Financial Statements 2011 - Royal Holloway, University of London

Operating and Financial Review(continued)Other IncomeIncome from research grants and contracts increased to £15.2mcompared to £14.1m in 2009-10, with increases from both ResearchCouncil funding and other funders. Other Operating Incomeremained at £27.0m. Excluding Students’ Union income, which wasnot included for the full-year in 2010-11, there was a small increaseof £0.4m. Endowment and investment income increased by 11%to £1.6m.ExpenditureOverall, expenditure fell by £0.6m to £125.6m from £126.2m in2009-10. Excluding the Students’ Union, which was included forpart of 2010-11, there was a decrease of £0.3m.Staff costs decreased by £0.9m (1.3%) to £71.5m. Staff FTEs fellby 29 (2.2%) to 1,312, due to voluntary severances and othersavings and a reduction in the number of staff employed onresearch contracts. There was a 0.4% nationally-agreed increasein pay costs from August 2010 and employer’s national insurancerates increased by 1% from April 2011. Additional costs were alsoincurred as a result of pay increments and promotions and theintroduction of a banded pay structure for professorial staff fromAugust 2010. Staff costs include £0.3m for staff restructuringcosts compared to £0.8m in 2009-10, mainly from the voluntaryseverance scheme.Other operating expenses also fell slightly, down to £40.3m from£40.5m in 2009-10. Expenditure on student awards continuedto increase, but there was a fall in equipment expenditure,primarily on PCs, following substantial expenditure to upgrade PClaboratories and PC facilities in academic departments in 2009-10.Other Expenses also fell reflecting a lower level of activity in RHELimited, a reduced bad debt provision and lower exchange ratelosses arising mainly from Euro denominated research grants.Cash Flow and Liquid AssetsThe net cash flow generated from operating activities was £10.6mand this, together with capital grants of £3.6m, financed capitalexpenditure of £10.2m and loan repayments of £2.0m. During theyear there was an increase in the proportion of cash depositedin on-demand Money Market Funds compared to term deposits,resulting in a reduction of investment deposits of £13.5m and anoverall increase in cash of £12.9m.Investment PerformanceThe balance sheet value of the College’s endowment assetsinvestments at the year-end increased by £5.7m (8.8%) to £70.8mfrom £65.1m in 2009-10. A full revaluation of the Picture Collectionwas carried out in July 2011 and this resulted in an increase invalue of £1.9m to £29.3m. The value of the investment portfoliosincreased by £3.8m to £41.6mThe investments (excluding the Picture Collection) are managed bytwo fund managers, Aberdeen Asset Management and NewtonInvestment Managers. During the year Newton was appointedand the portfolios managed by Kleinwort Benson were transferredto Newton and to Aberdeen. The managers’ performance ismonitored by WM Performance Services. A new total return targethas been set of 8.5% per annum over a five-year period with themanagers’ performance also being monitored against appropriatebenchmarks for each major asset class. The introduction of thisnew target is too recent for the managers’ performance to beevaluated against it.Depreciation costs increased by £0.7m (6.2%), to £11.5m, includingcharges for the refurbishment of Runnymede II halls of residence,electrical infrastructure upgrading and improvements to Founder’squads. Interest payable decreased by £0.1m from £2.3m to £2.2m.Exposure to variable interest rates for £40m of the loans is hedgedby fixed rate interest swaps. There is some exposure to LIBORinterest rate movements on the remaining borrowing, but rateswere fairly stable during the year.Capital InvestmentNet capital investment in the year was £10.2m, financed by capitalgrants of £3.6m and £6.6m cash. Projects included the extensionto the School of Management, the Student’s Union refurbishment,upgrades to the quadrangles of the Founder’s building andcyclical refurbishment of Runnymede and Gowar and Wedderburnstudent residences.Professor P LayzellPrincipalSir Andrew BurnsChairman of Council6