tremough campus services (a company limited by … · (a company limited by guarantee) consolidated...

Tremough Campus Services (a Company Limited by Guarantee) Consolidated Financial Statements for the Year to 31st July 2007

Tremough Campus Services

Directors: David Allen Professor Keith Atkinson Jeremy Lindley Niamh M Lamond Professor Alan Livingston Professor Eric Spiller Secretary: Hugh Murrell (Follett Stock Solicitors) Auditors: Ernst & Young LLP Broadwalk House Southernhay West Exeter Devon EX1 1LF Registered Number: 5103240 Registered Office: Tremough Treliever Road Penryn Cornwall TR10 9EZ Bankers: Barclays Bank plc Park House Newbrick Road Stoke Gifford Bristol BS34 8TN LloydsTSB Bank plc 25 Monument Street London EC3R 8BQ

Tremough Campus Services Consolidated Financial Statements For the Year ended 31st July 2007

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INDEX

Pages

Financial and Operational Review 2 – 7

Corporate Governance Statement 8

Statement of Directors’ Responsibilities 9

Independent Auditors Report 10

Consolidated Income and Expenditure Account 11

Statement of Consolidated Total Recognised Gains and Losses 11

Consolidated and Company Balance Sheets 12

Consolidated Cash Flow Statement 13

Notes to the Consolidated Financial Statements 14 – 25

Tremough Campus Services Report of the Directors

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Financial and Operational Review The Directors submit their report and the financial statements for the year ended 31st July 2007. Principal activities Tremough Campus Services (TCS) is a joint venture company established by University College Falmouth (UCF) and the University of Exeter (UoE) to operate a range of services on the Tremough Campus, for the joint benefit of the two Higher Education Institutions which occupy the site. The company has exempt charity status owing to the educational objectives of the HE partners which it supports with its services. It was incorporated on 16 April 2004 as a company limited by guarantee with UCF and UoE as the sole members. TCS develops and operates all student accommodation comprising Glasney Parc, an 800 unit residential development on campus, and Tuke House, a 156 unit residence located in Falmouth and leased from Sanctuary Housing. In addition it provides all catering, retail, day nursery and reprographics services to staff, students and third parties. TCS manages all the property issues on the campus, ranging from grounds and building maintenance, transport services to cleaning and security. Tremough Development Vehicle Limited (TDV) operates the Tremough Sports Centre and acts as the joint agent of UCF and UoE in the procurement of non residential building developments on the campus. TDV procured Phase 1 of the campus development, which was handed over in October 2004. The second phase of building was completed during the last year by TDV. The statements show the results of the Tremough Campus Services Group (TCSG), incorporating TDV, and TCS. Results for the year Summary consolidated results for 2006/07 are shown below: £ (000) £ (000)Income

Property and Management Services Income from UCF/UoE 2,468

Commercial Services 3,607

Investment Income 45

6,120

Expenditure

Property and Management Services costs 2,260

Commercial services Operating Costs 2,726

Interest 1,433 Depreciation 535 4,694 6,954 Deficit for the year (834)


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The overall deficit of £834K for the period relates to the losses on Commercial Services during the second year of its operation at the Tremough campus. The costs of the other services were fully recovered by UCF and UoE. The 2 higher education institutions are committed to TCS as a going concern and to supporting its losses during the start up period. Overview During its third year of operation the student numbers on the campus were still below Phase 1 capacity and therefore operations continued to lack the critical mass it expects in future years. The commercial operations benefited from a modest growth in students on campus and the associated footfall. This along with increased conference and events activity resulted in improved turnover in residences, retail and catering. Property costs recharged to the two institutions rose by 22% for the year mainly due to higher energy costs, business rates, and planned preventative and reactive maintenance costs. The appointment of a Sustainable Operations Coordinator in 2007/08 will enable the Company to more effectively manage this significant cost area responsibly and efficiently. Business rates include £65k of extraordinary charges made that have been challenged with the local council. Appropriate planned preventative maintenance contracts have been established during the year to ensure new building and equipment warranties remain effective and our statutory inspection and testing obligations are properly carried out. Losses have increased by £198K compared with the previous year. This is primarily relating to additional interest and depreciation charges associated with the early commissioning of the second phase of student housing. Under financial reporting standards the company must account for interest payable on loans as a constant percentage of the capital outstanding. This results in significantly higher charges in the earlier years due to the capital repayment holiday. The charges will reduce in later years when the capital repayments take effect. With 2 significant residential loans at the beginning of their term the accounting treatment has a substantial adverse impact on the commercial services results. Following a valuation of TCS land and building assets in 2007, the residences have been revalued on an existing use value at £35.5M. This increase in balance sheet value together with a previous revaluation exercise results in a revaluation reserve of £6M. This will be released over the outstanding life of the residences from 2007/08. The income and expenditure before interest payable is a surplus of £598K in the current year (compared to £674K in the previous year). A review of the management structure was undertaken during the year. The approved new structure creates clearer lines of accountability within TCS along with more executive decision making. The company’s executive team is being enhanced to improve operational and financial performance. This alongside the experience and expertise gained over the early years places TCSG in a strong position for the demands of further expansion over the next 5 years. In its third year of trading TCSG has generated income of £6.1M. Of this £2.4M was through direct charges to UCF and UoE for property and management services. Commercial Operations Commercial Services income is made up of a range of services set out in note 8. The largest single income source for Commercial Services is residences. Term time occupancy was high at 96.71% for Glasney Parc and 92.5% for Tuke House. This reflects the high standards of accommodation but also the shortfall in student accommodation for first year students. Out of term


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lettings income has risen during the year reflecting Tremough’s growing reputation as a quality venue for events and conferences. Depreciation charges for the residences are fixed over the life cycle of the facilities. In accordance with accounting standards interest is charged at a constant percentage of the amount outstanding and is therefore disproportionately high in the early years when capital balances are highest. As a result even a strong performance yields a loss for the year. As income grows with inflation and interest charges reduce in line with capital repayments, the situation will become reversed. The turnover of the shop grew on the back of better student footfall and out of term sales to conference and summer school visitors. The sports centre with its fixed costs base is still however lacking the critical mass of students to become profitable. This position should improve in 2007/08 when there will be a large increase in students with few added costs. The reprographics unit has continued to have positive results, partly attributable to its reprographics work from Woodlane. TCS’s catering income (comprising the restaurant and Stannary Bar) has shown higher than expected growth due to improving events and out of term activity although costs of staging events have impacted upon profitability. The Day Nursery operated on a deficit during the period due to volatility in demand during certain times of the day. Because this activity is heavily regulated and the service prioritises staff and student use rather than having full commercial freedom, it is difficult to achieve a profitable situation in the current set of arrangements. As explained above, property costs were higher than anticipated in the second year of operation but these have all been recovered from UCF and UoE. Overall profitability of TCS before interest and depreciation was higher than the projection for the year but was more than offset by the higher than projected interest on residences. Balance sheet The balance sheet includes the residential assets of TCS (note 9) and the related loan and lease obligations (note 14). High levels of debtors (note 12) and creditors (note 13) primarily relate to balances at the year end related to the TDV Phase 2 building project (see below). During the year, construction of the second phase of residences was completed. This is being funded by a loan of £10M from Lloyds TSB along with £2.5M borrowed from the two institutions on a 50:50 basis. Under Net Pension Liability, the full deficit of £14K (per the Actuarial valuation as of 31 July 2007) is shown, the detail of which is given in note 20. UCF and UoE are dependent upon TCSG (Tremough Campus Services Group) for essential services to its students and staff and have committed to supporting TCSG as a going concern. Cashflow, investment performance and liquidity The group had a net cashbook balance of £1.2M at the year end. The major movements during the year other than cash from operating activities (note 17) related to the new student residences under construction funded by borrowing from Lloyds TSB and the internal loans.


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The current asset ratio stood at 0.8 at 31 July 2007. This reflects the difficult trading circumstances of TCS as explained above but also the accrued costs on the Phase 2 residences not matched by loan debtors due to the timing of drawdown. Staff development and contribution The appointment of the Campus Services Director has improved coordination and communication among combined service staff. The service teams are preparing for larger numbers of students and staff in September 2007 following the completion of the second phase of campus development. All the functional managers and staff of TCS receive training with particular emphasis on customer service, health and safety and statutory compliance. All staff are operating under TCS’s conditions of employment and are eligible to join the Cornwall County Council’s Local Government Pension Scheme (see note 18). The staff of TCSG have shown huge commitment and played a central part in the development of the business and above all the services provided to students and staff. Environmental and Social and Community Policies During the year TCS has made significant steps to improve the environmental performance of the campus. These include;

• A new Sustainable Operations Coordination post dedicated to the improvement in energy and environmental management.

• subsidy to the local public bus services, increased in line with greater staff and student usage. • A new sustainability group has made considerable progress towards formalising a campus wide

strategy, and a Sustainability Policy for Tremough and Woodlane has been approved. • All new building plans (see future projects below), are incorporating environmental features

above and beyond increasingly high statutory requirements. The company is acutely aware of its growing impact upon the local communities of Penryn, Mabe and Falmouth and is working hard to fulfil its responsibilities to the local community in the following ways;

• Active representation in the local town forums, • Close working relations with the community police officer and other local officers • Development of additional on campus residential accommodation and expansion of its

accommodation team to place students in accommodation and work closely with landlords • Buying goods and services locally where possible and keeping the spend within Cornwall

Capital projects There have been two capital works projects on site during the year. The Phase 2 residential building project was completed by Midas Projects, the selected design and build contractor. The project, an extension to the existing Glasney Parc development, has added 302 new en-suite student rooms to the 500 units completed in 2004. This has been a highly successful project completing on time and within budget. Tremough Development Vehicle Limited (TDV) Loss for the Year The loss generated by the company is attributable to the Sports Centre. This is explained under Commercial Services above.


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Phase 2 Phase 2 comprises a substantial new 6,191 square metre building on the lower Tremough site to incorporate new lecture and seminar rooms and a new photography centre. Some teaching and office space will also be re-located into this building while an existing building will be refurbished to provide for expanded library and IT facilities. The project will provide accommodation for the growth of students from 2,000 to 3,500 between 2007 and 2010/11. Leadbitter, the design and build contractor, handed over the new completed buildings in July and refurbished spaces in September 2007. Throughout the design and build contract TDV have retained the services of the Project Managers, Mott MacDonald, the cost consultants, Turner and Townsend, and a small number of design consultants as client side advisors. The project was completed within the original budget of £24M allocated at the beginning of the contract. Future Projects Over the next five years further growth is envisaged for the Tremough campus as part of Cornwall’s development of the knowledge economy under the Convergence European structural funding programme. In addition 400 additional residential units are required for September 2009 to satisfy outstanding demand arising from phase 2. In order to be able to take forward these developments the Company acquired an option to acquire 26 acres of adjacent land. Of this, 20 acres is adjoining land on the southern boundary and 6 acres is on the Mabe side of the Penryn bypass, immediately opposite the western boundary. In September 2007, a master plan was commissioned to draw up how the campus will expand over the next few years. This work is being carried out in close consultation with the local planners and high way authorities. During the year significant planning took place in respect of the planned Tremough Innovation Centre. This development of 36,000 sq feet will be located on site adjoining the campus and overlooking the Treliever roundabout. The South West Regional Development Agency is currently the lead sponsor of the project but the intention is for a lease to be granted to TDV to complete construction and operate the facility from Spring 2009 (albeit through a tendered management operation contract). It is likely to house approximately 60 knowledge based businesses which will have access to many services and facilities on the campus as well as the wealth of student and staff talent and knowledge. During the year a small amount of refundable pre-development costs were incurred and capitalised in relation to the Tremough Innovation Centre. Conclusion The year has been demanding from the perspective of trading and construction. However a number of difficulties have been overcome and operating performance has improved as the company has become established. The successful completion of the 2 major building projects was a remarkable achievement. TCSG is well placed to take on the new challenges which are expected from the future projects described above. With the prospects of more students over the next few years TCSG is expecting to see increased trading and profitability and reduce the support needed from the two HE partners.


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Directors’ statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the Directors’ report are listed on page 1. Having made enquiries of fellow directors and of the company’s auditors, each of these directors confirms that:- • to the best of each director’s knowledge and belief, there is no information relevant to the

preparation of their report of which the company’s auditors are unaware; and

• each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the company’s auditors are aware of that information.

Appointment of Auditors Following a tendering exercise, KPMG LLP have been appointed as auditors for the forthcoming year. By Order of the Board

Tremough Campus Services Corporate Governance Statement

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Corporate Governance Statement During the 2006/07 accounting period the Board has continued to meet regularly and develop the robust arrangements for management and operation of the Company. The company’s in-house project team and estate professionals from the two institutions attend Board meetings to advise on specific issues relating to the construction of the new buildings. The Board receive regular reports on the progress of the trading and other operations of TCS including annual budgets, detailed financial updates on income and expenditure and financial forecasts for future years. These reports are reviewed by the Board at each meeting. The risk management policy and action plan has been reviewed by the internal auditors, Grant Thornton, and is considered four times per year by the Board. The risk management policy continues to be developed to reflect the various operations/activities of the Company and informs the internal audit programme. The Board recognises the importance of maintaining rigorous corporate governance procedures to ensure compliance and good practice. To this end a corporate governance away day event was arranged during the year for the directors to comprehensively review strategic issues and future developments. In addition the Company secretary reviewed current corporate governance issues with the directors. In particular, the directors considered the composition of the board, the respective roles of directors, systems for review of performance of directors, board procedures and the skills requirements of the Board generally The need to keep such issues under regular review was recognised by the directors and to this end a system of annual corporate away days would be put in place. This represents part of an ongoing programme of corporate governance compliance and the company secretary is tasked with providing updates on relevant corporate governance issues.

Statement of Responsibilities of the Directors of Tremough Campus Services

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Statement of Directors’ Responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting Practice. Company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the result of the Company for that period. In preparing those financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

- prepare the financial statements on the going concern basis unless it is inappropriate to

presume that the Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud or other irregularities.

Independent Auditor’s Report to the Members of Tremough Campus Services

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Independent Auditor’s Report We have audited the financial statements which comprise the consolidated income and expenditure account, the consolidated and company balance sheets, the consolidated cash flow statement, the statement of total recognised gains and losses and the related notes (notes 1 to 22) which have been prepared under the historical cost convention (as modified by the revaluation of certain fixed assets) and the accounting policies set out therein. This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members 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 responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the Statement of Directors' Responsibilities the company's directors are responsible for the preparation of the financial statements in accordance with United Kingdom law and accounting standards. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Auditing Standards (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 Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions with the company is not disclosed. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of audit opinion We conducted our audit in accordance with International Auditing Standards (UK and Ireland) issued by the Auditing Practices Board. 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 directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company'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: • the financial statements give a true and fair view, in accordance with United Kingdom Generally

Accepted Accounting Practice, of the state of the group’s and the parent company's affairs as at 31 July 2007 and of the group’s loss for the year then ended;

• the financial statements have been properly prepared in accordance with the Companies Act 1985; and

• the information given in the directors' report is consistent with the financial statements.

Tremough Campus Services Consolidated Income & Expenditure Account

For the Year ended 31st July 2007

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Year to Year to Note 31/7/07 31/7/06 £ (000) £ (000)Income Operating Income 2 6,075 5,430 Investment Income 3 45 29

Total Income 6,120 5,459 Expenditure

Cost of Sales 4 540 334 Staff Costs 5 1,889 1,735 Other Operating Expenses 6 2,557 2,203 Depreciation 536 513 Interest Payable 7 1,432 1,310 6,954 6,095 Deficit on Continuing Operations After Depreciation of Assets at Valuation and Before and After Tax £ (834) £ (636) Note of historical cost surpluses and deficits for the year ended 31st July 2007 Year to Year to 31/7/07 31/7/06 £ (000) £ (000) Deficit on Continuing Operations before Taxation (834) (636) Difference between Historical Cost Depreciation and the Actual Charge for the Year calculated at the Revalued Amount 23 23 Historical Cost Deficit for the Year before and after Tax (811) (613) Statement of consolidated total recognised gains and losses for the year ended 31st July 2007 Year to Year to 31/7/07 31/7/06 £ (000) £ (000) Deficit After Depreciation of Assets at Valuation and Tax (834) (636) Revaluation during the Year 6,072 - Transferred from Revaluation Reserve 23 23Prior Year Adjustment - (74)Actuarial gains in respect of pension scheme 116 3Total Gains/(Losses) since last annual report 5,377 (684)

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

Tremough Campus Services Balance Sheets as at 31st July 2007

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Group Group Company Company 2007 2006 2007 2006 Note £ (000) £ (000) £ (000) £ (000)FIXED ASSETS Tangible Assets 9 37,978 21,862 37,978 21,862 Investment Assets 10 - - - - 37,978 21,862 37,978 21,862 CURRENT ASSETS Stock 11 54 37 53 37 Debtors 12 2,250 2,566 696 1,480 Cash at Bank and in Hand 1,299 470 81 75 3,603 3,073 830 1,592 CREDITORS - amounts falling due in one year 13 (4,517) (2,979) (1,688) (1,465) NET CURRENT (LIABILITIES)/ASSETS (914) 94 (858) 127 TOTAL ASSETS LESS CURRENT LIABILITIES 37,064 21,956 37,120 21,989 CREDITORS - amounts falling due after more than one year 14 (32,251) (22,416) (32,251) (22,416) NET ASSETS/(LIABILITIES) EXCLUDING PENSION LIABILITY

4,813 (460)

4,869

(427)

Net Pension Liability (14) (95) (14) (95)

NET ASSETS/(LIABILITIES) £ 4,799

(555) 4,855

(522) RESERVES Revaluation Reserve 15 6,454 405 6,454 405 Income and Expenditure Account excluding pension reserve (1,641) (865) (1,585) (832) Pension Reserve (14) (95) (14) (95) Income and Expenditure Account including pension reserve 16 (1,655) (960) (1,599) (927)

TOTAL £ 4,799

(555) 4,855

(522) The financial statements on pages 11 to 25 were approved by the Board of Directors on 12 October 2007.

Tremough Campus Services Consolidated Cash Flow Statement For the Year ended 31st July 2007

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Year to Year to 31/7/07 31/7/06 £ (000) £ (000)

Net cash inflow from operating activities (see note 17)

2,854

2,654 Returns on investments and servicing of finance Interest Received 38 42 Bank Loan Interest Paid (1,836) (1,079) Interest Element of Finance Leases (193) (194) Net cash (outflow) from returns on investments (1,991) (1,231) Capital expenditure and financial investment Payments to Acquire Tangible Assets (9,900) (2,432) Net cash (outflow) from capital expenditure (9,900) (2,432) Cash (outflow) before use of liquid resources (9,037) (1,009) Management of liquid resources Movement in Short-Term Deposits (held with Related Company) 45 53 Financing Bank Loan Received 8,930 1,513 Other Loans Received 1,570 - Capital Element of Finance Leases (57) (48) Net cash inflow from financing 10,443 1,465 Increase in cash 1,451 509

Reconciliation of net cash flow to movement in net debt Year to Year to 31/7/07 31/7/06

£ (000) £ (000)Increase in cash in the period 1,451 509 Cash inflow from new bank loan (8,930) (1,513) Cash inflow from liquid resources (1,570) (53) Change in net debt resulting from cash flows 57 48 Movement in net debt in the period (8,992) (1,009) Net debt at 31 August (22,675) (21,666) Net debt at 31 July (31,667) (22,675)

Analysis of changes in net debt

At 1 Aug 2006 Cashflows At 31 July 2007 £ (000) £ (000) £ (000)Cash in hand, at bank 470 829 1,299Overdraft (674) 622 (52) (204) 1,451 1,247 Debt due after one year (included in related parties) (20,113) (10,500) (30,613)Finance leases (2,358) 57 (2,301)Total (22,675) (8,992) (31,667)

Tremough Campus Services Notes to the Consolidated Financial Statements


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1. Principal Accounting Policies

Fundamental Accounting Concept The accounts are prepared on a going concern basis as the University of Exeter and University College Falmouth have agreed to provide sufficient funding (including passing on specific grants received) to enable the group to meets its obligations as they fall due, and continue trading for the foreseeable future.

Basis of accounting These financial statements are prepared under the historical cost convention modified by the revaluation of certain fixed assets and in accordance with the Companies Act 1985 and applicable accounting standards. The Board of Directors has reviewed the Company’s accounting policies and estimation techniques, as required in FRS18 Accounting Policies, and considers that they are the most appropriate for the Group. Basis of consolidation The consolidated financial statements include the Company and its subsidiary company Tremough Development Vehicle Limited. As permitted by the Companies Act, an Income and Expenditure Account is not presented for the company alone. Intra-group sales and profits are eliminated fully on consolidation. Recognition of income Income is included to the extent of the completion of the service concerned. This is generally equivalent to the sum of the relevant expenditure incurred during the period and any related contributions towards overhead costs. All income from short-term deposits is credited to the income and expenditure account in the period in which it is earned. Pension schemes Retirement benefits for the employees of the Company are provided by the Cornwall County Council (CCC) Superannuation Scheme. This is a defined benefit scheme which is externally funded and contracted out of the State Earnings Related Pension Scheme. Contributions to the scheme are charged to the Income and Expenditure Account in order to spread the cost of the pensions over the employees’ working lives with the Company in such a way that the pension cost is a substantially level percentage of present and future pensionable payroll. Variations from regular costs are spread over the expected average remaining working lifetime of members of the scheme after making allowances for further withdrawals. The contributions are determined by qualified actuaries on the basis of triennial valuations, using a prospective benefit method. The assets of the CCC are measured using closing market values. Liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the scheme expected to arise from employee service in the period is charged to the operating surplus. The expected return on the scheme’s assets and the increase during the period in the present value of the scheme’s liabilities, arising from the passage of time, are included in pension finance costs. Actuarial gains and losses are recognised in the statement of total recognised gains and losses. Costs for early retirement provisions fall upon the Company and are based on the total capital cost of providing enhanced pension benefits with an allowance for future investment returns in excess of inflation.



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1 Principal accounting policies (continued) Maintenance of premises The cost of long term and routine corrective maintenance is charged to the Income and expenditure account as incurred.

Tangible fixed assets Land and buildings Freehold land is not depreciated. Buildings are stated at cost or valuation. Buildings and associated capital works are depreciated over their expected useful lives of 50 years (long leasehold) or the period of the lease (short leasehold). In accordance with FRS 15, periodic valuations will be undertaken on land and buildings and will be stated at their current Existing Use Value at that time. An impairment review of a fixed asset is carried out if events or changes in circumstance indicate that the carrying amount of the fixed asset may not be recoverable. Finance costs on associated loans from third parties that are directly attributable to the purchase of land or the construction of buildings are capitalised during the construction period but, thereafter, are not capitalised as part of the costs of those assets but are shown as interest payable. Loan Interest is allocated to periods over the term of the debt so as to produce a charge in the profit and loss account that is a constant percentage of the carrying amount of the liability in the balance sheet. Buildings under construction are accounted for at cost, based on the value of architects' certificates, contractor claims that are substantiated and other direct costs incurred to 31st July. They are not depreciated until they are brought into use. Equipment Equipment costing over £15,000 is capitalised with all other equipment being written off to the Income and expenditure account in the year of acquisition. Capitalised equipment is stated at cost and depreciated over its expected useful life, as follows: Computers and equipment - 4 years Motor vehicles - 4 years Leased assets Costs in respect of operating leases are charged on a straight line basis over the lease term. Leasing agreements that transfer substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in fixed assets and the capital element of the leasing commitments is shown as obligations under finance leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged to the Income and expenditure account on a straight line basis. Assets held under finance leases are depreciated over the shorter of the lease term or the useful economic lives of equivalent owned assets. Stock Stocks of materials for sale are valued at the lower of cost and net realisable value where cost is taken as that incurred in bringing each product to its present location and condition.



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1 Principal accounting policies (continued) Taxation status The Company is an exempt charity within the meaning of Schedule 2 of the Charities Act 1993 and as such is a charity within the meaning of Section 506(1) of the Income and Corporation Taxes Act (ICTA) 1988. Accordingly, the Company is potentially exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the ICTA1988 or Section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that such income or gains are applied to exclusively charitable purposes. The Company receives no similar exemption in respect of Value Added Tax. The Company’s subsidiary is subject to corporation tax and VAT in the same way as any commercial organisation.

Liquid resources Liquid resources include sums on short-term deposits with recognised banks, building societies and government securities.

Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of a past event, it is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

2. Operating income 31/7/07 31/7/06 £ (000) £ (000) Management Services 427 368 Property Management Services 2,041 1,614 Commercial Services 3,607 3,448 6,075 5,430

3. Interest receivable 31/7/07 31/7/06 £ (000) £ (000) Pension Finance Income 7 3 Bank Deposit Interest 38 26 45 29

4. Cost of sales 31/7/07 31/7/06 £ (000) £ (000) Material Purchases 540 334

5. Staff costs 31/7/07 31/7/06 £ (000) £ (000) Wages and Salaries 1,626 1,570 Social Security Costs 102 91 Other Pension Costs (including FRS17 adjustments) 161 74 1,889 1,735 Average Staff Numbers (FTEs) by Major Category: Administration 8 7 Premises 34 30 Other Income Generation 26 26 Residences and Catering 18 18 86 81



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6. Other Operating expenses 31/7/07 31/7/06 £ (000) £ (000) General Office Costs 178 120 Marketing & Promotions 6 19 Premises Costs 2,040 1,682 Insurance 50 48 Audit Fee 15 8 Management Costs 240 289 Other Professional Fees 28 37 2,557 2,203

7. Interest payable 31/7/07 31/7/06 £ (000) £ (000)

Bank overdraft, loans and loans not wholly repayable within five years 1,239 1,117

On Finance Leases 193 193 1,432 1,310

Interest charges relating to the finance lease are accounted for on a straight line basis. Interest on bank loans are allocated to periods over the term of the debt to produce a charge in the profit and loss account that is a constant percentage of the carrying amount of the liability in the balance sheet.

8. Analysis of commercial operations by activity for the period ended 31 July 2007

Income Net Profit/ (Loss) £ (000) £ (000) Retail 224 13 Catering & Bar 586 14 Residences (after depreciation and interest) 2,383 (783) Nursery 168 (21) Sports Centre 77 (23) Reprographics 169 41 3,607 (759)



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9. Fixed Assets Assets Long Short Equipment TotalGroup and company under Leasehold Leasehold Construction Buildings Buildings £ (000) £ (000) £ (000) £ (000) £ (000) Cost or valuation B/f as at 1st August 2006 2,091 17,851 2,899 46 22,887 Revaluation - 6,072 - - 6,072Additions for the Year 10,580 - - - 10,580 Transfers (12,671) 12,671 - - -C/f as at 31st July 2007 - 36,594 2,899 46 39,539 Depreciation B/f as at 1st August 2006 - 716 290 19 1,025 Charge for the Year - 378 146 12 536 C/f as at 31st July 2007 - 1,094 436 31 1,561 Net book value As at 31st July 2006 2,091 17,135 2,609 27 21,862 As at 31st July 2007 - 35,500 2,463 15 37,978

Interest of £413,000 has been capitalised and included within additions to assets under construction in the year to 31st July 2007. The comparable amounts of land and buildings included above at valuation determined according to historical cost accounting rules are as follows:

Long LeaseholdShort

Leasehold Buildings Buildings

£ (000) £ (000) Cost 30,522 2,448 Accumulated Depreciation (1,095) (367) Net Book Value: At 31st July 2006 17,135 2,203 At 31st July 2007 29,427 2,081 Long leasehold buildings were revalued during the year by Alder King, Chartered Surveyors on the basis of existing use value.

10. Investments

The Company owns 100% of the issued share capital of 100 £1 Ordinary shares of the Tremough Development Vehicle Ltd (TDV). These shares were transferred from the University of Exeter and University College Falmouth on 1st August 2004 for nil consideration. TDV was established to provide the construction of the main HUB for the Combined Universities in Cornwall project based at the Tremough campus in Penryn.

11. Stock Stock comprises items for resale for the bar, refectory, shop and sports centre.



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12. Debtors Group Group Company Company 2007 2006 2007 2006 £ (000) £ (000) £ (000) £ (000) Trade Debtors 163 111 160 111 Amounts Owed by Group Undertakings - - 198 399 Amounts Owed by Related Undertakings - University of Exeter 1,114 1,152 - 645 University College Falmouth 621 1,180 - 205 Other Debtors 1 3 1 3 Prepayments & Accrued Income 373 143 359 140 Bad Debt Provision (22) (23) (22) (23) 2,250 2,566 696 1,480

The amounts due from related companies represent costs billed or income accrued for costs due at the end of the financial period. Included within the balance due from University College Falmouth is surplus cash invested of £132,225 (2006: £177,225) through the College together with its own funds. This loan arrangement ensures that the Company maximises returns on investments.

13. Creditors - amounts falling due in one year Group Group Company Company 2007 2006 2007 2006 £ (000) £ (000) £ (000) £ (000) Bank Overdraft 52 674 6 418 Finance Lease Commitments due in One Year 63 55 63 55 Trade Creditors 834 559 20 559 Amounts Owed to Related Undertakings - University of Exeter 261 50 211 - University College Falmouth 232 50 182 - Other Taxation and Social Security 41 78 41 78 Other Creditors 188 60 178 50 Accruals 2,846 1,453 987 305 4,517 2,979 1,688 1,465

Included within creditors and accruals are amounts due to contractors for costs incurred on

Phases 1 and 2 at Tremough which will be reclaimed by grants from the two institutions. 14. Creditors - amounts falling due after more than one year Group and Company 2007 2006 £ (000) £ (000) Not wholly repayable within five years: Bank Loan 1 18,600 18,600 Bank Loan 2 10,443 1,513 Loans from Related Undertakings - University of Exeter 490 - University College Falmouth 480 - Finance Lease Commitments after One Year 2,238 2,303 32,251 22,416

Bank Loan 1 The company has drawn down a loan from LloydsTSB Bank plc of £18.6million. Interest on the loan balance since the completion of construction is being charged to the Income and Expenditure Account. A 25 year fixed interest rate SWAP at 5.779% has been in place since 1 January 2006 (see also note 7).



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14. Creditors - amounts falling due after more than one year (continued)

The loan includes a capital repayment holiday for the first five years to 2009. The loan is secured by way of a charge on the company's lease over the overall residential development.

Bank Loan 2 The company has also drawn down a loan of £10million. The loan is for £12.5million including rolled up interest and is for a term of 30 years with a capital repayment and interest payment holiday for the first 5 years. Interest will roll-up over this period. During the period of drawdown, the interest floor rate was 4.4% and cap rate was 5.5%. A fixed rate of 5.065% has applied from 1 March 2007. Guarantees covering both loans have been given by University College Falmouth and the University of Exeter on a 50:50 basis who also have banking covenants that they are required to meet on an annual basis. Loans from Related Undertakings The company has drawn down £778,000 from a facility of £1.25million from each institution. The loan agreements provide for repayments of £75,000 per quarter to each institution although this amount is subject to review in the first four years. The loans are repayable over fifteen years and interest is charged at base rate plus 0.5% per annum.

Group and Company 2007 2006 £ (000) £ (000) Amounts repayable on loans: In one year or less 600 - In more than one year but not more than two years 600 - In more than two years but not more than five years 2,074 898 In more than five years 27,339 19,215 30,613 20,113

Group and Company 2007 2006 £ (000) £ (000) Amounts repayable on finance leases: In one year or less 257 249 In more than one year but not more than two years 265 257 In more than two years but not more than five years 843 818 In more than five years 4,226 4,516 Less future finance charges (3,290) (3,482) 2,301 2,358

15. Revaluation reserve Group and Company 2007 2006 £ (000) £ (000) Balance Brought Forward 405 428 Revaluation during the Year 6,072 - Transferred to Income and Expenditure Account (23) (23) Balance Carried Forward 6,454 405



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16. Income and expenditure account Group Group Company Company 2007 2006 2007 2006 £ (000) £ (000) £ (000) £ (000)

Retained Deficit Brought Forward (960)

(350) (927)

(327)

Deficit after Depreciation of Assets at Valuation and Tax (834) (636) (811) (626)

Transfer from Revaluation Reserve 23 23 23 23

Actuarial Gains in respect of pension scheme

116 3 116 3 Retained Deficit Carried Forward (1,655) (960) (1,599) (927)

17. Reconciliation of consolidated operating deficit to net cash from operating activities Note 31/7/07 31/7/06 £ (000) £ (000) (Deficit) before Tax (834) (636) Depreciation 9 536 513 Interest Receivable 3 (45) (29) Interest Payable 7 1,432 1,310 Pension Costs less contributions payable 46 27 (Increase) in Stocks (17) (2) Decrease in Debtors 480 851 Increase in Creditors 1,256 620 Net Cash Inflow from Operating Activities 2,854 2,654

18. Pension schemes

The Company’s employees belong to the Cornwall County Council Superannuation Scheme.

The Company is finalising its admission agreement for membership of the Cornwall County Council Superannuation Scheme (CCC) which is a funded scheme defined benefit scheme with the assets held in separate trustee administered funds.

The pensions cost is assessed every three years in accordance with the advice of a qualified

independent actuary. The assumptions and other data that have the most significant effect on the determination of the contribution levels are shown below. The Company has set out below the information available on the scheme.

Latest actuarial valuation 31st March 2004Period of actuarial valuation 3 yearsActuarial method Prospective benefitsInvestment returns per annum 6.1%Salary scale increases per annum 4.9%Market value of assets at date of last valuation £ 617 millionProportion of members’ accrued benefits covered by the actuarial value of assets 78%Employers Contribution rates 14.0%Employees Contribution rates 6.0%



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19. FRS 17 retirement benefits disclosure The company contributes to the Cornwall County Council Pension Scheme, a defined benefit

scheme in the UK. A full actuarial valuation was carried out at 31 March 2004 and updated to 31 July 2007 by a qualified independent actuary. The major assumptions used by the actuary were:

31 Jul

2007 % pa

31 Jul 2006 % pa

31 Jul 2005 % pa

1 Aug 2004% pa

Inflation 3.3 3.1 2.8 2.9

Rate of increase in salaries payment 5.3 5.1 4.8 4.9

Rate of increase in pension 3.3 3.1 2.8 2.9

Discount rate 5.8 5.1 5.0 5.7

The assets and liabilities of the scheme and the expected rates of return were:

Long-term rate

expected 31 July 2007

%

Assets at31 July

2007

£(000)

Long-term rate

expected31 July 2006

%

Assets at31 July

2006

£(000)

Long-term rate

expected 31 July 2005

%

Assets at31 July

2005

£(000)Equities 8.0% 597 7.7% 428 7.3% 270

Bonds 5.2% 121 4.7% 75 4.7% 51

Property 6.0% 83 5.7% 58 5.4% 34

Cash 5.1% 17 4.8% 14 4.5% 18

Estimated employers’ share of scheme assets

818 575 373

Present value of scheme liabilities

832 670 447

Net pension liability

(14)

(95) (74)

Analysis of the amount charged to income and expenditure account

2007 £(000)

2006£(000)

Current service cost 157 125

Total operating charge 157 125

Analysis of the amount credited to pension finance income

2007 £(000)

2006£(000)

Expected return on pension scheme assets 46 29Interest on pension scheme liabilities (39) (26)

Net return 7 3



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19. FRS 17 retirement benefits disclosure (continued) Analysis of amount recognised in statement of total recognised gains and losses (STRGL) 2007

£(000) 2006

£(000)Actual return less expected return on pension scheme assets 34 32Experience gains and losses arising on the scheme liabilities (2) -Changes in the assumptions underlying the present value of the scheme liabilities

84 (29)

Actuarial gain recognised in STRGL 116 3

Movement in deficit during the period

2007 £(000)

2006£(000)

Deficit in scheme at beginning of the period (95) (74)Movement in period: Current service cost (157) (125)Contributions 115 98Net return on assets 7 3Actuarial gains 116 3

Deficit in the scheme at the end of the period (14) (95)

History of experience gains and losses

Year to 31 July 2007

£(000)

Year to 31 July 2006

£(000)Difference between the expected and actual return on assets 34 32Value of assets 818 575Percentage of assets 4.1% 5.6%Experience (losses) on liabilities (2) -Present value of liabilities 832 670Percentage of the present value of liabilities (0.2%) -Actuarial gains recognised in the STRGL 116 3Present value of liabilities 832 670Percentage of the present value of liabilities 13.9% 0.4%

20. Capital commitments Group Group Company Company 2007 2006 2007 2006 £ (000) £ (000) £ (000) £ (000) Authorised but not committed 728 6,304 238 448 Commitments contracted at 31st July 24,160 30,049 83 11,413

Amounts authorised are in respect of the building works for Phase 2 of the HUB for the Combined

Universities in Cornwall at Tremough, Penryn less commitments to date. Commitments then relate to the design, construction and fit-out for this work that had been awarded to contractors at the year end date.



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21. Financial commitments

The Company holds a loan agreement for £18.6million with LloydsTSB Bank plc to fund new student residences. The terms of the loan include a repayment holiday for the period of construction and a capital payments holiday for the first five years thereafter.

The fixed interest rate SWAP agreement gives the Company interest rate certainty for the duration of the repayment term. A fixed interest rate of 5.779% will apply for the full 25 year term. The company has a further loan of £10million with LloydsTSB Bank plc. The loan is for £12.5million including rolled up interest and is for a term of 30 years with a capital repayment and interest payment holiday for the first 5 years. Interest will roll-up over this period. During the period of drawdown, the interest floor rate was 4.4% and cap rate was 5.5%. A fixed rate of 5.065% has applied from 1 March 2007. The Company has partly drawn down loans of £1.25million from each of the two institutions. The loan agreements provide for repayments of £75,000 per quarter to each institution although this amount is subject to review in the first four years. The loans are repayable over fifteen years and interest is charged at base rate plus 0.5% per annum.

In addition, at 31st July the Company had annual commitments under non-cancellable operating leases as follows:

Group and Company 2007 2006 £ (000) £ (000) Land and buildings Expiring in more than five years 316 316

The above represents the remaining lease commitments for student residences, Henry Scott

Tuke House, which commenced on 1st August 1999 and was transferred from University College Falmouth to complement the freehold residences at Tremough. The remaining period of the lease is 17 years and lease payments are linked to the rate of inflation.

22. Related party transactions

The Company has taken advantage of the exemption under FRS 8 not to disclose transactions with subsidiaries that are over 90% owned.

For other related parties, the Company entered into the following transactions which are all

shown on an arms length basis.

Sales to related parties

Purchases from

related parties

Payments to third parties

Amounts owed by

related party

Amounts owed to related

party £ (000) £ (000) £ (000) £ (000) £ (000) University of Exeter 1,900 187 6,773 1,114 751 University College Falmouth 2,219 446 8,646 621 712

Payments to third parties represent amounts paid to contractors for the design and construction

of Phases 1 and 2 at the Tremough campus on behalf of the two institutions. Balances due to and from these entities have been netted off and are shown in note 12 Debtors.

The Group has and will contract for the main contracts with third parties and will recover funds from the two members on the basis of an agreed split of costs and usage of space. This split has been set at 52.44% (Phase 1) and 45.48% (Phase 2) for the University of Exeter and 47.56% (Phase 1) and 54.52% (Phase 2) for University College Falmouth.



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22. Related party transactions (continued)

Over the lives of the projects the following amounts have been expended and recovered from the two institutions:

2007 2006 £ £ £ £ Expenditure: Phase 1 Construction costs 37,370,876 36,994,759 Fit-out and equipment costs 2,787,954 2,806,407 Professional and other fees 5,787,465 5,973,471 45,946,295 45,774,637 Phase 2 Construction costs 14,445,820 2,112,484 Fit-out and equipment costs 2,044,137 32,054 Professional and other fees 2,341,411 1,632,732 18,831,368 3,777,270 Funded by: Phase 1 University of Exeter 24,369,456 24,287,485 University College Falmouth 21,576,839 21,487,152 45,946,295 45,774,637 Phase 2 University of Exeter 7,744,884 1,093,915 University College Falmouth 11,086,484 2,683,355 18,831,368 3,777,270

These amounts have been funded by grants to the two institutions from the South West of

England Regional Development Agency, the Higher Education Funding Council for England and European Regional Development Objective 1 Funds.

At the balance sheet date £1,114,000 (2006: £1,152,000) was due from the University of Exeter

and £621,000 (2006: £1,180,000) was due from University College Falmouth. Included within the balance due from Falmouth is £132,225 (2006: £177,225) of surplus cash invested with the College through a loan agreement. In addition, creditors within one year include £545,000 (2006: £50,000) due to the University of Exeter and £527,000 (2006: £50,000) due to University College Falmouth. Creditors falling due after more than one year include £490,000 due to the University of Exeter and £480,000 due to University College Falmouth.

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