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Falmouth Exeter Plus (formerly known as Tremough Campus Services)(a Company Limited by Guarantee)

Consolidated Financial Statementsfor the Year to 31st July 2012

Falmouth Exeter Plus

Directors:Professor Anne CarlislePeter Cox (appointed 6 February 2012)Robert Holmes (resigned 5 February 2012)Jeremy Lindley (resigned 2 January 2012)Professor Mark OvertonGeoff Pringle (appointed 2 January 2012)Michele ShoebridgeProfessor Geoff SmithProfessor A Upton (alternate Director for Professor Anne Carlisle)

Secretary: Hugh Murrell (Murrell Associates)

Auditor: KPMG LLPPlym House3 Longbridge RoadPlymouthPL6 8LT

Registered Number: 5103240

Registered Office: c/o Murrell Associates14 High CrossTruroCornwallTR1 2AJ

Bankers: Barclays Bank plcPark HouseNewbrick RoadStoke GiffordBristolBS34 8TN

LloydsTSB Bank plc25 Monument StreetLondonEC3R 8BQ

Falmouth Exeter PlusConsolidated Financial StatementsFor the Year ended 31st July 2012

INDEX

Pages

Financial and Operational Review 2 – 6

Corporate Governance Statement 7

Statement of Directors’ Responsibilities 8

Independent Auditor’s Report 9

Consolidated Income and Expenditure Account 10

Statement of Consolidated Total Recognised Gains and Losses 10

Consolidated and Company Balance Sheets 11

Consolidated Cash Flow Statement 12

Notes to the Consolidated Financial Statements 13 – 25

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Falmouth Exeter PlusReport of the Directors

Financial and Operational ReviewThe Directors submit their report and the financial statements for the year ended 31st July 2012.

Principal activitiesFalmouth Exeter Plus (FX Plus) is a joint venture Group established by University College Falmouth (UCF) and the University of Exeter (UoE) to operate a range of services and facilities on the Tremough Campus and UCF’s Woodlane Campus, for the joint benefit of the two Higher Education Institutions which occupy the site. Falmouth Exeter Plus is the new name for what was previously called Tremough Campus Services – the name change was registered with Companies House on 2nd July 2012.

FX Plus 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.

Objectives and activities for the public benefitThe objects of the Group are to advance the education of the public by providing and assisting in the provision of higher education facilities in Cornwall. The trustees confirm that they are aware of their duties with regard to public benefit and are conversant with the Charity Commission guidance in this area. In setting objectives and planning future activities, trustees have given consideration to the guidance on public benefit.

The Group carries out its objects by:

Providing residential accommodation to students;

Offering catering, retail, day nursery and reprographics services to students and HE staff;

Making available subsidised transport and sporting facilities to students, the latter in partnership with FXU, the joint student union;

Advancing education by providing facilities and services to staff and students;

Providing a safe and healthy environment at the Tremough campus.

The direct benefits of the Group’s work are (in conjunction with its members) the education of students at Tremough to enable individual development on both an academic and personal level. This should also enrich society by providing well educated members of society and potential employees. Fees are charged for some of the services provided and students can apply for hardship grants/loans, scholarships and bursaries from the two institutions. As the beneficiaries are students of the two institutions, the public benefit is inextricably linked to that of the two institutions. Further information about the institutions’ policies on public benefit including financial support to students and widening participation can be found in their financial statements.

FX Plus develops and operates all student accommodation comprising Glasney Parc, a 1,227 room residential development on campus, and Tuke House, a 156 unit residence located in Falmouth and leased from Sanctuary Housing. The Phase 2B development at Glasney, comprising 224 rooms, and the Sidings at Penryn with 233 rooms, operated under a Nominations Agreement, opened in September 2012. In addition FX Plus provides all catering, retail, day nursery and reprographics services to staff, students and third parties. FX Plus manages all the property issues on the campus, ranging from grounds and building maintenance, transport services to cleaning and security and academic services. FX Plus manages academic services, but their results are not included in these financial statements.

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 Phases 1 and 2 of the campus development, which were handed over in October 2004 and July 2007 respectively. It is currently delivering a number of substantial capital projects, known as Phase 3, more details of which are given below.

The financial statements show the results of the Falmouth Exeter Plus Group (FX Plus Group), incorporating TDV, and FX Plus.

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Results for the yearSummary consolidated results for 2011/12 are shown below:

£ (000) £ (000)Income

Central Support and Estates Services Income from UCF/UoE 5,202Campus Services 9,176Investment Income 32

14,410

Expenditure

Central Support and Estates Services costs 5,202

Campus ServicesStaffing and other costs 4,930Interest 2,463Depreciation 1,377

8,77013,972

Surplus for the year 438Transfer from Revaluation Reserve 125Historical Cost Surplus 563Actuarial Losses in respect of Pension Scheme (326)

Total Gains since last Annual Report 237

The overall historical cost basis surplus of £563K (2010/11 £500K) for the period relates to the surpluses generated from Campus Services. These primarily comprised residences, catering and retail during the year. The costs of the other services (property, group management and subsidised travel) were fully recovered from UCF and UoE.

OverviewWith student numbers increasing and favourable interest rates on residential loans, the Group has been able to post a retained surplus of £563K (a 13% increase compared with 2010/11) on a historical cost basis. The Directors are extremely grateful for all the efforts of the staff in achieving this result.

Actuarial losses in respect of the pension scheme are primarily due to significant changes in both the discount rate and expected return on assets.

Student numbers for both institutions rose with a combined total of over 5,500 students over Tremough and Woodlane. The higher campus footfall, residences turnover, and improved performance generally resulted in a 15% increase in income (up to £14.4m from £12.5m in 2010/11)

During October 2011 the Group secured an £8m loan for the Glasney 2b residences development. This comprised of a £4m loan from the European Investment Bank and £4m from Lloyds TSB Bank. The loans were originally on 3 month Libor rates but were fixed in June 2012 at low long term rates.

In accordance with the Education Reform Act 1988, the Board of Governors of Falmouth College of The College’s Board of Governors comprises independent and co-opted members, a student

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Campus ServicesThe trading income within the Group is analysed in note 8.

This shows overall an 8% improvement compared to the previous year. Retail turnover increased by 18%, but there was a 9% drop in catering and bar turnover, largely due to the lack of summer catered conferences this year.

With Glasney View fully in operation and rent increases, total residences income in 2011/12 represented 78% of trading income. Bunk bedded rooms again proved to be popular with some students. Overall occupancy of 98% was achieved along with a rise in turnover of 9% compared with 2010/11.

As expected Conferencing and Events business has suffered on account of the intensive building programme on the campus and general economic recession. More investment is being made in this area with a view to exploiting the commercial opportunities more fully from 2012 onwards. The difficulties experienced in conferences and events trading has been reflected in a reduction in catering turnover.

The refectory and bar operations generated surpluses as did the sports centre. The nursery which struggles with high costs and limited room for expansion generated a small deficit.

Balance sheet Net assets increased by £3,587K through the revaluation in the year offset by the increase in pension deficit.

Current assets have risen mainly through a rise in debtors. Most debtor and creditor balances reflect the large amounts flowing through TDV on capital projects which are charged back to the HE partners.

Cash net of the overdraft has dropped to £379K. However, debtors include a balance of £2,711K held on behalf of the company by UCF.

The pension deficit has risen to £403K reflecting actuarial losses of £326K, as assumptions underpinning future scheme liabilities because of a falling discount rate have become more onerous and returns on scheme investments have also fallen.

Cashflow, investment performance and liquidityAt the year end the Group’s net cash balances were £379K. The main movements during the year are shown in the cashflow statement with significant outgoings for loan interest.

Capital projects The major capital project for the year was the construction of 224 residential units in Glasney View (known as the Glasney 2b project). Midas Construction completed the project on time and the units are ready for the 2012 September term. Design tenders have just been asked for in relation to the Heart Project, which is a project to remodel and landscape the central area of the campus and incorporate a new retail and reprographics facility.

SustainabilityThe Tremough Campus has an environmental sustainability plan which includes energy and water management, procurement, transport, biodiversity, waste and recycling and information technology. As part of the carbon management plan, FX Plus has a target of 57 kg Co2 per m2 of floor area by 2019/20, against a base of 102 kg Co2 per m2 in 2005/06. The 2011/12 result was 88 kg Co2 per m2. The new buildings are built to a high environmental standard of at least BREEAM Excellent, with the ESI building having an Outstanding rating. The company has recently invested in electric vehicles and solar panels, and converted the last of the oil fired boilers to gas. Other projects include waste to water machines in catering, a cycle hire scheme and LED car park lighting.

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Principal RisksFX Plus, like all companies, faces risks and uncertainties and places great importance on internal control and risk management. As a service provider the expectations of students, staff and stakeholders and the proper delivery of that service is the principal objective and risk, and it is monitored in various ways including surveys, stakeholder meetings and service level agreements. FX Plus also relies on its two partner institutions for the intake of students from which its operating surplus is derived and those numbers are not guaranteed year to year. There are some mitigating commercial actions which can be taken but it is a risk both FX Plus and the institutions face in a competitive and changing market.

Corporate Social ResponsibilityFX Plus takes its community responsibilities very seriously and, in collaboration with UCF, UoE and FXU, works hard to encourage the permanent residents of Falmouth and Penryn to view the impact of the institutions on the two towns in a positive way. Public engagement initiatives include working in partnership with Devon & Cornwall Police, Falmouth Town Council and local publicans to fund a Taxi Marshal scheme in Falmouth to minimise the number of late-night anti-social incidents in the town centre, and student participation in festivals and events such as the Olympic Torch Relay and Falmouth Week. A community issues phone line provides local residents with a port-of-call to register complaints about university-related issues and FX Plus’s Living Support and Accommodation teams have a robust process for dealing with anti-social behaviour issues in consultation with the two institutions.

The Falmouth Town Council-led Town & Gown Committee provides opportunities for staff from our campuses to engage with town, parish and county councillors to discuss issues of common interest and work together to celebrate the positive benefits of Falmouth and Penryn being university towns. Engagement through sport is also a positive addition to this area of FX Plus activity. The Sports Centre has been nominated for a Community Involvement award by Workout magazine for its support of the FXU-led Tremough 2012 Community Games which attracted local people and their families to the Tremough Campus to try new sports and interact with students. FXU’s annual awards scheme celebrates student volunteering in the wider community. FX Plus encourages members of the public to join the Sports Centre’s corporate membership scheme and strong relationships between FXU societies, the Sports Centre, Penryn College and local sports clubs are well-developed. Lectures and exhibitions are promoted widely to encourage more local people to access our campuses and benefit culturally and socially from the experience.

Tremough Development Vehicle Limited (TDV)

Profit for the YearThe profit generated by the Company is attributable to the sports centre. This is referred to under Campus Services above.

Capital projectsThe last year has been very significant in terms of building development at Tremough.

Three major Tremough based European funded projects were approved in 2010 and have been built over the course of the year. These comprise Exeter’s £26m Environment & Sustainability Institute (ESI), UCF’s Academy for Innovation and Research (AIR) (£6m) and the Exchange (£11m), which is an extension to the campus’s joint learning resource centre and teaching accommodation and has a new facility called the Compass, for student enquiries. The AIR building was handed over in February 2012 and the ESI and Exchange will be ready for the start of the new academic term in September 2012.

The ESI has been designed to a BREEAM Outstanding standard and will be a centre of world leading research on climate change. AIR is a research and Innovation centre for Digital Economies and Sustainable Design. Both AIR and the Exchange are designed to be BREEAM Excellent.

A fourth non TDV project, Cornwall Council’s Tremough Innovation Centre (TIC), opened on the campus in January 2012.

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There has been disruption to the campus because of the extensive building works, despite the wide ranging mitigation measures taken. The directors are grateful to students, staff and visitors for their forbearance during this long building phase.

Future for the FX Plus GroupNiamh Lamond has now been in post as Chief Executive Officer of the Group for over a year, with a number of changes as a result, including a new senior executive team. A new identity, Falmouth Exeter Plus has been created with a strong brand and culture behind it. Academic and Student Services, which includes IT and the Library, is now managed as part of FX Plus. Stakeholder and customer service relations with UCF, UoE and the Students Union (FXU) have been reinforced and service level agreements agreed for all services. Internal communication has been a focus with staff meetings, newsletters and managers conferences. The company’s website is currently being redesigned and will be launched in the autumn. Along with commissioning the new buildings there is development work planned for early 2013 on the Heart project, retail complex and campus signage.

The strategic plans of the company all recognise that the expectations of students, staff and stakeholders have to be met and exceeded in the competitive environment that now exists, especially with the start in September 2012 of the £9k student fee. However, with this investment and new structure, FX Plus should be well placed to deliver world class services to meet the growing expectations of students, staff and other stakeholders.

ConclusionFX Plus has provided students and staff of UoE and UCF with an increased range of services to support the delivery of a positive student and staff experience on campus, as well as complementing teaching and research. As the students and staff numbers grow at Tremough, services are increasingly becoming more developed and cost efficient, and thereby relying less on the HE partners to provide subsidy.

Directors’ statement as to disclosure of information to auditorThe Directors who were members of the Board at the time of approving the Directors’ report are listed at the front of the financial statements. Having made enquiries of fellow Directors and of the Group’s auditor, 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 Group’s auditor is 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 Group’s auditor is aware of that information.

Reappointment of AuditorPursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

By Order of the Board

Professor A Carlisle Date: 26 October 2012Chair

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Falmouth Exeter PlusCorporate Governance Statement

Corporate Governance Statement

The accounting period for the Company (2011/12) has seen further work being carried out by the board, the Chief Executive Officer and her executive team on a variety of corporate governance related matters. This has included further strategic business planning, the development of new internal management systems and structures building on the work carried out in the previous accounting period of the Company. These changes reflect the developing role of the Company as a provider of on-going specialist commercial services to its key stakeholders.

The board has continued to meet and otherwise communicate on a regular basis. The development of delegated authority to the Chief Executive Officer and her executive team has ensured that quick and effective decisions on specified commercial issues can be made without reference to the board. Changes in the Company’s executive and reporting structures made in the previous accounting period have seen continued improvements in the communication and reporting arrangements between the board and key members of the executive.

At the board’s annual ‘away day’ in May 2012 the directors discussed various corporate governance issues. The board gave further consideration to the development of more formal service level arrangements between the Company and University College Falmouth and University of Exeter which have since resulted in the adoption of formal service level agreements for a number of areas of operation. Improvements in the business planning process have already helped to identify key performance issues relevant to the Company and this work is being developed further by the Chief Executive Officer.

As with previous years, the board has during the year continued to receive regular reports on the progress of the trading and other operations of the Company including annual budgets, detailed financial updates on income and expenditure and financial forecasts for future years as well as performance against agreed targets. This has also included work on more detailed business planning for the Company. These reports are reviewed by the Board at each meeting.

Revised risk management policy and reporting procedures have been put in place and these have resulted in a continued improvement in the presentation and monitoring of key areas of potential risk by the board. The risk management policy continues to be developed to reflect the changing and developing operations/activities of the Company and is the subject of continued scrutiny through the internal audit programme. An on -going review of potential risks to the Company in the form of a risk matrix continues to be developed and adapted to reflect these changes and developments and is reviewed on a regular basis at board level. During the accounting period the audit committee has continued its work, reviewing and scrutinising accounting and financial issues and reporting to the board as applicable.

Mr Hugh Murrell Date: 26 October 2012Company Secretary

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Statement of Responsibilities of the Directors ofFalmouth Exeter Plus

Statement of Directors’ Responsibilities in respect of the Directors’ Report and the Financial Statements

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the Group and parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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Independent Auditor’s Report to the Members of Falmouth Exeter Plus

We have audited the financial statements of Falmouth Exeter Plus for the year ended 31 July 2012 set out on pages 10 to 25.

The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the Group’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Group’s members those matters we are required to state to them in an auditor’s 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 Group and the Group’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs explained more fully in the Directors' Responsibilities Statement set out on page 8, the Directors are 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 (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the APB's website atwww.frc.org.uk/apb/scope/private.cfm

Opinion on financial statementsIn our opinion the financial statements:• give a true and fair view of the state of the Group's and of the parent company's affairs as at 31 July 2012 and of the Group's profit for the year then ended; • have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or• the parent company financial statements are not in agreement with the accounting records and returns; or• certain disclosures of Directors' remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

E Holiday (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor 2012Chartered AccountantsPlym HousePlymouth PL6 8LTPlymouth

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Falmouth Exeter PlusConsolidated Income & Expenditure Account

For the Year ended 31st July 2012

Year to Year toNote 31/7/12 31/7/11

£ (000) £ (000)IncomeOperating Income 2 14,378 12,502Investment Income 3 32 20

Total Income 14,410 12,522

Expenditure

Cost of Sales 4 1,413 1,025Staff Costs 5 3,923 3,282Other Operating Expenses 6 4,796 4,221Depreciation 1,377 1,334Interest Payable 7 2,463 2,285

13,972 12,147Surplus on Continuing Operations AfterDepreciation of Assets at Valuation and Before and After Tax 438 375

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

Note of historical cost surpluses and deficits for the year ended 31st July 2012Year to Year to 31/7/12 31/7/11£ (000) £ (000)

Surplus on Continuing Operations before Taxation 438 375

Difference between Historical Cost Depreciation and the ActualCharge for the Year calculated at the Revalued Amount 125 125

Historical Cost Surplus for the Year before and after Tax 563 500

Statement of consolidated total recognised gains and losses for the year ended 31st July 2012Year to Year to 31/7/12 31/7/11£ (000) £ (000)

Surplus After Depreciation of Assets at Valuation and Tax 438 375Revaluation 3,475 -Actuarial (losses)/gains in respect of pension scheme (326) 251Total gains since last annual report 3,587 626

Registered number: 5103240

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Falmouth Exeter PlusBalance Sheets as at 31st July 2012

Group Group Company Company2012 2011 2012 2011

Note £ (000) £ (000) £ (000) £ (000)FIXED ASSETSTangible Assets 9 64,826 54,569 64,826 54,569Investment Assets 10 - - - -

64,826 54,569 64,826 54,569

CURRENT ASSETSStock 11 75 66 74 65Debtors 12 7,612 4,242 4,044 2,715Cash at Bank and in Hand 975 1,383 975 1,194

8,662 5,691 5,093 3,974

CREDITORS - amounts falling due in one year 13 (7,079) (4,405) (3,473) (2,626)

NET CURRENT ASSETS 1,583 1,286 1,620 1,348

TOTAL ASSETS LESS CURRENT LIABILITIES 66,409 55,855 66,446 55,917

CREDITORS - amounts falling dueafter more than one year 14 (58,642) (52,031) (58,642) (52,031)NET ASSETS EXCLUDING PENSION LIABILITY 7,767 3,824 7,804 3,886

Net Pension Liability 18 (403

) (4

7) (403) (

47)

NET ASSETS 7,364 3,777 7,401 3,839

RESERVESRevaluation Reserve 15 9,306 5,956 9,306 5,956Income and Expenditure Accountexcluding pension reserve (1,539) (2,132) (1,502) (2,070)Pension Reserve (403) (47) (403) (47)Income and Expenditure Accountincluding pension reserve 16 (1,942) (2,179) (1,905) (2,117)

TOTAL 7,364 3,777 7,401 3,839

The financial statements on pages 10 to 25 were approved by the Board of Directors on 26 October 2012.

........................................................... …………………………………………Professor A Carlisle Professor M OvertonChair Director

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Falmouth Exeter PlusConsolidated Cash Flow Statement For the Year ended 31st July 2012

Year to Year to 31/7/12 31/7/11£ (000) £ (000)

Net cash inflow from operating activities (see note 17) 3,847 1,149

Returns on investments and servicing of financeInterest Received 26 14Bank Loan Interest Paid (2,151) (1, 270)Interest Element of Finance Leases (282) (303)

Net cash outflow from returns on investments (2,407) (1,559)

Capital expenditure and financial investmentPayments to Acquire Tangible Assets (7,275) (157)

Net cash outflow from capital expenditure (7,275) (157)

Cash outflow before use of liquid resources (5,835) (567)

FinancingRepayment of loans (806) (760)Bank Loan Received 6,886 425Changes in Finance Leases (8) 20

Net cash inflow/(outflow) from financing 6,072 (315)

Increase/(Decrease) in cash 237 (882)

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Falmouth Exeter PlusNotes to the Consolidated Financial Statements


1. Principal Accounting Policies

Basis of accountingThese financial statements are prepared under the historical cost convention modified by the revaluation of certain fixed assets and in accordance with the Companies Act 2006 and applicable accounting standards. The format of the financial statements follows the Statement of Recommended Practice: accounting for further and higher education on the basis that the company is a joint venture established by and for the joint benefit of two Higher Education Institutions.

The Board of Directors has reviewed the Group’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 consolidationThe 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.

Going concernThe Group has made surpluses for both the current and the prior years, and have net assets. Although the Group suffered a decrease in cash in the year, this is due to University College Falmouth investing £2.7M on the Group’s behalf to attract higher interest rates. The Group’s forecasts indicate that it will continue to generate surpluses and maintain positive net assets in the foreseeable future.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, thus they continue to adopt the going concern basis in preparing the annual financial statements.

Recognition of incomeIncome 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 schemesRetirement benefits for the employees of the Group are provided by the Cornwall Council (CC) 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 Group 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 thescheme 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 CC 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

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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 Group and are based on the total capital cost of providing enhanced pension benefits with an allowance for future investment returns in excess of inflation.

Maintenance of premisesThe cost of long term and routine corrective maintenance is charged to the Income and Expenditure account as incurred.

Tangible fixed assetsLand and buildingsFreehold 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 31 July. They are not depreciated until they are ready for use.

EquipmentEquipment 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 yearsMotor vehicles - 4 yearsMulti use games area -10 years

Leased assetsCosts 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 so as to produce a constant percentage of the carrying amount of the liability in the balance sheet.

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Assets held under finance leases are depreciated over the shorter of the lease term or the useful economic lives of equivalent owned assets.

StockStocks 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.

Taxation statusFalmouth Exeter Plus is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the charity is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 Corporation Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes.

The Group receives no similar exemption in respect of Value Added Tax. The Group’s subsidiary is subject to Corporation Tax and VAT in the same way as any commercial organisation.

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

ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a res-ult 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 31/7/12 31/7/11£ (000) £ (000)

Central Support Services 1,311 816Estates Services 3,891 3,200Campus Services 9,176 8,486

14,378 12,502

3. Interest receivable 31/7/12 31/7/11£ (000) £ (000)

Pension Finance Income (note 18) 21 8Bank Deposit Interest 11 12

32 20

4. Cost of sales 31/7/12 31/7/11£ (000) £ (000)

Material Purchases 1,413 1,025

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5. Staff costs 31/7/12 31/7/11£ (000) £ (000)

Wages and Salaries 3,379 2,833Social Security Costs 217 182Other Pension Costs (including FRS17 adjustments) 327 267

3,923 3,282Average Staff Numbers (FTEs) by Major Category:Management costs 16 13Estates and facilities 66 54Campus Services 69 71

151 138

All Directors are employees of the two institutions and received no emoluments from this Group.

6. Other Operating expenses 31/7/12 31/7/11£ (000) £ (000)

General Office Costs 45 48Marketing & Promotions 79 36Premises Costs 4,071 3,304Insurance 38 50Audit Fee 31 31Management Costs 282 371Other Professional Fees 250 381

4,796 4,221

7. Interest payable 31/7/12 31/7/11£ (000) £ (000)

On bank overdraft and loans 2,181 1,982On Finance Leases 282 303

2,463 2,285

Interest charges relating to the finance lease and interest on bank loans are allocated to periods over the term of the liability/debt to produce a charge in the Income and Expenditure account that is a constant percentage of the carrying amount of the liability/debt in the Balance Sheet.

8. Analysis of Campus Services income by activity for the period ended 31 July 2012

31/7/12 31/7/11£ (000) £ (000)

Retail 729 616Catering & Bar 613 677Residences 7,150 6,576Nursery 202 205Sports Centre 156 130Reprographics 326 282

9,176 8,486

9. Fixed Assets

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Assets in the Long Short Equipment TotalGroup and Company course of Leasehold Leasehold

construction Buildings Buildings£ (000) £ (000) £ (000) £ (000) £ (000)

Cost or valuationB/f as at 1st August 2011 47 57,511 2,899 161 60,618Additions for the Year 7,709 81 - 369 8,159Revaluation - (2,606) - - (2,606)C/f as at 31st July 2012 7,756 54,986 2,899 530 66,171

DepreciationB/f as at 1st August 2011 - 4,912 1,016 121 6,049Charge for the Year - 1,169 145 63 1,377Revaluation - (6,081) - - (6,081)C/f as at 31st July 2012 - - 1,161 184 1,345

Net book valueAs at 31st July 2011 47 52,599 1,883 40 54,569

As at 31st July 2012 7,756 54,986 1,738 346 64,826

The cumulative amount of interest capitalised at 31 July 2012 was £998,000 (2011: £970,000).

The comparable amounts of land and buildings included above at valuation determined according to historical cost accounting rules are as follows:

Long Leasehold Short LeaseholdBuildings Buildings

£ (000) £ (000)Cost 30,523 2,448Accumulated Depreciation (4,221) (979)Net Book Value:At 31st July 2011 26,926 1,591At 31st July 2012 26,302 1,469

Long leasehold buildings were revalued by Alder King, Chartered Surveyors on the basis of existing use value on 31 July 2012 at a value of £54,986K. The existing use value does not include directly attributable selling/acquisition costs.

The Tuke House lease (in short leasehold buildings above) was assessed by Vickery Holman Chartered Surveyors on the basis of existing use on 31 March 2005 and was valued at £2,899K.The valuers are external to the Group.

The Directors are not aware of any material change in value and therefore the valuations have not been updated.

10. InvestmentsThe 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. StockGroup Group Company Company

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2012 2011 2012 2011£ (000) £ (000) £ (000) £ (000)

Shop 31 31 31 31Refectory 15 13 15 13Bar 8 8 8 8Sports 2 1 - -Other 19 13 20 13

75 66 74 65

12. DebtorsGroup Group Company Company

2012 2011 2012 2011£ (000) £ (000) £ (000) £ (000)

Trade Debtors 344 308 331 308Bad Debt Provision (60) (62) (60) (62)Amounts Owed by Related Undertakings -

University of Exeter 4,180 825 160 31University College Falmouth 2,685 2,443 3,153 1,993

Other Debtors 38 5 37 5Prepayments & Accrued Income 425 723 423 440

7,612 4,242 4,044 2,715

Included within the balance owed by University College Falmouth is £2,711,000 held on behalf of the Group in a higher interest deposit account.

13. Creditors - amounts falling due in one yearGroup Group Company Company

2012 2011 2012 2011£ (000) £ (000) £ (000) £ (000)

Bank Overdraft 596 336 285 336Bank Loans 258 806 258 806Finance Lease Commitments due in One Year 299 290 299 290Trade Creditors 360 177 354 123Amounts Owed to Group Undertaking - - 474 64Other Taxation and Social Security 112 101 112 101Other Creditors 74 57 - 9Accruals 5,380 2,638 1,691 897

7,079 4,405 3,473 2,626

Included within creditors and accruals are amounts due to contractors for costs incurred on capital projects at Tremough which will be reclaimed by grants from the two institutions.

14. Creditors - amounts falling due after more than one yearGroup and Company

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2012 2011£ (000) £ (000)

Not wholly repayable within five years:Bank Loan 1 17,149 17,149Bank Loan 2 11,878 12,136Bank Loan 3 20,474 20,474Bank Loan 4 6,886 -Finance Lease Commitments after One Year 2,255 2,272

58,642 52,031

Bank Loan 1The Group drew down a loan from LloydsTSB Bank plc of £18.6M. 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), but was converted to a full term fixed rate in March 2012 of 5.215%.

The loan is secured by way of a charge on the Group's lease over the overall residential development.

Bank Loan 2The Group has also drawn down a loan of £10M. The loan is for £12.5M 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.

Bank Loan 3The Group has also drawn down a loan of £20.5M for new residences. The loan is repayable over 30 years. Interest has been fixed at 2.22% plus lending margin and costs from February 2011 for a period of 3 years.

Bank Loan 4The Group has also drawn down a loan of £8M for new residences, £4m from the European Investment Bank (EIB) and £4m from Lloyds TSB Bank. The loan is repayable over 16 years. Interest on the EIB loan has been fixed at 2.24% plus lending margin and costs from June 2012 for the full term. The Lloyds element has also been fixed under a callable swap at 2.745% plus lending margin and costs.

Guarantees covering all four bank 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.

Group and Company2012 2011

£ (000) £ (000)Amounts repayable on loans:In one year or less 258 806In more than one year but not more than two years 1,687 853In more than two years but not more than five years 5,999 4,902In more than five years 48,701 44,004

56,645 50,565

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

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2012 2011£ (000) £ (000)

Amounts repayable on finance leases:In one year or less 299 290In more than one year but not more than two years 308 299In more than two years but not more than five years 981 952In more than five years 2,658 2,992Less future finance charges (1,692) (1,971)

2,554 2,562

15. Revaluation reserveGroup and Company

2012 2011£ (000) £ (000)

Balance Brought Forward 5,956 6,081Revaluation 3,475 -Transferred to Income and Expenditure Account (125) (125)Balance Carried Forward 9,306 5,956

16. Income and expenditure accountGroup Group Company Company

2012 2011 2012 2011£ (000) £ (000) £ (000) £ (000)

Retained Deficit Brought Forward (2,179) (2,930) (2,117) (2,856)Surplus after Depreciation of Assets at Valuation and Tax 438 375 413 363Transfer from Revaluation Reserve 125 125 125 125Actuarial (Losses)/Gains in respect of pension scheme (326)

251 (326) 251

Retained Deficit Carried Forward (1,942) (2,179) (1,905) (2,117)

17. Reconciliation of consolidated operating deficit to net cash from operating activitiesNote 31/7/12 31/7/11

£ (000) £ (000)Surplus before Tax 438 375Depreciation 9 1,377 1,334Interest Receivable 3 (32) (20)Interest Payable 7 2,463 2,285Pension Costs less contributions payable 51 48(Increase)/Decrease in Stocks (9) 1Increase in Debtors (3,364) (711)Increase/(Decrease) in Creditors 2,923 (2,163)

Net Cash Inflow from Operating Activities 3,847 1,149

17. Reconciliation of consolidated operating deficit to net cash from operating activities (continued)

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Reconciliation of net cash flow to movement in net debt Year to Year to 31/7/12 31/7/11£ (000) £ (000)

Decrease in cash in the period (668) (882)Cash inflow from bank loan (6,072) (294)Movement in net debt in the period (6,740) (1,176)Net debt at 31 August (52,080) (50,904)Net debt at 31 July (58,820) (52,080)

Analysis of changes in net debtAt 1 Aug 2011 Cashflows At 31 July 2012

£ (000) £ (000) £ (000)Cash in hand, at bank 1,383 (408) 975Overdraft (336) (260) (596)

1,047 (668) 379

Debt due within one year (806) 548 (258)Debt due after one year (49,759) (6,628) (56,387)Finance leases (2,562) 8 (2,554)

Total (52,080) (6,740) (58,820)

18. Pension schemeThe Group’s employees belong to the Cornwall Council Superannuation Scheme.

The Group is an admitted body of the Cornwall Council Superannuation Scheme (CC) which is a funded 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 Group has set out below the information available on the scheme.

Latest actuarial valuation 31st March 2010Period of actuarial valuation 3 yearsActuarial method Prospective benefitsInvestment returns per annum 5.9%Salary scale increases per annum 5.3%Market value of assets at date of last valuation £1,041 millionProportion of members’ accrued benefits covered by the actuarial value of assets 78%Employers Contribution rates 16.5%Employees Contribution rates 6.5%

18. Pension scheme (continued)

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The Group contributes to the Cornwall Council Pension Scheme, a defined benefit scheme in the UK. A full actuarial valuation was carried out at 31 March 2010 and updated to 31 July 2012 by a qualified independent actuary. The major assumptions used by the actuary were:

31 Jul 2012% pa

31 Jul 2011% pa

31 Jul 2010% pa

Inflation (CPI) 2.2 2.7 2.9

Rate of increase in salaries payment 4.5 5.0 5.4

Rate of increase in pension 2.2 2.7 2.9

Discount rate 4.4 5.3 5.4

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement age 65 are:

Males FemalesCurrent pensioners 86.3 years 88.4 yearsFuture pensioners 88.2 years 90.6 years

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

Long-term rate

expected31 July

2012%

Assets at31 July

2012

£(000)

Long-term rate

expected31 July

2011%

Assets at31 July

2011

£(000)

Long-term rate

expected31 July

2010%

Assets at31 July

2010

£(000)

Equities 5.5 1,861 7.0 1,628 7.3 1,198

Bonds 3.3 472 4.6 349 4.8 243

Property 3.7 194 5.1 163 5.3 113

Cash 2.8 250 4.0 186 4.4 65

Estimated employer’s share of scheme assets

2,777 2,326 1,619

Present value of scheme liabilities 3,180 2,373 1,869

Net pension liability (403) (47) (250)

Analysis of the amount charged/credited to income and expenditure account2012

£(000)2011

£(000)Current service cost 360 281Past service gain - -

Total operating charge/(credit) 360 281

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Analysis of the amount charged to pension finance costs/credited to pension finance income

2012£(000)

2011£(000)

Expected return on pension scheme assets 159 119Interest on pension scheme liabilities (138) (111)

Net return 21 8

Analysis of amount recognised in statement of total recognised gains and losses (STRGL)2012

£(000)2011

£(000)Actual return less expected return on pension scheme assets (120) 259Experience gains and losses arising on the scheme liabilities (206) (8)

Actuarial gain/(loss) recognised in STRGL (326) 251

Reconciliation of defined benefit obligation2012

£(000)2011

£(000)Opening defined benefit obligation 2,373 1,869Current service cost 360 281Interest cost 138 111Contributions by members 130 104Actuarial losses 206 8Losses on curtailments - 21Estimated benefits paid (27) (21)

Closing defined benefit obligation 3,180 2,373

Reconciliation of fair value of employer assets2012

£(000)2011

£(000)Opening fair value of employer assets 2,326 1,619Expected return on assets 159 119Contributions by members 130 104Contributions by the employer 309 246Actuarial gains/(losses) (120) 259Benefits paid (27) (21)

Closing fair value of employer assets 2,777 2,326

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History of experience gains and lossesYear to 31 July

2012£(000)

Year to 31 July

2011£(000)

Year to 31 July

2010£(000)

Year to 31 July

2009£(000

Period to 31 July

2008£(000)

Difference between the expected and actual return on assets

(120) 259 80 (240) 27

Value of assets 2,777 2,326 1,619 1,147 1,079Percentage of assets (4.3%) 11.1% 4.9% (21%) 2.5%Experience gains/(losses) on liabilities

206 8 116 - 60

Present value of liabilities 3,180 2,373 1,869 1,434 964Percentage of the present value of liabilities

6.5% 0.3% 6.2% - 6.2%

Actuarial gains recognised in the STRGL

(326) 251 (36) (309) 26

Present value of liabilities 3,180 2,373 1,869 1,434 964Percentage of the present value of liabilities

(10.3%) 10.6% (1.9%) (22%) 2.7%

Deficit brought forward (47) (250) (287) - (14)Movement (356) 203 37 (287) 14Deficit carried forward (403) (47) (250) (287) (14)

19. Capital commitmentsGroup Group Company Company

2012 2011 2012 2011£ (000) £ (000) £ (000) £ (000)

Authorised but not committed 6,799 12,013 26 24Commitments contracted at 31 July 2012 5,054 21,610 242 9

Amounts authorised are in respect of various construction projects at Tremough, Penryn less commitments to date.

20. Financial commitmentsDetails of loan agreements are provided in note 14.

In addition, at 31 July 2012 the Group had annual commitments under non-cancellable operating leases as follows:

Group and Company2012 2011

£ (000) £ (000)Land and buildingsExpiring in more than five years 330 349

The above represents the remaining lease commitments for student residences, Henry Scott Tuke House, which commenced on 1 August 1999 and was transferred from University College Falmouth to complement the freehold residences at Tremough. The remaining period of the lease is 13 years and lease payments are linked to the rate of inflation.

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21. Related party transactionsThe Group has taken advantage of the exemption under FRS 8 not to disclose transactions with subsidiaries that are 100% owned.

For other related parties, the Group 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 2,235 119 14,383 4,180 -University College Falmouth 3,557 391 4,984 2,685 -

Payments to third parties represent amounts paid to contractors for the design and construction of Convergence projects 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 contracted for all the main contracts with third parties and will recover funds from the two members individually for their dedicated buildings and on an agreed usage basis for shared buildings.

The AIR building is funded 100% by UCF and the Environment & Sustainability Institute is funded 100% by UOE. The Exchange building is shared.

Phases 1 and 2 have been fully completed.

Over the lives of the projects (including previous years) the following amounts have been expended and recovered from the two institutions:

2012 2011£ £ £ £

Expenditure:Convergence Construction costs 40,782,900 21,273,400projects Fit-out and equipment costs 3,424,983 2,879,331

Professional and other fees 8,565,184 7,560,55452,773,067 31,713,285

Funded by:Convergence University of Exeter 23,821,563 8,936,236projects University College Falmouth 28,951,504 22,777,049

52,773,067 31,713,285

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 Fund (Convergence).

For the Convergence projects, certain projects have been funded by grants paid direct to TDV. This has been undertaken under an agency agreement with the two institutions.

At the balance sheet date £2,685,000 (2011: £2,443,000) was due from University College Falmouth and £4,180,000 was due from University of Exeter (2011: £825,000).

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