andCrucible initiatives are all means to this end, widening the scope andincreasing the accessibility of theFellowship programme.

Anne OsbournPlant biologist, £36,000 over one year, from January 2004

Many people fear science because they don’t understand it, and the language traditionally used by the scientificcommunity is partly to blame. Anne Osbourn, aninternationally renowned plant biologist, will be using her Dream Time to explore the interface between science and the arts through creative writing.

She’s hoping to find new ways of communicating theexcitement of science. “I want to get across colourfulmessages and stories,” she says. “Messages that arefascinating, thought-provoking, perhaps even life-changing.”

Anne will be pursuing this ambitious goal in association with the Department of English and American Studies, at the University of East Anglia. Can fiction bring scientificfact to life? Watch this space.

them and to others in their chosen field when they return to work.

This year, we received almost 200Dream Time applications. Most were of good quality, so our assessmentpanel – which comprised two membersof the NESTA team and two independentexperts – had its work cut out to arriveat a shortlist of around 25.

Following in-depth interviews andpresentations, we made 10 Dream Time awards, all of which are nowunderway. We’re very confident that by this time next year the Fellows willhave undertaken some extraordinary creative journeys.

Learning from experience

In 2004/05 our Dream Time programmewill expand again, with up to 16 awardsavailable. We will be continuing ourefforts to attract more applications from scientists and technologists.

And we will be actively seeking cross-disciplinary applications; a naturalprogression, since one of NESTA’s keybeliefs is that many of the most excitinginnovations emerge at the intersectionbetween science, technology and the arts.

Another priority is for NESTA to helpawardees to better manage the moveback into ‘reality’, and the transition tolife without NESTA’s financial support.Since long-term benefit is the goal ofthe programme, we’ll be looking closelyat maximising impact in the future, andhow we can best track their progress.

Ignite! Kindling the nextgeneration’s creative spark

Since NESTA began, we’ve becomeincreasingly aware of the criticalimportance of nurturing and inspiring the next creative generation. Our new Ignite! initiative, which began a three-year pilot period lastyear, is an important demonstration of how seriously we’re taking thisresponsibility.

The aim of Ignite! is to provideexceptionally creative people, aged from10 years to 21, with an opportunity tostretch their abilities, in a supportiveand inspiring environment.

Among 10–15 year olds, we’re doing thisby means of a series of workshops andresidential creativity labs. Participantsare very carefully selected, on the basisthat they have demonstrated realoriginality of thought, and a willingnessto challenge convention. By puttingthem in a situation where their naturalcreative impulses are both nurtured andchallenged, we hope to accelerate theirdevelopment as innovators, and opentheir minds to new ways of thinking.After the labs, we develop a tailor-madepackage of support to help maintain the momentum. Over 450 children have already taken part in workshopsand labs.

Older individuals aged 16–21 withoutstanding creative ability arenominated by third party organisations.They are then teamed with a highachieving creative adult to develop aproject, over a period of six to 12months. We awarded 5 Ignite! CreativeSparks awards in 2003/04.

Crucially, it’s not just the individualyoung people involved who will benefitfrom Ignite! We believe this initiativewill provide NESTA with invaluableinsights into what triggers thedevelopment of creativity in youngpeople, and what barriers stand in its way. We are doing this throughresearch, evaluation and consultationwith young people.

“For a year, I’ll be able to see how mylife might have turned out had I chosenart instead of science.”

Janna Levin, Dream Time Fellow, scientist in residence at the RuskinSchool of Fine Art.

“Few, if any, organisations exceptNESTA would be prepared to invest in my art, as, on the face of it, it isunproven territory.”

Sandra Chapman, Dream Time Fellow,artist and astrophysicist.

Dream Time: from pilot to take-off

Piloted in 2002/03, and now havingcompleted its first year, Dream Time is open to those who have worked with distinction in any field of the arts,engineering, science or technology for at least 10 years.

The purpose of the awards, which canbe worth up to £40,000 and run for up to a year, is to allow high achievingindividuals to shift the focus from their careers to develop new ideas orapproaches that will be of benefit to

“Such a project requires me to think very hard and deeply, and the slightestdistraction can topple the card house of ideas. Thanks to NESTA, I canconcentrate full time on Lucy for the next year.”

Steve Grand, Dream Time Fellow, inventorof Lucy, an intelligent living machine.

NESTA’s Fellowship Programme

Tim Hunkin, a cartoonist andengineer, is switching peopleonto technology by showingthem how intriguing and creativeelectricity can be.

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“The Crucible experience will probably be one of the mostmemorable and valuable of my life.”

“A completely new way of thinking delivered in an entertaining way –mind blowing.”

“Different, insightful, interesting.”

“‘Provided affirmation that my career path is not uniquely risky!”

“Fantastic and inspirational.”

So, what do young people get out of being involved with Ignite!? The feedback speaks for itself:

“It’s a great opportunity to be creative and make decisions about what I can do.” Philip, Creative Spark, 19

“Being able to let your imagination go wild.” Jade, Lab attendee, Ignite!

“I have learned how to get more ideas from my head and use them more effectively.” 12 year old Lab attendee, Ignite!

As well as the opportunity to push theboundaries of their knowledge, Ignite!allows young people to acquire newskills; explore and learn from theexperiences of NESTA awardees; andhave their exceptional ability validatedat a crucial stage in their educationaland social development.

Ignite! Nurturing exceptionalyoung talent.

We’re excited by the results so far.Already, Ignite! is making a realimpression on the young peopleselected to take part, and we lookforward to seeing how the project will continue to make an impact on their creative futures.

Crucible: a new melting pot for creative science

Crucible is a new initiative, intended to give scientists and engineers fromdifferent disciplines an opportunity tonetwork and expand their professionalhorizons. From geophysicists tovirologists, creatively minded scientistsor engineers can apply to take part.

Participants attend three residentialweekend Labs led by internationallyrespected practitioners, and expandtheir thinking about science in relationto ethics, politics and creativity. ButCrucible is not just about ideas; anotherimportant strand is personal and careerdevelopment, and attendees also have a chance to work on their management,networking and communication skills.

Reaction from the scientificcommunity? Very encouraging indeed:in its first year, Crucible was heavilyover-subscribed, and the feedback wereceived was overwhelmingly positive.

Investing in innovation Our Invention and Innovation programme in 2003/04

17

NESTA annual report 2003/04 September ’03

BreakThru Films LtdLearning£19,300, London

To support the developmentwork for a definitive film ofPeter and the Wolf, whichcan be used by orchestrasaround the world duringlive performances.

David Peall, AB TechnologyCambridge LtdInvention and Innovation£150,000, East of England

To support the productdevelopment and marketingof Gaslok, an early warningdevice that prevents ozone-depleting gasesleaking from commercialrefrigeration and airconditioning systems.

Camden Arts CentreLearning£70,130, London

A further award to developa mentoring programmethat nurtures talent among young people who are disaffected withconventional education.

Tanja FarmanFellowship£59,926, North West

A creative producer who is developing herskills, aiming to become an international artisticproducer.

October ’03

Soda Creative LtdLearning£200,000, London

To develop Sodaplay, aflexible online toolkit which helps schoolchildrenbuild their own robots and models.

Leeroy BrownInvention and Innovation£38,500, West Midlands

To develop and marketAirjack 2000, a new airbagcar jack which will end the strain and grime ofroadside wheel changes.

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It’s still early days for our Invention and Innovation programme, but we’restarting to get results. A number of theinnovative new ideas in which we’veshown faith are now getting very closeto market. And many more are showingreal promise, and attracting follow-oninvestment. No less important, we’relearning more all the time about thekind of hands-on help and support thatinnovative people need to turn theirbrilliant notions into fully functioningproducts or services that will enrich the nation.

NESTA: an investor like no other

In some areas of our work, where theresults we seek are intangible or hardto measure, it can be quite difficult toexplain what NESTA does, and why itmatters. In the case of our Inventionand Innovation (I&I) programme, it’seasy. Our aim is to ensure that whateveris invented in the UK has every possiblechance of success for the UK.

Much has been said about the ‘equitygap’ – the lack of risk capital for start-up companies – and its impact in business creation. But the questionusually asked is ‘where does the equity

gap stop?’ NESTA operates at the point at which it starts.

Our I&I programme exists to supportprojects that might otherwise not getoff the ground. We invest early – usuallylong before any conventional investorwould be prepared to consider gettinginvolved. In fact, NESTA is probably theUK’s single largest source of early-stage seed funding. So it follows thatwe’re happy to accept a high degree ofrisk: there’s no point backing an ideathat’s barely past the drawing-boardstage, then demanding detailed proofthat it’s sure to succeed.

Successful innovation: a matter of personal chemistry

Visionary innovators aren’t alwaysbrilliant business people. In fact, it’s fairto say that some inventors have littleaptitude for the painstaking processesinvolved in turning a concept into amarketable product or service. Which is why our I&I programme has alwaysprovided much more than just financialsupport. In fact, for many of theprojects we back, the practical help and guidance we supply are just asvaluable as the money we invest.

Since we started, we’ve developed ahighly successful mentoring system.And in April 2004, we took the firststeps towards providing innovators with the kind of hands-on commercialexpertise that can make the differencebetween success and failure. We also piloted a new part-timemanagement scheme.

Most fledgling enterprises urgentlyneed an injection of business acumen;but, in their early days, it would rarely be viable to bring on boardheavyweight management expertise on a full time basis. Our new initiativeinvolves us building a team of talentedand experienced managers who will be available to NESTA-backed projects,as and when needed – and at anaffordable cost.

We’re learning more all the time aboutwhat it takes to facilitate successfulinnovation, not least the often complexpersonal chemistry that has to work if a project is to achieve lift-off.

Results? A few green shoots, a lot of patience

NESTA is in the business of innovationfor the long term. On average, we investaround three years before any venturecapitalist or other funder would bewilling to do so – which means that, asa rule of thumb, we don’t expect to seea return for ten years, or even more.

One of the key problems facing earlystage companies is, of course, how tosecure finance to last them this long.Even with the development of follow-onfunding for particularly promisingInvention and Innovation investments,NESTA could never hope to bridge this funding gap, and provide all thefinancial support needed to bring a new idea to market.

But where we are increasinglysuccessful is in acting as a catalyst,attracting co-investment into ourawardees’ companies from businessangels and early stage venturecapitalists, who recognise the value of NESTA’s participation. Over the past year, some £3.5 million has been invested in 17 companies. It’simpossible to prove, but there’s goodreason to believe that much of thiswould not have happened without ourinvolvement at the ‘fledgling’ stage.

In any case, we’re happy to be patient.But, being human, we’re even happierwhen projects we’ve backed make reallyrapid progress; and, over the last 12months, quite a few have done just that.A number of new products and services– including those you see here – arenow getting very close to market.

Glenn MelvinPlasterer and inventor£59,000 in 2001 and a further £50,000 in 2003

Self-employed plasterer Glenn Melvin wasstudying for an HND in building when hebecame interested in thermal insulation.Working in his garage, he started to develop an insulating plaster that would dramaticallyreduce heat loss, saving on fuel costs and alsohelping to prevent damaging condensation.

With our financial support, and also the expert input of a NESTA mentor, Glenn’sbrilliant, simple idea has now become a highlymarketable product, called Wall Reform.

A distribution agreement with a leadinginstaller of cavity wall insulation has recentlybeen finalised; and there’s every reason tobelieve that Glenn’s invention will soon bedelivering a very worthwhile return. And notjust financially: equally important are the social and environmental benefits of a newproduct that will significantly reduce emissionsof greenhouse gases, and bring down heatingcosts for many who are caught in the fuelpoverty trap.

Tideway Systems£100,000 from December 2003

In financial terms, this is our I&I programme’s biggest success story so far. Following our initial seed funding,Tideway closed a major investment worth £3.25 million after the 2003/4 financial year with Apax Partners, one of the world’s largest venture capital companies.

The product that has caused such a stir? An innovativesoftware management system that automatically maps out,tracks and audits changes to complex IT environments. For large organisations, especially financial institutions, thepotential benefits are enormous – not just in terms of majorcost savings, but also improved security and risk management.

Tideway CEO Richard Muirhead comments, “NESTA’s seedinvestment has been instrumental in our success to this point. It’s allowed us to construct a world class team anddeliver significant innovation in a new product category.”

Starbridge Systems £120,000 from March 2004

Millions of diabetics depend on injecting insulinevery day. A much smaller number use a pump,worn like a pager on a belt, which deliversinsulin through a catheter. But this technologyis bulky and not always reliable.

Swansea-based Starbridge Systems havedeveloped an entirely new kind of micro-pump,about the size of a 1p piece and just a fewmillimetres deep, which can be worn anywhereon the skin, like a plaster. Pioneering micro-fluidics technology delivers precise dosages atthe prescribed intervals – allowing the diabetessufferer to wear and forget the device for up to three days.

It’s an invention with massive potential, both commercially and in terms of its socialvalue. With Starbridgeapproaching its next funding round,discussions with major pharmaceuticalcompanies are welladvanced.

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NESTA annual report 2003/04 November ’03

Kevin CareyFellowship£72,949, South East

An ICT pioneer andcampaigner for socialjustice who is using digital broadcasting toimprove public access toinformation, particularly for elderly and disabledpeople.

Zerbanoo GiffordFellowship£72,750, South East

A writer who is bringingtogether some of theworld’s most influential and inspiring women togenerate creative materialthat will act as a catalystfor her own literarydevelopment.

Emma JeffsFellowship£63,304, London

A surface materialsdesigner who is combiningher craftsperson’simagination with knowledgeof science and industrialtechnology to uncover newmaterials and productionprocesses.

Brighton FestivalLearning£59,350, East of England,South East, West Midlands,Northern Ireland, Wales

To expand BrightonFestival’s Adopt an Authorproject, which bringschildren in touch withpopular writers.

John TaylorFellowship£74,903, London

A musician and composerwho is creating amultimedia symphony thatencapsulates a mixture ofsounds and styles from the African diaspora.

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Developing entrepreneurship Our new Creative Pioneer programme

When is the right time to set up inbusiness? When you’ve recentlygraduated and your ideas and energyare flowing? But all the evidencesuggests that this is the very time whenthe confidence and entrepreneurialskills needed to get a business off theground are in short supply. Our CreativePioneer programme, launched in2003/04 is taking a new approach toaddressing the problem…

Great idea for a creativebusiness? Welcome to The Academy

This country urgently needs its mosttalented people to build successfulbusinesses that will create employmentopportunities for others, and generatewealth for the nation. But how do youconvince someone just starting out,with a head full of creative ideas butvery little grasp of commercial realities,that he or she is perfectly capable ofgetting something started?

Our answer was to devise The Academy.To begin with, we invited applicationsfrom individuals up to three years intocareers in the creative industries; and, in the first year of the programme,we were pleased to receive well over 100, mostly of high quality. Ourselection panel wasn’t just looking for young people of exceptional talent;applications also had to contain thegerm of a real business idea, andevidence of some entrepreneurial spirit, however latent.

From a long-list of 50 aspiring creativebusiness people, we chose 30 for TheAcademy, a residential workshop andideas laboratory, in two instalments.

The making of a creativeentrepreneur

The schedule included seminars led by high achievers from the creativeworld; personal coaching; groupbrainstorming sessions; and intensivebusiness training, including input from financial experts, employmentspecialists and lawyers.

The aim was not just to help thosetaking part to start creative businesses,but to transform the way they thoughtabout themselves, and their ownentrepreneurial abilities. Our approachdemonstrates that it is as much aboutthe person as the specific project. Some we feel certain will be successfulin the future, although by then, theymay well have moved on to new anddifferent ideas. And in this respect, theatmosphere and ethos of The Academy– challenging, supportive, aspirational –were every bit as valuable as any of thespecific activities.

In the final week of The Academy,Pioneers worked with businessprofessionals to draw up a businessproposition and all were given theopportunity to apply for up to £35,000 in start-up funding. All received long-term support, in the form of a mentoring programme andprofessional development activities.

We’re very pleased to say that many of the participants in Year One of TheAcademy have chosen to stay in closecontact – providing each other withhelp, encouragement and networkingopportunities. And 10 have set up in one studio, finding the peer-to-peerexperience very valuable.

In 2004/05 The Academy will almostdouble in size, with up to 50 places and 20 awards to be made.

Graduate sponsorships: anotherapproach to creative enterprise

As in every area of NESTA’s work, we’re open-minded about the best ways of achieving our objectives – and we were more than happy to formpartnerships with other organisationsthat share the aims of our CreativePioneer programme.

This year we worked with ManchesterMetropolian University and the Centrefor Fashion Enterprise in London,enabling them to offer scholarships that enhance students’ entrepreneurialskills.

Deborah Szebeko, ThinkpublicCreative Pioneer, 2003/04

On the basis of her own experienceswhen her mother was terminally ill,Deborah came to The Academy withan idea for starting a completelynew kind of design consultancy.

The aim of her company,Thinkpublic, will be to pinpoint and solve specific communicationproblems within the National Health Service – finding new ways of presenting information that willhelp to prevent misunderstandings,and the resulting anxiety to patientsand their families.

“The Academy gave me time to thinkin-depth about what I was doing,”comments Deborah. “I realised the need to plan, to think aboutresearch and development. Now Isee the bigger picture, and I’ve gotsomeone to bounce ideas off.”

Mark Bickers, ceramics and glassCreative Pioneer, 2003/04

Mark’s business idea is based on a newprocess in glass making, whichcombines industrial manufacturing withthe uniqueness of traditional hand-made craft.

As an apprentice glass maker, Markbecame aware that conventionaltechniques were so time consumingthat it was virtually impossible forcraftsmen to pursue commercialsuccess. His breakthrough came whenstudying for a Masters degree at theRoyal College of Art; and, following thesuccess of his degree show, he hasbeen inundated with orders for hisglass lighting range.

Mark’s verdict on the Creative Pioneerprogramme? “The Academy gave methe chance to try something differentand the belief that I was able to achieve.Without it, I would have fallen into thetrap of leaving college and doing thesame as everyone else.”

More positive thinking fromour Pioneers…

“At The Academy I learned how to turn an idea into a commercialreality, but I also got to knowmyself much better.”George Tremmel, Biopresence,Creative Pioneer

“I realised how important it is to take risks, to takeresponsibility for our own actionsand to learn how to cope withdisappointments. As we were told – risk takes a moment, regret lasts a lifetime!”

Cassie Robinson, Lorelei,Creative Pioneer

“I went along not knowing what toexpect. It gave me an immediatekick-start, massively altering theway I looked at business and how I have approached setting up acompany.”

Mark Champkins, Concentrate,Creative Pioneer

“I learned so much – I’d nevereven done a business plan or aforecast before. Without NESTA,my business would not havesurvived.” Alex Gore Brown, CreativePioneer

December ’03

Jonathan Morgan, Hypertag LtdInvention and Innovation£150,000, East of England

A further award to developtechnology which givesmobile phone users one-click access to web pagesby pointing and clicking at advertising posters or museum displays –alongside co-investorswhich included theCambridge UniversityChallenge Fund.

Jeremy Goldstein,Carnesky’s Ghost Train LtdInvention and Innovation£100,000, London

To create a real andspectacular ‘ghost train’ride, which includes multi-media live performance to explore issues to do with migration.

Richard Muirhead, Tideway Systems LtdInvention and Innovation£100,000, London

To fund the commercialrelease of software thatwill automatically track and audit changes tocomplex IT environments,bringing security and riskmanagement benefits.

LandesignLearning£132,775, London, SouthEast, West Midlands

To create ‘inter-re-active’software that allowschildren with severelearning difficulties to interact intuitively and creatively with astimulating environment.

Freddie KofiFellowship£74,845, East Midlands

A singer, songwriter andproducer who is redefiningBritish gospel music,making it more relevant to his own background and the multiculturalsociety he grew up in.

The Review Project, University of Hull Institute for Learning£213,000 over two years, from August 2002

The blackboard is dead, long live the interactivewhiteboard. For those who grew up in the Chalk Age,it can be hard to grasp the fantastic potential of thisnew technology which combines a traditional boardwith all the capabilities of a computer, from playingCDs to surfing the internet.

Perhaps that’s why, though demand for whiteboardsin schools is growing fast, research shows that manyteachers are unaware how this equipment can helpto transform the learning experience.

This project is a collaboration between the Universityof Hull Institute for Learning and Promethean Ltd,the leading European producers of whiteboards.

The aim, quite simply, isto help teachers get thebest out of all interactivewhiteboard technology.Having started bycollecting examples ofgood practice, the projecthas now produced 25,000copies of a CD whichgives advice and examplesto teachers and advisers

across the UK. The final stage is the development ofa website which provides downloadable resourcesand case studies.

Pioneering creative learning Our Learning programme in 2003/04

It was a year of very encouragingprogress for our Learning programme.Our efforts to pioneer new approachesto learning, and to inspire creativeenterprise among people of all ages,earned us a lot of positive feedback.And the new money we received in2002/03 enabled us to widen the scopeof the programme still further, makingmore awards to innovative learningprojects and developing important new strands of activity.

A catalyst for creative learning

For a relatively small organisation,NESTA has enormously ambitiousgoals. And nowhere is that more true than in relation to our Learningprogramme: our aim is nothing lessthan to make the UK a more creativecountry; a place where radical newthinking is nurtured, and where the value of innovation in science,technology and the arts is widelyunderstood.

Dreamlab Generation, Dream Ireland £82,500 over 12 months,from July 2003

Dreamlab Generation is a project whichgives young people an opportunity to explorethe possibilities of digital technology underthe guidance of professional mentors fromthe creative industries.

Initially, the project – which is run by Dream Ireland – is focusing on 11 schools;but the aim is to provide a model of learningdevelopment that will have a real impact on mainstream educational policy.

Involving leading industry professionals is the key to the success of DreamlabGeneration. Participating students will not only receive expert tuition in the mostup-to-date technology, they will also benefit from regular contact with potentialemployers.

Fortunately, we’re not trying to achievethis alone. NESTA’s key role is as acatalyst, working collaboratively withpublic and private sector partners, to develop learning projects with agenuine difference. If we put our weight behind a project, it’s because we believe it points the way forward,acting as a model and inspiration forothers engaged in the task of bringingcreative learning alive.

As with all NESTA programmes, ourinvolvement goes far beyond merelyfunding projects. We work closely withour awardees to develop their ideas,connect them to like-minded others,and encourage them to take risks in the pursuit of innovation. In manycases, we also help them to securefurther investment.

Widening the scope of Learning

We increased the number of Learningawards from 45 in 2002/03 to 48 in2003/04.

Keeping alive the spirit of Planet Science

In 2001, NESTA successfully bid tomanage Science Year, a major initiativefunded by the Department for Educationand Skills, and intended to get youngpeople excited about science andtechnology. It proved such a huge hit, with both students and teachers, that itwas extended for a further 12 months, as Planet Science.

When Planet Science formally closed inJuly 2003, we set to work to maximise itslegacy. In particular, we’ve focused ourefforts on further developing the website –www.planet-science.com – which hasproved itself a fantastically rich resourcefor science educators, as well as a funplace to visit for students needing astimulating break from their physicshomework.

This year the site received 11,519,972page views. And we’ve been working towiden its appeal still further by addingnew content every week and overhaulingthe site’s navigation and appearance tomake it even easier to explore. Originally,it was designed to inspire young peoplebetween 11-19 years old. But now we’reaiming lower: in response to demand from primary teachers, we have added awhole new section to the site, with lots of entertainingly educational new contentfor younger visitors, and those involved in teaching them.

Another important part of Planet Sciencethat lives on is the weekly e-newsletter,packed with science news and ideas forlearning activities, plus some fairlyterrible science-related jokes.

With around 16,000 subscribers, we’re reaching an impressively wideaudience, which includes scienceteachers, technicians and other scienceprofessionals, as well as members of the general public. In addition to PlanetScience Newsletter, we’re now alsoproducing a regular newsletter, Wired Up,for children from 10 years old upwards,full of activities and kitchen tableexperiments. And very soon, we’ll belaunching yet another newsletter forprimary aged kids called Hay-Wire.

Finally, a brief mention for our PlanetScience outreach programme. The aimhere is to take the fun and fascination of learning about science to where theyare most needed: schools with low levelsof engagement with extra-curricularactivities in science. We’ve made awardstotalling nearly £1 million to supportprojects designed to make science aschild-friendly as humanly possible – orinhumanly, in the case of Robocup, a newpilot project that challenges kids to solverobotic problems.

At the same time as spending more, we took important steps to improve thesystems and structure of the Learningprogramme. Among these, one of themost important was our appointment in September of a new programmedevelopment leader, responsible fordeveloping new strands of activity withinthe programme. The first priority:strengthening NESTA’s commitment to the teaching of creative enterpriseskills in schools.

Welcoming new ideas

Our Learning programme works byinviting and commissioning projectsfrom centres of excellence andinnovators across the UK’s learninglandscape. But we operate an openenquiry system: we’re always happy to hear from anyone who shares our desire to pioneer new ways oflearning. We’re aiming to improve our communication with the learningcommunity to ensure that this is more widely understood.

Creative Space, Cape UK £216,000 over two years, from May 2002

In too many schools,‘creativity’ is somethingthat only happens once a week, in the art class.But what this countryneeds is a generation ofyoung people who havelearned how to think imaginatively, andexplore fresh ideas, whatever the subjector activity that faces them.

Creative Space is a project run by Cape UKthat aims to encourage more adventurousscience teaching through long-termpartnerships with creative professionals in other fields. Primary and secondarystudents in Leeds and Manchester workwith a ‘think-tank’ of teachers, PhDscientists and artists on a range ofprojects, from constructing a workinghovercraft to residential science sessionsdesigned as an inter-galactic mission.

“It’s brightened up science for us,” saysone pupil.

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Science Skiffle, Soundproof Projects£37,970 over one year, from February 2004

How do you inspire a real interest in scienceamong secondary school students? One way is to get them to form a skiffle group.Science Skiffle is a pioneering project thatexplores the physics of sound in the mostenjoyably hands-on way imaginable – devised by musician Matthew Andrews and physicist Dominic Dickson.

Around 150 year 8 pupils from five schools in Liverpool took part in the six-weekprogramme, during which they created their own instruments, which they played at a joint performance with members of the Royal Liverpool Philharmonic Orchestra. At the same time, they were solving scientific problems, and learning about such things as vibration and frequency.

Longer term, the plan is to develop a national programme of schools’ projects, workshops and concerts.

23

NESTA annual report 2003/04 January ’04

Bob Carr, Nanosight LtdInvention and Innovation£100,000, South West

To develop a new optical device for use in nanotechnology that has groundbreakinganalytical capabilities andnumerous applications,including defence againstbio-terrorism.

Teach FirstLearning£104,250, UK-wide

To support a competitionfor university students that aims to engage themin developing creativeapproaches to teaching 11 to 14 year-olds inmaths, science, IT anddesign and technology.

Sarah AnglissFellowship£40,000, South East

An acoustic engineer and composer who isexploring new ways to use sound in museums and science centres.

Carol BrownFellowship£32,000, South East

A dancer andchoreographer who is taking dance out of the confines of the studio and exploring how space could play a more prominent role in performance.

Leslie HillFellowship£40,000, London

A contemporary artist whois furthering her work withleading scientists and artsaudiences, to explore therelationship between smell,memory and emotion.

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Transforming the learning landscape NESTA Futurelab in 2003/04 How will new technologies transform

the learning landscape, as the 21st

century unfolds? After anotherpioneering year’s work at NESTAFuturelab, some exciting answers to that question are beginning toemerge...

Managed by NESTA and based inBristol, NESTA Futurelab is, above all, a collaborative venture. Our aim is tohelp this country become a world leaderin producing imaginative and inspiringinteractive learning resources – bybringing together teachers and learnerswith the cream of the UK’s creative and technological talent.

Working in partnership, we’re here to nurture new ideas and gatherintelligence; to incubate early stageconcepts and develop prototypes on the way to market; and to share thelessons we learn from our work for the benefit of the entire country.

In 2003/04, we made importantprogress on all fronts. We received over 300 applications from people and organisations with innovative ICT learning ideas, far more than weexpected. We moved forward with 20new development projects, and at thetime of writing a number of successful

prototypes are on the verge of enteringthe market. And our collaborativestrength continued to grow, as weestablished a network of partners –including the BBC, RM, Microsoft, Sony, Cisco, Granada Learning, Hewlett Packard, Guardian Learnthings,Lego, HIT Entertainment, ImmersiveEducation, Atticmedia, 3T, IntuitiveMedia, and TAG Software – ascommitted to the cause of interactivelearning as we are.

Projects like those you see here are, ofcourse, the most visible achievementsof NESTA Futurelab. But no lessimportant, in terms of our widerobjectives, is our role as a conduit for ideas and information; and duringthe year we distilled a huge amount of learning from our research anddevelopment activities, to produce aseries of practical handbooks for boththe educational software industry andpolicy-makers.

It’s still early days for NESTA Futurelab;but in our second full year of operation,2003/04, we saw real evidence that ourwork is beginning to make an impact on policy and practice, in relation to maximising the potential of newtechnologies in the field of learning.

Design Challenge 2003

First, we put together nine teams of five people –three multimedia professionals, a teacher and astudent. Next, we briefed them to develop aninnovative concept in educational software. Then, we threw them into a three-day, round-the-clockhothouse – before our judging panel of education,technology and media experts sat down to assess the teams’ efforts.

The results were fantastic. Not only was it an incredible learning experience for all the participants, but all of the prototypes whichemerged had elements which impressed the judges.What’s more, our Design Challenge caused a buzz in the educational software industry that will ensure this year’s event is even bigger and better.

Savannah Project

How do you help children really understandthe importance of the environment, andnatural habitats? Easy, turn them intolions. Savannah is a strategy-basedadventure game where a virtual space is mapped onto a real space – such as a school playing field or playground.

Using hand-held computers, the childrenact as a pride of lions, roaming thesavannah in search of prey. The gamechallenges them to explore and survive,and to succeed, they need to adopt some of the strategies used by real lions.

Hugely popular in extensive trialsconducted last year, Savannah is acollaboration between NESTA Futurelab,Hewlett Packard, Mixed Reality Lab and the BBC Natural History Unit.

Immersive Education with Media Stage

One of NESTA Futurelab’s first developmentprojects to come to fruition, MediaStage is afully immersive 3D production studio that willsupport creativity in the field of media studies.The software lets students and teachersbecome theatre, film and TV directors, cameracrews and lighting technicians, by allowingthem to create their own stunning 3Dperformances.

Extensively trialled from the earliest conceptstages with teachers and students, and verypositively received, MediaStage is scheduled to reach the market in September.

Welcome to the Neighbourhood

Why should science be confined to formal settings, suchas the classroom? This innovative project will take thelearning of astronomy out into public spaces – allowingpeople to explore the solar system (our ‘neighbourhood’)while standing in a busy street, or relaxing in the park.

Welcome to the Neighbourhood brings togethermultimedia and mechanics to create an ‘informationsculpture’, that tracks an object in space – such as a planet, star or comet, and displays its continuallychanging distance from the earth. Users can get a unique grasp of their place in thecosmos, asking questions about where things are and what’s going on in the solar system right now.

From September 2004, a Welcome to the Neighbourhood celestial signpost will be located in Anchor Square, Bristol.

NESTA partnerships and competitions

We backed UK inventors withInnovation Nation, a prime time BBC1competition which threw down thegauntlet to would-be inventors.

Increasing our reach Our competitions and sponsorships in 2003/04

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The awards we make through ourfunding programmes are the principal way in which NESTA backs UK innovation and creativity. But,increasingly, we’re finding that through sponsorship and support for competitions, we’re able to reach an even wider audience.

We’ve supported innovation in science, through competitions such as Medical Futures, which encouragesentrepreneurship in the medicalprofession, and Visions of Science, anationwide photographic competitionaimed at bringing science to life.

We’ve backed up our ambitions to growthe Creative Industries by supporting arange of platforms for developing newdesign talent, for example joining forceswith D&AD in the D&AD NESTA ProductDesign and Innovation Awards.

And we’ve backed UK inventors, through Innovation Nation, a prime timeBBC One competition which threw downthe gauntlet to would-be inventors,attracting over 5,000 entries beforeeventually electing a new design for acollapsible rubbish bin as the winner.

In fact in total we supported 25competitions and sponsorships thisyear, more than ever before.

Innovation Nation

Everyone has those ‘why don’t they invent somethingtoo..’ moments, and this year we gave people thechance to prove they can do just that.

Innovation Nation, produced by BBC One in associationwith NESTA, encouraged would-be inventors to take part in a nationwide competition. A launch programmefeatured well known faces talking about their favouriteinventions, archive footage capturing past inventionsand the views of people on the street on the inventionsthey love, hate and can’t live without. Some of Britain’smost prolific inventors, including James Dyson, Sir CliveSinclair, Dr William Johnson and Trevor Baylis, alsoappeared on the programme, offering inspirationaladvice to aspiring inventors.

Teams of inventors then sent in application videos and, over five weeks, viewers watched the shortlistedthree teams transform their ideas from paper sketches into working prototypes. All three teams came together for a nail-bitinglive final. The winner, voted for by viewers, was DuncanGreen’s and Helen O’Driscoll’sYukka bin which can becollapsed, making it smallenough to be placed in a dishwasher and allowingeasy removal of bin bags.

Visions of Science

The Visions of Science Photographic Awards have been developed by pharmaceutical company Novartis to encouragepeople to find out more about science. Now in their fifth year,Novartis continues to run the awards in association with TheDaily Telegraph and the Science Photo library. NESTA’s support meant the images were shared with a wider audience through a series of lectures and exhibitions.

As NESTA trustee Simon Singh says: “We often think of scienceas being bogged down in equations and graphs, but picturesplay a vital role in our understanding of the world around us.Pictures cut through the technicalities, have an emotionalimpact and are a direct route to the truth.”

With the support of NESTA’s Learning programme, Visions ofScience worked with the Association for Science Education to bring the winning imagery into the classroom.

What we aimed to do in 2003/04 And how far we succeeded

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In order to deliver against NESTA’smission to pioneer ways of supportingand promoting talent, innovation andcreativity in science, technology and thearts, NESTA identified 5 strategic aimsfor the period 2003-06:

1. Improve our current support forpeople, ideas and projects.

2. Develop new approaches to, andareas for, supporting creativity.

3. Influence the activity of practitioners,funders and policymakers.

4. Promote the economic and culturalvalue of creativity and innovation.

5. Strengthen NESTA as anorganisation which can thrive in a21st century environment.

For 2003/04 we identified a number ofactivities and targets to help us achievethese aims. These pages report on thedegree to which we have achieved these objectives.

1. To improve our current support for people, ideas and projects

1.1 Support the development of talented individuals.

We’ll achieve this through ourFellowship, Learning and GraduatePioneer (re-named CreativePioneer) programmes. Our target is to make 45 Fellowship awards,investing £3.4 million in awards, and a total of 40 Learning awards,investing £3.4 million in awards.

> Fellowship: 42 awards have beencontracted under the nominationand Dream Time schemes. A further 32 smaller awardswere contracted under the newFellowship initiatives Ignite! and Crucible. The total value of awards was £2.4 millionreflecting a decline in theaverage size of awards.

> Learning: 48 awards have beencontracted with an award valueof £3.3 million.

1.2 Help to turn inventions and ideas into new products and services.

We’ll achieve this through ourInvention and Innovation (I+I)programme. Our target is to make40 entirely new Invention andInnovation awards, investing £2.5 million in awards.

> Invention and Innovation: 32 newawards have been contractedwith a value of £1.7 million.

We’ll also develop an action planand targets for the continuedimprovement of the lead-times we need to process applications.

> Application processing times areregularly monitored and will bepublished as part of NESTA’sCustomer Care Charter goingforward. All targets were met,except for the processing of I&Iapplications. This partly reflectsthe fact that evaluation ofapplications often leads to areworking of proposals in orderto strengthen them, extendingthe decision-making timeframe.However, measures have been introduced to addressprocessing times by tighteningthe criteria for full applicationsand reviewing the allocation ofresources.

1.3 Strengthen projects by improving the non-financial assistance offered to awardees.

We will undertake a survey ofawardees’ needs and reviewmentoring across all programmes.

> An awardee survey wasundertaken in the summer of2003. A mentoring review wasundertaken during the spring of2004 leading to an action planfor implementation in 2005/06.

Review of 2003/04 Strategic aims and performance against objectives and targets

Shobana JeyasinghFellowship£25,000, London

A choreographer, dancerand respected culturalcommentator who is takingtime away from ‘output’ torefresh her own creativity.

Ben WrightFellowship£73,794, London

A choreographer, directorand dance educator who isinvestigating the sharedqualities of dance, theatreand film, to develop a moreindividual and challengingartistic voice.

February ’04

Barbara Anderson, Box Consultants LtdInvention and Innovation£20,000, London

A further award to developa structural buildingmaterial that doubles as amultimedia display system.

SoundProofLearning£37,970, North West

To teach Liverpoolschoolchildren the physics behind music and composition, through a series of Science Skiffle workshops.

Martin Pemberton,Safeguide Technology LtdInvention and Innovation£60,000, West Midlands

A further award to developSafeguide, a revolutionarysteering mechanism forpublic transport systemssuch as trams.

Bruno MartelliInvention and Innovation£62,000, London

A further award to develop new methods ofinteraction between liveand virtual performers inthe context of a businessplanning process.

1.4 Provide follow-on funding to enable projects that have clear potential to overcome a particular hurdle, reach a milestone or achieve roll-out or replication.

We will invest up to £1.3 millionInvention and Innovation awardspend on follow-on funding forappropriate projects (in addition to the figure in 1.2).

> £1.2 million was invested in 18 projects through follow-onfunding awards.

1.5 Help the development of awardees and projects beyond the time period of their award.

We will develop exit strategies withall 17 Fellows who are approachingthe end of their funding period.

> A completion strategy andinterview has been developed.The purpose of this is to ensurethat awardees leave NESTA andenter their industry sector with a clear focus and constructiveplans. For NESTA, learning isderived for future programmedevelopment. The strategy wastrialled with 5 Fellows, and thenbegun with 10 further Fellows.

Our aim is that 10 percent ofInvention and Innovation projectsachieve further investment orsupport from other parties.

> 16 percent of Invention andInnovation projects (26 awards)had achieved further investmentor support from other parties by the end of the financial year.Over the past year some £3.5million has been invested intoour projects.

1.6 Develop stronger relationships with organisations who can help us to find the most suitable applicants.

We will increase regional representation,recruiting national representatives forWales, Northern Ireland and at least one English region.

> The Head of Nations and Regions andNational Development Managers forWales and Northern Ireland have been recruited, joining the ScotlandDevelopment Manager already in post. The team is responsible for thedevelopment and delivery of NESTA’sNations and Regions RepresentationStrategy, including engagement withthe English regions.

1.7 Support competitions and challenges to attract applicants to our funding programmes.

We will support at least 5 competitions or challenges.

> 6 competitions have been supportedduring the year including BBC TV’sInnovation Nation, which challenged the nation to come up with new ideasfor products and services, and theMedical Futures awards, for innovationin healthcare.

2. To develop new approaches to, and areas for, supporting creativity

2.1 Encourage more young people to study and develop careers in the sciences.

We will maintain the legacy of PlanetScience, which closed in July 2003. Of the planned 40 Learning awards, we aim to make 10 in the field of sciencecommunication.

> Legacy Planet Science projects,including the website, have continued to be developed and supported and 10 new awards have been made in the field of science communication.

2.2 Develop, through Information and Communication Technology (ICT), new ways to enrich and transform the learning landscape.

We aim to take 12 projects into prototypeproduction through NESTA Futurelab.

> 21 educational ICT projects have beentaken into prototype production throughNESTA Futurelab. These prototypes are developed in partnership with theeducational, media and technologycommunities and demonstrate how

new technologies can be used to support new approaches to teaching and learning.

2.3 Test approaches to the teaching of entrepreneurship in schools.

We will pilot a new Learning initiative whichwill focus on enterprise education and, ofthe planned 40 Learning awards, we aim to make five in this area.

> This strand of the programme has beendeveloped and four awards have beenmade. Research has been undertakento maximise NESTA’s impact in thisarea. The main focus of NESTA’sapproach will be enterprise andcreativity, and ideas that help broadenthe notion of what enterprise means.

2.4 Provide opportunities for younger people to develop their creative potential.

We will pilot a new Fellowship initiativewhich will support up to 65 young people.

> Our Ignite! initiative was launchedduring the year and 17 creativeworkshops were held with around 450young people, aged 10-15, attending. In addition, 3 weekend residentialcreativity labs were held for 60 youngpeople. 48 awards were approvedsubject to contract by the end of thefinancial year.

> The project based Creative Sparksstrand of Ignite!, for 16 to 21 year olds,made 5 awards. Ignite! made a furtheraward to a school to support a processof creative consultation.

2.5 Help art and design graduates form creative businesses.

We aim to launch our Graduate PioneerProgramme by October 2003, offering up to 35 people the opportunity to attend abusiness ‘Academy’. Up to twelve will thenbe offered funding and non-financialsupport to set up in business.

> Thirty graduates attended the Academyto learn about entrepreneurship and 11Pioneer awards were approved subjectto contract by the end of the financialyear. In addition we contracted 4Graduate Scholarships.

2.6 Support the development of exceptional achievers.

We will roll out our Dream Time Fellowshipawards, having opened for application inMay 2003. We aim to make 12 Dream Timeawards.

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NESTA annual report 2003/04 March ’04

Mike Hobson, MetropolisData Consultants LtdInvention and Innovation£110,000, East of England

To adapt and developcommercial applications for techniques used inastronomy, developedduring his tenure as aNESTA Fellow, which will enable a variety ofindustries to achievesharper definition fromdigital images.

Keith Hall, Bruntel Engines LtdInvention and Innovation£86,700, South East

To develop an alternative to gasoline and dieselengines, which is usedmostly in vehicles, butwhich also has applicationsfor sectors such asstationary power, marineand aviation.

Michael Medora,Colourholographic LtdInvention and Innovation£75,000, East of England

A further award, providingbridging finance to supportthe expansion in sales ofMoviPoster, the world’s first moving, full-colour,interactive 3D posteradvertisement.

BusinessDynamics TrustLearning£151,245, Northern Ireland,Wales, Scotland

To support a series of Blue Skies road shows, to inspire and equip young people to set up their own businesses,enabling the project toexpand into Wales andNorthern Ireland.

Mark JonesFellowship£10,000, North West

An interdisciplinarian whowill work in a productionand broadcast company togain a better understandingof the pre-productionprocesses for televisionseries development.

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> Ten Dream Time Fellowshipswere awarded to exceptionalindividuals to innovate andexplore new ideas emergingthrough periods of personaldevelopment. In the mix for2003/04 are a researchgeneticist, a dancer, an engineer,a web artist, a plant biologist, acomposer, a sound engineer, astage designer, a performanceartist, a choreographer and apsychologist.

2.7 Encourage science centres and museums to develop innovative approaches to interpretation.

We will pilot a new Learninginitiative which will exploreinnovation in scientific interpretationand, of the planned 40 Learningawards, we aim to make 5 in this area.

> 3 awards have been made in this field. These involve 6museums and science centresand support ideas that developnew, innovative techniques andinstallations that promotelearning and dialogue withvisitors.

2.8 Improve our understanding of the priorities, processes and learning developed by others.

We will establish mechanisms forgathering and sharing intelligenceand input, where appropriate, tothose policy developments whichaffect NESTA’s ability to deliver itsstatutory role.

> A weekly internal briefing bulletinhas been developed to shareinformation on recent researchfindings and policy initiatives inareas of interest to us.

3. To influence the activity of practitioners, funders and policymakers

3.1 Evaluate the projects we have supported.

We will prepare a framework forproject evaluation to ensure that all projects receive appropriateevaluation after their funding endsand that we can keep track of long-term achievements and extract thelearning on particular disciplines,themes and issues.

> A Project Evaluation Frameworkwas developed, and evaluationshave been undertaken onrecently finished projects.

3.2 Disseminating our learning to key audiences.

We will publish all significantfindings from research andevaluation – either in print or on our website.

> Key publications have includedNew Solutions to Old Problems:Investing in the CreativeIndustries, two polls of investorsand the public about the value ofthe creative industries, a thinkpiece on the creativity of youngpeople, and two literaturereviews on Games and Learningand Informal Learning andTechnology. These are availableboth in print and through ourwebsite. We have staged twoconferences, The Future of Assessment and DigitalDialogues, which showcased our research and developmentwork in educational ICT.

run by the ICA in London. In addition 8 networking events were organised by NESTA for its awardees.

We will increase traffic to our website by 50 percent over 2002/03 levels.

> There were 669,838 visitor sessions and241,015 unique visitors during 2003/4,representing increases over 2002/3 of86% and 93% respectively.

5. To strengthen NESTA as an organisation

5.1 Ensure that our staff, committee members and trustees are equipped to address current and future challenges.

We will co-ordinate a cross-organisationaltraining programme.

> A learning and development plan hasbeen developed and implementedproviding a comprehensive portfolio of generic learning and developmentactivities to support the NESTAbusiness plan. Selected activities arealso made available to awardees.

We will implement a managementdevelopment programme for existing staff.

> The management developmentprogramme, with an option of followingthe CMI accredited Diploma inManagement, was officially launched in March with uptake of over 30individuals. A talent managementstrategy is being developed, thefoundation of which is the managementdevelopment programme.

5.2 Derive greater value from our overheads by becoming more efficient as an organisation.

We will refine and streamline ourapplication assessment processes.

> Application processes are beingreviewed and amended in conjunctionwith the implementation of a new Award Management System. Applicationsuccess rate and processing times have been incorporated into NESTA’sCustomer Care Charter to be publishedin 2004/05.

We will undertake a benchmarking review and develop a plan for improvingperformance in benchmarked areas.

> We have carried out a review of keyperformance indicators, includingcomparisons with a number of otherpublic bodies.

> In addition, two key efficiency measures have been agreed with the DCMS (see page 4).

5.3 Secure further resources from a range of public and private sources and from a return on our investments.

We will implement a new long-terminvestment strategy enabling expenditure to be maintained at budgeted levels.

> The investment strategy has now been implemented, capitalising onchanges to NESTA’s investment powerswhich facilitate the use of longer-terminvestments, increasing the stability of returns.

We will seek to raise at least £350,000 insupport from public and private sources.

> Funding of £980,000 has been raisedfrom both public and private sources tosupport the NESTA Futurelab project.

5.4 Develop a higher profile amongst political and non-political opinion formers, including the media.

Initial approaches to 100 key contactswithin the UK Parliament, the ScottishParliament, the National Assembly of Wales and the Northern Ireland Legislative Assembly.

> Against this three year target we have met or spoken with around 50Parliament or Assembly members, and have had written contact, either in relation to awards or our journalpublications, with a further 60. Rt Hon Patricia Hewitt MP, Secretary of State for Trade and Industry, and Ian Gibson MP, Chair of the Science and Technology Select Committee,visited our offices.

> We delivered a briefing session for the Welsh Assembly, hosted a creativeindustries dinner with the ScottishExecutive in Glasgow, and held a fringe event at the Conservative Partyconference in Blackpool.

> We have met numerous other politicaland non-political stakeholders acrossthe UK to discuss issues of mutualinterest.

We aim to increase media coverage forawards and projects by 25 percent.

> Positive media coverage for awards andprojects has increased by 42 percent.

> The National Audit Office’sreport on NESTA was alsopublished last year and isavailable in print, or throughtheir website at www.nao.org.uk

4. To promote the value of creativity and innovation

4.1 Engage the public in the activity of creative learning.

Of the planned 40 Learning awards,we aim to make 10 in this area.

> 21 new awards were madethough the core Learningprogramme in this field.

4.2 Develop campaigns on particular issues, possibly in partnership with others.

We will develop a campaignframework, commission researchand disseminate findings.

> Based on research mentionedabove, we launched a campaign around investing in the creative industries, which has achieved good media coverage and interestfrom a number of otherorganizations. Work in 2004/05will build on this.

> We have responded to 9consultations on Governmentpolicy.

4.3 Develop or sponsor fora, which promote and celebrate the UK’s creativity, encouraging applicants to NESTA and sharing our learning.

We will develop 10 events,conferences or exhibitions.

> 19 events were sponsored,including the CambridgeEnterprise Conference forentrepreneurs and investors and the Foundation for Scienceand Technology’s Conference on Creativity in Science,Engineering and Technology. A further 24 networking eventswere sponsored for peopleworking within the creativeindustries, via the CreativeEntrepreneurs’ Clubs at theLighthouse in Glasgow and theCultural Entrepreneurs’ Clubs

Andrew Mearns Spragg,Aquapharm Bio-Discovery Ltd, developing newapproaches to the search for marine compounds.

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NESTA annual report 2003/04 NESTA annual report 2003/04

UK innovation. Here are the 233 awards, sponsorships andcompetitions supported in 2003/04.

Chris Dunn, Scala Technology Ltd£70,000, April 2003London

To develop, for commercialrelease, coding that will make high quality sound more readily available overalready congested Internetconnections.

Martin Lowson, AdvancedTransport Systems Ltd£125,000, April 2003South West

A further award to supportthe business development ofa new type of energy- andcost-efficient urban transport,successfully tested in Cardiff in January 2003.

Martin Pemberton, Safeguide Technology Ltd£10,000, April 2003West Midlands

To develop a business plan for Safeguide, a revolutionarysteering mechanism forpublic transport systems such as trams.

Martin Philcox£15,000, April 2003East of England

To help develop prototypes of intelligent surgicalinstruments for use inorthopaedic surgery.

Colin Barker, Robat Ltd£30,000, May 2003North West

A further award to developand market an innovativecircuit-board tester thatovercomes some of theproblems of producing high-quality telecommunicationsystems and computernetworks.

Richard Barker, Ashe Morris Ltd£100,000, May 2003London

To develop a prototype and commercialise abreakthrough in heat transfertechnology which offers moreprecise and fast temperaturecontrol, improving productivityin industries such aspharmaceuticals and finechemicals.

Nick Clarke, Addictive Television Ltd£50,000, June 2003South East

To produce a series of DVDsto bring visually-led musicinto the mainstream, helpingto make the UK a hotbed ofimaginative recording talent.

Leslie Couzens, Demetal Ltd£50,000, May 2003North West

A further award to developand market a prototype plant for removing heavymetals from incineratedsewerage waste.

Neil Graham£6,700, May 2003Scotland

To support the earlydevelopment of a newdressing, which is moreconvenient for medics and ensures better wound hygiene.

Dr Wei Jen Lo, Orthogem Ltd£90,000, May 2003East Midlands

To develop a new, poroussynthetic bone substitute for use in orthopaedicprocedures, which willremove the need for bonegrafts, saving hospitalsmoney, surgeons time andpatients discomfort.

Sue Riddlestone,BioRegional Minimills UK Ltd£90,500, May 2003South East

To develop technologies to safely and cheaplymanufacture paper fromstraw, reducing pressure on the world’s forests and rivers.

Carl Griffiths, OpticalReference Systems Ltd£60,000, June 2003Wales

To develop a new way of monitoring and controlling the production of semiconductors which are at the heart of allelectronic goods, frommobile phones to PCs.

Robert Rees£15,000, June 2003North West

To further investigate thepossibility of developing anatural flavouring for use in bread and fermented yeast products.

Arnold Wesker£13,250 June 2003Wales

To support a live studiorecording of The Kitchen,which was premiered inJapan in 2000, aimingtowards a UK/US production.

David Fenn, Wright, Fenn and Co Ltd£80,000, February 2004 East Midlands

A further award to developpharmaceutical packagingtechnologies for the efficientand safe dispensing ofmonitored dosage systemprescriptions to elderlypeople and their carers.

See Lip Sim, Iles Ltd£62,000, July 2003South East

To support the trading side of a company that markets a range of high quality,affordable and energy-efficient light switches, andto develop the technology for a dimmable, fluorescentlight batten and fitting.

Dr Johannes Zanker, Holvitz Ltd£60,000, July 2003South East

To enable the early-stagedevelopment and a feasibilitystudy for a new type of 3-D X-ray security scanner,which will reveal hidden orobscured objects in baggage.

Noel Warner£15,000, July 2003West Midlands

To develop a new coal-basedmethod for producing liquidsteel on a continuous basis.

Box Consultants Ltd£100,000, August 2003London

A further award tocommercialise a structuralbuilding material thatdoubles as a multimediadisplay system.

Mark O’Connell, Probe Scientific Ltd£98,989, August 2003East of England

To develop a new monitoringdevice which samples bloodwithout removing it from thebody, enabling automatic and continuous analysis of a patient’s blood chemistry.

Jonathan Morgan, Hypertag Ltd£150,000, December 2003East of England

A further award to developtechnology which givesmobile phone users one-click access to web pages by pointing and clicking atadvertising posters ormuseum displays – alongsideco-investors which includedthe Cambridge UniversityChallenge Fund.

David Peall, AB TechnologyCambridge Ltd£150,000, September 2003East of England

To support the productdevelopment and marketingof Gaslok, an early warningdevice that prevents ozone-depleting gases leaking fromcommercial refrigeration andair conditioning systems.

Neil Polwart, Hydrosense Ltd£15,000, September 2003Scotland

To help develop a prototypefor a portable kit thatrecognises pathogens in water.

Leeroy Brown£38,500, October 2003West Midlands

To develop and market Airjack2000, a new airbag car jackwhich will end the strain andgrime of roadside wheelchanges.

Mark Goulthorpe, DECOi Architects£30,000, October 2003East of England, London,International

A further award to developHyposurface, a responsivesurface that reacts physically to eventshappening around it.

Simon Harris, S Diagnostics Ltd£90,000, October 2003Surrey

To develop a method ofmonitoring glucose control indiabetics that is substantiallyeasier to use, and quicker,than existing methods.

Robert Marshall, Heritage Theatre Ltd£12,000, October 2003London

A further award to developand market multi-camera,live video recordings of great theatre, bringing it to a much wider audience, andgenerating an extra incomesource for the artists involved.

Alastair Wayne, AppliedPsycholinguistics Ltd£15,000, October 2003East of England

To develop the business casefor Rosetta, a stand-alonepiece of software and contentthat enables any DVD playedon a computer to become alanguage learning resource.

Neil Bevan, BevanEngineering Ltd£6,400, November 2003West Midlands

A further award to market a new type of compressor air bleed valve for gas turbine applications, aimed at bringing major benefits to the aerospace industry,improving engineperformance, reliability and maintenance.

Robert Boyce, IceRobotics Ltd £75,000, November 2003Scotland

A further award to develop andmarket a biomimetic roboticmilking system.

Roy Dixon£10,000, November 2003North East

To help him source andprepare for appropriatefunding sources for a systemwhich clears anti-personnellandmines and, at the sametime, prepares the ground for agricultural use.

Andrew Fentem £100,000, November 2003London

To commercialise innovativetouch screen technology in the music industry.

Claire Lomax, Flux Magazine£10,000, November 2003London

To develop a web-based space that enables artists andprogrammers to collaborateand produce real innovation in web-based art.

Tim Barnes, Virtual LightfieldCompany Ltd£15,000, December 2003London

To develop computer softwarefor the rendering of graphicsand other images.

Jeremy Goldstein, Carnesky’sGhost Train Ltd£100,000, December 2003London

To create a real andspectacular ‘ghost train’ ride,which includes multi-medialive performance to exploreissues to do with migration.

Frieda Hughes£20,000, December 2003London

To complete an ambitiousautobiographical project, Forty Years, which uses bothpoetry and large-scaleabstract paintings to chart the first 40 years of her life.

Richard Muirhead, Tideway Systems Ltd£100,000, December 2003London

To fund the commercialrelease of software that will automatically track and audit changes to complex IT environments, bringingsecurity and risk management benefits.

Bob Carr, Nanosight Ltd£100,000, January 2004South West

To develop a new opticaldevice for use innanotechnology that hasgroundbreaking analyticalcapabilities and numerousapplications, including defence against bio-terrorism.

Barbara Anderson, Box Consultants Ltd£20,000, February 2004London

A further award to develop astructural building materialthat doubles as a multimediadisplay system.

Joseph Cefai, Starbridge Ltd£120,000, February 2004Wales

To develop technology whichwill enable diabetics to receiveinsulin through a tiny pump,worn on the skin like a plaster.

Roger Eden, Clove BusinessSystems Ltd£71,000, January 2004London

A further award to develop a new ticket and passportprocessing system to speed up airport check-ins, lowerairline operational costs andimprove security.

Philip Evans, Parry PeopleMovers Ltd£10,000, February 2004West Midlands

To develop an ultra-light railsystem using automotiveengineering.

Kelly Forsyth-Gibson£6,200, February 2004Scotland

To develop a protective safety hat for infants.

Bruno Martelli£62,000, February 2004London

A further award to developnew methods of interactionbetween live and virtualperformers in the context of a business planning process.

Martin Pemberton, Safeguide Technology Ltd£60,000, February 2004West Midlands

A further award to developSafeguide, a revolutionarysteering mechanism for public transport systems such as trams.

Keith Hall, Bruntel Engines Ltd£86,700, March 2004South East

To develop an alternative togasoline and diesel engines,which is used mostly invehicles, but which also hasapplications for sectors suchas stationary power, marineand aviation.

Mike Hobson, Metropolis DataConsultants Ltd£110,000, March 2004East of England

To adapt and developcommercial applications for techniques used inastronomy, developed duringhis tenure as a NESTA Fellow,which will enable a variety ofindustries to achieve sharperdefinition from digital images.

Andrew Mearns Spragg,AquaPharm Bio-Discovery Ltd£25,000, March 2004Scotland

A further award to develop new approaches to bio-prospecting marine compounds anddeveloping antibiotics andpharmaceuticals potentiallycapable of satisfying unmetclinical needs.

Michael Medora,Colourholographic Ltd£75,000, March 2004East of England

A further award, providingbridging finance to support the expansion in sales ofMoviPoster, the world’s first moving, full-colour,interactive 3D posteradvertisement.

National Invention Strategy£35,000, January 2004UK-wide

To make recommendations, at a national level, for the development andimplementation of measureswhich will help increase thenumber of inventions whichbecome a commercial reality.

Invention and Innovation

Sue Riddlestone, BioRegional Minimills, I&I

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Creative Pioneer Academy£292,159, August –December 2003

To set up and manage The Academy, an intensivecourse that develops theentrepreneurial skills ofcreative individuals who want to develop a new type of business, and to supportthe 30 individuals whoattended it.

Graduate Scholarships4 scholarships worth a total of £57,530October and December2003

Partnerships withManchester MetropolitanUniversity and the Centrefor Fashion Enterprise to enable them to offerscholarships that enhancestudents’ entrepreneurialskills.

British Antarctic Survey£7,000, April 2003London

To work with NESTA Learningawardees, VJs.net, to provide an exciting hands-onopportunity to create musicand visuals inspired byAntarctic science.

The Creativity CentreEducational Trust£25,000, April 2003South East

To pilot Science Alliance, an initiative to raise theaspirations and achievementsof young people of African, African-Caribbean and otherminority ethnic backgrounds,particularly in science andtechnology

Channel 4/Media 19£110,000, May 2003UK-wide

To run Bedroom Britain, a campaign to identify andcelebrate new, young creativeand entrepreneurial talentfrom across the nation, usingtelevision, online, educationand a series of key events inmajor cities around the UK.

Caol Primary School£200,000, May 2003Scotland

To enable pupils to run Room13, an autonomous arts studioand to develop further Room13s in other schools.

Glasgow School of Art£95,104, May 2003Scotland

To enable the Digital DesignStudios to use the latest 3-Dtechnology to develop a newmodel for learning, whichdevelops design and art skillsin students with an aptitudefor science and technology.

Hi8us£10,000, May 2003West Midlands

A further award, following a series of successful pilots in schools, to helpcommercialise ‘e-drama’,which aims to develop theemerging talents of youngpeople at risk of socialexclusion.

Novartis Pharmaceuticals UK£15,300, June 2003UK-wide

To maximise the impact of the Visions of Science awards,enabling them to work withthe Association for ScienceEducation to link with schools to encourage interest in science.

Performing Arts Labs Ltd(PAL)£50,000, June 2003South East

A further award to enable PAL to developexperimental ‘Labs’ wheretalented individuals can push the boundaries of their creative practice.

Children’s Palaces£20,735, June 2003Yorkshire and Humberside

To establish the demand for a Children’s Palace concept in Yorkshire and to identifyand consult with potentialproviders in the Yorkshireregion.

Mary Walters, St NicholasSpecial School£9,000, June 2003Scotland

To explore ways ofencouraging and developingcreativity in young people withlearning difficulties by usingdigital technology, rather than language, as a primarycommunication tool.

Vu2 Media£210,618, June 2003East Midlands, North West,West Midlands, Yorkshire andHumberside

To further develop a VirtualLearning Environment foryoungsters who have fallenoutside the conventionaleducation system due to illhealth, behavioural problemsor social difficulties.

Garry Kennard, Winchester Festival of Arts and Science£7,000, June 2003South East

To develop a new festival of arts and science inWinchester that examinesthe effect that art has on the human brain.

Cape Farewell, Cape Farewell Ocean Ltd£119,660, July 2003London

Using film taken during avoyage to the Antarctic to develop and pilot aneducational resource for 14-16 year olds studying for Geography GCSEs (key stage 4).

Dream Ireland Ltd£82,500, July 2003Northern Ireland

To support DreamlabGeneration, which will teachdigital technology and offer‘insider knowledge’ of the creative industries toschoolchildren.

Brian J Ford£1,255, July 2003East of England

To help create a booklet on how to use digitalcameras.

Professor GeoffreyHarrison, RECORD&T£30,000, July 2003UK-wide

To work with the Qualificationsand Curriculum Authority toresearch the best Design andTechnology activities in theUK which inspire schools anddevelop pupils’ creativity.

Neston Primary School£35,057, July 2003South West

To encourage pupils’ interestin science and engineering,by developing the school’sNestonauts programme and building the Moonbaselearning facility in theirplayground.

Centre for Astronomy and Science Education£33,056, August 2003Wales

To stage a series ofconferences where schoolchildren use science fiction to stimulate theirimaginations and learn more about science.

HyperJam£25,358, August 2003London

To develop HyperVERSE, an online writing tool, which intends to give young students a betterunderstanding of the formand structure of poetry.

Bath and NE Somerset ArtsDevelopment£75,000, December 2003South West

A further award toconsolidate and promote theachievements of 5 x 5 x 5 =Creativity in the Early Years,which enables artists,educators and culturalcentres to work with children aged three to six.

BreakThru Films Ltd£19,300, September 2003London

To support the developmentwork for a definitive film ofPeter and the Wolf, which can be used by orchestrasaround the world during liveperformances.

Camden Arts Centre£70,130, September 2003London

A further award to develop amentoring programme thatnurtures talent among youngpeople who are disaffectedwith conventional education.

Future Physical Ltd£15,000, September 2003East of England, London,Yorkshire and Humberside

Future Physical’s independentarts production unitshinkansen is exploring whataudiences want and need from interactive digital art;NESTA is supporting the six-month research project.

XPT Ltd£17,300, September 2003London

A further award to develop an online, interactive dramawhich aims to interest girls in science by sharing the life,loves and university career of a fictional ‘virtual’ physicsstudent, Jemma.

Soda Creative Ltd£200,000, October 2003London

To develop Sodaplay, a flexibleonline toolkit which helpsschoolchildren build their own robots and models.

At-Bristol£300,000, November 2003East Midlands, East ofEngland, South West

To support Learning on theMove, which uses newinteractive mobiletechnologies to engage visitors at learning attractionssuch as museums andgalleries.

The Art Department£6,650, November 2003North West

To support Music from theMoon, a pilot project toencourage primary schoolchildren to interact with asculptural organ in Blackpool,which makes music from the movement of waves at high tide.

Brighton Festival£59,350, November 2003East of England, South East,West Midlands, NorthernIreland, Wales

To expand Brighton Festival’sAdopt an Author project, whichbrings children in touch withpopular writers.

The Royal National Theatre£56,950, November 2003London

To support Teamwork, a projectthat aims to partner youngpeople working in digitalmedia with arts professionalsto create new forms of liveperformance.

Science Line£3,800, November 2003UK-wide

To explore the possibility ofextending a Science Line type of service; free scienceinformation service via email,telephone and online.

Scottish Executive£18,910, November 2003Scotland

To provide a consultant toadvise the Scottish Executiveon a new grant scheme whichaims to boost science skillsand knowledge in Scottishschools.

Landesign£132,775, December 2003London, South East, West Midlands

To create ‘inter-re-active’software that allows childrenwith severe learningdifficulties to interactintuitively and creatively with a stimulating environment.

RSA£13,000, December 2003London

To support the launch video for the RSA Frameworks for theFuture conference to help mapout a new way forward for themusic recording industry.

Webaudio Ltd£65,000, December 2003London, North East, North West, South West

To support Project V, whichgives school children thechance to make audioprogrammes for broadcast on the internet.

The Royal Institution£141,000, January 2004London

To support a pilot schemewhich uses new interactivemobile technologies to helpbring key scientific discoveries to life.

Teach First£104,250, January 2004UK-wide

To support a competition foruniversity students that aimsto engage them in developingcreative approaches toteaching 11 to 14 year-olds inmaths, science, IT and designand technology.

Novartis Pharmaceuticals UK Ltd£9,500, February 2004UK-wide

To support the 2004/05 Visions of Science awards,maximising their impact inschools through the provisionof educational materials.

Metropolitan Film School£21,500, February 2004North West

To support an eight-weekfilmmaking course inLiverpool’s media centre,working with top names in the industry.

Sonic Arts Network£166,190, February 2004UK-wide

To encourage children toexplore their environments by creating digital postcardswhich they can swap over the Internet.

SoundProof£37,970, February 2004North West

To teach Liverpoolschoolchildren the physicsbehind music and composition,through a series of ScienceSkiffle workshops.

BusinessDynamics Trust£151,245, March 2004Northern Ireland, Wales,Scotland

To support a series of BlueSkies road shows, to inspireand equip young people to set up their own businesses,enabling the project to expand into Wales andNorthern Ireland.

Cape Farewell, Cape FarewellOcean Ltd£25,000, March 2004London

To work collaboratively withNESTA awardees HeatherAckroyd and Dan Harvey to evolve methods ofrepresenting fieldwork,created in the extreme HighArctic, in exciting new formatsfor exhibition in the UK.

Creative Pioneer program

me

Learning

Royal College ofPaediatrics and Child Health£10,000, July 2003London

To support a seminar for child medical andeducation professionals,which explored theeducational opportunitiesand challenges for childrenwith severe disabilities.

Simfonec School TeachersInnovation Programme£14,500, July 2003London

To support the Teachers’Innovation Programmewhich equips teachers withthe tools and knowledge to promote enterprise andinnovation in schools.

Special Steps£80,000, July 2003South West

To support the Living withScience research project,which aims to offer guidance on the effective use of Information andCommunication Technology(ICT) in science lessons for students with specialneeds.

Artefact Projects£31,820, August 2003North West

To support Explore, Expand,Exchange, a programme for artists and academicsto work together to attractnew audiences to museumsin Manchester.

Artswork£217,058, August 2003South East

To support the FutureSomething programme,which nurtures youngpeople’s creative desires, combining new technologies withtraditional concepts of professionalapprenticeships.

Braunarts£23,500, August 2003London

To investigate thepossibility of ‘musicalising’real-time data from spacescience experiments.

Novartis Pharmaceuticals UK Ltd:Visions of Science, Learning

3534


Fellowship Mark Miodownik

£69,000, May 2003London

A materials scientist who willdevelop a unique lab spaceand introduce new avenuesto traditional methods ofscientific research.

The British Centre forLiterary Translation£15,000, June 2003East of England

To support a three-yearlecture programme, incommemoration of the lateNESTA Fellow, WG Sebald, at the Royal Festival Hall.

Peter Beard£52,950, July 2003London

An architect and teacher who wants to create adetailed photographic record of working industriallandscapes in transition.

Bernadine Evaristo£74,974, July 2003London

A poet, author and dramatistwho is undertaking researchinto the historical presenceof black people in 15thCentury Europe anddeveloping her writing skills.

Allan McRobie£74,750, July 2003East of England

A structural engineer andacademic who is exploringthe connections betweenengineering, maths,emotions, imagination and the humanities.

James O’Neill£54,750, July 2003London

An emerging television and radio writer who isresearching the Jewish andIrish storytelling traditionsand searching for commonthreads between differentcultures.

Tanja Farman£59,926, September 2003North West

A creative producer who isdeveloping her skills, aimingto become an internationalartistic producer.

Sonya Boyce£68,356, November 2003London

A fine artist, whose workexplores race, identity,representation, nationalityand gender, aims to initiatecollaborations with at leastten other artists workingwith similar themes.

Kevin Carey£72,949, November 2003South East

An ICT pioneer andcampaigner for social justice who is using digitalbroadcasting to improvepublic access to information,particularly for elderly and disabled people.

Zerbanoo Gifford£72,750, November 2003South East

A writer who is bringingtogether some of the world’smost influential and inspiringwomen to generate creativematerial that will act as acatalyst for her own literarydevelopment.

Emma Jeffs£63,304, November 2003London

A surface materials designerwho is combining hercraftsperson’s imaginationwith knowledge of scienceand industrial technology touncover new materials andproduction processes.

Ruth Nutter and Josette Bushell-Mingo£74,820, November 2003London

A performer and producerwho are using their jointFellowship to continue theirwork to bring Black-led artinto mainstream theatre.

John Taylor£74,903, November 2003London

A musician and composerwho is creating a multimediasymphony that encapsulatesa mixture of sounds andstyles from the Africandiaspora.

Andrew Constantine£74,110, December 2003East Midlands

A leading British orchestraconductor who is advancinghis expertise, creativity andprofessional development.

Freddie Kofi£74,845, December 2003East Midlands

A singer, songwriter andproducer who is redefiningBritish gospel music, making it more relevant tohis own background and the multicultural society he grew up in.

Sarah Maguire£62,900, December 2003London

A poet who is exploring the language and context of Middle Eastern poetry,collaborating with literaltranslators to bring a newcanon closer to UKaudiences.

Lizzie Powell£28,580, December 2003West Midlands

A young lighting designerwho is trying out her creativeideas for theatre design.

Sarah Angliss£40,000, January 2004South East

An acoustic engineer andcomposer who is exploringnew ways to use sound inmuseums and sciencecentres.

Carol Brown£32,000, January 2004South East

A dancer and choreographerwho is taking dance out ofthe confines of the studioand exploring how spacecould play a more prominentrole in performance.

Brian Ford£75,000, January 2004East of England

An independent scientist who is carrying outinterdisciplinary scientificresearch in neglected fields.

Stephen Grand£25,000, January 2004South West

An Artificial Intelligenceexpert who is working inpartnership with NESTAFuturelab to develop Create-a-Creature, a learning toolfor ecology and biology.

Jeremy Herbert£35,460, January 2004London

A theatre designer who istaking time away from thepressure of the conventionalproduction process to create a body of inspiringand original work.

Leslie Hill£40,000, January 2004London

A contemporary artist who is furthering her work withleading scientists and artsaudiences, to explore therelationship between smell,memory and emotion.

Shobana Jeyasingh£25,000, January 2004London

A choreographer, dancer and respected culturalcommentator who is takingtime away from ‘output’ torefresh her own creativity.

Tim Hunkin£33,500, January 2004East of England

A cartoonist and engineerwho is switching people ontotechnology by showing themhow creative and excitingelectricity can be.

Chris McCabe£26,903, January 2004West Midlands

A scientist and novelist whois developing a new way ofwriting, using the skills hehas acquired during hiscareer in science.

Anne Osbourn£36,000, January 2004East of England

A plant biologist who isexploring ways of usingcreative writing to makescience more accessible to society.

stanza£40,000, January 2004London

A cutting edge artist who is investigating newtechnologies and theirrelationship to artisticpractice.

Richard Wiseman£36,890, January 2004East of England

A magician turned prominent psychologist, who is exploring ways to bring a sense of wonder and curiosity to thecommunication of science.

Ben Wright£73,794, January 2004London

A choreographer, director and dance educator who isinvestigating the sharedqualities of dance, theatre and film, to develop a moreindividual and challengingartistic voice.

Liz Crow£75,000, February 2004South West

A writer, filmmaker anddisability activist who isexploring how she cancombine her creative activity with her activism.

Martha Fleming£75,000, February 2004North East

A visual artist, curator andacademic who, by exploringparticle direction, radioastronomy and spectroscopy,aims to make a seriouscontribution to scientificmethodology.

Paul Granjon£74,636, February 2004Wales

A visual artist, shortlisted torepresent Wales at the VeniceBiennale, who is using scienceand technology to explore therelationship between humansand machines.

Jeremy Millar£50,175, February 2004South East

A freelance curator, writer andartist working in lens-basedand digital media, who isextending his creative practiceand filmmaking skills.

Clore Duffield LeadershipProgramme3 awards totalling £105,000,March 2004

To enable three awardees tostrengthen their knowledge of leadership and hone theiroperational skills.

Crucible Crucible – part of NESTA’s

Fellowship programme

Crucible laboratories£91,781, March 200426 awardsUK-wide

To set up and run a series of residential weekends for26 postdoctoral scientists to undertake career andpersonal development.

Daphne Jackson Trust£30,000, March 2004London

To support a ‘returner’ toscience, Bea Lyndsay, who is a leader in the field ofchromatography and x-rayphotoelectron spectroscopy.

Ed Gillespie, Futerra SustainabilityCommunications£15,000, March 2004 London

FUTERRA, communicationsspecialists on sustainabledevelopment, are workingcollaboratively with NESTAawardees VJs.net to producea new genre of audio-visualcollage.

Keith Griffiths£64,778, March 2004South East

A film producer who isresearching, developing andcommunicating a new filmand publishing distributionmodel, mainly relating to DVD.

Mark Jones£10,000, March 2004North West

An interdisciplinarian whowill work in a production andbroadcast company to gain abetter understanding of thepre-production processes for television seriesdevelopment.

Sarah Gurr£65,737, March 2004South East

A fungal biologist who isexploring new treatments for athlete’s foot andringworm and improving her own communicationsskills to share her passionfor science with adults and schoolchildren.

Eltham Green School£2,000, March 2004London

To support creativeconsultation with groups of young people and teacher inset opportunities.

Jon Molinari£11,700, March 2004London

To develop a personalapproach to documentaryfilmmaking.

Laura Cook£7,650, March 2004South West

To work with newentertainment technology and to explore aspects ofJamaican culture.

Martin Rosinski£4,000, March 2004North East

To enable this talentedelectronics designer to visit overseas centres ofexcellence.

Ignite!

Philip Latim£11,700, March 2004London and East Midlands

To work with an establishedmusician on writing andrecording fusions of musicgenres.

Sacha Berrisford£11,700, East and West Midlands

To work with a dramaturg ondeveloping scripts and otherforms of creative writing.

Carol Brown, NESTADream Time Fellow

Ben Wright,NESTA Fellow

Philip Latim, Ignite! Awardee.

IceRobotics are developing a new generation of dairy farm robots which use biomimetictechnology to improve milk yield.

3736


Sponsorships and com

petitions

ICA Club£7,000, throughout 2003/04South East

To support the CulturalEntrepreneur Clubs whichfacilitates a network for the creative industries inthe South East.

The Lighthouse Glasgow£35,000, throughout2003/04Scotland

To fund the CreativeEntrepreneurs’ Clubs at theLighthouse in Glasgow,which facilitates a networkfor the creative industriesin Scotland.

Energy 21£5,000, May 2003UK-wide

To assist Energywise, acompetition linking energy-related issues to productionof food in the home; acollaboration between the Science, Engineeringand ManufacturingTechnologies Alliance andthe Women’s EngineeringSociety.

BBC£80,000, May to December2003UK-wide

To back Innovation Nation, a prime time BBC1competition which threwdown the gauntlet towould-be inventors.

Foundation for Science and Technology£4,000, May 2003UK-wide

A lecture organised by the Foundation for Science and Technology on the topic of Creativity,Science, Engineering andTechnology, held at theRoyal Society.

Spiked Online and the Royal Institution£7,000, May 2003UK-wide

Panic Attack was aconference examining risk-aversion in the UK.

The City of London Festival£2,500, June 2003London

To sponsor Sounding Board,an event to promote thework of recent music andart graduates.

D&AD £10,000, June 2003UK-wide

An exhibition of D&ADmember colleges, NewBlood, showcasing the bestwork of over 1,500 arts and design students fromthe academic year.

D&AD£30,000, June 2003 UK-wide

To support the ProductDesign and InnovationAwards to identify andreward the best productdesign talent atundergraduate andpostgraduate level.

Medical Futures IP Booster£10,000, June 2003London

A series of workshops and presentations at theBusiness Design Centre,offering patent, legal,financial and marketingadvice; aimed at those fromthe medical professionwishing to commercialisetheir ideas.

New Designers£10,000, July 2003UK-wide

A two-week showcase of the work of the UK’sgraduate designers.

Craft Council£5,000, July 2003UK-wide

One Year On showcasedsome of the best emergingBritish design talent.

Undu£2,500, July 2003UK-wide

To sponsor the UnduGraduates Award, aplatform for upcoming newdesign talent from the UK.

BA Science FestivalExhibitions£2,800, September 2003UK-wide

To fund a NESTA exhibitionstand at this annualgathering of scientists from the UK and around the world.

Novartis Pharmaceuticalsand the Daily Telegraph £86,000, September 2003UK-wide

Visions of Science, anationwide photographiccompetition aimed atbringing science to life and engaging the public in science.

London Design Week£10,000, September 2003UK-wide

To support the WorldCreative Forum, aconference designed to promote the UK as aworld centre for creativeindustries.

GP Capital£10,000, October 2003UK-wide

The Investor Allstars awards aimed to raise the profile of early stageinvestors and facilitatecommunication betweenkey industry participants.

Medical Futures £10,500, October 2003UK-wide

The Medical FuturesInnovation awardsencouraged and recognisedinnovation in all parts ofthe medical profession.

International Associationfor Dance, Medicine andScience.£1,000, October 2003 UK-wide

A 3-day conferencededicated to providing a forum for dance research, dance scienceand medicine.

Theatre Cryptic£500, October 2003Glasgow

To sponsor a special post-show event for NESTAFellow, Cathie Boyd’s,production of Apocalypse,which targeted opinionformers.

V11 Ltd£7,000, November 2003UK-wide

To support the BritishInvention Show, the UK’slargest ‘invention expo’,aimed at independentinventors around Britain.

Cambridge EnterpriseConference£25,000, March 2004 UK-wide

The 6th CambridgeEnterprise Conferencebrought togetherentrepreneurs from around the world.

Intermediate TechnologyDevelopment Group£5,000, March 2004UK-wide

The SustainableDevelopment award was an initiative aimed at young people aged 15-19.

Learning and TeachingSupport Network (LTSN)£5,000, March 2004UK-wide

To sponsor two conferences‘How can creativity betaught?’ and ‘How cancreativity be assessed’?

The Royal HorticulturalSociety£10,000, March 2004

To assist Design a Garden, a nationwide competitionfor innovative gardendesign based on the theme of neighbourhood.

In addition…

The list of contracted awards expenditure does not include£89,280 to set up and run 17 Ignite! Workshops whichbenefited 450 young people in the West Midlands and 3weekend residential Creative Labs held for 60 young people.

We also released £215,000 in contingency funding for existing awardees.

NESTA’s Invention and Innovation Programme

39


38


Facts, figures and financial highlightsFunding position: at start up, NESTA received £200 millionfrom the National Lottery Distribution Fund and the intereston this sum funded our work. In February 2003 NESTAreceived an additional £95 million from the National LotteryDistribution Fund, as authorised by the Secretary of State forCulture, Media and Sport. The Endowment is invested with theCommissioners for the Reduction of National Debt (CRND) inline with our Financial Directions. £45 million of the additional£95 million is available to fund operations over the 3-yearperiod from 1 April 2003.

Income: £7 million of this revenue funding has beenrecognised as income during the year, supplementing our income from investments of £12 million and othergovernment funding of £4 million. This income has enabledNESTA to continue to increase the scale of its programme

support to £19.4 million (2003: £16.6 million) in line with our 3-year Strategic Plan. A further substantial increase isanticipated in 2004/05.

Growth: Fluctuations in interest rates and in investmentreturns and valuations, together with the phased release ofthe £45 million revenue funding, mean that our total incomein any one year, and our surplus or deficit for that year, will similarly be liable to significant fluctuations. However,NESTA’s long-term strategy is to achieve steady, yet rapidgrowth in our programme expenditure and to progressivelyreduce the proportion of our total expenditure allocated tonon-programme costs.

The table below shows our 5-year progress in this direction:

1999/2000 2000/01 2001/02 2002/03 2003/04

Programme costs £4,931,000 £8,389,000 £12,377,000 £16,553,000 £19,385,000

Non programme costs £983,000 £1,270,000 £1,204,000 £1,270,000 £1,458,000

Non programme costs as a % of total expenditure 16.6% 13.1% 8.9% 7.1% 7.0%

Recoveries in values of equity investments: a smallproportion of NESTA’s investments are invested in the equitymarket and the market value of the equity portfolio haddeclined in prior years producing unrealised losses. It wasconsidered prudent to recognise these losses in the incomeand expenditure account for 2002/03. At the beginning of2003/04 unrealised losses stood at £4.7 million. By March2004, with the recovery of the equity markets, £2.2 million ofthese losses have been recouped and this recovery ofinvestment value is similarly shown in the income andexpenditure account for this year.

Losses on Government Bonds: A total reduction in the valueof UK Government Bonds, held on our behalf by the CRND, of £7.0 million, has similarly been shown as a loss in theIncome and Expenditure Account. These losses arise, largely,

as Bonds have been bought at costs in excess of theirredemption value. However, these losses are offset by higherinterest income and only the net of interest and capital lossesshould be considered as meaningful in the context of NESTA’sinvestment returns.

Restructuring: during the year NESTA Enterprises Limited(NEL), the wholly owned subsidiary of NESTA, was wound upand the assets and activities transferred to NESTA, in order topromote operational synergies and administrative efficiency.The key activities undertaken by NEL were the Planet Scienceand NESTA Futurelab programmes. The legacy Planet Scienceprojects and NESTA Futurelab are now administered directlyby NESTA. An application was made to strike NEL off theregister of companies in June 2004.

2002/03 2002/03 2003/04 2003/04 2004/05

Awards contracted (hard committed) Number Value Number Value Target

Invention & Innovation (core & follow-on funding) 48 £2,509,000 50 £2,976,000 £4,440,000

Learning 45 £3,015,000 48 £3,313,000 £3,910,000

Fellowship (inc Dreamtime) 33 £1,831,000 42 £2,408,000 £3,413,000

Crucible 26 (total)

Ignite 6

Creative Pioneer – – 34 £350,000 £825,000

Total 126 £7,355,000 206 £9,047,000 £12,588,000

2002/03 2003/04 2004/05 Target range

Percentage of Fellowship nominees receiving funding 60% 68% 45-60%

Percentage of Invention & Innovation full applicants receiving funding 40% 63% 45-75%

Percentage of outline proposals to the Learning programme receiving funding 82% 75% 40-70%

Percentage of Creative Pioneer applicants who are invited N/A 27% 5-25%to participate as Pioneers programme not open

until 2003/04

Key performance indicatorsPerformance Indicator 2002/03 2003/04 2004/05

Actual Actual Target

Value of non-programme costs £1,270,000 £1,458,000 £2,011,000 (and as a percentage of total expenditure) (7.1%) (7.0%) (6.8%)

Award programme costs as a percentage of award costs + 39% 41% 42%award programme costs

Number of items of positive press coverage 730 1,040 913

Website traffic – number of visitor sessions 540,192 669,838 770,300

Percentage of Fellowship decisions made within 90 days * Not available 100% 90%of receiving a formal application

Percentage of Invention & Innovation decisions made within 90 days * Not available 40% 90%of inviting full applications

Percentage of Learning decisions made within 60 days * Not available 96% 90%of receiving a final funding proposal

Percentage of Creative Pioneers selected within 11 weeks * Not applicable 100% 90%of the deadline for applications

Number of upheld complaints * 2 (partly upheld) 1 (partly upheld) 0

Percentage of undisputed invoices paid within 30 days * 89% 81% 95%

* These measures will form part of our Customer Care Charter to be published in 2004/05.

As with total programme expenditure, the number of awards committed in the year and the total cash provided to awardees have risen substantiallyover the previous year. Cash awarded has risen by 23 percent and thenumber of awards by 63 percent.

41


40


Financial statements for the year ended 31 March 2004Foreword

Constitution

NESTA – the National Endowment for Science, Technologyand the Arts – is the UK’s first-ever national endowment. Wecame into being with the National Lottery Act, receiving RoyalAssent on 2 July 1998, and we were established to supportand promote talent, innovation and creativity in the fields ofscience, technology and the arts. The composition of theboard is given opposite. For the executive team see page 63 of the Annual Report.

The National Lottery Act 1998 and the Financial Directions, as issued by the Secretary of State of the Department forCulture, Media and Sport (DCMS) under the National LotteryAct 1998, govern the entire operation of NESTA whichincludes those of its subsidiary NESTA Enterprises Ltd.NESTA is therefore regulated in accordance with financialmemoranda and prepares its Accounts in accordance with the Accounts Directions issued by the Secretary of State.

Statutory Objects

We discharge our duties under the Lottery Act by:

> helping exceptional individuals to explore and developtheir potential (primarily through our Fellowshipprogramme);

> providing the support needed to help people to adequatelyprotect their original ideas and turn them into products,services or businesses with commercial and socialpotential (primarily through our Invention and Innovationand Creative Pioneer programmes);

> contributing to public knowledge and appreciation ofscience, technology and the arts, supporting inventive new approaches to teaching and learning (primarilythrough our Learning programme, formerly known as our Education programme, and the NESTA Futurelab and Planet Science projects and by producing research,sponsoring events and competitions).

NESTA Enterprises Ltd (NEL)

The activities of NESTA’s wholly owned subsidiary company,NEL, were transferred to NESTA during the year. Anapplication was made in June 2004 to strike NEL off theRegister of Companies.

Financial Results

The consolidated Financial Statements show an increase inaccumulated funds of £2,377k for the reporting period from 1 April 2003 to 31 March 2004 (compared with a decrease for2003 of £8,360k).

Income of £23,220k (2003; £9,463k) includes net investmentincome of £11,917k (2003; £4,963k), primarily from the coreendowment, government funding of £11,118k (2003; £3,572k)and other income of £185k (2003; £928k). For the major part of

its investments, NESTA has a policy of purchasing low-riskbonds and holding them to maturity. The market value of thesebonds can vary between purchase and maturity and NESTA isobliged to recognise these variations in its income, even thoughthe final amount to be received at maturity is known.The neteffect in the year was a reduction of £1,213k (2003: nil) ininvestment income, which will reverse in future years.

£19,385k of funds have been committed to support NESTAprogrammes during the year to 31 March 2004 (2003:£16,553k). The level of NESTA’s other future commitments is considered to be both prudent and appropriate with regardto its past and projected income flows, which have resulted in an accumulated funds surplus of £8,635k as at 31 March2004 (2003: £6,258k).

Future Developments

NESTA’s plans for 2004-05 are mainly the extension andstrengthening of current activities. Specific goals include:

> further development of ‘added value’ support to awardees, such as mentoring and management supportand assistance with further funding from sources other than NESTA;

> extension of NESTA’s regional representation in England;

> building on the successful pilot programmes launched in 2003-04;

> exploring new entry routes to the Fellowship programme;

> completing comprehensive evaluations of our Fellowshipand Invention and Innovation programmes and publishingrelevant findings from these and other commissionedresearch;

> further development of our expertise in the needs andproblems of the creative industries;

> implementation of a major new awards informationmanagement system and management structure; and

> submission to the DCMS of an outline of our long-termstrategic aims and their resource implications.

Appointment of Auditors

In accordance with paragraph 48 of the Financial Directionsas issued under section 21 of the National Lottery Act 1998,the Annual Accounts of NESTA are to be audited by theComptroller and Auditor General and his report is on page 44.The cost of audit services during the period was £25,000(2003: £21,000). No other services were provided to NESTA.

Creditors

It is NESTA’s policy to abide by the DTI’s ‘Better PaymentPractice Code’ and in particular to pay bills in accordancewith contract terms. The Better Payment Practice Code canbe obtained from the DTI’s orderline: 0870 150 2500. For theyear ended 31 March 2004 81% of undisputed invoices werepaid within a 30-day period (2003: 89%).

Equal Opportunities

NESTA is committed to a policy of equal opportunity in itsemployment practices. In particular it aims to ensure that noactual or potential employee or awardee receives more orless favourable treatment on the grounds of race, colour,ethnic or national origin, marital status, age, gender, sexualorientation, disability, religious beliefs, political beliefs,economic status or class.

Employee Consultation

NESTA ensures that there are arrangements to promoteeffective consultation and communications with all staff.Meetings of all staff are held periodically at whichmatters relating to NESTA’s activities are discussed andstaff are briefed on matters discussed at the SeniorManagement and Trustee meetings.

Post Balance Sheet Events

There are no post balance sheet events.

Board Members and responsibilities

Trustee Appointed Retired Committee membership

Lord Puttnam CBE (Chairman) October 2003 Learning

Chris Powell (Chairman) October 2003

Yasmin Anwar Invention & Innovation

Daniel Alexander Invention & Innovation

Paul Daniel Fellowship

Katie Gramich Learning

Sue Hunter October 2003 Finance & Audit /Invention & Innovation

Professor Janice Kirkpatrick Invention & Innovation

Francois Matarasso July 2003 Learning

Baroness McIntosh of Hudnall Fellowship

Professor Nancy Rothwell Fellowship

Graham Ross Russell Finance & Audit/Invention & Innovation/NESTAFuturelab/Creative Pioneer Programme

Simon Singh Fellowship

Derek Wanless Finance & Audit/NESTA Futurelab

Tom Bentley July 2003 Learning

Tracy Long December 2003 Invention & Innovation

Professor William Morris January 2004 Learning

Other Matters

Lloyds Bank PLC of Pall Mall St James’s, 8-10 WaterlooPlace, London, SW1Y 4BE were the bankers for NESTA for the entire period to 31 March 2004.

The Commissioners for the Reduction of the National Debt(CRND) through the National Debt Office of Eastcheap Court,11 Philpot Lane, London EC3M 8UD were the managers of the NESTA endowment for the period to 31 March 2004.

NESTA maintains a register of interests of members of the

Board of Trustees and staff which is available for public inspection by appointment at NESTA’s principaloffice address.

NESTA’s staff received gifts and hospitality totalling £354during the financial year.

Jeremy Newton Chris PowellChief Executive Chairman18 November 2004 18 November 2004

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Statement of Trustees and Chief Executive’s responsibilitiesUnder section 23 (1) and (2) of the National Lottery Act 1998NESTA is required to prepare a statement of accounts for the financial period in the form and on the basis directed by the Secretary of State, with the consent of HM Treasury.The accounts are to be prepared on an accruals basis and to show a true and fair view of NESTA’s state of affairs at the year-end and of its income and expenditure and cashflows for the financial year.

In preparing the accounts NESTA is required to:

> Observe the Accounts Directions issued by the Secretary of State which set accounting and disclosurerequirements and apply suitable accounting policies on a consistent basis;

> Make judgements and estimates on a reasonable basis;

> State whether applicable accounting standards have been followed and disclosed and explain any materialdepartures in the financial statements; and

> Prepare financial statements on the going concern basisunless it is inappropriate to presume that NESTA willcontinue in operation.

A copy of NESTA’s Accounts Directions can be obtained free of charge from the Finance Director, NESTA, Fishmongers’Chambers, 110 Upper Thames Street, London, EC4R 3TW.

The Accounting Officer for the Department for Culture, Media and Sport has designated the Chief Executive as the Accounting Officer for NESTA. The responsibilities asAccounting Officer, including the responsibility for proprietyand regularity of the public finances and for the keeping ofproper records, for which the Chief Executive is answerable,are set out in the Non-Departmental Public Bodies’Accounting Officers’ Memorandum issued by H M Treasuryand published in Government Accounting and in the FinancialDirections issued by the Secretary of State for Culture, Mediaand Sport under Section 21 of the National Lottery Act 1998.

Jeremy NewtonChief Executive18 November 2004

Statement on Internal Control

Scope of responsibility

As Accounting Officer, I, Jeremy Newton, have responsibilityfor maintaining a sound system of internal control thatsupports the achievement of NESTA’s corporate objectivesand aims, whilst safeguarding the public funds and assets forwhich I am personally responsible, in accordance with theresponsibilities assigned to me in Government Accounting,ensuring compliance with the requirements of NESTA’sManagement Statement and Statement of FinancialRequirements. I am accountable to the Secretary of State forCulture, Media and Sport and to Parliament for ensuring thatNESTA distributes its funds with due regularity and propriety,and to the Board of Trustees for the economic, efficient andeffective use and control of the funds.

As Chairman of the Board of Trustees, I, Chris Powell, haveresponsibility delegated from the Board of Trustees forsatisfying myself, and the Board, that such a sound system of internal control is maintained within NESTA.

The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failureto achieve NESTA’s corporate objectives and aims; it cantherefore only provide reasonable and not absolute assuranceof effectiveness. The system of internal control is based on anon-going process designed to identify and prioritise the risksto the achievement of NESTA’s corporate objectives and aims,to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage themefficiently, effectively and economically. The system of internalcontrol has been in place for the year ended 31 March 2004and up to the date of approval of the annual report andaccounts, and accords with Treasury guidance.

Capacity to handle risk

Under NESTA’s Risk Management Framework, which alsocovers NESTA Enterprises Limited (NEL), NESTA’s Finance &Audit Committee are responsible for monitoring compliancewith the Risk Management Framework and for reviewing andreporting to the Board of Trustees annually on the approachto risk management.

The Senior Management Team regularly review strategicrisks, and individual members of the Senior ManagementTeam are responsible for managing and monitoring theserisks, where appropriate through their teams. Operationalrisk management is documented in operating manuals and communicated to staff through the induction and linemanagement process. Policies are reinforced through the staff appraisal process and within job descriptions ofrelevant staff.

The risk and control framework

The key elements of NESTA and NEL’s risk managementstrategy and control framework are:

> Financial Directions issued by the Secretary of Stateunder the National Lottery Act 1998;

> Risk management has been incorporated into NESTA’sstrategic and business planning processes, withassessments of risk at the strategic, business plan and operating plan levels;

> A budget and budget monitoring system set within the context of the 3-year Strategic Plan 2003-2006. The budget is approved by the Board of Trustees, and regular reports on financial performance are made to the Finance & Audit Committee and Trustees;

> A Risk Management Framework setting out the basis for identifying, evaluating, allocating, monitoring andreporting on risk in the context of an agreed risk appetite.Central to this is the maintenance of a risk register whichis updated throughout the year, with a full risk and controlassessment being undertaken at the beginning of eachyear. Key risk indicators are reported to the Trustees and Finance & Audit Committee;

> The Senior Management Team meets monthly to considerNESTA’s strategic direction and financial performance.The agenda provides for the regular monitoring of risk management, internal control, and operationalperformance, including reports from directors on themanagement of risks in their areas of responsibility andprogress reports on key projects;

> Prior to the transfer of the operations of NEL to NESTA, regular progress reports were received on NESTA Futurelab and Planet Science by the NEL Board of Directors. Futurelab now comes under the direction of a Committee comprising DfES representatives, key NESTA staff, former NEL Board members and NESTA Trustees;

> NESTA has an internal audit service, which operates tostandards defined in the Government Internal AuditStandards. The annual internal audit plans are informedby the risk register, and are endorsed by the Finance &Audit Committee and approved by the Accounting Officer.The Head of Internal Audit (“HIA”) provides an annualreport on internal audit activity, including the HIA’sindependent opinion on the adequacy and effectiveness ofNESTA’s system of internal control and recommendationsfor improvement;

> The internal audit programme for the financial yearidentified that although overall controls reviewed were adequate, there is further scope to improve the risk management, governance and internal control processes at NESTA in line with emerging best practice. A programme of work is underway to implement the internal audit recommendations,including steps to embed the new organisationalstructure within an updated governance structure, and progress is reported quarterly to the Finance & Audit Committee.

Review of effectiveness

As Accounting Officer, I have responsibility for reviewingthe effectiveness of the system of internal control. My review of the effectiveness of the system of internalcontrol is informed by the work of the internal auditorsand the directors within NESTA who have responsibility forthe development and maintenance of the internal controlframework, and comments made by the external auditorsin their management letter and other reports. I have beenadvised on the implications of the result of my review ofthe effectiveness of the system of internal control by theBoard and the Finance & Audit Committee and a plan toaddress weaknesses and ensure continuous improvementof the system is in place.

The Board of Trustees determine the appropriate riskappetite and level of exposure for NESTA and receive a report annually from the Finance & Audit Committee on risk management. The Finance & Audit Committeemonitor the management of significant risks withinNESTA and NEL, satisfy themselves that the lesssignificant risks are being actively managed, and review annually NESTA’s approach to risk management.Internal audit undertake a programme of internal auditreviews based on suggestions from the Finance & AuditCommittee and the outcome of the risk workshopsundertaken by the Senior Management Team.

Jeremy Newton Chris PowellChief Executive Chairman18 November 2004 18 November 2004

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The Certificate and Report of the Comptroller and Auditor General to the Houses of Parliament and the Scottish Parliament

I certify that I have audited the financial statements on pages40 to 62 under the National Lottery Act 1998. These financialstatements have been prepared under the historical costconvention as modified by the revaluation of certain fixedassets and the accounting policies set out on pages 48 to 49.

Respective responsibilities of the Trustees, the Chief Executive and Auditor

As described on page 42, the Trustees and Chief Executive areresponsible for the preparation of the financial statements inaccordance with the National Lottery Act 1998 and directionsmade thereunder by the Secretary of State for Culture, Mediaand Sport, with the consent of HM Treasury, and for ensuringthe regularity of financial transactions. The Trustees andChief Executive are also responsible for the preparation of the Foreword and other contents of the Annual Report. My responsibilities, as independent auditor, are establishedby statute and I have regard to the standards and guidanceissued by the Auditing Practices Board and the ethicalguidance applicable to the auditing profession.

I report my opinion as to whether the financial statementsgive a true and fair view and are properly prepared inaccordance with the National Lottery Act 1998 and directionsmade thereunder, and whether in all material respects theexpenditure and income have been applied to the purposesintended by Parliament and the financial transactionsconform to the authorities which govern them. I also report if, in my opinion, the Foreword is not consistent with thefinancial statements, if the National Endowment for Science,Technology and the Arts has not kept proper accountingrecords, or if I have not received all the information andexplanations I require for my audit.

I read the other information contained in the Annual Reportand consider whether it is consistent with the auditedfinancial statements. I consider the implications for mycertificate if I become aware of any apparent misstatementsor material inconsistencies with the financial statements.

I review whether the statement on pages 42 and 43 reflects the National Endowment for Science, Technology and the Art’s compliance with Treasury’s guidance on theStatement on Internal Control. I report if it does not meet the requirements specified by Treasury, or if the statement is misleading or inconsistent with other information I amaware of from my audit of the financial statements. I am not required to consider, nor have I considered whether theAccounting Officer’s Statement on Internal Control covers allrisks and controls. I am also not required to form an opinionon the effectiveness of National Endowment for Science,Technology and the Art’s corporate governance procedures or its risk and control procedures.

Basis of audit opinion

I conducted my audit in accordance with United KingdomAuditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidencerelevant to the amounts, disclosures and regularity offinancial transactions included in the financial statements.

It also includes an assessment of the significant estimatesand judgements made by the Trustees and Chief Executive in the preparation of the financial statements, and of whether the accounting policies are appropriate to theNational Endowment for Science, Technology and the Art’scircumstances, consistently applied and adequately disclosed.

I planned and performed my audit so as to obtain all theinformation and explanations which I considered necessary in order to provide me with sufficient evidence to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by error, or by fraud or other irregularity and that, in all materialrespects, the expenditure and income have been applied to the purposes intended by Parliament and the financialtransactions conform to the authorities which govern them. Informing my opinion I have also evaluated the overall adequacyof the presentation of information in the financial statements.

Fundamental Uncertainty

In forming my opinion, I have considered the adequacy of thedisclosures made in the financial statements concerning thepossible outcomes of the National Endowment for Science,Technology and the Art’s decision to notify the EuropeanCommission of the Invention and Innovation scheme inrespect of State Aid. The outcome of this decision could resultin the scheme being deemed to be in contravention of StateAid regulations which would render spending on this schemeirregular. At 31 March 2004, the value of awards made underthis scheme since the National Endowment for Science,Technology and the Art’s inception was £10,068k. Details ofthe circumstances relating to this fundamental uncertaintyare described in note 21. I have not qualified my opinion inthis respect.

Opinion

In my opinion:

> the financial statements give a true and fair view of thestate of affairs of the National Endowment for Science,Technology and the Arts at 31 March 2004 and of thesurplus and cash flows for the year then ended and havebeen properly prepared in accordance with the NationalLottery Act 1998 and directions made thereunder by theSecretary of State for Culture, Media and Sport; and

> in all material respects the expenditure and income havebeen applied to the purposes intended by Parliament and the financial transactions conform to the authoritieswhich govern them.

I have no further observations to make on these financialstatements.

John Bourn National Audit Office Comptroller and 157-197 Buckingham Palace Road Auditor General Victoria, London SW1W 9SP22 November 2004

Income and Expenditure AccountFor the year ended 31st March 2004

2004 2003Income Notes £’000 £’000

Investment returns:

Endowment:

Gross Interest receivable 16.147 8,005

Amortisation of redemption premium 2 (4,777) –

Adjustment to market value 2 (2,181) –

Total returns 9,189 8,005

Other investments:

Interest & dividends receivable 573 718

Capital gains & losses 2 2,155 (3,760)

Total returns 2,728 (3,042)

11,917 4,963

Government funding 3 11,118 3,572

Other income 4 185 928

Total income 23,220 9,463

Expenditure

Programme costs:

Awards 7 8,985 7,271

Other award programme costs 7 6,117 4,669

Other projects directly delivering statutory objects 7 4,283 4,613

19,385 16,553

Non programme costs 7 1,458 1,270

Total expenditure 20,843 17,823

Notional cost of capital (23) (26)

Net surplus/(deficit) after notional costs 2,354 (8,386)

Reversal of notional costs 23 26

Surplus/(deficit) for the year 2,377 (8,360)

All operations relate to continuing activities. There were no other gains orlosses during the year. The notes on pages 48 to 62 form an integral part ofthese financial statements.

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Balance sheet at 31 March 2004

2004 2003Notes £’000 £’000

Fixed assets

Tangible fixed assets 8 1,279 1,316

Investments – Endowment 9(a) 265,000 280,000

266,279 281,316

Current assets

Debtors 10 909 1,799

Investments – Endowment 9(a) 23,005 14,368

Investments – Other 9(a) 14,995 12,178

Cash at bank and in hand 2,271 4,325

41,180 32,670

Current liabilities

Creditors: amounts falling due within one year 11 3,838 6,407

Awards committed and falling due for payment within one year 12 5,779 4,593

9,617 11,000

Net current assets 31,563 21,670

Awards committed and falling due for payment after one year 12 1,234 1,728

Provision for dilapidations on leasehold buildings 82 –

Net assets 296,526 301,258

Represented by reserves

Endowment reserve 18 287,891 295,000

Accumulated surplus 18 8,635 6,258

Total reserves 296,526 301,258

The financial statements, which comprise the income and expenditure

account, the statement of group total recognised gains and losses, the

balance sheet, the cash flow statement and the related notes, were approved

by the Board of Trustees on 22 July 2004 and signed on their behalf by:

Jeremy Newton, Chief Executive

Cash flow statement for the year ended 31 March 2004

2004 2003Notes £’000 £’000

Net cash outflow from operating activities

Payment of awards (8,293) (6,004)

Payment for staff and trustees costs (3,960) (3,470)

Payments for other costs (8,172) (4,913)

Government funding receipts 2,937 6,605

Donations received 37 64

Other income 55 30

16 (17,396) (7,688)

Returns on investments

Interest received 16,343 8,655

Capital expenditure and financial investment

Payments to acquire tangible fixed assets (551) (840)

Receipts from disposal of tangible fixed assets – 2

Receipts into endowment reserve – 95,000

Net proceeds from the sale of/(payments to acquire) fixed asset investments 4,372 (92,333)

3,821 1,829

Increase in cash 17 2,768 2,796

The notes on pages 48 to 62 form an integral part of these financial statements.The notes on pages 48 to 62 form an integral part of these financial statements.

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1 Accounting policies

Accounting convention

The financial statements are prepared under the historicalcost convention, modified to include, where relevant, therevaluation of tangible fixed assets for their value to NESTA by reference to current costs at the balance sheet date.

The accounts have been prepared in accordance with theAccounts Direction issued by the Secretary of State forCulture, Media and Sport (August 2002), and so far asappropriate they meet the requirements of the CompaniesAct, and of the Statements of Standard AccountingPractice/Financial Reporting Standards issued and adopted by the Accounting Standards Board.

In previous years, consolidated financial statements havebeen prepared in respect of NESTA and its wholly ownedsubsidiary undertaking, NESTA Enterprises Limited (‘NEL’).However, in October 2003, the operations of NEL weretransferred to NESTA and application to strike NEL off wasmade to the Registrar of Companies in June 2004. The 2004accounts and 2003 comparatives therefore represent NESTAas a single entity.

Extra notes have been added to the 2004 financial statementsfor added clarification.

Income

Income is accounted for on a receivable basis in the year towhich it relates.

Within the Endowment, most bonds are purchased under a policy of holding them to maturity. Total returns on suchbonds is the gross interest receivable plus or minus theamortisation of any discount or premium to nominal(redemption) value. The amortisation is calculated on astraight line basis over the remaining duration of the bond.Fluctuations in the market value of bonds is also included in total returns.

Also included within total investment returns are realisedcapital gains or losses and unrealised capital losses.

Policy for recognition of donations

Goods donated to NESTA are recognised in the Income andExpenditure Statement on a received basis where goods areretained by the group to add value to operations or whereNESTA acts as principal for resources which are transferredto third parties. Donations of goods are not recognised whereNESTA acts solely as an agent in relation to the resources.Donations of services are recognised on receipt of servicesthat add value to the group’s operations, to the extent that a monetary value can be reliably attributed to the service. In applying this policy the following considerations have been taken into account in determining where NESTA isacting as principal:

> whether NESTA applied for the grant of resources or donations which NESTA has then transferred to a third party;

> whether NESTA is able to direct how the donation should be used;

> whether NESTA owned the resources prior to transfer to a third party;

> whether NESTA accepts legal responsibility for the transfer of the donations to a third party.

Valuation is based on the lower of market value or the costNESTA would have incurred to acquire that asset or service,net of any discounts.

Awards committed

Awards made by NESTA are recognised in the Income andExpenditure Account and Balance Sheet on the date when thegrant awardee signs the award contract. The signing of theaward contract represents the date at which NESTA has areasonable expectation that the terms of the contract will bemet and therefore NESTA has an obligation to pay the award(hard commitments).

Programme costs

Due to the nature of the support provided to awardees byNESTA, in order to reflect the non-financial support as well as the financial support, programme costs are statedinclusive of support costs attributable to them.

Other projects directly delivering statutory objects

Such projects awards and costs are accounted for as they are contractually committed.

Investments

Fixed asset investments are carried at market value at theBalance Sheet date.

Current Asset investments are carried at the lower of costand market value at the Balance Sheet date.

In accordance with the National Lottery Act 1998, the NESTA endowment is invested with The Commissioners forthe Reduction of the National Debt (CRND) who invest theendowment in a narrow band of low risk assets such asgovernment bonds and cash. Part of the Endowment istreated as a fixed asset investment and part as a currentasset investment (see note 9a). Other investments are treated as current asset investments.

Tangible Fixed Assets

Tangible fixed assets are capitalised in the balance sheet attheir historic cost value and, where necessary because ofmateriality, revalued annually by reference to indicespublished by the Office of National Statistics.

Fixed assets costing less than £2,000 are written off in theyear of purchase.

Depreciation

Depreciation is provided on all tangible fixed assets.Depreciation is calculated on a straight line basis over theexpected useful life of the assets as follows:

Leasehold Improvements – over the life of the lease

All other assets – three years

Taxation

The National Lottery Act 1998 provides for NESTA to beexempt from tax under the Income and Corporation Taxes Act1988. The Inland Revenue has recognised this exemption.Accordingly, no taxation has been provided for in thesefinancial statements.

Value Added Tax

Income and Expenditure is recorded net of recoverable VAT.

Pensions

The costs of all employer pension contributions are chargedto the Income & Expenditure account.

Certain employees are members of a defined benefit pensionscheme. Because it is a multi-employer scheme, NESTA hasinsufficient information to estimate the actuarial valuation ofthis scheme and has therefore accounted for it as if it were adefined contribution scheme.

Notes to the Financial Statements for the year ended 31 March 2004

Operating leases

Costs incurred under operating leases are taken into theIncome and Expenditure account in the period to which they relate.

Notional Cost of Capital

Notional cost of capital employed by NESTA is calculated as 3.5% (2003: 6%) of the average non-lottery fundedbalances employed over the financial year.

2 Investment returns

Endowment

NESTA has a policy of buying Government bonds andholding them to maturity within part of the Endowment.In recent market conditions many such bonds have beenpurchased at a premium above nominal (redemption)value. This inevitably gives rise to a capital loss onredemption, compensated for by a higher interest income.NESTA’s policy is to amortise this premium on a straightline basis over the remaining life of the bond.

Whilst the amortisation of the redemption premium iscaused by the natural fall in bond prices as they reachmaturity, some changes are caused purely by fluctuationsin the market value of bonds. We have referred to theseamounts as adjustments to market value. £1,213k of thelosses included in the adjustments to market value willreverse in future years.

Included within amortisation of redemption premium andmarket value adjustment are realised losses of £403k and£102k respectively (2003: nil and nil).

Other investments

Included within capital gains and losses are realisedlosses of £132k (2003: £24k realised gain).

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3 Government Funding

2004 2003£’000 £’000

By source

DCMS by transfer from Endowment 7,109 –

DfES 3,869 3,512

DTI 140 60

11,118 3,572

NESTA is permitted to draw down limited funding from its Endowment as set out in note 9a. The £7,109k transfer represents the amounts used in this way in 2003/04.

By use

NESTA for general purposes 7,216 20

NESTA Futurelab 2,188 1,336

Planet Science 1,714 2,216

11,118 3,572

This includes staff costs for Futurelab and Planet Science, please refer to note 5

Sponsorship & Donations 37 779

Royalty income, loan interest & dividends from awards 30 60

Other income 118 89

185 928

4 Other income

5 Staff costs

Programme Non-programme Total Totalrelated related 2004 2003£’000 £’000 £’000 £’000

Salaries and benefits 2,891 411 3,302 2,919

Social security costs 319 53 372 278

Employer’s pension contributions 277 42 319 232

3,487 506 3,993 3,429

Trustees’ remuneration (see note 6) 47 48

4,040 3,477

The annual salary for the post of Chief Executive was agreed by theTrustees on 1 October 2003 as £92,700 per annum (2003: £86,000).The Chief Executive is employed under the same employmentconditions as all executive NESTA staff. Total remuneration of theChief Executive, including taxable benefits, was:

Salary & Pension Benefits Total Total2004 2004 2004 2003£’000 £’000 £’000 £’000

Salary 93 2 95 86

Pension 13 – 13 10

106 2 108 96

Salary & Real increase Total accrued Benefits in pension pension at 60 CETV at CETV at Real Increase in

at 60 31 March 2004 31 March 2004 31 March 2003 CETV in year

£’000 £’000 £’000 £’000 £’000 £’000

Jeremy Newton 90-95 0-2.5 5-10 47 27 11

Janet Morrison 65-70 0-2.5 5-10 16 8 4

Graham Watson 30-35 N/A N/A N/A N/A N/A

(resigned August 2003)

CETV is the cash equivalent transfer value.

NESTA made a contribution of 12% of gross salary to the personal pension scheme of Graham Watson.

Interest free season ticket loans were available to all NESTA staff during the year. As at 31 March 2004, three senior managers and fourteen staff had taken up these loans. All loans are below £4,000. The value in aggregate of season ticket loans in excess of £2,500 is £2,592.

The average number of persons employed during the year was as follows:

Benefits represent cash payments made under NESTA’s flexible benefitscheme. This scheme is available to all staff on the same terms.

The salary and pensions entitlement of the Chief Executive and theDeputy Chief Executives were:

2004 2004 2004 RestatedEmployees Agency/ Staff on 2004 2003

contract staff secondment Total Total

Executive 2 – – 2 4

Programmes & Operations 54 4 2 60 51

Finance, Administration & IT 24 5 – 29 15

Strategy & Communications 12 1 – 13 12

92 10 2 104 82

It has been necessary to restate the 2003 figures following areview of prior year staff numbers.

Programme related staff costs include £808k (2003: £815k) attributable toFuturelab and £179k (2003; £466k) attributable to Planet Science.

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6 Trustees’ remuneration 7(a) Expenditure

In October 2003, Lord Puttnam resigned and Chris Powell becameChairman. In accordance with paragraph 4 of schedule 4 of theNational Lottery Act 1998, the Secretary of State for Culture, Mediaand Sport has determined that NESTA remunerate its Chairmanand Trustees as follows:

> Under paragraph 4(1) of this schedule the Chairman is paid asalary of £23,850 (2003: £23,320) a year for two days a weekwork on NESTA business.

> Under paragraph 4(3) each Trustee (with the exception of theChairman) is paid an allowance of £165 (2003: £155) per dayspent on NESTA business.

> During his period of office, the costs of one day per week spenton NESTA business by Lord Puttnam’s personal assistant werereimbursed.

> Out of pocket expenses are recoverable.

Total remuneration of the Chairmen is as follows:

2004 2003£’000 £’000

Salary – Lord Puttnam 14 23

– Chris Powell 10 –

The number of Board members (excluding the Chairmen) receiving remuneration was as follows:

2004 2003Number Number

£0 – £5,000 15 15

The Chairman and other members of the Board of Trustees are appointed by the Secretary of State for periods of 4 years.

Programme costs 2004 2003Notes £’000 £’000

Awards (net of decommitments)

Invention and Innovation 12 2,946 2,437

Fellowship 12 2,408 1,825

Learning (formerly Education) 12 3,281 3,009

Creative Pioneer programme 12 350 –

8,985 7,271

Other programme costs

Invention and Innovation 7(b) 2,552 2,136

Fellowship 7(b) 1,544 1,215

Learning (formerly Education) 7(b) 1,542 1,318

Creative Pioneer programme 7(b) 479 –

6,117 4,669

Other projects directly delivering statutory objects

Futurelab 1,972 1,516

Planet Science 1,762 2,940

Competitions and Sponsorship 234 157

Web 207 –

Research 108 –

4,283 4,613

Total programme costs 19,385 16,553

Non programme costs

Staff & related costs 7(b) 520 409

Other costs 7(b) 938 861

Total non programme costs 1,458 1,270

Other programme costs include the direct costs of developing anddelivering programmes and an allocation of indirect costs, based onestimated time spent supporting programmes, as shown in Note 7b.

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7(b) Expenditure (detail) 7(c) Expenditure (detail)

Invention Fellowship Learning Creative Total Non – Total Total& Innovation Pioneer Prog. Prog. 2004 2003

Prog.

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Awards made (note 12) 2,976 2,408 3,313 350 9,047 – 9,047 7,355

Awards de-committed (30) – (32) – (62) – (62) (84)

2,946 2,408 3,281 350 8,985 – 8,985 7,271

Project assessment, monitoring & support costs 651 175 171 32 1,029 – 1,029 658

Agency staff costs 124 68 52 16 260 48 308 170

Communications & publicity 108 93 92 30 323 138 461 427

Consultancy & conference fees 48 33 55 9 145 44 189 244

Depreciation 101 85 85 24 295 127 422 263

Current cost devaluation – – – – – – – 90

Information Technology costs 49 42 42 11 144 61 205 614

Office & sundry 91 74 70 28 263 101 364 357

Finance, Investment Fees, Legal & audit fees 134 72 72 20 298 109 407 281

Operating lease – Land and buildings 61 53 53 14 181 77 258 208

Staff recruitment/training 92 58 59 15 224 82 306 157

Travel, subsistence & other staff costs 48 28 28 13 117 19 136 78

Irrecoverable VAT 103 89 89 24 305 132 437 196

Staff costs excluding NESTA Futurelab & Planet Science 942 674 674 243 2,533 520 3,053 2,196

Total other costs 2,552 1,544 1,542 479 6,117 1,458 7,575 5,939

NESTA Futurelab & Planet Science 3,734 3,734 4,456

Competitions and sponsorship 234 234 157

Web 207 207 –

Research 108 108 –

Total costs 5,498 3,952 4,823 829 19,385 1,458 20,843 17,823

2004 2003£’000 £’000

Net (deficit)/surplus is stated after charging:

Auditor’s remuneration

– Audit services – C&AG 25 21

– NEL 8 7

Staff travel, subsistence and hospitality 122 157

Trustee travel and subsistence 13 13

Leasehold Computer Computer Office Fixtures Award Assets Totalimprovement hardware software equipment & fittings assets under

construction

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Cost or valuation

At 1 April 2003 1,099 253 869 174 277 3 65 2,740

Additions 261 – 37 15 5 – 233 551

Disposals – (47) – – – – – (47)

Transfers into use – – 65 – – – (65) –

At 31 March 2004 1,360 206 971 189 282 3 233 3,244

Depreciation

At 1 April 2003 433 190 509 76 215 1 – 1,424

Charge for the year 324 26 163 43 31 1 – 588

Disposal in year – (47) – – – – – (47)

At 31 March 2004 757 169 672 119 246 2 – 1,965

Net Book Value

At 31 March 2004 603 37 299 70 36 1 233 1,279

At 31 March 2003 666 63 360 98 62 2 65 1,316

Leasehold improvements are in respect of the lease forFishmongers’ Chambers which is for a period of seven yearsof which 2.5 years remain.

Assets have not been revalued at 31 March 2004 as theircurrent cost does not differ materially from the historic cost.

Assets under construction relate to NESTA’s new awardmanagement system.

£166k of depreciation relates to NESTA Futurelab and Planet Science assets.

8 Tangible fixed assets

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9(a) Investments In accordance with paragraph 19 of the National Lottery Act1998, NESTA was provided with an endowment of £295m from the National Lottery Distribution Fund to enable theachievement of its objects. In accordance with the Act and its Financial Directions, NESTA invests the Endowment withthe Commissioners for the Reduction of The National Debt(CRND) in investments specified in paragraphs 1, 2, 3, 5, 5A,5B, 9 and 9A of Part II of the Trustee Investment Act 1961,essentially UK government bonds and cash.

£250m of this Endowment is non-expendable. The remaining£45m may be drawn down to meet commitments made up to31 March 2006. Annual expenditure over £10m may be metfrom this source up to a maximum of £15m to 31 March 2004,£30m cumulatively to 31 March 2005 and £45m cumulatively

Market Cost Balance Market Cost BalanceValue Sheet value Value Sheet value2004 2004 2004 2003 2003 2003£’000 £’000 £’000 £’000 £’000 £’000

Total Endowment: 288,005 289,293 288,005 294,682 294,368 294,368

Government & Government

guaranteed Stocks:

Up to one year 683 678 678 1,007 1,000 999

One to five years 766 770 766 2,809 2,759 2,759

Six to ten years 282 286 282 – – –

Bonds and Debentures 102 102 102 222 221 221

UK equities 9,960 12,470 9,960 7,718 12,473 7,718

Overseas equities 329 399 329 274 399 274

Property Funds 2,303 2,300 2,300 – – –

Cash 578 491 578 310 207 207

Total other investments 15,003 17,496 14,995 12,340 17,059 12,178

Total investments 303,008 306,789 303,000 307,022 311,427 306,546

Endowment Other Total Endowment Other Total

2004 2004 2004 2003 2003 2003

£’000 £’000 £’000 £’000 £’000 £’000

Balance at 1 April 294,368 12,178 306,546 200,000 17,812 217,812

New funds received – – – 95,000 – 95,000

Investment returns 9,189 2,658 11,847 8,005 (3,089) 4,916

Transferred to cover expenditure (15,552) 159 (15,393) (8,637) (2,545) (11,182)

Balance at 31 March 2004 288,005 14,995 303,000 294,368 12,178 306,546

9(b) Subsidiary undertaking

NESTA is the sole shareholder of NEL, which was incorporatedin the United Kingdom on 10 July 2000. The principal activitiesof NEL were project management and promotional activities inthe field of science, technology and the arts. NEL adopted thesame Financial Directions that apply to NESTA. The businessactivities of the company consisted of the management of twoprojects on behalf of the Department for Education and Skills(DfES) – Planet Science and Futurelab.

In October 2003 the operations of NEL were transferred toNESTA and an application to strike NEL off was made tothe Registrar of Companies in June 2004. The results ofNEL for the year to 31 March 2004 have been included inthe consolidated results.

10 Debtors 2004 2003

£’000 £’000

Other debtors 800 1,175

Prepayments 77 128

Accrued income 32 496

909 1,799

11 Creditors: amounts falling due within one year2004 2003

£’000 £’000

Trade creditors 172 784

Taxation and Social Security 102 89

Other creditors 53 1,061

Accruals and deferred income 3,511 4,473

3,838 6,407

Deferred income is substantially represented by government funding receiptsrelating to future year expenditure for Futurelab and Planet Science.

to 31 March 2006. NESTA is in discussions with the DCMSconcerning the use of any of this part of the Endowment notcommitted at 31 March 2006. The part of the Endowmentwhich may not be drawn down within the next 12 months is treated as a fixed asset investment and the rest as acurrent asset investment.

Other funds including any surplus income from theEndowment are invested separately by Schroders InvestmentManagement and Merrill Lynch Investment Managers on the Trustees’ behalf. Hymans Robertson is employed by the management of NESTA as investment advisors and recommends investment strategies to the Trustees. It also monitors Schroders and Merrill Lynch on theTrustees’ behalf and reports to the management of NESTAon the risks associated with the investment of these monies.

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12 Awards CommittedSoft Commitments arise when there is agreement in principle by NESTA to fund a project or scheme. A hardcommitment arises once a formal offer is made and theterms and conditions of the award have been contractuallyagreed. No provision is made in the financial statements forawards approved but not yet contracted (soft commitments),but they are quantified below:

Soft commitmentsAt 1 April 2003 New Transferred De-commitments At 31 March 2004

commitments to hardcommitments

£’000 £’000 £’000 £’000 £’000

Invention & Innovation 2,086 4,604 (2,976) (1,063) 2,651

Fellowship 556 2,573 (2,408) (376) 345

Learning 646 3,964 (3,313) (18) 1,279

Creative Pioneer programme – 708 (350) – 358

3,288 11,849 (9,047) (1,457) 4,633

Hard commitmentsAt 1 April 2003 New Commitments De-commitments At 31 March 2004

commitments paid£’000 £’000 £’000 £’000 £’000

Invention & Innovation 1,161 2,976 (3,048) (30) 1,059

Fellowship 2,876 2,408 (2,042) – 3,242

Learning 2,284 3,313 (2,859) (32) 2,706

Creative Pioneer programme – 350 (344) – 6

6,321 9,047 (8,293) (62) 7,013

Hard Commitments fall due as follows:

Within One to Two to Three to Four to Totalone year two years three years four years five years

£’000 £‘000 £’000 £’000 £’000 £’000

Invention & Innovation 986 73 – – – 1,059

Fellowship 2,360 619 184 67 12 3,242

Learning 2,427 279 – – – 2,706

Creative Pioneer 6 – – – – 6programme

5,779 971 184 67 12 7,013

13 PensionsNESTA is a member of the Pension Scheme forAdministration and Technical Staff in the Arts (‘PSATSITA’).The scheme is a multi-employer defined benefit scheme.NESTA also offers employees the alternative of a 12%contribution, on a defined contribution basis, to a personal pension scheme.

PSATSITA Defined Benefits Scheme

The scheme is financed from payments by NESTA andemployees into a trustee administered fund independentlymanaged and invested by a leading fund managementcompany.

An Actuarial Valuation of the pension fund takes place every three years. The market value of the scheme assets at 31 March 2001 was £6,666,000. This is a valuation of thewhole scheme. At that date the accrued assets of the whole scheme were 102% of the estimated liabilities of thescheme. The surplus or deficit on the scheme affects the size of contributions made by NESTA and its staff. A valuationwas conducted as at 31 March 2004, but has not yet beenmade available to NESTA.

The scheme is a defined benefit scheme. However, because it is a multi-employer scheme, NESTA is unable to identify its share of its underlying assets and liabilities.The scheme has therefore been accounted for as if it were a defined contribution scheme in accordance with FRS17:Retirement Benefits.

The total annual pension is calculated as one-sixtieth offinal pensionable earnings for each year of service andindex linked to the retail prices index, with a maximumincrease of 5% per annum. Upon retirement three-eightieths of the final pensionable earnings for each year of service may be taken as a lump sum.

Based on the advice of the actuary, employees’contributions were set at 5% and employer’s contributionwere set at 12% of pensionable earnings for the year ended 31 March 2001. The actuary recommended anincrease in contributions from 1 April 2003 of 2% ofpensionable earnings. Employees’ contribution increased to 51/2% and NESTA’s contribution increased to 131/2%.

14 Capital commitmentsAmounts committed and contracted for in respect of capital expenditure for Administrative purposes

2004 2003£’000 £’000

Computer System 180 509Building Works – 200

180 709

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At 31 March 2004, the group had an annual commitment under operating leases as follows:

Time to expiry 2004 2003£’000 £’000

Leasehold property

Fishmongers’ Chambers 2 yrs, 6 mths 215 224

Tufton Street 1 mths 14 45

University of Bristol 13 yrs, 3mths 54 54

283 323

15 Financial commitments1 April 2003 Cash flow 31 March 2004

£’000 £’000 £’000

Cash at bank and in hand 4,325 (2,054) 2,271

Fund A cash 2 2 4

Funds B & C cash 207 4,770 4,977

Cash in escrow – 50 50

4,534 2,768 7,302

17 Analysis of net cash

Endowment Accumulated Totalreserve funds

£’000 £’000 £’000

At 1 April 2003 295,000 6,258 301,258

Transfer from Endowment (7,109) – (7,109)

Surplus for the year – 2,377 2,377

At 31 March 2004 287,891 8,635 296,526

As set out in more detail in Note 9a, £45m of theEndowment can be drawn down by NESTA to covercommitments made up to 31 March 2006.

18 Reserves

The Tufton Street and University of Bristol leases were novated toNESTA from NEL during the financial year, and the Tufton Streetlease was surrendered in April 2004. The University of Bristolpremises have a 15-year lease with a break clause every third year.The first break point falls on the 15 July 2005. The annual leasecharge for the premises will rise to £71k in 2005.

£,000 £,000

Photocopier and service agreement 1 Year – 3

2-3 Years – 3

– 6

16 Reconciliation of surplus for the year to net cash outflow from operating activities

2004 2003£’000 £’000

Surplus/(Deficit) for the year 2,377 (8,360)

Non-cash transfer from Endowment (7,109) –

Investment returns (11,917) (4,963)

Current cost devaluation – 89

Depreciation 588 369

Decrease/(Increase) in debtors 460 (940)

(Decrease)/Increase in creditors (2,487) 4,705

Increase in awards committed 692 1,412

Net cash outflow from operating activities (17,396) (7,688)

19 Financial Instruments FRS 13 Derivatives and Other Financial Instruments,requires disclosure of the role which financial instrumentshave had during the period in creating or changing the riskswhich the Trustees of NESTA face in undertaking their role.

Liquidity Risks

Liquid resources comprise assets held as a readilydisposable store of value. They include governmentsecurities, equities and bonds and exclude any such assets held as non-expendable Endowment assetinvestments.

In the year, £11,917k (52%) of NESTA’s income derived fromthe returns accruing on its investments. The remainingincome derived from a transfer from its Endowment of£7,109k (30%), contract funding from the Department forEducation and Skills of £3,869k (17%), other governmentfunding of £140k and from other income of £185k

The Trustees of NESTA are satisfied that they have sufficient liquid resources in the form of cash of £2,271k and current asset investments of £38,000k. The Trustees are therefore content that NESTA is not exposed to significant liquidity risks.

Interest Rate Risks

For the main part of its Endowment, NESTA has a policy of buying five year gilts on a rolling basis and holding these until maturity. This policy significantly reduces its real economic exposure to short-term interest rate risks,although reported results may be volatile due to the policy of revaluing such investments to prevailing market prices.

Foreign Exchange Risks

NESTA is not exposed to any material foreign exchange risks.

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20 Related partiesNESTA produces consolidated financial statements and hastherefore taken advantage of the exemption given in FRS 8 not to disclose details of transactions with the subsidiaryundertaking that have been eliminated on consolidation.

The Department for Culture, Media and Sport (DCMS), theDepartment for Education and Skills (DfES), the Departmentfor Trade and Industry (DTI) and the Commissioners for theReduction of the National Debt (CRND) are all regarded asrelated parties. Transactions with these bodies are disclosedwithin these accounts.

Enigma Productions Limited is the office of the formerChairman, Lord Puttnam. Enigma recharged NESTA aproportion of office and overheads costs which reflects thecost of conducting NESTA business. Enigma is regarded as arelated party. The amount recharged in 2003-04 was £35,000(2003:£60,000). This was paid by 7 monthly transactions of£5,000. Lord Puttnam provided services to the value of £400 in February 2004.

21 State Aid Notification of the Invention and Innovation Programme

Paragraph 87 of the Treaty of the European Union definesState Aid as “any aid granted by a Member State or through State Resources in any form whatsoever whichdistorts or threatens to distort competition by favouringcertain undertakings or the production of certain goods” and declares that such Aid “shall, in so far as it affects trade between member states, be incompatible with thecommon market”.

NESTA has obtained detailed legal advice from leadingcounsel in the State Aid field and, on the basis of this, hadformed the view that transactions under the Invention andInnovation programme to date have not infringed Treatyrequirements, nor the requirements of regularity as set out in the Accounts Directions and Government Accounting.

The Counsel’s opinion, however, was that for the avoidance ofdoubt, NESTA should proceed with notification of the Inventionand Innovation programme to the European Commission inorder to provide certainty over the status of the Programme. A submission is being prepared in conjunction with theDepartment for Trade and Industry. It is anticipated that thesubmission will be delivered to the European Commission inSeptember 2004. A decision is not likely to be forthcominguntil early in the next financial year.

At 31 March 2004, the value of awards made under thisscheme since NESTA’s inception was £10,068k.

NESTA’s organisational structureChairman Chief Executive Deputy Chief Executive (S&C)Chris Powell Jeremy Newton Janet Morrison

2003/04

Our senior team

Gareth BinnsLearning Director(resigned Oct 2003)

Susan ButlerCommunications Director

Laura DawsonIT Director

Venu DhupaFellowship Director

Martin FreethChief Executive, NESTA Futurelab(resigned April 2003)

Jemma KinghamFinance Director

Sarah MacneeActing Learning Director(appointed Oct 2003)

Hugo ManasseiCreative Pioneer Director

Janet MorrisonDeputy Chief Executive

Jeremy NewtonChief Executive

Annika SmallNESTA Futurelab Managing Director(appointed April 2003)

Our trustees Appointed Retired Committee Membership

Lord Puttnam CBE (Chairman) July 1998 Oct 2003 Learning

Chris Powell (Chairman) Oct 2003

Yasmin Anwar Nov 2001 Invention and Innovation

Daniel Alexander June 1999 Invention and Innovation

Paul Daniel July 2001 Fellowship

Katie Gramich June 2002 Learning

Sue Hunter June 1999 Oct 2003 Finance and Audit/Invention and Innovation

Professor Janice Kirkpatrick Aug 1998 Invention and Innovation

Francois Matarasso July 1998 July 2003 Learning

Baroness McIntosh of Hudnall July 1998 Fellowship

Professor Nancy Rothwell Jan 2002 Fellowship

Graham Ross Russell Nov 2001 Finance and Audit/Invention and Innovation /NESTA Futurelab/Creative Pioneer Programme

Simon Singh June 2002 Fellowship

Derek Wanless Sept 2000 Finance and Audit/NESTA Futurelab

Tom Bentley July 2003 Learning

Tracy Long Dec 2003 Invention and Innovation

Professor William Morris Jan 2004 Learning

Mike TomlinsonPlanet Science Director(appointment ended July 2003)

Graham WatsonDeputy Chief Executive, Finance and Business(resigned Aug 2003)

Zoe WeaverHuman Resources Director

Mark WhiteInvention and Innovation Director

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Other Committee members Appointed Retired

Our Learning committee

David Hargreaves Feb 2000 Sept 2003

Mike Tomlinson June 2002

Maureen Burns July 2003

Jonathan Drori Sept 2003

Our Fellowship committee

Igor Aleksander Nov 2000

Shreela Ghosh May 2003

Patricia Lankester Apr 2000 Apr 2003

Dr David Raitt May 2003

Seona Reid Mar 2000 Apr 2003

Phyllida Shaw Mar 2000 Apr 2003

Our Invention and Innovation committee (I&I)

John Bates July 2002

Sue Emmas Apr 2000 Apr 2003

Thomas Hoegh Nov 2000 Mar 2004

Gareth Osborne Feb 2000 Apr 2003

David Wardell July 2001

Brett Allsop Sept 2003

Marcus Davey Sept 2003

Marc Gillespie Feb 2004

Ruth Turner Feb 2004

Our Creative Pioneer programme committee

Sir Michael Bichard Nov 2003

Margaret Bruce Nov 2003

Gillian Crampton Smith Nov 2003

David Kester Nov 2003

Stuart MacDonald Nov 2003

John Newbigin Nov 2003

John Sorrell Nov 2003

Our NESTA Futurelab committee

Adrian Hall Sept 2003

Anthony Lilley Sept 2003

Angela McFarlane Sept 2003

Niel McLean Sept 2003

Peter Orton Sept 2003NESTA maintains a register of interests ofmembers of the Board of Trustees andsenior staff, which is available for publicinspection by appointment at NESTA’sprincipal office address

Information about our complaints procedure is available online at www.nesta.org.uk

Printed in the UK for The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office 09/04, 172917

NESTA Learning programme

With NESTA’s support, pupils at Caol Primary School, outside Fort William, are able to run Room 13as an autonomous arts studio, and to start the task of developing furtherRoom 13s in other schools.

copy: L

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p design: Kathryn Sam

son cut-out photography: D

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evelopments

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Documents

NESTA Annual report a-w low res