Cambridge University Reporter

Reports and Financial Statements (Abstracts of Accounts) for the year ended 31 July 2005


Scope of the Financial Statements

The consolidated financial statements cover the teaching and research activities of the University, the University's subsidiary companies, which undertake activities which for legal or commercial reasons are more appropriately carried out by limited companies, the Local Examinations Syndicate and its subsidiary companies and joint ventures. This year for the first time the financial statements also include the activities of the Gates Cambridge Trust, and also those of the Cambridge Commonwealth Trust, Cambridge Overseas Trust, Cambridge European Trust and the Malaysian Commonwealth Studies Centre in Cambridge (the 'Associated Trusts'). The comparative figures for 2003-04 have been restated accordingly. Proposals to include the Cambridge University Press have been deferred one year to 2005-06, primarily for operational reasons.

The Local Examinations Syndicate, now known as Cambridge Assessment, is a constituent part of the corporation known as the Chancellor, Masters and Scholars of the University of Cambridge. It is established under the University's Statutes and its primary work is the conduct and administration of examinations in schools and for persons who are not members of the University.

The Gates Cambridge Trust is a separately constituted exempt charity. It is deemed to be 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 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 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 the Associated Trusts are similarly not available for the general purposes of the University.

The basis of preparation is explained more fully in the Statement of Principal Accounting Policies.

Results for the year

The consolidated results for the year ended 31 July 2005 are summarized as follows:

Surplus/(deficit) on continuing operations1.8(8.1) 
Transfer to accumulated income within specific endowments(2.3)(0.2) 
Deficit for the year(0.5)(8.3) 

Consolidated income for 2004-05 increased by £36.8m (+5.6%) to £694.7m. The income from the main constituent parts of the University group is made up as follows:

Teaching and research activities535.9
Cambridge Assessment165.4
Associated Trusts11.2
Gates Cambridge Trust4.4
Less: intra-group income(22.2)

Total income for the University and its subsidiary companies but excluding Cambridge Assessment, the Gates Cambridge Trust and the Associated Trusts increased by £41.4m (+8.4 %) to £535.9 m.

Grant income from the Higher Education Funding Council for England (HEFCE) and the Teacher Training Agency (TTA) increased by £7.4m (+4.8%) to £162.3m. The core recurrent grant from HEFCE/TTA increased by only £5.4m (+3.8%) slightly ahead of inflation, and there were grants for specified activities of £10.9m and transfers from grants for capital purposes.

Academic fees and support grants reduced slightly to £56.0m mainly due to reclassification of some part-time fees to Other Income.

Research grants and contracts income increased by £12.4m (+7.0%) to £188.7m. This includes £3.8m special government funding in advance of the introduction of full economic funding methodology for research council grants.

Examination and assessment services income, which derives from the activities of Cambridge Assessment, increased by £10.4m (+6.9%) to £161.1m from satisfactory growth in all areas but in particular from the UK examinations business.

Other operating income increased by £3.8m (+4.6%). Donations for general use fell slightly to £8.6m, and expenditure funded by specific donations increased by £1.7m to £14.5m.

Endowment and investment income increased by £4.1m (+11.1%) to £40.9m, mainly because of an increased distribution from the Cambridge University Endowment Fund. Of the total, £28.8m is directly available for the main University academic activities, with the balance supporting the activities of Cambridge Assessment, the Gates Cambridge Trust and the Associated Trusts.

Staff costs overall increased by £13.6m (+4.2%) to £334.7m. The Cambridge Assessment, Gates Cambridge Trust and Associated Trusts account for £6.1m and £51.5m respectively of these consolidated totals. The staff costs of the University's teaching and research activities increased by 2.7% in the year.

Other operating expenses at £319.2m were £11.5m (3.7%) higher, mainly from the growth in Cambridge Assessment's business. The expenditure in the main University academic and administrative departments has overall been contained within 2003-04 levels.

Depreciation has increased slightly as capital expenditure on new buildings and major refurbishments continues.

The Surplus on ongoing activities at £1.8m is a significant and encouraging improvement on the 2003-04 deficit of £(8.1)m (on the results restated to include the Gate Cambridge Trust and Associated Trusts), but this must be seen in the context of consolidated income of £694.7m. The impact of ongoing attention to costs taken with additional investment income and full economic costing funding, are the main reasons for this improvement.

Capital expenditure programme

The University group's high investment in physical assets over recent years, whilst considerable at £103.4m for 2004-05, is beginning to slow. Capital expenditure on buildings for academic use made up £71.5m of the total. Construction of a facility for cancer research at the Addenbrooke's site is nearing completion, new buildings for Education, English and Criminology were completed; construction of the Centre for Advanced Photonics and Electronics at West Cambridge commenced; the building for plant growth facilities is nearing completion, and there have been major refurbishments of Chemistry and Physiology laboratories. Investment in equipment for academic and research purposes was £20.1m, and by Cambridge Assessment £3.5m. The University acquired important heritage assets for its collections notably the Macclesfield Psalter now held by the Fitzwilliam Museum, at a total cost of £3.5m funded primarily by external donations.

Endowment and investment performance

The total endowment and fixed asset investment assets at the year-end were £1,006.3m for the University group, an increase of £134.5m made mainly through increases in market values. Of the total £84.8m is attributable to Cambridge Assessment, £149.7m to the Gates Cambridge Trust and £92.3m to the Associated Trusts.

The majority of the University's and Cambridge Assessment's endowment assets, and the majority of those of the Associated Trusts and other related bodies, are invested in the Cambridge University Endowment Fund (the Amalgamated Fund). The Fund's non-property holdings are managed by F&C Asset Management Limited, and its property portfolio by LaSalle Investment Management Limited. The University's short-term cash is managed by Tradition UK Ltd, Barclays Global Investors and directly by the University staff.

The Cambridge University Endowment Fund performed well over the year with a closing value of £747.3m. The capital value of a unit increased from £26.01 to £30.20 (now close to its peak of 2000), and there was a distribution per unit of £1.105 per unit, equivalent to a yield of 4.25% on the opening value, and giving a total return of 20% for the twelve months to 31 July 2005. The investment portfolio of the Gates Cambridge Trust is managed by a number of fund managers and performance was also pleasing with the total value of the endowment of the Trust increasing by £19.4m over the year.


The change in the basis of preparation of the financial statements, which now include the Gates Cambridge Trust, the Associated Trusts, as well as Cambridge Assessment, improves the overall picture of the University's activities. When the Cambridge University Press is included in 2005-06 the financial statements will follow current accounting practice and are expected to meet the Council's aim of presenting financial statements which are 'true and fair'. However the presentation of the core teaching and research activities of the University is made more difficult, and the University will continue to publish separately the accounts of these activities.

The improvement in the income and expenditure result is to be welcomed, and the University plan shows small surpluses in the coming years, largely because of anticipated significant changes to the pattern of the University's income. Higher fees will be charged to Home/EU undergraduates entering from 2006, research council grants and contracts awarded from early 2006 will be funded on a new basis, which should enable the recovery of a greater proportion of the full economic cost, and to address the same issue for charity-funded research a fund will be established to make a contribution to indirect costs of charity-funded research. The continued attention to costs is also having a major impact. Cambridge Assessment is expected to maintain its steady growth which will allow it to continue to invest in necessary technology and distribution resources.

Looking forward to the future there are areas of significant uncertainty. The Funding Council is currently reviewing its methodology for funding undergraduate education. Projected additional income for research is dependent on our ability to gain funding for research grants and contracts on the basis of full economic cost while simultaneously maintaining or increasing research volume. The future level of employers' contributions to pension funds remains a concern. Nevertheless, much has been achieved in the past year. Although the University's financial position remains tight, the measures taken, notably increased devolution of financial planning and management to the University's Schools and other institutions, have brought the budget under effective control. With the prospect of additional income from fees and research funding, the outlook is now more encouraging.


Pro-Vice-Chancellor and Acting Treasurer