Cambridge University Reporter

Reports and Financial Statements for the year ending 31 July 2007


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 summarized as follows:

Income 958 890 +7.6%
Expenditure (945) (882) +7.2%
Surplus/(deficit) on continuing operations 13 8
Exceptional items: gain on sale of tangible fixed assets 3 7
Surplus on continuing operations after exceptional items 16 15
Minority interest and transfer to specific endowments 5 (3)
Surplus for the year retained with general reserves 21 12
Net Assets 2,411 2,171 +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
Results by segment Education and research 617 612 5
  Cambridge Assessment 197 185 12
  Cambridge University Press 165 164 1
Eliminations Press sales to Cambridge Assessment (9) (9) -
  Financial support to the University from:      
  Cambridge Assessment (9) (9) -
  Cambridge University Press (1) (1) -
Pension scheme and other adjustments (2) 3 (5)
  958 945 13

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 326 302 +7.9%
Cambridge Assessment 52 52 -0.9%
Cambridge University Press 54 51 +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


Net assets at 31 July 2006 2,023 156 90 (98) 2,171
Surplus on continuing operations 5 12 1 (5) 13
Gain on disposal of tangible fixed assets - 3 - - 3
New endowment capital 34 - - - 34
External funding for capital expenditure 36 - - - 36
Actuarial gain on pension schemes - 1 6 44 51
Increase in investment values 96 5 2 - 103
Net assets at 31 July 2007 2,194 177 99 (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.


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 the 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 £8m (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.


Pro-Vice-Chancellor (Planning and Resources)