annual-report-2007-statement by University of Cambridge

Reports and Financial Statements For the year ended 31 July 2007

Financial Review Scope of the Financial Statements The consolidated financial statements cover the teaching and research activities of the University, its subsidiary companies which undertake activities which for legal or commercial reasons are more appropriately carried out by limited companies, Cambridge Assessment and Cambridge University Press and their subsidiary companies and joint ventures, the Gates Cambridge Trust, and certain other Trusts (the ‘Associated Trusts’). Cambridge Assessment and Cambridge University Press are constituent parts of the corporation known as the Chancellor, Masters and Scholars of the University of Cambridge. Cambridge Assessment’s primary work is the conduct and administration of examinations in schools and for persons who are not members of the University. Cambridge University Press is the printing and publishing house of the University dedicated to printing and publishing for the advancement of knowledge, education and learning worldwide. The Gates Cambridge Trust is a separately constituted exempt charity. The purposes of the Gates Cambridge Trust are to support the University by enabling persons from any part of the world outside the United Kingdom to benefit from education in the University by the provision of scholarships and grants and otherwise. The assets of the Gates Cambridge Trust are therefore not available for the general purposes of the University. The other Associated Trusts are also separately constituted exempt charities with purposes primarily to support students ordinarily resident or domiciled in countries outside the United Kingdom to benefit from education in the University. The assets of these Trusts are similarly not available for the general purposes of the University. The Gates and Associated Trusts are deemed to be subsidiary undertakings of the University since the University appoints the majority of their trustees, and the Trusts are therefore consolidated into the University’s financial statements. The University will continue to publish separately the accounts of its core education and research activities. The accounts of the activities of Cambridge Assessment and of Cambridge University Press are also published separately.

Results for the year The consolidated results for the year ended 31 July 2007 are summarised as follows:

2006–07 £m

2005–06 £m

Change %

958 (945)

890 (882)

+7.6% +7.2%

Surplus/(deficit) on continuing operations Exceptional items: gain on sale of tangible fixed assets

13 3

8 7

Surplus on continuing operations after exceptional items Minority interest and transfer to specific endowments

16 5

15 (3)

Surplus for the year retained within general reserves

2,411

2,171

Income Expenditure

Net assets

+11.1%

This consolidated position is built up from the University’s three main segments: its core academic activities, and the assessment and publishing activities carried out by Cambridge Assessment and Cambridge University Press. Within the group there are a number of intra-group transactions, principally the printing of examination papers which the Press provides for Cambridge Assessment, and financial and other support for the University’s academic activities made by both Cambridge Assessment and the Press. The information below may be helpful:

Surplus on continuing operations

Income £m

Expenditure £m

Surplus £m

617 197 165 (9)

612 185 164 (9)

5 12 1 –

(9) (1) (2)

(9) (1) 3

– – (5)

945

Results by segment

Education and research Cambridge Assessment Cambridge University Press Eliminations Press sales to Cambridge Assessment Financial support to the University from: Cambridge Assessment Cambridge University Press Pension scheme and other adjustments

958

In overview, the academic activities of the University group were broadly in financial balance, Cambridge University Press returned to a small surplus, and Cambridge Assessment continued its steady growth. The consolidated surplus is, however, small in the context of annual expenditure now approaching £1 billion. The academic activities benefited from additional transfers from Cambridge Assessment, improved investment income, and increased fee income from a further cohort of students paying fees at the higher rate, net of provision for bursaries. This extra income broadly covered the planned but significant increases in staff costs arising from the University-wide pay and grading exercise and general inflationary costs. Income from Research Grants and Contracts increased only modestly; however, once an adjustment is made for the transitional funding received in 2005–06 in advance of full economic costing of Research Council grants the underlying growth in research income was 7.8%. The faculties and departments of the University contained expenditure well below budget, offsetting shortfalls in full economic cost recovery on research grants. The net overall effect was a small surplus for the academic activities; however general funds (‘the Chest’) were depleted further although our Schools, faculties and departments continued to build up reserves. The central reserves available for strategic initiatives are insufficient and there is a need to build these funds substantially or to find other sources for strategic investment. Cambridge Assessment continues to grow its UK and international assessment services, and is now seeing benefits of the operational enhancements that it has implemented and continues to invest in information technology. Cambridge University Press continues its favourable trend with good increases in sales volumes, with academic publishing performing strongly, good performance by the journals and English language courses streams, and a return to small surplus in the printing business. As income and activity increased so did costs. Staff costs in the core University increased by 7.9% of which approximately half arises from the first year’s impact of a three-year pay settlement and the balance largely from the costs of assimilation to a single pay spine. Cambridge University Press staff costs increased through general increases and greater staff numbers, although total staff costs at Cambridge Assessment remained level. Staff costs by segment, before taking into account pension scheme adjustments, were:

Education and research activities Cambridge Assessment Cambridge University Press

2006–07 £m

2005–06 £m

Increase %

326 52 54

302 52 51

+7.9% -0.9% +6.9%

Other operating expenses increased by £31m (7.2%), of which £18m was in respect of the Cambridge Assessment and Cambridge University Press activities.

Change in financial position The University group has a sizeable balance sheet, and the table of movement in net assets below shows the capital flows into the group and the impact of changes in the values of investment assets. Movement in net assets

Education and research

Cambridge Assessment

Cambridge University Press

University Pension scheme

Total

£m

Net assets at 31 July 2006 Surplus on continuing operations Gain on disposal of tangible fixed assets New endowment capital External funding for capital expenditure Actuarial gain on pension schemes Increase in investment values

2,023 5 – 34 36 – 96

156 12 3 – – 1 5

90 1 – – – 6 2

(98) (5) – – – 44 –

2,171 13 3 34 36 51 103

Net assets at 31 July 2007

2,194

177

(59)

2,411

Capital expenditure programme Expenditure on land and buildings was £63m for the year, of which £53m was for the academic activities of the University. This included major projects, notably the Institute of Metabolic Science, the Cambridge Centre for Imaging and final works on the Cancer Research UK Centre, all at the Addenbrooke’s site, initial costs of the Centre for the Physics of Medicine and the Sainsbury Laboratory, and a number of major refurbishment projects. Cambridge Assessment made further expenditure on its warehousing and office facilities. Capital expenditure on equipment and business systems was £41m, of which £28m was made for education and research activities. Cambridge Assessment and Cambridge University Press continued to invest in business support systems and other equipment.

Endowment and investment performance The total endowment, fixed asset investment and other investment assets increased by £177m to £1,565m for the University group through investment performances and new donations. Of this total £180m is attributable to the Gates Cambridge Trust and £125m to the Associated Trusts. The vast majority of the endowment assets of the University and Cambridge Assessment, and the majority of those of the Associated Trusts, are invested in the Cambridge University Endowment Fund. The Fund performed well over the year with a closing value of £991m. With capital growth and the distribution made to support operations the total investment return per unit of the Fund was 12.1% over the year. The investment portfolio of the Gates Cambridge Trust is managed by a number of external fund managers. After providing financial aid to students, the total value of the endowment of the Trust increased by £15m over the year to £180m. The University’s investment assets are significant and although investment income provides only approximately 6% of the operating budget it eases pressures elsewhere and gives important financial assistance to students. The 800th Anniversary campaign is already giving helpful endowment and capital support. To enhance long-term investment returns an in-house Investment Office was set up in the year with Mr Nick Cavalla recruited as Chief Investment Officer.

Pensions Like most employers the Council is aware of the changing liabilities of defined benefit pension schemes and monitors the University’s position carefully. The main schemes of the Group are the Universities Superannuation Scheme (USS), the Cambridge University Assistants Contributory Pensions Scheme (CPS) and those of Cambridge University Press. The position of the USS is disclosed in detail in Note 29 to the accounts. The next actuarial valuation of the USS will be as at 31 March 2008. Although following recent consultation the USS has held contribution rates steady the costs of providing pensions remains of concern. The CPS and the Press’s schemes, being single-employer schemes, are presented in the financial statements following Financial Reporting Standard 17 (FRS 17). The total pension liability under FRS 17 has reduced by £38m to £79m, of which £18m relates to the Press’s schemes. The triennial valuation of the CPS as at 31 July 2007 gave a reduced deficit of £8 million (97% funded).

Future projects An indicative master plan for the development of University land at North West Cambridge has been prepared and the details are being negotiated with the City and District Councils. North West Cambridge represents a substantial financial asset. The main purpose of the development is to construct affordable accommodation for University staff and students and to provide opportunities for new academic developments in the future. In developing the site the University will also seek to generate a positive financial return within the context of the overall academic and other strategic objectives for the site. The University is also considering the development of its city-centre New Museums and Mill Lane sites and the proposals will be reviewed in detail over 2007-08.

The future The University must generate a modest operating surplus for investment and needs a diversity of income streams to reduce its exposure to short term changes in, for example, government policy or the economic situation. The operating budget for the core education and research activity is in approximate balance, a significant achievement given the growth in staff costs over the past two years. On current assumptions these activities should remain in balance over the next five years or generate a small surplus, but current assumptions are fragile and the position could be substantially changed by the outcome of the Research Assessment Exercise (RAE 2008), changes in the formulaic funding of undergraduate teaching, a downturn in the economy, a reduced commitment of the government to research, or an adverse outcome to the actuarial valuation of USS in 2008. Cambridge Assessment and Cambridge University Press both operate in challenging and competitive international environments but are planned to show gently improving financial results in the medium term. Despite the challenges and concerns the balance sheet remains sound and net assets are growing steadily, giving the University its operating and financial capability. Securing the sustainability of our operations and of our financial position remains a key concern for the University’s Council and its committees. Professor Tony Minson Pro-Vice-Chancellor (Planning and Resources)

Corporate Governance 1. The following statement is provided by the Council to enable readers of the financial statements to obtain a better understanding of the arrangements in the University for the management of its resources and for audit. 2. The University endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership) and within the general principles of the Guidance to Universities which has been provided by the Committee of University Chairmen and its ‘Guide for Members of Governing Bodies of Universities and Colleges in England, Wales and Northern Ireland’. Further information is given at paragraph 9 below. 3. Under the Statutes the Governing Body of the University is the Regent House which comprises the resident senior members of the University and the Colleges, together with the Chancellor, the High Steward, the Deputy High Steward, and the Commissary. Subject to the Regent House, the Council of the University is the principal executive and policy-making body of the University, with general responsibility for the administration of the University, for the planning of its work, and for the management of its resources. The membership of the Council includes two external members, one of whom chairs the Audit Committee (see paragraph 7 below). The General Board of the Faculties is responsible, subject to the Regent House and to the responsibilities of the Council, for the academic and educational policy of the University. 4. The Council is advised in carrying out its duties by a number of Committees, including the Planning and Resources Committee, the Finance Committee, the Audit Committee and the Risk Steering Committee. The Planning and Resources Committee is a joint committee of the Council and the General Board. Its responsibilities include the development and oversight of the University’s Strategic Plan, and the preparation of the University’s budget. The Finance Committee is chaired by the Vice-Chancellor and advises the Council on the management of the University’s assets, including real property, monies and securities, and on the care and maintenance of all University sites and buildings. The Audit Committee governs the work of the Internal and External Auditors, reporting on these matters directly to the Council. The Risk Steering Committee is responsible to the Council for the identification of the major corporate risks and their management. 5. The Vice-Chancellor is, de facto, the principal academic and administrative officer of the University. Under the terms of the Financial Memorandum between the University and the Higher Education Funding Council for England the ViceChancellor is the Designated Officer of the University.

6. Under the Statutes, it is the duty of the Council to exercise general supervision over the finances of all institutions in the University other than the University Press; to keep under review the University’s financial position and to make a report thereon to the University at least once in each year; to recommend bankers for appointment by the Regent House; to prepare and publish the annual accounts of the University in accordance with UK applicable accounting standards such that the accounts give a true and fair view of the state of affairs of the University. 7. It is the duty of the Audit Committee to keep under review the effectiveness of the University’s internal systems of financial and other controls; to advise the Council on the appointment of external and internal auditors; to consider reports submitted by the auditors, both external and internal; to monitor the implementation of recommendations made by the internal auditors; to satisfy themselves that satisfactory arrangements are adopted throughout the University for promoting economy, efficiency and effectiveness; to establish appropriate performance measures and to monitor the effectiveness of external and internal audit; to make an annual report to the Council, the Vice-Chancellor and the Higher Education Funding Council for England; to receive reports from the National Audit Office and the Higher Education Funding Council for England. Membership of the Audit Committee includes as a majority five external members (including the chair of the Committee), appointed by the Council with regard to their professional expertise and experience in comparable roles in corporate life. 8. The University maintains a Register of Interests of Members of the Council, the General Board, the Finance Committee and the Audit Committee, and of the Senior Administrative Officers, which may be consulted by arrangement with the Registrary. 9. The University is a self-governing community whose members act in accordance with the seven principles of public life (see paragraph 2 above) and in pursuit of the objectives and purposes of the University as set out in its Statutes. The University complies with most but not all of the voluntary Governance Code of Practice published in November 2004 by the Committee of University Chairmen. In particular the Vice-Chancellor is chair of the Council, which does not have a majority of external members, and the Council is subject to the statutory authority of the Regent House. The University has no immediate plans to change these arrangements, which have proved reliable over many years in enabling the University to achieve its academic objectives.

Statement of Internal Control 1. The Council has responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which the Council is responsible, in accordance with the Statutes and Ordinances and the Financial Memorandum with the HEFCE. 2. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. 3. The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. This process was in place for the year ended 31 July 2007 and up to the date of approval of the financial statements, and accords with HEFCE guidance. 4. The Council has responsibility for reviewing the effectiveness of the system of internal control. The following processes have been established: (a)

(b)

(c)

The Council meets ten times throughout the year to consider the plans and strategic direction of the University. The Council receives periodic reports from the Chairman of the Audit Committee concerning internal control and receives the minutes of all meetings of the Audit Committee. The Council’s Risk Steering Committee oversees risk management. The Council receives periodic reports

(d)

(e) (f) (g)

(h) (i)

from the Chairman of the Risk Steering Committee and receives the minutes of all meetings of the Risk Steering Committee. Risk management is a standing item on the agenda for meetings of the Council. The Audit Committee receives regular reports from the internal auditors, which include the internal auditors’ independent opinion on the adequacy and effectiveness of the University’s system of internal control and risk management, together with recommendations for improvement. The University has a continuing programme of risk management and awareness courses. A system of risk indicators has been developed for the University’s key risks. A robust risk prioritization methodology based on risk ranking and cost-benefit analysis has been established. A University-wide risk register is maintained. Key risks have been assigned to risk owners and risk reporting channels established.

5. The Council’s review of the effectiveness of the system of internal control is informed by the work of the internal auditors Grant Thornton. They operate to the standards defined in Accountability and Audit: HEFCE Code of Practice. 6. The Council’s review of the effectiveness of the system of internal control is also informed by the work of the senior officers and the risk owners within the University, who have responsibility for the development and maintenance of the internal control framework, and by comments made by the external auditors in their management letter and other reports.

Statement of Responsibilities of the Council 1. Under the University’s Statutes it is the duty of the Council to prepare and to publish the annual accounts of the University in accordance with UK applicable accounting standards such that the accounts give a true and fair view of the state of affairs of the University. 2. The Council is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University. 3. In preparing the financial statements the Council is required to: (a) select suitable accounting policies and then apply them consistently;

(b) (c) (d)

(e)

(f)

make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed; prepare the financial statements on a going concern basis unless it is inappropriate to presume that the University will continue to operate; ensure that income has been applied in accordance with the University’s Statutes and Ordinances, and its Financial Memorandum with the HEFCE and the funding Agreement with the Training and Development Agency for Schools; and safeguard the assets of the University and take reasonable steps to prevent and detect fraud and other irregularities. 51

Independent Auditors’ Report to the Council We have audited the financial statements of the University of Cambridge for the year ended 31 July 2007 which comprise the statement of principal accounting policies, the consolidated income and expenditure account, the note of historical cost result, the consolidated statement of total recognised gains and losses, the balance sheets, the consolidated cash flow statement and the related notes 1 to 34. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Council, as a body, in accordance with the Financial Memorandum effective from 1 August 2006. Our audit work has been undertaken so that we might state to the Council those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume any responsibility to anyone other than the Council and the Council’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Council and auditors As described in the statement of the responsibilities of the Council, the Council is responsible for the preparation of the financial statements in accordance with the University’s statute, the Statement of Recommended Practice on Accounting for Further and Higher Education and other applicable United Kingdom law and accounting standards (United Kingdom Generally Accepted Accounting Practice). Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Statement of Recommended Practice on Accounting for Further and Higher Education and other applicable United Kingdom law and accounting standards (United Kingdom Generally Accepted Accounting Practice). We also report whether, in all material respects, income from funding bodies, grants and income for specific purposes and from other restricted funds administered by the University of Cambridge have been properly applied only for the purposes for which they were received and whether income has been applied in accordance with the Statutes and Ordinances and, where appropriate, with the Financial Memorandum with the Higher Education Funding Council for England and the funding agreement with the Training and Development Agency for Schools.

We also report to you if, in our opinion, the Financial Review is not consistent with the financial statements, if the Group has not kept proper accounting records, the accounting records do not agree with the financial statements or if we have not received all the information and explanations we require for our audit. We read the other information contained in the Financial Review, the Corporate Governance Statement, the Statement of Internal Control and the Statement of Responsibilities of the Council and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.

Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing issued by the Auditing Practices Board and the Audit Code of Practice issued by the Higher Education Funding Council for England. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Council in the preparation of the financial statements and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion In our opinion: (a)

the financial statements give a true and fair view of the state of affairs of the University and the Group as at 31 July 2007 and of the surplus of the Group for the year then ended and have been properly prepared in accordance with the Statement of Recommended Practice on Accounting for Further and Higher Education;

(b)

in all material respects income from Higher Education Funding Council for England, and from the Training and Development Agency for Schools and grants and income for specific purposes and from other restricted

funds administered by the University have been applied only for the purposes for which they were received; and (c)

in all material respects income has been applied in accordance with the University’s Statutes and Ordinances, and where appropriate, with the Financial Memorandum, dated August 2006 with

the Higher Education Funding Council for England and with the funding agreement with the Training and Development Agency for Schools. Deloitte & Touche LLP Chartered Accountants and Registered Auditors Cambridge, United Kingdom 26 November 2007

Statement of Principal Accounting Policies Basis of preparation The financial statements have been prepared in accordance with applicable United Kingdom accounting standards and the Statement of Recommended Practice: Accounting for Further and Higher Education (the SORP).

Basis of accounting The financial statements have been prepared under the historical cost convention, modified in respect of the treatment of investments and certain operational properties which are included at valuation.

The consolidated financial statements do not include the accounts of the 30 Colleges and one Approved Society in the University (‘the Colleges’), each of which is an independent corporation. Transactions with the Colleges are disclosed in note 32. The consolidated financial statements do not include the accounts of Cambridge University Students Union or of the Cambridge University Graduate Union, as these are separate bodies in which the University has no financial interest and over whose policy decisions it has no control.

Recognition of income Basis of consolidation

Recurrent grant

The consolidated financial statements include the University and its subsidiary undertakings including the Gates Cambridge Trust and other Associated Trusts. Details of the subsidiary undertakings included are given in note 30. Intra-group transactions and balances are eliminated on consolidation.

Recurrent grant is received from the Higher Education Funding Council for England (HEFCE) and the Training and Development Agency for Schools. Recurrent grant is recognised as income in the period to which it relates. Restricted income

The Gates Cambridge Trust is a separately constituted exempt charity which is accounted for as a subsidiary undertaking of the University since the University appoints the majority of its trustees. The purposes of the Gates Cambridge Trust are to support the University by enabling persons (to be known as ‘Gates Cambridge Scholars’) from any part of the world outside the United Kingdom to benefit from education in the University by provision of scholarships and grants and otherwise. These purposes cannot be changed without the consent of the settler, The Bill & Melinda Gates Foundation. The assets of the Gates Cambridge Trust are therefore not available for the general purposes of the University. The Associated Trusts are similarly constituted exempt charities with purposes primarily to provide support to enable students ordinarily resident or domiciled in countries outside the United Kingdom to benefit from education in the University. The assets of the Associated Trusts are therefore not available for the general purposes of the University.

Income is received which is designated for restricted purposes as specified by grantors or donors, including HEFCE specific grants, research grants and specific donations. Except for income in respect of specific endowments, restricted income is recognised to the extent that relevant expenditure has been incurred, and unspent restricted income is included in creditors. Capital grants and donations Grants and external donations are received for the purposes of funding the acquisition and construction of tangible fixed assets. These are credited to deferred capital grants when the related capital expenditure is incurred and released to income over the expected useful life of the respective assets consistent with the depreciation policy. Academic fees Tuition fees for degree courses are charged to students by academic term. Income is recognised for academic terms 53

falling within the period. For short courses, fees are charged in advance for the entire course and income is recognised to the extent that the course duration falls within the period.

their estimated useful lives, which are between 15 and 50 years, and leasehold properties are written off over the length of the lease.

Examination and assessment services

Equipment

Income from assessment is recognised when the assessment service has been substantially rendered. Where assessment includes ongoing verification, judgment is used to establish the proportion of income that may be recognised in the period, based upon services performed within the period as a proportion of the total services to be performed.

Equipment costing less than ÂŁ10,000 per individual item is written off in the year of purchase. All other equipment is capitalised and depreciated so that it is written off over its estimated useful life of between four and ten years, except where it is purchased from a research grant when it is written off over the remaining life of the grant.

Publishing and printing

Heritage assets

Income is recognised on delivery of the goods to the customer.

The University holds and conserves a number of collections, exhibits, artefacts and other assets of historical, artistic or scientific importance. In accordance with FRS 15, all acquisitions since 1 August 1999 have been capitalised at cost or, in the case of donated assets, at valuation on receipt. In line with the general fixed assets accounting policy, the threshold for capitalising assets is ÂŁ10,000. Heritage assets are not depreciated since their long economic life and high residual value mean that any depreciation would not be material.

Other income Income is received from a range of activities including residences, catering, conferences, and other services rendered. Income is recognised on the exchange of the relevant goods or services. Endowment and investment income All investment income is credited to the income and expenditure account in the period in which it is earned. Income from specific endowments not expended in accordance with the restrictions of the endowment is transferred from the income and expenditure account to specific endowments. Specific endowments Permanent endowments are not included in the income and expenditure account but are credited to specific endowments when funds are received. Foreign currency translation Transactions denominated in foreign currencies are recorded at the rate of exchange ruling at the date of the transactions. Where foreign branches of Cambridge University Press (CUP) accounting in foreign currencies operate as separate businesses, all their assets and liabilities are translated into sterling at year-end rates and the net effect of currency adjustments is taken directly to reserves. Otherwise, monetary assets and liabilities denominated in foreign currencies are translated into sterling at year-end rates and translation differences are taken to the income and expenditure account.

Intangible fixed assets: goodwill Goodwill arises on consolidation and is based on the fair value of the consideration given for the subsidiary and the fair value of its assets at the date of acquisition. Goodwill is amortised over its estimated economic life of between five and ten years on a straight line basis. Where there is impairment in the carrying value of goodwill, the loss is included in the results of the period.

Investments Fixed asset investments and endowment assets are included in the balance sheet at market value, except for investments in subsidiary undertakings which are stated in the Universityâ&#x20AC;&#x2122;s balance sheet at cost and eliminated on consolidation. Properties held for investment purposes are valued annually on the basis of estimated open market values on an existing use basis by Knight Frank. Marketable securities are valued at mid-market valuation on 31 July. Non-marketable securities, including investments in spin-out companies, are included at valuation by the Council. Current asset investments are included in the balance sheet at the lower of cost and net realisable value.

Tangible fixed assets Land and buildings

Stocks and work in progress

Operational land and buildings are included in the financial statements at their 1994 valuation with subsequent additions at cost. No depreciation is provided on freehold land or on assets in construction. Freehold buildings are written off over

Stocks are stated at the lower of cost and net realisable value after making provision for slow moving and obsolete items. Expenditure on consumable materials for use in teaching and research activities is charged to revenue as incurred.

Pension costs The University contributes to a number of defined benefit pension schemes and accounts for the costs in relation to these schemes in accordance with FRS 17 (Retirement benefits). The University has adopted the revisions to the disclosure requirements of FRS 17 issued in December 2006 which do not become mandatory until the year ending 31 July 2008. Where the University is unable to identify its share of the underlying assets and liabilities in a scheme on a reasonable and consistent basis, it accounts as if the scheme were a defined contribution scheme, so that the cost is equal to the total of contributions payable in the year. For other defined benefit schemes, the assets of each scheme are measured at fair value, and the liabilities are measured

on an actuarial basis using the projected unit method and discounted at an appropriate rate of return. The Universityâ&#x20AC;&#x2122;s share of the surplus or deficit of the scheme is recognised as an asset or liability on the balance sheet. The current service cost, being the actuarially determined present value of the pension benefits earned by employees in the current period, and the past service cost are included within staff costs. Endowment and investment income includes the net of the expected return on assets, being the actuarial forecast of total return on the assets of the scheme, and the interest cost being the notional interest cost arising from unwinding the discount on the scheme liabilities. All changes in the pension surplus or deficit due to changes in actuarial assumptions or differences between actuarial forecasts and the actual out-turn are reported in the statement of total recognised gains and losses.

Consolidated income and expenditure account for the year ended 31 July 2007 Year ended 31 July 2007 ÂŁm

Year ended 31 July 2006 ÂŁm

183.2 67.8 211.5 192.7 153.2 96.2 53.6

178.1 59.0 203.9 169.5 141.8 90.9 47.5

958.2

890.7

8, 9 9 9 9

435.3 461.8 48.0 0.5

407.6 430.7 43.7 0.4

Total expenditure

945.6

882.4

Surplus on continuing operations before exceptional items

12.6

8.3

3.0

6.5

15.6

14.8

0.8

0.7 15.5

Note

Income Funding Council grants Academic fees and support grants Research grants and contracts Examination and assessment services Publishing and printing services Other income Endowment and investment income

1 2 3 4 5 6 7

Total income Expenditure Staff costs Other operating expenses Depreciation Interest payable

Exceptional items: gain on sale of tangible fixed assets Surplus on continuing operations after exceptional items Minority interests in results of subsidiary undertakings Surplus on continuing operations after minority interest

16.4

Transfer from / (to) accumulated income within specific endowments

4.9

Surplus for the year retained within general reserves

21.3

The income and expenditure account is in respect of continuing activities.

(3.4) 12.1

Note of historical cost result for the year ended 31 July 2007 Year ended 31 July 2007 Note

Surplus on continuing operations Realisation of gains on disposal of fixed asset investments Depreciation on revaluation element of tangible fixed assets

24 24

Historical cost surplus for the year

£m

Year ended 31 July 2006 Restated £m

16.4 15.4 6.0

15.5 33.2 6.0

37.8

54.7

Statement of total recognised gains and losses for the year ended 31 July 2007 Year ended 31 July 2007 £m

Year ended 31 July 2006 £m

16.4

15.5

23 14,24

67.5 36.3

72.2 40.9

New endowment capital

34.1

23.4

(Loss) / gain arising on foreign currency translation

(1.9)

0.5

Actuarial gain / (loss)

50.8

(11.3)

Note

Surplus on income and expenditure account Increase in market value of investments Endowment assets Fixed asset investments

Total recognised gains relating to the year

203.2

141.2

Total gains since the last annual report

203.2

141.2

1,735.0

1,593.8

203.2

141.2

1,938.2

1,735.0

Reconciliation Opening reserves and endowments Total gains since the last annual report Closing reserves and endowments

Balance sheets as at 31 July 2007 Group 31 July 2007

University 31 July 2007

£m

Group 31 July 2006 Restated £m

£m

University 31 July 2006 Restated £m

982.9 5.7 413.1

930.8 8.0 369.6

978.4 5.0 316.3

926.4 6.8 291.7

1,401.7

1,308.4

1,299.7

1,224.9

900.8

804.1

710.6

629.9

16 17

47.4 169.5

38.5 175.4

41.9 170.2

35.2 168.1

18 18

251.4 5.1 24.3

214.3 5.3 27.7

201.9 136.0 13.3

174.2 114.2 19.1

497.7

461.2

563.3

510.8

(306.8)

(272.5)

(413.4)

(353.6)

190.9

188.7

149.9

157.2

2,493.4

2,301.2

2,160.2

2,012.0

Note

Fixed assets Tangible assets Intangible assets Investments

12 13 14

Endowment assets Current assets Stocks and work in progress Debtors Investments University Held on behalf of others Cash at bank and in hand

Creditors: amounts falling due within one year

Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Pension liability

20 21

Total net assets

(2.7) (79.3)

(3.2) (127.0)

(10.6) (19.4)

(11.1) (27.0)

2,411.4

2,171.0

2,130.2

1,973.9

Represented by: Deferred capital grants

473.3

436.9

473.3

436.9

Endowments Specific endowments General endowments

23 23

892.5 8.3

796.4 7.7

702.3 8.3

622.2 7.7

900.8

804.1

710.6

629.9

24 24 24

740.9 157.4 139.1

649.3 163.4 118.2

694.7 157.4 94.2

655.1 163.4 88.6

24 Minority interest in subsidiary undertakings

1,037.4 (0.1)

930.9 (0.9)

946.3 –

907.1 –

Total

2,411.4

2,130.2

1,973.9

Reserves General reserves Operational property revaluation reserve Fixed asset investment revaluation reserve

2,171.0

The financial statements on pages 53 to 79 were approved by the Council on 26 November 2007 and signed on its behalf by: Professor Alison Richard Vice-Chancellor 58

Professor William Brown Member of Council

Andrew Reid Director of Finance

Consolidated cash flow statement for the year ended 31 July 2007 Year ended 31 July 2007 Note

ÂŁm

Year ended 31 July 2006 Restated ÂŁm

Net cash inflow from operating activities

17.0

6.6

Returns on investments and servicing of finance

53.4

46.2

Capital expenditure and financial investment

(71.4)

(40.1)

Cash (outflow) / inflow before use of liquid resources and financing

(1.0)

12.7

Management of liquid resources: Increase in short-term deposits

(6.1)

(1.5)

0.2

(0.5)

(6.9)

10.7

(6.9)

10.7

Cash outflow from liquid resources

6.1

1.5

Movement in net funds in the year

(0.8)

12.2

Net funds at 1 August

22.8

10.6

22.0

22.8

Financing

(Decrease) / increase in cash in the year

Reconciliation of net cash flow to movement in net funds (Decrease) / increase in cash

Net funds at 31 July

Notes to the accounts 2007 ÂŁm

2006 ÂŁm

162.1 10.2

147.3 20.3

4.4 3.1

4.5 2.5

179.8

174.6

3.4

3.5

183.2

178.1

27.4 31.0 8.6 0.8

21.5 28.9 7.8 0.8

67.8

59.0

93.2 60.6 57.7

89.7 60.1 54.1

211.5

203.9

180.0 12.7

155.4 14.1

192.7

169.5

146.8 6.4

132.9 8.9

153.2

141.8

23.3 10.8 8.1 1.7 12.1 5.0 7.9 11.6 4.7 11.0

Restated 21.3 10.8 8.4 1.5 9.9 6.4 10.9 12.4 5.5 3.8

96.2

90.9

1 Funding Council and Training and Development Agency grants Higher Education Funding Council for England (HEFCE) Recurrent grant Specific grants Deferred capital grant released in year (note 22) Equipment Buildings HEFCE total Training and Development Agency for Schools Recurrent grant

2 Academic fees and support grants Full-time home/EU students Full-time overseas (non-EU) students Part-time course fees Research Training Support Grants

3 Income: research grants and contracts Research councils UK based charities Other bodies

4 Examination and assessment services Examination fees Other examination and assessment services

5 Publishing and printing services Publishing services Printing services

6 Other income Other services rendered Health and hospital authorities Residences, catering and conferences AHRB museum grant University companies Released from deferred capital grants (note 22) General donations Specific donations released in the year Rental income Sundry income

In previous years income arising from catering activities was separately identified, income from conferences was included in other services rendered, and residences income was included in sundry income. These have now been combined into a total for residences, catering and conferences, and the figures for the previous year have been restated accordingly.

Notes to the accounts (continued) 2007 £m

2006 £m

29.4 0.3 0.1 23.8

25.7 0.3 0.5 21.0

53.6

47.5

2007 £m 350.3 32.6 52.4

2006 £m 329.8 29.4 48.4

435.3

407.6

2007 £000 204 –

2006 £000 196 –

204

196

7 Endowment and investment income

Income from specific endowment asset investments Income from general endowment asset investments Other income credited to specific endowments Other investment income

8 Staff costs

Wages and salaries Social security costs Pension costs (note 29)

Emoluments of the Vice-Chancellor Emoluments excluding employer’s pension contributions Employer’s pension contributions

Remuneration of higher paid staff, excluding employer’s pension contributions: The numbers in each band have been analysed by segment (see note 11) Education and research Clinical Non-Clinical

£70,000–£80,000 £80,001–£90,000 £90,001–£100,000 £100,001–£110,000 £110,001–£120,000 £120,001–£130,000 £130,001–£140,000 £140,001–£150,000 £150,001–£160,000 £160,001–£170,000 £170,001–£180,000 £180,001–£190,000 £190,001–£200,000 £200,001–£210,000 £210,001–£220,000 £220,001–£230,000 £230,001–£240,000 £240,001–£250,000 £250,001–£260,000 £260,001–£270,000

29 23 16 12 6 5 9 7 9 1 4 5 1 2 1 – – – – –

123 66 19 20 4 6 2 2 2 1 1 1 – 1 – – – – – –

Assessment and Press

2007 Total

2006 Total

14 11 5 3 5 4 2 1 1 – – – 1 – – – – 1 – 1

166 100 40 35 15 15 13 10 12 2 5 6 2 3 1 – – 1 – 1

93 71 44 18 17 8 11 9 4 5 5 3 2 1 – 1 – 1 – –

The above statistics include additional payments to employees of the University on behalf of NHS bodies.

Notes to the accounts (continued) 9 Analysis of expenditure by activity

Academic departments Academic services Payments to colleges (see note 32) Research grants and contracts Other activities: Examinations and assessment services Publishing and printing services Other services rendered University companies Residences, catering and conferences Other activities total Administration and central services: Administration General educational Staff and student facilities Development office Other Administration and central services total Premises Total per income and expenditure account

Staff costs £m

Other operating expenses £m

Depreciation £m

Interest payable £m

2007 Total £m

2006 Restated £m

152.0 18.5 – 97.4

26.8 8.3 34.7 75.3

7.5 0.7 – 9.4

– – – –

186.3 27.5 34.7 182.1

173.5 29.9 34.1 173.0

52.0 54.3 8.5 2.0 3.8 120.6

118.4 96.1 13.9 8.3 6.3 243.0

5.8 2.4 0.1 – 0.5 8.8

– 0.5 – – – 0.5

176.2 153.3 22.5 10.3 10.6 372.9

168.3 142.2 19.9 7.2 10.1 347.7

25.3 3.0 2.7 2.1 3.4 36.5 10.3

7.6 25.2 0.6 2.7 1.3 37.4 36.3

0.6 0.1 – – – 0.7 20.9

– – – – – – –

33.5 28.3 3.3 4.8 4.7 74.6 67.5

30.6 26.1 3.0 4.9 3.9 68.5 55.7

435.3

461.8

48.0

0.5

945.6

882.4

In previous years catering expenditure was separately identified, conferences expenditure was included in other services rendered, and residences expenditure was included under premises and administration. These have now been combined into a total for residences, catering and conferences and figures for the previous year have been restated accordingly. Expenditure shown as relating to the activities of “examinations and assessment services” and “publishing and printing services” includes related premises costs, which were previously included under “premises”. Figures for the previous year have been restated accordingly.

The depreciation charge has been funded by:

Deferred capital grants (note 22) Revaluation reserve (note 24) General income

21.9 6.0 20.1 48.0

Auditors’ remuneration Other operating expenses include: Audit fees payable to the University’s external auditors Other fees payable to the University’s external auditors Audit fees payable to other firms These amounts include related irrecoverable VAT.

2007 £000

2006 £000

221 27 391

223 7 358

Notes to the accounts (continued) 10 Surplus on continuing operations before exceptional items for the year The surplus on continuing operations before exceptional items for the year is made up as follows: University’s surplus for the year Surplus generated by subsidiary undertakings and transferred to the University under gift aid Surplus dealt with in the accounts of the University Group level adjustments re defined benefit schemes Surplus / (deficit) retained in subsidiary undertakings

2007 £m

2006 £m

9.3

17.2

1.6

2.8

10.9 (4.2) 5.9

20.0 (1.6) (10.1)

12.6

8.3

11 Segmental reporting The group consisting of the University and its subsidiary undertakings has three principal classes of activity: Education and research Assessment Examination and assessment services, carried out by the University of Cambridge Local Examinations Syndicate and subsidiary undertakings, collectively known as Cambridge Assessment. Press Publishing and printing services, carried out by the Cambridge University Press Syndicate and subsidiary undertakings

Income, result for the year and net assets at the year end are attributable to the three segments as follows:

Year ended 31 July 2007 Education and research Assessment Press

Segment total income £m

Intersegment income £m

Income from third parties £m

Surplus / (deficit) £m

Net assets £m

615.5 197.1 165.1

9.3 – 9.1

606.2 197.1 156.0

4.3 14.4 2.2

2,194.7 176.8 98.5

977.7

18.4

959.3

20.9

2,470.0

Unallocated re Contributory Pension Scheme

(1.1)

Group

Year ended 31 July 2006 Education and research Assessment Press

Unallocated re Contributory Pension Scheme Group

(4.5)

(58.6)

958.2

16.4

2,411.4

575.3 173.2 154.9

3.6 – 10.2

571.7 173.2 144.7

10.8 1.4 5.0

2,023.0 156.2 89.6

903.4

13.8

889.6

17.2

2,268.8

1.1

(1.7)

(97.8)

890.7

15.5

2,171.0

Notes to the accounts (continued) 12 Tangible fixed assets

Land and buildings

Assets in construction

Equipment

Heritage assets

2007 Total

2006 Total

£m

872.5 7.8 138.2 (9.2) (1.4)

127.5 55.0 (138.2) – –

192.5 41.4 – (35.6) (0.3)

17.5 3.9 – – –

1,210.0 108.1 – (44.8) (1.7)

1,129.9 94.5 – (15.3) 0.9

1,007.9

44.3

198.0

21.4

1,271.6

1,210.0

Depreciation At 1 August Charge for the year Elimination on disposals Currency adjustments

133.7 24.4 (4.6) (0.2)

– – – –

145.5 23.6 (33.5) (0.2)

– – – –

279.2 48.0 (38.1) (0.4)

243.6 43.7 (8.3) 0.2

At 31 July

153.3

–

135.4

–

288.7

279.2

Net book value At 31 July

854.6

44.3

62.6

21.4

982.9

930.8

738.8

127.5

47.0

17.5

930.8

886.3

863.2 6.0 138.2 (5.7) (1.5)

127.7 55.0 (138.2) – –

188.4 40.3 – (35.7) (0.3)

17.5 3.9 – – –

1,196.8 105.2 – (41.4) (1.8)

1,116.9 94.3 – (15.3) 0.9

1,000.2

44.5

192.7

21.4

1,258.8

1,196.8

Depreciation At 1 August Charge for the year Elimination on disposals Currency adjustments

128.6 23.9 (3.2) (0.2)

– – – –

141.8 23.3 (33.6) (0.2)

– – – –

270.4 47.2 (36.8) (0.4)

235.3 43.2 (8.3) 0.2

At 31 July

149.1

–

131.3

–

280.4

270.4

Net book value At 31 July

851.1

44.5

61.4

21.4

978.4

926.4

734.6

127.7

46.6

17.5

926.4

881.6

Group Cost or valuation At 1 August Additions at cost Transfers Disposals Currency adjustments At 31 July

At 1 August

University Cost or valuation At 1 August Additions at cost Transfers Disposals Currency adjustments At 31 July

At 1 August

Land and buildings includes land totalling £78.8m (2006: £78.8m) which is not depreciated. The net book value of land and buildings at the year end on a historical cost basis would be: Group £697.2m (2006: £575.4m); University £693.7m (2006: £571.2m). All other tangible fixed assets are stated at cost less accumulated depreciation. The cost to the group of freehold buildings and assets in construction consists of the cost incurred by the University less the surplus recorded in the accounts of Lynxvale Limited, a subsidiary undertaking, and eliminated on consolidation. 64

Notes to the accounts (continued) 13 Intangible fixed assets: goodwill and others

Opening balance Additions / (disposals) in the year Amortisation charge for the year Currency adjustments Closing balance

Group 2007 £m 8.0 – (2.2) (0.1)

Group 2006 £m 4.3 6.0 (2.4) 0.1

University 2007 £m 6.8 – (1.7) (0.1)

University 2006 £m 1.1 6.1 (0.5) 0.1

5.7

8.0

5.0

6.8

320.9

Restated 320.2

243.0

Restated 252.6

48.7

42.9

48.7

42.9

Restated opening balance Additions / (disposals) in the year Increase in market value of investments

369.6 7.2 36.3

363.1 (34.4) 40.9

291.7 6.7 17.9

295.5 (32.9) 29.1

Closing balance

413.1

369.6

316.3

291.7

Represented by: Property Securities Money market investments Investments in subsidiary undertakings Investment in spin-out companies (see note 30) Cash in hand and at investment managers Investments in joint ventures Other

65.2 302.3 31.6 – 10.4 3.3 0.1 0.2

61.5 275.3 11.0 – 6.6 14.9 0.1 0.2

56.6 208.1 25.4 21.2 2.2 2.6 – 0.2

53.2 190.9 8.9 24.3 2.4 11.8 – 0.2

413.1

369.6

316.3

291.7

14 Fixed asset investments Opening balance as previously stated Reclassification of holdings formerly included as current asset investments

All long-term investments held other than those held either for endowments (see note 15) or on behalf of other parties (see note 18) are now classified as fixed asset investments. Previously some long-term investments were classified as current asset investments. The figures for 31 July 2006 have been restated accordingly.

Notes to the accounts (continued) 15 Endowment assets

Group 2007 £m

Group 2006 £m

University 2007 £m

University 2006 £m

Long-term Investments Property Securities Money market investments Loan to subsidiary undertaking Cash in hand and at investment managers

98.7 696.4 85.5 – 17.6

101.5 619.1 53.2 – 28.1

88.1 537.8 74.9 2.6 7.2

84.5 476.8 37.6 2.4 28.6

Investment in spin-out companies (see note 30)

898.2 2.6

801.9 2.2

710.6 –

629.9 –

900.8

804.1

710.6

629.9

Included in the Group’s endowment assets is £179.6m (2006: £164.7m) relating to the Gates Cambridge Trust. The use of these assets is restricted to supporting the University by enabling persons from any part of the world outside the United Kingdom to benefit from education in the University by the provision of scholarships and grants and otherwise. The assets of the Gates Cambridge Trust are therefore not available for the general purposes of the University.

16 Stocks and work in progress Goods for resale Work in progress Other stocks

17 Debtors Research grants recoverable Amounts due from subsidiary undertakings Debtors re examination and assessment services Debtors re publishing and printing Other debtors

40.0 7.1 0.3

30.5 7.0 1.0

36.3 5.3 0.3

29.6 5.0 0.6

47.4

38.5

41.9

35.2

54.7 – 43.8 41.8 29.2

59.2 – 41.5 44.8 29.9

54.7 20.9 34.7 52.6 7.3

59.2 4.5 33.5 46.9 24.0

169.5

175.4

170.2

168.1

Notes to the accounts (continued) 18 Current asset investments

Group 2007 £m

Group 2006 £m Restated

University 2007 £m

University 2006 £m Restated

Property Securities Money market investments Short-term deposits

0.4 2.1 247.7 6.3

0.4 1.9 217.1 0.2

9.5 57.0 263.4 8.0

9.6 52.2 222.9 3.7

256.5

219.6

337.9

288.4

251.4

214.3

201.9

174.2

5.1

5.3

136.0

114.2

256.5

219.6

337.9

288.4

Representing: University Held on behalf of subsidiary undertakings, related parties and other associated bodies (see note 19)

Current asset investments include investments held on behalf of subsidiary undertakings, related parties and other associated bodies. The book value of these investments is included in creditors due within one year. The value in the University’s balance sheet at 31 July 2006 given in the previous financial statements was overstated by £64.0m. This overstatement applied to both current asset investments and creditors due within one year, with no effect on net current assets or on net assets. The 2006 figures shown in these financial statements have been corrected. All long-term investments held other than those held either for endowments (see note 15) or on behalf of other parties are now classified as fixed asset investments (see note 14). Previously some long-term investments were classified as current asset investments. The figures for 31 July 2006 have been restated accordingly.

19 Creditors: amounts falling due within one year Bank overdraft Research grants received in advance Amounts due to subsidiary undertakings Creditors re examination and assessment services Creditors re publishing and printing Other creditors Investments held on behalf of subsidiary undertakings, related parties and other associated bodies (see note 18)

Restated 8.6 79.1 – 46.8 47.3 119.9

5.1 68.1 – 43.6 48.9 101.5

7.7 79.1 11.9 27.8 47.2 103.7

5.1 68.1 0.8 25.5 48.2 91.7

5.1

5.3

136.0

114.2

306.8

272.5

413.4

353.6

20 Creditors: amounts falling due after more than one year Amounts due to subsidiary undertakings – Bank loans – Loan from minority interest 2.7

– 0.5 2.7

10.6 – –

10.6 0.5 –

2.7

3.2

10.6

11.1

Notes to the accounts (continued) 21 Pension liability The pension liability has been measured in accordance with the requirements of FRS 17 and relates to the defined benefit schemes disclosed in note 29.

Group 2007 £m

Group 2006 £m

127.0

115.0

27.0

30.0

22.3 (19.5) 0.3 –

21.1 (19.5) (0.9) –

6.2 (6.6) (0.7) (0.1)

6.2 (7.2) 0.1 0.1

(50.8)

11.3

(6.4)

(2.2)

79.3

127.0

19.4

27.0

Funding Council £m

Research Grants £m

Other Grants £m

2007 Total £m

2006

121.0 9.8 –

– 15.4 –

271.2 2.1 17.4

392.2 27.3 17.4

368.0 28.1 14.2

130.8

15.4

290.7

436.9

410.3

25.1 7.0 –

– 10.8 –

12.4 1.2 3.4

37.5 19.0 3.4

31.7 14.6 3.2

32.1

10.8

17.0

59.9

49.5

(3.1) (4.4) (0.4)

– (9.4) (1.1)

(3.8) (1.2) (0.1)

(6.9) (15.0) (1.6)

(7.5) (14.4) (1.0)

(7.9)

(10.5)

(5.1)

(23.5)

(22.9)

Opening balance Movement in year: Current service cost including life assurance Contributions Other finance cost / (income) Currency adjustments Actuarial (gain) / loss recognised in statement of total recognised gains and losses Closing balance

University 2007 £m

University 2006 £m

22 Deferred capital grants

Group and University Balance 1 August Buildings Equipment Heritage assets

Grants received Buildings Equipment Heritage assets

Released to income and expenditure Buildings – for depreciation Equipment – for depreciation Equipment – on disposals

Balance 31 July Buildings Equipment Heritage assets

£m

143.0 12.0 –

– 15.7 –

279.8 2.0 20.8

422.8 29.7 20.8

392.2 27.3 17.4

155.0

15.7

302.6

473.3

436.9

Notes to the accounts (continued) 23 Endowments

Group

2007 Total £m

2006 Total £m

Specific £m

General £m

Balance 1 August Permanent endowments received Income receivable from endowment asset investments Donations and other income Expenditure Net transfer (to) / from income and expenditure account Increase in market value of investments

796.4 34.1

7.7 –

804.1 34.1

705.1 23.4

29.4 0.1 (34.4)

0.3 – (0.3)

29.7 0.1 (34.7)

26.0 0.2 (22.8)

(4.9) 66.9

– 0.6

(4.9) 67.5

3.4 72.2

Balance 31 July

892.5

8.3

Specific £m

General £m

Trust and Special Funds: Professorships, Readerships and Lectureships Scholarships and bursaries Other Examination Board restricted funds Gates Cambridge Trust Other subsidiary undertakings General endowments

321.1 80.4 286.0 12.3 179.6 13.1 –

– – – – – – 8.3

321.1 80.4 286.0 12.3 179.6 13.1 8.3

251.1 67.6 282.4 18.6 164.7 12.0 7.7

Group total

892.5

8.3

900.8

804.1

Specific £m

General £m

622.2 34.1

7.7 –

629.9 34.1

546.1 23.4

22.9 0.1 (29.1)

0.3 – (0.3)

23.2 0.1 (29.4)

20.6 0.2 (17.3)

(6.1) 52.1

– 0.6

(6.1) 52.7

3.5 56.9

Balance 31 July

702.3

Representing:

University

8.3

900.8

2007 Total £m

710.6

804.1

2006 Total £m

629.9

Notes to the accounts (continued) 24 Reserves

Group General reserves £m

Balance 1 August As previously stated Prior year adjustment – establishment of fixed asset investment revaluation reserve

Operational property revaluation reserve £m

Fixed asset investment revaluation reserve £m

2007 Total £m

2006 Total £m

767.5

163.4

–

930.9

888.7

(118.2)

–

118.2

–

Restated opening balance Surplus retained for the year Actuarial gain / (loss) Transfer in respect of depreciation on revalued operational properties Transfer in respect of disposals of fixed asset investments (Loss) / gain arising on foreign currency translation Increase in market value of investments

649.3 21.3 50.8 6.0

163.4 – – (6.0)

118.2 – – –

930.9 21.3 50.8 –

888.7 12.1 (11.3) –

15.4

–

(15.4)

–

(1.9) –

– –

– 36.3

(1.9) 36.3

0.5 40.9

Balance 31 July

740.9

157.4

139.1

1,037.4

930.9

Reserves are reduced by the net pension liability in respect of defined benefit pension schemes – see note 21 Reserves before net pension liability

820.2

157.4

139.1

1,116.7

1,057.9

Effect of net pension liability

(79.3)

–

Reserves balance at 31 July

740.9

157.4

139.1

1,037.4

930.9

General reserves £m

Operational property revaluation reserve £m

Fixed asset investment revaluation reserve £m

2007 Total £m

2006 Total £m

743.7

163.4

–

907.1

858.8

(88.6)

–

88.6

–

Restated opening balance Surplus retained for the year Actuarial gain Transfer in respect of depreciation on revalued operational properties Transfer in respect of disposals of fixed asset investments (Loss) / gain arising on foreign currency translation Increase in market value of investments

655.1 17.0 6.4 6.0

163.4 – – (6.0)

88.6 – – –

907.1 17.0 6.4 –

858.8 16.5 2.2 –

12.3

–

(12.3)

–

(2.1) –

– –

– 17.9

(2.1) 17.9

0.5 29.1

Balance 31 July

694.7

157.4

94.2

University

Balance 1 August As previously stated Prior year adjustment – establishment of fixed asset investment revaluation reserve

(79.3)

946.3

(127.0)

907.1

Notes to the accounts (continued) 25 Reconciliation of consolidated operating surplus to net cash inflow from operating activities Surplus on continuing operations before gain on disposal of tangible fixed assets Depreciation of fixed tangible assets Amortisation of goodwill Deferred capital grants released to income Investment income Interest payable Pension cost less contributions payable (see note 21) Currency adjustments

2007 £m

2006 £m

12.6 48.0 2.2 (21.9) (53.6) 0.5 2.8 (0.5)

8.3 43.7 2.4 (21.9) (47.5) 0.4 1.6 (0.2)

Increase in stock Decrease / (increase) in debtors Increase in creditors

(9.9) (8.9) 5.8 30.0

(13.2) (2.5) (13.9) 36.2

Net cash inflow from operating activities

17.0

6.6

2007 £m

2006 £m

Returns on investments and servicing of finance Endowment and investment income received Interest paid

53.9 (0.5)

46.6 (0.4)

Net cash inflow from returns on investments and servicing of finance

53.4

46.2

(107.2) – 59.9 8.2

(94.0) (6.0) 62.6 12.5

(66.4) 34.1

(40.0) 24.8

(71.4)

(40.1)

Issue of share capital to minority interest Repayment of long-term loan

0.7 (0.5)

0.5 (1.0)

Net cash inflow / (outflow) from financing

0.2

(0.5)

26 Cash flows

Capital expenditure and financial investment Purchase of tangible fixed assets Acquisition of goodwill and other intangible fixed assets Donations for buildings and other deferred capital grants received Proceeds of disposal of tangible fixed assets Net purchase of long-term investments (excluding investments held on behalf of others) New endowments received Net cash outflow from capital expenditure and financial investment

Financing

Notes to the accounts (continued) 27 Analysis of the balances of cash and bank overdraft

Bank overdrafts Cash at bank and in hand

Add short term deposits: Current asset investments (excluding those held on behalf of related parties and other associated bodies) Net funds

Group 2007 £m

Group 2006 £m Restated

University 2007 £m

University 2006 £m Restated

(8.6) 24.3

(5.1) 27.7

(7.7) 13.3

(5.1) 19.1

15.7

22.6

5.6

14.0

6.3

0.2

8.0

3.7

22.0

22.8

13.6

17.7

The analysis of cash and short term deposits has been restated as a result of the reclassification of investments referred to in notes 14 and 18.

28 Capital commitments Commitments contracted at 31 July Authorised but not contracted at 31 July

2007 £m

2006 £m

64.7

49.2

–

Of the capital expenditure committed at 31 July 2007, approximately 63% (2006: 50%) will be funded by specific grants and donations.

29 Pension schemes The two principal pension schemes for the University’s staff are the Universities Superannuation Scheme (USS) and the Cambridge University Assistants’ Contributory Pension Scheme (CPS). Cambridge University Press operates two defined benefit schemes for its UK staff, the Press Contributory Pension Fund (PCPF) and the Press Senior Staff Pension Scheme (PSSPS). Employees covered by the schemes are contracted out of the State Second Pension. The assets of the schemes are held in separate trustee-administered funds. The USS and the CPS are not closed, nor is the age profile of their active membership rising significantly. The PCPF and the PSSPS have been closed to new members. The schemes are defined benefit schemes which are valued every three years using the projected unit method, by professionally qualified actuaries, the rates of contribution payable being determined by the trustees on the advice of the actuaries. USS It is not possible to identify each institution’s share of underlying assets and liabilities of the scheme, and therefore contributions are accounted for as if it were a defined contribution scheme in accordance with FRS 17. The assumptions and other data that have the most significant effect on the determination of the contribution levels are as follows:

Notes to the accounts (continued) 29 Pension schemes (continued) Latest actuarial valuation Investment returns per annum Salary scale increases per annum Pension increases per annum Mortality – equivalent life expectancy for members reaching retirement age of 65: Males Females Market value of assets at date of last valuation Proportion of members’ accrued benefits covered by the actuarial value of the assets

March 2005 4.50% 3.90% 2.90% 85 88 £21,740m 77%

The contribution rate payable by the institution is 14% of pensionable salaries. The next actuarial valuation is due to take place at 31 March 2008. The scheme actuary has estimated that on the FRS 17 basis the funding level at 31 March 2006 and at 31 March 2007 was over 100%. Cambridge University Assistants’ Contributory Pension Scheme (CPS) The CPS was established under the authority of the Universities of Oxford and Cambridge Act 1923. It is a registered pension scheme for the purposes of Finance Act 2004. The active members of the scheme are employees of the University and its subsidiary undertakings. Triennial valuation of the scheme A full triennial valuation of the scheme was carried out by the actuary for the trustees of the scheme for funding purposes as at 31 July 2006. The results showed the actuarial value of the scheme’s assets as £276.8m. These were insufficient to cover the scheme’s past service liabilities of £285.0m and as a result the scheme had a deficit of £8.2m and was 97% funded. The joint contribution rate has been set at 25.7% of pensionable pay from 1 August 2005. Pension costs under FRS 17 For accounting purposes the scheme’s assets are measured at market value and liabilities are valued using the projected unit method and discounted using the gross redemption yield for corporate AA rated bonds. The valuation uses market-based assumptions and asset valuations, and represents a current valuation. It does not impact on the joint contribution rate set by the trustees of the scheme. Full actuarial valuations for this purpose were carried out as at 31 July 2003 and 31 July 2006 by a qualified actuary. The actuary also updated the 2003 accounting valuation to 31 July 2004 and 31 July 2005 for the purposes of the University’s financial statements. The principal assumptions used by the actuary were:

Discount rate Expected rate of return on scheme assets at beginning of year Equities Bonds (including cash) Property Rate of increase in salaries Rate of increase in pensions in deferment Rate of increase in pensions in payment Age at retirement: Males – active Males – deferred Females – active Females – deferred Mortality – equivalent life expectancy for members reaching retirement age: Males Females

2007 5.80%

2006 5.20%

7.50% 4.70% 6.50% 4.00% 3.25% 3.25%

7.50% 4.70% 6.50% 3.85% 3.10% 3.10%

63 61 61 60

84 87

Notes to the accounts (continued) 29 Pension schemes (continued) The following results were measured in accordance with the requirements of FRS 17, based on the assumptions summarised above:

Opening Service cost Employer contributions Expected return on scheme assets Contributions by members Interest cost Actuarial gains / (losses) Benefits and expenses paid

Present value of defined benefit obligation 2007 2006 £m £m (374.6) (331.8) (16.0) (14.6) – – – – (4.0) (3.8) (19.6) (16.8) 28.8 (19.2) 12.9 11.6

Closing defined benefit obligation

(372.5)

(374.6)

Fair value of scheme assets 2007 2006 £m £m 276.8 249.0 – – 12.6 11.9 18.5 17.9 4.0 3.8 – – 14.9 5.8 (12.9) (11.6) 313.9

276.8

The amounts recognised in the income and expenditure account were as follows:

Net liability recognised in the balance sheet 2007 2006 £m £m (97.8) (82.8) (16.0) (14.6) 12.6 11.9 18.5 17.9 – – (19.6) (16.8) 43.7 (13.4) – – (58.6)

(97.8)

In staff costs: current service cost

2007 £m 16.0

2006 £m 14.6

In endowment and investment income: Expected return on pension scheme assets Interest on pension scheme liabilities

18.5 (19.6)

17.9 (16.8)

(1.1)

1.1

Amounts for the current and previous four years were as follows: 2007 £m (372.5) 313.9

2006 £m (374.6) 276.8

2005 £m (331.8) 249.0

2004 £m (279.4) 208.9

2003 £m (245.9) 192.0

(58.6)

(97.8)

(82.8)

(70.5)

(53.9)

Experience (losses) / gains for the year on plan liabilities

(4.1)

(7.2)

0.2

(0.8)

(1.7)

Experience gains / (losses) for the year on plan assets

14.9

5.8

22.2

(1.2)

(5.0)

Defined benefit obligation Plan assets Deficit at the balance sheet date

The above results have been recognised in the consolidated balance sheet. The University is, however, unable to identify its own share of the underlying assets and liabilities in the scheme, as distinct from that attributable to subsidiary undertakings, on a reasonable and consistent basis. For the University itself, therefore, pension costs are accounted for as if the CPS were a defined contribution scheme, and the University’s own balance sheet does not include a pension liability in respect of the CPS.

Notes to the accounts (continued) 29 Pension schemes (continued) Cambridge University Press UK defined benefit schemes (PCPF and PSSPS) Triennial valuation of the schemes Full triennial valuations of the schemes were carried out by the actuary for the trustees of the schemes for funding purposes as at 1 January 2004. The results of the latest triennial valuation as at 1 January 2007 are awaited. Pension costs under FRS 17 For accounting purposes the schemes’ assets are measured at market value and liabilities are valued using the attained age method and discounted using the gross redemption yield for corporate AA rated bonds. The valuations use market-based assumptions and asset valuations, and represent current valuations. They do not impact on the joint contribution rates set by the trustees of the schemes. Full actuarial valuations for this purpose were carried out as at 1 January 2004 by a qualified actuary. The actuary has also updated the 2004 accounting valuation to 31 July 2005, 31 July 2006 and 31 July 2007 for the purposes of the University’s financial statements. The principal assumptions used by the actuary for both schemes were:

Discount rate Expected rate of return on scheme assets at beginning of year Rate of increase in salaries – schemes are now on frozen current salary basis Rate of increase in pensions in deferment Rate of increase in pensions in payment Age at retirement: PSSPS – males – active All others Mortality – equivalent life expectancy for members reaching retirement age: Males Females

2007

2006

5.75% 6.25% 0.00% 3.50% 3.50%

5.00% 6.25% 3.00% 3.00% 3.00%

59 60

55 60

84 87

The following results were measured in accordance with the requirements of FRS 17, based on the assumptions summarised above: Present value of defined benefit obligation 2007 2006 £m £m

Fair value of scheme assets 2007 2006 £m £m

Net liability recognised in the balance sheet 2007 2006 £m £m

Opening Service cost Employer contributions Expected return on scheme assets Contributions by members Interest cost Actuarial gains / (losses) Benefits and expenses paid

(174.9) (5.5) – – (0.7) (8.7) 1.6 6.8

(159.8) (5.6) – – (0.6) (8.4) (6.7) 6.2

149.1 – 5.9 9.3 0.7 – 4.9 (6.8)

131.6 – 6.6 8.2 0.6 – 8.3 (6.2)

(25.8) (5.5) 5.9 9.3 – (8.7) 6.5 –

(28.2) (5.6) 6.6 8.2 – (8.4) 1.6 –

Closing defined benefit obligation

(181.4)

(174.9)

163.1

149.1

(18.3)

(25.8)

The amounts recognised in the income and expenditure account were as follows: In staff costs: current service cost In endowment and investment income: Expected return on pension scheme assets Interest on pension scheme liabilities

2007 £m 5.5

2006 £m 5.6

9.3 (8.7)

8.2 (8.4)

0.6

(0.2) 75

Notes to the accounts (continued) 29 Pension schemes (continued) Amounts for the current and previous two years were as follows: Defined benefit obligation Plan assets Deficit at the balance sheet date Experience losses for the year on plan liabilities Experience gains for the year on plan assets

2007 £m (181.4) 163.1

2006 £m (174.9) 149.1

2005 £m (159.8) 131.6

(18.3)

(25.8)

(28.2)

(3.8)

(0.4)

(2.0)

5.2

8.3

15.1

The University also has a smaller number of staff in other pension schemes, including the National Health Service Pension Scheme (NHSPS), the Cambridge University Press Defined Benefit Plan (CUPDBP, for US staff) and the RSA Examinations Board scheme (RSAEBS). Pension costs relating to CUPDBP and RSAEBS are accounted for in accordance with FRS 17 as applied to a defined benefit scheme and the related pension liability is included in the consolidated balance sheet (see note 21). Further disclosures are not given as the balances and movements are not material.

The total pension cost for the year (see note 8) was: USS: contributions CPS: charged to income and expenditure account PCPF: charged to income and expenditure account PSSPS: charged to income and expenditure account NHSPS: contributions CUPDBP: charged to income and expenditure account RSAEBS: charged to income and expenditure account Contributions to other pension schemes

2007 £m 27.3 16.0 4.3 1.2 1.5 0.6 0.2 1.3

2006 £m 24.9 14.6 4.5 1.1 1.4 0.6 0.2 1.1

52.4

48.4

Notes to the accounts (continued) 30 Principal subsidiary and associated undertakings and other significant investments The following undertakings were wholly-owned subsidiary undertakings throughout the year ended 31 July 2007. Except where stated, the accounting reference date is 31 July and the undertaking is a company registered in England and Wales.

Name Cambridge Enterprise Limited

Notes

Cambridge Manufacturing Industry Links Limited Cambridge University Environmental Projects Limited Cambridge University Technical Services Limited Challenge Fund Trading Company Limited Cory Enterprises Limited Fitzwilliam Museum Enterprises Limited

a b

JBS Executive Education Limited Lynxvale Limited The Cambridge Foundation

Associated Trusts Cambridge Overseas Trust Cambridge Commonwealth Trust Gates Cambridge Trust Cambridge European Trust Malaysian Commonwealth Studies Centre in Cambridge Cambridge Assessment subsidiary undertakings Cambridge Examinations Inc Mill Wharf Limited Oxford and Cambridge International Assessment Services Limited Oxford Cambridge and RSA Examinations RSA Examinations Board Sandonian Properties Limited The West Midlands Examinations Board Cambridge University Press subsidiary undertakings Cambridge Global Grid for Learning Limited Cambridge Knowledge (China) Limited Cambridge Printing Services Limited Cambridge University Press (Holdings) Limited Cambridge University Press India Private Limited Cambridge University Press Japan KK Cambridge University Press South Africa (Proprietary) Limited Cambridge-Hitachisoft Educational Solutions PLC United Publishers Services Limited

⎫ ⎪ ⎬ ⎪ ⎭

Principal activity Consultancy and commercial exploitation of intellectual property Consultancy and commercial exploitation of intellectual property Environmental projects Consultancy and commercial exploitation of intellectual property Providing funds to promote the transfer of research to business Retail shop Publication of fine art books and sale of museum merchandise Corporate education services Provision of construction and development services Fundraising

c Provision of scholarships, grants and other support for the education of overseas students in the University

Examination services Training and consultancy Assessment services Examination and assessment services Assessment services Property holding Examination services

g h

Provision of electronic educational content Representative office Printing Holding company Publishing Representative office

i j k

Publishing Electronic educational publishing Distribution

Notes to the accounts (continued) 30 Principal subsidiary and associated undertakings and other significant investments (continued) a b c d e f g h i j k

Cory Enterprises Limited has an accounting reference date of 31 January for commercial reasons. The effect of this is not material to the consolidated accounts. Fitzwilliam Museum Enterprises Limited has an accounting reference date of 31 January for commercial reasons. The effect of this is not material to the consolidated accounts. The Cambridge Foundation and the Associated Trusts are exempt charities established by trust deeds. Cambridge Examinations Inc is a United States non-stock non-profit corporation. Cambridge University Press subsidiary undertakings have an accounting reference date of 30 April for commercial reasons. Cambridge Knowledge (China) Limited is incorporated in Hong Kong. Cambridge University Press India Private Limited is a 51% subsidiary incorporated in India. Cambridge University Press Japan KK is incorporated in Japan. Cambridge University Press South Africa (Proprietary) Limited is incorporated in South Africa. The University holds 60% of the issued share capital in Cambridge-Hitachisoft Educational Solutions PLC. United Publishers Services Limited is incorporated in Hong Kong and was acquired in the year ended 31 July 2007.

The University has interests in a number of spin-out companies formed to exploit intellectual property rights or inventions. These are included at valuation in fixed asset investments (see note 14) and endowment assets (note 15). In some cases the University’s interest amounts to 20% or more of the share capital, and these companies are listed below. As the University does not exercise a significant influence over these investments and they are not intended to be held for the long-term, they are not accounted for as associated undertakings. Other undertakings where the University’s investment amounts to 20% or more are also listed below. These are not accounted for as associated undertakings as the effect on the financial statements would not be material.

Name % interest Ampika Limited 40 BSCR Limited 22 Cambridge Flow Solutions Limited 20 Cambridge in America 22 Cambridge InnoVision Limited 83 Cambridge Lab-on-Chip Limited 30 Camfridge Limited 23 Coolanalgesia Limited 20 Genapta Limited 36 Inotec AMD Limited 23 Markready Limited 33 Microbial Technics Limited 23 The CRISP Consortium Limited 45 Vivamer Limited 58

Principal Activity Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property Fundraising Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property Research and development Commercial exploitation of intellectual property Commercial exploitation of intellectual property Commercial exploitation of intellectual property

In addition, the University is one of two equal members of Cambridge-MIT Institute Limited (CMI), a joint venture company limited by guarantee whose principal activity is the support of research and educational programmes. At 31 July 2007 and 2006 CMI had nil net assets. In the year ended 31 July 2007 it funded expenditure of £4.2m (2006: £12.5m) and its profit after tax was nil (2006: nil) During the year CMI reimbursed the University £1.9m (2006: £6.7m) for expenditure incurred on projects. As at 31 July 2007 the University was owed £0.03m (2006: £1.5m) by CMI.

31 Related party transactions In accordance with FRS 8 the University is not required to disclose the transactions and balances between its group undertakings, which have been eliminated on consolidation.

Notes to the accounts (continued) 32 Colleges There are 30 Colleges and one Approved Society (the Colleges) each of which is an independent corporation with its own property and income. The individual audited accounts of the Colleges, in a form specified by the University, are published in the Cambridge University Reporter. During the year payments were made by the University from HEFCE funding in respect of the College fees of publicly-funded undergraduates of £34.7m (2006: £34.1m). These payments are included as “Payments to Colleges” in note 9 above. The University also made payments in respect of the College fees of postgraduate students totalling £2.6m (2006: £2.2m). These payments are included in other operating expenses. The Cambridge Foundation distributed third party donations to the Colleges totalling £5.2m (2006: £6.3m). The payments are not included in the consolidated income and expenditure account. During the year the University provided printing, network and other services to the Colleges for which the Colleges paid a total of £3.0m (2006: £3.6m), and the Colleges provided accommodation, catering and other services to the University for which the University paid a total of £6.3m (2006: £4.7m). During the year the Colleges made donations to the University totalling £2.1m (2006: £4.0m) of which £nil (2006: £2.0m) was credited to specific endowments. Colleges fund

Balance at 1 August Contributions received from Colleges Interest earned Payments to Colleges Balance at 31 July included in creditors

2007 £000

2006 £000

40 3,025 41 (3,100)

58 2,835 30 (2,883)

The Colleges Fund is administered by the University on behalf of the Colleges, who make all contributions to and receive all allocations from the Fund. The transactions on the Colleges Fund are not included in the income and expenditure account. 33 DfES / HEFCE Access funds

Access to Learning Fund allocation Interest earned

Disbursed to students Balance unspent at 31 July

2007 £000

2006 £000

310 4

573 6

314 (314)

579 (579)

–

Access to Learning Fund grants are available for students: the University acts only as agent. The grants and related disbursements are therefore excluded from the income and expenditure account. 34 TDA grants for Black and Minority Ethnic Recruitment and Retention

TDA grants Disbursed to students Balance unspent at 31 July

2007 £000

2006 £000

8 (8)

22 (22)

–

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