Skip to main contentCambridge University Reporter

No 6289

Tuesday 11 December 2012

Vol cxliii No 12

pp. 212–267

Reports and financial statements for the year ended 31 July 2012

Financial review

Preliminary

The commentary that follows is intended to give the readers of the financial statements an overview of the finances and operations of the University group including Cambridge Assessment and Cambridge University Press. It should be read in conjunction with the Annual Report of the Council and the Annual Report of the General Board to the Council for the academical year 2011–12, which are published alongside these financial statements. The financial position of the teaching and research activities of the University may be seen more clearly in the Financial Management Information published in the Reporter. Further detailed information about the finances and operations of Cambridge Assessment and Cambridge University Press is given in the annual reports of those entities which are also published.

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 publishing house of the University dedicated to publishing for the advancement of knowledge, education, and learning worldwide.

The Gates Cambridge Trust and the Associated Trusts are separately constituted charities. They are deemed to be subsidiary undertakings of the University since the University appoints the majority of the trustees of each Trust. The purposes of the Gates Cambridge Trust and the Associated Trusts are to support the University by enabling persons from outside the United Kingdom to benefit from education in the University by the provision of scholarships and grants and otherwise.

Mission

The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence.

Its principal activities are teaching and learning, research, stewardship of collections and ancient buildings, and the activities of Cambridge Assessment and Cambridge University Press.

Funding

The sources of income of the University are:

The government, which through the Higher Education Funding Council for England (HEFCE) provides a block grant for teaching and a grant determined by the quality and volume of research through the Research Assessment Exercise last carried out in 2008;

Students through fees charged for instruction and facilities;

Research income from publicly funded Research Councils, charitable foundations, and through collaborations with the private sector;

Benefactions and donations for current use;

Investment income from our accumulated endowment and other assets;

Income from services provided to external customers, including the customers of Cambridge Assessment and Cambridge University Press;

A small but increasing income from commercialization of intellectual property.

Accounting for endowment and investment income

The main investment pool generating endowment and investment income is the Cambridge University Endowment Fund (CUEF). The CUEF is managed on a total return basis, such that the amount distributed for budgetary expenditure is determined by a formula which has regard to the total return reasonably to be expected in the long term. The CUEF’s portfolio is largely invested indirectly through fund managers with this approach intended to maximize total investment return. A substantial proportion of the CUEF’s current investments yield little or no income in the form of dividends, interest, and rents. In the year ended 31 July 2012, distributions by the CUEF exceeded the income received from its underlying investments by £54m (2011: £48m), the balance of the distributions being funded by drawing on long-term capital growth.

In these financial statements total endowment and investment income includes the income from CUEF’s underlying investments rather than the distributions made by the CUEF. The impact is that endowment and investment income is £54m less than it would have been had it been based on distribution, with a corresponding increase in capital gains (reflected in the statement of recognized gains and losses). For the individual trust funds and other endowment funds which have invested capital in the CUEF the full distribution remains available as income.

Financial performance for the year

The consolidated results for the year ended 31 July 2012 are summarized in Table 1.

Table 1
Consolidated results

2011–12

2010–11

Restated

Change

%

£m

£m

Income

1,322

1,251

+5.6%

Expenditure

(1,317)

(1,261)

+4.5%

(Deficit) / surplus on continuing operations

5

(10)

Minority interests

(1)

Transfer from restricted endowments

44

43

Surplus for the year retained within general reserves

48

33

Net assets

2,641

2,590

+2.0%

 

Corresponding figures including the element of CUEF distributions funded out of long-term capital growth, as explained above, are:

 

2011–12

£m

2010–11

£m

Income

1,376

1,299

Surplus for the year retained within general reserves

70

51

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 respectively. Within the Group there are a number of intra-group transactions, principally the financial and other support for the University’s academic activities made by both Cambridge Assessment and the Press. Table 2 gives segmental information.

Table 2:
Surplus / (deficit) on continuing operations

Income

£m

Expenditure

£m

Surplus / (deficit)

£m

Results by segment

Education and research

799

822

(23)

Cambridge Assessment

309

280

29

Cambridge University Press

247

250

(3)

Financial support to the University from Cambridge Assessment

(33)

(33)

Pension scheme and other adjustments

(2)

2

1,322

1,317

5

The education and research activities of the University Group were in deficit for the year, after accounting for investment income as described above. The recurrent and special grants from HEFCE reduced by £5m as cuts in government funding impacted. Fees and support grants increased by £22m, of which £14m related to studentships funded by Research Councils, now included as the University’s income as explained more fully in Note 2 to the Accounts. Research grants and contracts income increased by £20m, a little over 3%, but within this, revenue from Research Councils remained flat with the increase primarily from charity and European Commission sources. Despite the overall increase in sponsored research income, recovery of the indirect costs of research remained broadly level, reflecting the lower contribution made by those categories of sponsor.

Cambridge Assessment is the University’s international exams group. Its mission is to promote educational excellence. It pursues this by researching, developing, and delivering qualifications in around 160 countries. Cambridge Assessment offers these qualifications through three exam boards: Oxford Cambridge and RSA Examinations (OCR), Cambridge International Examinations (CIE), and University of Cambridge ESOL Examinations (English for Speakers of Other Languages). Income from its examination and assessment services was £300m in the year, an increase of 13% over 2010–11. The international businesses of English language testing and of international examinations were particularly strong, with the IELTS qualification being notably successful. Cambridge Assessment transferred £32.6m during the year in support of the University’s teaching and research activities.

The Cambridge University Press is the University’s publishing arm. Its mission is to further through publication the University’s objective of advancing learning, knowledge, and research worldwide. The Press is organized into two main streams: academic publishing of books and journals, and English language teaching materials and educational publishing. Revenues from publishing and printing services increased 6.2% over 2011–12 to £241m. The Press has a growing programme of digital product in academic books and journals, and has expanded its collaboration with Cambridge Assessment in English language materials and testing.

 

Change in financial position

Table 3 below gives the movement in net assets showing the capital flows into the Group, analyzed into its three main segments, and the impact of changes in the values of investment assets.

Table 3
Movement in net assets

Education and research

Cambridge Assessment

Cambridge University Press

University Assistants Pension scheme

Total

£m

£m

£m

£m

£m

Net assets at 31 July 2011

2,516

265

37

(228)

2,590

Surplus / (deficit) on continuing operations

(23)

29

(3)

2

5

Minority interests

(1)

(1)

Currency adjustments

(1)

(1)

New endowment capital

43

43

External funding for capital expenditure

5

5

Actuarial loss on retirement benefits

(26)

(40)

(66)

Increase in investment values

66

66

Net assets at 31 July 2012

2,607

294

6

(266)

2,641

Inflows to the endowment from benefactions and donations, increases in investment values, more than offset increased deficits on the University’s pension schemes as accounted for on an FRS 17 basis.

 

Capital expenditure programme

The University continues its investment in refreshing, renewing, and expanding its academic estate and equipment and in the physical and technical facilities for Cambridge Assessment and Cambridge University Press.

In recent years, major capital expenditure projects, mainly new buildings, have been funded from a combination of sources, principally government funding through HEFCE and external donations. Equipment has been funded by a combination of sources including HEFCE, research grant sponsors, and from operating cash flows. The capital funding stream from HEFCE has been reduced substantially. The ability to continue investing in the University’s operational buildings is essential if it is to remain globally competitive. The University’s capital planning framework schedules buildings and large equipment purchases over a planning period of up to 20 years to match academic priorities and to take account of inter-dependencies between projects. Cambridge Assessment and the Press similarly propose capital expenditure on office and logistics buildings, and in enhanced business systems.

Over the year the University’s total capital expenditure was £95m (of which £64m was in respect of the University’s academic activities), including equipment expenditure of £25m. In addition, £6m of heritage assets were acquired, £5m by donation. Major items of expenditure are set out in Table 4, and include the new Materials Science building being constructed on the West Cambridge site, and completion of the Alison Richard Building; other investment was made over a number of projects across the University’s main sites, and expenditure, primarily on systems and equipment, by Cambridge Assessment and Cambridge University Press.

Table 4

£m

New Materials Science building

16

Alison Richard Building

4

Other new build

24

Extension / improvements

6

Refurbishment

2

Total academic estate buildings

52

Equipment for academic purposes

14

Cambridge Assessment total

17

Cambridge University Press total

12

95

Heritage assets

6

101

There are currently several major projects at various stages of implementation representing a significant capital investment: completion of the building for Materials Science and Metallurgy; a new building for Chemical Engineering and Biotechnology; the new Sports Centre; the proposed Data Centre (all these on the West Cambridge site); the conversion of the Arup Building for the Cambridge Conservation Initiative; and the development of facilities for Student Services.

Endowment and other investments

The University Group’s investment assets are significant. Although investment income provides only a small percentage of the operating budget of the University’s academic activities, it supports posts and activities and gives important financial assistance to students. The investment assets are managed in three principal pools:

(i) Cambridge University Endowment Fund (CUEF)

The majority of fixed asset investments and endowment assets are held in the CUEF, which is managed by the University’s Investment Office with the advice and oversight of the Investment Board. The CUEF is managed on a total return basis with a long-term investment objective of RPI plus 5.25%. The amount distributed for budgetary expenditure is determined by a formula based on underlying capital values combined with factors which smooth the rate of spending changes from year to year, allowing a degree of certainty for planning purposes.

Colleges and other charities linked with the University are permitted to invest in the CUEF, to gain from its scale, diversification, and professional management. The Gates Cambridge Trust and the Associated Trusts are substantially invested in the CUEF, and a number of Colleges have made investments.

As at 31 July 2012 the CUEF had a market value of £1,651m (2011: £1,550m) of which £46m was invested by Colleges. The increase was a result of investment performance and new funds invested during the year less the amounts distributed for spend on operations.

The investment performance of the CUEF is monitored to 30 June year-end. The CUEF gained 1.2% in the year to June 2012, a return below the fund’s long-term objective but above that of broad equity markets (the MSCI AC World index in sterling fell 4.3%). Its investment managers within the fund’s two largest asset classes, public equity and absolute return, materially outperformed their sector benchmarks. By contrast, the CUEF’s lack of exposure to the very low-yielding gilts markets served as a drag on performance.

Over the period the US was the most buoyant region. Consumer staples was the best performing sector, attractive to investors in the highly uncertain macroeconomic environment on the basis of its defensive character and stable cash flow generation. By contrast cyclical sectors such as financials, materials, and energy suffered. The CUEF’s equity allocations were well positioned for these relative movements.

The CUEF operates an evolving asset allocation and the proposed changes over the following twelve months are revised quarterly in discussion with the Investment Board. Over the year, the fund’s broad asset allocation was not changed materially, but there was a measured increase in investment in less liquid credit markets. As at 30 June 2012, the actual asset allocation was global equities 60%, private investments 7%, absolute return including hedge funds 15%, credit 5%, real assets including property 11%, and fixed income including cash 2%. At the end of the year the exposure to assets denominated in sterling was 49%.

(ii) Money market investments

The majority of the University and Group current asset investments are invested in the deposit pool. This pool is managed by the Finance Division according to guidelines on diversification, exposure, and credit quality agreed by the Finance Committee and subject to external advice. The investments are principally short-term deposits with banks and similar institutions.

(iii) Other investment assets

Some long-term investments are held outside the CUEF including certain investment properties in Cambridge, other securities, and equity investments in spin-out companies.

 

Staff costs and pensions

Staff cost increased by a modest 1.4% over the previous year and made up 47% of the University Group’s total operating expenditure and 57% in respect of the University’s teaching and research activities. There was pay restraint in the challenging and uncertain economic conditions and the 2011 voluntary severance scheme has resulted in savings. The staff costs of Cambridge Assessment and Cambridge University Press again increased slightly in line with business growth.

The costs and risks of the pension schemes to which the University is exposed remain of concern. The Universities Superannuation Scheme (USS) is a very large multi-employer scheme. The triennial valuation as at 31 March 2011 showed a material deficit of £2.9 billion, a funding level of 92%, which the scheme actuary estimated had increased as at 31 March 2012 to a deficit of £9.8 billion, a funding level of 77%. The deficit of the USS is not reflected in the University’s balance sheet but is a major exposure for the University. Changes have been introduced by the USS in benefits in respect of future service in order to make the scheme affordable and sustainable. The University’s contribution to the USS continues at 16% of pensionable pay.

The University Group has three other major schemes: the Cambridge University Assistants’ Contributory Pension Scheme (CPS) for assistant staff of the teaching and research activities of the University, and two schemes for staff of the Cambridge University Press. The CPS is a defined benefit scheme open to new joiners and for future accrual. The University is making deficit-recovery contributions to the scheme of £14.6m per annum for fourteen years commencing August 2011. To ensure that the CPS remains affordable and sustainable changes to future service benefits will take effect from 1 January 2013 in order to reduce risk and cost to the University. The CPS will nevertheless remain an attractive benefit to staff. The Cambridge University Press defined benefit schemes are closed to new joiners and are subject to recovery plan payments currently at £5.9m p.a. increasing in steps to £7.6m in 2022.

The CPS and the Press’s schemes, being single-employer schemes, are included in the financial statements following Financial Reporting Standard 17 (FRS 17). The total pension liability under FRS 17 has increased from £308m to £369m, of which £95m relates to the Press’s schemes.

Development and alumni relations

The Cambridge 800th Anniversary Campaign was brought to a close in 2011 having raised a total of £1.172 billion across the University and Colleges. The University is currently considering the form, themes, and priorities of a new Campaign. In the course of 2011–12 £43m (2011: £49m) was raised in new endowment capital, with a further £14m (2011: £16m) received as unrestricted donations.

The benefits of philanthropy are long term, strengthening Cambridge’s financial security for posterity at a time of intensifying global competition and uncertainty. The University is committed to continued investment in fundraising and in building close relationships with its alumni and supporters internationally.

 

North West Cambridge

The University plans to develop its site at North West Cambridge, currently comprising primarily agricultural land. The proposals include site infrastructure and landscaping, University housing for letting to staff, market housing for sale and let, supermarket and retail units, and further sites for research. This will contribute to the strategic need to provide affordable and high quality housing for post-doctoral research staff and others at the beginning of their careers with the University. The development will add to the long-term strategy of the University in allowing further expansion of academic activities. The market housing, which will number 1,500 units, and retail and commercial developments contribute significantly to the viability of the development.

The University considers there is a strong strategic case for proceeding with the development and is satisfied that the project is viable and that the projected capital investment required is affordable and will not impair the University’s ability to continue to invest appropriately in academic budgets and capital. Subject to receiving the approval of the Regent House, the University expects to proceed with the first phase of the development in 2013. The first phase includes around 530 units for rental to qualifying staff on a subsidized basis, 300 units of postgraduate student accommodation, and some 700 units for sale on a market basis by residential developers under land sale agreements. This first phase is expected to involve a peak investment of approximately £250m by 2015.

 

Bond issue

Subsequent to the 2011–12 year-end, on 17 October 2012 the University issued £350m of 3.75% unsecured bonds due October 2052. The bonds are listed on the London Stock Exchange. The proceeds of issue, less directly attributable transaction costs, amounted to £342m, and are for general corporate purposes, including investment in research facilities, accommodation, and other assets. The bonds proved attractive to investors and were almost four times oversubscribed, with pricing at 0.60% over the underlying reference government treasury stock.

In preparation for the issue the University sought a rating from Moody’s Investor Services, which assigned an Aaa (stable) rating to the University. Moody’s noted that its assessment took account of the University’s outstanding market position, significant amount of liquid assets, and strong governance structure. It also took into account the expected increase in the University’s debt-to-revenue ratio.

 

The financial outlook

The recurrent grants from HEFCE remain a core part of the University’s income. Funding for undergraduate teaching will reduce substantially from the current year but will be offset by a corresponding increase in home student tuition fees. Undergraduate numbers will remain broadly constant whilst graduate numbers are expected to continue to follow the historic trend of around 2% growth per annum. This, in conjunction with a continuing revision of our postgraduate fees, should provide a steady increase in funding. The HEFCE recurrent grant for research has been maintained broadly level but there are increasing challenges in replacing its capital funding stream which has been reduced significantly.

Cambridge University Press continues to find its markets difficult, but remains broadly on track to increase its turnover and its surplus, so that it remains in a good position to continue to invest for the future. Cambridge Assessment is subject to increased regulatory scrutiny and costs in the United Kingdom, but its overseas activities, notably English language testing, are expected to continue to flourish. The business will be impacted by considerable investment in systems over the coming years.

Endowment returns reverted to a more muted, but still positive, level after the strong returns of the previous two years, and the average return over the tumultuous ten years to 31 July 2012 was 7.9%. However, the continued low interest rates and global economic uncertainties make the future long-term returns at the target levels challenging.

 

Principal risks and uncertainties affecting the long-term financial position

The principal risks the University must address do not change: its long-term ability to maintain and develop its research funding, to attract the best staff and students, and to maintain and renew its physical facilities. The activities of Cambridge Assessment and the Press are subject to the pressures of international competition, and they must balance the need to generate sufficient net income to ensure that they thrive with the need to support the University’s core academic activities whenever possible.

The key financial uncertainties and risks are:

The possibility of further cuts to government support for teaching and research;

The outcome of the Research Evaluation Framework exercise in 2014, which will have a major impact on the University’s research funding;

The impact of government policy on immigration, affecting both students and staff;

Funding by charities and foundations of sponsored research, and their unwillingness to cover the full costs, and an increase in EC-sponsored research also at a level below full economic costs;

Movements in investment markets reducing the value of the endowment and other investment assets;

Increasing and uncertain costs of pension provision;

Pay inflation, against a background of pay restraint in recent years;

The ability to continue to invest in physical facilities, against a background of reduced government and research council capital funding;

The support by benefactors for endowment, capital expenditure, and for current use;

The economic success of Cambridge Assessment and the Press, which operate in challenging international markets. Cambridge Assessment provides an increasingly important source of unrestricted funding for the University.

 

In summary

The University Group’s financial operating performance was a little ahead of break-even and a small surplus (in the context of the University’s size) was retained in general reserves for future investment. Cambridge Assessment’s operating performance was again at a significant surplus. Operating cash flows were strong and additional capital inflows, investment performance, and operating surplus, offset by worsening pension deficits, resulted in a small gain in net assets to £2.6 billion.

The University welcomes the affirmation of its financial soundness and governance and management systems evidenced by its Aaa rating, and overall the prospects do appear to be improving. The main uncertainties in government funding have now been resolved, although the next Comprehensive Spending Review will be critical. The new fee regime has been absorbed satisfactorily, the mix of research sponsors is changing as alternative funding sources are secured. Cambridge Assessment continues its strong performance. Costs have been tightly controlled and must remain so.

The University is one of the world’s leading academic institutions and has a reputation for outstanding academic achievement. This reputation has been built up over a long time and is an important factor in attracting the best academic staff and the best students.

Maintaining the financial ability to continue to attract and retain the best staff and to provide research and teaching facilities commensurate with our standing as one of the world’s leading universities remains an ongoing challenge. The recent bond issue will provide much needed flexibility in financing our strategic investments, especially the proposed North West Cambridge development and a number of other urgent infrastructure projects. In the longer term, we must continue to build and diversify our income streams especially from endowments and philanthropy generally.

Professor Steve Young

Senior Pro-Vice-Chancellor

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 endeavors 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.

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 four external members, one of whom chairs the Audit Committee (see paragraph 7 below). The Statutes provide for the appointment of a Deputy Chairman of the Council, normally one of the external members, to take the chair as necessary or when it would be inappropriate for the Vice-Chancellor to do so, in particular in relation to the Vice-Chancellor’s own accountability. 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.

3. The University is an exempt charity and is subject to regulation by the Higher Education Funding Council for England. The members of the University Council are the charity trustees and are responsible for ensuring compliance with charity law.

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, the Remuneration Committee, the Investment Board, 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 Remuneration Committee is chaired by an external member of Council and advises the Council on the remuneration of senior staff in the University. The Investment Board, which has a majority of external members, advises the Council on the management of the University’s investment assets. 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 officer of the University. Under the terms of the Financial Memorandum between the University and the Higher Education Funding Council for England the Vice-Chancellor is the Accountable 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 (which is governed by the Council and the Press Syndicate through separate statutory arrangements); 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. There are Registers of Interests of Members of the Council, the General Board, the Finance Committee, and the Audit Committee, and of the senior administrative officers. Declarations of interest are made systematically at meetings.

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.

Members of the Council and the charity trustees during the year ended 31 July 2012

The Chancellor

Lord Sainsbury of Turville

The Vice-Chancellor

Professor Sir Leszek Borysiewicz

Elected as Heads of Colleges

Sir Christopher Hum

Professor A. David Yates

Professor Francis Kelly

Professor Robert Lethbridge

Elected as Professors or Readers

Professor David Abulafia

Professor Dame Athene Donald

Professor Nicholas Gay

Professor Andrew Hopper

Elected as members of the Regent House

Dr Richard Barnes

Mr Robert Dowling

Dr David Good

Dr Rachael Padman

Dr Nick Bampos

Dr Stephen Cowley

Mr Ian Du Quesnay

Dr Susan Oosthuizen

Student members 2011–12

(to 30 June 2012)

Mr Thomas Parry-Jones

Mr Gerard Tully

Mr Morgan Wild

(from 1 July 2012)

Mr Charles Bell

Ms Rosalyn Old

Mr Sam Wakeford

Members in class (e) (external members)

Dr Vanessa Lawrence

Dame Mavis McDonald (Deputy Chair)

Mr Dominic Casserley

Mr John Shakeshaft

The Chancellor, external members, student members, Sir Christopher Hum, Professor Lethbridge, Professor Yates, and Mr Du Quesnay are not employees of the University. Professor Lethbridge is an employee of the Gates Cambridge Trust, a subsidiary undertaking. The other members of the Council are employees of the University. No member of the Council receives payment for serving as a member of the Council.

Statement of public benefit

The University is an exempt charity subject to regulation by the HEFCE under the Charities Act 2006. The University reports annually on the ways in which it has delivered charitable purposes for the public benefit.

The Council, in reviewing the University’s activities in this regard, has taken into account the Charity Commission’s guidance on public benefit. The Council is satisfied that the activities of the University as described in these Reports and Financial Statements, and in the Annual Report of the Council, fully meet the public benefit requirements.

The Mission of the University

The Mission of the University is ‘to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence’. The University makes a significant contribution, through these activities, directly and most obviously to the advancement of education, research, and dissemination of knowledge.

Research

The University is widely recognized as one of the leading research universities in the world both in terms of quality and in terms of scope and breadth. Research is undertaken at the highest level across a wide range of areas. The University takes seriously its obligations to disseminate and make publicly accessible the outcomes of its academic research activities through publication, teaching, conferences, consultancy, and other knowledge transfer and outreach activities. It therefore offers public benefit through the continued advancement of knowledge across the sciences, medicine, arts, humanities, culture, and heritage.

A substantial proportion of the research undertaken in the University across the fields of clinical medicine, biomedicine, physics of medicine, and engineering leads directly to the advancement of health and the saving of lives. Research is also carried out in the area of sustainability, environmental protection, and improvement.

Research work in the University is focussed at local, national, and international levels. The products of this research have a wide-ranging influence through the advancement of understanding and its application in scientific and technological advances, and through informing public debate on policy. The impact of the University’s research extends to governments, public sector bodies, and charities.

Education

The University’s research activities feed directly into its teaching at every level. Around 18,000 students, of whom 12,000 are undergraduates, pursue courses across a wide range of disciplines. The quality of the education (and, as importantly, the educational experience) which the University provides is consistently recognized by the University’s status at or near the top of national and international rankings.

The University is committed to admitting students of the highest intellectual potential, irrespective of social, racial, religious, financial, or other considerations. The University ensures that individuals from all backgrounds can benefit from the opportunities afforded by a first-rate education and are not unreasonably excluded from those opportunities by the charging of fees. The University ensures that bursaries are available where necessary and outreach activities are undertaken to improve participation by under-represented groups. Financial support is provided to students from overseas through University funds and by trusts associated with the University. Further information is available at: http://www.admin.cam.ac.uk/univ/cambridgebursary/ and http://www.admin.cam.ac.uk/offices/gradstud/fees/funding/new.html.

The University is aware that there are significant variations in the educational opportunities, information, and support available to individuals. It therefore invests significant resource and effort into its access and widening participation activities. The University encourages applications from people with disabilities and from mature students.

For the wider community a broad range of lectures, seminars, and courses provide the opportunity for members of the wider public to share in the University’s educational provision. The University’s Institute of Continuing Education offers short non-credit courses, residential and summer schools.

The University is committed to equipping those who participate in its educational programmes with the highest quality of teaching and pastoral, infrastructural, and academic support. It is fundamental to the University’s mission that its students are personally, academically, and professionally equipped to contribute positively to society. In this regard, the quality and depth of their student experience benefits them directly but also benefits the societies to which they will contribute, through their participation in the workforce and as informed and questioning citizens.

The wider applications of the University’s commitment to disseminating knowledge

The University’s publishing house, the Cambridge University Press, contributes to the University’s commitment to make publicly accessible the outcomes of academic research activities in Cambridge and from across the world by publishing peer-reviewed academic material and other educational publications. Through Cambridge Assessment the University develops and delivers a range of widely used and respected examinations, benefiting the UK and world-wide community by offering internationally recognized qualifications, raising aspirations, and transforming lives.

Statement of internal control

1. The Council is responsible 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 therefore provides reasonable but not absolute assurance of effectiveness.

3. The system of internal control is 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 2012 and up to the date of approval of the financial statements, and accords with HEFCE guidance.

4. The Council is responsible for reviewing the effectiveness of the system of internal control. The following processes have been established:

(a)The Council meets eleven times throughout the year to consider the plans and strategic direction of the University.

(b)The Council receives periodic reports from the Chairman of the Audit Committee concerning internal control and the minutes of all meetings of the Audit Committee.

(c)The Council’s Risk Steering Committee oversees risk management. The Council receives periodic reports from the Chairman of the Risk Steering Committee and the minutes of all meetings of the Risk Steering Committee.

(d)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. Risk management is a standing item on the Audit Committee agenda.

(e)The University provides information (primarily through web-based resources) to those who own or manage central or School risks.

(f)A system of indicators has been developed for the University’s key risks.

(g)A robust risk prioritization methodology based on risk ranking and cost-benefit analysis has been established.

The Council’s review of the effectiveness of the system of internal control is informed by the work of the internal auditors, Deloitte LLP.

5. 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 the 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)make judgements and estimates that are reasonable and prudent;

(c)state whether applicable accounting standards have been followed;

(d)prepare the financial statements on a going concern basis unless it is inappropriate to presume that the University will continue to operate;

(e)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 Teaching Agency (formerly the Training and Development Agency for Schools); and

(f)safeguard the assets of the University and take reasonable steps to prevent and detect fraud and other irregularities.

Independent auditors’ report to the Council of the University of Cambridge

We have audited the Group and University financial statements (the ‘‘financial statements’’) of the University of Cambridge for the year ended 31 July 2012 which comprise the Consolidated income and expenditure account, the note of consolidated historical cost result, the Consolidated statement of total recognised gains and losses, the Group and University balance sheets, the Consolidated cash flow statement, the Statement of principal accounting policies, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of the Council and auditors

As explained more fully in the Statement of the Responsibilities of the Council set out on page 237 the Council is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Council as a body in accordance with the Statutes and Ordinances of the University and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and University’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Council; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in pages 228 to 237 and in the Annual Reports of the Council and of the General Board to the Council to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the state of the Group’s and University’s affairs as at 31 July 2012 and of the Group’s income and expenditure, recognised gains and losses, and cash flows for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the Statement of Recommended Practice – Accounting for Further and Higher Education.

Opinion on other matters prescribed in the HEFCE Audit Code of Practice issued under the Further and Higher Education Act 1992

In our opinion, in all material respects:

funds from whatever source administered by the institution for specific purposes have been properly applied to those purposes and, if relevant, managed in accordance with relevant legislation;

income has been applied in accordance with the Statutes and Ordinances of the University; and

funds provided by HEFCE have been applied in accordance with the Financial Memorandum and any other terms and conditions attached to them.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matter where the HEFCE Audit Code of Practice issued under the Further and Higher Education Act 1992 requires us to report to you if, in our opinion:

the statement of internal control is inconsistent with our knowledge of the University and Group.

PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Cambridge
26 November 2012

Notes:

(a)The maintenance and integrity of the University of Cambridge’s website is the responsibility of the Council; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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).

The income and expenditure account includes captions additional to those specified by the SORP in order to present an appropriate overview for the specific circumstances of the University.

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.

Basis of consolidation

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 31. Intra-group transactions and balances are eliminated on consolidation.

The Gates Cambridge Trust and the Associated Trusts are separately constituted charities. They are deemed to be subsidiary undertakings of the University since the University appoints the majority of the trustees of each Trust. The purposes of the Gates Cambridge Trust and the Associated Trusts are to support the University by enabling persons from 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 and the Associated Trusts are therefore not available for the general purposes of the University.

The consolidated financial statements do not include the accounts of the 31 Colleges in the University (‘the Colleges’), each of which is an independent corporation. Transactions with the Colleges are disclosed in note 33.

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

Recurrent grant

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

Restricted grant income

Grants are received for restricted purposes, principally from HEFCE and research sponsors. Restricted grants are recognized as income to the extent that relevant expenditure has been incurred.

Charitable donations

Charitable donations are recognized on receipt or where there is certainty of future receipt and the value can be measured reliably. The accounting treatment of a donation depends on the nature and extent of restrictions specified by the donor. Donations with no substantial restrictions are recognized as income in the income and expenditure account. Donations which are to be retained for the future benefit of the University, and other donations with substantially restricted purposes, other than for the acquisition or construction of tangible fixed assets, are recognized in the statement of total recognized gains and losses as new endowments.

Capital grants and donations

Grants and donations are received for the purposes of funding the acquisition and construction of tangible fixed assets. In the case of depreciable assets these are credited to deferred capital grants and released to income over the expected useful life of the respective assets in line with the depreciation policy. Grants and donations of, or for the acquisition of, freehold land or heritage assets, which are non-depreciable assets, are credited to income in the year of acquisition.

Academic fees

Tuition fees for degree courses are charged to students by academic term. Income is recognized for academic terms falling within the period. For short courses, fees are charged in advance for the entire course and income is recognized to the extent that the course duration falls within the period.

Examination and assessment services

Income from examination-based assessments is recognized when services are rendered and substantially complete. Income from qualifications not based on examination sessions is recognized in proportion to the number of modules achieved by candidates.

Publishing and printing

In the case of books and other print publications, income is recognized on delivery of the goods to the customer. Income generated from electronic publishing, including the provision of perpetual access, is recognized when the material is initially made available. Subscriptions income is recognized evenly over subscription periods. Journals income is recognized when the journals are published and shipped.

Other income

Income is received from a range of activities including residences, catering, conferences, and other services rendered. Income is recognized 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 restricted endowments not expended in accordance with the restrictions of the endowment is transferred from the income and expenditure account to restricted endowments.

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 and subsidiaries 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.

Tangible fixed assets

Land and buildings

Operational land and buildings are included in the financial statements at their 1994 valuation with subsequent additions at cost. On the adoption of Financial Reporting Standard (FRS) 15 (Tangible fixed assets), the University followed the transitional provision to retain the book value of land and buildings, which had last been revalued on 1 August 1994 on the basis of market value for existing use, but not to adopt a policy of revaluations of these properties in the future.

No depreciation is provided on freehold land or on assets in construction. Freehold buildings are written off on a straight line basis over their estimated useful lives, which are between 15 and 50 years, and leasehold properties are written off over the length of the lease.

Equipment

Equipment costing less than £30,000 per individual item is written off in the year of purchase. All other equipment is capitalized and depreciated so that it is written off on a straight line basis over its estimated useful life of between four and ten years.

Heritage assets

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 and FRS 30 (Heritage assets), heritage assets acquired before 1 August 1999 have not been capitalized, since reliable estimates of cost or value are not available on a cost-benefit basis. Acquisitions since 1 August 1999 have been capitalized at cost or, in the case of donated assets, at expert valuation on receipt. In line with the accounting policy in respect of equipment, the threshold for capitalizing assets is £30,000. Heritage assets are not depreciated since their long economic life and high residual value mean that any depreciation would not be material.

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 amortized 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 University’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 or, in the case of local non-operational properties, by chartered surveyors employed by the University. Marketable securities are valued at midmarket valuation on 31 July. Investments in spin-out companies are valued in accordance with the International Private Equity and Venture Capital Guidelines, and other non-marketable securities 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.

Stocks and work in progress

Stocks are stated at the lower of cost and net realizable value after making provision for slow moving and obsolete items. In respect of publishing and printing services, (a) direct costs incurred prior to publication are included in stocks and work in progress and are written off over a period of up to three years from the publication date; and (b) the University makes full provision against the cost of stock in excess of one and a half times the most recent year’s sales on all publications dated more than two years before the reporting date.

Endowment funds

Endowment funds are classified under three headings:

Where the donor has specified that the fund is to be permanently invested to generate an income stream for the general purposes of the University, the fund is classified as an unrestricted permanent endowment.

Where the donor has specified that the fund is to be permanently invested to generate an income stream to be applied for a restricted purpose, the fund is classified as a restricted permanent endowment.

Where the donor has specified a particular objective other than the acquisition or construction of tangible fixed assets, and that the University must or may convert the donated sum into income, the fund is classified as a restricted expendable endowment.

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).

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 University’s share of the surplus or deficit of the scheme is recognized 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 recognized gains and losses.

Segmental reporting

The University operates in a number of different classes of business. For the purpose of segmental reporting as required by Statement of Standard Accounting Practice 25 (Segmental reporting), classes of business have been identified by reference to the nature of activity, the nature of funding, and the management organization.

Consolidated income and expenditure account for the year ended 31 July 2012

Year ended 31 July 2012

Year ended 31 July 2011

Restated

Note

£m

£m

Income

Funding body grants

1

197

203

Academic fees and support grants

2

149

127

Research grants and contracts

3

293

284

Examination and assessment services

4

300

266

Publishing and printing services

241

227

Other income

5

123

127

Endowment and investment income

6

19

17

Total income

1,322

1,251

Expenditure

Staff costs

7

579

571

Other operating expenses

8

656

609

Depreciation

8

71

71

Interest and other finance costs

8

11

10

Total expenditure

8

1,317

1,261

Surplus / (deficit) on continuing operations

5

(10)

Minority interests in results of subsidiary undertakings

(1)

 

Surplus on continuing operations after minority interest

4

(10)

Transfer from restricted endowments

24

44

43

Surplus for the year retained in general reserves

25

48

33

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

The transfer from restricted endowments for the year ended 31 July 2011 has been restated to ensure comparability with the basis used for the year ended 31 July 2012, as described in note 11.

Note of consolidated historical cost result for the year ended 31 July 2012

Note

Year ended 31 July 2012

£m

Year ended
31 July 2011

£m

Surplus / (deficit) on continuing operations

4

(10)

Realization of gains on disposal of fixed asset investments

25

11

48

Depreciation on revaluation element of tangible fixed assets

25

6

6

Historical cost surplus for the year

21

44

Additional information:

Total income and surplus on continuing operations as stated above do not include the element of Cambridge University Endowment Fund distributions funded out of long-term capital growth, as described in note 6, amounting to £54m (2011: £48m). The surplus retained in general reserves does not include the proportion of this element relating to reserves, amounting to £22m (2011: £18m). The corresponding figures including these elements are:

Year ended 31 July 2012

£m
 

Year ended 31 July 2011

£m
 

Total income on a distribution basis

1,376

1,299

Surplus for the year retained in general reserves on a distribution basis

70

51

Consolidated statement of total recognised gains and losses for the year ended 31 July 2012

Year ended 31 July 2012

Year ended 31 July 2011

Note

Restated

£m

£m

(Deficit) / surplus on income and expenditure account

4

(10)

Increase in market value of investments

Endowment assets

24

39

101

Fixed asset investments

14, 25

27

57

New endowment capital

24

43

49

Loss arising on foreign currency translation

25

(1)

(4)

Actuarial loss

25

(66)

(29)

Total recognised gains relating to the year

46

164

Prior year adjustment

Reserves

23, 25

57

Total gains since the last annual report

103

Reconciliation

Opening reserves and endowments as previously stated

2,035

Total gains since the last annual report

103

Closing reserves and endowments

2,138

The increase in market value of investments for the year ended 31 July 2011 has been reanalysed as between endowment assets and fixed asset investments to ensure comparability with the basis used for the year ended 31 July 2012, as described in note 11.

Balance sheets as at 31 July 2012

Group

31 July 2012

Group

31 July 2011

University

31 July 2012

University

31 July 2011

Restated

Restated

Note

£m

£m

£m

£m

Fixed assets

Intangible assets

12

5

2

2

2

Tangible assets

13

1,156

1,130

1,154

1,126

Investments

14

705

661

530

484

1,866

1,793

1,686

1,612

Endowment assets

15

1,057

1,019

873

836

Current assets

Stocks and work in progress

16

59

54

50

47

Debtors

17

260

244

238

263

Investments

University

18

197

186

163

160

Held on behalf of others

18

50

24

443

409

Cash at bank and in hand

51

47

28

25

617

555

922

904

Creditors: amounts falling due within one year

19

(506)

(448)

(825)

(793)

Net current assets

111

107

97

111

Total assets less current liabilities

3,034

2,919

2,656

2,559

Creditors: amounts falling due after more than one year

20

(3)

(5)

(4)

Pension liabilities

21

(369)

(308)

(104)

(80)

Other retirement benefits liability

22

(21)

(16)

(21)

(16)

Total net assets

2,641

2,590

2,531

2,459

Represented by:

Deferred capital grants

23

502

497

502

497

Endowments

Expendable endowments

24

362

352

180

170

Permanent endowments

24

695

667

693

666

24

1,057

1,019

873

836

Reserves

General reserves

25

818

820

931

909

Operational property revaluation reserve

25

127

133

127

133

Fixed asset investment revaluation reserve

25

136

120

98

84

25

1,081

1,073

1,156

1,126

Reserves and endowments

2,138

2,092

2,029

1,962

Minority interest in subsidiary undertakings

1

1

Total

2,641

2,590

2,531

2,459

Deferred capital grants and reserves at 31 July 2011 have been restated to reflect the prior year adjustment described in note 23.

The financial statements on pages 239 to 267 were approved by the Council on 26 November 2012 and signed on its behalf by:

Professor Sir Leszek Borysiewicz

Dame Mavis McDonald

Andrew Reid

Vice-Chancellor

Member of Council

Director of Finance

Consolidated cash flow statement for the year ended 31 July 2012

Year ended

31 July 2012

Year ended

31 July 2011

Note

£m

£m

Net cash inflow from operating activities

26

25

40

Returns on investments and servicing of finance

27

19

17

Capital expenditure and financial investment

27

(37)

(53)

Cash inflow before use of liquid resources and financing

7

4

Management of liquid resources

Decrease in short-term deposits

28

8

Financing

27

(1)

(2)

Increase in cash in the year

6

10

Reconciliation of net cash flow to movement in net funds

Year ended

31 July 2012

Year ended

31 July 2011

Note

£m

£m

Increase in cash

6

10

Cash outflow from liquid resources

(8)

Movement in net funds in the year

6

2

Net funds at 1 August

48

46

Net funds at 31 July

28

54

48

Notes to the accounts

Notes to the accounts