NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES OR TO U.S. PERSONS OR OTHERWISE THAN TO PERSONS TO WHOM IT CAN LAWFULLY BE DISTRIBUTED

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached prospectus. You are advised to read this disclaimer carefully before accessing, reading or making any other use of the attached prospectus. In accessing the attached prospectus, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access.

Confirmation of Your Representation: You have accessed the attached prospectus on the basis that you have confirmed your representation to The Chancellor Masters and Scholars of the University of Oxford (the "Issuer") and J.P. Morgan Securities plc (the "Lead Manager") that (1) you are a "Qualified Investor" (within the meaning of Article 2(1)(e) of Directive 2003/71/EC, as amended) if in the European Economic Area, (2) you are outside the United States and are not a U.S. Person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), nor acting on behalf of a U.S. Person and, to the extent you purchase the securities described in the attached prospectus, you will be doing so pursuant to Regulation S under the Securities Act, (3) the electronic mail address to which the attached prospectus has been delivered is not located in the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; and its possessions include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands and (4) you consent to delivery of the attached prospectus and any amendments or supplements thereto by electronic transmission. The attached prospectus has been made available to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and consequently none of the Issuer, the Lead Manager and their respective affiliates, directors, officers, employees, representatives and agents or any other person controlling the Issuer, the Lead Manager or any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any discrepancies between the document distributed to you in electronic format and the hard copy version. We will provide a hard copy version to you upon request.

Restrictions: The attached prospectus is being furnished in connection with an offering exempt from registration under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities described therein. Nothing in this electronic transmission constitutes an offer of securities for sale in the United States or to any U.S. Person.

ANY SECURITIES TO BE ISSUED HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES ACT) UNLESS REGISTERED UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. YOU ARE NOT AUTHORISED TO AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED PROSPECTUS, ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH PROSPECTUS IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT AND THE ATTACHED PROSPECTUS IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. No action has been or will be taken in any jurisdiction by the Lead Manager or the Issuer that would, or is intended to, permit a public offering of the securities, or possession or distribution of the prospectus (in proof or final form) or any other offering or publicity material relating to the securities, in any country or jurisdiction where action for that purpose is required. If a jurisdiction requires that the offering be made by a licensed broker or dealer and any of the Lead Manager or any affiliate of the Lead Manager is a licensed broker or dealer in that jurisdiction, the offering

shall be deemed to be made by the Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction.

The attached prospectus is being distributed only to and directed only at (i) in Member States of the European Economic Area, persons who are Qualified Investors, (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or (iii) those persons to whom it may otherwise lawfully be distributed (all such persons together being referred to as "relevant persons"). The attached prospectus is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which the attached prospectus relates is available only to relevant persons and will be engaged in only with relevant persons.

You are reminded that you have accessed the attached prospectus on the basis that you are a person into whose possession the attached prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this document, electronically or otherwise, to any other person. If you have gained access to this document contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein. If you received this document by e-mail, you should not reply by e-mail to this announcement and you may not purchase any securities by doing so. Any reply e-mail communications, including those you generate by using the "Reply" function on your e-mail software, will be ignored or rejected. If you receive this document by e-mail, your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.

PROSPECTUS DATED 06 DECEMBER 2017

The Chancellor Masters and Scholars of the University of Oxford (incorporated as a civil corporation established under common law) £750,000,000 2.544 per cent. Bonds due 2117 The issue price of the £750,000,000 2.544 per cent. Bonds due 2117 (the "Bonds") of The Chancellor Masters and Scholars of the University of Oxford (the "Issuer") is 100 per cent. of their principal amount. Unless previously redeemed or cancelled, the Bonds will be redeemed at their principal amount on 8 December 2117. The Bonds are subject to redemption, in whole but not in part, at their principal amount at the option of the Issuer at any time in the event of certain changes affecting taxation in the United Kingdom. The Bonds may also be redeemed at any time at the option of the Issuer, in whole or in part, at the Redemption Price (as defined in "Terms and Conditions of the Bonds—Condition 5(c)—Redemption at the option of the Issuer"). See "Terms and Conditions of the Bonds—Redemption and Purchase". The Bonds will bear interest from the Issue Date (as defined below) at the rate of 2.544 per cent. per annum payable annually in arrear on 8 December in each year commencing on 8 December 2018. Payments on the Bonds will be made in sterling without deduction for or on account of taxes imposed or levied by the United Kingdom to the extent described under "Terms and Conditions of the Bonds—Condition 7— Taxation". Applications have been made to the United Kingdom Financial Conduct Authority (the "FCA") in its capacity as competent authority under Part VI of the Financial Services and Markets Act 2000 (the "FSMA") for the Bonds to be admitted to listing on the official list of the FCA (the "Official List") and to the London Stock Exchange plc (the "London Stock Exchange") for the Bonds to be admitted to trading on the Regulated Market of the London Stock Exchange. The Regulated Market of the London Stock Exchange is a regulated market for the purposes of Directive 2004/39/EC on markets in financial instruments. The Bonds have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act") and are subject to United States tax law requirements. The Bonds are being offered outside the United States by the Lead Manager (as defined in "Subscription and Sale") in accordance with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Bonds will be in bearer form and in the denominations of £100,000 and higher integral multiples of £1,000 (up to and including £199,000). The Bonds will initially be in the form of a temporary global bond (the "Temporary Global Bond"), without interest coupons, which will be deposited on or around 8 December 2017 (the "Issue Date") with a common safekeeper for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking S.A. ("Clearstream, Luxembourg"). The Temporary Global Bond will be exchangeable, in whole or in part, for interests in a permanent global bond (the "Permanent Global Bond"), without interest coupons, not earlier than 40 days after the Issue Date upon certification as to non U.S. beneficial ownership. Interest payments in respect of the Bonds cannot be collected without such certification of non U.S. beneficial ownership. The Permanent Global Bond will be exchangeable in certain limited circumstances in whole, but not in part, for Bonds in definitive form in the denominations of £100,000 and higher integral multiples of £1,000 (up to and including £199,000) each with interest coupons and (if applicable) talons attached. See "Summary of Provisions Relating to the Bonds in Global Form". The Bonds are expected to be assigned a rating of Aaa by Moody's Investors Service Limited ("Moody's") upon issue. Moody's is established in the European Economic Area ("EEA") and registered under Regulation (EU) No 1060/2009, as amended (the "CRA Regulation"). A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. An investment in the Bonds involves certain risks; for a discussion of these risks see "Risk Factors" herein. Lead Manager J.P. Morgan

CONTENTS

Page

IMPORTANT NOTICES ...... 1 OVERVIEW ...... 3 RISK FACTORS ...... 6 TERMS AND CONDITIONS OF THE BONDS ...... 20 SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM ...... 31 USE OF PROCEEDS ...... 33 DESCRIPTION OF THE ISSUER ...... 34 GOVERNANCE AND REGULATION OF THE ISSUER ...... 50 TAXATION ...... 59 SUBSCRIPTION AND SALE ...... 61 GENERAL INFORMATION ...... 62 FINANCIAL STATEMENTS AND AUDITORS' REPORTS ...... 64

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IMPORTANT NOTICES

This Prospectus comprises an approved prospectus for the purposes of section 85(2) of the FSMA.

The Issuer accepts responsibility for the information contained in this Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to affect its import.

The Issuer has confirmed to J.P. Morgan Securities plc (the "Lead Manager") that this Prospectus contains all information which is (in the context of the issue, offering and sale of the Bonds) material (including all information required by applicable laws and the information which, according to the particular nature of the Issuer and the Bonds, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and of the rights attaching to the Bonds); this Prospectus is true and accurate in all material respects and is not misleading; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer are honestly held or made and are not misleading and are based on reasonable assumptions; this Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in the context of the issue, offering and sale of the Bonds) not misleading; all proper enquiries have been made to ascertain or verify the foregoing; and the Prospectus has been made available to the public as required under the prospectus rules issued by the FCA under Part VI of the FSMA.

The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Bonds other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer, the Lead Manager or the Trustee.

Neither the Lead Manager nor any of its respective affiliates have authorised the whole or any part of this Prospectus and none of them makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Prospectus. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Bond shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer since the date of this Prospectus.

This Prospectus does not constitute an offer of, or an invitation to subscribe or purchase, any Bonds. The distribution of this Prospectus and the offering, sale and delivery of Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Lead Manager to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Bonds and on distribution of this Prospectus and other offering material relating to the Bonds, see "Subscription and Sale".

In particular, the Bonds have not been and will not be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, Bonds may not be offered, sold or delivered within the United States or to U.S. persons.

In this Prospectus, unless otherwise specified, references to "£" or "sterling" are to the lawful currency for the time being of the United Kingdom. References to "billions" are to thousands of millions.

Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

Potential investors should note that unless otherwise specified herein, statistical data and other information (including both financial and non-financial metrics and performance measures) in this Prospectus which relate to the Issuer do not include data or information relating to OUP (as defined herein). In addition, any financial information relating to the Issuer and expressed to be given in respect of a financial year of the Issuer has been extracted or derived from the audited financial statements of the Issuer for the relevant financial year, and therefore excludes any financial information relating to OUP. For further information with respect to the basis of preparation of the Issuer's and OUP's financial

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statements, see the section entitled "Financial Statements and Auditors' Reports" on page 64 of this Prospectus.

In connection with the issue of the Bonds, J.P. Morgan Securities plc (the "Stabilising Manager") (or persons acting on behalf of the Stabilising Manager) may over allot Bonds or effect transactions with a view to supporting the price of the Bonds at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Bonds is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the Bonds and 60 days after the date of the allotment of the Bonds. Any stabilisation action or over-allotment must be conducted by the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules.

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Bonds are legal investments for it, (2) the Bonds can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Bonds. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Bonds under any applicable risk-based capital or similar rules.

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OVERVIEW

This overview must be read as an introduction to this Prospectus and any decision to invest in the Bonds should be based on a consideration of the Prospectus as a whole.

Words and expressions defined in the "Terms and Conditions of the Bonds" below or elsewhere in this Prospectus have the same meanings in this overview.

The Issuer The Chancellor Masters and Scholars of the University of Oxford.

Lead Manager J.P. Morgan Securities plc.

Trustee HSBC Corporate Trustee Company (UK) Limited.

Principal Paying Agent HSBC Bank plc.

The Bonds £750,000,000 2.544 per cent. Bonds due 2117.

Issue Price 100 per cent. of the principal amount of the Bonds.

Issue Date 8 December 2017.

Use of Proceeds General corporate purposes.

Interest The Bonds will bear interest from the Issue Date at a rate of 2.544 per cent. per annum payable annually in arrear on 8 December in each year commencing 8 December 2018.

Status The Bonds will constitute direct, unconditional and unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by applicable laws relating to creditors' rights.

Form and Denomination The Bonds will be issued in bearer form in the denominations of £100,000 and higher integral multiples of £1,000 (up to and including £199,000).

The Temporary Global Bond and the Permanent Global Bond are to be issued in new global note form.

Final Redemption 8 December 2117.

Optional Redemption On giving not less than 10 nor more than 20 days' notice to the Bondholders in accordance with Condition 15 (Notices) and to the Trustee (which notice shall be irrevocable), the Issuer may redeem some or all of the Bonds for the time being outstanding at any time at the Redemption Price together with interest accrued to (but excluding) the date of redemption.

The "Redemption Price" shall be: (i) if the Redemption Date falls on or after 8 June 2117 the principal amount of the Bonds to be redeemed, or (ii) otherwise, the higher of (a) the principal amount of the Bonds to be redeemed and (b) the product of the principal amount of the Bonds to be redeemed and the price, expressed as a percentage (rounded to three decimal places, with 0.005 being rounded down), (as reported in writing to the Issuer and the Trustee by an independent financial adviser (a "financial adviser") appointed by the Issuer and notified to the Trustee) at which the Gross Redemption Yield on the Bonds on the Calculation Date is equal to the sum of (A) the Gross Redemption Yield at 11.00 a.m. (London time) on such date of the 3.5 per cent. Treasury Gilt due July 2068 (or, from time to time, such other government stock selected by the financial adviser (i) as having a maturity comparable to the remaining term of the Bonds and (ii)

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which would be utilised, at the time of selection and in accordance with customary financial practice at such time, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds as such financial adviser may recommend) and (B) 0.15 per cent.

For further details, see Condition 5(c) (Redemption at the option of the Issuer).

Tax Redemption The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days' notice to the Bondholders in accordance with Condition 15 (Notices) and to the Trustee (which notice shall be irrevocable), at their principal amount, together with interest accrued to the date fixed for redemption, in the event of certain changes affecting taxation in the United Kingdom. See Condition 5(b) (Redemption for tax reasons).

Negative Pledge So long as any of the Bonds remains outstanding, the Issuer shall not create or permit to subsist any Security Interest upon the whole or any part of its present or future undertaking, assets or revenues to secure any Relevant Indebtedness of the Issuer or any guarantee or indemnity of the Issuer in respect of any Relevant Indebtedness without (a) at the same time or prior thereto securing the Issuer's obligations under the Bonds, the Coupons and the Trust Deed equally and rateably therewith or (b) providing such other security for the Issuer's obligations under the Bonds, the Coupons and the Trust Deed as the Trustee may in its absolute discretion consider to be not materially less beneficial to the interests of the Bondholders or as may be approved by an Extraordinary Resolution (as defined in the Trust Deed) of Bondholders. See Condition 3 (Negative Pledge).

Cross Acceleration If any of the following events occurs and is continuing, then the Trustee may at its discretion and, if so requested in writing by holders of at least one-quarter of the aggregate principal amount of the outstanding Bonds or if so directed by an Extraordinary Resolution, shall (subject, in each case, to it being indemnified and/or secured and/or prefunded to its satisfaction) give written notice to the Issuer declaring the Bonds to be immediately due and payable, whereupon they shall become immediately due and payable at their principal amount together with accrued interest without further action or formality if (i) any Indebtedness of the Issuer is not paid when due or (as the case may be) within any originally applicable grace period; or (ii) any such Indebtedness becomes due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described); or (iii) the Issuer fails to pay when due any amount payable by it under any guarantee for, or indemnity in respect of, any Indebtedness, provided that the amount of Indebtedness referred to in sub-paragraph (i) and/or subparagraph (ii) above and/or the amount payable under any guarantee or indemnity referred to in sub-paragraph (iii) above individually or in the aggregate exceeds the Threshold Amount. See Condition 8(c) (Cross-acceleration of Issuer).

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Withholding Tax All payments of principal and interest in respect of the Bonds and the Coupons by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision thereof or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Bondholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Bond or Coupon presented for payment in the limited circumstances set out in Condition 7 (Taxation).

Rating The Bonds are expected to be assigned a rating of Aaa by Moody's.

Moody's is established in the EEA and registered under the CRA Regulation.

A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation.

Governing Law The Bonds, the Trust Deed, the Paying Agency Agreement and any non- contractual obligations arising out of or in connection with any of them will be governed by English law.

Listing and Trading Applications have been made for the Bonds to be admitted to listing on the Official List and to trading on the Regulated Market of the London Stock Exchange.

Clearing Systems Euroclear and Clearstream, Luxembourg.

Selling Restrictions For a description of certain restrictions on offers, sales and deliveries of the Bonds and on the distribution of offering materials in the United Kingdom and the United States see "Subscription and Sale".

Risk Factors Investing in the Bonds involves risks. See "Risk Factors".

ISIN XS1713474838.

Common Code 171347483.

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RISK FACTORS

The Issuer believes that the following factors could affect its ability to fulfil its obligations under the Bonds. All of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring.

Factors which the Issuer believes may be material for the purpose of assessing the market risks associated with the Bonds are also described below.

The Issuer believes that the factors described below, which are drawn from the Issuer's Strategic Risk Register, represent the principal risks inherent in investing in the Bonds, but the Issuer may be unable to pay interest, principal or other amounts on or in connection with the Bonds for other reasons, and the Issuer does not represent that the statements below regarding the risks of holding the Bonds are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision.

A RISKS RELATING TO THE ISSUER

1. Fees and Funding

(a) Tuition

The Issuer does not have complete control over the tuition fees that it is able to charge to United Kingdom ("UK") and the European Union ("EU") undergraduates and this could have an impact on the revenue generated by the Issuer from its teaching activities

The Issuer does not have complete freedom over the amount that it can charge UK/EU undergraduate students for tuition. While the Issuer can set a fee above the basic amount set by the UK Government (which from 1 August 2017, is £6,165 per annum for all eligible institutions) in relation to a year and a course, the fee must not exceed the maximum amount specified by the UK Government. With effect from 1 August 2017, The Higher Education (Higher Amount) (England) Regulations 2016 increased the maximum amount to £9,250 for all eligible institutions. The Issuer is an eligible institution and it has applied the maximum tuition fee of £9,250 per annum to all UK/EU undergraduate students enrolling from September 2017 (see "The Issuer's ability to charge the maximum undergraduate tuition fees for UK/EU students is dependent on compliance with an access agreement approved by the Office for Fair Access"). The Government policy on the level of tuition fees for undergraduate UK students is currently under review and fee levels for 2018/19 have been frozen at £9,250 pending the outcome of this review.

The UK Government may increase or decrease the basic amount or the higher amount again in the future, which could impact on the income received by the Issuer from student tuition fees. This could be achieved either through the introduction of further regulations under the Higher Education Act 2004, or through the introduction of primary legislation.

The Higher Education and Research Act 2017 ("HERA") received royal assent on 27 April 2017. As set out in more detail below, the implementation of HERA will make changes to, among others, (i) the ability of a university to charge the maximum tuition fee by linking this to its rating under the Teaching Excellence Framework ("TEF"); (ii) how funding for research is administered by allocating the responsibility for Quality Related ("QR") funding and competitively-won Research Council and Innovate UK grants to a new body called UK Research and Innovation; and (iii) the regulatory framework of higher education by establishing a new principal regulator in the Office for Students ("OfS") with the power to impose monetary penalties, powers in relation to quality and standards, power to authorise the granting of degrees and the use of "university" in an institution's name.

Accordingly, the Issuer does not have complete control over the tuition fees it is able to charge to UK/EU undergraduates, and this may have an impact on the income it derives from teaching these students.

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The Issuer's ability to charge the maximum undergraduate tuition fees for UK/EU students is dependent on compliance with an access agreement approved by the Office for Fair Access

The maximum tuition fee for undergraduate students from the UK and the EU described above is dependent upon compliance with criteria set by the Office for Fair Access ("OFFA"). In order to be able to charge any rate higher than the basic amount, the Issuer must operate an access agreement which has been approved by OFFA.

If the Issuer fails to comply with its access agreement, it may lose its ability to charge the maximum level of tuition fees for UK/EU undergraduate students. Such a reduction in the level of tuition fees would reduce the revenue generated by the Issuer from its teaching activities.

From April 2018, HERA will transfer OFFA's functions to the OfS. A university that wants to charge the higher fee limits will need to have an access and participation plan, approved by the OfS, as a condition of its continued registration as a provider of English higher education.

Failure to comply with the criteria set by OFFA (or, following the transfer of OFFA's functions to OfS, the OfS) could result in the Issuer no longer being able to charge the maximum tuition fees which would result in a real terms reduction in income, and place the Issuer at a financial disadvantage with universities that have continued to be eligible to apply the maximum uplift.

There are risks that the current fee levels for non-UK, non-EU ("International Students") and UK/EU postgraduate students cannot be maintained

Although the Issuer is not subject to a fee cap in relation to international undergraduate students or postgraduate students (both UK/EU and international) and is therefore able to set higher fees than those that apply for undergraduate UK/EU students, the maintenance of its fee levels cannot be guaranteed.

The capacity of the Issuer to set fee levels for international undergraduate students and postgraduate students is, to an extent, determined by market forces. The Issuer is competing in a global market and its ability to command particular fee levels will depend on, amongst other things, global economic conditions, its competitors and the international reputation of the Issuer more generally.

If the Issuer is unable to maintain the current fee levels charged to these groups of students, this could reduce the Issuer's fee income and could impact on the overall revenue of the Issuer. While the recent trend has been an increase in the number of postgraduate and International Students, the flow of International Students enrolling on courses at the Issuer cannot be guaranteed.

(b) Research

Significant changes are being made to the way in which the UK Government provides funding for research that could impact adversely upon the Issuer's research funding

Public funding for research in English higher education is administered under a "dual support" system under which the Higher Education Funding Council for England ("HEFCE") provides block grants for institutions to support their research infrastructure and enable their research activities. The majority of this HEFCE-provided grant is QR funding. The level of QR funding received by the Issuer is linked to its performance in the Research Excellence Framework ("REF") (a system of assessing the quality of research in UK higher education institutions, completed in 2014) relative to the rest of the sector. In the 2016/17 academic year, 10.2 per cent. of the Issuer's total income was provided by QR funding, however if there is a reduction in the overall allocation for research funding by the UK Government, the amount of research funding received by the Issuer could fall. In addition, the continued success of the Issuer in relation to its research activities cannot be guaranteed. A change in the Issuer's REF performance could impact adversely on the level of QR block grant received by the Issuer.

With effect from April 2018, HERA will transfer the power to allocate QR funding to a new body, UK Research and Innovation ("UKRI"). HERA will also amalgamate the UK Research Councils as committees of UKRI. UKRI will therefore have responsibility for overseeing both QR funding for research infrastructure and competitively-won grants for specific research

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projects and programmes. Whilst the change of funding organisation is not expected to change the allocation of QR funding in the short term, there is a risk that UKRI will adopt different criteria in allocating grant funding to institutions, and as a result the Issuer's overall research funding is reduced.

Further changes to UK Government support for research cannot be ruled out. The UK Government has signalled its intention to support the increase of UK R&D to 3 per cent. of GDP. This should aid the continued success of the Issuer in relation to its research activities which is vital to maintaining the Issuer's ranking amongst other global academic institutions and to attracting further research funding, but its success is not guaranteed.

There is an increasing expectation from the UK Government that universities deliver research benefits to society in a range of forms including in relation to the economy, society, culture, public policy and services, health, the environment and quality of life. Failure by academic staff to engage with external stakeholders and demonstrate impact from their research and knowledge exchange activity could reduce access to research and knowledge exchange funding and damage the Issuer's institutional reputation. Additionally, failure to implement systems, processes and support structures to incentivise, support, monitor and capture this impact may lead to a competitive disadvantage compared to other universities. It will also reduce the opportunity for the Issuer to benefit from promoting its contribution to wider society.

The UK Government has funded the opening of a number of dedicated research institutes in the last few years, such as the Crick Institute (in which, together with the Turing Institute, the Issuer has been a participant to date and anticipates being a party to any similar initiatives in the future). If the UK Government decides to centralise research funding into such institutes or otherwise concentrates research funding, there may be a reduction in the level of research funding the Issuer receives directly from UK Government sources.

The Issuer receives research grant income from publicly-funded Research Councils, UK Government departments, charitable foundations and the EU, and through collaborations with the private sector none of which can be guaranteed to continue in the future

The second limb of the public funding dual support system referred to above comes from competitively won grants for specific research projects and programmes provided by UK Research Councils. The Issuer also receives a significant proportion of its research grant income from UK and foreign charitable foundations, the EU, UK Government departments and through collaborations with the private sector. The Issuer considers that Brexit is a particular threat to its ability to access EU funding, although the UK Government has signalled that continued access to such funding is a major priority in those negotiations. The Issuer's research income from sources other than UK Research Councils in 2016/17 was £418.5 million. Of this £155.8 million came from UK based charities and £164.3 million from other overseas sources. Further, the possibility of changes to the funding available to these sources, and hence the funds available to them to support research activities, cannot be excluded. In addition, the continued success of the Issuer in relation to competitively won research grants cannot be guaranteed.

The Issuer receives benefactions, capital grants, and unrestricted and restricted donations from individuals and charities and through its engagement with the private sector. The level of such financial support is determined by the Issuer's success in fundraising, economic conditions and the ability and willingness of the donors to support the Issuer. The level of funding therefore cannot be guaranteed.

2. UK Withdrawal from the EU and UK Immigration Policy

The impact of the UK leaving the EU may have a negative effect on the UK economy

Following the result of the referendum on the UK's continued membership of the EU and the passing of the European Union (Notification of Withdrawal) Act 2017, the formal process of the UK leaving the EU was triggered on 29 March 2017. There is a risk that withdrawal from the EU may have a negative impact on the UK economy. If there is deterioration in public finances as a result of an economic downturn, this could lead to further public spending cuts and austerity

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measures, with the potential for less money being made available to the higher education sector from the UK Government, and a consequent reduction in the income of the Issuer.

A significant proportion of the Issuer's research funding comes from EU research funding programmes, and there is no guarantee that such funding will still be available once the UK has withdrawn from the EU

In 2016/17, 12 per cent. of the Issuer's research income came from the European Commission (£66.3 million) and income from services rendered from the EU was £0.3 million. There is a risk that it will become more difficult for the Issuer to obtain research grants from Horizon 2020 (the largest EU Research and Innovation programme), participate in other EU-funded projects or collaborate with other EU institutions in the run-up to the UK's withdrawal from the EU and for the Issuer to enter into research collaboration projects with EU partners, as there is continued uncertainty as to whether the UK will be able to continue to participate in these EU funded programmes when it is no longer a Member State. This could result in a reduction in EU research funding received by the Issuer prior to the UK's withdrawal from the EU.

While the UK has indicated in The United Kingdom's Exit From, And New Partnership With, The European Union White Paper published on 2 February 2017 (the "Brexit White Paper") that it will work with the European Commission to ensure payment of research funds that have been awarded by the European Commission to UK applicants even when the projects continue beyond the UK's departure from the EU, and that it will underwrite any research awards that are not paid, there is no guarantee that this will be the case. Even if the Issuer continues to bid for competitive EU funding on the back of these government assurances, there is no guarantee that such bids will be successful or that EU research partners will continue to collaborate with UK universities on competitive bids.

There is a risk that the numbers of EU students choosing to study in the UK will fall, both in the run-up to the withdrawal of the UK from the EU, and once that withdrawal has been completed

On a full-time equivalent basis, in 2016/17 the Issuer had 986 undergraduate students, and 2,672 postgraduate students, from the EU (excluding the UK). The departure of the UK from the EU will potentially reduce the number of EU students attending courses offered by the Issuer, as those students may be required to pay overseas students tuition fees which are higher than the capped fees set for UK/EU students. Standard undergraduate fees for International Students in 2017/18 have been set by the Issuer between £15,755 and £23,190 for all courses, save for clinical medicine, which is £36,007. There is also some uncertainty as to whether EU students will be able to apply for student loans from the Student Loans Company Limited, once the UK has withdrawn from the EU, and this may make the UK a less attractive place to study. It was confirmed in separate statements across all UK nations (England, Wales, Scotland and Northern Ireland) that current university students from the EU and those applying to courses starting in 2018 will not see any changes to their loan eligibility or fee status. This guarantee will apply for the full duration of the course, even if the course finishes after the UK has left the EU. The UK Prime Minister's speech in Florence in September 2017 confirmed a two-year transition period. The UK is seeking clarification that the same rules will still apply for EU students as currently in place after the UK has withdrawn from the EU, however, there is no guarantee of the position in future years.

Currently, undergraduate EU students at the Issuer make up just over 8 per cent. of the total student population. The number of applications from EU students has risen steadily in previous years, and for 2018 entry, the Issuer received a 10.46 per cent. increase in applications based on provisional figures. Given the uncertainty as to how the UK's exit of the EU will affect EU student numbers, there is a risk that applications from EU students will not continue to grow.

There is uncertainty about the status of EU citizens currently working within the UK, and whether they will be allowed to remain in the UK once the UK has withdrawn from the EU, and this uncertainty may cause some EU staff to relocate to other countries within the EU. This will potentially restrict the ability of UK universities to attract and retain the best staff, which in turn may impact on the ability to attract the same level and quality of students.

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A departure of the UK from the EU might also affect staffing. As at 31 July 2017, the Issuer employed 2,495 staff from EU Member States other than the UK, from a total staff population of 14,350. Of the Issuer's total academic staff, 24.4 per cent. are from the EU. The Brexit White Paper confirmed that it would be a priority of the UK Government in negotiations to leave the EU to secure the status of, and provide certainty to, EU nationals residing in the UK. However, there is no guarantee of the eventual agreement that will be made with the EU on this question.

For as long as the UK is still a member of the EU, the rights of EU nationals to work and reside in the UK will remain unchanged. However, the continued uncertainty as to the position of EU nationals residing in the UK after the UK's departure from the EU may result in EU staff leaving the Issuer in advance of formal departure from the EU and may make it more difficult for the Issuer to attract EU staff.

The loss of key academic staff members could impact on the Issuer's global reputation as a higher education provider, and could make the Issuer a less attractive place to study, which in turn could result in a decline in the numbers of students who apply to study at the Issuer. If key academic researchers leave the Issuer, there is a risk that the overall levels of research income of the Issuer may fall.

There have been changes, and may be further changes, to the UK's immigration system which could impact negatively on the Issuer's ability to attract and recruit the best international academics and students

In 2008, a points-based immigration system was introduced by the government with the policy objectives of controlling migration more effectively, tackling abuse and identifying the most talented migrant workers and students. There have been a series of changes since the introduction of the points-based system, with the aim of reducing net migration. This could have implications for the Issuer's capacity to attract the best international academics and students. There is a risk that the current arrangements will impact negatively on the competitiveness of the UK higher education sector and on the way in which the UK higher education sector is perceived internationally.

3. Teaching Excellence and Student Outcomes Framework ("TEF")

The TEF will assess the quality of, and the standards applied to, higher education providers across the sector and an unfavourable rating could have a financial impact on the Issuer

It is current UK Government policy to implement the TEF, as a way to assess the quality of, and the standards applied to, higher education providers across the higher education sector. The TEF rating is currently based on a number of metrics, which include aspects of the National Student Survey, a submission by the Issuer, the Issuer's success in retaining students and the results of the Destination of Leavers from Higher Education Survey (which surveys graduate destinations approximately six months following graduation). The TEF is being phased in over a period of years. The first TEF assessment was carried out in the academic year 2015/16 and institutions were either awarded a rating of "meets expectations" or "does not meet expectations". The Issuer was awarded a rating of "meets expectations", which allows it to charge the higher tuition fees. In the most recent TEF assessment for the academic year 2016/2017, institutions were awarded ratings of "Gold", "Silver" and "Bronze" and the Issuer was awarded a rating of "Gold". The Issuer's performance in all of these measures, which may fluctuate depending on the intake of students and/or the economic outlook (in terms of employment), may therefore affect its TEF rating.

Currently, all institutions achieving a rating of "Gold", "Silver" or "Bronze" are eligible to receive the full inflationary uplift, but it is expected that with effect from the academic year 2020/21, the performance of the Issuer in the TEF will determine whether or not it can take the benefit of an inflationary uplift to the maximum tuition fee.

From September 2020, onwards, it is possible that HERA may establish a link between a university's performance in the TEF with an ability to apply further inflation linked rises to the maximum tuition fee.

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It is also proposed that, from the academic year 2021/22, individual courses or groups of subjects will have their own TEF rating, and potentially different fees.

4. Ability for postgraduate students to obtain funding

Given the changes outlined above in relation to the funding environment there is uncertainty over whether postgraduate student numbers can be maintained with an associated impact on fee income

Historically, the Issuer's postgraduate student numbers have tended to be stable with moderate growth, with over 26,000 applications received for 5,400 postgraduate places with respect to the 2017/18 academic year (5 per cent. up from the 2016/17 academic year). Compared to the 2016/17 academic year, current figures show applications from the UK remaining flat (-0.2 per cent.), a slight increase in applications from the EU (2 per cent.) and a marked increase in non- EU international applications (8 per cent.). The conversion rate of postgraduate offers into final acceptances is 62 per cent. for the 2017/18 academic year compared to 60 per cent. for the 2016/17 academic year, with the Issuer recruiting in excess of its planned intake targets.

The UK government has introduced a postgraduate student loans scheme and increasing numbers of postgraduate student are accessing this funding source. More students have applied for a postgraduate loan for the current year than was the case last year (currently 420 applications in 2017/18 compared to 375 last year in 2016/17). This may be due to a better awareness of the scheme which was introduced very late in the 2015/16 admissions cycle. However, it is possible that undergraduate debt may impact the number of students wishing to progress from undergraduate to postgraduate study. For entry in 2017/18, there has not been any growth in applications from the UK, whereas non-UK application numbers have increased.

Given the increased student loan liability incurred by undergraduate students from the United Kingdom or other EU Member States there is no guarantee that the numbers of postgraduate students from the United Kingdom and other EU Member States will remain at their current levels.

5. Reputation

Reputation risk

The Issuer is one of the world's leading academic institutions and has a reputation for outstanding academic achievement. This reputation has been built up over a long time. The Issuer's reputation is an important factor in attracting the best academics and the best students. If, for example, the integrity of research, admissions or standards of teaching were to be called into question, this would have the potential to damage the reputation of the Issuer.

The Issuer and its subsidiary undertakings carry on activities throughout the world, certain of which are subject to a high level of external scrutiny. Should circumstances occur that cast a negative light on the Issuer, this could also have an adverse impact on the Issuer's reputation.

Philanthropic donations and research funding are accepted from donors and funders who are subject to scrutiny to ensure that the acceptance of such funds is in the best interests of the Issuer. The public perception of donors and funders may change, and this could have an adverse impact on the acceptability of the funds and the Issuer's reputation.

A failure to manage reputational risk effectively could therefore materially affect the Issuer's business and prospects.

A deterioration in employee relations with the Issuer's staff and trade unions could lead to industrial action and impact on the Issuer's reputation, research and teaching functions

The need to maintain a focus on efficiency and pay restraint in the light of external financial challenges, coupled with the need to review pension schemes to ensure that they are adequately funded, may lead to a deterioration in employee relations with its staff and trade unions. Any such deterioration could result in industrial action, including strike action, which could impact on the Issuer's reputation (e.g. students being unable to graduate, complaints from students and

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stakeholders, impact on student experience), research projects, teaching functions and quality and standards. Students and stakeholders may seek compensation or other forms of legal redress. The Issuer regularly engages with the three recognised trade unions (Unison, Unite and the University and College Union) and the Issuer continues, via its human resources department, to engage in regular discussions with them and develop partnerships. However, it is possible that such interactions may result in potential delay (and dispute) in respect of the implementation of efficiency measures and changes.

6. Regulation

HERA will reform the regulatory framework of higher education, and will replace HEFCE and the OFFA with the OfS. OfS will have an explicit duty to promote choice and consider the students', employers' and taxpayers' interest in all its regulatory and funding decisions. OfS is intended to have a range of powers to ensure compliance with its conditions of regulation which could have a negative impact on the Issuer if it fails to comply

The implementation of HERA introduces reforms to the regulatory framework of higher education and establishes OfS as the principal regulator for higher education. HERA also grants new powers to the OfS to enable it to meet the government policy object of promoting choice and consideration of the students', employers' and taxpayers' interest in all its regulatory and funding decisions.

Under HERA, OfS is required to have regard to guidance issued by the Secretary of State. The OfS will be required to establish and maintain a register of English higher education providers and will determine the conditions that a provider must meet if it is to remain on that register. Registration as a higher education provider is a requirement for accessing student support via the Student Loans Company Limited and grant funding and for the institution being licensed to sponsor migrants under Tier 4 of the UK's points-based immigration system. If the Issuer fails to meet the conditions of its registration imposed by OfS, this could lead to a monetary penalty being imposed or the Issuer being suspended or removed from the register of English higher education providers.

HERA also requires the OfS to determine the conditions that a provider must meet in order to charge the higher fee limits (see, "The Issuer's ability to charge the maximum undergraduate tuition fees for UK/EU students is dependent on compliance with an access agreement approved by the Office for Fair Access"). OfS has also been given the power, subject to conditions, to vary or revoke authorisations to award degrees and the power to revoke authorisation to use the university title.

7. Endowment Fund and Pension Schemes

The Issuer has a large endowment fund and the value of its investments in the fund can fall as well as rise

The Oxford Endowment Fund (the "OEF") is managed by Oxford University Endowment Management ("OUem") on a total return basis with a long-term investment objective of CPI plus 5 per cent. (of which the OEF aims to distribute approximately 4 per cent. to support the Issuer's current and future expenditure). The net assets of the OEF attributable to the Issuer were valued at £1,545.5 million as at 31 July 2017. The continued low interest rate environment and the impact of the current financial climate on the opportunities for investment generally may make this target level of performance difficult to maintain. Despite an uncertain backdrop of political and macro risks, global equity markets have continued to enjoy a period of positive performance, with low levels of volatility and unprecedented levels of central bank support. The OEF's approach to risk management is not to spend significant amounts of time forecasting precise outcomes of inherently unstable events, but to ensure that the OEF has the appropriate balance of opportunities and protections in a range of investments.

The value of the OEF's investments, and the income received from them, could fall as well as rise and therefore the income, return and the availability of funding to the Issuer from the OEF could vary considerably.

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Much of the Issuer's Endowment Fund is restricted for specific purposes

As at 31 July 2017, 64 per cent. of £1,545.5 million of the Issuer's endowment assets were restricted and can be applied solely for the purpose for which they were given. Much of the value of the OEF and the Issuer's other endowment assets is therefore not available to holders of the Bonds or other creditors of the Issuer.

There are financial risks associated with the pensions schemes in which the Issuer participates which could have an adverse impact on the Issuer

The Issuer participates in the following multi-employer and UK Government pension schemes:

 the Universities Superannuation Scheme ("USS"), which is the Issuer's principal scheme for academic and academic-related staff;  the University of Oxford Staff Pension Scheme ("OSPS"); and  the NHS Pension Scheme ("NHSPS"). The USS and the OSPS are large multi-employer schemes which are used by other institutions in addition to the Issuer. In respect of the OSPS, the participating institutions other than the Issuer are most of its Colleges (as defined in "Description of Issuer–The relationship between the Issuer and the Oxford Colleges"). As a result of the mutual nature of the schemes, their assets are not hypothecated to individual institutions and a scheme-wide contribution rate is set. The Issuer is therefore exposed to the actuarial risks associated with other institutions' employees and is unable to identify its share of the underlying assets and liabilities of each scheme on a consistent and reasonable basis. As such, and as required by FRS 102, the Issuer accounts for the USS and the OSPS schemes as if they were defined contribution schemes.

The participating employers in USS individually have limited ability to influence the way USS is managed and invested. In addition, in the event of the withdrawal of any of the participating employers, the amount of any pension funding shortfall (which cannot be otherwise recovered) in respect of that employer will be spread across the remaining participating employers (including the Issuer) and reflected in the next actuarial valuation of the scheme.

NHSPS on the other hand, is an unfunded government-backed scheme in respect of which the Issuer is exposed to the risk of increased contributions.

Finally, the Issuer also participates in the Oxford University Press Group Pension Scheme ("OUPGPS"), which is an Issuer-specific pension scheme. As at 31 March 2015, the date of the most recent triennial valuation, the OUPGPS had a deficit of £26 million on a technical provisions basis, but there is a risk that the deficit increases as a consequence of market-driven volatilities affecting the value of the assets or liabilities within the pension scheme. Regular valuations, conducted by independent qualified actuaries, are used to determine the costs and funding requirements of the OUPGPS. However, as the scheme's assets are invested in the capital markets, which are often volatile, the OUPGPS may require additional funding.

8. Oxford University Press ("OUP")

Global economic conditions may adversely impact OUP's financial performance

With the continued pressure and uncertainty in global economies, there is a risk of a weakening in trading conditions, which could adversely impact OUP's future financial performance. Weak or deteriorating macro-economic conditions can have a negative impact on OUP's operations, turnover, surplus, and planning assumptions. OUP is heavily engaged in emerging markets, which are inherently volatile.

OUP's business will be impacted by the rate of and state of technological change, including the digital revolution and other disruptive technologies

A common trend facing the publishing industry is the digitisation of content and proliferation of distribution channels, either over the internet, or via other electronic means, replacing traditional

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print formats. Digital migration brings changes in product and content distribution, consumers' perception of value and relationships with retailers and authors.

OUP faces competitive threats both from large media players and from smaller businesses, online and mobile portals and operators in the digital arena that provide alternative sources of content. New distribution channels, e.g. digital formats, the internet, online retailers, growing delivery platforms (e.g. e-readers or tablets) pose both threats and opportunities to OUP's traditional publishing business models, potentially impacting both sales volumes and pricing.

Digitisation also enables the creation of lower-priced open educational resources that may impact the size of the market for educational resources.

OUP may be adversely affected by changes in government funding resulting from general economic conditions, changes in government educational funding, programmes, policy decisions, legislation and/or changes in procurement processes

There is a risk that changes in government funding, policies and regulations may negatively impact turnover, surplus and planning assumptions. The key drivers in this respect are:

 Policy changes, including lack of curriculum reform, that reduce OUP's ability to develop and supply new publications to educational markets. Government policy relating to digital delivery may impact the way content is delivered.  Government changes to funding or procurement models can undermine revenue projections.  Changes in regulatory environments may affect OUP's operation (e.g. price capping, or the banning of imported books).  The Open Access movement may lead to changes in legislative policy requiring increasing amounts of material to be made freely available, or on an alternative funding basis. If OUP is not able to protect its intellectual property and proprietary rights its competitive position and results may be adversely affected and limit its ability to grow

As an international publisher, operating in some challenging environments, the risk of piracy is significant. OUP may be unable to achieve its desired market reach and impact due to an increase in illegal copying, large scale commercial piracy and/or plagiarism, or changes to national or international legal frameworks in respect of copyright. As a result, the financial sustainability of content investment and dissemination is placed at risk.

OUP's business depends on a strong brand, and any failure to maintain, protect and enhance that brand would damage OUP's ability to maintain or expand its business

OUP believes that the "Oxford" brand has contributed significantly to the success of OUP's business. Maintaining, protecting and enhancing the "Oxford" brand is critical to OUP's future success and its ability to maintain customer trust in the quality and integrity of OUP's products and services. If OUP and the rest of the Issuer do not successfully maintain a strong "Oxford" brand, OUP's business could be harmed.

OUP operates in markets that are dependent on Information Technology (IT) systems and technological change

All of OUP's businesses, to a greater or lesser extent, are dependent on information technology. OUP uses complex IT systems and products to support its business activities, including customer-facing systems, back-office processing and infrastructure. OUP faces several technological risks associated with product development and service delivery, information security (including virus and cyber-attacks), e-commerce, enterprise resource planning system implementations and upgrades. Although plans and procedures are in place to reduce such risks, from time to time OUP has experienced verifiable attacks on its systems by unauthorised parties. To date such attacks have not resulted in any material damage to OUP, but its businesses could be adversely affected if its systems and infrastructure experience a significant failure or interruption.

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Operational disruption to OUP's business caused by its third party suppliers, a major disaster and/or external threats could restrict OUP's ability to supply products and services to its customers

OUP manages complex operational and logistical arrangements across all its businesses, including warehouse and distribution centres, data centres and office facilities, as well as relationships with third party printers and other key suppliers. The failure of such third parties to perform such outsourced business functions could adversely affect OUP's reputation and financial condition and could restrict OUP's ability to service its customers.

Changes in tax law may lead to higher tax payments

Changes in tax rates and/or other relevant tax laws in the jurisdictions in which OUP operates could have a material impact on OUP's future tax payments.

In particular, there is a risk that OUP loses the charitable tax exempt status in the UK and certain other territories that derives from it being part of the Issuer (an exempt charity in the UK) and furthering the Issuer's objective of excellence in research, scholarship, and education by publishing worldwide.

OUP is committed to complying with all statutory obligations, to undertaking full disclosure to tax authorities and to following agreed policies and procedures with regard to tax planning and strategy. OUP closely monitors tax legislation and consults regularly with external advisers to ensure compliance with relevant tax legislation.

The UK's withdrawal from the EU may have a negative impact on OUP's business

There is a risk that OUP's business, and in particular its English Language Teaching business, may be adversely affected if, as a result of the UK's withdrawal from the EU, English becomes less attractive as a foreign language to non-English speakers. OUP's supply chain may also be adversely affected by any disruption to the movement of goods into and out of the UK in connection with the UK's withdrawal from the EU.

OUP is subject to foreign currency and foreign exchange rate fluctuations

OUP's earnings are generated in a number of countries and different currencies. More than 80 per cent. of OUP's turnover is generated from non-UK customers and as such it is subject to the risk that movements in foreign currency exchange rates could adversely affect its earnings and the strength of its balance sheet.

If OUP fails to attract, retain and develop appropriately skilled employees, its business may be harmed

OUP's success depends on the skill, experience and dedication of its employees. If OUP is unable to attract, retain and develop sufficiently experienced and capable personnel, especially in editorial, technology, product development, sales and management, its business and financial results may suffer.

In the course of its business, OUP is exposed to ethical and legal risks (including bribery and corruption, and data loss and/or breach)

OUP, by virtue of its international reach, conducts business in territories where ethical conduct may fall short of desired and required international standards. There is a risk that OUP, its subsidiaries, employees and other associated persons could breach laws , including those relating to bribery, corruption, fraud, money laundering and data privacy.

9. Other risks related to the Issuer

European Investment Bank Loan

In 2015, the Issuer drew down a £200 million, 30 year term loan from the European Investment Bank (the "EIB"). Since the loan was originally drawn, the Issuer has amended its accounting

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policies in line with sector-wide changes which have been required of all UK universities. As a result of such changes, if very significant mark-to-market investment losses were to occur in the Issuer's endowment portfolio, this could result in a covenant breach in the EIB loan. The Issuer has an agreement in place with the EIB to address any such effect of mark-to-market adjustment for the financial years ended 31 July 2017 and 31 July 2018, however the Issuer will need to reach agreement for further waivers with the EIB for subsequent financial periods. It is expected that the proceeds of the Bonds will provide the Issuer with greater financial flexibility to address any concerns arising with respect to the EIB, including (if necessary) the repayment of the EIB loan.

The introduction of the General Data Protection Regulation

In May 2018, the General Data Protection Regulation will come into effect, with potential regulatory fines for breach of data protection law. The Information Commissioner will also have power to ban or restrict an organisation in breach from processing data. It will place a range of stronger obligations on data controllers, including reporting certain data breaches promptly. Fines, data breaches, bans or restrictions, with attendant reputational risks, could affect the Issuer's operations and prospects and the operations and prospects of OUP.

B RISK RELATING TO THE BONDS

There is no active trading market for the Bonds

The Bonds are new securities which may not be widely distributed and for which there is currently no active trading market. If the Bonds are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer. Although applications have been made for the Bonds to be admitted to listing on the Official List and to trading on the Regulated Market of the London Stock Exchange, there is no assurance that such applications will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Bonds.

The Bonds may be redeemed prior to maturity

If the Issuer would be obliged to increase the amounts payable in respect of any Bonds due to any withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Bonds in accordance with their terms and conditions (the "Conditions").

In addition the Conditions provide that the Bonds are redeemable at the Issuer's option and accordingly the Issuer may choose to redeem the Bonds at times when prevailing interest rates may be relatively low. In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the Bonds.

Because the Temporary Global Bond and the Permanent Global Bond are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer.

The Bonds will initially be represented by the Temporary Global Bond and thereafter by a Permanent Global Bond except in certain limited circumstances described in the Permanent Global Bond. The Temporary Global Bond and the Permanent Global Bond will be deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg. Except in certain limited circumstances described in the Permanent Global Bond, investors will not be entitled to receive Definitive Bonds (as defined below). Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Temporary Global Bond and the Permanent Global Bond. While the Bonds are represented by the Temporary Global Bond or the Permanent Global

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Bond, investors will be able to trade beneficial interests in the Bonds only through Euroclear and Clearstream, Luxembourg.

The Issuer will discharge its payment obligations under the Bonds by making payments to or to the order of the common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in the Permanent Global Bond must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Bonds. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Permanent Global Bond.

Holders of beneficial interests in the Temporary Global Bond or the Permanent Global Bond will not have a direct right to vote in respect of the Bonds. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies.

Minimum Denomination

As the Bonds have denominations consisting of the minimum denomination of £100,000 and higher integral multiples of £1,000 (up to and including £199,000), it is possible that the Bonds may be traded in amounts in excess of £100,000 that are not integral multiples of £100,000. In such case a Bondholder who, as a result of trading such amounts, holds a principal amount of less than the minimum denomination of £100,000 may not receive a Definitive Bond in respect of such holding (should Definitive Bonds be printed) and would need to purchase a principal amount of Bonds such that its holding amounts to that minimum denomination.

Credit Rating

The Bonds are expected to be assigned a rating of Aaa by Moody's. Moody's is established in the EEA and registered under the CRA Regulation. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Any adverse change in an applicable credit rating could adversely affect the trading price for the Bonds.

Exchange rate risks and exchange controls

Payments of principal and interest on the Bonds will be made in sterling. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than sterling. These include the risk that exchange rates may significantly change (including changes due to devaluation of sterling or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to sterling would decrease (1) the Investor's Currency-equivalent yield on the Bonds, (2) the Investor's Currency equivalent value of the principal payable on the Bonds and (3) the Investor's Currency equivalent market value of the Bonds. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

Interest rate risks

The Bonds bear interest at a fixed rate. An investment in the Bonds during that time involves the risk that subsequent changes in market interest rates may adversely affect the value of the Bonds.

Modifications, waivers and substitution

The Trust Deed contains provisions for convening meetings of Bondholders to consider matters relating to the Bonds, including the modification of any provision of the Conditions or the Trust Deed and to obtain written resolutions of Bondholders without calling a meeting.

Any modification of the Conditions or the Trust Deed may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Trustee (subject to it being indemnified and/or secured and/or prefunded to

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its satisfaction) upon the request in writing of Bondholders holding not less than one-quarter of the aggregate principal amount of the outstanding Bonds. The quorum at any meeting convened to vote on an Extraordinary Resolution will be one or more persons holding or representing at least one-third of the aggregate principal amount of the outstanding Bonds or, at any adjourned meeting, one or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented; provided, however, that certain proposals (including any proposal to delay or extend any date fixed for payment of principal or interest in respect of the Bonds, to reduce the amount of principal or interest payable on any date in respect of the Bonds, to alter the method of calculating the amount of any payment in respect of the Bonds or the date for any such payment, or to change the quorum requirements relating to meetings or the majority required to pass an Extraordinary Resolution) may only be sanctioned by an Extraordinary Resolution passed at a meeting of Bondholders at which one or more persons holding or representing not less than one-half or, at any adjourned meeting, not less than one-quarter of the aggregate principal amount of the outstanding Bonds form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Bondholders and Couponholders, whether present or not.

A written resolution signed by or on behalf of the holders of not less than 75 per cent. in principal amount of the Bonds whose Bonds are outstanding shall, for all purposes, take effect as an Extraordinary Resolution.

In certain circumstances, where the Bonds are held in global form in Euroclear and Clearstream, Luxembourg, the Issuer and the Trustee (as the case may be) will be entitled to rely upon:

(i) where the terms of the proposed resolution have been notified through the relevant clearing system(s) as provided in the Trust Deed, approval of a resolution proposed by the Issuer or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant clearing systems in accordance with their operating rules and procedures by or on behalf of the holders of not less than 75 per cent. in principal amount of the Bonds for the time being outstanding; and (ii) where electronic consent is not being sought, consent or instructions given in writing directly to the Issuer and/or the Trustee (as the case may be) by (a) accountholders in the clearing systems with entitlements to the Permanent Global Bond and/or, (b) where the accountholders hold such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer and the Trustee shall be entitled to rely on any certificate or other document issued by, in the case of (a) above, Euroclear, Clearstream, Luxembourg or any other relevant alternative clearing system (the "relevant clearing system") and, in the case of (b) above, the relevant clearing system and the accountholder identified by the relevant clearing system for the purposes of (b) above. A written resolution or an electronic consent as described above may be effected in connection with any matter affecting the interests of Bondholders, including the modification of the Conditions, that would otherwise be required to be passed at a meeting of Bondholders satisfying the special quorum in accordance with the provisions of the Trust Deed, and shall for all purposes take effect as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held. These provisions permit defined majorities to bind all Bondholders including Bondholders who did not attend and vote at the relevant meeting and Bondholders who voted in a manner contrary to the majority.

The Conditions also provide that the Trustee may, without the consent of Bondholders, agree to any modification of the Conditions, the Trust Deed or the Paying Agency Agreement (other than in respect of a Reserved Matter), if in the opinion of the Trustee, such modification will not be materially prejudicial to the interests of the Bondholders and to any other modification of the Conditions, the Trust Deed or the Paying Agency Agreement which is in its opinion of a formal, minor or technical nature or to correct a manifest error. The Trustee may also agree, without the consent of Bondholders, to (i) the waiver or authorisation of any breach or proposed breach of,

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any of the provisions of the Bonds or the Trust Deed or (ii) determine without the consent of the Bondholders that any Event of Default or Potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Bonds in place of the Issuer, in each case in the circumstances described in Condition 12 and the Trust Deed.

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TERMS AND CONDITIONS OF THE BONDS

The following is the text of the Terms and Conditions of the Bonds which (subject to completion and amendment) will be endorsed on each Bond in definitive form:

The £750,000,000 2.544 per cent. Bonds due 2117 (the "Bonds", which expression includes any further Bonds issued pursuant to Condition 14 (Further Issues) and forming a single series therewith) of The Chancellor Masters and Scholars of the University of Oxford (the "Issuer") are constituted by a trust deed dated 8 December 2017 (as amended or supplemented from time to time, the "Trust Deed") between the Issuer and HSBC Corporate Trustee Company (UK) Limited as trustee (the "Trustee", which expression includes all persons for the time being trustee or trustees appointed under the Trust Deed). The Issuer, HSBC Bank plc as principal paying agent (the "Principal Paying Agent", which expression includes any successor principal paying agent appointed from time to time in connection with the Bonds), the paying agents named therein (together with the Principal Paying Agent, the "Paying Agents", which expression includes any successor or additional paying agents appointed from time to time in connection with the Bonds) and the Trustee have entered into a paying agency agreement dated 8 December 2017 (as amended or supplemented from time to time, the "Paying Agency Agreement") in relation to the Bonds. Certain provisions of these Conditions are summaries of the Trust Deed and the Paying Agency Agreement and subject to their detailed provisions. The holders of the Bonds (the "Bondholders") and the holders of the related interest coupons (the "Couponholders" and the "Coupons", respectively, which expressions shall, unless the context otherwise requires, include the holders of the talons for further Coupons (the "Talons")) are bound by and have the benefit of the Trust Deed and are deemed to have notice of all the provisions of the Trust Deed and the Paying Agency Agreement applicable to them. Copies of the Trust Deed and the Paying Agency Agreement are available for inspection by Bondholders during normal business hours at the Specified Offices (as defined in the Trust Deed) of each of the Paying Agents, the initial Specified Offices of which are set out below.

1. Form, Denomination and Title

The Bonds are serially numbered and in bearer form in denominations of £100,000 and higher integral multiples of £1,000 up to and including £199,000 with Coupons and Talons attached at the time of issue. Bonds of one denomination will not be exchangeable for Bonds of another denomination. Title to the Bonds and the Coupons will pass by delivery. The holder of any Bond or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing thereon or any notice of any previous loss or theft thereof) and no person shall be liable for so treating such holder. No person shall have any right to enforce any term or condition of the Bonds, the Coupons or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

2. Status

The Bonds and the Coupons constitute direct, unconditional and (subject to the provisions of Condition 3 (Negative Pledge)) unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by applicable laws relating to creditors' rights.

3. Negative Pledge

So long as any of the Bonds remains outstanding (as defined in the Trust Deed), the Issuer shall not create or permit to subsist any Security Interest upon the whole or any part of its present or future undertaking, assets or revenues to secure any Relevant Indebtedness of the Issuer or any guarantee or indemnity of the Issuer in respect of any Relevant Indebtedness without (a) at the same time or prior thereto securing the Issuer's obligations under the Bonds, the Coupons and the Trust Deed equally and rateably therewith or (b) providing such other security for the Issuer's obligations under the Bonds, the Coupons and the Trust Deed as the Trustee may in its absolute discretion consider to be not materially less beneficial to the interests of the Bondholders or as may be approved by an Extraordinary Resolution (as defined in the Trust Deed) of Bondholders.

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In these Conditions:

"Relevant Indebtedness" means any indebtedness for money borrowed or raised which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which, for the time being, is, or is intended by the Issuer to be, listed, quoted, dealt in or traded on any stock exchange or regulated securities market; and

"Security Interest" means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction.

4. Interest

The Bonds bear interest from 8 December 2017 (the "Issue Date") at the rate of 2.544 per cent. per annum, (the "Rate of Interest") payable annually in arrear on 8 December in each year (each, an "Interest Payment Date"), subject as provided in Condition 6 (Payments).

The amount of interest payable on each Interest Payment Date shall be £25.44 per £1,000 (the "Calculation Amount"). The period from and including the Issue Date to but excluding the initial Interest Payment Date, and each period from and including one Interest Payment Date to but excluding the next Interest Payment Date, shall constitute an "Interest Period".

Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant Bondholder and (b) the day which is seven days after the Principal Paying Agent or the Trustee has notified the Bondholders that it has received all sums due in respect of the Bonds up to such seventh day (except to the extent that there is any subsequent default in payment).

If interest is required to be paid in respect of a Bond on any date other than an Interest Payment Date, it shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by a fraction (a) the numerator of which is the number of days from (and including) the most recent Interest Payment Date (or from the Issue Date if such period is before the first scheduled Interest Payment Date) to (but excluding) the date of payment; and (b) the denominator of which is the number of days (including the first such day and excluding the last such day) in the scheduled Interest Period in which the relevant calculation period falls, rounding the resulting figure to the nearest penny (half a penny being rounded upwards) and multiplying such rounded figure by a fraction equal to the denomination of such Bond divided by the Calculation Amount.

5. Redemption and Purchase

(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on 8 December 2117, subject as provided in Condition 6 (Payments).

(b) Redemption for tax reasons: The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days' notice to the Bondholders in accordance with Condition 15 (Notices) and to the Trustee (which notice shall be irrevocable), at their principal amount, together with interest accrued to the date fixed for redemption, if, immediately before giving such notice, the Issuer satisfies the Trustee that:

(i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 6 December 2017; and

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(ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided, however, that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Bonds were then due.

Prior to the publication of any notice of redemption pursuant to this Condition 5(b), the Issuer shall deliver to the Trustee:

(A) a certificate signed by two Authorised Signatories (as defined in the Trust Deed) of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred; and

(B) an opinion in form and substance satisfactory to the Trustee of independent legal, accounting or other advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment.

The Trustee shall be entitled to accept and rely on such certificate and opinion as sufficient evidence of the satisfaction of the circumstances set out in (i) and (ii) above without liability to any person for so doing, in which event it shall be conclusive and binding on the Bondholders and the Couponholders.

Upon the expiry of any such notice as is referred to in this Condition 5(b), the Issuer shall be bound to redeem the Bonds in accordance with this Condition 5(b).

(c) Redemption at the option of the Issuer: On giving not less than 10 nor more than 20 days' notice to the Bondholders in accordance with Condition 15 (Notices) and to the Trustee, the Issuer may redeem some or all of the Bonds for the time being outstanding at any time at the Redemption Price (as defined below) together with interest accrued to (but excluding) the date of redemption (the "Redemption Date").

The "Redemption Price" shall be: (i) if the Redemption Date falls on or after 8 June 2117 the principal amount of the Bonds to be redeemed, or (ii) otherwise, the higher of (a) the principal amount of the Bonds to be redeemed and (b) the product of the principal amount of the Bonds to be redeemed and the price, expressed as a percentage (rounded to three decimal places, with 0.005 being rounded down), (as reported in writing to the Issuer and the Trustee by an independent financial adviser (a "financial adviser") appointed by the Issuer and notified to the Trustee) at which the Gross Redemption Yield on the Bonds on the Calculation Date is equal to the sum of (A) the Gross Redemption Yield at 11.00 a.m. (London time) on such date of the 3.5 per cent. Treasury Gilt due July 2068 (or, from time to time, such other government stock selected by the financial adviser (i) as having a maturity comparable to the remaining term of the Bonds and (ii) which would be utilised, at the time of selection and in accordance with customary financial practice at such time, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds as such financial adviser may recommend) and (B) 0.15 per cent.

For such purposes:

"Business Day" means a day on which banks are generally open for business in London;

"Calculation Date" means the date which is the second Business Day prior to the date on which the notice to redeem is dispatched; and

"Gross Redemption Yield" means a yield, expressed as a percentage, calculated by the financial adviser on the basis set out by the United Kingdom Debt Management Office in the paper "Formulae for Calculating Gilt Prices from Yields" page 5, Section One: Price/Yield Formulae (Conventional Gilts; Double-dated and Undated Gilts with

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Assumed (or Actual) Redemption on a Quasi-Coupon Date) (published on 8 June, 1998 and updated on 15 January, 2002 and 16 March, 2005) (as updated, amended or supplemented from time to time) on an annual compounding basis (rounded up (if necessary) to four decimal places) or, if such formula does not reflect generally accepted market practice at the time of redemption, a yield calculated in accordance with generally accepted market practice at such time, all as advised to the Issuer and the Trustee by such financial adviser.

Any notice given pursuant to this Condition 5(c) (Redemption at the option of the Issuer) shall be irrevocable and shall specify the Redemption Date and the Redemption Price. If any such notice has been given, references in these Conditions and the Trust Deed to "principal" and "principal amount" shall, unless the context otherwise requires, be deemed to include references to the Redemption Price in relation to any redemption pursuant to such notice. Upon the expiry of any such notice, the Issuer shall be bound to redeem the Bonds so called for redemption at the applicable Redemption Price on the Redemption Date together with accrued interest as aforesaid unless previously purchased and cancelled or redeemed. The Trustee may rely absolutely on the advice of any financial adviser appointed as provided in this Condition 5(c) (Redemption at the option of the Issuer) and shall not be liable for so doing.

(d) Partial redemption: If the Bonds are to be redeemed in part only on any date in accordance with Condition 5(c) (Redemption at the option of the Issuer), the Bonds to be redeemed shall be selected by the drawing of lots in such place as the Issuer selects and in such manner as shall be fair and reasonable in the circumstances, subject to compliance with applicable law and the rules of each listing authority, stock exchange and/or quotation system (if any) by which the Bonds have then been admitted to listing, trading and/or quotation, and the notice to Bondholders referred to in Condition 5(c) (Redemption at the option of the Issuer) shall specify the serial numbers of the Bonds so to be redeemed and the aggregate principal amount of the Bonds which will be outstanding after the partial redemption.

(e) Purchase: The Issuer or any party acting on its behalf may at any time purchase Bonds in the open market or otherwise and at any price, provided that all unmatured Coupons and unexchanged Talons are purchased therewith.

Bonds purchased by or on behalf of the Issuer may, at the option of the Issuer or the relevant party, be cancelled (together with all unmatured Coupons purchased therewith) or may be held, re-issued or re-sold. Bonds held by or on behalf of the Issuer or any of its Subsidiaries (as defined in the Trust Deed) shall not entitle the holder to vote at any meetings of the Bondholders or otherwise to exercise any voting rights and such Bonds shall be deemed not to be outstanding for the purposes of calculating quorums at meetings of Bondholders or for voting on any Extraordinary Resolution or for the purposes of Condition 8 (Events of Default), Condition 12 (Meetings of Bondholders; Modification and Waiver; Substitution) and Condition 13 (Enforcement).

6. Payments

(a) Principal: Payments of principal shall be made only against presentation and (provided that payment is made in full) surrender of Bonds at the Specified Office of any Paying Agent outside the United States by transfer to a sterling account maintained by the payee with a bank in London.

(b) Interest: Payments of interest shall, subject to paragraph (f) (Payments other than in respect of matured Coupons) below, be made only against presentation and (provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of any Paying Agent outside the United States in the manner described in paragraph (a) (Principal) above.

(c) Payments subject to fiscal laws: All payments in respect of the Bonds are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7 (Taxation). No commissions or

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expenses shall be charged to the Bondholders or Couponholders in respect of such payments.

(d) Deduction for unmatured Coupons: If a Bond is presented without all unmatured Coupons relating thereto, then:

(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due for payment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the amount of principal due for payment;

(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment:

(A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result in the aggregate amount of the remainder of such missing Coupons (the "Relevant Coupons") being equal to the amount of principal due for payment; provided, however, that where this sub-paragraph would otherwise require a fraction of a missing Coupon to become void, such missing Coupon shall become void in its entirety; and

(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principal due for payment) will be deducted from the amount of principal due for payment; provided, however, that, if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of the Relevant Coupons (or, as the case may be, the amount of principal due for payment) which the gross amount actually available for payment bears to the amount of principal due for payment.

Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) (Principal) above against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons. No payments will be made in respect of void Coupons.

(e) Payments on business days: If the due date for payment of any amount in respect of any Bond or Coupon is not a business day in the place of presentation, the holder shall not be entitled to payment in such place of the amount due until the next succeeding business day in such place and shall not be entitled to any further interest or other payment in respect of any such delay. In this paragraph (e), "business day" means, in respect of any place (including the place of presentation), a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in that place and, in the case of payment by transfer to a sterling account as referred to above, on which dealings in foreign currencies may be carried on both in London and in such place of presentation.

(f) Payments other than in respect of matured Coupons: Payments of interest other than in respect of matured Coupons shall be made only against presentation of the relevant Bonds at the Specified Office of any Paying Agent outside the United States.

(g) Partial payments: If a Paying Agent makes a partial payment in respect of any Bond or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and the date of such payment.

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(h) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time of issue) part of a coupon sheet relating to the Bonds (each, a "Coupon Sheet"), the Talon forming part of such Coupon Sheet may be exchanged at the Specified Office of the Principal Paying Agent for a further Coupon Sheet (including a further Talon but excluding any Coupons in respect of which claims have already become void pursuant to Condition 9 (Prescription). Upon the due date for redemption of any Bond, any unexchanged Talon relating to such Bond shall become void and no Coupon will be delivered in respect of such Talon.

7. Taxation

All payments of principal and interest in respect of the Bonds and the Coupons by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision thereof or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Bondholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Bond or Coupon presented for payment:

(a) by or on behalf of a holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of its having some connection with the United Kingdom other than the mere holding of the Bond or Coupon; or

(b) more than 30 days after the Relevant Date except to the extent that the holder of such Bond or Coupon would have been entitled to such additional amounts on presenting such Bond or Coupon for payment on the last day of such period of 30 days.

In these Conditions, "Relevant Date" means whichever is the later of (1) the date on which the payment in question first becomes due and (2) if the full amount payable has not been received in London by the Principal Paying Agent or the Trustee on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Bondholders in accordance with Condition 15 (Notices).

Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Condition 7 (Taxation) or any undertaking given in addition to or in substitution of this Condition 7 (Taxation) pursuant to the Trust Deed.

If the Issuer becomes subject at any time to any taxing jurisdiction other than the United Kingdom, references in these Conditions to the United Kingdom shall be construed as references to the United Kingdom and/or such other jurisdiction.

For the avoidance of doubt, any amounts to be paid by the Issuer on the Bonds will be paid net of any deduction or withholding imposed or required pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, any intergovernmental agreement, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code (or any law implementing such an intergovernmental agreement) (a "FATCA Withholding Tax"), and the Issuer will not be required to pay additional amounts on account of any FATCA Withholding Tax.

8. Events of Default

If any of the following events occurs and is continuing (each, an "Event of Default"), then the Trustee at its discretion may and, if so requested in writing by holders of at least one quarter of

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the aggregate principal amount of the outstanding Bonds or if so directed by an Extraordinary Resolution, shall (subject in each case to it being indemnified and/or secured and/or prefunded to its satisfaction) give written notice to the Issuer declaring the Bonds to be immediately due and payable, whereupon they shall become immediately due and payable at their principal amount together with accrued interest without further action or formality:

(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Bonds on the due date for payment thereof or fails to pay any amount of interest in respect of the Bonds within three business days of the due date for payment thereof; or

(b) Breach of other obligations: the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Bonds or the Trust Deed and such default (i) is, in the opinion of the Trustee, incapable of remedy or remediation or (ii) being a default which is, in the opinion of the Trustee, capable of remedy or remediation, remains, in the opinion of the Trustee, unremedied or unremediated for 30 days or such longer period as the Trustee may agree after the Trustee has given written notice thereof to the Issuer; or

(c) Cross-acceleration of Issuer:

(i) any Indebtedness (as defined below) of the Issuer is not paid when due or (as the case may be) within any originally applicable grace period; or

(ii) any such Indebtedness becomes due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described); or

(iii) the Issuer fails to pay when due any amount payable by it under any guarantee for, or indemnity in respect of, any Indebtedness,

provided that the amount of Indebtedness referred to in sub-paragraph (i) and/or sub- paragraph (ii) above and/or the amount payable under any guarantee or indemnity referred to in sub-paragraph (iii) above individually or in the aggregate exceeds the Threshold Amount; or

(d) Unsatisfied judgment: one or more judgment(s) or order(s) from which no further appeal or judicial review is permissible under applicable law for the payment of an amount in excess of the Threshold Amount, whether individually or in aggregate, is rendered against the Issuer and continue(s) unsatisfied and unstayed for a period of 30 days after the date(s) thereof or, if later, the date therein specified for payment; or

(e) Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed, of the whole or substantially the whole of the undertaking, assets and revenues of the Issuer; or

(f) Insolvency, etc.: (i) the Issuer is (or is deemed to be) insolvent or bankrupt under any applicable insolvency or other similar laws or is unable to pay its debts as they fall due; (ii) the Issuer stops or suspends payment of all or a material part of its debts being an amount not less than the Threshold Amount, or makes a general assignment or composition with or for the benefit of the relevant creditors in respect of such debts or a moratorium is agreed or declared or comes into effect in respect of or affecting all or a material part of the debts of the Issuer being an amount not less than the Threshold Amount, in each case in circumstances of the Issuer's financial distress; and/or (iii) an administrator or liquidator is appointed over the whole or substantially the whole of the undertaking, assets and revenues of the Issuer; or

(g) Winding up, etc.: an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer save for a solvent winding-up solely for the purposes of a reconstruction or amalgamation of the Issuer, the terms of which have been previously approved in writing by an Extraordinary Resolution; or

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(h) Failure to take action, etc.: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its payment obligations under and in respect of the Bonds or the Trust Deed, (ii) to ensure that those obligations are legal, valid, binding and enforceable and (iii) to make the Bonds, the Coupons and the Trust Deed admissible in evidence in the courts of the United Kingdom is not taken, fulfilled or done; or

(i) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its payment obligations under or in respect of the Bonds or the Trust Deed,

provided that, in the case of sub-paragraphs (b) and (h) above, the Trustee shall have certified in writing that the happening of the relevant event or events is in its opinion materially prejudicial to the interests of the Bondholders.

For the purposes of this Condition 8 (Events of Default):

"business day" means a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London;

"CPI" means the Consumer Prices Index published by the Office for National Statistics or, if that index ceases for any reason to be published in the United Kingdom, such other index issued or caused to be issued from time to time by the UK government as may commonly be used in place of that index;

"Indebtedness" means indebtedness for money borrowed or raised, other than indebtedness created by the Bonds; and

"Threshold Amount" means £25,000,000 (or its equivalent in any other currency or currencies) as adjusted on each three year anniversary of the Issue Date (each an "Indexation Date") in direct proportion to the change in the CPI (as published in the month of November 2017, being 104.2) to the CPI published most recently before the relevant Indexation Date.

9. Prescription

Claims for principal shall become void unless the relevant Bonds are presented for payment within ten years of the appropriate Relevant Date. Claims for interest shall become void unless the relevant Coupons are presented for payment within five years of the appropriate Relevant Date. For this purpose, references to Bonds and Coupons shall not include Talons.

10. Replacement of Bonds, Coupons and Talons

If any Bond, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Principal Paying Agent and the Paying Agent having its Specified Office in London, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer and/or the Principal Paying Agent (in its capacity as Replacement Agent (as defined in the Paying Agency Agreement)) may require. Mutilated or defaced Bonds, Coupons or Talons must be surrendered before replacements will be issued.

11. Trustee and Paying Agents

Under the Trust Deed, the Trustee is entitled to be indemnified and/or secured and/or prefunded before taking any steps or actions or initiating any proceedings and relieved from responsibility in certain circumstances and to be paid its costs, fees and expenses in priority to the claims of the Bondholders. In addition, the Trustee is entitled to enter into business transactions with the Issuer and any entity relating to the Issuer without accounting for any profit.

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The Trust Deed provides that, when determining whether an indemnity or any security or pre- funding is satisfactory to it, the Trustee shall be entitled (i) to evaluate its risk in any given circumstance by considering the worst-case scenario and (ii) to require that any indemnity or security given to it by the Bondholders or any of them be given on a joint and several basis and be supported by evidence satisfactory to it as to the financial standing and creditworthiness of each counterparty and/or as to the value of the security and an opinion as to the capacity, power and authority of each counterparty and/or the validity and effectiveness of the security.

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee shall have regard to the general interests of the Bondholders as a class but shall not have regard to any interests arising from circumstances particular to individual Bondholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Bondholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed. The Trustee may rely absolutely on the advice of any financial or other professional adviser appointed by it or the Issuer in connection with the exercise of the Trustee's powers, functions and/or discretions under the Trust Deed or the Bonds and shall not be liable to any person for so doing.

In acting under the Paying Agency Agreement and in connection with the Bonds and the Coupons, the Paying Agents act solely as agents of the Issuer and (to the extent provided therein) the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Bondholders or Couponholders.

The initial Paying Agents and their initial Specified Offices are listed below. The Issuer reserves the right (with the prior approval of the Trustee, not to be unreasonably withheld) at any time to terminate the appointment of any Paying Agent and to appoint a successor principal paying agent and additional or successor paying agents; provided, however, that the Issuer shall at all times maintain (a) a principal paying agent and (b) a paying agent in London.

Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be given to the Bondholders in accordance with Condition 15 (Notices).

12. Meetings of Bondholders; Modification and Waiver; Substitution

(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters relating to the Bonds, including the modification of any provision of these Conditions or the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Trustee (subject to it being indemnified and/or secured and/or prefunded to its satisfaction) upon the request in writing of Bondholders holding not less than one-quarter of the aggregate principal amount of the outstanding Bonds. The quorum at any meeting convened to vote on an Extraordinary Resolution will be one or more persons holding or representing at least one-third of the aggregate principal amount of the outstanding Bonds or, at any adjourned meeting, one or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented; provided, however, that certain proposals (including any proposal to delay or extend any date fixed for payment of principal or interest in respect of the Bonds, to reduce the amount of principal or interest payable on any date in respect of the Bonds, to alter the method of calculating the amount of any payment in respect of the Bonds or the date for any such payment, or to change the quorum requirements relating to meetings or the majority required to pass an Extraordinary Resolution (each, a "Reserved Matter")) may only be sanctioned by an Extraordinary Resolution passed at a meeting of Bondholders at which one or more

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persons holding or representing not less than one-half or, at any adjourned meeting, not less than one-quarter of the aggregate principal amount of the outstanding Bonds form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Bondholders and Couponholders, whether present or not.

In addition, a resolution in writing signed by or on behalf of the holders of not less than 75 per cent. in principal amount of the Bonds then outstanding will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders.

(b) Modification and waiver: The Trustee may, without the consent of the Bondholders or Couponholders agree to any modification of these Conditions or the Trust Deed or the Paying Agency Agreement (other than in respect of a Reserved Matter) if, in the opinion of the Trustee, such modification will not be materially prejudicial to the interests of Bondholders and to any modification of the Bonds, the Trust Deed or the Paying Agency Agreement which is in the opinion of the Trustee of a formal, minor or technical nature or is to correct a manifest error.

In addition, the Trustee may, without the consent of the Bondholders or Couponholders authorise or waive any proposed breach or breach of the Bonds or the Trust Deed or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such if, in the opinion of the Trustee, the interests of the Bondholders will not be materially prejudiced thereby.

Unless the Trustee agrees otherwise, any such authorisation, waiver or modification shall be notified to the Bondholders by the Issuer as soon as practicable thereafter in accordance with Condition 15 (Notices).

(c) Substitution: The Trust Deed contains provisions under which the Trustee may agree, without the consent of the Bondholders or Couponholders, to the substitution of a successor in business of the Issuer or any other person, in place of the Issuer, or of any previous substituted company, as principal debtor under the Trust Deed and the Bonds provided that certain conditions specified in the Trust Deed are fulfilled.

No Bondholder or Couponholder shall, in connection with any substitution, be entitled to claim any indemnification or payment in respect of any tax consequence thereof for such Bondholder or (as the case may be) Couponholder except to the extent provided for in Condition 7 (Taxation) (or any undertaking given in addition to or substitution for it pursuant to the provisions of the Trust Deed).

13. Enforcement

The Trustee may at any time, at its discretion and without notice, institute such steps, actions or proceedings as it thinks fit to enforce its rights under the Trust Deed in respect of the Bonds, but it shall not be bound to do so unless:

(a) it has been so requested in writing by the holders of at least one quarter of the aggregate principal amount of the outstanding Bonds or has been so directed by an Extraordinary Resolution; and

(b) it has been indemnified and/or secured and/or prefunded to its satisfaction.

No Bondholder may proceed directly against the Issuer unless the Trustee, having become bound to do so, fails to do so within a reasonable time and such failure is continuing.

14. Further Issues

The Issuer may from time to time, without the consent of the Bondholders or Couponholders and in accordance with the Trust Deed, create and issue further bonds having the same terms and conditions as the Bonds in all respects (or in all respects except for the first payment of interest)

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so as to form a single series with the Bonds. Any further bonds which are to form a single series with the Bonds shall be constituted by a deed supplemental to the Trust Deed.

15. Notices

Notices to the Bondholders shall be valid if published in a leading English language daily newspaper published in London (which is expected to be the Financial Times) or via a recognised information service under the Financial Services and Markets Act 2000 or equivalent. Any such notice shall be deemed to have been given on the date of first publication. Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Bondholders.

16. Governing Law and Jurisdiction

The Bonds, the Coupons and the Trust Deed and any non-contractual obligations arising out of or in connection with the Bonds, the Coupons and the Trust Deed are governed by English law.

The English courts have exclusive jurisdiction to settle any dispute arising out of or in connection with the Bonds, the Coupons or the Trust Deed including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of their nullity and any dispute relating to any non-contractual obligations arising out of or in connection with the Bonds, the Coupons or the Trust Deed (a "Dispute") and each of the Issuer, the Trustee and any Bondholders or Couponholders in relation to any Dispute submits to the exclusive jurisdiction of the English courts.

For the purposes of this Condition 16, the Issuer waives any objection to the English courts on the grounds that they are an inconvenient or inappropriate forum to settle any Dispute.

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SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM

The Bonds will initially be in the form of the Temporary Global Bond which will be deposited on the Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg.

The Bonds will be issued in new global note ("NGN") form. On 13 June 2006 the European Central Bank (the "ECB") announced that Bonds in NGN form are in compliance with the "Standards for the use of EU securities settlement systems in ESCB credit operations" of the central banking system for the euro (the "Eurosystem"), provided that certain other criteria are fulfilled. At the same time the ECB also announced that arrangements for Bonds in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2006 and that debt securities in global bearer form issued through Euroclear and Clearstream, Luxembourg after 31 December 2006 will only be eligible as collateral for Eurosystem operations if the NGN form is used.

The Bonds are intended to be held in a manner which would allow Eurosystem eligibility and will therefore be deposited with one of the International Central Securities Depositaries as common safekeeper. Accordingly, the Bonds are intended to be held in a manner which would allow the Bonds to be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria. Bondholders should note that the European Central Bank has applied a temporary extension of Eurosystem eligibility to Sterling denominated securities, the effective commencement date for this temporary extension being 9 November 2012. However, should this extension cease at any time during the life of the Bonds, the Bonds will not be in a form which can be recognised as eligible collateral.

The Temporary Global Bond will be exchangeable in whole or in part for interests in the Permanent Global Bond not earlier than 40 days after the Issue Date upon certification as to non U.S. beneficial ownership. No payments will be made under the Temporary Global Bond unless exchange for interests in the Permanent Global Bond is improperly withheld or refused. In addition, interest payments in respect of the Bonds cannot be collected without such certification of non U.S. beneficial ownership.

The Permanent Global Bond will be exchanged in whole, but not in part, for Bonds in definitive form ("Definitive Bonds") in the denomination of £100,000 each and higher integral multiples of £1,000 up to and including £199,000 against presentation and surrender of the Permanent Global Bond to the Principal Paying Agent if Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business (an "Exchange Event").

So long as the Bonds are represented by a Temporary Global Bond or a Permanent Global Bond and the relevant clearing system(s) so permit, the Bonds will be tradeable only in the minimum authorised denomination of £100,000 and higher integral multiples of £1,000, notwithstanding that no Definitive Bonds will be issued with a denomination above £199,000.

Whenever the Permanent Global Bond is to be exchanged for Definitive Bonds, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Bonds, duly authenticated and with Coupons and (if applicable) Talons attached, in an aggregate principal amount equal to the principal amount of the Permanent Global Bond to the bearer of the Permanent Global Bond against the surrender of the Permanent Global Bond to or to the order of the Principal Paying Agent within 30 days of the occurrence of the relevant Exchange Event.

In addition, the Temporary Global Bond and the Permanent Global Bond will contain provisions which modify the Terms and Conditions of the Bonds as they apply to the Temporary Global Bond and the Permanent Global Bond. The following is a summary of certain of those provisions:

Payments: All payments in respect of the Temporary Global Bond and the Permanent Global Bond will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Temporary Global Bond or (as the case may be) the Permanent Global Bond to or to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Bonds. On each occasion on which a payment of principal or interest is made in respect of the Temporary Global Bond or (as the case may be) the Permanent Global

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Bond, the Issuer shall procure that the payment is entered in the records of Euroclear and Clearstream, Luxembourg.

Payments on business days: In the case of all payments made in respect of the Temporary Global Bond and the Permanent Global Bond "business day" means a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London.

Partial exercise of call option: In connection with an exercise of the option contained in Condition 5(c) (Redemption at the option of the Issuer) in relation to some only of the Bonds, the Permanent Global Bond may be redeemed in part in the principal amount specified by the Issuer in accordance with the Conditions and the Bonds to be redeemed will not be selected as provided in the Conditions but in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in principal amount, at their discretion).

Notices: Notwithstanding Condition 15 (Notices), while all the Bonds are represented by the Permanent Global Bond (or by the Permanent Global Bond and/or the Temporary Global Bond) and the Permanent Global Bond is (or the Permanent Global Bond and/or the Temporary Global Bond are) deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg, notices to Bondholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such notices shall be deemed to have been given to the Bondholders in accordance with Condition 15 (Notices) on the date of delivery to Euroclear and Clearstream, Luxembourg.

Purchase and Cancellation: Cancellation of any Bond required by the Conditions to be cancelled following its purchase will be effected by reduction in the principal amount of the Temporary Global Bond or (as the case may be) the Permanent Global Bond.

Trustee's Powers: In considering the interests of Bondholders while the Temporary Global Bond or (as the case may be) the Permanent Global Bond is held on behalf of a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Temporary Global Bond or (as the case may be) the Permanent Global Bond and may consider such interests as if such accountholders were the holder of the Temporary Global Bond or (as the case may be) the Permanent Global Bond.

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USE OF PROCEEDS

The net proceeds of the issue of the Bonds, expected to amount to £746,163,900 after deduction of the total commissions and other expenses incurred in connection with the issue of the Bonds, will be used by the Issuer for general corporate purposes.

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DESCRIPTION OF THE ISSUER

Introduction

The Issuer is one of the world's leading centres of learning, teaching and research and the oldest university in the English-speaking world. The Issuer is consistently ranked among the foremost universities in the world. Globally, the Issuer was ranked first in The Times Higher Education ("THE") World University Rankings 2017, and again in 2018. The Issuer was also ranked first in the Forbes World University Rankings 2017. 27 graduates of the Issuer have become British Prime Ministers, 52 Oxford academics and graduates have won the Nobel Prize and 160 graduates of the Issuer are Olympic medal winners. Oxford academics and graduates have won Nobel Prizes in every category: 5 in peace, 5 in literature, 6 in physics, 9 in economics, 11 in chemistry and 16 in medicine. The Issuer's strategic plan The Issuer has adopted a strategic plan (the "Strategic Plan") with the vision of leading the world in research and education in ways which benefit society on a national and a global scale, while building on the Issuer's long traditions of scholarship and academic freedom. The Strategic Plan contains a number of objectives, including the following:  To maintain originality, significance and rigour in research within a framework of the highest standards of infrastructure, training and integrity.  To ensure that the undergraduate and graduate admissions processes identify students with outstanding academic potential and the ability to benefit from an Oxford course whatever their background.  To ensure the Issuer fully equips graduates for the best of the diverse range of opportunities for study and employment available to them.  To serve society by promoting and contributing to economic, cultural, and social advances through the accessibility of the Issuer's ideas, skills, and expertise.  To share the products of research as widely as possible.  To develop a strong and constructive relationship with the wider communities of Oxford by contributing to the cultural, health, social, and economic wellbeing of the local and regional community.

History and constitution of the Issuer

As the oldest university in the English-speaking world, the Issuer is a unique and historic institution. There is no clear date of foundation, but teaching existed at the Issuer in some form in 1096 and developed rapidly when Henry II of England banned English students from attending the University of Paris. The Issuer is a civil corporation established under common law, which was formally incorporated by the Act for Incorporation of Both Universities 1571. The corporate title of the Issuer is "The Chancellor Masters and Scholars of the University of Oxford" but is more commonly referred to as the "University of Oxford" or "Oxford University". The Issuer is governed by its statutes (the "Statutes") and its regulations (the "Regulations"), which are made by the Issuer from time to time. The Statutes are the Issuer's principal constitutional document, while the regulations make provision for matters of detail. The Issuer is therefore governed by the Statutes and Regulations together with applicable national and EU legislation. The Statutes may be, and have been, amended from time to time. Certain Statutes may only be amended with the approval of Her Majesty in Council (being the Queen acting through the Privy Council). Congregation ("Congregation") is the ultimate legislative body of the Issuer. The Issuer's Council (the "Council") is the principal executive and policy-making body of the Issuer. Further information

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on Congregation, Council and the governance structure of the Issuer is set out in the section titled "Governance and Regulation of the Issuer" on page 50 of this document. The Issuer is an exempt charity subject to regulation by the Higher Education Funding Council for England ("HEFCE") under the Charities Act 2011. HEFCE is a public body established by the Further and Higher Education Act 1992 and is responsible for distributing public funds for higher education in England in accordance with an annual grant letter from the UK Government which sets out government funding and priorities for HEFCE and for higher education for the coming year. The members of Council are the charity trustees and are responsible for ensuring compliance with United Kingdom charity law. From April 2018 HEFCE will be disbanded. The portion which oversees and supports student provision will be replaced by the OfS whilst the part which oversees and supports research activities is, as a result of the enactment of HERA, about to be merged with the Research Councils and Innovate UK into a single organisation, the UKRI.

The relationship between the Issuer and the Oxford Colleges

Affiliated to the Issuer are the 38 Oxford Colleges (the "Colleges"). The Colleges are separate and distinct from the Issuer. Each of the Colleges (other than Kellogg College and St Cross College, which are societies established by the Issuer) is autonomous and self-governing, and is a separate registered charity. The Issuer is financially separate from and has no financial responsibility or liability for any of the Colleges (other than Kellogg College and St Cross College) and similarly has no access to or guaranteed support from the financial resources of any of the Colleges (other than Kellogg College and St Cross College). The Issuer and the Colleges work together to provide the teaching and research environment that constitutes the Issuer as a whole. Many of the Issuer's academic staff also hold appointments and fellowships with a College. All students at the Issuer become members of a College, as well as being members of the Issuer. The Issuer provides the central resources for research and teaching, such as academic, administrative and support staff, lecture theatres, libraries and laboratories. The Issuer also sets the curriculum, provides lectures, conducts the examinations and confers the degrees. The Colleges, however, undertake a substantial portion of teaching for undergraduates, for example through the small group teaching sessions known as tutorials, and are responsible for the welfare and housing of the students (although the Issuer has a greater role in these aspects for graduate students). The Issuer makes payments to each College in consideration of the teaching it provides to students. In the financial year 2016/2017, the Issuer made a payment of £53.9 million to the Colleges in respect of teaching provision. Each College has its own property and income, and has its own governing body that manages its affairs and decides on policy. The academic staff of the Issuer generally hold a fellowship at one of the colleges or societies. The Colleges appoint their own staff. The Colleges are responsible for selecting the Issuer's undergraduate students, in accordance with the Regulations. The following table sets out the Colleges' key endowment and liquidity metrics:

Colleges' Amount in £million / per cent.

2015 2016 Endowment funds ...... 3,869 4,159 Cash at bank and in hand ...... 156 219 Pension liability ...... 46 44 Creditors (% of total assets) ...... 6.7 9.4

The Issuer is also affiliated with six permanent private halls ("PPHs"). The six entities forming the PPHs are separate and distinct from the Issuer, and were founded by Christian denominations. The Issuer has granted the status of PPH to those six entities. The terms on which the status is granted, and the circumstances in which the status may be revoked or surrendered, are set out in an agreement between the Issuer and each institution. Revocation, other than on the grounds of an

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institution's insolvency or dissolution, requires the consent of Council and Congregation. The relationship is overseen by the Supervisory Committee for Permanent Private Halls. The day to day operation of the affiliation is similar to that of the colleges. Student and Staff Numbers The Issuer has undergraduate and post-graduate students from the UK, EU and overseas (outside the EU). The Issuer has a higher percentage of non-UK students (40 per cent.) compared to the UK average (19 per cent.), which reflects the Issuer's lower dependence than other universities on the UK's economic development as well as the strong global reach of the Issuer's brand. Details of full-time student numbers for each of the last five academic years are set out below. Student Population

Academic year Undergraduate Post-graduate Total

UK EU International UK EU International 2016/17 ...... 9,432 986 1,310 4,000 2,672 4,269 22,669 2015/16 ...... 9,416 894 1,293 3,896 2,457 4,146 22,102 2014/15 ...... 9,598 879 1,226 3,838 2,300 4,035 21,876 2013/14 ...... 9,768 839 1,165 3,710 2,166 3,974 21,622 2012/13 ...... 9,865 869 1,099 3,837 2,089 3,931 21,690

The Issuer's students pursue courses across a wide range of subjects and the Issuer's research activities feed directly into its teaching at every level. Competition for student places at the Issuer remains strong, and there is a large pool of qualified applicants. The standard A level offer for entry to the Issuer is currently advertised as between A*A*A* and AAA depending on the subject. In the academic year 2016/2017, more than 19,000 applicants applied for approximately 3,200 undergraduate places, meaning the Issuer received, on average, nearly 6 applications for each available place. Set out below are the numbers of undergraduate and postgraduate applications and acceptances for the last five academic years:

Undergraduate Postgraduate Academic year Applications Acceptances Applications Acceptances 2017/18 ...... 19,938 3,203 26,020 5,392 2016/17 ...... 19,144 3,261 25,177 5,065 2015/16 ...... 18,377 3,216 23,881 4,839 2014/15 ...... 17,484 3,161 21,030 4,578 2013/14 ...... 17,216 3,201 19,819 4,434 2012/13 ...... 17,251 3,236 19,377 4,273

On a full-time equivalent basis, in 2016/17 the Issuer had 986 undergraduate students and 2,672 postgraduate students from the EU (excluding the UK). The departure of the UK from the EU will potentially reduce the number of EU students attending courses offered by the Issuer, as those students may be required to pay overseas students tuition fees which are higher than the capped fees set for UK/EU students (see further the risk factor entitled "There is a risk that the numbers of EU students choosing to study in the UK will fall, both in the run-up to the withdrawal of the UK from the EU, and once that withdrawal has been completed"). Notwithstanding any such reduction in the numbers of EU students, however, the historic number of applicants to study courses offered by the Issuer significantly exceeds the level of acceptances (see the table above). Accordingly, the Issuer believes it is very well placed to meet its recruitment targets following the UK's exit from the EU by increasing the intake of UK or International Students if numbers of EU students decline. The Issuer has approximately 12,700 staff engaged in its academic activities, made up of approximately 6,400 teaching and research staff and approximately 6,300 technical and administrative staff.

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Principal Activities of the Issuer

The principal activities of the Issuer can be summarised as follows:  Teaching;  Research; and  Related activities. The Issuer organises its academic activities into divisions. The term "division" for this purpose indicates a financial and administrative grouping of related academic faculties and departments. There are four divisions that cover 58 departments: the Humanities Division; the Mathematical, Physical and Life Sciences Division; the Medical Sciences Division; and the Social Sciences Division. The Issuer's other principal activities, which in each case are related to teaching and research activities, are:  widening participation to the educational opportunities offered by the Issuer;  publishing;  the operation of gardens, museums, libraries and collections;  the commercialisation of research conducted by, and intellectual property generated within, the Issuer;  knowledge exchange; and  public engagement. Sources of Income The Issuer's income, excluding the income generated by OUP, in each of the last five academic years (as reported in the consolidated income and expenditure account in the Issuer's audited financial statements for that year or, where restated in the financial statements for the following year, as so restated) is shown in the table, and described in more detail below.1

Amount in £million

2013/14 2014/15 2015/16 2016/17 Tuition Fees and education contracts ...... 235.9 265.7 293.5 307.2 Funding body grants ...... 217.1 186.1 192.5 194.6 Research grants and contracts ...... 471.4 608.0 537.4 564.9 Investment income ...... 30.3 4.7 8.8 14.4 Donations and endowments ...... 33.6 103.7 74.4 88.4 Donation of heritage assets ...... 0.9 10.0 2.2 3.2 Other income*...... 239.8 345.7** 213.0 227.7 Total income** ...... 1,229.0 1,523.9 1,321.8 1,400.4

* Other income includes annual cash transfers from OUP as follows: 2013/14: £48.7 million; 2014/15: £45.9 million; 2015/16: £44.9 million; 2016-17: £40.0 million; and, in respect of 2014/15, a special cash transfer from OUP of £120 million. ** The total income for 2012/13 was £1,086.9 million on a UK GAAP basis. *** 2014/15 included two one-off items: (i) the Research & Development Expenditure Claim for £85.1 million and the special transfer from OUP for £120 million.

1 The figures for 2013/2014 have been restated for FRS102 for consistency so are different from the figures which appeared in the published financial statements for 2013/14. The figures provided for 2013/14, 2014/15, 2015/16 and 2016/17 in the below table have been restated in the financial statements for the following year.

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Funding Body Grants

The Issuer receives recurrent grant funding from the UK government through HEFCE in the form of a quality-related "block grant". This block grant relates to the Issuer's teaching, research and other activities. It is not expected that the disbanding of the HEFCE and associated changes will bring any immediate changes to the funding of Oxford. Teaching: The amount of the teaching block grant is calculated by HEFCE according to the number of UK and other EU member states' undergraduate students enrolled on the Issuer's courses and the nature of the courses. HEFCE takes into account the fact that certain courses, such as laboratory subjects, cost more than classroom-based ones. In the academic year 2016/17, income from HEFCE to the Issuer allocated to undergraduate teaching was £9.5 million and UK/EU undergraduate tuition fees received by the Issuer in the academic year 2016/17 were £83.4 million. There are also special teaching grants to assist UK government priorities such as protecting strategically important subjects, widening participation and commercial collaborations. University teaching is supported by a combination of the HEFCE block grant and student fees. The Issuer received £14.5 million for teaching within its total "block grant" for the 2016/17 academic year. The funding that the Issuer receives for teaching students from the United Kingdom and other EU member states is dependent upon the number of students who choose to study on a course provided by the Issuer. The major part of funding for teaching is distributed by the Student Loans Company Limited (as higher tuition fees paid direct to institutions for newly admitted students underwritten by loans made to those students). The Issuer's publicly-funded income is therefore dependent upon students deciding to enter higher education. In recognition that some courses are considered to be strategically important and valuable or cost more to provide than the maximum fee of £9,000 (£9,250 for eligible institutions since 1 August 2017), HEFCE will continue to provide the Issuer with an element of teaching block grant to assist with the direct funding of those subjects, although this position may change in the future due to political influence. Under HERA, funding will be allocated by the OfS from April 2018 onwards. Research: The Issuer receives a grant from HEFCE to support its research infrastructure and enable its research activities. HEFCE calculates the grant primarily on the basis of research quality, taking into account the volume and relative cost of research in different areas ("QR funding"). HEFCE calculates how much funding to provide for research in different subjects, and then allocates the total for each subject between institutions. The Issuer's performance in the REF relative to the rest of the sector affects its recurrent QR funding for the period after 2015. Completed in 2014, the REF is a system for assessing the quality of research in UK higher education institutions, assessing research which had taken place in the period 2008 to 2013 (inclusive). The calculation of QR funding takes into account the quality of research as measured in the 2014 REF and the volume of research using research active staff numbers and relative costs, reflecting the fact that laboratory based research is more expensive than library based research. Funding is also allocated for other research related costs such as supervision of postgraduate research students and funds to support research that universities carry out with charities and with business and industry. In the 2014 REF, the Issuer was found to have the largest volume of world leading research in the UK. The Issuer was allocated £142.7 million of QR funding, representing nine per cent. of the overall English grant award in the 2016/17 academic year to higher education institutions. 87 per cent. of the Issuer's research was judged to be world leading (4*) or internationally excellent (3*) with a further 11 per cent. ranked 2* (internationally recognised) and 1 per cent. ranked 1* (recognised nationally) in the 2014 REF. HERA incorporates HEFCE's research-funding functions into a new research and innovation funding body, the UKRI which will be responsible for distributing the QR funding referred to above from April 2018 onwards.

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Academic Fees and Support Grants

Students are charged tuition fees for courses undertaken at the Issuer. From the academic year 2017 /18, newly admitted UK, Channel Islands and EU undergraduate students will be charged annual tuition fees of £9,250 per annum. Annual tuition fees for non-UK, Channel Islands and EU students in 2017 /18 have been set between £16,230 and £23,885 for all courses, save for clinical medicine, which will be £36,007. HERA also links a university's performance in the TEF with an ability to apply inflation linked rises to the maximum tuition fee. A rating of "Gold" or "Silver" in the TEF assessment for 2019/20 could mean that, for the academic year 2020/21, an institution would be eligible for 100 per cent. of the inflationary uplift. The Issuer has been given a Gold TEF rating however the UK Government's announcement in October 2017 that it intends to freeze tuition fees for 2018/19 has put future inflation linked fee rises in doubt.

Research Grants and Contracts

The Issuer is recognised as one of the leading research universities in the world both in terms of quality and in terms of scope and breadth. The Issuer undertakes research across all four academic divisions and currently has 4,581 active research awards with contracted income of £2.7 billion. The Issuer receives in the form of grants for specific research projects and programmes, income from the UK Research Councils, UK charities, government departments and the European Commission. The Issuer also derives income through collaborations with the private sector. A breakdown of research grants and contracts income by source is set out below:

Amount in £million

Sponsor Type 2013/14 2014/15 2015/16 2016/17 Research Councils ...... 135.4 146.5 152.9 146.4 UK Charities ...... 144.5 159.6 147.0 155.8 UK Public Sector ...... 47.3 50.9 58.1 68.9 UK industry ...... 16.1 18.9 19,6 22.9 EU Government ...... 53.3 60.4 64.3 66.3 EU industry ...... 8.4 8.5 8.0 10.2 Other UK & Overseas Sources* 66.4 78.1 87.5 87.8 Sub-Total ...... 471.4 522.9 537.4 558.3 Research and Development credit - 85.1 - 6.6 Total ...... 471.4 608.0 537.4 564.9

* Other UK & Overseas Sources includes a broad range of international industrial funding partners including large pharmaceutical companies and other non-charitable UK funders.

Issuer Debt Structure

The following table sets out the Issuer's debt profile:

Amount in £million

Bank Loans Loan 1 Loan 2 Loan 3 Total Amount borrowed 25.0 25.0 200.0 250.0 Amount outstanding 5.3 25.0 200.0 230.3 Interest rate 5.13% 5.07% 2.55%

Final repayment year 2019 2047 2045 Amount due within 1 year 2.6 - - 2.6

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Amount due between 1 and 2 years 2.7 - - 2.7 Amount due between 2 and 5 years - - 14.4 14.4 Amount due after 5 years - 25.0 185.6 210.6 5.3 25.0 200.0 230.3

Oxford University Press

Oxford University Press ("OUP") is the largest university press in the world. It publishes in 70 languages and sells to 190 countries. OUP's mission is to achieve excellence in research, scholarship and education through publishing worldwide. It operates in three large and global publishing markets: Research, the Learning of English, and Education (Schools and Higher Education). These markets are attractive to OUP because: they have good long term prospects, a global approach may be taken towards them, and OUP has strong competitive positions within them. Publications cover academic monographs, journals, university text books, reference works, dictionaries, as well as school textbooks, and English language teaching resources. Ancillary services go beyond traditional publishing, offering support to teachers and delivering digital learning and assessment platforms. Trading Operations OUP has a resilient business model with geographically well-diversified revenue streams, steady growth, and stable income margins. The compound annual growth rate of revenue from Trading Operations from 2014 to 2017 was 3.7 per cent. and net income margin was in the range of 9.8 to 12.6 per cent. of turnover over that period. OUP is well capitalised. Total assets in respect of Trading Operations at 31 March 2017 amounted to £699.9 million and bank loans and overdrafts amounted to £3.7 million. Current assets investments amounted to £229.8 million while bank balances and cash were £31.4 million. For the financial year ended 31 March 2017, OUP's income was £847.4 million. Delegates' Property and Reserve Fund

The Delegates' Property and Reserve Fund ("DPRF") was established in 1984 in order to distinguish the reserve investments of OUP from the assets and liabilities of its Trading Operations. The DPRF holds and manages properties owned by OUP, together with the income arising from them. Total funds held by the DPRF as at 31 March 2017 were £327.5 million, including £277.1 million of properties held at their market value, £49.3 million of investment deposits, and £8.0 million of bank balances and cash. Transfers by OUP to the rest of the Issuer OUP currently transfers annually the higher of £40 million or 45 per cent. of its net surplus to the rest of the Issuer. There is a periodic review of OUP's cash requirements and funds considered surplus to operational requirements, and following this review such funds are transferred to the rest of the Issuer by way of a special transfer. Over the past ten years, OUP has transferred over £860 million in cash to the rest of the Issuer. The following table sets out annual and special amounts transferred by OUP to the rest of the Issuer in the Issuer's financial reporting year ending 31 July in the stated years (excluding benefits in kind and transfers of property):

Amount in £million

2011 2012 2013 2014 2015 2016 2017 Annual cash transfer ...... 42.1 53.3 50.3 48.7 45.9 44.9 40.0 Special transfer ...... 192.5 − −−120.0 −−

The following table sets out amounts in respect of the turnover and net income of OUP's Trading Operations:

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Amount in £million*

2014 2015 2016 2017 Turnover ...... 759.0 762.2 760.5 847.4 Net Income ...... 95.5 85.5 74.8 93.7

* Turnover and net income figures are for OUP Trading Operations for years to 31 March. Figures have been presented under FRS 102 except for 2014 which was prepared at fixed rates of exchange under applicable UK GAAP.

Governance and Management of OUP OUP is a department of the Issuer, rather than a separate legal entity. The delegates of OUP (the "Delegates" or "Delegacy") have overall responsibility for the affairs of OUP, including its publishing policy and academic standards. The Delegacy is chaired by the Vice-Chancellor, and includes 17 academics from the staff of the Issuer covering a wide range of disciplines, who are appointed by Council. The Delegacy has established a finance committee (the "OUP Finance Committee") which, under the general authority of the Delegates, directs and manages the business, assets, and finances of OUP. The Chair of the OUP Finance Committee is also a member of the Delegacy, if not already a Delegate. The Delegacy appoints a Secretary to the Delegates to act as the Chief Executive Officer with executive responsibility for the management of OUP. Authority to act within OUP is given through a power of attorney granted to the Chief Executive Officer. The accounts of OUP are prepared under the direction of the OUP Finance Committee, and are presented annually to the Delegacy. There is no annual general meeting but the audited accounts of OUP, as approved by the Delegacy, are submitted to the Issuer's Finance Committee and Council. The Chief Executive Officer of OUP is Nigel Portwood, who has held this position since August 2009. Nigel Portwood's experience includes acting as (i) Director of Strategy and Development of Pearson PLC from 1997 to 1999; (ii) President and Chief Executive Officer of Pearson Education Europe, Middle East and Africa from 1999 to 2002; and (iii) Chief Financial Officer of the Penguin Group from 2003 to 2009. The Group Finance Director of OUP is Giles Spackman, who has held this position since December 2013. Giles Spackman's experience includes acting as Chief Financial Officer for a number of media and digital technology companies including (i) Time Atlantic (part of Time Warner, Inc.) from 1996 to 1999; (ii) The Financial Times Group (part of Pearson PLC) from 2000 to 2002; (iii) AOL Europe (part of Time Warner, Inc.) from 2002 to 2007; and (iv) the Global Business Organization of Google, Inc. from 2009 to 2013. Financial statements relating to OUP OUP's financial statements comprise the annual accounts relating to OUP's Trading Operations, the annual accounts relating to the DPRF and the Annual Report of the Delegates of the University Press. Other Income

Benefactions and Donations: The Issuer receives benefactions and donations from a variety of different sources. These sources include trusts and foundations, corporations and individuals, both alumni of the Issuer and non- alumni. In the financial year 2016/2017, the Issuer secured new cash gifts and pledges totalling £119 million. The vast majority of benefactions and donations received by the Issuer are for restricted purposes. For example, a gift to fund specific facilities can only be used for the funding of those specific facilities. In 2008, the Issuer also launched the Oxford Thinking Campaign with a target of raising £1.25 billion. This target was achieved in 2012, when a revised goal of £3 billion was announced. As at the date of this Prospectus, £2.6 billion had been raised by the collegiate Issuer. The Oxford Thinking Campaign is the largest fundraising campaign for higher education outside of North America. The money raised is being used to support students; fund academic staff; advance the work of each of the

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four academic divisions of the Issuer; support the Issuer's cultural institutions (gardens, libraries and museums); and develop the Issuer's physical infrastructure and buildings. The table below sets out the cumulative donations made to the Oxford Thinking Campaign since 2005:

Cumulative donations to Oxford Thinking Campaign

Amount in £million

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cumulative donations ...... 168 293 414 601 719 957 1,145 1,405 1,626 1,896 2,137 2,485 2,658

The table below sets out the percentage that each source contributed to the cumulative donations as at July 2017:

Source of donations to the Oxford Thinking Campaign As at 31 July 2017 Trusts & foundations ...... 50% Other individuals ...... 25% Former & current students ...... 14% Corporation ...... 8% Other organisations ...... 3%

Translation and Commercialisation of Research: Oxford University Innovation Ltd ("OUI") supports the translation of the Issuer's intellectual property and expertise into new products and services that provide social and economic returns. OUI is recognised as one of the leading university technology transfer companies in the world and is responsible for:  The commercialisation of the Issuer's intellectual property, through investing in patents, completing licensing deals and the promotion of spin-out and start-up companies;

 Providing support to academics who wish to consult with external parties;

 The management of the Issuer's equity stakes in spinout companies and investment of up to £4 million per annum of additional funds in such companies; and

 Oversight of proof of concept funds to progress early stage technologies to a point of maturity and validation at which partners will invest.

Since 2011, the Issuer's spinouts have collectively raised more than £1.5 billion in external fundraising. As at 31 July 2017, OUI managed for the Issuer a portfolio of stakes in 104 companies worth almost £115 million. In addition, this portfolio has seen 11 flotations or trade sales of companies since 2011, worth £1.85 billon as at 31 October 2017, including the sale in 2014 of the spin out Natural Motion Ltd to Zynga Inc for $527 million, which yielded £33.6 million profit for the Issuer, and the NASDAQ flotation in 2017 of Nightstar Therapeutics, with a market capitalisation at the offer price of about $400 million, giving the Issuer a stake worth more than $15 million. OUI also generates significant revenues via its licensing activities, with 127 commercial deals signed in 2016/2017 and licensing income of £6.6 million. OUI's Consulting Services group generated £5.1 million of income for academics in the financial year 2016/2017.

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Oxford Sciences Innovation (OSI) was formed in 2015 and has raised over £600 million to invest in spinouts from the Issuer. It is the largest single university venturing fund worldwide and along with the Issuer, its core investors include GoogleVentures and several government venture arms. Oxford Spinout Equity Management (OSEM) manages the Issuer's shareholdings in its spinout companies and seeks ways of maximising the value of its equity stakes. The Issuer has ownership of all intellectual property generated by its employees as part of their employment and where it is identified that such intellectual property has a commercial value, the Issuer works cooperatively with the academic inventor(s) to achieve commercialisation. This will typically occur via a licencing arrangement or through the formation of a spin-out company. Typically the Issuer will receive an initial founder stake in each spin-out company approximately equal to the inventor(s) stake in consideration for the help and support provided to the inventor(s). The Issuer currently has 3,425 patents under management. For the year ended 31 July 2017, the Issuer's income from research grants and contracts was £564.89 million. Rental Income: The Issuer has a significant estate, described in more detail below. The Issuer received rental income of £14.8 million from its estate in the year ended 31 July 2017.

Endowment and Investment Income

The Oxford Funds is an investment vehicle which enables the Issuer, and the Colleges of the Issuer, to pool assets held on trust and invest them as one. Funding for The Oxford Funds stems from expendable and permanent endowments, the Colleges and certain associated third-party investors. All of the Issuer's assets in The Oxford Funds are subject to trust and the vast majority of those trusts are dedicated to a discrete activity within the Issuer. These assets cannot therefore be freely used by the Issuer to service debt or meet working capital requirements. There are two unitised class accounts, the Oxford Endowment Fund ("OEF") and the Oxford Capital Fund ("OCF"). The OEF and the OCF are open to the Issuer, the Colleges and charitable trusts associated with the Issuer and the terms of the OEF and OCF require the proceeds from any redemptions or distributions from such funds to be used exclusively for the charitable purposes of the Issuer or for similar charity purposes.

OEF

OUem operates the OEF, which aims to preserve and grow the value of the perpetuity capital of the Issuer, while providing a sustainable income stream. The OEF's objective is to generate an average return of 5 per cent. over the Consumer Prices Index with volatility below that of the MSCI World Index. As at 31 July 2017, the market value of the OEF was £2,484.5 million. A distribution of £82.1 million was paid to the collegiate University in May 2017 relating to the calendar year 2016. Of that distribution, £52.8 million was paid to the Issuer. The OEF's specific investment objective is long term, and the fund seeks to achieve its objectives by investing across a range of asset groups that give a diversified stream of returns and which can function in a variety of environments. For the three years to 31 July 2017, the OEF returned an annualised (average) 12.0 per cent., over five years, it returned an annualised 11.5 per cent.; and over eight years, it returned an annualised 10.7 per cent. The tables below show The Oxford Funds' diversification across geographies and asset-classes: Oxford Endowment Fund breakdown by Asset Class

Oxford Endowment Fund As of 31 December 2016 Public Equity ...... 44.1% Private equity ...... 24.5% Credit ...... 10.4% Property ...... 6.5% Other assets ...... 1.0%

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Oxford Endowment Fund As of 31 December 2016 Cash and bonds ...... 13.5%

Oxford Endowment Fund breakdown by Geography

Geographical breakdown As of 31 December 2016 North America ...... 33% United Kingdom ...... 33% Europe ...... 11% Emerging Markets ...... 15% Asia Pacific ...... 2% Japan ...... 6%

OCF

The purpose of the OCF is to invest expendable capital over a medium horizon. This typically consists of capital for building projects which have a known liability at a fixed point in the future. As a result, the OCF operates at a lower volatility than the OEF. The OCF's objective is to generate an average return of 1.5 per cent. over the Consumer Prices Index with a volatility range of 5 – 8 per cent. As at 31 July 2017 the Issuer's share of the market value of the OCF was £435.3 million. For the three years to 31 July 2017, the OCF returned an annualised (average) 6.5 per cent., over five years, it returned an annualised 6.1 per cent., over eight years it returned an annualised 6.5 per cent. The below table sets out the net asset value of The Oxford Funds from 2010 to the present: The Oxford Funds – Total Net Asset Value

Amount in £million as at 31 July

2010 2011 2012 2013 2014 2015 2016 2017 Oxford Endowment Fund ...... 667 986 1,037 1,231 1,488 1,897 2,146 2,485 Oxford Capital Fund ...... 432 416 417 457 384 353 495 483

The below table sets out the Issuer's interest in The Oxford Funds from 2010 to the present: Issuer's interest in The Oxford Funds

Amount in £million as at 31 July

2010 2011 2012 2013 2014 2015 2016 2017 Oxford Endowment Fund ...... 435 724 749 854 1,006 1,240 1,380 1,546 Oxford Capital Fund ...... 432 407 407 446 365 328 471 435

Oxford University Endowment Management OUem, a separate investment management company which is regulated by the UK Financial Conduct Authority, acts as the discretionary investment manager of The Oxford Funds and is responsible for: (i) advising the Investment Committee (as described under "Governance and Regulation of the Issuer") on investment and distribution policy; and (ii) implementing the investment policy, reporting, performance measurement, risk management and investor relations. The Chief Investment Officer ("CIO") and Chief Executive Officer ("CEO") of OUem is Sandra Robertson, who has held this position since the establishment of OUem in 2007. As CIO and CEO, Sandra Robertson has discretion for all investment decisions and is responsible for the overall strategy of OUem, respectively. Sandra Robertson's experience includes holding positions such as:

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(i) Co-Head of portfolio management at Wellcome Trust and sitting on their investment committee from 1997 – 2007; (ii) non-executive director of RIT Capital Partners plc, Rothschild Investment Trust; (iii) acting as part of the TIFF Advisory Services, Inc. Board; and (iv) acting as Trustee of the Queen's Trust. Giles Kerr, Director of Finance of the Issuer (2005 – present) also acts as a director of OUem.

Pension schemes

The principal pension schemes in which the Issuer participates are (i) the multi-employer and UK Government schemes; and (ii) the Issuer specific pension schemes, each of which are described below. The assets of all the schemes (where applicable) are held separately from those of the Issuer in separate trustee administered funds. USS The USS is a "last man standing" scheme so that, in the event of insolvency of any of the participating employers in the scheme, the amount of any pension shortfall (which cannot be recovered) in respect of that employer will be spread across the remaining participant employers and reflected in the next actuarial valuation of the USS. The last triennial actuarial valuation of the USS was carried out as at 31 March 2014. At the valuation date of 31 March 2014, the value of the assets of the scheme was £41.6 billion and the value of the scheme's technical provisions was £46.9 billion, indicating a shortfall of £5.3 billion. The scheme's assets were sufficient to cover 89 per cent. of the benefits which had accrued to members after allowing for expected future increases in earnings. As part of the valuation, the trustee has determined a recovery plan to pay off the shortfall by 31 March 2031. The Issuer has a contractual commitment to this deficit recovery plan, and under FRS 102 the Issuer's share of the past service deficit is recorded as a provision within the Issuer's balance sheet. The employers' contributions have increased to 18 per cent. per annum of earnings with effect from 1 April 2016 (from its previous level of 16 per cent. per annum).

For the year ended 31 July 2017, the total pension cost to the Issuer was £63.5 million in relation to USS. With effect from 31 March 2016 there have been a number of changes to the benefits provided by the USS, which include the following:  for both current Final Salary ("FS") and Career Revalued Basis ("CRB") members, accrued benefits at the implementation date will be revalued in line with increases in official pensions (currently the Consumer Price Index) each April up to the point of retirement or leaving the scheme;  all members will accrue a pension of 1/75th and a cash lump sum of 3/75ths of salary for each year of service after the implementation date in respect of salary up to and including a salary threshold of £55,000 a year and the salary threshold will be automatically revalued in line with increases in official pensions subject to a review to be undertaken by 31 March 2020;  all members will have access to a new defined contribution section, made up of individual defined contribution accounts for salary in excess of the salary threshold;  all member contributions, for both FS and CRB members, will increase to 8 per cent. of salary;  employer contributions have increased to 18 per cent. of salary for all members until 31 March 2020; and  optional additional contributions into the members defined contribution account will be available with the first 1 per cent. of additional contributions being matched by the employer.

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NHSPS The notional assets of NHSPS are assessed by the Government Actuary and the benefits are underwritten by the UK Government. There are no underlying assets. It is not possible to identify each institution's share of the underlying assets and liabilities of the NHSPS and hence contributions to the NHSPS are accounted for as if it were a defined contribution scheme. The cost recognised within the surplus for the year in the income and expenditure account is therefore equal to the contributions payable to the NHSPS for the year. The latest published actuarial valuation of the NHSPS was at 31 March 2012. The contribution rate payable by the Issuer during the year ended 31 July 2017 was equal to 14.3 per cent. of the total pensionable salaries, in accordance with the conclusion of the Government Actuary's report on the NHSPS. The total pension cost for the Issuer in respect of the NHSPS for the year ended 31 July 2017 was £4.0 million. OSPS The OSPS is a multi-employer pension scheme for the benefit of the staff of the Issuer and most of its Colleges. The scheme is a contributory defined benefit scheme although from 1 October 2017 OSPS introduced a defined contribution section for new entrants and from 1 April 2018 changes introduced will break the final salary link for relevant members. OSPS' actuarial valuation as at 31 March 2016 identified a long-term employer contribution rate of 17.3 per cent. and a funding deficit of £133 million. The Issuer recognised a provision for its commitments under the agreed deficit reduction plan of £50.6 million as at 31 July 2017. As security for payment of the agreed contributions to the scheme, the Issuer has granted a floating charge over certain assets subject to the value not falling below £100 million. OUPGPS OUPGPS is a funded defined benefit pension scheme of OUP providing retirement benefits to UK employees of OUP. The assets of the scheme are held in a separate trustee-administered fund. The most recent triennial valuation of OUPGPS for funding purposes was performed as at 31 March 2015 revealing a shortfall of £26 million (technical provisions liabilities of £476 million less assets of £450 million). A recovery plan was prepared by the trustees of OUPGPS on 9 February 2016 and agreed with the Issuer, through the Delegates. Under the recovery plan, OUP paid a contribution of £7 million into OUPGPS in February 2016 and agreed that the remaining funding shortfall will be eliminated by continued OUP contributions of 19 per cent. per annum of pensionable salaries. As at 1 April 2016 (following the most recent triennial valuation), this rate of 19 per cent. per annum of pensionable salaries exceeded OUP's future service contribution rate for Career Average Revalued Earnings benefits of 12.4 per cent. per annum of pensionable salaries. Based on market conditions at that date, the funding shortfall was expected to be eliminated by 30 September 2022 at the latest. For the year beginning 1 April 2017, based on the estimated pensionable salaries at that date, it is expected that the contribution paid will be about £8.5 million. The FRS 102 net liability for 2016/17 of £197.1 million (2015/16 net liability of £126.7 million) comprised a net liability on OUPGPS of £189.8 million (2015/16 net liability of £120.0 million) and net liabilities on other schemes of £7.3 million (2015/16 net liabilities of £6.7 million). The increase in the FRS 102 net liability in the year was due to changes in actuarial assumptions, notably the fall in gilt yields and an increase in inflation rates. As security for the payment by the Issuer of its agreed contributions to the scheme, the Issuer has granted a floating charge of up to £50 million over certain assets held in OUP's DPRF. The Issuer and the OUPGPS trustees intend to discuss the possibility of increasing the agreed contributions and an increase in the maximum amount of the floating charge.

The Issuer's Estate

The Issuer's academic estate (excluding the estate of OUP) is spread over a number of sites and currently comprises 235 buildings, with a total gross internal area of 590,000m2, which accommodates the day-to-day activities of the Issuer and a further 150 properties in and around Oxford which are managed commercially, including accommodation for graduate students, offices, warehouses and land.

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The estate has buildings dating from 1424 and includes a significant portfolio of new research buildings developed over the last 10 years. The vast majority of the Issuer's estate is freehold. The principal sites the Issuer occupies are primarily in the city centre and Headington and specifically include campuses at the Radcliffe Observatory Quarter, the Science Area and Keble Triangle, the Old Road Campus, space at the hospital sites comprising the John Radcliffe, the Churchill, the Nuffield Orthopaedic and the Warneford as well as a number of buildings in the city centre. In addition, the Issuer has a 136.73 hectare presence at Begbroke, 4 miles from the city centre. Capital Expenditure The Issuer has undertaken the following five main capital projects since 2011: Nuffield Department of Medicine  Project estimated cost: £22.8 million  Construction Period: July 2011 to March 2013  Main benefits: provision of medical research laboratory facilities which facilitated the development of the Target Discovery Institute linking advances in genetics, genomics, cell and chemical biology, for improved drug target discovery. The building also enabled the expansion of existing research groups with research synergies such as Respiratory Medicine and Viral Immunology, and is home to one of two sites for the Centre for Tropical Medicine and Global Health. Weston Library  Project estimated cost: £84.1 million  Construction period: May 2011 to August 2014  Main benefits: provision of high quality storage for the Bodleian's special collections and provision of facilities for advanced research, including reading rooms, seminar rooms and study spaces. In addition the project enabled and extended public access to the Libraries' treasures via exhibition galleries and provided a Centre for Digital Scholarship, a Visiting Scholars Centre, a lecture theatre, the Bodleian Café and The Zvi Meitar Bodleian Shop. Blavatnik School of Government  Project estimated cost: £55.0 million  Construction period: September 2013 to November 2015  Main benefits: provision of teaching, research and engagement spaces where transformative teaching programmes are delivered, research undertaken and networks forged, which in turn enable the improvement of government and public policy-making worldwide. Big Data Institute  Project estimated cost: £46.9 million  Construction Period: February 2015 to January 2017  Main benefits: provision of state of the art interdisciplinary research centre for the analysis of large, complex, heterogeneous data sets for research into the causes and consequences, prevention and treatment, of disease by development, evaluation and deployment of efficient methods for acquiring and analysing information for large clinical research studies. Beecroft Building for Physics  Projected project estimated cost: £50.2 million  Construction period: September 2015 to March 2018  Main benefits: provision of state of the art working space for theoretical physicists centred around an atrium containing a hierarchy of spaces facilitating discussion and collaboration as

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well as below ground basement laboratories providing high quality environmental control with very low vibration levels for practical experimentation. The below table sets out the capital expenditure from 2008 to the present:

Amount in £million

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Capital Expenditure ...... 113.5 124.2 128.3 103.8 139.2 207.6 153.1 133.2 155.7 139.3

Libraries, Museums and Collections

The Issuer's collections are a resource for researchers, students and members of the public. The Issuer's museums and collections include the Bodleian Library and Weston Library, the Ashmolean Museum, the University Museum of Natural History, the Museum of the History of Science, the Pitt Rivers Museum, the Bate Collection of Musical Instruments and the Botanic Garden.

Widening Participation

The Issuer aims to attract and retain the best students from the most diverse backgrounds and provide affordable access for all who can benefit. The Issuer's Widening Access and Engagement team is highly collaborative, working with Colleges and departments across the Issuer whilst also maintaining and building key partnerships with external organisations. The team contributes to a variety of projects with differing scope and scale relating to access and admissions at the Issuer and the wider higher education context. The Issuer offers, amongst other initiatives:  Oxplore, which is an innovative new digital outreach portal that aims to raise aspirations, promote broad thinking and stimulate intellectual curiosity.  UNIQ which is a programme of free summer schools at the Issuer for year 12 UK state school students.  IntoUniversity which is a local learning centre where young people are inspired to achieve.  Oxford for Oxford which is a set of programmes and initiatives working to make Oxford's assets accessible to schools and families.  Study Higher Partnership which is a collaborative partnership to help raise aspirations and educational attainment among young people.  Target Oxbridge which is a programme that helps high-achieving black students gain places at the UK's top universities.

Employability

The Issuer has a strong record of graduate employability, with over 95 per cent. of its graduates being in either employment or further study within six months of graduation and is placed eighth in the QS Graduate Employability Ratings 2018.

The Issuer's Solvency

There have been no recent events particular to the Issuer that are relevant, to a material extent, to the evaluation of the Issuer's solvency.

The Issuer's Subsidiaries

The Issuer is part of a group as it has various subsidiary undertakings (together with the Issuer, the "Group") and interests in other entities both in the UK and overseas. The Issuer is not dependent on any other entity within the Group.

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The Issuer's Contact Details

The contact address for the Issuer is The Chancellor Masters and Scholars of the University of Oxford, University Offices, Wellington Square, Oxford OX1 2JD, UK and its telephone number is +44 (0)1865 270000.

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GOVERNANCE AND REGULATION OF THE ISSUER

Introduction

An explanation of certain key governance aspects of the Issuer, together with a summary of each of the constituent bodies and offices referred to in the summary, is set out below.

 Congregation is the ultimate legislative body of the Issuer and has responsibility for, amongst other things, approving changes to the Statutes or Regulations, conferring degrees, electing certain members of Council and other bodies of the Issuer, and approving the appointment of the Vice-Chancellor.

 Council is the principal executive and policy-making body of the Issuer and is bound by all resolutions passed by Congregation and all other acts and decisions taken by it.

 Council is advised in carrying out its duties by a range of committees, including the Education Committee, the General Purposes Committee, the Personnel Committee, the Planning and Resource Allocation Committee, the Research and Innovation Committee, the Audit and Scrutiny Committee and the Finance Committee.

Congregation

Congregation is the ultimate legislative body of the Issuer. It has approximately 5,000 members, comprising the academic staff of the Issuer, heads and other members of governing bodies of Colleges and senior research, computing, library and administrative staff of the Issuer.

Congregation has responsibility for, amongst other things, deciding on proposals submitted to it by Council for amending, repealing, or adding to the statutes or regulations, considering major policy issues submitted by Council or members of Congregation, electing members to Council and approving the appointment of the Vice-Chancellor. Meetings of Congregation are held, if there is relevant business, on the Tuesday of First, Second, Fourth, Sixth, Eighth, and Tenth Weeks of each term. If there is no opposed business or any other reason to hold a meeting, any items on the agenda are declared by the Vice- Chancellor to have been approved without the meeting being held.

Council

Council is the principal executive and policy-making body of the Issuer and has overall responsibility for the advancement of the Issuer's objects, for its administration, and for the management of its finances and property and the academic policy and strategic direction of the Issuer, including its relations with Colleges and external relations. Council may delegate its decision-making powers to any other body or person (subject to the provisions of the Statutes and Regulations).

Council determines the system of internal controls operated by the Issuer and monitors the adequacy and effectiveness of the control environment. Council is also responsible to HEFCE for meeting the conditions of the memorandum of assurance and accountability between HEFCE and the Issuer (the "memorandum of assurance and accountability") and is required, amongst other things, to take reasonable steps to ensure that there are appropriate financial and management controls in place to safeguard public funds and funds from other sources, to safeguard the assets of the Issuer and prevent and detect fraud and other irregularities.

Council consists of the Issuer's charity trustees. There are twenty-five positions on Council, with provision for up to three co-opted members. Nine are ex-officio members: the Vice-Chancellor, who is the chair of Council; the Chair of the Conference of Colleges; the two Proctors and the Assessor; and the four Heads of Division. See "Description of the Issuer" for a description of the four divisions. Four are external members, nominated by Council and approved by Congregation. Twelve members of Congregation are elected to Council: one by the Conference of Colleges; four by Congregation from members of the faculties in the Divisions of Mathematical, Physical and Life Sciences and of Medical Sciences; four by Congregation from members of the faculties in the Divisions of Humanities and of Social Sciences; and three by Congregation, not necessarily being members of any division and not in any case being nominated in a divisional capacity. Up to three members of Congregation may be co-opted to Council. One of the Pro-Vice-Chancellors with portfolio may be appointed by Council as one of its

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Deputy Chairs, in which case, if he or she is not anyway a member of Council, he or she fills one of these co-opted places for as long as he or she is Deputy Chair.

For further details on the current members of Council, please see below.

Convocation

Convocation is a body that consists of all the former student members of the Issuer who have been admitted to a degree (other than an honorary degree) of the Issuer, and of any other persons who are members of Congregation or who have retired having been members of Congregation on the date of their retirement.

The functions of Convocation are to elect the Chancellor and the Professor of Poetry. The procedure for holding elections in Convocation is set out in Regulations passed by Council.

The Chancellor

The Chancellor is elected as the constitutional head of the Issuer. The Chancellor has important statutory and ceremonial duties, supports the day-to-day work of the Vice-Chancellor and the Colleges and advises the Issuer on difficult points at issue. The incumbent Chancellor is the Rt Hon. the Lord Patten of Barnes.

The Vice-Chancellor

The Vice-Chancellor is, de facto, the principal officer of the Issuer. He or she is appointed by Congregation on the nomination of Council, for a period of seven years (save that, when a Vice- Chancellor vacates the office before the expiry of his or her full term of office and at a time other than the end of the academic year, his or her successor's period shall consist of the remainder of that academic year and seven further years). The Vice-Chancellor is the principal academic and administrative officer of the Issuer. The Vice-Chancellor chairs Council and other principal bodies of the Issuer, nominates deputies to chair others and works closely with the Colleges to promote a unified vision across all the constituent parts of the Issuer. Under the terms of the memorandum of assurance and accountability between the Issuer and HEFCE the Vice-Chancellor is the Accountable Officer of the Issuer. The current Vice-Chancellor is Professor Louise Richardson.

The Pro-Vice-Chancellors

There are five Pro-Vice-Chancellors with specific portfolios whose role, as well as supporting the Vice- Chancellor in providing academic leadership to the Issuer, is to work in partnership with senior administrators of the Issuer to help drive strategy and policy development. The Pro-Vice-Chancellors report to the Vice-Chancellor. The current Pro-Vice-Chancellors are:

 Dr Robert Easton, Pro-Vice-Chancellor for Development and External Affairs;

 Professor Sarah Whatmore, Pro-Vice-Chancellor for Education;

 Dr David Prout, Pro-Vice-Chancellor for Planning and Resources;

 Professor Ian Walmsley, Pro-Vice-Chancellor for Research and Innovation; and

 Professor Anne Trefethen, Pro-Vice-Chancellor for Academic Resources and Information Systems.

Registrar

The Registrar is appointed by Council and is responsible for the effective implementation of the Issuer's policies and for ensuring compliance with legislative requirements. Reporting to the Vice-Chancellor, the Registrar is responsible for the central administrative departments of the Issuer. The exceptions are the Finance Division which reports directly to the Vice-Chancellor; and the Development Office, the Public Affairs Directorate, the Alumni Office and the International Strategy Office, which report to the Pro- Vice-Chancellor (Development and External Affairs). The current Registrar is Professor Ewan McKendrick.

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Proctors and Assessor

The two Proctors and the Assessor are elected for a period of one year by the Colleges on rotation, with a new team taking office at the start of each Easter vacation. The Proctors have a responsibility generally to ensure that the statutes, regulations, customs and privileges of the Issuer are observed. As well as being members of decision-making committees, they are responsible for aspects of student discipline, for dealing with complaints about matters of the Issuer, and for ensuring the proper conduct of the Issuer's examinations. The Assessor has special responsibility for student welfare and finance. The current Proctors are Dr Ed Bispham and Professor Dan Hicks and the current Assessor is Professor Stefan Enchelmaier.

The Committees

Council is advised by a range of committees that report directly to it on core business. The Education Committee, the Personnel Committee, the Planning and Resource Allocation Committee and the Research and Innovation Committee are responsible for implementing and monitoring the aspects of the Issuer's Strategic Plan which relate to their remit. Other responsibilities of the committees are as follows:

 The Education Committee is responsible for defining and keeping under review the educational philosophy, policy and standards of the Issuer, and for the oversight of activities relating to teaching, learning and assessment; and student-related equalities matters.

 The General Purposes Committee advises Council on policy in respect of issues or activities which are Issuer-wide and do not fall wholly within the remit of the other main committees of Council or other specialist committees as appropriate. Its remit includes responsibility for keeping under review procedures for identifying and managing risks across the Issuer's activities.

 The Personnel Committee is responsible for the development and review of employment policies, for staff relations and for all personnel and staff-related equality matters.

 The Planning and Resource Allocation Committee is responsible for setting the Issuer's annual budget, and resource allocation, including making recommendations to Council on recurrent and capital planning and budgeting, forecasts, resource allocation and other financial arrangements, monitoring performance against plans and ensuring that the Issuer and its departments deliver balanced accounts.

 The Research and Innovation Committee is responsible for Issuer policy and planning issues relating to research, knowledge exchange, innovation, commercial and social entrepreneurship and public engagement with research; and facilitates the preparation of external reviews of the Issuer's research and co-ordinates the gathering of data for such reviews.

 The Audit and Scrutiny Committee reviews the adequacy and effectiveness of the Issuer's arrangements for risk management, internal control, value for money, data quality and governance, considers the annual financial statements and, under Council, oversees the Issuer's arrangements to detect and prevent fraud and irregularity. The Committee's remit includes responsibility for the appointment of the Issuer's external auditors (subject to Council's approval) and its internal audit service and for agreeing the nature and scope of their work and their fees. During 2016/17, the Audit and Scrutiny Committee had no formal responsibility for assurance over OUP's activities. However, the Committee has been informed periodically about matters within OUP, and members of the Finance and Audit Committees of OUP have attended meetings of the Audit and Scrutiny Committee during the year.

 The Finance Committee is responsible, under Council, for the consideration of the financial resources available to the Issuer, and for proposing, for approval by Council, the overall income and expenditure budget, the overall capital expenditure budget and the five-year financial strategy for the Issuer. The Committee is also responsible for the review of, and provision of advice to Council on the Issuer's annual financial statements and annual accounts of the Delegates of OUP, and providing advice to Council on the needs of the Issuer (as established by its plans) in order that Council can take these views into account when establishing a capital investment policy. The Finance Committee is also responsible, under Council, for the review of

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the annual financial statements of the Issuer and of OUP, for banking arrangements and for the review and publication of financial regulations and procedures.

 The Investment Committee is responsible, under Council, for the management of the Issuer's investment portfolio.

Membership of Council

The following individuals are the current members of Council

Council Principal activities outside the Position: Name: member since: Issuer: The Vice- Professor Louise 1 Jan 2016 Board member of the Carnegie Chancellor: Richardson Corporation of New York. Duff and Phelps New York: Non- executive Director (NED). Central European University: Board Member. Universities UK, Member of the Board of Directors. Booker Prize Foundation, Trustee. Heads of Professor Donal 1 Sept 2015 The Solar Press (UK) Ltd: NED. Divisions: Bradley Molecular Vision (Ltd) and Abingdon Health Group: Consultant. Institute of Advanced Materials at Nanjing Tech: Honorary Professor and Consultant. Co-Editor in Chief, Nature Partner Journal Flexible Electronics. Nanjing University of Posts and Telecommunications: Researcher. The Rank Prize Funds: Trustee and Chair of the Optoelectronics Advisory Committee. Imperial College London: Visiting Professor of Physics. Professor Gavin 1 Oct 2017 Vaccine Scientific Advisory Board, Screaton GSK: Member. Cell Medica: Former Member of Scientific Advisory Board and Shareholder. MRC: Strategy Board Member. Professor Neil 1 Oct 2017 Associate research fellow in the Russia- MacFarlane Eurasia Programme at Chatham House. National Science Foundation of Georgia: Secretary of the Board. Professor Karen 13 Sept 2016 Nothing to declare. O'Brien Chair of the Sir Rick Trainor 1 Oct 2015 Museum of London: Governor. Conference of Royal Academy of Music: Governor. Colleges:

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Council Principal activities outside the Position: Name: member since: Issuer: Worshipful Company of Educators: Court member and livery member/freeman. City of London: Freeman. Economic History Society: Vice- president. US/UK Fulbright Commission: Patron. Royal Society of Arts: Fellow. Member of Dame Elish Angiolini 16 Sept 2016 Practising QC at the Scottish Bar. Congregation Medical Defence Union of Scotland elected by the (MDDUS): NED. Conference of Colleges: Proctors and Dr Ed Bispham 15 Mar 2017 Nothing to declare. Assessors: Dr Dan Hicks 15 Mar 2017 Society of Antiquaries of London: Trustee. Professor Stefan 15 Mar 2017 Nothing to declare. Enchelmaier Members Professor Matthew 1 Oct 2015 Chairman of the Company of elected by Freeman Biologists. Congregation: Council of European Molecular Biology Organisation, Member. Professor Helen 1 Oct 2014 Oxford University Innovation Ltd: McShane NED. Professor Richard 31 Oct 2013 Director of the NIHR Collaboration for Hobbs Leadership in Applied Health Research and Care, Oxford and National Director of the NIHR School for Primary Care Research. Modality Partnership: Partner (GP Practice). Dr Kate Blackmon 1 Oct 2015 Fellow of the Advanced Institute of Management Research. Professor Helena 1 Oct 2016 Oxford Archaeology: Trustee. Hamerow Lincoln College Keith Murray Fund: Trustee. Dr Ian Watson 1 Oct 2014 University and College Union: Member. Professor Anne 1 Oct 2014 JISC: Trustee. Trefethen Professor Tim Coulson 1 Oct 2017 John Wiley and Sons: Senior Journal Editor. Professor Sir Rory 1 Oct 2016 UK Biobank: CEO. Collins

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Council Principal activities outside the Position: Name: member since: Issuer: Professor Geraldine 1 Oct 2017 Academic advisor for a major Johnson television drama series, Medici: Masters of Florence. Trustee for Blackfriars Overseas Aid Trust (BOAT) and Consultant with Oxford University Innovation Ltd. Mr Richard Ovenden 1 Oct 2017 Consortium of European Research Libraries: Treasurer and Director. Research Libraries UK: Director. Photography Oxford: Chairman. Co-opted: Professor Ian Walmsley 1 Sept 2016 Fellow of the Royal Society, the Optical Society of America, the American Physical Society and the UK Institute of Physics and Director of the Networked Quantum Information Technologies Hub. Engineering and Physical Sciences Research Council: Member of Peer Review College. Max-Planck-Institute of Quantum Optics, Germany: Scientific Advisory Board Member. Imperial College London: Member, Advisory Board DTC in Controlled Quantum Dynamics, and Advisory Board EPRSC Attosecond Programme Grant. Dodd-Walls Centre for Photonic and Quantum Technologies: Science Advisory Board Member. Japanese MEXT "Science of Hybrid Quantum Systems" project, Tohoku University: Advisory Board Member. European Commission Expert Group on Quantum Flagship: Member of High Level Steering Committee. Journal of Modern Optics and Annalen der Physik: Editorial board member. External Dame Kate Barker 1 July 2017 Yorkshire Building Society: pension Members: trustee. Taylor Wimpey plc: NED. Man Group plc: NED. Jersey Fiscal Policy Panel: Chair. National Infrastructure Commission: Member. British Coal Staff Superannuation Scheme: Chair of Trustees.

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Council Principal activities outside the Position: Name: member since: Issuer: Coal Pension Trustees Ltd: Director. Essex Community Foundation: Trustee. Society of Business Economists: Member of Council. Independent Industrial Strategy Commission: Chair. Resolution Foundation Intergenerational Commission: Member. Lord Paul Drayson 1 Jan 2014 Major shareholder, Director, Chairman and CEO of Drayson Technologies Ltd (and subsidiaries). House of Lords: Life Peer. Royal Navy: NED. Royal Academy of Engineering: Fellow. H.M. Privy Council: Member. Drayson Foundation charity: Trustee. Sir David Norgrove 1 Oct 2014 UK Statistics Authority: Chair. British Museum Trust: Trustee.

Charles Harman has been nominated by Council to become an external member of Council, and such nomination has been approved by Congregation in accordance with the Issuer's statutes and regulations. The Issuer and Mr Harman have agreed that Mr Harman will begin his term as a Council member on 1 January 2018. Mr Harman is Vice Chairman at J.P. Morgan Cazenove.

The business address for each of the members of Council is University of Oxford, University Offices, Wellington Square, Oxford OX1 2JD, UK.

The Issuer is not aware of any potential conflicts of interest between the duties to the Issuer of the persons listed above and their private interests and/or duties.

Regulation

The Issuer is governed by the Oxford and Cambridge Act 1923 and is regulated by HEFCE. HEFCE is responsible for ensuring that the Issuer acts in accordance with its external governance obligations, that it manages itself and the funding it receives appropriately and that it complies with the requirements imposed on it by virtue of its exempt charitable status.

From April 2018, HEFCE will be disbanded. The portion which supports and oversees student provision will become the OfS whilst the part which supports and oversees research activities is about to be merged with the Research Councils and Innovate UK into a single organisation, UKRI.

The Issuer must comply with certain requirements which are specified in HEFCE's memorandum of assurance and accountability and Audit Code of Practice. The Issuer is required to submit audited financial statements to HEFCE each year. The Issuer's Accountable Officer, the Chair of the Council, or both can be called before the Public Accounts Committee to discuss issues relating to financial regularity, propriety or value for money in relation to the public funding that it has received.

The Issuer must provide HEFCE with certain information about the way it operates and its financial position, in order to demonstrate the effectiveness of its management systems and ability to make

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appropriate use of the funding it receives. The Issuer must provide HEFCE with certain information such as copies of the annual audited financial statements, financial forecasts, the audit committee's annual report, the internal auditors' annual report, the external auditors' management letter and the management response and any other information HEFCE may reasonably require to understand the Issuer's risk status. The Issuer must also provide annual accountability returns to HEFCE and HEFCE and provide the Issuer with a confidential risk assessment. The Issuer shall provide HEFCE with any other information it might reasonably require to enable it to act as principal charity regulator. If there is any material adverse change in the Issuer's circumstances, it is under a duty to inform HEFCE of that change, as well as informing HEFCE of any significant developments which could impact upon the mutual interests of the Issuer and HEFCE or major changes in strategy, plans for major restructuring or merger.

In addition, the Issuer is required to submit returns to other Higher Education bodies – notably annual student, staff and finance returns to the Higher Education Statistics Agency, an annual Access Agreement to the Office for Fair Access (and associated monitoring returns), a summary of student numbers to HEFCE, and returns to the Quality Assurance Agency, UK Research Councils and the NHS. The Issuer materially complies with the Committee of University Chairs' (CUC) Higher Education Code of Governance published in December 2014.

The Issuer must obtain prior written consent from HEFCE before it agrees to any new financial commitment meeting either of the following criteria:

 where the total financial commitments (long term and short term) exceed five times its average earnings before tax interest depreciation and amortisation; and/or

 where it is assessed by HEFCE as being at higher risk.

On the basis of the first of these criteria, the issue of the Bonds does require specific HEFCE consent, which was granted on 22 November 2017.

The Issuer is an exempt charity to which HEFCE was appointed as principal regulator on 1 June 2010. Consequently, in relation to its charitable activities, the Issuer benefits from the status of a charity but it is not necessary for it to register with the Charity Commission. As principal regulator, HEFCE is responsible for ensuring that the Issuer, as an exempt charity, fulfils its obligations under charity law. HEFCE's objective is to promote compliance by the trustees of the Issuer (the trustees being members of the Council) with their legal obligations when controlling and managing the Issuer, so far as reasonably possible. In doing so it is required to monitor the Issuer regularly, and potentially to liaise with the Charity Commission if the issues involved are more complex and may result in the use of its power.

A Memorandum of Understanding exists between HEFCE and the Charity Commission. This sets out how HEFCE, as principal regulator of higher education institutions which are exempt charities, works in conjunction with the Charity Commission and, in particular, how the two bodies formulate regulatory policy frameworks and co-ordinate their approach to regulation. Council members are charity trustees and as such must exercise their duties as trustees prudently and in accordance with the Issuer's Statutes and Regulations. The Charity Commission has the power to take proceedings against the members of Council if it believes that they have acted imprudently. The actions that Council takes should always be in the best interests of the charity.

The Charities Act 2011 extends most of the Charity Commission's powers in relation to exempt charities (including the Issuer) as well as to charities registered with the Charity Commission. However, before exercising any of its powers in respect of the Issuer, the Charity Commission must first consult with HEFCE. HEFCE is also able to invite the Charity Commission to use its powers in relation to investigation and intervention. Legal decisions taken by the Charity Commission are subject to review of the Charity Tribunal.

HERA will reform the regulatory framework of higher education by replacing HEFCE with the OfS, as the principal regulator for higher education in relation to the education of students, whilst UKRI will be responsible for funding and the administration of research and innovation.

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In addition to the roles undertaken by HEFCE as described above, HERA will enable the OfS to:

 meet the UK Government policy object of promoting choice and consideration of the students', employers' and taxpayers' interest in all its regulatory and funding decisions; and

 subject to conditions, vary or revoke authorisations to award degrees and revoke authorisation to use the university title.

HERA requires the OfS to establish and maintain a register of English higher education providers and determine the conditions that a provider must meet if it is to remain on that register. Registration as a higher education provider is a requirement for accessing student support and grant funding and for the institution being licensed to sponsor migrants under Tier 4 of the UK's points-based immigration system. If the Issuer fails to meet the conditions of its registration imposed by OfS, this, this could lead to a monetary penalty being imposed or the Issuer being suspended or removed from the register of English higher education providers. Under HERA, the OfS will also determine the conditions that a provider must meet in order to charge the higher fee limits (see "Risk Factors – The Issuer's ability to charge the maximum undergraduate tuition fees for UK/EU students is dependent on compliance with an access agreement approved by the Office for Fair Access").

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TAXATION

UNITED KINGDOM TAXATION

The following is a summary of the United Kingdom withholding taxation treatment at the date hereof in relation to payments of principal and interest in respect of the Bonds. The comments below are of a general nature and are not intended to be exhaustive. They are based on current United Kingdom tax law as applied in England and Wales and the practice of Her Majesty's Revenue and Customs ("HMRC") (which may not be binding on HMRC), in each case which may be subject to change, sometimes with retrospective effect. The comments do not deal with all United Kingdom tax aspects of acquiring, holding or disposing of Bonds. The comments relate only to the position of persons who are absolute beneficial owners of the Bonds. Certain classes of persons such as dealers, certain professional investors, or persons connected with the Issuer may be subject to special rules and this summary does not apply to such Bondholders. The comments below also assume that there will be no substitution of an issuer pursuant to Condition 12(c) (Substitution) of the Bonds or otherwise and does not consider the tax consequences of any such substitution.

The following is a general guide for information purposes and should be treated with appropriate caution. It is not intended as tax advice and it does not purport to describe all of the tax considerations that may be relevant to a prospective purchaser. Bondholders who are in any doubt as to their tax position should consult their professional advisers. Bondholders who may be liable to taxation in jurisdictions other than the United Kingdom in respect of their acquisition, holding or disposal of the Bonds are particularly advised to consult their professional advisers as to whether they are so liable (and if so under the laws of which jurisdictions), since the following comments relate only to certain United Kingdom taxation matters in respect of the Bonds. In particular, Bondholders should be aware that they may be liable to taxation under the laws of other jurisdictions in relation to payments in respect of the Bonds even if such payments may be made without withholding or deduction for or on account of taxation under the laws of the United Kingdom.

UK Withholding Tax on UK Source Interest

(a) Bonds listed on a recognised stock exchange

Under section 987 of the Income Tax Act 2007 ("ITA") securities issued by a company which carry a right to interest will constitute "quoted Eurobonds" provided they are and continue to be listed on a recognised stock exchange. The London Stock Exchange is a recognised stock exchange for these purposes. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List by the United Kingdom Listing Authority and are admitted to trading on the London Stock Exchange. Whilst such securities are and continue to be quoted Eurobonds, payments of interest on the Bonds may be made without withholding or deduction for or on account of United Kingdom income tax. The Issuer is of the view that it is a "company" for the purposes of section 987 of the ITA.

(b) All Bonds

In all cases falling outside the exemption described in (a) above, interest on the Bonds may fall to be paid under deduction of United Kingdom income tax at the basic rate (currently 20 per cent.) subject to such relief as may be available following a direction from HMRC pursuant to the provisions of any applicable double taxation treaty, or to any other exemption which may apply.

Other Rules Relating to United Kingdom Withholding Tax

Any discount element on the issue of the Bonds will not generally be subject to any United Kingdom withholding tax pursuant to the provisions mentioned in "UK Withholding Tax on UK Source Income" above.

Where Bonds are to be, or may fall to be, redeemed at a premium, as opposed to being issued at a discount, then any such element of premium may constitute a payment of interest. Payments of interest are subject to the rules on United Kingdom withholding tax as outlined above.

Where interest has been paid under deduction of United Kingdom income tax (e.g. if the Bonds lost their listing), Bondholders who are not resident in the United Kingdom may be able to recover all or part of the

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tax deducted if there is an appropriate provision in any applicable double taxation treaty and all conditions for relief under that double taxation treaty are satisfied.

The references to "interest" above mean "interest" as understood in United Kingdom tax law. The statements above do not take any account of any different definitions of "interest" or principal" which may prevail under any other law or which may be created by the terms and conditions of the Bonds or any related documentation.

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SUBSCRIPTION AND SALE

J.P. Morgan Securities plc (the "Lead Manager") has, in a subscription agreement dated 6 December 2017 (the "Subscription Agreement") and made between the Issuer and the Lead Manager upon the terms and subject to the conditions contained therein, agreed to subscribe for the Bonds at their issue price of 100 per cent. of their principal amount plus any accrued interest in respect thereof and less total commissions and certain expenses incurred by the Lead Manager in connection with the management of the issue of the Bonds. The Lead Manager is entitled in certain circumstances to be released and discharged from its obligations under the Subscription Agreement prior to the closing of the issue of the Bonds.

The Lead Manager and its affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to the Issuer and/or its affiliates in the ordinary course of business.

General

The Lead Manager has represented, warranted and undertaken that it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Bonds or possesses, distributes or publishes this Prospectus or any other offering material relating to the Bonds. Persons into whose hands this Prospectus comes are required by the Issuer and the Lead Manager to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Bonds or possess, distribute or publish this Prospectus or any other offering material relating to the Bonds, in all cases at their own expense.

United Kingdom

The Lead Manager has further represented, warranted and undertaken that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

United States of America

The Bonds have not been and will not be registered under the Securities Act and are subject to U.S. tax law requirements. Subject to certain exceptions, Bonds may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act. The Lead Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Bonds within the United States or to, or for the account or benefit of, U.S. persons. In addition, until 40 days after commencement of the offering, an offer or sale of Bonds within the United States by a dealer whether or not participating in the offering may violate the registration requirements of the Securities Act.

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GENERAL INFORMATION

Authorisation

1. The creation and issue of the Bonds has been authorised at a meeting of the Council on 30 October 2017 and at meetings of a committee of the Council on 27 November 2017 and 1 December 2017.

Listing and Admission to Trading

2. Application has been made to the FCA for the Bonds to be admitted to the Official List, and to the London Stock Exchange for such Bonds to be admitted to trading on the Regulated Market of the London Stock Exchange. It is expected that such admission will become effective, and that dealings in the Bonds on the London Stock Exchange will commence, on or about 11 December 2017.

The Issuer estimates that the total expenses related to the admission to trading will be approximately £7,040.

Governmental, Legal and Arbitration Proceedings

3. There are no governmental, legal or arbitration proceedings, (including any such proceedings which are pending or threatened, of which the Issuer is aware), which may have, or have had during the 12 months prior to the date of this Prospectus, a significant effect on the financial position or profitability of the Issuer.

Significant/Material Change

4. Since 31 July 2017 there has been no material adverse change in the prospects of the Issuer nor any significant change in the financial or trading position of the Group.

Auditors

5. The consolidated financial statements of the Issuer (excluding OUP) for the two years ended 31 July 2016 and 31 July 2017 have been audited (with qualification) by KPMG LLP of One Snowhill, Snow Hill Queensway, Birmingham B4 6GH, United Kingdom. KPMG LLP is a member of the Institute of Chartered Accountants in England and Wales.

6. The financial statements of each of OUP's Trading Operations and DPRF for the two years ended 31 March 2016 and 31 March 2017, have been audited by KPMG LLP of Arlington Business Park, Theale, Reading, RG7 4SD, United Kingdom. KPMG LLP is a member of the Institute of Chartered Accountants in England and Wales.

Documents on Display

7. Copies of the following documents may be inspected during normal business hours at the offices of the Principal Paying Agent for 12 months from the date of this Prospectus:

(a) the Statutes and Regulations of the Issuer;

(b) the Paying Agency Agreement and the Trust Deed;

(c) the audited consolidated financial statements of the Issuer for the years ended 31 July 2016 and 31 July 2017; and

(d) the audited financial statements of each of OUP's Trading Operations and DPRF for the financial years ended 31 March 2016 and 31 March 2017.

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Yield

8. On the basis of the issue price of the Bonds of 100 per cent. of their principal amount, the gross yield of the Bonds is an annual yield of 2.544 per cent. per annum.

Legend Concerning US Persons

9. The Bonds and any Coupons and Talons appertaining thereto will bear a legend to the following effect: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".

ISIN and Common Code

10. The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS1713474838 and the common code is 171347483.

The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking S.A., 42 Avenue JF Kennedy, L-1855 Luxembourg, Luxembourg.

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FINANCIAL STATEMENTS AND AUDITORS' REPORTS

The following pages of this document set out the following information:

 the audit reports and the consolidated financial statements of Issuer for the financial years ended 31 July 2016 and 31 July 2017 (together, the "Issuer Financial Statements"); and

 the audit reports and the financial statements of each of OUP's Trading Operations and DPRF for the financial years ended 31 March 2016 and 31 March 2017 (together, the "OUP Financial Statements").

Each of the Issuer Financial Statements and the OUP Financial Statements have been audited (in the case of the Issuer, with qualification) by KPMG LLP of One Snowhill, Snow Hill Queensway, Birmingham B4 6GH, United Kingdom (in respect of the Issuer, excluding OUP) and KPMG LLP of Arlington Business Park, Theale, Reading, RG7 4SD, United Kingdom (in respect of OUP). KPMG LLP is a member of the Institute of Chartered Accountants in England and Wales.

Information regarding the Issuer Financial Statements

Potential investors should note that the Issuer Financial Statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), including FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland). The Issuer Financial Statements consolidate the accounts of the Issuer and of its subsidiary undertakings for the financial year to 31 July 2017. However, the Issuer Financial Statements do not include the transactions and balances of OUP, which is a department of the Issuer (but not a separate legal entity). Under the Issuer's Statutes and Regulations, the financial statements of OUP shall not be included in the Issuer's financial statements and the Delegacy of OUP is responsible for preparing separate audited financial statements relating to OUP for submission to the Council (which are also prepared in accordance with UK GAAP). The exclusion of OUP from the Issuer Financial Statements is not, however, in accordance with applicable Accounting Standards and the Statement of recommended practice: on accounting for further and higher education (FEHE SORP). Therefore, the audit reports with respect to the Issuer Financial Statements are qualified by reference to the matters described above.

Except for the effects of these matters, the audit reports with respect to the Issuer Financial Statements state that the Issuer Financial Statements give a true and fair view of the state of affairs of the Group and the Issuer as at 31 July 2016 and 31 July 2017, respectively, and of the Group's and Issuer's income and expenditure, gains and losses and changes in reserves and the Group's cash flows for the year then ended.

Information regarding the OUP Financial Statements

OUP's financial statements consist of the annual accounts relating to OUP's Trading Operations, the annual accounts relating to DPRF and the Annual Report of the Delegates of the University Press. The DPRF was established in 1984 in order to distinguish the reserve investments of OUP from the assets and liabilities of its Trading Operations. The DPRF holds and manages properties owned by OUP, together with the income arising from them.

Amendments to the Issuer's financial statements with effect from the year ended 31 July 2018

Notwithstanding the foregoing, the Issuer has elected to fully include the financial statements of OUP's Trading Operations and DPRF into its own consolidated financial statements for all financial periods beginning on and after 1 August 2017. Accordingly, the Issuer's consolidated financial statements for the year ended 31 July 2018 (which are expected to be published in or around November 2018), and for future financial periods thereafter, will include the transactions and balances of OUP's Trading Operations and DPRF.

As the Issuer and OUP have historically had different financial periods as at which their audited financial statements have historically been produced (respectively, 31 July and 31 March), it is not possible to provide consolidated financial data on the basis of audited financial statements.

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On the basis of the Issuer's most recent year end at 31 July 2017 and each of OUP's Trading Operations' and DPRF's most recent year end at 31 March 2017 their respective audited financial statements show the following2:

Issuer for period ending 31 July Trading Operations for period DPRF for period ending 31 2017 (£ million) ending 31 March 2017 (£ March 2017 (£ million) million)

Total Comprehensive Income: Profit for the Year: £93.7 Net Income: £20.5 £219.7 Total Net Assets: £3,232.3 Net Assets: £213.6 Net Assets: £327.5 Total Reserves: £3,232.3 Total Funds: £213.6 Total Funds: £327.5

Had the Issuer accounted for OUP as part of the Issuer with respect to its historic financial periods, the Issuer's consolidated financial statements for the year ended 31 July 2017 would have recognised additional net assets of £582 million (2016: £636 million) and an increase in the reported surplus for the year of £79 million (2016: increase in surplus of £48 million) based on unaudited management accounts of OUP to 31 July 2017.

2 The figures in the following table must be considered in conjunction with Issuer Financial Statements and the OUP Financial Statements included in this Prospectus and the notes thereto.

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Financial Statements of the Issuer for the year ended 31 July 2017

Financial Statements of the Issuer for the year ended 31 July 2016

26 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Independent auditor’s report to the members of the Council of the University of Oxford

We have audited the Group and University financial statements (‘financial statements’) of the University of Oxford for the year ended 31 July 2016 set out on pages 28–79. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

This report is made solely to the Council of the University of Oxford in accordance with the University’s Statutes and the Higher Education Funding Council for England (HEFCE) Memorandum of Assurance and Accountability August 2014. Our audit work has been undertaken so that we might state to the Council’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 Council and the Council’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Council and the auditor

As explained more fully in the Statement of the Responsibilities of Council, Council is responsible for the preparation of the financial statements that 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 Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the University’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by Council; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Basis for qualified opinion on financial statements

As explained in note 1 to the Statement of Accounting Policies, the University has not included the transactions and balances of the Oxford University Press (“the Press”) in its financial statements. As the Press is a department of the University rather than a separate legal entity, in our opinion, under the relevant accounting standards, the transaction and balances of the Press should have been included in the University and Group financial statements. Had the University accounted for the Press as part of the University, the University and Group financial statements for the year ended 31 July 2016 would have recognised additional net assets of some £636m (2015: £516m) and an increase in the reported surplus for the year of some £48m (2015: reduction in surplus £52m) based on unaudited management accounts of the Press to 31 July 2016. Extracts from the accounts of the Press for the year ended 31 March 2016 are included for information at pages 80–91 but do not form part of these financial statements.

We qualified our audit opinion on the financial statements for the year ended 31 July 2015 with regard to this same disagreement. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 27

Qualified opinion on financial statements

In our opinion, except for the effects of the matter described in the Basis for qualified opinion on financial statements paragraph, the financial statements:

nn give a true and fair view of the state of affairs of the Group and the University as at 31 July 2016 and of the Group’s and University’s income and expenditure, gains and losses and changes in reserves and the Group’s cash flows for the year then ended; nn have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice and with the 2015 Statement of Recommended Practice – Accounting for Further and Higher Education; and nn meet the requirements of HEFCE’s Accounts Direction to higher education institutions for 2015–16 financial statements. Opinion on other matters prescribed by the Higher Education Funding Council for England Audit Code of Practice issued under the Further and Higher Education Act 1992

In our opinion, in all material respects,

nn funds from whatever source administered by the University for specific purposes have been properly applied to those purposes; nn income during the year ended 31 July 2016 has been applied in accordance with the University’s statutes and, where appropriate, with the HEFCE Memorandum of Assurance and Accountability; nn funds provided by HEFCE have been applied in accordance with the Memorandum of Assurance and Accountability and any other terms and conditions attached to them; and nn the corporate governance and internal control requirements of HEFCE’s Accounts Direction to higher education institutions for 2015–16 financial statements have been met.

Michael Rowley For and on behalf of KPMG LLP Statutory Auditor One Snowhill Snow Hill Queensway Birmingham B4 6GH 28 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Consolidated & University Statements of Comprehensive Income

For the year ended 31 July 2016

CONSOLIDATED UNIVERSITY 2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Income Tuition fees and education contracts 1 293.5 265.7 277.2 251.2 Funding Body Grants 2 192.5 186.1 192.5 186.1 Research grants and contracts 3 537.4 608.0 534.3 604.6 Other income 4 213.0 345.7 168.0 307.6 Investment income 5 8.8 4.7 7.8 4.1 TOTAL INCOME BEFORE DONATIONS 1,245.2 1,410.2 1,179.8 1,353.6 Donations and endowments 6 74.4 103.7 71.0 103.0 Donation of heritage assets 6,14 2.2 10.0 2.2 10.0 TOTAL INCOME 1,321.8 1,523.9 1,253.0 1,466.6

Expenditure Staff Costs 7 680.3 638.2 661.5 620.2 Staff costs - movement in pensions provision 24 11.0 75.8 10.6 74.8 Operating expenditure 9 545.3 516.0 504.4 481.1 Depreciation/Amortisation 9,13 87.1 82.6 86.9 82.1 Interest and other finance costs 8 12.8 5.9 12.7 5.8 TOTAL EXPENDITURE 1,336.5 1,318.5 1,276.1 1,264.0

(DEFICIT)/SURPLUS BEFORE OTHER GAINS (14.7) 205.4 (23.1) 202.6 Gains on investments 5 188.0 205.4 186.1 202.5 SURPLUS BEFORE TAX 173.3 410.8 163.0 405.1 Taxation 10 (0.4) (18.5) - (18.5) TOTAL COMPREHENSIVE INCOME 172.9 392.3 163.0 386.6

Represented by Unrestricted comprehensive income for the year 95.5 237.2 84.6 232.0 Endowment comprehensive income for the year 73.9 147.9 74.9 147.4 Restricted comprehensive income for the year 3.5 7.2 3.5 7.2 172.9 392.3 163.0 386.6

The activities of the Oxford University Press (‘the Press’) are not included within the University’s Financial Statements. Extracts from the accounts of the Press for the year ended 31 March 2016 are included for information at pages 80–91 but do not form part of these Financial Statements.

All activities relate to continuing operations FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 29

Consolidated & University Statements of Changes in Reserves

For the year ended 31 July 2016

INCOME AND CONSOLIDATED ENDOWMENT RESERVES TOTAL EXPENDITURE RESERVES Permanent Expendable Restricted Unrestricted £’m £’m £’m £’m £’m Balance at 31 July 2014 617.4 70.6 67.0 1,692.4 2,447.4 Income 45.4 34.3 27.4 1,416.8 1,523.9 Expenditure (14.7) (12.0) (20.2) (1,271.6) (1,318.5) Surplus/(deficit) 30.7 22.3 7.2 145.2 205.4 Reserve transfer (2.2) 12.9 - (10.7) - Other comprehensive income 72.4 11.8 - 102.7 186.9 Balance at 31 July 2015 718.3 117.6 74.2 1,929.6 2,839.7

Income 25.3 12.9 20.8 1,262.8 1,321.8 Expenditure (15.6) (5.1) (17.3) (1,298.5) (1,336.5) Surplus/(deficit) 9.7 7.8 3.5 (35.7) (14.7) Reserve transfer (9.9) - - 9.9 - Other comprehensive income 55.1 11.2 - 121.3 187.6 BALANCE AT 31 JULY 2016 773.2 136.6 77.7 2,025.1 3,012.6

INCOME AND UNIVERSITY ENDOWMENT RESERVES TOTAL EXPENDITURE RESERVES

Permanent Expendable Restricted Unrestricted £’m £’m £’m £’m £’m

Balance at 31 July 2014 550.6 70.6 67.0 1,700.4 2,388.6 Income 45.4 34.3 27.4 1,359.5 1,466.6 Expenditure - (12.0) (20.2) (1,231.8) (1,264.0) Surplus/(deficit) 45.4 22.3 7.2 127.7 202.6 Reserve transfer (14.3) 12.9 - 1.4 - Other comprehensive income 69.3 11.8 - 102.9 184.0 Balance at 31 July 2015 651.0 117.6 74.2 1,932.4 2,775.2

Income 25.3 12.9 20.8 1,194.0 1,253.0 Expenditure - (5.1) (17.3) (1,253.7) (1,276.1) Surplus/(deficit) 25.3 7.8 3.5 (59.7) (23.1) Reserve transfer (22.9) - - 22.9 - Other comprehensive income 53.5 11.2 - 121.4 186.1 BALANCE AT 31 JULY 2016 706.9 136.6 77.7 2,017.0 2,938.2 30 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Consolidated and University Balance Sheets

As at 31 July 2016

CONSOLIDATED UNIVERSITY 2016 2015 2016 2015 £’m £’m £’m £’m Non-current Assets Intangible assets and goodwill 12 1.4 0.1 1.6 0.3 Property, plant and equipment 13 1,329.0 1,261.8 1,327.6 1,260.8 Heritage assets 14 80.5 77.0 80.5 77.0 Investments 15 2,057.8 1,860.8 2,005.2 1,797.3 3,468.7 3,199.7 3,414.9 3,135.4

Current Assets Inventories 2.9 3.1 1.4 1.5 Trade and other receivables ¡ due within one year 17 224.5 236.0 227.1 241.1 ¡ due after one year 18 7.2 7.2 7.2 7.2 Investments 19 51.1 65.2 49.9 63.0 Cash & Cash equivalents 20 217.1 233.3 183.1 214.4 502.8 544.8 468.7 527.2 Creditors: Amounts falling due within one year 21 (493.1) (474.7) (481.6) (459.0) NET CURRENT ASSETS 9.7 70.1 (12.9) 68.2

TOTAL ASSETS LESS CURRENT LIABILITIES 3,478.4 3,269.8 3,401.9 3,203.6 Creditors: Amounts falling due after more 22 (256.8) (241.7) (256.8) (241.7) than one year Provisions for liabilities Pension provisions 24 (197.4) (181.2) (196.2) (180.4) Other provisions 25 (11.6) (7.2) (10.7) (6.3) TOTAL NET ASSETS 3,012.6 2,839.7 2,938.2 2,775.2

Reserves Endowment Reserves ¡ Permanent 26 773.2 718.3 706.9 651.0 ¡ Expendable 26 136.6 117.6 136.6 117.6 909.8 835.9 843.5 768.6 Restricted reserves ¡ Income and expenditure reserve 27 77.7 74.2 77.7 74.2 Unrestricted reserves ¡ Income and expenditure reserve 2,025.1 1,929.6 2,017.0 1,932.4 2,102.8 2,003.8 2,094.7 2,006.6 TOTAL RESERVES 3,012.6 2,839.7 2,938.2 2,775.2

The activities of the Oxford University Press (‘the Press’) are not included within the University’s Financial Statements. Extracts from the accounts of the Press for the year ended 31 March 2016 are included for information at pages 80–91 but do not form part of these Financial Statements.

The Financial Statements were approved by Council on 1 December 2016 and signed on its behalf by:

Prof. Louise Richardson G. F. B. Kerr Vice-Chancellor Director of Finance FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 31

Consolidated Statement of Cash Flows

For the year ended 31 July 2016

CONSOLIDATED

2015/16 2014/15 £’m £’m Cash flows from operating activities Surplus for the year 172.9 392.3 Adjustment for: Depreciation 13 87.1 82.6 Amortisation of intangibles 12 0.1 0.1 (Gain) on investments (188.0) (205.4) Decrease/(increase) in inventories 0.2 (0.3) (Increase) in receivables 17 (5.2) (23.5) Increase in payables 21,22 51.6 9.4 Increase in other provisions 25 4.4 1.3 Increase in pension provisions 24 10.9 82.5 Heritage assets non-cash donation 14 (2.2) (10.0) Unrealised exchange rate loss/(gain) 15.3 (3.3) Adjustment for investing or financing activities: Investment income 5 (8.8) (7.8) Interest payable 8 12.8 5.9 Endowment income 6 (37.9) (79.5) Capital grant income (77.7) (76.4) Profit on disposal of property, plant and equipment 13 - (0.3) NET CASH FLOWS FROM OPERATING ACTIVITIES 35.5 167.6

Cash flows from investing activities Capital grants receipts 63.1 56.3 Payments to acquire heritage assets 14 (1.3) (0.4) Payments to acquire property, plant and equipment 13 (154.3) (132.2) Payments to acquire intangible assets 12 (1.4) - Net divestment/(investment) in current investments 19 14.1 (58.2) Net (investment) in non-current investments 15 (26.6) (213.9) Investment income 5 6.5 5.7

NET CASH FLOWS FROM INVESTING ACTIVITIES (99.9) (342.7)

Cash flows from financing activities Interest paid on borrowings and finance leases 8 (7.5) (1.9) Endowment Cash Received 53.0 61.6 Repayment of borrowings 21, 22 (2.3) (2.3) New borrowings 22 - 200.0 NET CASH FLOWS FROM FINANCING ACTIVITIES 43.2 257.4

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (21.2) 82.3 Cash and cash equivalents at beginning of year 233.3 151.0 Effect of foreign exchange rate changes 4.9 - CASH AND CASH EQUIVALENTS AT END OF YEAR 20 217.1 233.3 32 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Statement Of Accounting Policies

1. Basis of Accounting

The Financial Statements have been prepared under the historical cost convention, modified to include certain items at fair value in accordance with the applicable accounting standard FRS 102 (Financial Reporting Standard 102) and the Statement of Recommended Practice: on Accounting for further and higher Education (FEHE SORP), except for the exclusion of Oxford University Press “Press”.

The University is a public benefit entity and has applied the relevant public benefit requirements of FRS 102.

The functional currency of the University is Pounds Sterling, the currency of the United Kingdom the primary economic environment the University operates in. The consolidated Financial Statements are also presented in Pounds Sterling. Foreign operations are included in accordance with the policies set out in policy 3.

Judgements made by management in the application of these accounting policies that have a significant effect on the Financial Statements and estimates with a significant risk of material adjustment in the next year are discussed at the end of these policies.

Exclusion of the Press

The Financial Statements do not include the transactions and balances of the Press which is a department of the University rather than a separate legal entity. Under the University’s Statutes and Regulations the Financial Statements of the Press shall not be included in the University financial statements and the Delegacy of the Press is responsible for preparing separate audited accounts relating to the Press for submission to Council. Extracts from the accounts of the Press for the year ended 31 March 2016 are included for information at pages 80-91 but do not form part of these financial statements. Where funds are transferred from the Reserves of the Press these are reflected as income in the financial statements of the University. The exclusion of the Press from the University and consolidated financial statements is however not in accordance with applicable Accounting Standards and the Statement of recommended practice: on accounting for further and higher education (FEHE SORP).

The University has complied with all other requirements of FRS 102, the FEHE SORP, and HEFCE accounts guidance in preparation of the Financial Statements.

2. Scope of the Financial Statements

Basis of consolidation

The Financial Statements (apart from the University’s own balance sheet, income statement and related notes) consolidate the accounts of the University and of its subsidiary undertakings for the financial year to 31 July 2016.

The results of subsidiaries acquired or sold in the current or prior years are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the purchase method.

The Financial Statements do not consolidate the accounts of the Oxford University Student Union and its subsidiary company, as they are separate and independent legal entities in which the University has no financial interest and it does not exercise direct control or dominant influence over their policy decisions.

The Financial Statements do not consolidate the accounts of those colleges of the University that are separate and independent legal entities. The accounts of Kellogg College and St Cross College are included as they are departments of the University.

Non-company charitable subsidiaries, including trusts, are aggregated into the University accounts where they meet the definition of a ‘Special Trust’ as per section 287 of the Charities Act 2011. Where a trust does not meet the definition of a special trust, but control can be demonstrated by the University, it is consolidated. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 33

Investment funds where the University is the majority investor, but does not exercise any management control are excluded from consolidation in accordance with the provisions of Section 9 of FRS 102, and accounted for as Investment Assets.

In the Consolidated Financial Statements, associated undertakings are accounted for using the ‘Equity Method’. They are initially recognised at transaction cost adjusted each year to reflect the University’s share of the associates’ Comprehensive Income, recognised through Other Comprehensive Income.

Going concern

After making enquiries, Council has a reasonable expectation that the University has adequate resources to continue in operational existence for the foreseeable future.

The University prepares budgets and forecasts on an annual basis and operates an ongoing 5 year forecast sustainability review in line with HEFCE guidance. The going concern nature of the University has been considered for a period of greater than 12 months from the date of approval of the Financial Statements.

Detailed cash flow forecasts covering a period of greater than 12 months have been prepared and the University is satisfied that it can meet its day to day working capital needs out of cash and liquid investments. Council is not aware of any material uncertainties which would prevent the University from continuing as a going concern.

For these reasons, it continues to adopt the going concern basis in preparing the accounts.

3. Foreign Currencies

Transactions in foreign currencies are recorded at the rate of exchange on the transaction date. Monetary assets and liabilities denominated in foreign currencies are reported at the rates of exchange prevailing at the balance sheet date. Non-monetary assets and liabilities measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income.

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rates prevailing at the balance sheet date. Exchange differences arising from this translation of foreign operations are reported as an item of Other Comprehensive Income.

4. Income

University income falls into 7 main material categories:

nn tuition fees and educational contracts nn provision of other goods and services nn royalty income nn investment income nn research grants and contracts nn funding body grants nn donated and endowment income Income recognition is determined by the nature of the transaction, income source, and whether or not the transaction has commercial substance.

Transactions with commercial substance

Where a transaction has commercial substance it is accounted for as a revenue transaction. Income is recognised in line with the provision of the associated goods or services, with reference to the terms of the contract. 34 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Tuition fees and educational contracts

Fee income is stated gross of any expenditure and credited to the Statement of Comprehensive Income over the period students study. Where the amount of the tuition fee is reduced, income receivable is shown net of the discount. Bursaries and scholarships are accounted for gross as expenditure and not deducted from income.

Tuition and other course fees relate directly to the provision of specific academic and non-academic courses. Income is recognised on a pro-rata basis across the length of the course, in line with the provision of the courses to students.

Professional course fees and other educational contracts are accounted for as for service contracts below.

Provision of other goods and services

Income from the sale of goods or services is credited to the Statement of Comprehensive Income when the goods or services are supplied to the external customer.

Where services are being rendered, but are not complete at the end of the period income is recognised with reference to the stage of completion/degree of provision of the service, as determined on an appropriate basis for each contract.

Royalty income

Royalty income is recognised on an accruals basis in accordance with the substance of relevant agreements.

Investment income

Refer to policy 13 for investment income recognition policy.

Agency income

Funds the University receives and disburses as paying agent on behalf of a funding body are excluded from the income and expenditure of the University where the University is exposed to minimal risk.

Transactions without commercial substance

Where the University receives income on a basis that is without commercial substance it accounts for this on a Non- Exchange Transaction basis. A Non-Exchange Transaction is defined as when:

“An entity receives value from another entity without directly giving approximately equal value in exchange”.

Performance model

Income is recognised within the Statement of Comprehensive Income when the grant is receivable (legal/contractual commitment) and performance related conditions specified in the agreement are met. In the absence of performance conditions income is recognised in full as soon as it becomes receivable.

Performance conditions are defined as follows:

“A condition that requires the performance of a particular level of service or units of output to be delivered, with payment of, or entitlement to, the resources conditional on that performance”.

Resources received in advance of completion of performance conditions are recognised on the balance sheet as deferred income and released to the Statement of Comprehensive Income as conditions are met. Where grants are received in arrears accrued revenue or receivable assets are recognised in line with income. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 35

Government grants

Both revenue and capital government grants are accounted for under the Performance Model.

nn HEFCE funding grants For funding grants relating to a single academic year income is recognised in full in the period to which the grant relates. Grants relating to more than a single year are recognised pro-rata across the term of the grant. Non-Government grants, donations and endowments

Grant and donation income received from a non-governmental source is accounted for under the Performance Model.

Income is recognised as Donation and Endowment income, with the exception of funding for the purposes of research which is recognised as ‘Research Grants and Contracts’.

Non-government grant and donation income is split into 4 classes;

nn Non-government grants and donated income with performance conditions Income is recognised within the Statement of Comprehensive Income when receivable (legal/contractual commitment) and performance conditions have been met nn Donations with restrictions A donation is considered to have a restriction when the gift agreement contains;

“A requirement that limits or directs the purposes for which a resource may be used that does not meet the definition of a performance-related condition.”

Income with restrictions, but no performance conditions, is recognised within the Statement of Comprehensive Income when the grant is receivable (legal/contractual commitment) and recorded within restricted reserves.

As the funding is expended against the restriction it is transferred to unrestricted reserves by way of a reserves transfer. nn Donations without restrictions Income with neither restrictions nor performance conditions is recognised within the Statement of Comprehensive Income when the grant is receivable (legal/contractual commitment) and recorded within unrestricted reserves.

The University on occasion receives donations and endowments which either take the form of a bequeathment which will be paid upon the death of donor or will be paid in a series of tranches. It is the University’s policy to recognise the income on these donations and endowments once it has a legal or constructive right to receive them, with the amounts due from the donors recognised on the Balance Sheet as Donations and Endowments Receivable. nn Endowments Refer to policy 5 for income recognition policy for endowments. Capital grants

Non-government grants, for the purpose of purchasing or constructing specific assets are recognised as income upon the asset being brought into use, or in line with phase completion of large construction projects. Grants where the University has discretion over the assets purchased/built are recognised in full as income when the grant becomes receivable. Government grants are taken as income as they become receivable.

Grant income is only recognised across the useful life of an asset to the extent that the grant specifically funds the operation/maintenance of the asset. 36 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Research income

Income recognition for research funding is dependent upon the source of the funding and the nature of the transaction. Income is classified as ‘Research Grants and Contracts’ regardless of source when it meets the Frascati definition of research.

The following specific research income recognition criteria have been applied;

Research funding from United Kingdom Research Councils, and the European Commission is received on the basis of reimbursing the University for costs incurred in performance of the research. Income is recognised in line with expenditure which creates a right to receive funding from these bodies.

Funding from charities and industry is recognised on bases set out in the terms of individual funding agreements. In the majority of cases income is recognised on a reimbursement basis, with income recognised as costs are incurred for which the University has a right to reimbursement.

The following specific research income recognition criteria have been applied;

nn Where funding is from a government body, expenditure on the grant purpose is presumed to be the performance condition unless specifically disallowed under the funding agreement. nn Funding from charities and industry is accounted for as non-government grant income unless it is demonstrable that a revenue transaction has taken place with near equal value being exchanged. 5. Endowments

Endowments are a class of donation where the donor requires the original gift be invested, with the return to be spent against the donor’s charitable aims. The donor can specify that the capital can be spent (expendable endowment) or maintained in perpetuity (permanent endowment).

Endowments are classified as ‘Non-Exchange Transactions’ and are accounted for under the Performance Model. The original endowment gift is recognised as ‘Donation and Endowment’ income when receivable.

Permanent endowments

nn Permanent Restricted Donor has indicated the original gift be maintained in perpetuity, with investment income spent on restricted purposes defined by the donor. nn Permanent Unrestricted Donor has indicated the original gift be maintained in perpetuity, with investment income spent on the general purposes of the University. Upon initial income recognition permanent endowments are recorded as endowment capital within permanent endowment reserves.

Investment income and endowment spend is accounted for under the Total Return model.

Total Return

The University operates a Total Return endowment investment management policy for permanent endowments and an associated Total Return Accounting policy. Total Return Accounting allows the spending of permanent endowment investment gains regardless of whether they are realised/unrealised capital gains or dividend/interest income.

Investment gains on permanent endowment assets are recognised in the Statement of Comprehensive Income as accrued. The gains are recorded within the University’s permanent endowment reserves as unapplied return.

For permanent restricted endowments unapplied return is transferred to unrestricted reserves as expenditure is incurred against the charitable purposes of each endowment. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 37

For permanent unrestricted endowments unapplied return is transferred to unrestricted reserves under a spend rule based on the estimated long term investment real rate of return. This is calculated as a percentage (currently 4.0%) of the value of the brought forward endowment.

Indexation of permanent endowment capital

UK charity law requires the University to maintain the charitable benefit of all permanent endowments in perpetuity. The University has adopted a policy of indexing brought forward permanent endowment capital by CPI to maintain the original capital value in real terms. A transfer is made on an annual basis from unapplied return to an indexation reserve (a subset of permanent endowment capital).

Expendable endowments

nn Expendable Restricted The donor has indicated the original gift may be spent, but unspent funds be invested. The original gift and investment gains are to be spent on restricted purposes defined by the donor. Expendable restricted endowments upon initial income recognition are recognised within expendable endowment reserves.

Investment income is recognised within the Statement of Comprehensive Income as accrued and recorded as accumulated income within expendable endowment reserves.

Accumulated income is released to unrestricted reserves as a reserves transfer in line with spend against the restricted purposes of each endowment.

6. Employee Benefits

Short-term employee benefits

Short term employment benefits such as salaries and compensated absences are recognised as an expense in the year employees render service to the University. A liability is recognised at each balance sheet date to the extent that employee holiday allowances have been accrued but not taken, the expense being recognised as staff costs in the Statement of Comprehensive Income.

Post-employment benefits (pensions)

The two principal pension schemes for the University’s staff are the Universities Superannuation Scheme (USS) and the University of Oxford Staff Pension Scheme (OSPS). The University also contributes on behalf of its employees to a number of other pension schemes including; Superannuation Arrangements of the University of London (SAUL), Medical Research Council Pension Scheme (MRCPS) and NHS Pension Scheme.

These schemes are all defined benefit schemes, which are externally funded and contracted out of the State Second Pension (S2P). Each fund is valued every three years by professionally qualified independent actuaries.

USS, OSPS, SAUL, and MRCPS are multi-employer schemes for which it is not possible to identify the assets and liabilities belonging to individual institutional members due to the mutual nature of the schemes and therefore these schemes are accounted for as defined contribution retirement benefit schemes.

The University contributes to USS, OSPS, SAUL and MRCPS at rates set by the scheme actuaries and advised to the University by the scheme administrators. The University contributes to the NHS Pension Scheme at rates in accordance with the Government’s actuary’s report on the scheme.

The amount charged to the Statement of Comprehensive Income represents the contributions payable to each scheme in respect of the accounting period, excluding any extra costs incurred related to clearing scheme deficits already provided for.

A liability is recorded within provisions for any contractual commitment to fund past deficits within the multi- employer schemes as determined by the scheme management. The associated expense is recognised in the Statement of Comprehensive Income. 38 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

7. Leases and Service Concession Arrangements

Finance leases

Leases in which the University assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases.

Leased assets acquired by finance lease and associated lease liability are stated at the lower of fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.

Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

The University recognises finance leases only for agreements of £100k or above in line with the minimum value at which Property, Plant and Equipment is capitalised.

Operating leases

Costs in respect of operating leases are charged on a straight-line basis over the lease term. Future commitments under operating leases are disclosed in note 31.

Any lease premiums or incentives are recognised as a reduction in expense spread evenly over the minimum lease term. The difference between expenditure recognised and cash flow benefits received is recognised as a liability released to the Statement of Comprehensive Income over the lease term.

Service concession arrangements

Service concession arrangements are finance lease arrangements whereby the lessor also provides services (e.g. maintenance and operation) alongside provision of the assets. Service concession arrangements are accounted for on the same basis as finance leases except for the apportionment of payments.

Payment under the service concession arrangement is allocated between service costs, finance charges and financial liability repayments to reduce the financial liability to nil over the life of the arrangement.

8. Intangible Assets and Goodwill

Goodwill

Goodwill arises on consolidation and is based on the difference between the fair value of the consideration given for the undertaking acquired, and the fair value of its separable net assets at the date of acquisition.

Goodwill is amortised over its estimated useful life of between five and ten years on a straight-line basis. A full year of amortisation is taken in the year of acquisition.

Goodwill is assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income. The recoverable amount of goodwill is the present value of the future cash flows of the cash-generating units of which the goodwill is a part.

Negative goodwill relating to non-monetary assets is released to the Statement of Comprehensive Income as those assets are recovered through depreciation or sale. Negative goodwill in excess of the fair values of the non-monetary assets is released to the Statement of Comprehensive Income in the period in which the non-monetary assets are recovered. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 39

Other internally generated intangibles

No internally generated intangibles are capitalised as the future inflow of economic benefits cannot be shown to be probable.

Research and development costs are written off to the Statement of Comprehensive Income as incurred.

9. Property, Plant and Equipment

Property, Plant and Equipment (PPE) consists of equipment, software and vehicles costing over £25k and capital building projects over £100k, land and completed buildings having a useful economic life of greater than 1 year and not intended for resale.

Property, Plant and Equipment (other than properties held for investment purposes) is stated at cost and depreciated on a straight-line basis over the following periods:

Freehold buildings 50 years Building plant and equipment 20 years Buildings on National Health Service sites 50 years Leasehold properties 50 years or the period of the lease if shorter Equipment 3–5 years

Freehold land and assets in the course of construction are not depreciated.

Assets are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income. Assets are considered to be impaired if their recoverable value is less than book value. The recoverable amount of a PPE asset is the higher of its fair value less costs to sell and its value in use.

Where indicators exist for a decrease in impairment loss on assets, the prior impairment loss is reversed only to the extent that it does not lead to a revised carrying amount higher than if no impairment had been recognised.

Borrowing costs

Borrowing costs relating to purchase or construction of PPE assets are recognised as an expense in the Statement of Comprehensive Income in the period in which they are incurred.

10. Heritage Assets

Works of art and other valuable artefacts (heritage assets) acquired since 1 August 1999 and valued at over £25k are capitalised and recognised in the Balance Sheet at the cost or value of the acquisition, where such a cost or valuation is reasonably obtainable.

Heritage assets are not depreciated since their long economic life and high residual value mean that any depreciation would not be material.

11. Donated Assets

The University receives benefits in kind such as gifts of equipment, works of art and property. Items of a significant value donated to the University, which, if purchased, the University would treat as Property, Plant and Equipment, are capitalised at their current value and depreciated in accordance with the policy set out above. The value of the donation is included in the Statement of Comprehensive Income in the year they are received.

12. Repairs and Maintenance

Expenditure to ensure that a Property, Plant and Equipment asset maintains its previously recognised standard of performance is recognised in the Statement of Comprehensive Income in the period in which it is incurred. The University has a planned maintenance programme, which is reviewed annually. 40 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

13. Investments

Basis of valuation

All investments will initially be recognised at cost and subsequently measured at fair value at each reporting date. Where fair value cannot be reliably measured or investments are not publicly traded, they will be measured at cost less impairment.

Investments in listed shares and venture capital vehicles (where shares are publicly traded or their fair value can be reliably measurable) are measured at market value. The majority of listed shares are invested through the Oxford Endowment and Oxford Capital Funds.

Investment properties will be measured at fair value, based on the triennial valuation undertaken by an independent Chartered Surveyor.

Investments in subsidiaries and associated undertakings are accounted for under the Cost Model and recognised at transaction cost less accumulated impairment losses.

Revaluation

All gains and losses on investment assets, both realised and unrealised are recognised in the Statement of Comprehensive Income as they accrue.

External entities

External entities such as Colleges and other bodies closely associated with the University can invest in the Oxford Endowment and Oxford Capital Funds. Since it is not possible to show the specific investments of these entities in the various funds, the amounts held on their behalf by the University are shown as a deduction from the University’s Investment Assets.

14. Inventories

Inventories are stated at the lower of cost and selling price less costs to sell. Where necessary, provision is made for obsolete, slow-moving and defective stocks.

Consumables are charged to the Statement of Comprehensive Income as purchased or released from stores.

15. Taxation status

The University is an exempt charity within the meaning of Schedule 3 of the Charities Act 2011 and as such is listed as a charity within the meaning of Paragraph 1 of Schedule 6 to the Finance Act 2010. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Sections 472–488 of the Corporation Tax Act 2010 and Section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that such income or gains are applied to exclusively charitable purposes.

Most of the University’s principal activities are exempt from Value Added Tax ‘VAT’, but certain activities and other ancillary supplies and services are liable to VAT at various rates. Expenditure includes VAT charged by suppliers to the University where it is not recoverable and is likewise included in the cost of fixed assets.

Commercial trading activities undertaken by the University are operated through its subsidiary companies. This income will attract applicable VAT and the profits are liable to Corporation Tax. However, the taxable profits made by these companies are covenanted to the University and paid under Gift Aid, to the extent that the companies have distributable reserves, which negates that liability. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 41

16. Cash and Cash Equivalents

Cash includes cash in hand, cash at bank, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty.

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value. These include term deposits and other instruments held as part of the University’s treasury management activities.

Cash and cash equivalents contains sums relating to endowment reserves which the University is restricted as to how they are disbursed. Note 26 summarises the assets restricted in their use.

17. Financial Instruments

As allowable under FRS 102 the University has adopted the option to apply the recognition, measurement and disclosure requirements of sections 11 and 12 of FRS 102.

Financial assets are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income.

For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date.

18. Intra-Group Transactions

Gains or losses on any intra-group transactions are eliminated in full. Amounts in relation to debts and claims between undertakings included in the consolidation are also eliminated. Balances between the University and its associates and joint ventures are not eliminated; unsettled normal trading transactions are included as current assets or liabilities. Any gains or losses are included in the carrying amount of assets of either entity; the part relating to the University’s share is eliminated.

19. Public Benefit Concessionary Loans

Where loans are made at below the prevailing market rate of interest, not repayable on demand and made for the purpose of furthering the objectives of the University, they are classified as concessionary loans.

Concessionary loans are initially measured at the amount paid and adjusted at the period end to reflect any accrued income receivable. Should a loan be judged as irrecoverable it is written off to the Statement of Comprehensive Income in the period in which it becomes irrecoverable. 42 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

20. Accounting for Jointly Controlled Entities, Assets, and Operations

Jointly controlled entities

The University accounts for its share of jointly controlled entities using the equity method.

Investments in jointly controlled entities are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the Group’s share of the Profit or Loss and Other Comprehensive Income of the Joint Operation.

Jointly controlled assets and operations

The University accounts for jointly controlled assets and operations based upon its share of costs incurred, and recognises its share of liabilities incurred pro-rata. Income and expenditure is recognised based upon the University’s share.

21. Transition to FEHE SORP/FRS102

This is the first year that the University has presented its Financial Statements under FRS 102 and the FEHE SORP based upon it. The University has consequently applied the first time adoption requirements.

An explanation of how the transition to the FEHE SORP has affected the reported financial position, financial performance and cash flows of the consolidated results of the University is provided in note 35.

Assets and liabilities have been measured at historic cost under previous UK GAAP, as at 31 July 2014, upon transition.

Application of first time adoption grants certain exemptions from the full requirements of the FEHE SORP during the transition period.

The following specific accounting policies have been applied upon transition to the new accounting standards, as allowed under FRS 102;

nn Investments in subsidiaries, associates and jointly controlled entities held previously at impaired cost will be initially recognised at the carrying amount at the date of transition. nn Lease incentives on leases entered into before the transition date will continue to be accounted for on the pre- transition basis and not as per Section 20 of FRS 102. The deemed cost upon transition of Property, Plant & Equipment is the historic depreciated cost under the previous UK GAAP as at 31 July 2014.

22. Legal Form

The University is a civil corporation established under common law, which was formally incorporated by the Act for Incorporation of Both Universities 1571 under the name of ‘The Chancellor Masters and Scholars of the University of Oxford’.

The University is incorporated in the United Kingdom.

Principal Office

University of Oxford University Offices Wellington Square Oxford OX1 2JD FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 43

Accounting Judgements and Estimates

The University prepares its consolidated financial statements in accordance with FRS102 as issued by the Financial Reporting Council, the application of which often requires judgements to be made by management when formulating the consolidated financial position and results. Under FRS102, management is required to adopt those accounting policies most appropriate to the circumstances for the purpose of presenting fairly the Group’s financial position, financial performance and cash flows. In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the University; it may later be determined that a different choice would have been more appropriate.

Management considers that certain accounting estimates and assumptions relating to revenue, debtors, fixed assets and provisions are its critical accounting estimates. A discussion of these critical accounting estimates is provided below and should be read in conjunction with the disclosure of the Group’s significant accounting policies provided on page 32–42. Management has discussed its critical accounting estimates and associated disclosures with the external auditors, its Finance Committee and its Audit and Scrutiny Committee.

Research revenue from the Research Councils and European Commission is recognised in line with expenditure which in the judgment of the University creates the right to receive funding from these bodies. Research revenue from charities and industry is recognised in most cases on a reimbursement basis as costs are incurred which it is judged creates the right to reimbursement.

Research and Development Expenditure credits are credited to income on the basis of the estimated amount of credit believed to be receivable. The credit in respect of 2013/14 has been paid in full and the claim for 2014/15 has not yet been submitted. 2014/15 is the last year for which a claim can be made for this credit.

Pensions include key assumptions on discount rates, salary inflation and staff numbers in the future. Sensitivity analysis has been provided in the Pension note on changes in these assumptions. The costs of the USS and OSPS deficit recovery plans have been estimated based on a model devised by USS and the British Universities Finance Directors Group. The model uses the additional costs included in the deficit recovery plan, adjusts accordingly to management judgement of estimated changes in staffing levels and pay increases, and is discounted based on corporate bond levels having a maturity of a similar length to the recovery plan. The scheme actuary reviews the funding of the USS every year and undertakes a formal actuarial valuation every three years, at which time the deficit recovery plan may be amended.

Depreciation is calculated on a straight-line basis over the estimated useful economic lives of the related assets.

Investment properties are revalued triennially. The latest revaluation was July 2016.

The holiday pay provision is calculated using a sample of departments.

A provision for bad and doubtful debts is calculated using a formula based on the age of the overdue debt. The formula is applied consistently each year but necessarily requires a degree of estimation. Specific provision is made for individual debts where recovery is believed to be uncertain and this requires an element of judgement.

JUDGEMENTS NOTE Income recognition 1–6 Depreciation of Property, Plant and Equipment 13 Investment valuations 15 Valuation of investment properties 15 Indexation of permanent endowment capital 26

ESTIMATION UNCERTAINTIES AND ASSUMPTIONS Provision for irrecoverable receivables 17 Calculation of short-term employee benefit accrual 7 Calculation of the provision for funding of pension deficits 24 44 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Notes to the Financial Statements

1. Tuition fees and education contracts

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Full-time students Home and EU 106.1 98.8 106.1 98.8 Overseas and other fees 94.2 80.4 94.2 80.4

Part-time students Home and EU 7.4 6.5 7.4 6.5 Overseas and other fees 11.1 11.6 11.1 11.6

Other Fees and education contracts Professional and non-matriculated courses 36.4 33.9 20.1 19.4 Examination and other fees 1.2 0.8 1.2 0.8 Research Training Support Grants 37.1 33.7 37.1 33.7 293.5 265.7 277.2 251.2

2. Funding body grants

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Recurrent grants HEFCE 158.1 159.9 158.1 159.9

Specific grants Museums, galleries and collections fund 3.4 3.4 3.4 3.4 Higher education innovation fund 3.8 3.6 3.8 3.6 Scholarship 0.4 2.7 0.4 2.7 HEFCE capital grants 26.5 15.2 26.5 15.2 Other 0.3 1.3 0.3 1.3 192.5 186.1 192.5 186.1

The HEFCE recurrent grant is the annual funding for the purposes of Teaching, Research, and Knowledge Exchange. Each grant relates to a specific academic year and each grant is recognised in full in the year to which it relates.

The Museums, Galleries and Collections Fund is provided by HEFCE to support museums and galleries in the HE sector that have research significance beyond their home institution. Within the University grant funding is provided to support the Ashmolean, Pitt Rivers Museum, Museum of Natural History and the Museum of the History of Science. Grants are awarded on an academic year basis to fund specific operations of each of the museums, income is recognised in full in the academic year in which the operations have been performed.

The Higher Education Innovation Fund is provided by HEFCE to support Knowledge Exchange between members of the HE Sector and the wider-community. HEIF funding is allotted by HEFCE on an annual basis and becomes receivable once the University has provided an approved Knowledge Exchange strategy for the funding. Income is recognised on an annual basis once the strategy has been approved.

HEFCE capital grants are those grants from HEFCE provided for the purposes of purchasing or building of capital assets, they generally do not specify particular assets and income is recognised in full once the University has a right to receive the grant. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 45

3. Research grants and contracts

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m UK funders Research councils 152.9 148.4 152.9 148.4 UK government and health authorities 58.1 50.9 58.1 50.9 UK charities 147.0 152.2 147.0 152.2 UK industry and commerce 19.6 18.9 19.6 18.9

EU funders European commission and other EU government bodies 64.3 60.4 64.3 60.4 EU based charities 1.1 1.7 1.1 1.7 EU based industry and commerce 8.0 6.1 8.0 6.1

Non-EU funders Other government 21.8 21.5 21.8 21.5 Other charities 22.8 24.8 22.8 24.8 Other industry and commerce 41.8 38.0 38.7 34.6 537.4 522.9 534.3 519.5 Research and Development Expenditure Credit - 85.1 - 85.1 537.4 608.0 534.3 604.6

Research grants and contract income includes £22m (2015: £22m) in respect of capital funding

4. Other income

CONSOLIDATED UNIVERSITY 2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Residences, catering and conferences 4.7 5.6 4.4 3.5 Other services rendered 49.0 42.0 6.5 6.2 National Health Service 18.0 17.2 18.0 17.2 Royalty income 3.2 7.9 2.0 3.1 Receipts from Educational Activities 12.9 12.8 12.9 12.8 Rental Income from Operating Leases 11.8 11.1 11.8 11.1 Transfer from the Press 45.8 46.8 45.8 46.8 Special transfer from the Press - 120.0 - 120.0 Other Income 38.4 43.1 37.4 47.7 Capital Grants 29.2 39.2 29.2 39.2 213.0 345.7 168.0 307.6

Capital Grant income is external funding other than Research or HEFCE for assets capitalised in year and included in the £29.2m is the Blavatnik funding of £22.7m, £2.2m OCMR extension, and £1.9m for the WIMM extension.

Total rentals receiveable under operating leases:

31 JULY 2016 Land and buildings £’m Receivable during the year 11.8 Future minimum lease receivables due Not later than 1 year 8.8 Later than 1 year and not later than 5 years 7.2 Later than 5 years 25.4 TOTAL FUTURE LEASE RECEIVABLES DUE 41.4 46 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

5. Investment income

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Profit on disposal of spin-out company investments 2.3 1.7 2.3 1.7 Other income and interest from investments 6.5 3.0 5.5 2.4 8.8 4.7 7.8 4.1

Profit on disposal of spin-outs includes £0.4m (2015: £1.3m) release of deferred income from Beeson Gregory Merchant Bankers for the right to purchase a percentage share of share capital in spin-out companies formed by the Department of Chemistry (see note 22) £0.8m (2015: £0.8m) release of deferred income from Technikos LLP for the right to purchase a percentage share of share capital in spin-out companies formed by the Institute of Biomedical Engineering (see note 22) and £ 1.1m (2015: £0) release of deferred income from Oxford Sciences Innovation plc for the right to purchase a percentage share of share capital in spin-out companies formed by the University (see note 33). This is offset by impairment charges related to other spin-out company investments.

Investment Gains

Analysis of Gains on Investments

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Investments held in the Oxford Funds 149.5 185.5 147.6 182.5 Spin-outs 11.1 17.4 11.1 17.4 Investment Properties held directly 17.8 - 17.8 - Other Investments 9.6 2.5 9.6 2.6 188.0 205.4 186.1 202.5

6. Donations and endowments

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Donations Donations with restrictions 18.6 18.7 18.6 18.7 Donations without restrictions 17.9 11.7 14.5 11.0

Endowments New endowments 37.9 73.3 37.9 73.3

74.4 103.7 71.0 103.0 Donation of Heritage Assets 2.2 10.0 2.2 10.0 76.6 113.7 73.2 113.0

Details of material Heritage Assets donated in the year can be found in note 14. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 47

7. Staff Costs

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m

Wages and salaries 547.6 517.6 532.8 502.5 Social security costs 48.5 43.2 46.5 41.9 Pension costs as paid (note 34) 84.2 77.4 82.2 75.8 680.3 638.2 661.5 620.2 Pension Provision (note 34) 11.0 75.8 10.6 74.8 691.3 714.0 672.1 695.0

2015/16 2014/15 FTE FTE Average staff numbers by major category: Academic 1,747 1,680 Research 4,634 4,501 Teaching and Research Support 2,608 2,561 Library and Museum Services 497 470 Central Support Services 1,527 1,307 Technical and Crafts 604 566 Ancillary 503 511 12,120 11,596 Subsidiaries 258 250 AVERAGE NUMBER OF FULL TIME EQUIVALENT STAFF 12,378 11,846

The emoluments of the current Vice-Chancellor from 1 January 2016 were:

2015/16 2014/15 £’000 £’000 Emoluments (excl. pension contribution) 204 - Benefits in kind - - Pension contributions 35 - 239 -

The emoluments of the former Vice-Chancellor to 31 December 2015 were:

2015/16 2014/15 £’000 £’000 Emoluments (excl. pension contribution) 155 346 Benefits in kind 16 61 Pension contributions 23 55 194 462

In addition, relocation costs of £6k and the related tax costs of £3k were paid to the former Vice-Chancellor.

The Vice-Chancellors made pension contributions through the Salary Exchange Scheme which is available to all staff who are members of the Universities Superannuation Scheme (USS) and Oxford Staff Pension Scheme (OSPS). 48 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Trustees

No trustee has received any remuneration or waived payments from the University during the year in respect of their services as trustees (2015: nil).The total expenses paid to or on behalf of a trustee were £1,140 (2015: £1,700). This represents travel and other expenses incurred in attending Council and related meetings.

Salary Banding

The numbers of members of staff throughout the University whose emoluments (excluding employer pension contributions and compensation for loss of office but including payments under early retirement schemes) exceeded £100k are set out in the table below.

The salaries reflected in these ranges include payments made on behalf of the NHS in respect of its contractual obligations to University staff under separate NHS contracts of employment. These payments are excluded from the University’s Statement of Comprehensive Income. Of the 451 staff earning in excess of £100k, 152 include such payments on behalf of the NHS. Also included are royalty payments to members of staff via the payroll and professorial merit awards to non-clinical staff.

CLINICAL NON-CLINICAL TOTAL

2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 £100,000 to £109,999 25 35 85 84 110 119 £110,000 to £119,999 16 17 45 40 61 57 £120,000 to £129,999 17 18 44 48 61 66 £130,000 to £139,999 14 9 23 18 37 27 £140,000 to £149,999 9 15 25 30 34 45 £150,000 to £159,999 15 12 16 13 31 25 £160,000 to £169,999 9 9 14 6 23 15 £170,000 to £179,999 11 10 8 12 19 22 £180,000 to £189,999 5 8 8 4 13 12 £190,000 to £199,999 9 6 6 1 15 7 £200,000 to £209,999 5 4 6 4 11 8 £210,000 to £219,999 4 5 5 4 9 9 £220,000 to £229,999 3 4 3 4 6 8 £230,000 to £239,999 3 2 1 5 4 7 £240,000 to £249,999 3 3 2 3 5 6 £250,000 to £259,999 - 1 1 1 1 2 £260,000 to £269,999 1 1 1 - 2 1 £270,000 to £279,999 1 1 1 - 2 1 £300,000 to £309,999 1 1 - - 1 1 £310,000 to £319,999 - - - 1 - 1 £330,000 to £339,999 1 - 1 1 2 1 £370,000 to £379,999 - - 2 - 2 - £440,000 to £449,999 - - - 1 - 1 £450,000 to £459,999 - - 1 - 1 - £770,000 to £779,999 - - - 1 - 1 £880,000 to £889,999 - - 1 - 1 - 152 161 299 281 451 442 FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 49

Compensation for loss of office payable to senior post-holders

2015/16 2014/15 £’000 £’000 Compensation payable 376 -

COMPENSATION PAYABLE 376 -

The severance payments were paid in cash funded from general income and expenditure reserves and were approved by the University’s Remuneration Committee.

Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the University. This includes compensation paid to key management personnel defined as: the Registrar, Pro-Vice-Chancellors with portfolio, Heads of Division and the Director of Finance. The Vice-Chancellor is excluded from this figure.

2015/16 2014/15 £’000 £’000

Key management personnel – total remuneration 2,604 2,443 Number of staff 12 12

KEY MANAGEMENT PERSONNEL – AVERAGE REMUNERATION 217 204

8. Interest and other finance costs

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Interest on loans 7.5 1.9 7.4 1.9 Net charge on pension scheme 5.3 4.0 5.3 3.9 12.8 5.9 12.7 5.8 50 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

9. Operating expenditure

CONSOLIDATED AND UNIVERSITY 2015/16 2014/15

Staff Non-Staff Total Total £’m £’m £’m £’m Academic departments 274.3 112.9 387.2 360.1 Research grants and contracts 257.2 194.8 452.0 447.1 Academic services 31.0 24.5 55.5 53.5 Residence, catering and conferences 0.4 0.4 0.8 0.7 Bursaries and scholarships - 56.8 56.8 51.5 Premises 19.7 82.0 101.8 95.5 Administration 72.6 37.5 110.1 99.4 Payments to colleges - 54.5 54.5 55.9 Other expenses 6.3 20.6 26.9 18.7 Foreign Exchange loss 7.3 7.3 - TOTAL UNIVERSITY 661.6 591.3 1,252.9 1,182.4 Subsidiary companies 18.7 41.1 59.8 54.4 Movement in pensions provision - - 11.0 75.8 Interest and other finance costs - - 12.8 5.9 TOTAL CONSOLIDATED 680.3 632.4 1,336.5 1,318.5

Depreciation (£87.1m) and Operating expenditure (£545.3m) are combined in the non staff figures of £632.4m.

In 2014/15 there was a foreign exchange gain which is part of “Other Income” in note 4.

Other operating expenses include:

Remuneration paid to auditors during the year was in respect of the following services:

2015/16 2014/15 CONSOLIDATED £’m £’m

Audit of the consolidated University's annual financial statements 170 170 Audit of the subsidiaries annual financial statements 125 110 TOTAL AUDIT FEES 295 280 Services relating to taxation 96 50 Research Grant certification services 251 198 Assurance/VAT advice (OUEM) 23 - Other non-audit services 13 10 TOTAL NON AUDIT FEES 383 258 TOTAL FEES TO AUDITORS 678 538

Auditors’ remuneration in respect of services provided to the Press is disclosed in the separate audited accounts of the Press’s Trading Operations and Property and Reserve Fund. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 51

10. Taxation

CONSOLIDATED UNIVERSITY 2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m

UK Corporation Tax 0.4 18.5 - 18.5

TAXATION CHARGE FOR THE YEAR 0.4 18.5 - 18.5

CONSOLIDATED UNIVERSITY

2015/16 2014/15 2015/16 2014/15 £’m £’m £’m £’m Factors Affecting The Tax Charge Total Comprehensive Income 172.9 392.3 169.0 386.6 Surplus on ordinary activities multiplied by the standard 34.6 81.1 32.6 79.9 rate of corporation tax of 20% (2015: 20.67% ) Less tax due on surplus falling within charitable (34.2) (62.6) (32.6) (61.4) exemption TAXATION CHARGE FOR THE YEAR 0.4 18.5 - 18.5

11. OXFORD UNIVERSITY PRESS (“The Press”)

As explained in the accounting policies, these financial statements do not include the accounts of the Press, which is a department of the University. In addition to the transactions disclosed under note 4 (Other Income) the Press provided the rest of the University during the year with goods and services worth approximately £0.9m (2015: £0.9m) which were free of charge. The Press leased premises from the University during the year for a total of £248k (2015: £248k), the University leased premises from the Press during the year for a total of £150k (2015: £97k). At 31 July 2016 the Press owed the rest of the University £0.1m (2015: £0.1m). There were no material amounts due to the Press by the rest of the University at 31 July 2016 or 31 July 2015. An extract of the Press accounts for the year ended 31 March 2016 is included at pages 80–91.

The table below summarises the main transactions with the Press:

2015/16 2014/15 £’m £’m Annual transfer 44.9 45.9 Special transfer - 120.0 Benefits in Kind – (University year) 0.9 0.9 45.8 166.8 Lease payments received from Press 0.2 0.2 Lease payments paid to Press (0.2) (0.1)

52 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

12. Intangible Assets and Goodwill

CONSOLIDATED GOODWILL OTHER INTANGIBLES

Negative goodwill Software licences Total £’m £’m £’m As at 31 July 2015 (0.2) 0.3 0.1 Additions - 1.4 1.4 Amortisation - (0.1) (0.1) AS AT 31 JULY 2016 (0.2) 1.6 1.4

The Negative goodwill arose on the acquisition of the Edward Jenner Institute for Vaccine Research on 1 November 2005 and the Gray Cancer Institute on 20 June 2006.

UNIVERSITY OTHER INTANGIBLES

Software Licences Total £’m £’m

As at 31 July 2015 0.3 0.3 Additions 1.4 1.4 Amortisation (0.1) (0.1)

AS AT 31 JULY 2016 1.6 1.6

13. Property, Plant and Equipment

CONSOLIDATED LAND AND BUILDINGS Equipment & Assets under Freehold Leasehold machinery construction TOTAL £’m £’m £’m £’m £’m Cost As at 1 August 2015 1,422.9 20.0 145.4 112.7 1,701.0 Additions 3.3 - 31.1 119.9 154.3 Completed 82.5 5.5 24.2 (112.2) - Disposals - - (33.9) - (33.9) AS AT 31 JULY 2016 1,508.7 25.5 166.8 120.4 1,821.4

Depreciation As at 1 August 2015 374.3 4.9 60.0 - 439.2 Charge for the year 46.8 1.3 39.0 - 87.1 Disposals - - (33.9) - (33.9) AS AT 31 JULY 2016 421.1 6.2 65.1 - 492.4 Net book value AS AT 31 JULY 2016 1,087.6 19.3 101.7 120.4 1,329.0 As at 31 July 2015 1,048.6 15.1 85.4 112.7 1,261.8 Leased assets included above: Net book value As at 31 July 2016 - 19.3 - - 19.3 As at 31 July 2015 - 15.1 - - 15.1 FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 53

All Property, Plant and Equipment are stated at historic cost.

Land and buildings (Consolidated and University) includes £84.2m (2015: £84.2m) of freehold land on which no depreciation is charged.

There are ‘claw back’ provisions within the agreement on the Radcliffe Observatory Quarter (ROQ) site to the NHS should the University at some point in the future decide to change the designated use of the site and dispose of part of it for development.

Land and buildings (Consolidated and University) include properties financed and occupied by the University on NHS sites with a net book value of £7.1m (2015: £5.4m).

Equipment additions include £10.7m (2015: £6.5m) of labour capitalisation relating to internal IT resource, which has been applied to major IT projects. The largest spends on a single project were for Students Systems Admissions £3.7m and integrated communications £1.6m.

Saïd Business School: In November 2000, the University entered into a leasing arrangement with the Saïd Foundation in respect of the Saïd Business School. In accordance with FRS 102 section 2.8, Reporting the Substance over form, as the risks and rewards of occupancy vest in the University, the building is included in fixed assets. At 31 July 2016 the fixed assets of the University included a cost of £62.7m (2015: £62.7m) in respect of the building.

Expenditure on certain buildings was financed in part from public funds. In the event of disposal of the relevant buildings the proceeds may revert wholly or in part to HM Treasury.

Equipment is treated as having been disposed of in the year after that in which its net book value becomes zero.

UNIVERSITY LAND AND BUILDINGS Equipment & Assets under Freehold Leasehold machinery construction TOTAL £’m £’m £’m £’m £’m Cost As at 1 August 2015 1,420.5 20.0 142.4 112.7 1,695.6 Additions 2.9 - 30.8 119.9 153.6 Completed 82.5 5.5 24.2 (112.2) - Disposals - - (33.8) - (33.8) AS AT 31 JULY 2016 1,505.9 25.5 163.6 120.4 1,815.4

Depreciation As at 1 August 2015 372.3 4.9 57.6 - 434.8 Charge for the year 46.8 1.3 38.7 - 86.9 Disposals - - (33.8) - (33.8)

AS AT 31 JULY 2016 419.1 6.2 62.5 - 487.8 Net book value AS AT 31 JULY 2016 1,086.8 19.3 101.1 120.4 1,327.6 As at 31 July 2015 1,048.2 15.1 84.8 112.7 1,260.8 Leased assets included above: Net book value As at 31 July 2016 - 19.3 - - 19.3 As at 31 July 2015 - 15.1 - - 15.1

54 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

14. Heritage assets

The University of Oxford collections relate to museums, libraries and other collections. The University objectives are to make the collections a focus for research, teaching, and collection-based scholarship within the University. The collections are used as a research resource for a wide range of scholarly users, a facility for interaction between the University and the public and an active contributor to the region’s cultural development.

Heritage assets acquired since 1999 are held at cost or valuation on receipt. Due to the scale and uniqueness of many of the heritage assets, it is not possible to value the University’s heritage assets acquired prior to 1999. The cost would also be prohibitive.

The cost of new heritage asset acquisitions in 2015/16 was £1.3m (2015:£0.4m). The main acquisition was the JMW Turner painting of the High Street, Oxford for a total of £0.9m paid for by public and private donations. Disposals are unlikely as most donations have conditions preventing disposal, and there were no disposals in 2015/16. The costs of donated assets are based on valuations by experts in the relevant field. The five year summary for heritage asset donations/additions is:

2011/12 2012/13 2013/14 2014/15 2015/16 £’m £’m £’m £’m £’m

BROUGHT FORWARD 24.6 25.3 64.3 66.6 77.0 Acquisitions purchased with specific 0.4 10.5 1.1 0.3 - donations Acquisitions purchased with University - - 0.3 0.1 1.3 funds TOTAL COST OF ACQUISITIONS 0.4 10.5 1.4 0.4 1.3 PURCHASED VALUE OF ACQUISITIONS BY 0.3 28.5 0.9 10.0 2.2 DONATION CARRIED FORWARD 25.3 64.3 66.6 77.0 80.5

Heritage assets of £2.2m were donated in the year (2015: £10.0m). The largest donation was £0.75m for the Simon Digby collection of Islamic and Indian manuscripts. These donations are shown as a separate item in the Statement of Comprehensive Income.

Expenditure required to preserve heritage assets is recognised in the Statement of Comprehensive Income when incurred. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 55

15. Non-current investments

CONSOLIDATED UNIVERSITY 2016 2015 2016 2015 £’m £’m £’m £’m Investments stated at market value: Spin-out companies 81.5 70.4 81.5 70.4 Investment property 218.8 217.1 218.8 216.8 Global and private equities 2,298.5 1,978.3 2,293.2 1,963.6 Inflation hedges 143.9 138.2 143.9 138.0 Pledges 9.0 8.8 9.0 8.8 Third party managed 97.1 95.4 74.2 69.9 Participating interest in Associates 0.3 0.2 - - Investments stated at cost: Subsidiary and associated undertakings - - 16.9 16.9 2,849.1 2,508.4 2,837.5 2,484.4 Less: amounts attributable to outside bodies (791.3) (647.6) (832.3) (687.1) TOTAL AT END OF YEAR 2,057.8 1,860.8 2,005.2 1,797.3

Investment assets held are split between reserves as follows: Income & Expenditure Reserves 1,148.0 1,024.9 1,161.7 1,028.7 Endowment reserves 26 909.8 835.9 843.5 768.6 2,057.8 1,860.8 2,005.2 1,797.3 Held on behalf of outside bodies 791.3 647.6 832.3 687.1 TOTAL AT END OF YEAR 2,849.1 2,508.4 2,837.5 2,484.4

The investment market value gain is shown in the notes. 56 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

16. Investment in Subsidiaries and Associates

Subsidiaries

As at 31 July 2016 the University exercised control of the following subsidiary undertakings (excluding dormant undertakings):

COUNTRY OF % NATURE OF ACTIVITY INCORPORATION INTEREST Scientific facilities-sharing Instruct Academic Services Ltd United Kingdom 100 infrastructure services Oxford Ltd United Kingdom Retail and other trading activities 100

Oxford Mutual Ltd1 United Kingdom Provision of discretionary cover 100

Oxford Research South Africa Ltd United Kingdom Social policy research 100

Oxford Saïd Business School Ltd United Kingdom Executive education 100 Oxford University (Beijing) Science & Technology China Clinical research 100 Co. Ltd Oxford University Development (North America), United States of Office administration 100 Inc. America Investment management Oxford University Endowment Management Ltd United Kingdom 100 services Oxford University Fixed Assets Ltd United Kingdom Building management and utilities 100 Innovation technology research Oxford University Innovation Centres Ltd United Kingdom 100 services Commercial exploitation of Oxford University Innovation Ltd United Kingdom 100 intellectual property Commercial exploitation of Oxford University Innovation (Hong Kong) Ltd2 Hong Kong 100 intellectual property Oxford University Trading Ltd United Kingdom General trading activities 100

The Gray Laboratory Cancer Research Trust3 United Kingdom Radiobiology research 100

University of Oxford China Office Ltd Hong Kong Fundraising and alumni relations 100

Voltaire Foundation Ltd United Kingdom Publishing 100

James Martin UK Ltd4 United Kingdom Endowment management 100

As part of the Mortiz-Heyman endowment the University invests in the Sequoia Heritage fund through SCHF OU, LP. The University has a majority share of the capital and reserves of SCHF OU, LP but has no demonstrable control so it is not treated as a subsidiary, instead it is recognised as an investment asset.

All subsidiary undertakings have been included within the consolidated Financial Statements.

All subsidiary undertakings prepare accounts to 31 July each year except for; Jenner Vaccine Foundation which draws up its accounts to 31 March and Oxford University (Beijing) Science and Technology Co Ltd to 31 December each year.

1 Oxford Mutual Ltd is a company limited by guarantee. The members of Oxford Mutual Limited are the University, Instruct Academic Services Limited, Oxford University Innovation Limited, Jenner Vaccine Foundation, Oxford Limited, Oxford Saïd Business School Limited, Oxford University Endowment Management Limited, Oxford University Fixed Assets Limited, Oxford University Trading Limited, The Gray Laboratory Cancer Research Trust, and Voltaire Foundation Limited. 2 Oxford University Innovation (Hong Kong) Ltd is a wholly-owned subsidiary of Oxford University Innovation Ltd. 3 The Gray Laboratory Cancer Research Trust is a company limited by guarantee. The sole member is the University. 4 The James Martin Trust is a charitable trust incorporated in the United Kingdom where the University has the power to appoint the majority of the trustees. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 57

UNIVERSITY HOLDINGS IN SUBSIDIARIES £’m Cost As at 31 July 2015 16.9 Additions 4.0 Capital reduction (4.0) AS AT 31 JULY 2016 16.9

Joint venture

The Jenner Vaccine Foundation is a charitable company limited by guarantee set up for the purpose of researching novel human and animal vaccines. The University has the right to appoint half of the directors, with the other half appointed by the Pirbright Institute, and the foundation is accounted for as a joint venture using the equity method based upon its Financial Statements prepared to 31 March 2016.

Year ended 31 March Year ended 31 March 2016 2015 £’m £’m Income statement Surplus/(deficit) for the year to 31 March (0.1) - SHARE OF NET ASSETS 0.8 0.9 58 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Associates

As at 31 July 2016 the University exerted significant influence but not control or joint control over the following associated undertakings (excluding any dormant undertakings).

COUNTRY OF % NATURE OF ACTIVITY INCORPORATION INTEREST Commercial exploitation of Designer Carbon Materials Ltd United Kingdom 50 intellectual property African Research Collaboration for Health United Kingdom Medical research 50 Isis Changzhou International Technology Transfer China Technology transfer 40 Centre Co. Ltd1 Commercial exploitation of Oxford Vacmedix UK Ltd United Kingdom 34 intellectual property Smith Institute (limited by guarantee) United Kingdom Knowledge transfer 33 Commercial exploitation of Oxford Ancestors Ltd United Kingdom 32 intellectual property Commercial exploitation of Reox Ltd United Kingdom 31 intellectual property Suzhou Isis International Technology Transfer Co. China Technology transfer 30 Ltd2 Commercial exploitation of Oxford Risk Research and Analysis Ltd United Kingdom 30 intellectual property Commercial exploitation of Oxford Electromagnetic Solutions Ltd United Kingdom 28 intellectual property Commercial exploitation of TdeltaS Ltd United Kingdom 28 intellectual property Commercial exploitation of Oxtex Ltd United Kingdom 27 intellectual property Shenzhen Zhongjin International Technology China Technology transfer 25 Transfer Center Ltd3 Commercial exploitation of Kepler Energy Ltd United Kingdom 23 intellectual property Commercial exploitation of Minervation Ltd United Kingdom 22 intellectual property Commercial exploitation of NightstaRx Ltd United Kingdom 21 intellectual property Commercial exploitation of Aurox Ltd United Kingdom 20 intellectual property Commercial exploitation of Celleron Therapeutics Ltd United Kingdom 20 intellectual property Commercial exploitation of Mind Foundry Ltd United Kingdom 20 intellectual property Commercial exploitation of Oxcept Ltd United Kingdom 20 intellectual property Commercial exploitation of Oxford Multispectral Ltd United Kingdom 20 intellectual property

The associated undertakings prepare accounts to various year-ends.

CONSOLIDATED £’m Share of net assets of associate undertakings as at 31 July 2015 0.4 Share of surplus/(deficit) of associated undertakings for the year 2015/16 - SHARE OF NET ASSETS OF ASSOCIATE UNDERTAKINGS AS AT 31 JULY 2016 0.4

1 Oxford University Innovation (Hong Kong) Limited has entered into a joint venture with the Changzhou government in China 2 Oxford University Innovation (Hong Kong) Limited has established a Sino-foreign joint venture in partnership with the Suzhou city government and Oxlink Investment Consulting Co. Ltd (Oxlink). Oxlink is a company registered in PRC. 3 Oxford University Innovation (Hong Kong) Limited has established a Sino-foreign joint venture in partnership with Shenzhen City Jinyucheng Science & Technology Co. Ltd (Jinyucheng), and Shenzhen City Guochuang Lianhe Science & Technology Investment Co. Ltd (Guochuang). Jinyucheng and Guochuang are companies registered in PRC. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 59

17. Trade and other receivables falling due within one year

CONSOLIDATED UNIVERSITY

2016 2015 2016 2015 £’m £’m £’m £’m Research grants receivable 115.6 107.5 115.8 107.5 Research and Development Expenditure credit 30.4 66.6 30.4 66.6 Prepayments and accrued income 18.2 18.1 15.4 15.1 Other trade receivables 48.5 40.0 37.4 31.5 Other receivables 11.8 3.8 16.9 3.4 Amounts due from subsidiaries - - 11.2 17.0 224.5 236.0 227.1 241.1

18. Receivables amounts falling due after more than one year

CONSOLIDATED UNIVERSITY 2016 2015 2016 2015 £’m £’m £’m £’m Other receivables 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2

Other receivables include loans to staff for housing in conjunction with recruitment.

19. Current investments

CONSOLIDATED UNIVERSITY

2016 2015 2016 2015 £’m £’m £’m £’m As at 1 August 2015 65.2 7.0 63.0 7.7 (Disposals)/Additions (14.1) 58.2 (13.1) 55.3 AS AT 31 JULY 2016 51.1 65.2 49.9 63.0

20. Cash and cash equivalents

CONSOLIDATED At 1 August Cashflows At 31 July

2015 2016 £’m £’m £’m Cash and cash equivalents 72.4 77.8 150.2 Cash and Cash equivalents held in Oxford Funds 117.4 (91.8) 25.6 Investment asset cash 43.5 (2.2) 41.3 233.3 (16.2) 217.1 60 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

21. Creditors: Amounts falling due within one year

CONSOLIDATED UNIVERSITY

2016 2015 2016 2015 £’m £’m £’m £’m Research grants creditors 238.6 227.9 238.6 227.9 Accruals and deferred income 105.7 72.1 90.0 50.2 Capital grants with performance conditions 60.6 58.0 60.6 58.0 Unsecured bank loans 22 2.4 2.3 2.4 2.3 Social security and other taxation payable 26.2 14.0 26.2 13.9 Trade payables 59.6 100.4 60.6 99.3 Amounts due to subsidiaries - - 3.2 7.4 493.1 474.7 481.6 459.0

22. Creditors: Amounts falling due after more than one year

CONSOLIDATED UNIVERSITY

2016 2015 2016 2015 £’m £’m £’m £’m Oxford Sciences Innovation 16.4 - 16.4 - Technikos 4.1 4.9 4.1 4.9 Other creditors: Salix Fund - 0.1 - 0.1 Grant to Turing Institute 3.0 4.0 3.0 4.0 Bank loans 230.3 232.7 230.3 232.7 Loan to Blavatnik School of Government 3.0 - 3.0 - 256.8 241.7 256.8 241.7 Analysis of unsecured bank loans: Due between one and two years 2.6 2.4 2.6 2.4 Due between two and five years 11.2 8.1 11.2 8.1 Due in five years or more 216.5 222.2 216.5 222.2 230.3 232.7 230.3 232.7

BANK LOANS Loan 1 Loan 2 Loan 3 TOTAL £’m £’m £’m £’m Amount borrowed 25.0 25.0 200.0 250.0 Amount outstanding at 31 July 2016 7.7 25.0 200.0 232.7 Interest rate 5.13 % 5.07 % 2.55% - Final repayment date April 2019 June 2047 June 2045 -

Amount due within one year 2.4 - - 2.4 Amount due between one and two years 2.6 - - 2.6 Amount due between two and five years 2.7 - 8.5 11.2 Amount due after five years - 25.0 191.5 216.5 7.7 25.0 200.0 232.7

The University entered into an agreement with Beeson Gregory Merchant Bankers (BG) to fund the Department of Chemistry over a 15-year period commencing 23 November 2000. The total balance released to income in 2015/16 £0.4m. This completed the release of income. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 61

During 2007, the University entered into an agreement with Technikos LLP to fund the Institute of Biomedical Engineering over a 15-year period following completion of a new building. The building was completed on 1 October 2007. Cash of £12m had been received from Technikos by July 2010. The total balance that had not been set against costs at 31 July 2016 was £4.9m.

The University entered into an agreement with Oxford Sciences Innovation plc (OSI) in 2015/16. In return for 50% of its stake in each company spun out from Medical Science and Mathematical, Physical and Life Sciences over the next 15 years, the University received a 5% non-diluted stake in OSI. This stake was valued at £17.5m and is being released to income over 15 years.

The investments of £17.5m in OSI has been treated as deferred income within the Balance Sheet is being released to the Statement of Comprehensive Income evenly over the 15-year period of the agreement. The amount due to be released in 2016/17 is included within Creditors: within one year, with the remaining balance included within Creditors: after more than one year.

23. Financial instruments

The carrying values of the Group and the University’s financial assets and liabilities are summarised by the categories below:

2016 2015 CONSOLIDATED £’m £’m Financial Assets Measured at fair value through the profit or loss Global and private equities 15 2,298.5 1,978.3

Measured at undiscounted amount receivable Trade and other receivables 17 224.5 236.0

Equity instruments measured at cost less impairment Current asset unlisted investments 19 51.1 65.2 2,574.1 2,279.5

Financial liabilities Measured at amortised cost Loans payable 22 230.3 232.7

Measured at undiscounted amount payable Trade and other payables 21 59.6 100.4

289.9 333.1 62 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Derivative Financial Instruments

Derivatives that are designated and effective as hedging instruments carried at fair value.

CONSOLIDATED AND UNIVERSITY CURRENT NON-CURRENT

2016 2015 2016 2015 £’m £’m £’m £’m Forward foreign currency contracts for investments 327.0 327.7 - - Forward foreign currency contracts for research 25.8 9.7 - - 352.8 337.4 - -

Forward contracts are used by the Oxford Endowment Fund to hedge exposure to foreign exchange risk. These contracts are used as hedging instruments to ensure that the sterling value of investments are within a range decided by the Investment Committee between 40% and 70% of the assets held in the Oxford Endowment Fund.

Such contracts are initially recognised at fair value on the date on which contract is entered into and are subsequently re-measured to fair value. Forward currency contracts are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in fair value contracts are recognised in the income and expenditure account. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

The nominal value of current hedging contracts in place at 31 July 2016 was £327.0m and the contracts, when marked to market, showed an unrealised loss of £19.1m.

The University had outstanding forward contracts to sell US Dollars relating to expected US Dollar receipts from research funders. These forward contracts give greater certainty as to expected research income. It also had swap contracts to hedge its exposure to exchange rate fluctuations on Euro denominated cash balances held.

The nominal value of current hedging contracts in place at 31 July 2016 was £25.8m and the contracts when marked to market showed an unrealised gain of £0.6m. In 2015 the value was £9.7m and the contracts, when marked to market, showed an unrealised loss of £1.0m.

Nature of risks being hedged

Market risks

Market risk is the risk that changes in market prices, such as foreign exchange rates will affect the University’s value of its investment assets.

Foreign Currency Risk

Risk analysis is an integral part of University’s investment decision making and portfolio management. Geographical and foreign current exposures and the liquidity of the underlying portfolio are consistently evaluated. An in-house performance and risk system has been developed to provide the ability to review The Oxford Funds’ performance, understand the risks and evaluate them on a real-time basis. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 63

24. Pension Scheme Provisions

CONSOLIDATED USS OSPS OTHER TOTAL £'m £'m £'m £'m At 1 August 2015 133.6 46.1 1.5 181.2 Utilised in year - - (0.1) (0.1) Additions in year 9.9 1.1 - 11.0 Interest release 3.9 1.4 - 5.3 AT 31 JULY 2016 147.4 48.6 1.4 197.4

UNIVERSITY USS OSPS OTHER TOTAL £'m £'m £'m £'m At 1 August 2015 133.0 45.9 1.5 180.4 Utilised in year - - (0.1) (0.1) Additions in year 9.5 (1.1) - 10.6 Interest release 3.9 1.4 - 5.3 AT 31 JULY 2016 146.4 48.4 1.4 196.2

The University is a member of the Universities Superannuation Scheme (USS) and Oxford Staff Pension Scheme (OSPS) multi-employer pension schemes both of which are in deficit. The University has recognised a provision for its commitments under the agreed deficit reduction plans for each scheme, in calculating these provisions the University has estimated that salary expense will increase at 2.4–4.4% p.a. and the liability is discounted at a 15 year corporate bond rate of 1.4% (2015: 2.95%). A sensitivity analysis to changes in salary and discount rate changes is shown in note 34.

The University has also recognised a provision in respect of pension provisions for retired staff members of Federated Superannuation System for Universities and Employees Pension Scheme who receive pension supplements (see note 34).

25. Other Provisions

BUILDING CONSOLIDATED OTHER TOTAL DILAPIDATION £'m £'m £'m

At 1 August 2015 - 7.2 7.2 Transfer from income and expenditure account 6.4 0.2 6.6 Utilised in year (0.3) (1.9) (2.2)

AT 31 JULY 2016 6.1 5.5 11.6

BUILDING UNIVERSITY OTHER TOTAL DILAPIDATION £'m £'m £'m

At 1 August 2015 - 6.3 6.3 Transfer from income and expenditure account 6.4 0.2 6.6 Utilised in year (0.3) (1.9) (2.2)

AT 31 JULY 2016 6.1 4.6 10.7

The “Other” provision relates to provisions for tax and potential repayments to a sponsor. The building dilapidations provision relates to remedial work on Castle Mill Graduate Accommodation. 64 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

26. Endowment Funds

Permanent Endowments CONSOLIDATED UNRESTRICTED RESTRICTED TOTAL Unapplied Unapplied Capital Return Total Capital Return Total £’m £’m £’m £’m £’m £’m £’m Capital - Original gift 75.1 - 75.1 236.5 - 236.5 311.6 Capital - Indexation reserve 21.3 - 21.3 45.2 - 45.2 66.5 Unapplied return - 153.5 153.5 - 186.7 186.7 340.2 As at 31 July 2015 96.4 153.5 249.9 281.7 186.7 468.4 718.3

Investment Income - 0.1 0.1 - 0.2 0.2 0.3 New endowments 0.1 - 0.1 24.9 - 24.9 25.0 Reclassification to expendable 4.9 - 4.9 (4.9) - (4.9) - endowments Indexation 0.6 (0.6) - 1.5 (1.5) -- Market value gains - 11.5 11.5 - 43.6 43.6 55.1 Released to Unrestricted reserves - (9.9) (9.9) - (15.6) (15.6) (25.5) AS AT 31 JULY 2016 102.0 154.6 256.6 303.2 213.4 516.6 773.2

Represented by: Capital – Original gift 80.1 - 80.1 256.5 - 256.5 336.6 Capital – Indexation reserve 21.9 - 21.9 46.7 - 46.7 68.6 Unapplied return - 154.6 154.6 - 213.4 213.4 368.0 102.0 154.6 256.6 303.2 213.4 516.6 773.2

UNIVERSITY UNRESTRICTED RESTRICTED TOTAL Unapplied Unapplied Capital Return Total Capital Return Total £’m £’m £’m £’m £’m £’m £’m Capital – Original gift 24.5 - 24.5 233.6 - 233.6 258.1 Capital – Indexation reserve 12.6 - 12.6 45.2 - 45.2 57.8 Unapplied return - 145.4 145.4 - 189.7 189.7 335.1 As at 31 July 2015 37.1 145.4 182.5 278.8 189.7 468.5 651.0

Investment Income - 0.1 0.1 - 0.2 0.2 0.3 New endowments 0.1 - 0.1 24.9 - 24.9 25.0 Reclassification to expendable 4.9 - 4.9 (4.9) - (4.9) - endowments Indexation 0.2 (0.2) - 1.5 (1.5) -- Market value gains - 9.9 9.9 - 43.6 43.6 53.5 Released to Unrestricted reserves - (7.3) (7.3) - (15.6) (15.6) (22.9) AS AT 31 JULY 2016 42.3 147.9 190.2 300.3 216.4 516.7 706.9

Represented by: Capital – Original gift 29.5 - 29.5 253.6 - 253.6 283.1 Capital – Indexation reserve 12.8 - 12.8 46.7 - 46.7 59.3 Unapplied return - 147.9 147.9 - 216.4 216.4 364.3 42.3 147.9 190.2 300.3 216.4 516.7 706.9

As required by Charities Law, to apply Total Return Accounting to permanent endowments the University has made a significant judgement as to the rate at which expenditure can be made against unapplied return. This ensures that benefit can be derived both now and in perpetuity. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 65

This is achieved by the investment of endowment funds within the Oxford Endowment Fund which returns each year a cash dividend of 4% of holding value. The University considers 4% to represent a reasonable estimate of the long- term return on investment achievable above inflation.

A transfer to unrestricted reserves for restricted permanent endowments expenditure is recognised to the extent of the spend in the year against the restricted purposes, and for the unrestricted permanent endowments the transfer to unrestricted reserves is based on the long-term real rate of return which is estimated at 4%.

To ensure the preservation of original endowment capital in real terms the University has adopted a policy of indexing brought forward permanent endowment capital each year by the Consumer Price Index (CPI).

Restricted Expendable Endowments

CONSOLIDATED UNIVERSITY

Accumulated Accumulated Capital income Total Capital income Total £’m £’m £’m £’m £’m £’m As at 31 July 2015 114.7 2.9 117.6 114.7 2.9 117.6

New endowments 12.9 - 12.9 12.9 - 12.9 Market value gains - 11.2 11.2 - 11.2 11.2 Expenditure - (5.1) (5.1) - (5.1) (5.1) AS AT 31 JULY 2016 127.6 9.0 136.6 127.6 9.0 136.6

Endowment assets

To ensure that endowment gifts provide the greatest benefit possible and where appropriate to ensure that their charitable benefit is maintained in perpetuity the University invests unspent endowment reserves and capital in a mixture of investment vehicles. These balances are recognised on the Balance Sheet within the balances held for Investments and Cash and Cash Equivalents as follows:

CONSOLIDATED UNIVERSITY 2016 2015 2016 2015 £’m £’m £’m £’m Investments Global bonds and equities 326.7 301.3 309.8 283.1 Non-directional funds 74.3 74.3 69.9 69.8 Private equity 166.1 147.3 156.2 138.3 Inflation Hedges 46.5 40.4 43.7 38.0 Property 79.2 69.8 76.3 67.0 3rd party managed 91.9 83.8 68.9 58.2 Other Assets 17.0 19.3 17.0 16.9 Current asset investments 2.4 - 2.6 - 804.2 736.2 744.4 671.3

Cash and cash equivalents 105.6 99.7 99.1 97.3 BALANCES AS AT 31 JULY 909.8 835.9 843.5 768.6 66 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Endowment purposes

Endowments, both permanent and expendable, fall into the following categories for the year to 31 July 2016

As at 31 Investment Investment New As at 31 August gains Income Endowments July 2016 2015 General Academic 322.5 25.0 0.1 5.3 (11.2) 341.7 Academic posts 245.6 16.6 0.1 15.0 (8.5) 268.8 Scholarship funds 216.6 20.5 0.1 11.8 (8.8) 240.2 Support for libraries and museums 32.1 2.5 - 3.2 (1.2) 36.6 Societies 16.6 1.4 - - (0.7) 17.3 Prize funds 2.5 0.3 - 2.6 (0.2) 5.2 TOTAL 835.9 66.3 0.3 37.9 (30.6) 909.8 Material endowments

The following endowment funds are considered to be individually material to the University

NUFFIELD JAMES MARTIN 21ST MORITZ-HEYMAN BENEFACTION CENTURY FOUNDATION £'m £'m £'m

Capital – Original gift 3.1 50.6 49.6 Capital – Indexation reserve 0.6 8.8 0.4 Unapplied return 82.0 5.6 7.5 As at 31 July 2015 85.7 65.0 57.5

Investment gains and income 7.2 2.0 10.6 Expenditure (3.1) (1.4) (2.1)

AS AT 31 JULY 2016 89.8 65.6 66.0

Represented by Capital – Original gift 3.1 50.6 49.6 Capital – Indexation reserve 0.6 9.1 0.7 Unapplied return 86.1 5.9 15.7 89.8 65.6 66.0

The donor for the Nuffield Benefaction was Lord Nuffield (William Morris). Under the terms of the trust deed dated 24 November 1936 the fund is to be used to widen the scope of the Medical School of the University and provide special facilities for research.

The primary purpose of the James Martin 21st Century Foundation (established in 2004) and James Martin 21st Century (UK) Trust (established in 2012) is to support the Oxford Martin School (formerly James Martin 21st Century School) and establish or support any other entity within the University that advances specialised education relating to the severe problems of the 21st century.

The Moritz-Heyman Scholarship Fund was established in 2012/13 through an endowment gift from the CrankStart Foundation to provide a programme of support for UK resident undergraduate students from disadvantaged backgrounds. Under the terms of the deed of gift, the University is required to commit matching income annually for the same purpose.

Total return accounting can lead to negative unapplied total return especially in the short term as the total return rate is a long term rate of return. The University reduces the risk of trust funds eroding their capital by ensuring that accumulated expenditure does not exceed the accumulated income for individual trust funds. There are no trust funds with greater than £0.5m deficit in their unapplied total return (2014/15: none). FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 67

27. Restricted Reserves

The University has received charitable donations and gifts with restricted purposes falling into the following categories

New As at 31 July Restricted As at 31 July CONSOLIDATED donations 2015 expenditure 2016 & grants General academic 11.7 7.4 (6.0) 13.1 Academic posts 1.9 1.7 (1.2) 2.4 Scholarship funds 5.6 7.8 (7.9) 5.5 Support for libraries 1.5 1.2 (1.3) 1.4 Support for museums 2.1 0.5 (0.9) 1.7 Donated heritage assets 48.9 2.2 - 51.1 Mixed use buildings 2.5 - - 2.5 74.2 20.8 (17.3) 77.7

New As at 31 July Restricted As at 31 July UNIVERSITY donations 2015 expenditure 2016 & grants General academic 11.7 7.4 (6.0) 13.1 Academic posts 1.9 1.7 (1.2) 2.4 Scholarship funds 5.6 7.8 (7.9) 5.5 Support for libraries 1.5 1.2 (1.3) 1.4 Support for museums 2.1 0.5 (0.9) 1.7 Donated heritage assets 48.9 2.2 - 51.1 Mixed use buildings 2.5 - - 2.5 74.2 20.8 (17.3) 77.7 68 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

28. Linked Charities

The University administers, either directly or indirectly, a number of charitable institutions that are established for its general purposes or a special purpose of or in connection with it. Under paragraph 28(1) of Schedule 3 of the Charities Act 2011, these institutions are referred to as “paragraph 28” or “linked” charities/ They fall under the umbrella of the University’s charitable status and are exempt from registration with the Charities Commission. The University maintains a detailed register of its linked charities and for those with income of more than £100k publishes information via its gateway page at: www.ox.ac.uk/about/organisation/university-as-a-charity. The financial results of those linked charities are disclosed below.

The Colleges of the University are specifically excluded from being Connected Charities under the 2011 Charities Act being established as charitable entities in their own right.

Incoming resources including Outgoing AT 31 JULY investment resources and AT 31 JULY 2015 gains expenditure Transfers 2016 £’m £’m £’m £’m £’m Consolidated into the Group Financial Statements James Martin 21st Century Foundation 25.6 - - (25.6) - James Martin 21st Century (UK) Trust 37.4 4.9 (2.3) 25.6 65.6 The Gray Laboratory Cancer Research - 1.5 (1.6) - (0.1) Trust Aggregated into the University Financial Statements University of Oxford Development Trust 974.1 305.0 (56.7) - 1,222.4 Fund Oxford University Law Foundation 0.5 0.1 (0.1) - 0.5

Excluded from the University and group accounts as they are not controlled by the University Oxford University Boat Club 3.9 0.4 (0.4) - 3.9 Oxford University Rugby Club 0.4 0.2 (0.4) - 0.2 Oxford University Women's Boat Club 0.1 0.3 (0.3) - 0.1 Smaller sports charities 0.2 1.1 (1.1) - 0.2 Smaller non-sports charities 0.7 0.6 (0.6) - 0.7

Excluded from the University and group accounts as the University does not derive benefit from their activities Nuffield Dominions Trust 25.5 0.7 (0.3) - 25.9 College Contribution Fund 46.9 8.2 (1.6) - 53.5

Further details about the University’s Connected charities are available via the University’s gateway page at www.ox.ac.uk/about/organisation/university-as-a-charity

29. Capital and other commitments

Provision has not been made for the following capital commitments at 31 July 2016

CONSOLIDATED UNIVERSITY 2016 2015 2016 2015 £’m £’m £’m £’m

At the end of the year the University had major capital commitments for building projects as follows: Contracted for: 93.3 77.3 93.3 77.3 At the end of the year the University had commitments to invest additional funds within its investment 302.0 265.6 302.0 265.6 portfolio FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 69

30. Contingent Liabilities

As explained in the Statement of Accounting Policies, these financial statements do not include those assets and liabilities that relate to the activities of the Press. In the unlikely event of the Press not having sufficient assets to meet such liabilities, those liabilities would fall to be met by the University as a whole. At 31 March 2016 the date of its latest audited balance sheet, the Press had total net assets of £429.8m (2015: £371.4m), after deducting total liabilities of £383.7m (2015: £393.2m).

The University has entered into an agreement with the Trustees of the Oxford Staff Pension Scheme (‘OSPS’) to eliminate the scheme deficit over a period of years. As security for the payment of the agreed contributions into the Scheme, the University has granted a floating charge in favour of the Trustees of OSPS over certain assets, which are located in the United Kingdom, subject to the value not falling below £100m.

The University as a whole is subject to a number of legal claims and other matters the outcomes of which are uncertain and may give rise to liabilities or other adverse consequences which cannot currently be quantified.

31. Lease obligations

Total rentals payable under operating leases:

2016 Land and Buildings £’m PAYABLE DURING THE YEAR 4.0

Future minimum lease payments due: Not later than 1 year 4.0 Later than 1 year and not later than 5 12.0 years Later than 5 years 36.1 TOTAL LEASE PAYMENTS DUE 52.1

32. HEFCE Hardship Funds/National College for Teaching and Leadership (‘NCTL’)

The University enters into a number of arrangements with funding bodies to disburse funds on their behalf to students. The University accounts for these as agency arrangements as it does not receive the majority of the benefits or incur the risks of the transactions. Neither income nor expenditure is recognised by the University on these transactions beyond any consideration the University has received for the provision of agency services.

In the current year the University has received and disbursed the following funds on an agency basis;

CONSOLIDATED & UNIVERSITY NCTL £’m UNDISBURSED FUNDS BROUGHT FORWARD - Funds received in the year 2.5 Funds disbursed in the year (2.6) UNDISBURSED FUNDS CARRIED FORWARD (0.1)

The University acts only as a paying agent in relation to NCTL bursaries, distributing them to students. The funds received and related disbursements are therefore excluded from the Statement of Comprehensive Income. 70 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

33. Related parties

During the year ended 31 July 2016 the University had transactions with entities and individuals which fell within the definition of Related Parties under Section 33 of FRS 102. Transactions are disclosed where Key Management Personnel including all members of Council and other senior members of staff disclose an interest in a body with which the University undertakes transactions which are considered material to the University’s Financial Statements and/or the other party. Due to the nature of the University’s operations and the composition of Council (being drawn from colleges and other private and public sector organisations) it is inevitable that transactions in the normal course of business will take place with organisations in which a member of Council may have an interest. All transactions involving an organisation in which a member of Council may have an interest are conducted in accordance with the University’s financial regulations and normal procurement procedures.

Included in the Financial Statements are the following transactions between the University and related parties where a member of the University or Senior Officer was also a director or trustee of the related party. This excludes the colleges which are seperate legal entities.

EXPENDITURE/ RELATED PARTY INCOME BALANCE DUE TRANSFERS £'000 £’000 £’000 BTG International Ltd 25 - 8 Department for Environment Food & Rural Affairs 17 - 94 Edward Penley Abraham Research Fund 288 - 6 Guy Newton Research Fund 52 - 19 Imperial College London 200 287 425 JISC Collections and Janet Limited - 1,392 - McGill University 34 243 1 Medical Schools Council - 18 - Nanjing University 65 - - National Institute for Health Research 2,589 - 1,131 Optical Society of America - 13 - Oxford BioMedica (UK) Limited 26 - 6 Royal Academy of Engineering 23 18 12 Saxton Bampfylde Hever Plc - 71 - Taylor & Francis Group 23 - 2 The Company of Biologists Ltd - 18 - The Russell Group of Universities - 69 - University of Helsinki 10 6 9 Wellcome Trust 84,700 119 13,794 Transactions with joint ventures and associates Jenner Vaccine Foundation - - -

There were no transactions in the year between the University and Key management personnel other than remuneration.

The University of Oxford, in the form of ‘The Chancellor Masters and Scholars of the University of Oxford’, is the ultimate controlling entity of the group consolidated into these Financial Statements. It has a number of wholly owned subsidiaries, as set out in note 16, which as per Section 33 of FRS 102 are not considered to be related parties.

During the year, the University made grants and other payments totalling £488K (2015: £402K) to the Oxford University Student Union and its wholly-owned subsidary.

The Alan Turing Institute: The institute has been created as a government initiative to fund a national centre for data science and analysis, and is a joint venture between five universities who are all making grants to the Institute. The University as a founding partner has agreed to make a grant of £5m to the new Institute. This commitment has been recorded as a creditor at 31st July 2016. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 71

Oxford Sciences Innovation plc, (OSI): The University has signed a 15 year agreement with OSI for the funding and development of spin-out companies based on research from the Mathematical, Physical and Life Sciences and Medical Sciences Divisions. The University will retain a 5% equity stake in OSI.

The University provides support to spin-out companies in which it has invested via Oxford University Spin-Out Equity Management.

Research Councils: In common with many universities, senior members of the University sit on Research Councils, other NHS Trust boards and other grant awarding bodies which have their own internal procedures to avoid potential conflicts of interest. Members of Council also sit on Research Councils and their sub-committees including the Engineering and Physical Sciences Research Council, the Science and Technology Facilities Council, the Medical Research Council and the Arts and Humanities Research Council.

INCOME 2016 2015

£’m £’m Medical Research Council 61.1 54.7 Science and Technology Facilities Council 9.7 8.8 Engineering and Physical Sciences Research Council 45.7 35.3 Arts & Humanities Research Council 3.8 3.2 Biotechnology & Biological Sciences Research Council 10.2 10.4 Natural Environmental Research Council 7.6 7.1 Economic & Social Research Council 5.0 6.4 143.1 125.9

Colleges

The 36 external colleges of the University of Oxford are independent legal institutions and are therefore not included in the financial results of the University. Whilst the University has no financial responsibility for the colleges, the collegiate nature of Oxford gives rise to financial interaction between the University and colleges. During the year the University paid £54.5m to the colleges via its Joint Resource Allocation Method (JRAM) (see note 9) out of HEFCE funding and fee income (2015: £55.9m).

The University made a payment of £1m to the College Contributions Fund in 2015/16 (2015: £1m) and will make further payments of £1m per year for the next 2 years. The Fund finances a scheme which provides support to colleges with relatively low assets. The University agreed to make these payments to help build up a permanent endowment to provide income grants. Grants are awarded to colleges to improve services in key areas, including the provision of bursaries, scholarships, libraries, IT, and teaching support.

Other areas of interaction with the colleges are as follows:

Hardship funds: A large part of HEFCE hardship funds received by the University is passed to colleges to administer (see note 32).

Investments: The colleges are able to invest in the Oxford Endowment Fund; such investments are treated as ‘amounts attributable to outside bodies’ and are deducted from Fixed Asset Investments (see note 15). At 31 July 2016 the University held investments in the Endowment Fund amounting to £404.5m (2015: £324.3m) on colleges’ behalf. Colleges are also among the investors in the Oxford Capital Fund. They have invested £23.5m as at 31 July 2016 (2015: £13.9m).

General trading takes place between the University and colleges, including the provision of research, accommodation, and teaching facilities. These arrangements are undertaken on a commercial basis.

Other external funds/trusts: Certain external trusts provide research and other funding to the University and some colleges. A number of these trusts (note 26) are allowed to participate in the Oxford Endowment Fund, and such assets held on their behalf by the University are included in the deduction from Fixed Asset Investments (see note 15). 72 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

34. Pension schemes

The University participates in two principal pension schemes for its staff - the Universities Superannuation Scheme (USS) and the University of Oxford Staff Pension Scheme (OSPS). The schemes are contributory defined benefit schemes (i.e. they provide benefits based on length of service and pensionable salary) and until April 2016 were contracted out from the State Second Pension Scheme. The assets of USS and OSPS are each held in separate trustee-administered funds. The schemes are multi–employer schemes and the University is unable to identify its share of the underlying assets and liabilities of each scheme on a consistent and reasonable basis. Therefore, in accordance with the accounting standard FRS 102 paragraph 28.11, the University accounts for the schemes as if they were defined contribution schemes. As a result, the amount charged to the Statement of Comprehensive Income represents the contributions payable to the schemes in respect of the accounting period.

In the event of the withdrawal of any of the participating employers in USS, the amount of any pension funding shortfall (which cannot be otherwise recovered) in respect of that employer will be spread across the remaining participating employers and reflected in the next actuarial valuation of the scheme.

However, in OSPS the amount of any pension funding shortfall in respect of any withdrawing participating employer will be charged to that employer.

The University also has a small number of staff in other pension schemes, including the National Health Service Pension Scheme (NHSPS), the Superannuation Arrangements of the University of London (SAUL) and the Medical Research Council Pension Scheme (MRCPS). The University’s participation in NHSPS is in respect of employees who meet certain eligibility criteria, including being an active member of the scheme prior to joining the University. The University’s participation in SAUL is in respect of employees of the Gray Laboratory Cancer Research Trust which was acquired by the University on 30 June 2006. The University’s participation in MRCPS is in respect of employees of whose units transferred from other MRC funded institutions.

The University has made available the National Employment Savings Trust for non-employees who are eligible under automatic enrolment regulations to pension benefits.

Actuarial valuations

The last full actuarial valuation of the NHSPS was performed as at 31 March 2012. The 2012 valuation reported scheme liabilities of £240bn. There are no underlying assets, and therefore no surplus or deficit was reported except on a purely notional basis. An accounting valuation of the scheme liability is carried out annually by the scheme actuary, whose report forms part of the annual NHS Pension Scheme (England and Wales) Resource Account, published annually. These accounts can be viewed on the NHS Pensions website. The actuary agreed that the employer contributions rate would increase from 14.0% to 14.3% from 1 April 2015. With the introduction of the new pension arrangements based on Career Average Revalued Earnings, the 2015 Scheme, the contributions will be 14.3% for a four year period and the rate will be reassessed at the next valuation to be carried out as at 31 March 2016. NHSPS is in a similar position to USS in that in the event of the withdrawal of a participating employer the remaining participating employers will assume responsibility for any increased contributions arising.

The last full actuarial valuation of SAUL was performed as at 31 March 2014. The 2014 valuation reported a deficit on a technical provisions basis of £9m and was 97% funded. From 1 April 2016 the employers’ contribution rate increased by 3% to 16% for the period to 31 March 2018 in accordance with the deficit recovery plan. On 1 April 2016 a number of changes were made to the benefits provided including closure of the final salary plan, with all members now building up benefits on a Career Average Revalued Earnings basis at an accrual rate of 1/75ths. In SAUL the amount of any pension funding shortfall in respect of any withdrawing participating employer will be charged to that employer.

Qualified actuaries periodically value the USS, OSPS, MRCPS and SAUL schemes using the ‘projected unit method’, embracing a market value approach. The resulting levels of contribution take account of actuarial surpluses or deficits in each scheme. The financial assumptions were derived from market conditions prevailing at the valuation date. The results of the latest actuarial valuations and the assumptions which have the most significant effect on the results of the latest valuations and the determination of the contribution levels are for the two principal schemes shown in the following table. The other schemes do not have significant numbers of University employees contributing. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 73

USS OSPS Date of valuation: 31/03/14 31/03/13 Date valuation results published: 24/07/15 23/06/14 Value of liabilities: £46.9bn £597m Value of assets: £41.6bn £424m Funding surplus / (deficit): (£5.3bn)a (£173m)b Principal assumptions: ¡ Investment return 5.2%pac - ¡ Rate of interest (periods up to retirement) - Gilts' +1.2% ¡ Rate of interest (periods after retirement) - Gilts' +1.2% ¡ Rate of increase in salaries RPI + 1%pad RPI + 1%pa ¡ Rate of increase in pensions CPI pad CPI pa Mortality assumptions: ¡ Assumed life expectancy at age 65 (males) 24.2 yrs 22.5 yrs ¡ Assumed life expectancy at age 65 (females) 26.3 yrs 25.2 yrs Funding Ratios: ¡ Technical provisions basis 89% 71% ¡ Statutory Pension Protection Fund basis 82% 69% ¡ ‘Buy-out’ basis 54%e 44% ¡ Estimated FRS102 Total Funding level 85%e 82% 21.5%, Recommended employer’s contribution rate (as % of pensionable salaries): 18%e increasing to 23.5%f Effective date of next valuation: 31/03/17 31/03/16

a USS’s actuarial valuation as at 31 March 2014 takes into account the revised benefit structure effective 1 April 2016 agreed both by the Joint Negotiating Committee and the Trustee in July 2015 following the Employers’ consultation which concluded in June 2015. Key changes agreed include: for Final Salary section members, the benefits built up to 31 March 2016 were calculated as at that date using pensionable salary and pensionable service immediately prior to that date and going forwards will be revalued in line with increases in official pensions (currently CPI); all members accrue a pension of 1/75th and a cash lump sum of 3/75ths of salary each year of service in respect of salary up to a salary threshold, initially £55,000 p.a., with the threshold applying from 1 October 2016; member contributions are 8% of salary; a defined contribution benefit for salary above the salary threshold at the total level of 20% of salary in excess of the salary threshold; and optional additional contributions payable into the defined contribution section from 1 October 2016 of which the first 1% of salary is matched by the employer. Further details about the changes may be reviewed on USS’s website, www.uss.co.uk. For the period up to 1 April 2016 the employer deficit contribution was 0.7% p.a. of salaries based on the assumptions made. After allowing for those changes, the actuary established a long term employer contribution rate of 18% pa of salaries for the period from 1 April 2016 to 31 March 2031. On the assumptions made and with the salary threshold and defined contribution section implemented this gives rise to deficit contributions of at least 2.1% p.a of salaries. At 31 March 2016 USS reported that the funding deficit had increased to £10.0 bn (83% funded), from £8.2 bn (86% funded) at 31 March 2015. b OSPS’s actuarial valuation as at 31 March 2013 identified a required long-term employer contribution rate of 20.1% of total pensionable salaries, with a funding deficit of £173 m. The University of Oxford, on behalf of all the employers participating in the scheme, has agreed with the trustees of OSPS to address this deficit by raising the employer contribution rate in increments of 0.5% of pensionable salary to 23.5%, with this increase being implemented over the three years to 1 August 2017. The actuary has certified that the additional contribution should eliminate the deficit by 30 June 2026. At 31 March 2015 the scheme reported a funding deficit of £213.4 m (71% funded) from £134.8 m (77% funded) at 31 March 2014. The next triennial valuation is due with an effective date of 31 March 2016. c USS’s actuary has assumed that the investment return is 5.2% in year 1, decreasing linearly to 4.7% over 20 years. d USS’s actuary has assumed that general pay growth will be CPI in year 1, CPI + 1% in year 2 and RPI + 1% pa thereafter. It is assumed that CPI is based on the RPI assumption (market derived price inflation of 3.6% p.a less an inflation risk premium) less RPI/CPI gap of 0.8% p.a. e As noted above (note a) the USS employer contribution rate is 18% of salaries from 1 April 2016. Prior to that date it was 16% of salaries. The total employer contributions include provisions for the cost of future accrual of defined benefits (DB) (net of member contributions to the DB section), deficit contributions, administrative expenses of 0.4% of salaries and from the implementation of the salary threshold the employer contribution towards defined contribution benefits including employer matching contributions and certain investment management costs relating to the DC section. f As noted above (note b), the OSPS employer contribution rate required for future service benefits alone at the date of the valuation was 20.1% of total pensionable salaries. It was agreed that employers increase their contribution rate by 0.5% each year to 1 August 2017 to 23.5%. 74 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Sensitivity of actuarial valuation assumptions

Surpluses or deficits which arise at future valuations may impact on the University’s future contribution commitment. The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

USS Assumption Change in assumption Impact on USS liabilities

Initial discount rate increase / reduce by 0.25% decrease / increase by £0.8bn

Discount rate in 20 years’ time increase / reduce by 0.25% decrease / increase by £1.1bn

RPI inflation increase / decrease by 0.1% increase / decrease by £0.8bn

more prudent assumption (mortality used Rate of mortality at last valuation, rated down by a increase by £0.5bn further year)

OSPS Assumption Change in assumption Impact on OSPS liabilities

Valuation rate of interest increase / decrease by 0.5% decrease / increase by £63m

Rate of pension increases increase / decrease by 0.5% increase / decrease by £41m

Rate of salary growth increase / decrease by 0.5% increase / decrease by £13m more prudent assumption (mortality Rate of mortality used at last valuation, rated down increase by £20m by a further year)

Deficit Recovery Plans

In line with FRS 102 paragraph 28.11A, the University has recognised a liability for the contributions payable for the agreed deficit funding plan. The principle assumptions used in these calculations are tabled below:

OSPS SAUL USS Finish Date for Deficit Recovery Plan 30/06/26 31/03/18 31/03/31 Average staff number increase 2.4–4.4% 0% 2.4–4.4% Average staff salary increase 2.00% 2.00% 2.00% Average discount rate over period 1.40% 1.50% 1.75% Effect of 0.5% change in discount rate £1.4m - £5.8m Effect of 1% change in staff growth £2.9m - £12.5m

A provision of £197.4m has been made at 31 July 2016 (2015: £181.2m) for the present value of the estimated future deficit funding element of the contributions payable under these agreements, using the assumptions shown. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 75

Pension charge for the year

The pension charge recorded by the University during the accounting period (excluding pension finance costs) was equal to the contributions payable after allowance for the deficit recovery plan as follows:

SCHEME 2015/16 2014/15 £m £m

Universities Superannuation Scheme 74.5 131.4 University of Oxford Staff Pension Scheme 15.6 14.3 NHS Pension Scheme 4.1 3.9 MRC 0.4 0.5 Other schemes – contributions 0.7 1.6 TOTAL 95.3 151.7

Included in other creditors are pension contributions payable of £10.9m (2015: £9.9m).

A copy of the full actuarial valuation report and other further details on the scheme are available on the relevant website: www.uss.co.uk , www.nhsbsa.nhs.uk/Pensions, www1.admin.ox.ac.uk/finance/epp/pensions/schemes/ osps, www.saul.org.uk.

35. Transition to FRS 102

This is the first year the University has prepared accounts under Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council and the FEHE SORP based upon it. The transition to the new accounting standard has required the University to adopt new accounting policies for many balances with a material impact upon the University’s Financial Performance and Position. The policies which have changed are as follows;

Reserves adjusting policy changes

Income recognition on non-exchange transactions

FRS 102 has introduced the concept of non-exchange transactions where there is not an exchange of equal benefit between 2 entities. This has changed the University’s policy for recognising income on government grants, non-government grants, donations and endowments from an accruals model (income is recognised in line with expenditure) to a performance model (income is recognised when performance conditions specified by the grantor/ donor are met).

Research Income

In the majority of cases research income will continue to be recognised on a spend basis as defined by the funding agreements. In a small number of cases income is recognised as receivable, or straight-line over time giving an adjustment to transition date reserves and 2014/15 income.

New Endowments

The new FEHE SORP requires new endowments be recognised as income rather than directly in Endowment Reserves and they be recognised when the University has a legal/constructive right to receive the endowment rather than when the assets are received. This has resulted in a restatement of transition date endowment reserves for endowments receivable but not yet received and 2014/15 income for new endowmwents receivable in the year. 76 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Restricted reserves

The new FEHE SORP requires the University to recognise reserves for restricted income and expenditure serparately from unrestricted reserves. The new income recognition requirements for non-exchange transactions also requires income to be recognised as receivable in the absence of performance conditions, this requires restricted donation deferred income under the previous SORP being recognised as restricted reserves under the new SORP. This requires a restatement of reserves at the transition date for unspent restricted donations and gifted restricted heritage assets.

The University has changed its policy for recognising gifts as expendable endowments to only those gifts which specifically state the gift is an endowment or that the unspent capital be invested. This has resulted in a transfer between endowment and restricted reserves.

Capital grants

Under previous accounting standards the University applied an accruals model for capital grant accounting. Income was recognised in line with depreciation of the associated asset built or purchased with the grant, with unrecognised income being held in the Deferred Capital Grants reserve.

Under FRS 102 capital grants are a treated sub class of non-exchange transactions, for grants related to the purchase of specified assets income is recognised when the asset is purchased whereas grants for building projects are recognised upon completion of the building. Grants received are held in deferred income until income is recognised. This accounting policy change has resulted in the removal of the Deferred Capital Grants reserve.

Short-term employee benefits

FRS 102 has introduced a requirement to accrue for employee benefits earned but not taken as at the reporting date.

Pension deficit funding provision

Under the previous accounting standards the University was exempt from recognising pensions actuarial surpluses and deficits on defined benefit schemes as they were multi-employer schemes for which it was not possible to separately identify the University’s share of the assets and liabilities. Under FRS 102 the University is still exempt from disclosing actuarial surpluses and deficits, but is required to provide for its known future contributions under published deficit funding schemes.

Non-reserves adjusting policy changes

Investment market value gains

The University’s previous accounting policy for investment asset market value gains was to recognise them directly within reserves, either in the revaluation reserve for unrealised gains or retained earnings for realised gains. Under FRS 102 all investment returns must be recognised in the Statement of Comprehensive Income as earned regardless of whether they are realised or unrealised.

Cash equivalents

Short term deposits previously classified as current asset investments, under FRS 102 will now be classified as cash equivalents.

Foreign currency translation of overseas subsidiaries

Under FRS 102 the income and expenditure transactions of overseas subsidiaries which report in a currency other than Pounds Sterling will now be translated at the exchange rates prevailing on the transaction date rather than an average for the year. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 77

Reconciliation of Total Funds

31 July 2014

Deferred Capital Minority CONSOLIDATED Unrestricted Restricted Grants Endowments Interest Total £’m £’m £’m £’m £’m £’m TOTAL FUNDS UNDER PREVIOUS 1,192.8 - 670.0 705.9 0.4 2,569.1 UK GAAP

New endowments receivable, not yet - - - 12.2 - 12.2 received Recognise restricted donations within - 16.4 - - - 16.4 reserves Recognise restricted heritage assets (38.8) 38.8 - - - - within reserves Reclassify endowments under new 19.7 - - (19.7) - - SORP Expendable endowments reclassified - 9.2 - (10.4) - (1.2) to restricted donations Investment gains in mixed-use - 2.6 - - - 2.6 properties Gains on Investments in Spin-out 40.0 - - - - 40.0 Companies Capital grants recognised on 579.7 - (670.0) - - (90.3) performance basis Short-term employee benefit accrual (5.7) - - - - (5.7) Remove minority interest - - - - (0.4) (0.4) Pension deficit funding provision (90.8) - - - - (90.8) Subsidiary adjustments (4.5) - - - - (4.5) TOTAL FUNDS UNDER FRS 102 1,692.4 67.0 - 688.0 - 2,447.4

Deferred Capital UNIVERSITY Unrestricted Restricted Grants Endowments Total £’m £’m £’m £’m £’m TOTAL FUNDS UNDER PREVIOUS 1,195.5 - 671.9 639.1 2,506.5 UK GAAP

New endowments receivable, not yet - - - 12.2 12.2 received Recognise restricted donations within - 16.4 - - 16.4 reserves Recognise restricted heritage assets (38.8) 38.8 - - - within reserves Reclassify endowments under new 19.7 - - (19.7) - SORP Expendable endowments reclassified - 9.2 - (10.4) (1.2) to restricted donations Investment gains in mixed-use - 2.6 - - 2.6 properties Gains on Investments in Spin-out 40.0 - - - 40.0 companies Capital grants recognised on 581.6 - (671.9) - (90.8) performance basis Short-term employee benefit accrual (5.7) - - - (5.7) Pension deficit funding provision (90.8) - - - (90.8) Other minor adjustments (1.1) - - - (1.1) TOTAL FUNDS UNDER PREVIOUS 1,700.4 67.0 - 621.2 2,388.6 78 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

31 July 2015

Deferred Capital Minority CONSOLIDATED Unrestricted Restricted Grants Endowments Interest Total £’m £’m £’m £’m £’m £’m TOTAL FUNDS UNDER PREVIOUS 1,478.3 - 706.7 833.9 0.4 3,019.3 UK GAAP

New endowments previously accrued - - - (6.1) - (6.1) Research income recognised on 5.5 - - - - 5.5 performance basis Recognise restricted donations within - 16.4 - - - 16.4 reserves Recognise restricted heritage assets (39.7) 39.7 - - - - within reserves Expendable endowments reclassified (17.6) 15.7 - 1.9 - - to restricted donations Investment gains in mixed-use - 2.6 - - - 2.6 properties Gains on Investments in Spin-out 58.5 - - - - 58.5 companies Capital grants recognised on 636.5 - (706.7) - - (70.2) performance basis Short-term employee benefit accrual (5.4) - - - - (5.4) Remove minority interest - - - - (0.4) (0.4) Pension deficit funding provision (179.7) - - - - (179.7) Consolidation adjustments (other) (1.2) - - - - (1.2) Other minor adjustments (3.0) (0.2) - 3.6 - 0.4 TOTAL FUNDS UNDER FRS 102 1,932.2 74.2 - 833.3 - 2,839.7

Deferred Capital UNIVERSITY Unrestricted Restricted Grants Endowments Total £’m £’m £’m £’m £’m TOTAL FUNDS UNDER PREVIOUS 1,475.1 - 706.9 766.6 2,948.6 UK GAAP

New endowments previously accrued - - - (6.1) (6.1) Research income recognised on 5.5 - - - 5.5 performance basis Recognise restricted donations within - 16.4 - - 16.4 reserves Recognise restricted heritage assets (39.7) 39.7 - - - within reserves Expendable endowments reclassified (21.0) 19.0 - 2.0 - to restricted donations Investment gains in mixed-use - 2.6 - - 2.6 properties Gains on Investments in Spin-out 57.4 - - - 57.4 companies Capital grants recognised on 636.7 - (706.9) - (70.2) performance basis Short-term employee benefit accrual (5.4) - - - (5.4) Pension deficit funding provision (178.9) - - - (178.9) Other minor adjustments 5.2 - - 0.1 5.3 TOTAL FUNDS UNDER FRS 102 1,934.9 77.7 - 762.6 2,775.2 FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 79

Reconcilitation of 2014/15 Surplus

These financial statements present the 2014/15 Income and Expenditure restated under FRS102. The net surplus as reported under the previous accounting standards reconciles to the surplus under FRS102 as follows:

CONSOLIDATED UNIVERSITY

2014/15 2014/15 £’m £’m 2014/15 NET SURPLUS UNDER PREVIOUS UK GAAP 184.3 178.3

Research grant income recognised on performance basis 5.5 5.5 Endowment on earnings not Total Return (24.0) (21.6) Holiday Pay accrual 0.5 0.5 Donation income recognised on performance basis 0.7 0.7 New endowments recognised as income when receivable 67.4 67.4 Investment gains recognised as income as earned 205.4 202.5 Endowment income recognised as reserves transfer instead (11.8) (11.8) of income Pension provision change (75.8) (75.8) Capital grants recognised on performance basis 35.0 35.0 Other adjustments 5.1 5.9 2014/15 NET SURPLUS UNDER FRS 102 392.3 386.6 80 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Oxford University Press: Financial Report Extracts

Abstract of the Accounts of the Trading Operations and the Delegates’ Property and Reserve Fund of Oxford University Press for the year ended 31 March 2016

Introductory note

The Delegates wish to observe that:

(a) the abstracts of Accounts are drawn from the full audited non-statutory accounts of the Trading Operations and the Delegates’ Property and Reserve Fund of the Press;

(b) with regard to the abstract of the combined Balance Sheet of the Trading Operations, the short term cash position is substantially stronger at 31 March than at certain other times of the year;

(c) a proportion of earnings and cash balances arising in certain overseas countries is not available for use elsewhere;

(d) the Delegates’ Property and Reserve Fund was established during the year ended 31 March 1984 in order to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Trading Operations. The Fund holds and manages the properties of the Press together with the income arising therefrom. The main purpose of the Fund is to manage, in the short and medium term, the impact on the Press, and consequently on the University, of the realisation of material economic and financial risks to the Press. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 81

Oxford University Press: Financial Report Extracts

Independent Auditor’s Statement to the Delegates of the Oxford University

We have examined the Abstract of the non-statutory accounts of the Trading Operations and the Delegates Property and Reserve Fund of Oxford University Press for the year ended 31 March 2016 which comprises the abstract of the combined balance sheet, combined statement of comprehensive income and combined statement of changes in equity, and accompanying note on explanation of transition to FRS102 from Old UK GAAP of the Trading Operations and the abstract of the combined balance sheet and combined statement of financial activities of the Delegates Property and Reserve Fund (“the Abstract”) and accompanying note on explanation of transition to FRS102 from Old UK GAAP.

This statement is made solely to the Delegates of the Oxford University Press, as a body, in accordance with our terms of engagement. Our work has been undertaken so that we might state to the Delegates those matters we have agreed to state to them in such a statement and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Oxford University Press and the Delegates, as a body, for our work, for this statement, or for the opinions we have formed.

Respective responsibilities of the Delegates and KPMG LLP

The Delegates are responsible for preparing the Abstract within the Financial Statements of the University of Oxford in accordance with the applicable Statutes of Oxford University. Our responsibility is to report to you our opinion on the accurate extraction of the captions and amounts included in Abstract within the Financial Statements of the University of Oxford with the full annual non-statutory accounts of the Trading Operations and Delegates Property and Reserve Fund of Oxford University Press.

Basis of opinion

Our examination of the Abstract consisted primarily of agreeing the captions and amounts included in the Abstract to the corresponding items within the full annual non-statutory accounts of the Trading Operations and the Delegates Property and Reserve Fund of Oxford University Press for the year ended 31 March 2016. We also read the other information contained in the Financial Statements of the University of Oxford and consider the implications for our statement if we become aware of any apparent misstatements or material inconsistencies with the Abstract.

This engagement is separate from the audit of the annual non-statutory accounts of Trading Operations and the Delegates Property and Reserve Fund of Oxford University Press and the report here relates only to the extraction of the Abstract from those annual non-statutory accounts and does not extend to the annual non-statutory accounts taken as a whole.

As set out in our audit report on those non-statutory accounts, that audit report is made solely to the Delegates, as a body, in accordance with Council Regulation 20 of 2002 of Oxford University. The audit work has been undertaken so that we might state to the Delegates 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 Trading Operations and Delegates Property and Reserve Fund of Oxford University Press and the Delegates as a body for that audit work, for the audit report, or for the opinions we have formed in respect of that audit.

Opinion

On the basis of the work performed, in our opinion the captions and amounts included in the Abstract have been accurately extracted from the full annual non-statutory accounts of the Trading Operations and Delegates Property and Reserve Fund of Oxford University Press for the year ended 31 March 2016.

KPMG LLP Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD 31-May-16 82 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Abstract of the Combined Balance Sheet of the Trading Operations as at 31 March 2016

2016 2015

£’m £’m £’m £’m

Fixed Assets Tangible assets 22.4 22.1 Intangible fixed assets 83.9 81.8 Investments 0.5 0.5 106.8 104.4 Current Assets Intangible assets - pre-publication 20.0 21.0 Stock and work-in-progress 73.2 77.3 Debtors 203.8 199.5 Current asset investments 174.2 153.4 Cash at bank and in hand 22.0 23.6 493.2 474.8 Current Liabilities Creditors: amounts falling due within one year (209.3) (208.3) Taxation (12.8) (11.5) Bank loans and overdrafts (8.0) (13.5) (230.1) (233.3) Net Current Assets 263.1 241.5 TOTAL ASSETS LESS CURRENT LIABILITIES 369.9 345.9 Creditors: amounts falling due after more than (7.2) (6.0) one year Provisions for liabilities (1.6) (1.9) NET ASSETS EXCLUDING PENSION LIABILITY 361.1 338.0 PENSION LIABILITY (126.7) (135.8) NET ASSETS 234.4 202.2 Capital Employed Accumulated Fund 232.7 200.7 Minority Interests 1.7 1.5 TOTAL FUND 234.4 202.2

Abstract of the Combined Results of the Trading Operations for the year ended 31 March 2016

2016 2015

£’m £’m

TURNOVER 760.5 762.2 PROFIT BEFORE TAX 85.3 96.3 Taxation (10.1) (9.3) PROFIT AFTER TAX 75.2 87.0 Profit attributable to minority interests (0.4) (1.5) PROFIT FOR THE YEAR 74.8 85.5

The above results relate to continuing operations. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 83

Abstract of the Combined Statement of Comprehensive Income of the Trading Operations for the year ended 31 March 2016

2016 2015

£’m £’m PROFIT FOR THE YEAR 74.8 85.5 Other Comprehensive Income: Effective Portion Of Changes In Fair Value Of Cash Flow Hedges (10.6) 1.7 Actuarial Losses On Group Pension Schemes Actuarial Gain/(Loss) Arising During Period 28.9 (63.4) Return On Scheme Assets (Less)/Greater Than Discount Rate (16.2) 28.8 Net Investments - 3.7 TOTAL OTHER COMPREHENSIVE INCOME 2.1 (29.2) TOTAL RECOGNIZED COMPREHENSIVE 76.9 56.3 INCOME RELATING TO THE YEAR

Abstract of the Combined Statement of Changes in Equity of the Trading Operations for the year ended 31 March 2016

CASH FLOW PROFIT HEDGING AND LOSS TOTAL RESERVE ACCOUNT £’m £’m £’m Balance At 1 April 2014 3.1 287.2 290.3 Total Comprehensive Income For The Year: Profit For The Year - 85.5 85.5 Other Comprehensive Income 1.7 (30.9) (29.2)

Transfer To Delegates' Property And Reserve Fund - (145.9) (145.9)

BALANCE AT 31 MARCH 2015 4.8 195.9 200.7 Total Comprehensive Income For The Year: Profit For The Year - 74.8 74.8 Other Comprehensive Income (10.6) 12.7 2.1

Transfer To Delegates' Property And Reserve Fund - (44.9) (44.9)

BALANCE AT 31 MARCH 2016 (5.8) 238.5 232.7 84 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Explanation of Transition to FRS102 from Old UK GAAP

These are the Trading Operations’ first non-statutory accounts prepared in accordance with FRS 102. The accounting policies set out in note 2 have been applied in preparing the non-statutory accounts for the year ended 31 March 2016 and the comparative information presented in these non-statutory accounts for the year ended 31 March 2015.

In preparing its FRS 102 balance sheet, the Press has adjusted amounts reported previously in non-statutory accounts prepared in accordance with its previous basis of accounting, old UK GAAP. An explanation of how the transition from UK GAAP has affected the Press’s financial position and financial performance is set out in the following tables.

RECONCILIATION OF EQUITY 31 MARCH 2015 Effect of Old UK GAAP FRS 102 transition £’m £’m £’m Fixed Assets Tangible fixed assets (a) 40.3 (18.2) 22.1 Intangible fixed assets (a) 63.6 18.2 81.8 Investments 0.5 - 0.5 104.4 - 104.4 Current Assets Intangible assets – pre-publication (b) - 21.0 21.0 Stock and work-in-progress (b) 98.3 (21.0) 77.3 Debtors (c) 190.6 8.9 199.5 Current asset investments (c) 153.3 0.1 153.4 Cash at bank and in hand 23.6 - 23.6 465.8 9.0 474.8 Creditors Amounts falling due within one year (c),(d),(e) (226.6) (6.7) (233.3) NET CURRENT ASSETS 239.2 2.3 241.5 TOTAL ASSETS LESS CURRENT LIABILITIES 343.6 2.3 345.9 Creditors amounts falling due after more than one year (c) (4.3) (1.7) (6.0) PROVISION FOR LIABILITIES (1.9) - (1.9) NET ASSETS EXCLUDING PENSION LIABILITY 337.4 0.6 338.0 Pension Liability (135.8) - (135.8) NET ASSETS INCLUDING PENSION LIABILITY 201.6 0.6 202.2 Reserves 200.1 0.6 200.7 Minority Interests 1.5 - 1.5 TOTAL FUND 201.6 0.6 202.2 FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 85

Explanation of Transition to FRS102 from Old UK GAAP

RECONCILIATION OF EQUITY (CONTINUED) 1 APRIL 2014 Effect of Old UK GAAP FRS 102 transition £’m £’m £’m

Fixed Assets Tangible assets (a) 36.1 (15.8) 20.3 Intangible fixed assets (a) 75.8 15.8 91.6 Investments 0.5 - 0.5 112.4 0.0 112.4 Current Assets Intangible assets - pre-publication (b) - 24.1 24.1 Stock and work-in-progress (b) 98.4 (24.1) 74.3 Debtors (c) 188.5 5.5 194.0 Current asset investments (c) 212.0 (0.3) 211.7 Cash at bank and in hand 32.7 - 32.7 531.6 5.2 536.8 Creditors Amounts falling due within one year (c),(d),(e) (231.3) (7.1) (238.4) NET CURRENT ASSETS 300.3 (1.9) 298.4 TOTAL ASSETS LESS CURRENT LIABILITIES 412.7 (1.9) 410.8 Creditors Amounts falling due after more than one year (c) (4.8) (0.3) (5.1) Provision For Liabilities (1.7) - (1.7) NET ASSETS EXCLUDING PENSION LIABILITY 406.2 (2.2) 404.0 Pension Liability (112.5) - (112.5) NET ASSETS INCLUDING PENSION LIABILITY 293.7 (2.2) 291.5 Reserves 292.4 (2.2) 290.2 Minority Interests 1.3 - 1.3 TOTAL FUND 293.7 (2.2) 291.5

Notes on reconciliation of equity: (a) Classification of ixedF Assets under FRS 102 requires computer software assets, including costs of configuring and implementing computer systems, to be shown as an intangible asset separate from the hardware on which the software is installed rather than a tangible fixed asset for the combined software and hardware. The net book value of capitalised software that has been reclassified as Intangible Fixed Assets, at 31st March 2015: £18.2m (1st April 2014 £15.8m). (b) Pre-production costs of publications have been shown as First Costs within Stock, and amortized over twelve months from first publication. Under FRS 102, these costs will be reclassified as Intangible Assets – Pre-Publication but will continue to be disclosed alongside Stock as Current Assets in the balance sheet. These assets will also continue to be amortised over twelve months from publication. Pre-production costs of publications were £21.0m at 31st March 2015 and £24.1m at 1st April 2014. (c) The Press enters into hedging contracts to protect itself from within-period exchange rate volatility. Under old UK GAAP, there was no requirement to hold hedging instruments (such as future currency sales or purchases at a fixed rate) on the balance sheet or to revalue them to current market value. Effective hedging under FRS 102 allows transactions to be recorded at the hedged rate and changes in the market value of hedges relating to future periods to be recorded through OCI rather than in the profit and loss account for the current period. This is achieved by matching FX contracts with phased cash flow forecasts. Hedges deemed as ineffective are revalued to market rate with changes in value taken through the profit and loss account. Previously, hedged transactions were recorded at the hedged rate and any mismatch between the value of transactions and hedges was closed out at spot rate with any differences taken to exchange gains and losses in the profit and loss account (this is equivalent to assuming that all hedges were fully effective) and periodic changes in market value of the hedging instruments did not need to be reflected in the profit and loss account. Under FRS 102, all outstanding invoiced transactions are revalued to the period end spot rate. At 1st April 2014 amounts recognised in the balance sheet in relation to cash flow hedges, the revaluation of invoiced items and cash to the year end rate was £2.0m (31st March 2015 £4.8m). In 2014/15, amounts taken to the Profit and Loss account due to ineffectiveness, the revaluation of invoiced items and cash was a loss of £1.1m. Effective hedges recognised in OCI at 1st April 2014 was a gain of £3.1m, the movement on OCI in 2014/15 was a gain of £1.8m. (d) The cost of unused holiday entitlement at the end of the year is accrued under FRS 102 with movements in the accrual taken through the Profit and Loss account. An opening accrual of £3.9m has been posted in the balance sheet at 1st April 86 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

2014, and the movement in the accrual will be recognised in the profit and loss account each year. The accrual at 31 March 2015 was calculated to be £4.2m, thus a £0.3m profit and loss account movement was recognised in 2014/15. (e) Deferred tax on unremitted earnings – under old FRS 19 unremitted earnings of subsidiaries only gave rise to deferred tax liabilities to the extent that dividends had been accrued. Under FRS 102 deferred tax is recognised when income from a subsidiary or branch has been recognised in the financial statements and the subsidiary is a regular remitter of dividends. Deferred tax on unremitted earnings was £0.2m at 1st April 2014 and reduced to £0.1m at 31st March 2015, with the movement taken to Taxation in the profit and loss account in 2014/15.

Explanation of Transitionto FRS102 from Old UK GAAP

RECONCILIATION OF PROFIT AND LOSS 31 MARCH 2015 Effect of Old UK GAAP FRS 102 transition £’m £’m £’m

TURNOVER (a) 767.2 (5.0) 762.2 Trading profit before sale of fixed assets 105.1 (3.4) 101.7 Profit on sale of fixed assets 0.1 - 0.1 OPERATING PROFIT (c) 105.2 (3.4) 101.8 Net interest receivable/(payable) (1.0) - (1.0) Other finance (expense)/income (b) (0.5) (4.3) (4.8) PROFIT BEFORE INVESTMENT INCOME 103.7 (7.7) 96.0 Investment income 0.3 - 0.3 PROFIT BEFORE TAX (a) 104.0 (7.7) 96.3 Taxation (d) (9.5) 0.2 (9.3) PROFIT AFTER TAX 94.5 (7.5) 87.0 Profit attributable to minority interest (1.4) (0.1) (1.5) PROFIT FOR THE YEAR 93.1 (7.6) 85.5

Notes on reconciliation of profit and loss: (a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and Profit and Loss account were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognised in Other Comprehensive Income. The retranslation of the profit and loss account for the year ended 31st March 2015 to average rates reduced Trading Operations turnover by £5.0m and net profitbefore tax by £4.2m compared to what was previously reported under old UK GAAP. (b) The costs of providing post-retirement benefits for employees is recognised in the Profit and Loss account through a Service Charge that recognises the cost of the benefits actually accruing to current employees during the year, and a Finance Charge which reflects the notional interest on thefuture scheme liabilities (calculated at a discount rate set in line with high quality corporate bonds) less the income generated from scheme assets. Under FRS 17, the income on assets was calculated according to the type and mix of assets and different rates of income were assumed on each separate class of asset. Under FRS 102, there is no change in Service Charge but returns on assets are calculated using the same rate used to discount the liabilities and no investment premium can be assumed. The resultant increase in Finance Charge for 2014/15 was £4.3m. (c)The profit and loss account movement in the holiday accrual in 2014/15 was a charge of £0.3m. (d) Deferred tax on unremitted earnings recognised in the profit and loss account in 2014/15 was a £0.1m credit. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 87

Abstract of the Combined Balance Sheet of the Delegates’ Property and Reserve Fund as at 31 March 2016

2016 2015 Strategic Effective Property Operating Reserve Reserve Total Total £’m £’m £’m £’m Fixed Assets Properties 167.5 84.8 252.3 233.8 Investments 5.0 25.2 30.2 40.1 172.5 110.0 282.5 273.9 Current Assets Debtors 0.2 0.1 0.3 0.2 Cash at bank and in hand 29.3 - 29.3 14.6 29.5 0.1 29.6 14.8 Creditors: amounts falling due within one year (6.6) (9.8) (16.4) (18.1) NET CURRENT ASSETS/(LIABILITIES) 22.9 (9.7) 13.2 (3.3)

TOTAL ASSETS LESS CURRENT LIABILITIES 195.4 100.3 295.7 270.6

NET ASSETS 195.4 100.3 295.7 270.6 Reconciliation Of Funds Opening balance 169.0 101.6 270.6 248.9 Net movement in funds 26.4 (1.3) 25.1 21.7 CLOSING BALANCE 195.4 100.3 295.7 270.6 88 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Abstract of the Combined Statement of Financial Activities of the Delegates’ Property and Reserve Fund for the year ended 31 March 2016

2016 2015 Strategic Effective Property Operating Reserve Reserve Total Total £’m £’m £’m £’m Incoming Resources From Generated Funds Rental income from properties 14.8 3.0 17.8 17.7 Income from investments 0.2 0.1 0.3 0.4 Transfer from Trading Operations - 44.9 44.9 145.9 TOTAL INCOMING RESOURCES 15.0 48.0 63.0 164.0 Expenditure Costs of generating funds Other resources expended (8.3) (0.9) (9.2) (9.1) Expenditure on charitable activities Transfer of funds to the rest of the University: ¡ Cash - (44.9) (44.9) (165.9) ¡ Benefits in kind (1.0) - (1.0) (0.9) TOTAL EXPENDITURE (9.3) (45.8) (55.1) (175.9) Gains on investment properties 9.7 6.1 15.8 27.8 NET INCOME 15.4 8.3 23.7 15.9

Transfer Between Funds 9.6 (9.6) - - NET INCOMING/(OUTGOING) RESOURCES 25.0 (1.3) 23.7 15.9 FOR THE YEAR Currency Translation Differences On Foreign 1.4 - 1.4 5.8 Currency Net Investments NET MOVEMENT IN FUNDS 26.4 (1.3) 25.1 21.7 Reconciliation Of Funds Total Funds Brought Forward 169.0 101.6 270.6 248.9 TOTAL FUNDS CARRIED FORWARD 195.4 100.3 295.7 270.6

The Above Results Relate To Continuing Operations. FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 89

Explanation of Transitionto FRS102 from Old UK GAAP

These are the DPRF’s first non-statutory accounts prepared in accordance with FRS 102. The accounting policies set out in note 2 have been applied in preparing the non-statutory accounts for the year ended 31 March 2016 and the comparative information presented in these non-statutory accounts for the year ended 31 March 2015.

In preparing its FRS 102 Balance Sheet, the DPRF has adjusted amounts reported previously in non-statutory accounts prepared in accordance with its previous basis of accounting, old UK GAAP. An explanation of how the transition from old UK GAAP has affected the DPRF’s financial position and financial performance is set out in the following tables.

RECONCILIATION OF EQUITY 31 MARCH 2015 Effect of Old UK GAAP FRS 102 transition £’m £’m £’m Fixed Assets Properties (a) 131.0 102.8 233.8 Investments 40.1 - 40.1 171.1 102.8 273.9 Current Assets Debtors 0.2 - 0.2 Cash at bank and in hand 14.6 - 14.6 14.8 - 14.8 Creditors Amounts falling due within one year (f) (16.7) (1.4) (18.1) NET CURRENT ASSETS (1.9) (1.4) (3.3) TOTAL ASSETS LESS CURRENT LIABILITIES 169.2 101.4 270.6 Creditors amounts falling due after more than one year (c) - - - NET ASSETS 169.2 101.4 270.6 Reconciliation Of Funds Opening balance 172.4 76.5 248.9 Net movement in funds (3.2) 24.9 21.7 TOTAL FUNDS 169.2 101.4 270.6 90 | UNIVERSITY OF OXFORD FINANCIAL STATEMENTS 2015/16

Explanation of Transition to FRS102 from Old UK GAAP

RECONCILIATION OF EQUITY 1 APRIL, 2014 Effect of Old UK GAAP FRS 102 transition £’m £’m £’m Fixed Assets Propertiesa 117.9 77.7 195.6 Investments 47.0 - 47.0 164.9 77.7 242.6 Current Assets Debtors 0.4 - 0.4 Cash at bank and in hand 22.7 - 22.7 23.1 - 23.1 Creditors Amounts falling due within one yearb (15.5) (1.2) (16.7) NET CURRENT ASSETS 7.6 (1.2) 6.4 TOTAL ASSETS LESS CURRENT LIABILITIES 172.5 76.5 249.0 Creditors Amounts falling due after more than one year (0.1) - (0.1) NET ASSETS 172.4 76.5 248.9 Reconciliation Of Funds Opening balance 152.8 - 152.8 Net movement in funds 19.6 76.5 96.1 TOTAL FUNDS 172.4 76.5 248.9

Notes on reconciliation of equity: (a) Strategic properties, regardless of their occupation for business use, are treated as Investment Properties in the non- statutory accounts, as the exemption under old UK GAAP for properties held by other companies within a group has been removed in FRS 102. The movement in the fair value of investment properties is recognised in the Statement of Financial Activities (including investment properties already held at fair value in the EOR). The fair value of properties, based on management opinion, at 1st April 2014 increased the net assets of the DPRF balance sheet by £77.7m as they were previously recognised at depreciated cost. At 31st March 2015 the revaluation of the strategic properties, based on professional advice, increased the value of properties by a further £25.1m. (b) FRS 102 section 29 requires deferred tax to be recognised in respect of all timing differences at the reporting date. The recognition of deferred tax for timing differences arising on a revaluation is recognised consistent with the accounting itself, therefore, the upward revaluation of an asset gives rise to a deferred tax liability. Under FRS 19, asset revaluations did not give rise to deferred tax assets and liabilities where gains and losses were recorded in the SOFA unless there was a binding commitment to sell, and the resulting gain/loss on disposal was recognised in the non-statutory accounts. At 1st April 2014 the deferred tax liability on the movement in property valuation in taxable jurisdictions was £1.2m (31st March 2015: £1.5m). FINANCIAL STATEMENTS 2015/16 UNIVERSITY OF OXFORD | 91

Explanation of Transition to FRS102 from Old UK GAAP

RECONCILIATION OF STATEMENT OF YEAR ENDED 31 MARCH 2015 FINANCIAL ACTIVITIES Effect of Old UK GAAP FRS 102 transition £’m £’m £’m Income Rental income from properties (a) 18.0 (0.3) 17.7 Income from investments 0.4 - 0.4 Transfer from Trading Operations 145.9 - 145.9 TOTAL INCOME 164.3 (0.3) 164.0 Expenditure Costs of generating funds Other resources expended (a),(b),(c) (10.7) 1.6 (9.1) Expenditure on charitable activities Transfer of funds to the rest of the University: ¡ Cash (165.9) - (165.9) ¡ Benefits in kind (0.9) - (0.9) TOTAL EXPENDITURE (177.5) 1.6 (175.9) Gains on investment properties - 27.8 27.8 NET (LOSS)/ INCOME (13.2) 29.1 15.9 Other gains/(losses): Surplus on revaluation of investment properties (b) 8.2 (8.2) - Currency translation differences on foreign currency net (a),(c) 1.8 4.0 5.8 investments

NET MOVEMENT IN FUNDS (3.2) 24.9 21.7 Reconciliation Of Funds TOTAL FUNDS BROUGHT FORWARD 172.4 76.5 248.9 TOTAL FUNDS CARRIED FORWARD 169.2 101.4 270.6

Notes: (a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and statement of financial activities were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognised within the net movement in funds. The retranslation of total income for the year ended 31st March 2015 to average rates reduced total income by £0.3m compared to what was previously reported under old UK GAAP. (b) As investment properties are recognised at market value, depreciation that would previously have been charged was added back to other resources expended. Gains on the revaluation of investment properties were recognised within net income on the statement of financial activities as well as the gain on EOR investment properties which was previously shown within the net movement of funds. (c) An increase in the deferred tax liability of £0.3m on revaluation gains of investment properties was recognised within other resources expended. Financial Statements of OUP's Trading Operations for the year ended 31 March 2017

1

TRADING OPERATIONS

ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2017 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Oxford University Press (the “Press”) is committed to providing information relating to corporate governance in its published accounts, consistent with developments in those of listed companies and other public interest bodies, and with the relevant and applicable sections of the UK Corporate Governance Code (the “Code”). Many of the principles of the Code that apply to companies with shares and shareholders are not relevant to the Press. The Press is committed to implementing best practice in this area, insofar as it is appropriate to the Press’s circumstances. Although the Press is exempt from the requirements of the Code, the Delegates have decided to provide the following information.

Summary of Oxford University Press's Structure of Governance

1. The Press is a department of the University of Oxford whose governance structure is set out in the Statutes and Regulations of the University. The Delegates of the Press have overall responsibility for the affairs of the Press, including its publishing policy and academic standards. Pursuant to the Statutes, the Delegacy has established a Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press. The Delegacy appoints a Secretary to the Delegates to act as the Chief Executive of the Press with executive responsibility for the management of the Press. Authority to act within the Press is given through powers of attorney granted by the Chief Executive. 2. The Delegates of the Press are chosen from senior academics at the University, and their terms of appointment and tenure are in accordance with the provisions of the Statutes of the University. The Delegacy meets regularly throughout the year, receives reports on the management of the Press from the Chief Executive and Finance Committee, and reviews and authorizes publications. 3. The Finance Committee of the Delegacy consists of a chair elected by the Delegates, the Vice-Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. Terms of office are stipulated within the Statutes and Regulations of the University. 4. The governance structure of the Press contains a clear separation between the executive responsibility for the management of the Press which rests with the Chief Executive, and the Chairmanship of the Delegacy (which is held by the Vice-Chancellor) and of the Finance Committee (which is held by a senior academic of the University). 5. The Chief Executive is supported in the day to day control of the Press by an Executive Committee which monitors the detailed performance of the divisions of the Press. The Chief Executive is responsible for advising on governance matters and ensuring good information flows to Delegates and relevant committees. 6. The accounts of the Press are prepared under the direction of the Finance Committee, and are presented annually to the Delegacy by the Finance Committee. There is no Annual General Meeting but the audited accounts of the Press, as approved by the Delegacy, are submitted to the University’s Finance Committee and Council. An abstract of the audited accounts is published in the University Gazette and in the Financial Statements of the University of Oxford. 7. Pursuant to the Regulations of the University, the Finance Committee is entitled to establish such subcommittees as it may from time to time think fit. It has established the Press’s Audit Committee as a sub-committee of Finance Committee. The Audit Committee meets at least four times a year, with the external and internal auditors normally in attendance. The Audit Committee provides independent oversight of audit activities and reports to the Finance Committee on issues of internal control, governance, operational effectiveness, risk management, legal affairs, regulatory matters, and external audit. The Audit Committee reviews the effectiveness of the financial, risk management, and other internal control systems of the Press, including both the scope and the effectiveness of the work of both Internal and External Audit The Audit Committee comprises some Delegate members of the Finance Committee and some external members of the Finance Committee. Although senior officers of the Press attend meetings of the Audit Committee as necessary, they are not members of the Committee. The Audit Committee reports to the Finance Committee following its meeting. 8. The Press's Remuneration Committee, another sub-committee of Finance Committee and one which includes the Vice-Chancellor of the University, reviews the salaries, benefits, bonuses, and fees of the Press's senior officers and Finance Committee members. 9. The Press’s Nominations Committee, another sub-committee of Finance Committee and one which is chaired by the Vice-Chancellor of the University, proposes names in connection with vacancies on Finance Committee, Audit Committee and Remuneration Sub-Committee and with any vacancy of the Chair of OUP Pension Trustees.

1 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Corporate Governance and Internal Control

The Press acknowledges and endorses the principles of corporate governance, including the adoption of a risk-based approach to the review of internal controls.

● The Press has implemented a global risk-based approach to the design, application and review of its risk management systems and internal controls. A Risk Register has been developed for all of the Press's operations, including major overseas branches and subsidiaries; this register identifies, evaluates, and manages all the material risks facing the Press.

● The Finance Committee is responsible for the Press's system of risk management and internal control and for reviewing its effectiveness. The Press's system of internal controls is designed to manage rather than eliminate the risk of failure to achieve operational objectives, and inevitably can only provide reasonable and not absolute assurance against material misstatement or loss.

● The Press’s risk assessment practices are incorporated into its wider business planning, budgeting, and financial reporting processes.

● The Finance Committee, through the Audit Committee, regularly reviews the effectiveness of the Group's system of risk management and internal control. The Finance Committee's monitoring covers all controls, including financial, operational and compliance controls. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed, and controlled and whether any significant weaknesses are promptly remedied or need extensive monitoring.

● The Press has established a framework for dealing with concerns that staff might raise on potential improprieties in financial reporting and other areas.

● The Press's management controls the operations of the enterprise through annual planning and budgeting, with monthly monitoring processes to ensure that operations are performing as expected. The Press's management hierarchy operates through a divisional structure to ensure adequate control of individual operating and trading entities within the Press.

● A number of key management matters, as formally set out in a Group Levels of Authority document, are reserved for the decision of the Finance Committee.

2 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

STATEMENT OF THE RESPONSIBILITIES OF THE DELEGATES OF OXFORD UNIVERSITY PRESS

Under the University’s Statutes and Regulations, the Delegates of the University Press are responsible for the affairs of the Press. Through the Finance Committee, the Delegates have responsibility for the direction of the finance and management of the Press’s activity.

The Delegates, through the Finance Committee, are responsible for preparing these non-statutory accounts for the year ended 31 March 2017 which are intended by them to give a true and fair view of the state of affairs of the Trading Operations and of the profit or loss for that period.

The Finance Committee, on behalf of the Delegates, has elected to prepare the non-statutory accounts on the basis of the financial reporting framework UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland. In preparing these non- statutory accounts, the Delegates are required to:

● select suitable accounting policies and then apply them consistently; ● make judgements and accounting 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 non-statutory accounts; and ● prepare the non-statutory accounts on the going concern basis unless it is inappropriate to presume that the Press will continue in business.

The Delegates are responsible for keeping adequate accounting records that are sufficient to show and explain the Press’s transactions and disclose with reasonable accuracy at any time the financial position of the Press. They are also responsible for safeguarding the assets of the Press and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities including the maintenance of an appropriate system of internal controls.

Signed on behalf of the Delegates by

Sir John Vickers, Chair of Finance Committee 30 May 2017

3 INDEPENDENT AUDITOR'S REPORT TO THE DELEGATES OF OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

We have audited the non-statutory accounts of the Trading Operations of Oxford University Press (“the Trading Operations”) for the year ended 31 March 2017, which comprise the combined Profit and Loss Account, the combined statement of total comprehensive income, the combined balance sheet, the combined cash flow statement and the related notes. These non-statutory accounts have been prepared for the reasons set out in note 1 to the non-statutory accounts and on the basis of the financial reporting framework UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, as prescribed by the Statutes of the University and according to instructions received from the Delegates.

Our report has been prepared solely for the Delegates as a body, in accordance with Council Regulation 20 of 2002 of Oxford University. It has been released to the Delegates on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Delegates own internal purposes) or in part, without our prior written consent.

Our report was designed to meet the agreed requirements of the Delegates determined by the Delegates' needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Delegates for any purpose or in any context. Any party other than the Delegates who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG LLP will accept no responsibility or liability in respect of our report to any other party.

Respective responsibilities of the Delegates and the auditor

As explained more fully in the Statement of the Responsibilities of the Delegates of Oxford University Press set out on page 3, the Delegates, through the Finance Committee, are responsible for the preparation of the non-statutory accounts, which are intended by them to give a true and fair view. Our responsibility is to audit, and express an opinion on, the non-statutory accounts in accordance with the terms of our engagement letter dated 6th April 2017 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the non-statutory accounts

An audit involves obtaining evidence about the amounts and disclosures in the non-statutory accounts sufficient to give reasonable assurance that the non-statutory accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trading Operations’ circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Delegates; and the overall presentation of the non-statutory accounts.

In addition we read all the financial and non-financial information in the Corporate Governance statement attached to the non-statutory combined accounts of the Trading Operations to identify material inconsistencies with the audited non-statutory accounts and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on non-statutory accounts

In our opinion the non-statutory accounts: ● give a true and fair view of the state of the Trading Operations’ affairs as at 31 March 2017 and of its profit for the the year then ended; and ● have been properly prepared in accordance with UK Generally Accepted Accounting Practice.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where under the terms of our engagement we are required to report to you if, in our opinion: ● adequate accounting records have not been kept by the Trading Operations and that the returns adequate for our audit have not been received from branches not visited by us; ● your balance sheet and profit and loss account are not in agreement with the accounting records and returns; ● the information in the Finance Committee’s report to the Delegates is not consistent with that in the non-statutory accounts; and ● we have not obtained all the information and explanations which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG LLP Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD 30 May 2017

4 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED PROFIT AND LOSS ACCOUNT OF THE TRADING OPERATIONS FOR THE YEAR ENDED 31 MARCH 2017

Notes 2017 2016 £'m £’m

TURNOVER 3 (a), (b) 847.4 760.5

OPERATING PROFIT 3(c), 4 115.2 92.3

NET INTEREST RECEIVABLE/(PAYABLE) 5 (a) 0.2 (2.2)

OTHER FINANCE EXPENSE 5 (b) (4.0) (4.6)

PROFIT BEFORE INVESTMENT INCOME 111.4 85.5

SHARE OF LOSS IN JOINT VENTURE 6(a) (0.9) (0.4)

INCOME FROM OTHER FIXED ASSET INVESTMENTS 6(b) - 0.2

PROFIT BEFORE TAX 110.5 85.3 TAXATION 8 (16.7) (10.1)

PROFIT AFTER TAX 93.8 75.2

PROFIT ATTRIBUTABLE TO MINORITY INTEREST (0.1) (0.4)

PROFIT FOR THE YEAR 21 93.7 74.8

The above results relate to continuing operations.

The notes on pages 10 to 29 form part of the financial statements.

5 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2017

Notes 2017 2016 £'m £’m

PROFIT FOR THE YEAR 93.7 74.8

OTHER COMPREHENSIVE INCOME:

EFFECTIVE PORTION OF CHANGES IN FAIR VALUE OF CASH FLOW HEDGES 3.3 (10.6)

ACTUARIAL LOSSES ON GROUP PENSION SCHEMES 25 Actuarial (loss)/gain arising during period (183.5) 28.9 Return on scheme assets greater/(less) than discount rate 96.4 (16.2)

CURRENCY TRANSLATION DIFFERENCES ON FOREIGN CURRENCY NET INVESTMENTS 21 9.3 0.0

TOTAL OTHER COMPREHENSIVE (EXPENSE)/INCOME (74.5) 2.1

TOTAL RECOGNIZED COMPREHENSIVE INCOME RELATING TO THE YEAR 19.2 76.9

The notes on pages 10 to 29 form part of the financial statements.

6 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED BALANCE SHEET OF THE TRADING OPERATIONS AS AT 31 MARCH 2017

Notes 2017 2016 £m £’m FIXED ASSETS Tangible fixed assets 9 19.5 22.4 Intangible fixed assets: 10 73.0 83.9 Investments 11 0.5 0.5

93.0 106.8

CURRENT ASSETS Intangible assets - pre-publication 12 20.7 20.0 Fixed asset held for sale 13 2.3 - Stock and work in progress 14 76.3 73.2 Debtors 15 246.4 203.8 Current asset investments 11 229.8 174.2 Cash at bank and in hand 31.4 22.0

606.9 493.2 CREDITORS Amounts falling due within one year 16 (281.0) (230.1)

NET CURRENT ASSETS 325.9 263.1

TOTAL ASSETS LESS CURRENT LIABILITIES 418.9 369.9

CREDITORS Amounts falling due after more than one year 17 (6.7) (7.2)

PROVISION FOR LIABILITIES 18 (1.5) (1.6)

NET ASSETS EXCLUDING PENSION LIABILITY 410.7 361.1

PENSION LIABILITY 25 (197.1) (126.7)

NET ASSETS 3 (d) 213.6 234.4

RESERVES 21 211.9 232.7

MINORITY INTERESTS 1.7 1.7

TOTAL FUND 213.6 234.4

The notes on pages 10 to 29 form part of the financial statements.

The financial statements on pages 5 to 29 were approved by Finance Committee on 30 May 2017 and were signed on its behalf by:

Nigel Portwood Giles Spackman Chief Executive and Secretary to the Delegates Group Finance Director 30 May 2017 30 May 2017

7 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017

Cash Flow Profit and Hedging Loss Reserve Account Total £'m £'m £'m

BALANCE AT 1 APRIL 2015 4.8 195.9 200.7

TOTAL COMPREHENSIVE INCOME FOR THE YEAR: PROFIT FOR THE YEAR - 74.8 74.8 OTHER COMPREHENSIVE INCOME (10.6) 12.7 2.1 TRANSFER TO DELEGATES' PROPERTY AND RESERVE FUND - (44.9) (44.9)

BALANCE AT 31 MARCH 2016 (5.8) 238.5 232.7

TOTAL COMPREHENSIVE INCOME FOR THE YEAR: PROFIT FOR THE YEAR - 93.7 93.7 OTHER COMPREHENSIVE INCOME 3.3 (77.8) (74.5) TRANSFER TO DELEGATES' PROPERTY AND RESERVE FUND - (40.0) (40.0)

BALANCE AT 31 MARCH 2017 (2.5) 214.4 211.9

8 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED CASH FLOW STATEMENT OF THE TRADING OPERATIONS FOR THE YEAR ENDED 31 MARCH 2017

Notes 2017 2016 £'m £'m £'m £'m CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 115.2 92.3 Adjustments for: Depreciation, amortisation and impairment 34.0 27.8 Foreign Exchange losses 2.6 9.1 Gain on the sale of tangible fixed assets (0.2) (0.2)

151.6 129.0

Increase in trade and other debtors (38.0) (3.5) (Increase)/decrease in stock (3.1) 4.1 (Increase)/decrease in first costs (0.7) 1.0 (Increase)/decrease in current asset investments 1.2 - Increase in trade and other creditors 49.9 0.8 Decrease in provisions and employee benefits (20.7) (1.0) Movement in hedging reserve 3.3 (10.6)

143.5 119.8

MI dividend paid (0.1) (0.2) Interest paid (1.5) (3.6) Tax paid (12.0) (8.8)

Net cash from operating activities 129.9 107.2

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of intangible fixed assets (0.5) 0.1 Proceeds from sale of tangible fixed assets 1.2 0.7 Interest received 1.7 1.4 Share of loss in joint venture (0.9) (0.4) Dividend received - 0.2 Acquisition of subsidiaries - (13.3) Acquisition of tangible fixed assets (4.5) (6.7) Acquisition of other intangible fixed assets (16.3) (10.2) Adjustments to Goodwill 0.2 - Net cash from investing activities (19.1) (28.2)

CASH FLOWS FROM FINANCING ACTIVITIES Transfer to DPRF (40.0) (44.9)

Net cash from financing activities (40.0) (44.9)

Net increase in cash and cash equivalents 70.8 34.1 Cash and cash equivalents at 1st April 188.2 163.0 Effect of exchange rate fluctuations on cash held 3.1 (8.9)

Cash and cash equivalents at 31 March 3(d) 262.1 188.2

9 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

1. Status Oxford University Press ("the Press") is a department of the University of Oxford (“the University”). The trading operations of Oxford University Press (“the Trading Operations”), for which these financial statements are presented, are defined as the Press excluding the Delegates' Property and Reserve Fund (“the DPRF”). The DPRF was established in order to distinguish more clearly the property investment operations of the Press from the trade, assets and liabilities relating to its publishing operations. The DPRF holds and manages the property and investment portfolio of the Press. Accordingly, these non-statutory financial statements exclude the assets and liabilities of the property and investment portfolio, together with the related income and expenses. The Trading Operations comprise the publishing and related activities of the Press, including the relevant assets, liabilities, income and expenses of the Press and the branches/subsidiaries listed in note 22, but excluding the DPRF as noted above. Separate financial statements are presented for the DPRF. The activities of the Trading Operations are managed separately from those of the DPRF and separate accounting records are maintained. The Annual Report of the Delegates of the University Press is a separately available document that sets out how the Trading Operations and the DPRF have furthered the University's charitable purposes for the public benefit. The University is a charity and its income is therefore generally exempt from UK taxation. Therefore no provision is made in respect of such taxation as regards the Trading Operations and a number of its branches. The exemption does not extend to subsidiary companies of the Trading Operations. Whilst a number of overseas branches and affiliates have charitable status, certain of these branches may suffer local taxation.

2. Principal Accounting Policies The principal accounting policies are summarized below. They have all been applied consistently throughout the year and to the preceding year.

(a) Basis of Accounting The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value in accordance with the applicable United Kingdom Financial Reporting Standard 102 ("FRS 102") issued by the Financial Reporting Council. The functional currency of the Press is Pounds Sterling, the currency of the United Kingdom, the primary economic environment in which the Press operates. The combined financial statements are therefore presented in Pounds Sterling. Foreign operations are included in the financial statements in accordance with the policies set out in policy The(l). Press is, as stated in note 1, a department of the University of Oxford, which is a public benefit entity, and it has where applicable applied the relevant public benefit requirements of FRS 102.

(b) Principles adopted in the financial statements [FRS 102 section 2] The financial statements are prepared in the form of the combined Profit and Loss Account, the combined statement of comprehensive income, the combined balance sheet, the combined statement of changes in equity and the combined statement of cash flows, in accordance with FRS 102. These combined financial statements comprise the financial statements of the Trading Operations of the Press, including its overseas branches and its subsidiary undertakings ("the group"). The results of subsidiary undertakings acquired or sold in the current or prior years are combined for the periods from which or to the date on which control passed. Acquisitions are accounted for under the purchase method.

(c) Going Concern [FRS 102 section 3] The Press prepares budgets and forecasts on an annual basis and operates an ongoing three-year forecast sustainability review. The going concern nature of the Press has been considered for a period of greater than twelve months from the date of approval of the financial statements. Detailed cash flow forecasts covering a period of greater than twelve months have been prepared, and the Press is satisfied that it can meet its day-to-day working capital needs out of cash and liquid investments. The Finance Committee is not aware of any material uncertainties which would prevent the Press from continuing as a going concern for the foreseeable future. Thus the Press continues to adopt the going concern basis in preparing the annual financial statements.

10 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2. Principal Accounting Policies (continued)

(d) Turnover [FRS 102 section 23] Turnover is stated net of Value Added Tax and trade discounts and is recognized when the significant risks and rewards are considered to have been transferred to the buyer. Turnover from the sale of goods is recognized when the goods are physically delivered to the customer. Turnover from the supply of services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of Creditors falling due within one year.

(e) Provision for Sales Returns [FRS 102 section 23] Provision has been made for expected sales returns after the balance sheet date on the basis of the historical level of such returns augmented by additional provisions made in accordance with FRS 102, where in the opinion of management these are required. The movement in the returns provision is recognized within turnover and cost of sales.

(f) Other Income [FRS 102 section 23] Commission and distribution income that are incidental to core operations are shown in Other Income. Grant and donation income received is accounted for under the performance model. This stipulates that transactions that impose specified future performance-related conditions on the Press are recognized in income only when the performance-related conditions are met; resources received in advance of the completion of the performance conditions are recognized on the balance sheet as deferred income and released to the Profit and Loss Account as conditions are met. In the absence of performance conditions income is recognized in full as soon as it becomes receivable.

(g) Fixed Assets [FRS 102 section 17] Fixed assets consist of plant and equipment and motor vehicles costing over £25,000 and capital building projects costing over £100,000, having a useful life of greater than one year and not intended for resale. Fixed assets are stated at purchase cost including incidental costs of acquisition less accumulated depreciation and provisions for impairment. Depreciation is provided at rates designed to write off the cost of fixed assets over the expected useful lives of the assets concerned. The principal annual rates applied on a straight-line basis are as follows: Freehold buildings 2% and 3.33% Leasehold buildings Over the terms of the lease Plant and equipment 10% to 100% Motor vehicles 25% Freehold land is not depreciated. Assets are assessed for indicators of impairment at each balance sheet date [FRS 102 section 27]. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. Assets are considered to be impaired if their recoverable value is less than book value. The recoverable amount of a Fixed Asset is the higher of its fair value less costs to sell and its value in use. Where indicators exist for a decrease in impairment loss on assets, the prior impairment loss is reversed only to the extent that it does not lead to a revised carrying amount higher than if no impairment had been recognized.

(h) Goodwill and other Intangible Fixed Assets [FRS 102 section 19] Goodwill arises on consolidation and is based on the difference between the fair value of the consideration given for the undertaking acquired, and the fair value of its separable net assets at the date of acquisition. Goodwill is amortized over its estimated economic life of between five and ten years in accordance with FRS 102 on a straight-line basis. A full year of amortization is taken in the year of acquisition. Goodwill is assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. The recoverable amount of goodwill is the present value of the future cash flows of the cash-generating units of which the goodwill is a part. Purchased goodwill acquired prior to 31 March 1999 has been written off in full against reserves. This purchased goodwill will be charged or credited in the Profit and Loss Account as appropriate on the subsequent disposal of the business to which it related. Purchased goodwill acquired after that date is stated in the balance sheet and is amortized through the Profit and Loss Account over its estimated economic life of between five and ten years on a straight-line basis, in accordance with FRS 102. A full year of amortization is taken in the year of acquisition. Acquired lists in intangible assets are amortized on a straight-line basis over their estimated economic life deemed to be between three and ten years, in accordance with FRS 102, the period being determined by the nature of the list acquired. Internally-generated intangible assets are not shown in the balance sheet.

11 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2. Principal Accounting Policies (continued)

(h) Goodwill and other Intangible Fixed Assets (continued) Computer software is stated at purchase cost including incidental costs of acquisition less accumulated amortization and provisions for impairment. Amortization is provided at rates designed to write off the cost of the software over the expected useful lives of the assets concerned. The annual rates applied on a straight-line basis are between 20% and 33.3%. Assets are assessed for indicators of impairment at each balance sheet date [FRS 102 section 27]. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. Assets are considered to be impaired if their recoverable value is less than book value. The recoverable amount of a Fixed Asset is the higher of its fair value less costs to sell and its value in use. Where indicators exist for a decrease in impairment loss on assets, the prior impairment loss is reversed only to the extent that it does not lead to a revised carrying amount higher than if no impairment had been recognized.

(i) Intangible Current Assets - Pre-Publication [FRS 102 section 18] Pre-publication external costs attributable to individual print publications are capitalised and amortized over twelve months from the date of publication. Editorial salaries and the related overheads are not included.

(j) Stock and Work in Progress [FRS 102 section 13] Stock and work in progress are valued at the lower of cost and selling price less costs to sell. Cost includes all direct expenditure except that, in the case of finished books and work in progress, editorial salaries and the related overheads are not included. Development costs associated with the compilation of major new reference works, the revenues from which are long deferred, are written off as they are incurred. Development costs associated with electronic publications are also written off as they are incurred. Selling price less costs to sell is the amount for which the stock can be realized in the normal course of business after allowing for the costs of realization and, where appropriate, the cost of conversion from its existing state to a finished condition.

(k) Financial Instruments Financial assets and liabilities are recognized when the group becomes a party to the contractual provisions of the instrument. [FRS 102 section 11] All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through the Profit and Loss Account. [FRS 102 section 12] Financial assets and liabilities are offset in the balance sheet only when there exists a legally enforceable right to set off the recognized amounts and the group intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

i. Cash [FRS 102 section 11] Cash includes cash in hand, cash at bank, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty. ii. Cash Equivalents (Investments) [FRS 102 section 11] Shares in companies outside the group in which the Press holds an investment are shown at cost and subsequently measured at fair value at each reporting date. Where fair value cannot be reliably measured or investments are not publicly traded, they are measured at cost less impairment. Dividends relating to these investments are recognized in the Profit and Loss Account upon receipt. Current asset investments consist of short- and long-term deposits. Investments in listed shares and venture capital vehicles (where shares are publicly traded or their fair value can be reliably measured) are measured at market value. All gains and losses on investment assets, both realized and unrealized, are recognized in the Profit and Loss Account as they accrue. Investments in subsidiary and associate undertakings are accounted for under the Cost Model and are recognized at transaction cost less accumulated impairment losses.

12 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2. Principal Accounting Policies (continued)

(k) Financial Instruments (continued) iii. Hedge accounting [FRS 102 section 12] The group designates certain derivatives as hedging instruments in respect of the foreign exchange risk of forecast cash flows. At the inception of the hedge relationship, the group documents the relationship between the hedging instruments and the hedged cash flows, along with the clear identification of the risk in the hedged item that is being hedged by the hedging instrument. Furthermore, at the inception of the hedge and on a continual basis the group assesses whether the hedging instrument is highly effective in offsetting the designated hedge risk. The effective portion of changes in the fair value of the designated hedging instrument is recognized in Other Comprehensive Income. The gain or loss relating to the ineffective portion is recognized immediately in the Profit and Loss Account. Amounts previously recognized in Other Comprehensive Income and included in the Accumulated Fund are reclassified to the Profit and Loss Account in the periods in which the hedged item affects the Profit and Loss Account or when the hedging relationship ends. Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any gain or loss included in the Accumulated Fund at that time is reclassified to the Profit and Loss Account when the hedged item is recognized in the Profit and Loss Account. When a forecast cash flow is no longer expected to occur, any gain or loss that was recognized in Other Comprehensive Income is reclassified immediately to the Profit and Loss Account. (l) Foreign Currencies [FRS 102 section 30] The results of overseas branches and subsidiaries are translated into sterling at the average rates of exchange prevailing during the financial year, and their balance sheets are translated into sterling at the rates prevailing at the date of the combined balance sheet. Exchange differences arising from this translation of foreign operations are dealt with as a movement on the Accumulated Fund, reported in combined Other Comprehensive Income. Individual transactions denominated in foreign currency are translated into the local currency of the respective entity at the rates ruling at the dates of the transactions. Amounts receivable and payable at the balance sheet date are translated at the year-end rates, and all exchange differences arising from transactions relating to trading items are included in the combined Profit and Loss Account.

(m) Operating Leases [FRS 102 section 20] Costs in respect of operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Future commitments under operating leases are disclosed in note 26. Any lease premiums or incentives are recognized as a reduction in expense spread evenly over the minimum lease term. The difference between expenditure recognized and cash flow benefits received is recognized as a liability released to the Profit and Loss Account over the lease term.

(n) Royalties [FRS 102 section 21] Royalties payable on sales are charged against income on an accruals basis. Amounts advanced to authors prior to publication of titles are recovered by set-off against royalties subsequently payable on sales of the related titles [FRS 102 section 11]. Provisions are made to reduce advances to the amounts expected to be recovered, taking into account the likely level of future sales and, where titles have not yet been published, the probability that publication will be completed. Royalties receivable are recognized on an accruals basis.

(o) Employee Benefits [FRS 102 section 28] Short-Term Employee Benefits Short-term employment benefits such as salaries and compensated absences are recognized as an expense in the year employees render service to the Press. A liability is recognized at each balance sheet date to the extent that employee holiday allowances have been accrued but not taken, the expense being recognized as staff costs in the Profit and Loss Account.

13 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2. Principal Accounting Policies (continued)

(o) Employee Benefits (continued) Post-Employment Benefits (Pensions) [FRS 102 section 28] The group operates both defined benefit pension schemes and defined contribution schemes. For defined benefit schemes, the amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognized immediately in the Profit and Loss Account if the benefits have vested. If the benefits have not vested immediately, the costs are recognized over the period until vesting occurs. The net interest cost on the net defined benefit liability is reported as other finance expense in the Profit and Loss Account. Actuarial gains and losses, together with the return on plan assets, are recognized immediately as Other Comprehensive Income. Most defined benefit schemes are funded, the assets of the schemes being held separately from those of the group in separate trustee-administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of any related deferred tax, is presented separately after other net assets on the face of the balance sheet. For defined contribution schemes, the amount charged to the Profit and Loss Account in respect of pension costs and other post-employment benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions paid are shown as either accruals or prepayments in the balance sheet.

(p) Repairs and maintenance [FRS 102 section 17] Expenditure to ensure that fixed assets maintain their previously-recognized standard of performance is recognized in the Profit and Loss Account in the period in which it is incurred. The Press has a planned maintenance programme, which is reviewed annually.

(q) Transactions with Related Parties [FRS 102 section 33] FRS 102 Section 33 requires disclosure in the financial statements to draw attention to the possibility that the combined balance sheet and profit or loss have been affected by the existence of related parties and transactions and outstanding balances with such parties. Disclosures are not required of transactions entered into between two or more members of a group as long as any subsidiary which is a party to the transaction is wholly owned by such a member. Disclosure of related party transactions is addressed in note 29.

(r) Taxation [FRS 102 section 29] The Press is, as stated in note 1, a department of the University of Oxford, which is an exempt charity within the meaning of Schedule 3 of the United Kingdom Charities Act 2011 and as such is listed as a charity within the meaning of Paragraph 1 of Schedule 6 to the Finance Act 2010. Current tax, which is wholly composed of non-United Kingdom tax, is provided at amounts expected to be paid (or recovered) using the taxation rates and laws which have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains or losses in tax assessments in periods different from those in which they are recognized in the financial statements. Deferred tax assets are recognized only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

14 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3. Segmental Reporting

(a) Turnover by destination

Turnover represents the value of goods sold from publishing, exclusive of all sales taxes, to customers outside the Press and is recognized on shipment of the goods from the relevant warehouse. It is analysed by destination as follows:

2017 2016 £'m £'m United Kingdom 134.6 128.1 Asia Pacific 247.7 210.2 North America 176.3 156.0 Europe 159.3 157.0 Latin America 47.1 41.2 Central Asia, Middle East and North Africa 37.8 36.9 Sub Saharan Africa 44.6 31.1

847.4 760.5

An error in the analysis of turnover for the year ended 31 March 2016 has been corrected in the comparative year in the note above. The value of goods exported by the Trading Operations from the United Kingdom, including transfers to Press operations overseas, was £347.4m (2016: £344.7m).

(b) Turnover by origin

2017 2016 Total Inter- Net Total Inter- Net Turnover Business Turnover Turnover Business Turnover £'m £'m £'m £'m £'m £'m United Kingdom 479.7 90.2 389.5 469.9 90.4 379.5 Asia Pacific 192.8 3.0 189.8 156.3 2.4 153.9 North America 127.0 11.6 115.4 113.5 10.3 103.2 Europe 68.4 0.1 68.3 60.8 0.1 60.7 Latin America 34.7 - 34.7 28.3 - 28.3 Central Asia, Middle East and North Africa 9.2 - 9.2 7.9 - 7.9 Sub Saharan Africa 42.3 1.8 40.5 27.1 0.1 27.0

954.1 106.7 847.4 863.8 103.3 760.5

15 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3. Segmental Reporting (continued) (c) Operating Profit

2017 2016 £'m £'m United Kingdom 57.3 67.2 Asia Pacific 24.7 18.3 North America 8.9 5.7 Europe 5.8 4.8 Latin America 10.3 2.4 Central Asia, Middle East and North Africa 1.8 0.0 Sub Saharan Africa 8.6 0.8

117.4 99.2 Consolidation adjustments (2.2) (6.9)

115.2 92.3

(d) Net Assets

2017 2016 £'m £'m United Kingdom (79.8) 2.6 Asia Pacific 13.7 10.6 North America 24.5 26.5 Europe 15.2 18.7 Latin America 18.4 15.6 Central Asia, Middle East and North Africa 3.1 3.7 Sub Saharan Africa (2.7) (1.2)

(7.6) 76.5 Consolidation adjustments (40.9) (30.3)

(48.5) 46.2 Interest-bearing net assets 262.1 188.2

213.6 234.4

4. Expenses and auditor's remuneration

The operating profit for the year is stated after charging/(crediting):- 2017 2016 £'m £'m Depreciation of tangible fixed assets 5.3 5.4 Amortization of goodwill 12.1 12.1 Amortization of other intangible fixed assets 12.6 10.3 Auditor's remuneration: Audit fees (UK £0.2m (2016 £0.2m)) 0.7 0.6 Hire/operating lease costs – plant and equipment 4.7 4.1 Hire/operating lease costs – land and buildings 18.0 16.2 Profit on sale of fixed assets 0.2 0.2 Gain/(loss) on foreign exchange transactions 6.1 (0.1)

Auditor's non-audit fees were £11,000 (2016: £18,000)

16 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

5. Finance (Expense)/Income

(a) Net Interest Payable 2017 2016 £'m £'m Interest payable (1.5) (3.6) Interest receivable from deposits 1.7 1.4

Net interest receivable/(payable) 0.2 (2.2)

(b) Other Finance Expense 2017 2016 £'m £'m Interest cost on the defined benefit obligation (19.7) (20.2) Interest income on Scheme assets 15.7 15.6

Other finance expense (4.0) (4.6)

6. Investment Income 2017 2016 £'m £'m (a) Share of loss in joint venture (0.9) (0.4)

(b) Dividend income from fixed asset investment - 0.2

7. Employees

(a) Employee Costs 2017 2016 UK Overseas UK Overseas £'m £'m £'m £'m Wages and salaries 94.7 110.8 90.9 105.0 Social security costs 7.9 7.1 6.7 6.9 Other pension costs 21.1 7.0 22.1 6.7

123.7 124.9 119.7 118.6

Other pension costs include all those items charged to the combined Profit and Loss Account and exclude those items included within the combined Statement of Comprehensive Income.

(b) Employee Numbers The average number of persons employed by the Trading Operations (including part-time staff and contractors) during the year was as follows: 2017 2016 UK Overseas UK Overseas No. No. No. No. Editorial/Production/Design 921 1,302 933 1,308 Sales/Marketing 513 1,684 513 1,659 Distribution 166 278 162 282 Finance and Information Services 435 293 461 303 Administration 261 346 262 351 Printing 21 - 21 -

2,317 3,903 2,352 3,903

Comparative headcount numbers in the note above have been restated to reflect global roles defined in the OUP HR information system.

17 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

7. Employees

(c) Emoluments The number of members of staff through the year whose emoluments (excluding employers' pension contributions, but including salaries, bonus payments, and other benefits) fell into the following ranges were:- 2017 2016 No. No. £100,000-£149,999 77 84 £150,000-£199,999 22 28 £200,000-£249,999 18 7 £250,000-£299,999 3 3 £300,000-£349,999 3 2 £350,000-£399,999 - 4 £400,000-£449,999 1 1 £550,000-£599,999 2 - £600,000-£649,999 - 2

The emoluments of the Chief Executive fell in the £550,000-£599,999 range (2016: £600,000-£649,999 range). The Press’s Remuneration Committee, which is a committee of the Finance Committee, comprised the Vice- Chancellor of the University (Professor Louise Richardson), the Chair of the Finance Committee (Sir John Vickers), the Chairman of the Audit Committee (Hugh Crisp), Professor Mari Sako, and three members of the Finance Committee who are not part of the University (Mr James Crosby to September 2016, Wendy Becker from October 2016, Ms Charlotte Hogg, Mr Richard Ensor). The Secretary to the Delegates participates in meetings of the Remuneration Committee but is not present for any discussions on matters in which he has a personal interest. The Remuneration Committee determines the broad policy for the remuneration of the senior officers of the Press, and fixes the total remuneration of each senior officer in accordance with this policy. The committee takes into account advice from professional remuneration consultants, the requirements of the Press, and the capabilities and performance of the individual senior officers. The remuneration of other Press employees is established by Press management. The analysis above includes individuals paid in currencies other than sterling, whose emoluments are translated into sterling at monthly average rates of exchange. 80 of those listed in the table above were employed outside the UK. The Press operates a number of staff retirement schemes throughout the world. The total pension cost for the group charged to Trading Profit was £28.1m (2016: £28.8m) of which £7.0m (2016: £6.7m) relates to overseas schemes (see note 25).

8. Reconciliation of effective tax rate 2017 2016 £'m £'m Profit for the year 93.8 75.2 Taxation 16.7 10.1

Profit before tax 110.5 85.3

Taxation using the UK standard rate of corporation tax 20% (2016: 20%) 22.1 17.1 Surplus falling within charitable exemptions (13.6) (18.4) Effect of overseas tax rates 5.2 5.7 Permanent differences 1.8 4.9 Other 1.2 0.8

16.7 10.1

Within Taxation, amounts are included in respect of the following matters: OUP Pakistan has claimed exemption from taxation on its profits for the period 1979- 2013. The matter is pending at the Supreme Court of Pakistan. Taxation has been provided in the accounts based on management’s calculation of potential tax liabilities if the case is decided against OUP. The Indian Tax Authority has assessed the Indian branch as “resident” since 1993, whereas in the view of management it should be assessed as non-resident. Provisions are held reflecting the potential impact of differing interpretations of OUP India’s tax status. There were no material reconciling items to average applicable rates for 2017 relating to items in respect of prior years.

18 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

9. Tangible Fixed Assets Freehold Leasehold Plant & Motor Total Land & Buildings Equipment Vehicles Buildings £'m £'m £'m £'m £'m Cost At 1 April 2016 1.2 8.7 52.4 4.7 67.0 Exchange adjustments 0.3 1.3 4.8 0.5 6.9 Additions - 0.3 3.5 0.7 4.5 Disposals - (0.3) (7.0) (0.7) (8.0) Reclassified as current assets - (3.6) (0.4) - (4.0) At 31 March 2017 1.5 6.4 53.3 5.2 66.4

Depreciation At 1 April 2016 0.1 2.5 38.8 3.2 44.6 Exchange adjustments - 0.4 3.8 0.3 4.5 Charge for the year 0.2 0.3 4.0 0.8 5.3 Disposals - (0.1) (6.2) (0.7) (7.0) Reclassified as current assets - (0.3) (0.2) - (0.5) At 31 March 2017 0.3 2.8 40.2 3.6 46.9

Net book value at 31 March 2017 1.2 3.6 13.1 1.6 19.5

Net book value at 31 March 2016 1.1 6.2 13.6 1.5 22.4

The fixed asset reclassified as a current asset relates to a property in India that is surplus to current operational requirements that is being marketed for resale.

10. Intangible Fixed Assets Other Intangible Fixed Assets Goodwill Computer Acquired Total Software Lists £'m £'m £'m Cost At 1 April 2016 102.7 71.8 105.6 177.4 Exchange adjustments 0.2 3.1 8.9 12.0 Additions - 9.0 7.3 16.3 Adjustments to Goodwill (0.2) - - - Disposals - (1.2) - (1.2)

At 31 March 2017 102.7 82.7 121.8 204.5

Amortization At 1 April 2016 53.0 52.5 90.7 143.2 Exchange adjustments 0.1 2.6 8.3 10.9 Charge for the year 12.1 7.4 5.2 12.6 Impairment of Goodwill 4.0 - - - Disposals - (1.7) - (1.7)

At 31 March 2017 69.2 60.8 104.2 165.0

Net book value at 31 March 2017 33.5 21.9 17.6 39.5

Net book value at 31 March 2016 49.7 19.3 14.9 34.2

Goodwill relating to the bab.la acquisition was adjusted during the year as the final payment on the earn-out agreement was lower than expected. A £4.0m impairment of goodwill was taken, related to the goodwill arising on the acquisition of Epigeum, following a review by OUP management of Epigeum's latest trading projections.

19 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

11. Fixed Asset Investments Proportion of Country of 2017 2016 nominal incorpora- value of tion ordinary shares held % £'m £'m Name of Company ITEXT Limited 50 England 0.5 0.5

Oxford International AQA Examinations Limited 50 England 1.0 0.4 1.5 0.9 Less: Provisions and Recognised Losses (1.0) (0.4)

0.5 0.5

In the opinion of management, the value of the above investments is not less than the amounts stated above. Current Asset Investments 2017 2016 £'m £'m

Investments 229.8 174.2

The current asset investments consist of overnight deposits and term deposits in Pounds Sterling with banks resident in the United Kingdom. Owing to their short-term maturity, the fair values of these investments are estimated to approximate to their carrying values.

12. Intangible Assets - Pre-Publication

2017 2016 £'m £'m

Intangible assets - pre-publication 20.7 20.0

Intangible assets - pre-publication represent directly-attributable external expenditure incurred to create, produce and prepare content. In view of their short-term life, their fair value is considered to be their book value.

20 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13. Current asset held for sale

2017 2016 £'m £'m

Asset transferred from fixed assets 3.5 - Impairment provision (1.2) -

2.3 -

The fixed asset held for sale relates to a property in India that is surplus to current operational requirements and is being marketed for resale.

14. Stock and Work in Progress

2017 2016 £'m £'m Raw materials 1.3 1.3 Work in progress and printed sheets 7.0 3.3 Bound books 68.0 68.6

76.3 73.2

There is no material difference between the balance sheet value of stocks and their replacement cost.

15. Debtors

Amounts falling due within one year 2017 2016 £'m £'m Trade debtors 172.8 148.4 Derivative financial assets (see note 20) 2.5 1.2 Other debtors 56.3 40.5 Prepayments and accrued income 14.2 13.6

245.8 203.7

Amounts falling due after more than one year 2017 2016 £'m £'m Derivative financial assets (see note 20) 0.6 0.1

16. Creditors – amounts falling due within one year

2017 2016 £'m £'m Bank loans and overdrafts (unsecured) 3.7 8.0 Trade creditors 30.3 26.2 Derivative financial liabilities (see note 20) 7.7 6.9 Taxation 17.5 12.8 Other taxes and social security costs 1.6 1.4 Other creditors 49.4 36.5 Accruals and deferred income 111.5 91.3 Royalty creditors 59.3 47.0

281.0 230.1

17. Creditors – amounts falling due after more than one year 2017 2016 £'m £'m Other creditors 5.4 5.3 Derivative financial liabilities (see note 20) 1.3 1.9 6.7 7.2

The derivative financial liabilities are disclosed at fair value; other creditors are considered to have a fair value not materially different from their book value.

21 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

18. Provision for Liabilities Total £'m At 1 April 2016 1.6 Release during the year (0.1) At 31 March 2017 1.5

The provision relates to permanent health insurance and is expected to be paid out over a period in excess of 15 years. It is disclosed at its fair value.

19. Financial Instruments

The carrying amounts of the financial assets and liabilities include: 2017 2016 Note £'m £'m Assets measured at fair value through profit or loss: Derivative financial assets maturing within 12 months 20 2.5 1.2 Derivative financial assets maturing within more than 12 months 20 0.6 0.1 Assets measured at undiscounted amount receivable: Current asset investments 11 229.8 174.2 Trade and other debtors 15 229.1 188.9 Assets measured at cost less impairment: Fixed asset investments 11 0.5 0.5

462.5 364.9

Liabilities measured at fair value through profit or loss: Derivative financial liabilities maturing within 12 months 20 7.7 6.9 Derivative financial liabilities maturing within more than 12 months 20 1.3 1.9 Liabilities measured at undiscounted amount payable: Trade and other creditors falling due within one year 16 79.7 62.7 Tax and social security 16 19.1 14.2 Royalty creditors 16 59.3 47.0 Trade and other creditors falling due within more than one year 17 5.4 5.3

172.5 138.0

Total financial instruments 290.0 226.9

The group's income, expense, gains and losses in respect of financial instruments are summarized below:

2017 2016 Note £'m £'m Interest income and expense Interest receivable from deposits 5 (1.5) (3.6) Interest payable 5 1.7 1.4

0.2 (2.2)

Fair value gains and losses on Derivative Financial Instruments Amount recognized in Other Comprehensive Income 20 (2.5) (5.8) Amount recognized in Profit and Loss Account 20 2.3 0.8

(0.2) (5.0)

Total income, expense, gains and losses (0.0) (7.2)

22 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

20. Derivative Financial Instruments

Group Treasury manages foreign currency transactional exposure in relation to forecast foreign currency sales and purchases by the business units. In order to manage the foreign currency risk, Group Treasury enters into foreign currency forward contracts and/or foreign exchange swaps, with approved counterparties, to hedge the volatility in cash flows due to fluctuations in exchange rates. The fair value of its foreign currency cash flow hedging instruments at 31 March was as follows: Cash flows between 1 and Cash flows within 1 year 2 years Total cash flows 2017 2016 2017 2016 2017 2016 £'m £'m £'m £'m £'m £'m Assets Forward foreign currency contracts 2.5 1.2 0.6 0.1 3.1 1.3

Liabilities Forward foreign currency contracts 7.7 6.9 1.3 1.9 9.0 8.8

TOTAL (5.9) (7.5)

Forward foreign currency contracts are fair-valued by comparing their discounted contractual price with the discounted price at forward rates at the balance sheet date.

The forward foreign currency contracts at 31 March are analysed by currency as follows: Average contractual Foreign currency at Currency exchange rate contractual rate Fair value 2017 2016 2017 2016 2017 2016 £'m £'m £'m £'m Currency purchased Swiss Franc (CHF) 1.26 1.44 0.3 0.3 - - Hong Kong Dollar (HKD) 10.17 11.58 23.9 13.2 1.0 0.5 Hungarian Forint (HUF) 362.79 422.95 0.3 0.2 - - Japanese Yen (JPY) 144.16 171.64 1.3 0.7 0.1 0.1 Kenyan Shilling (KES) 136.59 - 0.2 - - - Polish Zloty (PLN) 5.20 5.76 1.4 1.3 0.1 0.1 United States Dollar (USD) 1.42 1.48 0.6 5.7 0.1 0.2

Currency sold Australian Dollar (AUD) 1.77 2.06 5.5 3.1 (0.3) (0.3) Canadian Dollar (CAD) 1.81 1.96 1.9 2.3 (0.2) (0.1) Czech Koruna (CZK) 31.25 35.97 4.0 3.2 - (0.2) Euro (EUR) 1.20 1.32 59.4 56.7 (1.8) (3.5) Japanese Yen (JPY) 151.83 171.93 9.6 7.9 (0.9) (0.6) Kenyan Shilling (KES) 178.00 169.10 0.1 1.1 - (0.1) Mexican Peso (MXN) 27.53 26.19 9.9 8.3 (1.0) (0.2) Turkish Lira (TRY) 4.79 4.84 4.8 5.0 0.2 (0.4) United States Dollar (USD) 1.34 1.56 46.6 35.0 (2.6) (2.9) South African Rand (ZAR) 20.10 23.15 3.7 2.0 (0.5) (0.1)

TOTAL (5.9) (7.5)

The approach adopted by Group Treasury to assess prospective effectiveness of hedging instruments in hedging hedged items is an economic basis. Group Treasury puts in place hedging instruments on an economic basis in the context of forecast transactions relating to a financial year, and periodically assesses the degree to which an economic correspondence remains, to ensure that the degree of effectiveness of the hedge in mitigating any currency volatility is reported. To the extent that there exist either over-hedging in terms of quantum, or timing differences between the hedging instrument and the forecast exposure hedged item, an ineffective portion is calculated.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e. a hedge against a highly probable forecast cash flow) is recognized in Other Comprehensive Income. Any remaining gain or loss on the hedging instrument is hedge ineffectiveness recognized in the Profit and Loss Account. The cumulative amount recognized in Other Comprehensive Income is disclosed in the balance sheet as the cash flow hedging reserve.

23 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

20. Derivative Financial Instruments (continued)

The movements on the balance of the fair value of the forward foreign currency contracts are as follows: Cash Flow Profit and Cash Flow Profit and Hedging Loss Hedging Loss Reserve Account Total Reserve Account Total 2017 2017 2017 2016 2016 2016 £'m £'m £'m £'m £'m £'m At beginning of the year (5.8) (0.8) (6.6) 4.8 - 4.8 Amount recognized in Other Comprehensive Income (2.5) - (2.5) (5.8) - (5.8) Amount reclassified to Profit and Loss Account for the year 5.8 (5.8) - (4.8) 4.8 - Amount recognized in Profit and Loss Account - 4.3 4.3 - (5.6) (5.6)

At end of year (2.5) (2.3) (4.8) (5.8) (0.8) (6.6)

21. Reserves Cash Flow Profit and Hedging Loss Reserve Account Total 2016 2016 2016 £'m £'m £'m Reserves at 1 April 2015 4.8 195.9 200.7 Net profit for the year - 74.8 74.8 Movement on cash flow hedging reserve (10.6) - (10.6) Actuarial losses on Pension Scheme - 12.7 12.7 Currency translation - - - Other Comprehensive Income (10.6) 12.7 2.1 Transfer to Delegates' Property and Reserve Fund - (44.9) (44.9)

Reserves at 31 March 2016 (5.8) 238.5 232.7

Cash Flow Profit and Hedging Loss Reserve Account Total 2017 2017 2017 £'m £'m £'m Reserves at 1 April 2016 (5.8) 238.5 232.7 Net profit for the year - 93.7 93.7 Movement on cash flow hedging reserve 3.3 - 3.3 Actuarial losses on Pension Scheme - (87.1) (87.1) Currency translation - 9.3 9.3 Other Comprehensive Income 3.3 (77.8) (74.5) Transfer to Delegates' Property and Reserve Fund - (40.0) (40.0)

Reserves at 31 March 2017 (2.5) 214.4 211.9

Included within the Accumulated Fund in 2016 and 2017 is cumulative goodwill written off of £24.1m.

22. Non-remittable Foreign Reserves

There are restrictions affecting the remittance of certain branch surpluses to the United Kingdom. The retained earnings so restricted at 31 March 2017, which are included in the Accumulated Fund, amounted to £10.8m (2016: £9.1m).

24 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23. Subsidiary Companies Country of incorporation Proportion of nominal value of ordinary shares held Oxford University Press Argentina S.A. 2 Argentina 100% MyMaths Pty Ltd Australia 100% OUP Pty Limited 1 Australia 100% Oxford University Press Botswana (Proprietary) Limited 1, 2 Botswana 100% Oxford University Press do Brasil Publicacoes Limitada 2 Brazil 100% Oxford University Press (Shanghai) Limited 2 China 100% Oxford University Press (China) Limited China (Hong Kong) 100% Oxford University Press (Cyprus) Limited Cyprus 100% bab.la GmbH 2 Germany 100% Oxford University Press GmbH 2 Germany 100% Oxford University Press India Private Limited 2 India 100% Oxford University Press Srl 2 Italy 100% Oxford University Press Kabushiki Kaisha Japan 100% Oxford University Press East Africa Limited 2 Kenya 100% Oxford University Press Korea Limited 2 Korea, Republic of 100% Oxford University Press Lesotho (Proprietary) Limited 2 Lesotho 100% Oxford University Press (Macau) Limited 2 Macau 100% Oxford Fajar SDN BHD 2 Malaysia 70% Oxford Publishing (Malaysia) SDN BHD 2 Malaysia 100% Oxford University Press Mexico SA de CV 2 Mexico 100% Oxford University Press Namibia (Proprietary) Limited 2 Namibia 100% Oxford University Press Polska sp. z o.o. 2 Poland 100% Oxford University Press (Singapore) Pte Ltd 2 Singapore 100% Oxford University Press Orbis Proprietary Limited 2 South Africa 100% Oxford University Press Southern Africa Proprietary Limited South Africa 75% Oxford University Press España S.A 2 Spain 100% Oxford University Press Swaziland Proprietary Limited 1, 2 Swaziland 100% Oxford University Press Tanzania Limited 2 Tanzania, United Republic of 100% Oxford Educational Books Tanzania Limited 1 Tanzania, United Republic of 70% Oxford Yayincilik Limited Sirketi 2 Turkey 100% Epigeum Limited United Kingdom 100% Nelson Thornes Limited United Kingdom 100% OELT Limited United Kingdom 100% Oxford Information Limited United Kingdom 100% Oxford Publishing Limited United Kingdom 100% Oxford Reference Limited United Kingdom 100% Oxuniprint Limited United Kingdom 100% Pen123 Limited United Kingdom 100% IRL Press Limited 1 United Kingdom 100% MyMaths Limited 1 United Kingdom 100% Numicon Limited 1 United Kingdom 100% Oxford Academic Press Limited 1 United Kingdom 100% Oxford Bibliographical Services Limited 1 United Kingdom 100% Oxford Books Limited 1 United Kingdom 100% Oxford Database Limited 1 United Kingdom 100% Oxford Distribution Services Limited 1 United Kingdom 100% Oxford Educational Books Limited 1 United Kingdom 100% Oxford Educational Limited 1 United Kingdom 100% Oxford Educational Software Limited 1 United Kingdom 100% Oxford Educational Video Limited 1 United Kingdom 100% Oxford Electronic Dictionary Limited 1 United Kingdom 100% Oxford Electronic Publishing Limited 1 United Kingdom 100% Oxford English Language Teaching Limited 1 United Kingdom 100% Oxford English Learning Limited 1 United Kingdom 100% Oxford English Limited 1 United Kingdom 100% Oxford English Teaching Limited 1 United Kingdom 100% Oxford Expert Systems Limited 1 United Kingdom 100% Oxford Interactive Limited 1 United Kingdom 100% Oxford Language Services Limited 1 United Kingdom 100% Oxford Medical Publications Limited 1 United Kingdom 100% Oxford Medical Systems Limited 1 United Kingdom 100% Oxford Medicine Limited 1 United Kingdom 100% Oxford Newsletter Limited 1 United Kingdom 100% Oxford Office Publications Limited 1 United Kingdom 100% Oxford Paperbacks Limited 1 United Kingdom 100%

25 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23. Subsidiary Companies (continued) Country of incorporation Proportion of nominal value of ordinary shares held Oxford Periodicals Limited 1 United Kingdom 100% Oxford Press Limited 1 United Kingdom 100% Oxford Reference Software Limited 1 United Kingdom 100% Oxford Reviews Limited 1 United Kingdom 100% Oxford Scholars Press Limited 1 United Kingdom 100% Oxford Scientific Publications Limited 1 United Kingdom 100% Oxford Software Publishing Limited 1 United Kingdom 100% Oxford System of Medicine Limited 1 United Kingdom 100% Oxford Text Systems Limited 1 United Kingdom 100% Oxford Video Publishing Limited 1 United Kingdom 100% Epigeum Inc 2 United States 100% Oxford University Press LLC 1 United States 100%

1 Dormant 2 Owned by a subsidiary undertaking

24. Capital Commitments

At 31 March 2017 there were outstanding commitments for the purchase of fixed assets, not provided in the financial statements, amounting to £3.4m (2016: £2.0m) of which £3.3m (2016: £2.0m) had been authorized but not yet contracted for.

25. Pension Commitments

The Press operates a number of staff retirement schemes throughout the world. The total pension cost for the group charged to operating profit was £24.1m (2016: £24.2m) of which £7.0m (2016: £6.7m) relates to overseas schemes. Of the amount charged to operating profit £8.6m (2016: £7.8m) represents contributions payable to defined contribution schemes at rates specified in the rules of those plans.

Amounts recognized in the balance sheet were as follows: 2017 2016 £'m £'m

Group Pension Scheme Present value of funded obligations (779.4) (577.9) Fair value of scheme assets 589.6 457.9 (189.8) (120.0) Overseas schemes Present value of funded obligations (10.2) (6.7) Fair value of scheme assets 6.3 5.6 (3.9) (1.1)

Present value of unfunded obligations (3.4) (5.6)

Net liability (197.1) (126.7)

26 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

25. Pension Commitments (continued) 2017 2016 £'m £'m Amounts in the balance sheet Liabilities (793.0) (590.2) Assets 595.9 463.5

Net liability (197.1) (126.7)

Amounts recognized in the Profit and Loss Account were as follows: 2017 2016 £'m £'m Current service cost (24.1) (24.2) Net interest on net defined benefit liability (4.0) (4.6)

Total (28.1) (28.8)

Included in employee contributions in the year was £3.4m (2016: £3.7m) relating to the salary sacrifice scheme. The actuarial net loss for the year of £197.1m (2015/16 loss of £126.7m) comprised a loss on the Group Pension Scheme of £189.8m (2015/16 loss £120.0m) and net losses on other schemes of £7.3m (2015/16 net losses of £6.7m). The increase in the actuarial loss in the year was due to the fall in gilt yields and an increase in inflation rates. The major scheme ("the Group Pension Scheme") is a funded defined benefit pension scheme providing retirement benefits to UK employees based on final pensionable salary and length of service. The assets of the scheme are held in a separate trustee-administered fund. The most recent triennial valuation of the Group Pension Scheme for funding purposes was performed as at 31 March 2015 revealing a shortfall (technical provisions minus value of assets) of £26m. A recovery plan was prepared by the Trustees of the Group Pension Scheme on 9 February 2016 and agreed with The Chancellor Masters and Scholars of the University of Oxford, through the Delegates of the Press trading as Oxford University Press. Under the recovery plan, the Press paid a contribution of £7m into the Scheme in February 2016 and agreed that the remaining funding shortfall will be eliminated by continued Press contributions of 19% pa of pensionable salaries. As at 1 April 2016, this rate of 19% pa of pensionable salaries exceeded the Press' future service contribution rate for CARE benefits of 12.4% pa of pensionable salaries. At the valuation date, based on market conditions at that date, the funding shortfall was expected to be eliminated by 30 September 2022 at the latest. For the year beginning 1 April 2017, based on the estimated pensionable salaries at that date, it is expected that the contribution paid will be about £8.5m.

There is a charge of £50m in favour of the Trustees over specified Press assets as protection against any outstanding past service deficit.

Changes in the present value of the defined benefit obligation of the Group Pension Scheme were as follows: 2017 2016 £'m £'m Plan liabilities at 1 April 577.9 578.4 Employer service cost 8.2 16.3 Interest cost 19.6 20.1 Plan participants' contributions 3.6 4.0 Remeasurement of the defined benefit obligation 182.8 (28.9) Benefits paid from plan assets (12.7) (12.0)

Plan liabilities at 31 March 779.4 577.9

Changes in the fair value of the Group Pension Scheme assets were as follows: 2017 2016 £'m £'m Market value at 1 April 457.9 449.6 Interest income 15.7 15.6 Return on scheme assets greater/(less) than discount rate 95.7 (16.8) Benefits paid from plan assets (12.7) (12.0) Employer contributions 29.4 17.5 Employee contributions 3.6 4.0

Market value at 31 March 589.6 457.9

The group expects to contribute £8.5m to the Group Pension Scheme in the year 2017/18.

27 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

25. Pension Commitments (continued) The major categories of the Group Pension Scheme assets as a percentage of total scheme assets were as follows:

2017 2016 Equities 23.0% 29.2% Corporate bonds 9.9% 11.5% Gilts 0.6% 1.0% Property 0.4% 0.7% BlackRock Diversified Growth Fund 8.9% 11.9% GMO Diversified Growth Fund 9.3% 11.3% Hedge Funds 8.8% 9.9% Indexed linked bonds 35.9% 18.8% Cash and other 3.2% 5.7%

100.0% 100.0%

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) in relation to the Group Pension Scheme were: 2017 2016 Discount rate 2.5% 3.4% Price inflation (RPI) 3.4% 3.2% Price inflation (CPI) 2.4% 2.2% Rate of salary increase* 3.9% 3.7% Pension increases for in-payment benefits 2.4% 2.2% Pension increases for deferred benefits 2.4% 2.2% Scheme participant census date 31/03/2015 31/03/2015 * plus promotional salary scale

Expected Lifetime The expected lifetime of a participant who is age 60 and the expected lifetime (from age 60) of a participant who will be aged 60 in 15 years are shown in years below, based on the mortality tables used for both the 2016 and 2017 FRS102 disclosures:

2017 FRS 102 assumptions 2016 FRS 102 assumptions Age Males Females Age Males Females 60 28.1 29.9 60 28.0 29.8 60 in 15 yrs 29.5 31.4 60 in 15 yrs 29.4 31.3

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are estimated below:

Assumption Change in assumption Impact on scheme liabilities Discount rate Increase/decrease by 0.1% Decrease/increase by c. 2.4% CPI Inflation Increase/decrease by 0.1% Increase/decrease by c. 2.0% Salary Increase/decrease by 0.1% Increase/decrease by c. 0.4% Base table multipliers Increase/decrease by 5% Decrease/increase by c. 1.5% Future mortality improvements 1.25% pa to 1.5% pa long term trend Increase by c. 1.5% - 2.0% Commutation Using revised Scheme factors Increase by c. 0.5% - 1.0%

Amounts for the current and previous four years were as follows:

Group Pension Scheme:

2017 2016 2015 2014 2013 £'m £'m £'m £'m £'m Defined benefit obligation (779.4) (577.9) (578.4) (485.1) (430.1) Scheme assets 589.6 457.9 449.5 378.4 375.6

Deficit (189.8) (120.0) (128.9) (106.7) (54.5)

Experience adjustments on scheme liabilities - - - - 0.3% Experience adjustments on scheme assets - - (5.7%) 5.7% (5.9%)

The actuarial gains and losses recognized in the combined statement of comprehensive income arose from changes in assumptions concerning the discount rate, price inflation, and pension commutation to cash.

28 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

26. Financial Commitments

At 31 March the Press had commitments to third parties under non-cancellable operating leases as follows:

2017 2016 Property Other Property Other £'m £'m £'m £'m Less than one year 6.4 1.5 8.1 1.4 Between one and five years 13.3 1.3 13.3 1.7 More than five years 15.8 - 19.1 - 35.5 2.8 40.5 3.1

27. Contingent Liabilities

Oxford University Press is a department of the University of Oxford. It is the responsibility of the Delegates of the University Press to prepare financial statements and have them audited. However, the Statutes and Regulations of the University do not permit the inclusion of these financial statements in the financial statements of the rest of the University. In the unlikely event of the rest of the University not having sufficient assets to meet its liabilities, those liabilities would fall to be met by the Press, including the DPRF. At 31 July 2016, the date of its latest audited balance sheet, the rest of the University of Oxford had total liabilities of £958.9m (2015: £904.8m) and net assets after deducting such liabilities of £3,012.6m (2015: £2,839.7m). The DPRF was established in 1984 to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Press's Trading Operations. In the unlikely event of the DPRF not having sufficient assets to meet its liabilities those liabilities would fall to be met by the Press's Trading Operations. At 31 March 2017 the DPRF had total liabilities of £8.2m (2016: £16.4m) and net assets after deducting such liabilities of £327.5m (2016: £301.1m). On 29 June 2007, the Press entered into an agreement with the Trustees of the Oxford University Press Group Pension Scheme to eliminate the scheme deficit over a period of years. As security for the payment of the agreed contributions into the Scheme, the Press granted a floating charge in favour of the Trustees over the assets located in the United Kingdom which are allocated to the OUP Effective Operating Reserve subject to a maximum of £50.0m. The Press is subject to a number of legal claims and other matters the outcomes of which are uncertain and may give rise to liabilities or other adverse consequences which cannot currently be quantified.

28. Subsequent Events

On 7 April 2017 the Trading Operations acquired the assets of Sinauer Associates Inc., a biology, psychology, and neuroscience publisher headquartered in Massachusetts, USA, for £14.3m, and the DPRF acquired a building and property from Sinauer, LLC for £0.8m.

29. Transactions with Related Parties

The Trading Operations occupy certain properties which are held by the Delegates' Property and Reserve Fund. Rents are charged at prevailing market rates on these properties. Rents and service charges payable during the year for occupancy of these properties amounted to £13.6m (2016: £13.8m). During the year £40.0m (2016: £44.9m) was transferred from the Trading Operations to the Delegates' Property and Reserve Fund. Key management personnel compensation for the year ended 31 March 2017 was £2.1m (2016: £2.4m). Key management personnel are the Press's Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press (see Corporate Governance Statement, page 1 above). The Finance Committee of the Delegacy consists of a chairman elected by the Delegates, the Vice- Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. The members of the University who attend Finance Committee are not remunerated by the Press. There are no other transactions that need to be disclosed.

29 Financial Statements of OUP's Trading Operations for the year ended 31 March 2016

1

TRADING OPERATIONS

ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2016 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Oxford University Press (the “Press”) is committed to providing information relating to corporate governance in its published accounts, consistent with developments in those of listed companies and other public interest bodies, and with the relevant and applicable sections of the UK Corporate Governance Code (the “Code”). Many of the principles of the Code that apply to companies with shares and shareholders are not relevant to the Press. The Press is committed to implementing best practice in this area, insofar as it is appropriate to the Press’s circumstances. Although the Press is exempt from the requirements of the Code, the Delegates have decided to provide the following information.

Summary of Oxford University Press's Structure of Governance

1. The Press is a department of the University of Oxford whose governance structure is set out in the Statutes and Regulations of the University. The Delegates of the Press have overall responsibility for the affairs of the Press, including its publishing policy and academic standards. Pursuant to the Statutes, the Delegacy has established a Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press. The Delegacy appoints a Secretary to the Delegates to act as the Chief Executive of the Press with executive responsibility for the management of the Press. Authority to act within the Press is given through powers of attorney granted by the Chief Executive. 2. The Delegates of the Press are chosen from senior academics at the University, and their terms of appointment and tenure are in accordance with the provisions of the Statutes of the University. The Delegacy meets regularly throughout the year, receives reports on the management of the Press from the Chief Executive and Finance Committee, and reviews and authorizes publications. 3. The Finance Committee of the Delegacy consists of a chair elected by the Delegates, the Vice-Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. Terms of office are stipulated within the Statutes and Regulations of the University. 4. The governance structure of the Press contains a clear separation between the executive responsibility for the management of the Press which rests with the Chief Executive, and the Chairmanship of the Delegacy (which is held by the Vice-Chancellor) and of the Finance Committee (which is held by a senior academic of the University). 5. The Chief Executive is supported in the day to day control of the Press by an Executive Committee which monitors the detailed performance of the divisions of the Press. The Chief Executive is responsible for advising on governance matters and ensuring good information flows to Delegates and relevant committees. 6. The accounts of the Press are prepared under the direction of the Finance Committee, and are presented annually to the Delegacy by the Finance Committee. There is no Annual General Meeting but the audited accounts of the Press, as approved by the Delegacy, are submitted to the University’s Finance Committee and Council. An abstract of the audited accounts is published in the University Gazette and in the Financial Statements of the University of Oxford. 7. Pursuant to the Regulations of the University, the Finance Committee is entitled to establish such subcommittees as it may from time to time think fit. It has established the Press’s Audit Committee as a sub-committee of Finance Committee. The Audit Committee meets at least four times a year, with the external and internal auditors normally in attendance. The Audit Committee provides independent oversight of audit activities and reports to the Finance Committee on issues of internal control, governance, operational effectiveness, risk management, legal affairs, regulatory matters, and external audit. The Audit Committee reviews the effectiveness of the financial, risk management, and other internal control systems of the Press, including both the scope and the effectiveness of the work of both Internal and External Audit The Audit Committee comprises some Delegate members of the Finance Committee and some external members of the Finance Committee. Although senior officers of the Press attend meetings of the Audit Committee as necessary, they are not members of the Committee. The Audit Committee reports to the Finance Committee following its meeting. 8. The Press's Remuneration Committee, another sub-committee of Finance Committee and one which includes the Vice-Chancellor of the University, reviews the salaries, benefits, bonuses, and fees of the Press's senior officers and Finance Committee members. 9. The Press’s Nominations Committee, another sub-committee of Finance Committee and one which includes the Vice-Chancellor of the University, proposes names in connection with vacancies on Finance Committee, Audit Committee and Remuneration Sub-Committee and with any vacancy of the Chair of OUP Pension Trustees.

1 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Corporate Governance and Internal Control

The Press acknowledges and endorses the principles of corporate governance, including the adoption of a risk-based approach to the review of internal controls.

● The Press has implemented a global risk-based approach to the design, application and review of its risk management systems and internal controls. A Risk Register has been developed for all of the Press's operations, including major overseas branches and subsidiaries; this register identifies, evaluates, and manages all the material risks facing the Press.

● The Finance Committee is responsible for the Press's system of risk management and internal control and for reviewing its effectiveness. The Press's system of internal controls is designed to manage rather than eliminate the risk of failure to achieve operational objectives, and inevitably can only provide reasonable and not absolute assurance against material misstatement or loss.

● The Press’s risk assessment practices are incorporated into its wider business planning, budgeting, and financial reporting processes.

● The Finance Committee, through the Audit Committee, regularly reviews the effectiveness of the Group's system of risk management and internal control. The Finance Committee's monitoring covers all controls, including financial, operational and compliance controls. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed, and controlled and whether any significant weaknesses are promptly remedied or need extensive monitoring.

● The Press has established a framework for dealing with concerns that staff might raise on potential improprieties in financial reporting and other areas.

● The Press's management controls the operations of the enterprise through annual planning and budgeting, with monthly monitoring processes to ensure that operations are performing as expected. The Press's management hierarchy operates through a divisional structure to ensure adequate control of individual operating and trading entities within the Press.

● A number of key management matters, as formally set out in a Group Levels of Authority document, are reserved for the decision of the Finance Committee.

2 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

STATEMENT OF THE RESPONSIBILITIES OF THE DELEGATES OF OXFORD UNIVERSITY PRESS

Under the University’s Statutes and Regulations, the Delegates of the University Press are responsible for the affairs of the Press. Through the Finance Committee, the Delegates have responsibility for the direction of the finance and management of the Press’s activity.

The Delegates, through the Finance Committee, are responsible for preparing these non-statutory accounts for the year ended 31 March 2016 which are intended by them to give a true and fair view of the state of affairs of the Trading Operations and of the profit or loss for that period.

The Finance Committee, on behalf of the Delegates, has elected to prepare the non-statutory accounts on the basis of the financial reporting framework UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law. In preparing these non-statutory accounts, the Delegates are required to:

● select suitable accounting policies and then apply them consistently; ● make judgements and accounting 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 non-statutory accounts; and ● prepare the non-statutory accounts on the going concern basis unless it is inappropriate to presume that the Press will continue in business.

The Delegates are responsible for keeping adequate accounting records that are sufficient to show and explain the Press’s transactions and disclose with reasonable accuracy at any time the financial position of the Press. They are also responsible for safeguarding the assets of the Press and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities including the maintenance of an appropriate system of internal controls.

Signed on behalf of the Delegates by

Sir John Vickers, Chair of Finance Committee 31 May 2016

3 INDEPENDENT AUDITOR'S REPORT TO THE DELEGATES OF OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

We have audited the non-statutory accounts of the Trading Operations of Oxford University Press (“the Trading Operations”) for the year ended 31 March 2016, which comprise the combined Profit and Loss Account, the combined statement of total comprehensive income, the combined balance sheet, the combined cash flow statement and the related notes. These non-statutory accounts have been prepared for the reasons set out in note 1 to the non-statutory accounts and on the basis of the financial reporting framework UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, have been applied, as prescribed by the Statutes of the University and according to instructions received from the Delegates.

Our report has been prepared solely for the Delegates as a body, in accordance with Council Regulation 20 of 2002 of Oxford University. It has been released to the Delegates on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Delegates own internal purposes) or in part, without our prior written consent.

Our report was designed to meet the agreed requirements of the Delegates determined by the Delegates' needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Delegates for any purpose or in any context. Any party other than the Delegates who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG LLP will accept no responsibility or liability in respect of our report to any other party.

Respective responsibilities of the Delegates and the auditor

As explained more fully in the Statement of the Responsibilities of the Delegates of Oxford University Press set out on page 3, the Delegates, through the Finance Committee, are responsible for the preparation of the non-statutory accounts, which are intended by them to give a true and fair view. Our responsibility is to audit, and express an opinion on, the non-statutory accounts in accordance with the terms of our engagement letter dated 15th April 2015 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the non-statutory accounts

An audit involves obtaining evidence about the amounts and disclosures in the non-statutory accounts sufficient to give reasonable assurance that the non-statutory accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trading Operations’ circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Delegates; and the overall presentation of the non-statutory accounts.

In addition we read all the financial and non-financial information in the Corporate Governance statement attached to the non-statutory combined accounts of the Trading Operations to identify material inconsistencies with the audited non-statutory accounts and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on non-statutory accounts

In our opinion the non-statutory accounts: ● give a true and fair view of the state of the Trading Operations’ affairs as at 31 March 2016 and of its profit for the the year then ended; and ● have been properly prepared in accordance with UK Generally Accepted Accounting Practice.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where under the terms of our engagement we are required to report to you if, in our opinion: ● adequate accounting records have not been kept by the Trading Operations and that the returns adequate for our audit have not been received from branches not visited by us; ● your balance sheet and profit and loss account are not in agreement with the accounting records and returns; ● the information in the Finance Committee’s report to the Delegates is not consistent with that in the non-statutory accounts; and ● we have not obtained all the information and explanations which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG LLP Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD 31 May 2016

4 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED PROFIT AND LOSS ACCOUNT OF THE TRADING OPERATIONS FOR THE YEAR ENDED 31 MARCH 2016

Notes 2016 2015 £'m £’m

TURNOVER 3 (a), (b) 760.5 762.2

OPERATING PROFIT 3(c), 4 92.3 101.9

NET INTEREST PAYABLE 5 (a) (2.2) (1.0)

OTHER FINANCE EXPENSE 5 (b) (4.6) (4.8)

PROFIT BEFORE INVESTMENT INCOME 85.5 96.1

SHARE OF LOSS IN JOINT VENTURE 6(a) (0.4) -

INCOME FROM OTHER FIXED ASSET INVESTMENTS 6(b) 0.2 0.2

PROFIT BEFORE TAX 85.3 96.3 TAXATION 8 (10.1) (9.3)

PROFIT AFTER TAX 75.2 87.0

PROFIT ATTRIBUTABLE TO MINORITY INTEREST (0.4) (1.5)

PROFIT FOR THE YEAR 21 74.8 85.5

The above results relate to continuing operations.

The notes on pages 10 to 33 form part of the financial statements.

5 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2016

Notes 2016 2015 £'m £’m

PROFIT FOR THE YEAR 74.8 85.5

OTHER COMPREHENSIVE INCOME:

EFFECTIVE PORTION OF CHANGES IN FAIR VALUE OF CASH FLOW HEDGES (10.6) 1.7

ACTUARIAL LOSSES ON GROUP PENSION SCHEMES 25 Actuarial gain/(loss) arising during period 28.9 (63.4) Return on scheme assets (less)/greater than discount rate (16.2) 28.8

CURRENCY TRANSLATION DIFFERENCES ON FOREIGN CURRENCY NET INVESTMENTS 21 - 3.7

TOTAL OTHER COMPREHENSIVE INCOME 2.1 (29.2)

TOTAL RECOGNIZED COMPREHENSIVE INCOME RELATING TO THE YEAR 76.9 56.3

The notes on pages 10 to 33 form part of the financial statements.

6 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED BALANCE SHEET OF THE TRADING OPERATIONS AS AT 31 MARCH 2016

Notes 2016 2015 £m £’m FIXED ASSETS Tangible fixed assets 9 22.4 22.1 Intangible fixed assets: 10 83.9 81.8 Investments 12 0.5 0.5

106.8 104.4

CURRENT ASSETS Intangible assets - pre-publication 13 20.0 21.0 Stock and work in progress 14 73.2 77.3 Debtors 15 203.8 199.5 Current asset investments 12 174.2 153.4 Cash at bank and in hand 22.0 23.6

493.2 474.8 CREDITORS Amounts falling due within one year 16 (230.1) (233.3)

NET CURRENT ASSETS 263.1 241.5

TOTAL ASSETS LESS CURRENT LIABILITIES 369.9 345.9

CREDITORS Amounts falling due after more than one year 17 (7.2) (6.0)

PROVISION FOR LIABILITIES 18 (1.6) (1.9)

NET ASSETS EXCLUDING PENSION LIABILITY 361.1 338.0

PENSION LIABILITY 25 (126.7) (135.8)

NET ASSETS 3 (d) 234.4 202.2

RESERVES 21 232.7 200.7

MINORITY INTERESTS 1.7 1.5

TOTAL FUND 234.4 202.2

The notes on pages 10 to 33 form part of the financial statements.

The financial statements on pages 5 to 33 were approved by Finance Committee on 31 May 2016 and were signed on its behalf by:

Nigel Portwood Giles Spackman Chief Executive and Secretary to the Delegates Group Finance Director 31 May 2016 31 May 2016

7 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2016

Cash Flow Profit and Hedging Loss Reserve Account Total £'m £'m £'m

BALANCE AT 1 APRIL 2014 3.1 287.2 290.3

TOTAL COMPREHENSIVE INCOME FOR THE YEAR: PROFIT FOR THE YEAR - 85.5 85.5 OTHER COMPREHENSIVE INCOME 1.7 (30.9) (29.2) TRANSFER TO DELEGATES' PROPERTY AND RESERVE FUND - (145.9) (145.9)

BALANCE AT 31 MARCH 2015 4.8 195.9 200.7

TOTAL COMPREHENSIVE INCOME FOR THE YEAR: PROFIT FOR THE YEAR - 74.8 74.8 OTHER COMPREHENSIVE INCOME (10.6) 12.7 2.1 TRANSFER TO DELEGATES' PROPERTY AND RESERVE FUND - (44.9) (44.9)

BALANCE AT 31 MARCH 2016 (5.8) 238.5 232.7

8 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

COMBINED CASH FLOW STATEMENT OF THE TRADING OPERATIONS FOR THE YEAR ENDED 31 MARCH 2016

Notes 2016 2015 £'m £'m £'m £'m CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 92.3 101.9 Adjustments for: Depreciation, amortisation and impairment 27.8 26.0 Foreign Exchange losses/(gains) 9.1 (0.9) Gain on the sale of tangible fixed assets (0.2) -

129.0 127.0

Increase in trade and other debtors (3.5) (12.8) Decrease/(increase) in stock 4.1 (3.0) Decrease in first costs 1.0 3.1 Increase/(decrease) in trade and other creditors 0.8 (7.0) Decrease in provisions and employee benefits (1.0) (16.1) Movement in hedging reserve (10.6) 1.7

119.8 92.9

MI dividend paid (0.2) (1.2) Interest paid (3.6) (2.7) Tax paid (8.8) (8.5) Transfer to DPRF (44.9) (145.9)

Net cash from operating activities 62.3 (65.4)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of intangible fixed assets 0.1 0.6 Proceeds from sale of tangible fixed assets 0.7 0.4 Interest received 1.4 1.7 Share of loss in joint venture (0.4) - Dividend received 0.2 0.2 Acquisition of subsidiaries (13.3) - Acquisition of tangible fixed assets (6.7) (6.7) Acquisition of other intangible fixed assets (10.2) (11.2)

Net cash from investing activities (28.2) (15.0)

Net increase/(decrease) in cash and cash equivalents 34.1 (80.4) Cash and cash equivalents at 1st April 163.0 239.9 Effect of exchange rate fluctuations on cash held (8.9) 3.5

Cash and cash equivalents at 31st March 3(d) 188.2 163.0

9 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

1. Status Oxford University Press ("the Press") is a department of the University of Oxford (“the University”). The trading operations of Oxford University Press (“the Trading Operations”), for which these financial statements are presented, are defined as the Press excluding the Delegates' Property and Reserve Fund (“the DPRF”). The DPRF was established in order to distinguish more clearly the property investment operations of the Press from the trade, assets and liabilities relating to its publishing operations. The DPRF holds and manages the property and investment portfolio of the Press. Accordingly, these non-statutory financial statements exclude the assets and liabilities of the property and investment portfolio, together with the related income and expenses. The Trading Operations comprise the publishing and related activities of the Press, including the relevant assets, liabilities, income and expenses of the Press and the branches/subsidiaries listed in note 23, but excluding the DPRF as noted above. Separate financial statements are presented for the DPRF. The activities of the Trading Operations are managed separately from those of the DPRF and separate accounting records are maintained. The Annual Report of the Delegates of the University Press is a separately available document that sets out how the Trading Operations and the DPRF have furthered the University's charitable purposes for the public benefit. The University is a charity and its income is therefore generally exempt from UK taxation. Therefore no provision is made in respect of such taxation as regards the Trading Operations and a number of its branches. The exemption does not extend to subsidiary companies of the Trading Operations. Whilst a number of overseas branches and affiliates have charitable status, certain of these branches may suffer local taxation.

2. Principal Accounting Policies The principal accounting policies are summarized below. They have all been applied consistently throughout the year and to the preceding year.

(a) Basis of Accounting The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value in accordance with the applicable United Kingdom Financial Reporting Standard 102 ("FRS 102") issued by the Financial Reporting Council. This is the first year that the Press has presented its financial statements under FRS 102. The Press has consequently applied the first-time adoption requirements. The prior year financial statements have been restated for material adjustments on adoption of FRS 102 in the current year [FRS 102 section 35]. An explanation of how the transition has affected the reported financial position and the financial performance of the combined financial statements is provided in note 29. The functional currency of the Press is Pounds Sterling, the currency of the United Kingdom, the primary economic environment in which the Press operates. The combined financial statements are therefore presented in Pounds Sterling. Foreign operations are included in the financial statements in accordance with the policies set out in policy (l). The Press is, as stated in note 1, a department of the University of Oxford, which is a public benefit entity, and it has where applicable applied the relevant public benefit requirements of FRS 102.

(b) Principles adopted in the financial statements [FRS 102 section 2] The financial statements are prepared in the form of the combined Profit and Loss Account, the combined statement of comprehensive income, the combined balance sheet, the combined statement of changes in equity and the combined statement of cash flows, in accordance with FRS 102. These combined financial statements comprise the financial statements of the Trading Operations of the Press, including its overseas branches and its subsidiary undertakings ("the group"). The results of subsidiary undertakings acquired or sold in the current or prior years are combined for the periods from which or to the date on which control passed. Acquisitions are accounted for under the purchase method.

(c) Going Concern [FRS 102 section 3] The Press prepares budgets and forecasts on an annual basis and operates an ongoing five-year forecast sustainability review. The going concern nature of the Press has been considered for a period of greater than twelve months from the date of approval of the financial statements.

Detailed cash flow forecasts covering a period of greater than twelve months have been prepared, and the Press is satisfied that it can meet its day-to-day working capital needs out of cash and liquid investments. The Finance Committee is not aware of any material uncertainties which would prevent the Press from continuing as a going concern for the foreseeable future. Thus the Press continues to adopt the going concern basis in preparing the annual financial statements.

10 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

2. Principal Accounting Policies (continued)

(d) Turnover [FRS 102 section 23] Turnover is stated net of Value Added Tax and trade discounts and is recognized when the significant risks and rewards are considered to have been transferred to the buyer. Turnover from the sale of goods is recognized when the goods are physically delivered to the customer. Turnover from the supply of services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of Creditors falling due within one year.

(e) Provision for Sales Returns [FRS 102 section 23] Provision has been made for expected sales returns after the balance sheet date on the basis of the historical level of such returns augmented by additional provisions made in accordance with FRS 102, where in the opinion of management these are required. The movement in the returns provision is recognized within turnover and cost of sales.

(f) Other Income [FRS 102 section 23] Commission and distribution income that are incidental to core operations are shown in Other Income. Grant and donation income received is accounted for under the performance model. This stipulates that transactions that impose specified future performance-related conditions on the Press are recognized in income only when the performance-related conditions are met; resources received in advance of the completion of the performance conditions are recognized on the balance sheet as deferred income and released to the Profit and Loss Account as conditions are met. In the absence of performance conditions income is recognized in full as soon as it becomes receivable.

(g) Fixed Assets [FRS 102 section 17] Fixed assets consist of plant and equipment and motor vehicles costing over £25,000 and capital building projects costing over £100,000, having a useful life of greater than one year and not intended for resale. Fixed assets are stated at purchase cost including incidental costs of acquisition less accumulated depreciation and provisions for impairment. Depreciation is provided at rates designed to write off the cost of fixed assets over the expected useful lives of the assets concerned. The principal annual rates applied on a straight-line basis are as follows: Freehold buildings 2% and 3.33% Leasehold buildings Over the terms of the lease Plant and equipment 10% to 100% Motor vehicles 25% Freehold land is not depreciated. Assets are assessed for indicators of impairment at each balance sheet date [FRS 102 section 27]. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. Assets are considered to be impaired if their recoverable value is less than book value. The recoverable amount of a Fixed Asset is the higher of its fair value less costs to sell and its value in use.

Where indicators exist for a decrease in impairment loss on assets, the prior impairment loss is reversed only to the extent that it does not lead to a revised carrying amount higher than if no impairment had been recognized.

(h) Goodwill and other Intangible Fixed Assets [FRS 102 section 19] Goodwill arises on consolidation and is based on the difference between the fair value of the consideration given for the undertaking acquired, and the fair value of its separable net assets at the date of acquisition. Goodwill is amortized over its estimated economic life of between five and ten years in accordance with FRS 102 on a straight-line basis. A full year of amortization is taken in the year of acquisition.

Goodwill is assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. The recoverable amount of goodwill is the present value of the future cash flows of the cash-generating units of which the goodwill is a part. Purchased goodwill acquired prior to 31 March 1999 has been written off in full against reserves. This purchased goodwill will be charged or credited in the Profit and Loss Account as appropriate on the subsequent disposal of the business to which it related. Purchased goodwill acquired after that date is stated in the balance sheet and is amortized through the Profit and Loss Account over its estimated economic life of between five and ten years on a straight-line basis, in accordance with FRS 102. A full year of amortization is taken in the year of acquisition.

Acquired lists in intangible assets are amortized on a straight-line basis over their estimated economic life deemed to be between three and ten years, in accordance with FRS 102, the period being determined by the nature of the list acquired. Internally-generated intangible assets are not shown in the balance sheet.

11 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

2. Principal Accounting Policies (continued)

(h) Goodwill and other Intangible Fixed Assets (continued) Computer software is stated at purchase cost including incidental costs of acquisition less accumulated amortization and provisions for impairment. Amortization is provided at rates designed to write off the cost of the software over the expected useful lives of the assets concerned. The annual rates applied on a straight-line basis are between 20% and 33.3%. Assets are assessed for indicators of impairment at each balance sheet date [FRS 102 section 27]. If there is objective evidence of impairment, an impairment loss is recognized in the Profit and Loss Account. Assets are considered to be impaired if their recoverable value is less than book value. The recoverable amount of a Fixed Asset is the higher of its fair value less costs to sell and its value in use.

Where indicators exist for a decrease in impairment loss on assets, the prior impairment loss is reversed only to the extent that it does not lead to a revised carrying amount higher than if no impairment had been recognized.

(i) Intangible Current Assets - Pre-Publication [FRS 102 section 18] Pre-publication external costs attributable to individual print publications are capitalised and amortized over twelve months from the date of publication. Editorial salaries and the related overheads are not included.

(j) Stock and Work in Progress [FRS 102 section 13] Stock and work in progress are valued at the lower of cost and selling price less costs to sell. Cost includes all direct expenditure except that, in the case of finished books and work in progress, editorial salaries and the related overheads are not included. Development costs associated with the compilation of major new reference works, the revenues from which are long deferred, are written off as they are incurred. Development costs associated with electronic publications are also written off as they are incurred. Selling price less costs to sell is the amount for which the stock can be realized in the normal course of business after allowing for the costs of realization and, where appropriate, the cost of conversion from its existing state to a finished condition.

(k) Financial Instruments Financial assets and liabilities are recognized when the group becomes a party to the contractual provisions of the instrument. [FRS 102 section 11]

All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through the Profit and Loss Account. [FRS 102 section 12]

Financial assets and liabilities are offset in the balance sheet only when there exists a legally enforceable right to set off the recognized amounts and the group intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

i. Cash [FRS 102 section 11] Cash includes cash in hand, cash at bank, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty. ii. Cash Equivalents (Investments) [FRS 102 section 11] Shares in companies outside the group in which the Press holds an investment are shown at cost and subsequently measured at fair value at each reporting date. Where fair value cannot be reliably measured or investments are not publicly traded, they are measured at cost less impairment. Dividends relating to these investments are recognized in the Profit and Loss Account upon receipt. Current asset investments consist of short- and long-term deposits.

Investments in listed shares and venture capital vehicles (where shares are publicly traded or their fair value can be reliably measured) are measured at market value. All gains and losses on investment assets, both realized and unrealized, are recognized in the Profit and Loss Account as they accrue.

Investments in subsidiary and associate undertakings are accounted for under the Cost Model and are recognized at transaction cost less accumulated impairment losses.

12 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

2. Principal Accounting Policies (continued)

(k) Financial Instruments (continued) iii. Hedge accounting [FRS 102 section 12] The group designates certain derivatives as hedging instruments in respect of the foreign exchange risk of forecast cash flows.

At the inception of the hedge relationship, the group documents the relationship between the hedging instruments and the hedged cash flows, along with the clear identification of the risk in the hedged item that is being hedged by the hedging instrument. Furthermore, at the inception of the hedge and on a continual basis the group assesses whether the hedging instrument is highly effective in offsetting the designated hedge risk.

The effective portion of changes in the fair value of the designated hedging instrument is recognized in Other Comprehensive Income. The gain or loss relating to the ineffective portion is recognized immediately in the Profit and Loss Account. Amounts previously recognized in Other Comprehensive Income and included in the Accumulated Fund are reclassified to the Profit and Loss Account in the periods in which the hedged item affects the Profit and Loss Account or when the hedging relationship ends.

Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any gain or loss included in the Accumulated Fund at that time is reclassified to the Profit and Loss Account when the hedged item is recognized in the Profit and Loss Account. When a forecast cash flow is no longer expected to occur, any gain or loss that was recognized in Other Comprehensive Income is reclassified immediately to the Profit and Loss Account.

(l) Foreign Currencies [FRS 102 section 30] The results of overseas branches and subsidiaries are translated into sterling at the average rates of exchange prevailing during the financial year, and their balance sheets are translated into sterling at the rates prevailing at the date of the combined balance sheet. Exchange differences arising from this translation of foreign operations are dealt with as a movement on the Accumulated Fund, reported in combined Other Comprehensive Income. Individual transactions denominated in foreign currency are translated into the local currency of the respective entity at the rates ruling at the dates of the transactions. Amounts receivable and payable at the balance sheet date are translated at the year-end rates, and all exchange differences arising from transactions relating to trading items are included in the combined Profit and Loss Account.

(m) Operating Leases [FRS 102 section 20] Costs in respect of operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Future commitments under operating leases are disclosed in note 26.

Any lease premiums or incentives are recognized as a reduction in expense spread evenly over the minimum lease term. The difference between expenditure recognized and cash flow benefits received is recognized as a liability released to the Profit and Loss Account over the lease term.

(n) Royalties [FRS 102 section 21] Royalties payable on sales are charged against income on an accruals basis. Amounts advanced to authors prior to publication of titles are recovered by set-off against royalties subsequently payable on sales of the related titles [FRS 102 section 11]. Provisions are made to reduce advances to the amounts expected to be recovered, taking into account the likely level of future sales and, where titles have not yet been published, the probability that publication will be completed. Royalties receivable are recognized on an accruals basis.

(o) Employee Benefits [FRS 102 section 28] Short-Term Employee Benefits Short-term employment benefits such as salaries and compensated absences are recognized as an expense in the year employees render service to the Press. A liability is recognized at each balance sheet date to the extent that employee holiday allowances have been accrued but not taken, the expense being recognized as staff costs in the Profit and Loss Account.

13 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

2. Principal Accounting Policies (continued)

(o) Employee Benefits (continued) Post-Employment Benefits (Pensions) [FRS 102 section 28] The group operates both defined benefit pension schemes and defined contribution schemes.

For defined benefit schemes, the amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognized immediately in the Profit and Loss Account if the benefits have vested. If the benefits have not vested immediately, the costs are recognized over the period until vesting occurs. The net interest cost on the net defined benefit liability is reported as other finance expense in the Profit and Loss Account. Actuarial gains and losses, together with the return on plan assets, are recognized immediately as Other Comprehensive Income.

Most defined benefit schemes are funded, the assets of the schemes being held separately from those of the group in separate trustee-administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of any related deferred tax, is presented separately after other net assets on the face of the balance sheet.

For defined contribution schemes, the amount charged to the Profit and Loss Account in respect of pension costs and other post-employment benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions paid are shown as either accruals or prepayments in the balance sheet.

(p) Repairs and maintenance [FRS 102 section 17] Expenditure to ensure that fixed assets maintain their previously-recognized standard of performance is recognized in the Profit and Loss Account in the period in which it is incurred. The Press has a planned maintenance programme, which is reviewed annually.

(q) Transactions with Related Parties [FRS 102 section 33] FRS 102 Section 33 requires disclosure in the financial statements to draw attention to the possibility that the combined balance sheet and profit or loss have been affected by the existence of related parties and transactions and outstanding balances with such parties. Disclosures are not required of transactions entered into between two or more members of a group as long as any subsidiary which is a party to the transaction is wholly owned by such a member. Disclosure of related party transactions are addressed in note 28.

(r) Taxation [FRS 102 section 29] The Press is, as stated in note 1, a department of the University of Oxford, which is an exempt charity within the meaning of Schedule 3 of the United Kingdom Charities Act 2011 and as such is listed as a charity within the meaning of Paragraph 1 of Schedule 6 to the Finance Act 2010.

Current tax, which is wholly composed of non-United Kingdom tax, is provided at amounts expected to be paid (or recovered) using the taxation rates and laws which have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains or losses in tax assessments in periods different from those in which they are recognized in the financial statements.

Deferred tax assets are recognized only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

14 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

3. Segmental Reporting

(a) Turnover by destination

Turnover represents the value of goods sold from publishing, exclusive of all sales taxes, to customers outside the Press and is recognized on shipment of the goods from the relevant warehouse. It is analysed by destination as follows:

2016 2015 £'m £'m United Kingdom 160.9 165.2 Asia Pacific 216.7 206.8 North America 161.9 168.5 Europe 132.0 125.5 Latin America 42.4 46.0 Central Asia, Middle East and North Africa 38.1 42.8 Sub Saharan Africa 8.5 7.4

760.5 762.2

The value of goods exported by the Trading Operations from the United Kingdom, including transfers to Press operations overseas, was £351.8m (2015: £344.7m).

(b) Turnover by origin

2016 2015 Total Inter- Net Total Inter- Net Turnover Business Turnover Turnover Business Turnover £'m £'m £'m £'m £'m £'m United Kingdom 469.9 90.4 379.5 470.0 89.5 380.5 Asia Pacific 156.3 2.4 153.9 144.1 2.6 141.5 North America 113.5 10.3 103.2 115.2 10.6 104.6 Europe 60.8 0.1 60.7 59.1 0.1 59.0 Latin America 28.3 0.0 28.3 32.6 0.0 32.6 CAMENA 7.9 0.0 7.9 10.0 0.0 10.0 Sub Saharan Africa 27.1 0.1 27.0 35.2 1.2 34.0

863.8 103.3 760.5 866.2 104.0 762.2

15 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

3. Segmental Reporting (continued) (c) Operating Profit

2016 2015 £'m £'m United Kingdom 67.2 75.0 Asia Pacific 18.3 15.0 North America 5.7 9.2 Europe 4.8 4.6 Latin America 2.4 (1.1) CAMENA 0.0 0.4 Sub Saharan Africa 0.8 4.1

99.2 107.2 Consolidation adjustments (6.9) (5.3)

92.3 101.9

(d) Net Assets

2016 2015 £'m £'m United Kingdom 2.6 2.9 Asia Pacific 10.6 2.4 North America 26.5 25.6 Europe 18.7 14.9 Latin America 15.6 16.3 CAMENA 3.7 5.1 Sub Saharan Africa (1.2) (1.9)

76.5 65.3 Consolidation adjustments (30.3) (26.1)

46.2 39.2 Interest-bearing net assets 188.2 163.0

234.4 202.2

4. Expenses and auditor's remuneration

The operating profit for the year is stated after charging/(crediting):- 2016 2015 £'m £'m Depreciation of tangible fixed assets 5.4 5.2 Amortization of goodwill 12.1 11.3 Amortization of other intangible fixed assets 10.3 9.5 Auditor's remuneration: Audit fees (UK £0.2 (2015 £0.2)) 0.6 0.6 Hire/operating lease costs – plant and equipment 4.1 2.9 Hire/operating lease costs – land and buildings 16.2 14.5 Profit on sale of fixed assets 0.2 - Loss on foreign exchange transactions 0.1 2.2

Auditor's non-audit fees were £18,000 (2015: £8,000)

16 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

5. Finance (Expense)/Income

(a) Net Interest Payable 2016 2015 £'m £'m Interest payable (3.6) (2.7) Interest receivable from deposits 1.4 1.7

Net interest payable (2.2) (1.0)

(b) Other Finance Expense 2016 2015 £'m £'m Interest cost on the defined benefit obligation (20.2) (21.9) Interest income on Scheme assets 15.6 17.1

Other finance expense (4.6) (4.8)

6. Investment Income 2016 2015 £'m £'m (a) Share of loss in joint venture (0.4) -

(b) Dividend income from fixed asset investment 0.2 0.2

7. Employees

(a) Employee Costs 2016 2015 UK Overseas UK Overseas £'m £'m £'m £'m Wages and salaries 90.9 105.0 83.7 101.2 Social security costs 6.7 6.9 6.4 6.5 Other pension costs 22.1 6.7 20.3 6.8

119.7 118.6 110.4 114.5

Other pension costs include all those items charged to the combined Profit and Loss Account and exclude those items included within the combined Statement of Comprehensive Income.

(b) Employee Numbers The average number of persons employed by the Trading Operations (including part-time staff and contractors) during the year was as follows: 2016 2015 UK Overseas UK Overseas No. No. No. No. Editorial/Production/Design 1,027 1,103 1,008 1,127 Sales/Marketing 566 1,962 560 1,929 Distribution 187 420 195 430 Finance and Information Services 287 297 284 289 Administration 168 215 154 202 Printing 23 - 23 -

2,258 3,997 2,224 3,977

17 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

7. Employees

(c) Emoluments The number of members of staff through the year whose emoluments (excluding employers' pension contributions, but including salaries, bonus payments, and other benefits) fell into the following ranges were:- 2016 2015 No. No. £100,000-£149,999 84 72 £150,000-£199,999 28 24 £200,000-£249,999 7 9 £250,000-£299,999 3 2 £300,000-£349,999 2 - £350,000-£399,999 4 3 £400,000-£449,999 1 2 £550,000-£599,999 - 1 £600,000-£649,999 2 1 £700,000-£749,999 - 1

The emoluments of the Chief Executive fell in the £600,000-£649,999 range (2015: £700,000-£749,999 range). The Press’s Remuneration Committee, which is a committee of the Finance Committee, comprised the Vice- Chancellor of the University (Professor Andrew Hamilton to 31st December 2015; Professor Louise Richardson from 1st January 2016), the Chair of the Finance Committee (Sir John Vickers), the Chairman of the Audit Committee (Hugh Crisp), Professor Mari Sako, and three members of the Finance Committee who are not part of the University (Mr James Crosby, Ms Charlotte Hogg, Mr Richard Ensor). The Secretary to the Delegates participates in meetings of the Remuneration Committee but is not present for any discussions on matters in which he has a personal interest. The Remuneration Committee determines the broad policy for the remuneration of the senior officers of the Press, and fixes the total remuneration of each senior officer in accordance with this policy. The committee takes into account advice from professional remuneration consultants, the requirements of the Press, and the capabilities and performance of the individual senior officers. The remuneration of other Press employees is established by Press management. The analysis above includes individuals paid in currencies other than sterling, whose emoluments are translated into sterling at monthly average rates of exchange. 90 of those listed in the table above were employed outside the UK. The Press operates a number of staff retirement schemes throughout the world. The total pension cost for the group charged to Trading Profit was £24.2m (2015: £22.3m) of which £6.7m (2015: £6.8m) relates to overseas schemes (see note 25).

8. Reconciliation of effective tax rate 2016 2015 £'m £'m Profit for the year 75.2 87.0 Taxation 10.1 9.3

Profit before tax 85.3 96.3

Taxation using the UK standard rate of corporation tax 20% (2015: 21%) 17.1 20.2 Surplus falling within charitable exemptions (18.4) (16.5) Effect of overseas tax rates 5.7 2.5 Permanent differences 4.9 2.0 Other 0.8 1.1

10.1 9.3

There were no material reconciling items to average applicable rates for 2016 relating to items in respect of prior years.

18 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

9. Tangible Fixed Assets Freehold Leasehold Plant & Motor Total Land & Buildings Equipment Vehicles Buildings £'m £'m £'m £'m £'m Cost At 1 April 2015 0.1 9.0 49.3 5.0 63.4 Exchange adjustments 0.1 (0.3) 0.6 (0.2) 0.2 Additions 1.0 0.5 4.5 0.7 6.7 Disposals - (0.5) (2.0) (0.8) (3.3) At 31 March 2016 1.2 8.7 52.4 4.7 67.0

Depreciation At 1 April 2015 0.1 2.3 35.6 3.3 41.3 Exchange adjustments - - 0.8 (0.1) 0.7 Charge for the year - 0.3 4.4 0.7 5.4 Disposals - (0.1) (2.0) (0.7) (2.8) At 31 March 2016 0.1 2.5 38.8 3.2 44.6

Net book value at 31 March 2016 1.1 6.2 13.6 1.5 22.4

Net book value at 31 March 2015 - 6.7 13.7 1.7 22.1

10. Intangible Fixed Assets Other Intangible Fixed Assets Goodwill Computer Acquired Total Software Lists £'m £'m £'m Cost At 1 April 2015 88.3 63.6 101.5 165.1 Exchange adjustments 0.3 0.6 1.7 2.3 Additions 14.1 7.8 2.4 10.2 Disposals - (0.2) - (0.2)

At 31 March 2016 102.7 71.8 105.6 177.4

Amortization At 1 April 2015 41.0 45.4 85.2 130.6 Exchange adjustments (0.1) 0.7 1.7 2.4 Charge for the year 12.1 6.5 3.8 10.3 Disposals - (0.1) - (0.1)

At 31 March 2016 53.0 52.5 90.7 143.2

Net book value at 31 March 2016 49.7 19.3 14.9 34.2

Net book value at 31 March 2015 47.3 18.2 16.3 34.5

19 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

11. Acquisitions

On 16th April 2015, Oxford University Press completed the acquisition of 100% of the ordinary share capital of bab.la GmbH, a company incorporated in Germany. bab.la is an interactive language portal offering 40 bilingual dictionaries, vocabulary lessons, language quizzes, and language games all for free. The fair value of the total consideration was £3.4m.

On 22nd May 2015, Oxford University Press completed the acquisition of 100% of the ordinary share capital of Epigeum Limited, a company incorporated in the United Kingdom. Epigeum is the leading provider of exceptional online courses designed to help universities and colleges transform their core activities – in teaching, research, studying and leadership and management. The fair value of the total consideration was £11.4m.

The following tables set out the book values of the identifiable assets and liabilities acquired and their fair value to the group:

£'m

Total cash consideration 14.7 Fair value of net assets acquired (see below) (0.6)

Goodwill 14.1

Fair value of net assets acquired were as follows: Book value Fair value to the Group

£'m £'m

Debtors 0.8 0.8 Cash 1.4 1.4 Creditors (1.6) (1.6)

0.6 0.6

Net cash outflows as a result of the acquisition comprised: £'m

Consideration 14.7 Cash at bank and in hand acquired (1.4)

13.3

12. Fixed Asset Investments Proportion of Country of 2016 2015 nominal incorpora- value of tion ordinary shares held % £'m £'m Name of Company ITEXT Limited 50 England 0.5 0.5

Oxford International AQA Examinations Limited 50 England 0.4 - 0.9 0.5 Less: Provisions and Recognised Losses (0.4) -

0.5 0.5

In the opinion of management, the value of the above investments is not less than the amounts stated above. Current Asset Investments 2016 2015 £'m £'m

Investments 174.2 153.4

The current asset investments consist of overnight deposits and term deposits in Pounds Sterling with banks resident in the United Kingdom. Owing to their short-term maturity, the fair values of these investments are estimated to approximate to their carrying values.

20 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

13. Intangible Assets - Pre-Publication

2016 2015 £'m £'m

Intangible assets - pre-publication 20.0 21.0

Intangible assets - pre-publication represent directly-attributable external expenditure incurred to create, produce and prepare content. In view of their short-term life, their fair value is considered to be their book value.

14. Stock and Work in Progress

2016 2015 £'m £'m Raw materials 1.3 1.0 Work in progress and printed sheets 3.3 4.5 Bound books 68.6 71.8

73.2 77.3

There is no material difference between the balance sheet value of stocks and their replacement cost.

15. Debtors

Amounts falling due within one year 2016 2015 £'m £'m Trade debtors 148.4 144.4 Derivative financial assets (see note 20) 1.2 7.7 Other debtors 40.5 36.5 Prepayments and accrued income 13.6 9.8

203.7 198.4

Amounts falling due after more than one year 2016 2015 £'m £'m Derivative financial assets (see note 20) 0.1 1.1

16. Creditors – amounts falling due within one year

2016 2015 £'m £'m Bank loans and overdrafts (unsecured) 8.0 13.5 Trade creditors 26.2 31.3 Derivative financial liabilities (see note 20) 6.9 2.1 Taxation 12.8 11.5 Other taxes and social security costs 1.4 1.4 Other creditors 36.5 42.1 Accruals and deferred income 91.3 88.5 Royalty creditors 47.0 42.9

230.1 233.3

17. Creditors – amounts falling due after more than one year 2016 2015 £'m £'m Other creditors 5.3 4.4 Derivative financial liabilities (see note 20) 1.9 1.6 7.2 6.0

The derivative financial liabilities are disclosed at fair value; other creditors are considered to have a fair value not materially different from their book value.

21 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

18. Provision for Liabilities Total £'m At 1 April 2015 1.9 Release during the year (0.3) At 31 March 2016 1.6

The provision relates to permanent health insurance and is expected to be paid out over a period in excess of 15 years. It is disclosed at its fair value.

19. Financial Instruments

The carrying amounts of the financial assets and liabilities include: 2016 2015 Note £'m £'m Assets measured at fair value through profit or loss: Derivative financial assets maturing within 12 months 20 1.2 7.7 Derivative financial assets maturing within more than 12 months 20 0.1 1.1 Assets measured at undiscounted amount receivable: Current asset investments 12 174.2 153.4 Trade and other debtors 15 188.9 180.9 Assets measured at cost less impairment: Fixed asset investments 12 0.5 0.5

364.9 343.6

Liabilities measured at fair value through profit or loss: Derivative financial liabilities maturing within 12 months 20 6.9 2.1 Derivative financial liabilities maturing within more than 12 months 20 1.9 1.6 Liabilities measured at undiscounted amount payable: Trade and other creditors falling due within one year 16 62.7 73.4 Tax and social security 16 14.2 12.9 Royalty creditors 16 47.0 42.9 Trade and other creditors falling due within more than one year 17 5.3 4.4

138.0 137.3

Total financial instruments 226.9 206.3

The group's income, expense, gains and losses in respect of financial instruments are summarized below:

2016 2015 Note £'m £'m Interest income and expense Interest receivable from deposits 5 (3.6) (2.7) Interest payable 5 1.4 1.7

(2.2) (1.0)

Fair value gains and losses on Derivative Financial Instruments Amount recognized in Other Comprehensive Income 20 (5.8) 4.8 Amount recognized in Profit and Loss Account 20 0.8 1.1

(5.0) 5.9

Total income, expense, gains and losses (7.2) 4.9

22 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

20. Derivative Financial Instruments

Group Treasury manages foreign currency transactional exposure in relation to forecast foreign currency sales and purchases by the business units. In order to manage the foreign currency risk, Group Treasury enters into foreign currency forward contracts and/or foreign exchange swaps, with approved counterparties, to hedge the volatility in cash flows due to fluctuations in exchange rates. The fair value of its foreign currency cash flow hedging instruments at 31 March was as follows: Cash flows between 1 and Cash flows within 1 year 2 years Total cash flows 2016 2015 2016 2015 2016 2015 £'m £'m £'m £'m £'m £'m Assets Forward foreign currency contracts 1.2 7.7 0.1 1.1 1.3 8.8

Liabilities Forward foreign currency contracts 6.9 2.1 1.9 1.6 8.8 3.7

TOTAL (7.5) 5.1

Forward foreign currency contracts are fair-valued by comparing their discounted contractual price with the discounted price at forward rates at the balance sheet date.

The forward foreign currency contracts at 31 March are analysed by currency as follows: Average contractual Foreign currency at Currency exchange rate contractual rate Fair value 2016 2015 2016 2015 2016 2015 £'m £'m £'m £'m Currency purchased Swiss Franc (CHF) 1.44 1.48 0.3 0.4 - - Euro (EUR) Hong Kong Dollar (HKD) 11.58 12.23 13.2 23.8 0.5 1.5 Hungarian Forint (HUF) 422.95 393.86 0.2 0.3 - - Japanese Yen (JPY) 171.64 159.91 0.7 0.9 0.1 (0.1) Polish Zloty (PLN) 5.76 5.37 1.3 1.9 0.1 (0.1) United States Dollar (USD) 1.48 1.67 5.7 2.8 0.2 0.3

Currency sold Australian Dollar (AUD) 2.06 1.91 3.1 3.4 (0.3) 0.1 Canadian Dollar (CAD) 1.96 1.84 2.3 2.0 (0.1) 0.1 Czech Koruna (CZK) 35.97 34.80 3.2 3.2 (0.2) 0.2 Euro (EUR) 1.32 1.25 56.7 64.6 (3.5) 5.5 Japanese Yen (JPY) 171.93 162.64 7.9 9.3 (0.6) 0.7 Kenyan Shilling (KES) 169.10 - 1.1 - (0.1) - Mexican Peso (MXN) 26.19 22.97 8.3 3.8 (0.2) - Turkish Lira (TRY) 4.84 4.13 5.0 6.3 (0.4) - United States Dollar (USD) 1.56 1.60 35.0 42.0 (2.9) (3.1) South African Rand (ZAR) 23.15 18.04 2.0 0.6 (0.1) -

TOTAL (7.5) 5.1

The approach adopted by Group Treasury to assess prospective effectiveness of hedging instruments in hedging hedged items is an economic basis. Group Treasury puts in place hedging instruments on an economic basis in the context of forecast transactions relating to a financial year, and periodically assesses the degree to which an economic correspondence remains, to ensure that the degree of effectiveness of the hedge in mitigating any currency volatility is reported. To the extent that there exist either over-hedging in terms of quantum, or timing differences between the hedging instrument and the forecast exposure hedged item, an ineffective portion is calculated.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e. a hedge against a highly probable forecast cash flow) is recognized in Other Comprehensive Income. Any remaining gain or loss on the hedging instrument is hedge ineffectiveness recognized in the Profit and Loss Account. The cumulative amount recognized in Other Comprehensive Income is disclosed in the balance sheet as the cash flow hedging reserve.

23 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

20. Derivative Financial Instruments (continued)

The movements on the balance of the fair value of the forward foreign currency contracts are as follows: Cash Flow Profit and Cash Flow Profit and Hedging Loss Hedging Loss Reserve Account Total Reserve Account Total 2016 2016 2016 2015 2015 2015 £'m £'m £'m £'m £'m £'m At beginning of the year 4.8 - 4.8 3.1 1.1 4.2 Amount recognized in Other Comprehensive Income (5.8) - (5.8) 4.8 - 4.8 Amount reclassified to Profit and Loss Account for the year (4.8) 4.8 - (3.1) 3.1 - Amount recognized in Profit and Loss Account - (5.6) (5.6) - (4.2) (4.2)

At end of year (5.8) (0.8) (6.6) 4.8 - 4.8

21. Reserves Cash Flow Profit and Hedging Loss Reserve Account Total 2015 2015 2015 £'m £'m £'m Reserves at 1 April 2014 3.1 287.2 290.3 Net profit for the year - 85.5 85.5 Movement on cash flow hedging reserve 1.7 - 1.7 Actuarial losses on Pension Scheme - (34.6) (34.6) Currency translation - 3.7 3.7 Other Comprehensive Income 1.7 (30.9) (29.2) Transfer to Delegates' Property and Reserve Fund - (145.9) (145.9)

Reserves at 31 March 2015 4.8 195.9 200.7

Cash Flow Profit and Hedging Loss Reserve Account Total 2016 2016 2016 £'m £'m £'m Reserves at 1 April 2015 4.8 195.9 200.7 Net profit for the year - 74.8 74.8 Movement on cash flow hedging reserve (10.6) - (10.6) Actuarial gains on Pension Scheme - 12.7 12.7 Currency translation - - - Other Comprehensive Income (10.6) 12.7 2.1 Transfer to Delegates' Property and Reserve Fund - (44.9) (44.9)

Reserves at 31 March 2016 (5.8) 238.5 232.7

Included within the Accumulated Fund in 2015 and 2016 is cumulative goodwill written off of £24.1m.

22. Non-remittable Foreign Reserves

There are restrictions affecting the remittance of certain branch surpluses to the United Kingdom. The retained earnings so restricted at 31 March 2016, which are included in the Accumulated Fund, amounted to £9.1m (2015: £9.2m).

24 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

23. Subsidiary Companies Country of incorporation Proportion of nominal value of ordinary shares held Oxford University Press Argentina S.A. 2 Argentina 100% MyMaths Pty Ltd Australia 100% OUP Pty Limited 1 Australia 100% Oxford University Press Botswana (Proprietary) Limited 1, 2 Botswana 100% Oxford University Press do Brasil Publicacoes Limitada 2 Brazil 100% Oxford University Press (Shanghai) Limited 2 China 100% Oxford University Press (China) Limited China (Hong Kong) 100% Oxford University Press (Cyprus) Limited Cyprus 100% bab.la GmbH 2 Germany 100% Oxford University Press GmbH 2 Germany 100% Oxford University Press India Private Limited 2 India 100% Oxford University Press Srl 2 Italy 100% Oxford University Press Kabushiki Kaisha Japan 100% Oxford University Press East Africa Limited 2 Kenya 100% Oxford University Press Korea Limited 2 Korea, Republic of 100% Oxford University Press Lesotho (Proprietary) Limited 2 Lesotho 100% Oxford University Press (Macau) Limited 2 Macau 100% Oxford Fajar SDN BHD 2 Malaysia 70% Oxford Publishing (Malaysia) SDN BHD 2 Malaysia 100% Oxford University Press Mexico SA de CV 2 Mexico 100% Oxford University Press Namibia (Proprietary) Limited 2 Namibia 100% Oxford University Press Polska sp. z o.o. 2 Poland 100% Oxford University Press (Singapore) Pte Ltd 2 Singapore 100% Oxford University Press Orbis (Proprietary) Limited 2 South Africa 100% Oxford University Press Southern Africa (Proprietary) Limited South Africa 75% Oxford University Press España S.A 2 Spain 100% Oxford University Press Swaziland (Proprietary) Limited 1, 2 Swaziland 100% Oxford University Press Tanzania Limited 2 Tanzania, United Republic of 100% Oxford Educational Books Tanzania Limited 1 Tanzania, United Republic of 70% Oxford University Press Yayincilik Limited Sirketi 2 Turkey 100% Epigeum Limited United Kingdom 100% Nelson Thornes Limited United Kingdom 100% OELT Limited United Kingdom 100% Oxford Information Limited United Kingdom 100% Oxford Publishing Limited United Kingdom 100% Oxford Reference Limited United Kingdom 100% Oxuniprint Limited United Kingdom 100% Pen123 Limited United Kingdom 100% IRL Press Limited 1 United Kingdom 100% MyMaths Limited 1 United Kingdom 100% Numicon Limited 1 United Kingdom 100% Oxford Academic Press Limited 1 United Kingdom 100% Oxford Bibliographical Services Limited 1 United Kingdom 100% Oxford Books Limited 1 United Kingdom 100% Oxford Database Limited 1 United Kingdom 100% Oxford Distribution Services Limited 1 United Kingdom 100% Oxford Educational Books Limited 1 United Kingdom 100% Oxford Educational Limited 1 United Kingdom 100% Oxford Educational Software Limited 1 United Kingdom 100% Oxford Educational Video Limited 1 United Kingdom 100% Oxford Electronic Dictionary Limited 1 United Kingdom 100% Oxford Electronic Publishing Limited 1 United Kingdom 100% Oxford English Language Teaching Limited 1 United Kingdom 100% Oxford English Learning Limited 1 United Kingdom 100% Oxford English Limited 1 United Kingdom 100% Oxford English Teaching Limited 1 United Kingdom 100% Oxford Expert Systems Limited 1 United Kingdom 100% Oxford Interactive Limited 1 United Kingdom 100% Oxford Language Services Limited 1 United Kingdom 100% Oxford Medical Publications Limited 1 United Kingdom 100% Oxford Medical Systems Limited 1 United Kingdom 100% Oxford Medicine Limited 1 United Kingdom 100% Oxford Newsletter Limited 1 United Kingdom 100% Oxford Office Publications Limited 1 United Kingdom 100% Oxford Paperbacks Limited 1 United Kingdom 100%

25 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

23. Subsidiary Companies (continued) Country of incorporation Proportion of nominal value of ordinary shares held Oxford Periodicals Limited 1 United Kingdom 100% Oxford Press Limited 1 United Kingdom 100% Oxford Reference Software Limited 1 United Kingdom 100% Oxford Reviews Limited 1 United Kingdom 100% Oxford Scholars Press Limited 1 United Kingdom 100% Oxford Scientific Publications Limited 1 United Kingdom 100% Oxford Software Publishing Limited 1 United Kingdom 100% Oxford System of Medicine Limited 1 United Kingdom 100% Oxford Text Systems Limited 1 United Kingdom 100% Oxford Video Publishing Limited 1 United Kingdom 100% Epigeum Inc 2 United States 100% Oxford University Press LLC 1 United States 100%

1 Dormant 2 Owned by a subsidiary undertaking

24. Capital Commitments

At 31 March 2016 there were outstanding commitments for the purchase of fixed assets, not provided in the financial statements, amounting to £2.0m (2015: £5.8m) of which £2.0m (2015: £3.7m) had been authorized but not yet contracted for.

25. Pension Commitments

The Press operates a number of staff retirement schemes throughout the world. The total pension cost for the group charged to operating profit was £24.2m (2015: £22.3m) of which £6.7m (2015: £6.8m) relates to overseas schemes. Of the amount charged to operating profit £7.8m (2015: £7.6m) represents contributions payable to defined contribution schemes at rates specified in the rules of those plans.

Amounts recognized in the balance sheet were as follows: 2016 2015 £'m £'m

Group Pension Scheme Present value of funded obligations (577.9) (578.4) Fair value of scheme assets 457.9 449.5 (120.0) (128.9) Overseas schemes Present value of funded obligations (6.7) (6.9) Fair value of scheme assets 5.6 5.8 (1.1) (1.1)

Present value of unfunded obligations (5.6) (5.8)

Net liability (126.7) (135.8)

26 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

25. Pension Commitments (continued) 2016 2015 £'m £'m Amounts in the balance sheet Liabilities (590.2) (591.1) Assets 463.5 455.3

Net liability (126.7) (135.8)

Amounts recognized in the Profit and Loss Account were as follows: 2016 2015 £'m £'m Current service cost (24.2) (22.4) Net interest on net defined benefit liability/(asset) (4.6) (4.7)

Total (28.8) (27.1)

Included in employee contributions in the year was £3.8m (2015: £3.7m) relating to the salary sacrifice scheme. The actuarial net loss for the year of £126.7m (2014/15 loss of £135.8m) comprised a loss on the Group Pension Scheme of £120.0m (2014/15 loss £128.8m) and net losses on other schemes of £6.7m (2014/15 net losses of £6.9m). The major scheme ("the Group Pension Scheme") is a funded defined benefit pension scheme providing retirement benefits to UK employees based on final pensionable salary and length of service. The assets of the scheme are held in a separate trustee-administered fund. The most recent triennial valuation of the Group Pension Scheme for funding purposes was performed as at 31st March 2015 revealing a shortfall (technical provisions minus value of assets) of £26m. A recovery plan was prepared by the Trustees of the Group Pension Scheme on 9th February 2016 and agreed with The Chancellor Masters and Scholars of the University of Oxford, through the Delegates of the Press trading as Oxford University Press. Under the recovery plan the Press paid a contribution of £7m into the Scheme in February 2016 and agreed that the remaining funding shortfall will be eliminated by continued Press contributions of 19% pa of pensionable salaries. From 1st April 2016, the rate of 19% pa of pensionable salaries exceeds the Press' future service contribution rate for CARE benefits of 12.4% pa of pensionable salaries. Based on the projection of salaries from the valuation, it is expected that there will be a gain of approximately £3.7m over the year commencing 1st April 2016. The funding shortfall is expected to be eliminated by 30th September 2022 at the latest.

There is a charge of £50m in favour of the Trustees over specified Press assets as protection against any outstanding past service deficit.

Changes in the present value of the defined benefit obligation of the Group Pension Scheme were as follows: 2016 2015 £'m £'m Plan liabilities at 1 April 578.4 485.1 Employer service cost 16.3 15.0 Interest cost 20.1 21.8 Plan participants' contributions 4.0 4.2 Remeasurement of the defined benefit obligation (28.9) 63.4 Benefits paid from plan assets (12.0) (11.1)

Plan liabilities at 31 March 577.9 578.4

Changes in the fair value of the Group Pension Scheme assets were as follows: 2016 2015 £'m £'m Market value at 1 April 449.6 378.4 Interest income 15.6 17.1 Return on scheme assets greater/(less) than discount rate (16.8) 30.0 Benefits paid from plan assets (12.0) (11.1) Employer contributions 17.5 31.0 Employee contributions 4.0 4.2

Market value at 31 March 457.9 449.6

The group expects to contribute £10.4m to the Group Pension Scheme in the year 2016/17.

27 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

25. Pension Commitments (continued) The major categories of the Group Pension Scheme assets as a percentage of total scheme assets were as follows:

2016 2015 Equities 29.2% 30.8% Corporate bonds 11.5% 10.0% Gilts 1.0% 14.6% Property 0.7% 0.0% BlackRock Diversified Growth Fund 11.9% 11.3% GMO Diversified Growth Fund 11.3% 11.2% Hedge Funds 9.9% 9.6% Indexed linked bonds 18.8% 0.0% Cash and other 5.7% 12.5%

100.0% 100.0%

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) in relation to the Group Pension Scheme were: 2016 2015 Discount rate 3.4% 3.5% Price inflation (RPI) 3.2% 3.2% Price inflation (CPI) 2.2% 2.2% Rate of salary increase* 3.7% 3.2% Pension increases for in-payment benefits 2.2% 2.2% Pension increases for deferred benefits 2.2% 2.2% Scheme participant census date 31/03/2015 31/03/2012 * plus promotional salary scale

Expected Lifetime The expected lifetime of a participant who is age 60 and the expected lifetime (from age 60) of a participant who will be aged 60 in 15 years are shown in years below, based on the mortality tables used for both the 2015 and 2016 FRS102 disclosures:

2016 FRS 102 assumptions 2015 FRS 102 assumptions Age Males Females Age Males Females 60 28.0 29.8 60 29.5 30.7 60 in 15 yrs 29.4 31.3 60 in 15 yrs 31.0 32.2

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are estimated below:

Assumption Change in assumption Impact on scheme liabilities Discount rate Increase/decrease by 0.1% Decrease/increase by c. 2% CPI Inflation Increase/decrease by 0.1% Increase/decrease by c. 1.5%-2.0% Salary Increase/decrease by 0.1% Increase/decrease by c. 0.3% Base table multipliers Increase/decrease by 5% Increase/decrease by c. 1.0%-1.5% Future mortality improvements 1.25% pa to 1.5% pa long term trend Increase by c. 1%

Amounts for the current and previous four years were as follows:

Group Pension Scheme:

2016 2015 2014 2013 2012 £'m £'m £'m £'m £'m Defined benefit obligation (577.9) (578.4) (485.1) (430.1) (337.4) Scheme assets 457.9 449.5 378.4 375.6 326.0

Deficit (120.0) (128.9) (106.7) (54.5) (11.4)

Experience adjustments on scheme liabilities - - - 0.3% - Experience adjustments on scheme assets - (5.7%) 5.7% (5.9%) 4.4%

The actuarial gains and losses recognized in the combined statement of comprehensive income arose from changes in assumptions concerning the discount rate, price inflation, and pension commutation to cash.

28 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

26. Financial Commitments

At 31 March the Press had commitments to third parties under non-cancellable operating leases as follows:

2016 2015 Property Other Property Other £'m £'m £'m £'m Less than one year 8.1 1.4 8.1 1.4 Between one and five years 13.3 1.7 14.8 1.8 More than five years 19.1 - 21.3 - 40.5 3.1 44.2 3.2

27. Contingent Liabilities

Oxford University Press is a department of the University of Oxford. It is the responsibility of the Delegates of the University Press to prepare financial statements and have them audited. However, the Statutes and Regulations of the University do not permit the inclusion of these financial statements in the financial statements of the rest of the University. In the unlikely event of the rest of the University not having sufficient assets to meet its liabilities, those liabilities would fall to be met by the Press, including the DPRF. At 31 July 2015, the date of its latest audited balance sheet, the rest of the University of Oxford had total liabilities of £1,376.8m (2014: £1,134.3m) and net assets after deducting such liabilities of £2,312.2m (2014: £1,898.7m). The DPRF was established in 1984 to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Press's Trading Operations. In the unlikely event of the DPRF not having sufficient assets to meet its liabilities those liabilities would fall to be met by the Press's Trading Operations. At 31 March 2016 the DPRF had total liabilities of £16.4m (2015: £18.1m) and net assets after deducting such liabilities of £301.1m (2015: £270.6m). On 29 June 2007, the Press entered into an agreement with the Trustees of the Oxford University Press Group Pension Scheme to eliminate the scheme deficit over a period of years. As security for the payment of the agreed contributions into the Scheme, the Press granted a floating charge in favour of the Trustees over the assets located in the United Kingdom which are allocated to the OUP Effective Operating Reserve subject to a maximum of £50.0m. The Press is subject to a number of legal claims and other matters the outcomes of which are uncertain and may give rise to liabilities or other adverse consequences which cannot currently be quantified.

28. Transactions with Related Parties

The Trading Operations occupy certain properties which are held by the Delegates' Property and Reserve Fund. Rents are charged at prevailing market rates on these properties. Rents and service charges payable during the year for occupancy of these properties amounted to £13.8m (2015: £13.9m). During the year £44.9m (2015: £145.9m) was transferred from the Trading Operations to the Delegates' Property and Reserve Fund. Key management personnel compensation for the year ended 31 March 2016 was £2.4m (2015: £2.5m). Key management personnel are the Press's Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press (see Corporate Governance Statement, page 1 above). The Finance Committee of the Delegacy consists of a chairman elected by the Delegates, the Vice- Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. The members of the University who attend Finance Committee are not remunerated by the Press. There are no other transactions that need to be disclosed.

29 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

29. Explanation of transition to FRS 102 from old UK GAAP

As stated in note 2, these are the Press's first financial statements prepared in accordance with FRS 102. The accounting policies set out in note 2 have been applied in preparing the Financial Statements for the year ended 31 March 2016 and the comparative information presented in these financial statements for the year ended 31 March 2015. In preparing its FRS 102 balance sheet, the Press has adjusted amounts reported previously in financial statements prepared in accordance with its previous basis of accounting, old UK GAAP. An explanation of how the transition from UK GAAP has affected the Press's financial position and financial performance is set out in the following tables.

Reconciliation of equity Note 31 March 2015 Old UK Effect of FRS 102 GAAP transition £m £m £’m FIXED ASSETS Tangible fixed assets (a) 40.3 (18.2) 22.1 Intangible fixed assets: (a) 63.6 18.2 81.8 Investments 0.5 - 0.5

104.4 - 104.4

CURRENT ASSETS Intangible assets - pre-publication (b) - 21.0 21.0 Stock and work in progress (b) 98.3 (21.0) 77.3 Debtors (c) 190.6 8.9 199.5 Current asset investments (c) 153.3 0.1 153.4 Cash at bank and in hand 23.6 - 23.6

465.8 9.0 474.8 CREDITORS Amounts falling due within one year (c),(d),(e) (226.6) (6.7) (233.3)

NET CURRENT ASSETS 239.2 2.3 241.5

TOTAL ASSETS LESS CURRENT LIABILITIES 343.6 2.3 345.9

CREDITORS Amounts falling due after more than one year (c) (4.3) (1.7) (6.0)

PROVISION FOR LIABILITIES (1.9) - (1.9)

NET ASSETS EXCLUDING PENSION LIABILITY 337.4 0.6 338.0

PENSION LIABILITY (135.8) - (135.8)

NET ASSETS INCLUDING PENSION LIABILITY 201.6 0.6 202.2

RESERVES 200.1 0.6 200.7

MINORITY INTERESTS 1.5 - 1.5

TOTAL FUND 201.6 0.6 202.2

30 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

29. Explanation of transition to FRS 102 from old UK GAAP (continued)

Reconciliation of equity (continued) 1 April 2014 Old UK Effect of FRS 102 GAAP transition £m £m £m FIXED ASSETS Tangible fixed assets (a) 36.1 (15.8) 20.3 Intangible fixed assets (a) 75.8 15.8 91.6 Investments 0.5 - 0.5

112.4 - 112.4

CURRENT ASSETS Intangible assets - pre-publication (b) - 24.1 24.1 Stock and work in progress (b) 98.4 (24.1) 74.3 Debtors (c) 188.5 5.5 194.0 Current asset investments (c) 212.0 (0.3) 211.7 Cash at bank and in hand 32.7 - 32.7

531.6 5.2 536.8 CREDITORS Amounts falling due within one year (c),(d),(e) (231.3) (7.1) (238.4)

NET CURRENT ASSETS 300.3 (1.9) 298.4

TOTAL ASSETS LESS CURRENT LIABILITIES 412.7 (1.9) 410.8

CREDITORS Amounts falling due after more than one year (c) (4.8) (0.3) (5.1)

PROVISION FOR LIABILITIES (1.7) - (1.7)

NET ASSETS EXCLUDING PENSION LIABILITY 406.2 (2.2) 404.0

PENSION LIABILITY (112.5) - (112.5)

NET ASSETS INCLUDING PENSION LIABILITY 293.7 (2.2) 291.5

RESERVES 292.4 (2.2) 290.2

MINORITY INTERESTS 1.3 - 1.3

TOTAL FUND 293.7 (2.2) 291.5

Notes on reconciliation of equity: (a) Classification of Fixed Assets under FRS 102 requires computer software assets, including costs of configuring and implementing computer systems, to be shown as an intangible asset separate from the hardware on which the software is installed rather than a tangible fixed asset for the combined software and hardware. The net book value of capitalised software that has been reclassified as Intangible Fixed Assets, at 31st March 2015: £18.2m (1st April 2014 £15.8m). (b) Pre-production costs of publications have been shown as First Costs within Stock, and amortized over twelve months from first publication. Under FRS 102, these costs will be reclassified as Intangible Assets – Pre-Publication but will continue to be disclosed alongside Stock as Current Assets in the balance sheet. These assets will also continue to be amortised over twelve months from publication. Pre-production costs of publications were £21.0m at 31st March 2015 and £24.1m at 1st April 2014.

31 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

29. Explanation of transition to FRS 102 from old UK GAAP (continued)

(c) The Press enters into hedging contracts to protect itself from within-period exchange rate volatility. Under old UK GAAP, there was no requirement to hold hedging instruments (such as future currency sales or purchases at a fixed rate) on the balance sheet or to revalue them to current market value. Effective hedging under FRS 102 allows transactions to be recorded at the hedged rate and changes in the market value of hedges relating to future periods to be recorded through OCI rather than in the profit and loss account for the current period. This is achieved by matching FX contracts with phased cash flow forecasts. Hedges deemed as ineffective are revalued to market rate with changes in value taken through the profit and loss account. Previously, hedged transactions were recorded at the hedged rate and any mismatch between the value of transactions and hedges was closed out at spot rate with any differences taken to exchange gains and losses in the profit and loss account (this is equivalent to assuming that all hedges were fully effective) and periodic changes in market value of the hedging instruments did not need to be reflected in the profit and loss account. Under FRS 102, all outstanding invoiced transactions are revalued to the period end spot rate. At 1st April 2014 amounts recognised in the Balance Sheet in relation to cash flow hedges, the revaluation of invoiced items and cash to the year end rate was £2.0m (31st March 2015 £4.8m). In 2014/15, amounts taken to the profit or loss account due to ineffectiveness, the revaluation of invoiced items and cash was a loss of £1.1m. Effective hedges recognised in OCI at 1st April 2014 was a gain of £3.1m, the movement on OCI in 2014/15 was a gain of £1.8m.

(d) The cost of unused holiday entitlement at the end of the year is accrued under FRS 102 with movements in the accrual taken through the profit and loss account. An opening accrual of £3.9m has been posted in the balance sheet at 1st April 2014, and the movement in the accrual will be recognised in the profit and loss account each year. The accrual at 31 March 2015 was calculated to be £4.2m, thus a £0.3m profit and loss account movement was recognised in 2014/15. (e) Deferred tax on unremitted earnings - Under old FRS 19 unremitted earnings of subsidiaries only gave rise to deferred tax liabilities to the extent that dividends had been accrued. Under FRS 102 deferred tax is recognised when income from a subsidiary or branch has been recognised in the financial statements and the subsidiary is a regular remitter of dividends. Deferred tax on unremitted earnings was £0.2m at 1st April 2014 and reduced to £0.1m at 31st March 2015, with the movement taken to Taxation in the profit and loss account in 2014/15.

32 OXFORD UNIVERSITY PRESS – TRADING OPERATIONS

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

29. Explanation of transition to FRS 102 from old UK GAAP (continued)

Reconciliation of profit and loss Note Year ended 31 March 2015 Old UK Effect of FRS 102 GAAP transition £m £m £m

TURNOVER (a) 767.2 (5.0) 762.2

OPERATING PROFIT (c) 105.2 (3.4) 101.8

NET INTEREST PAYABLE (1.0) - (1.0)

OTHER FINANCE EXPENSE (b) (0.5) (4.3) (4.8)

PROFIT BEFORE INVESTMENT INCOME 103.7 (7.7) 96.0

INVESTMENT INCOME 0.3 - 0.3

PROFIT BEFORE TAX (a) 104.0 (7.7) 96.3

TAXATION (d) (9.5) 0.2 (9.3)

PROFIT AFTER TAX 94.5 (7.5) 87.0

PROFIT ATTRIBUTABLE TO MINORITY INTEREST (1.4) (0.1) (1.5)

NET PROFIT FOR THE YEAR 93.1 (7.6) 85.5

Notes on reconciliation of profit and loss:

(a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and Profit and Loss account were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognised in Other Comprehensive Income. The retranslation of the profit and loss account for the year ended 31st March 2015 to average rates reduced Trading Operations turnover by £5.0m and profit before tax by £4.2m compared to what was previously reported under old UK GAAP. (b) The costs of providing post-retirement benefits for employees is recognised in the profit and loss account through a Service Charge that recognises the cost of the benefits actually accruing to current employees during the year, and a Finance Charge which reflects the notional interest on the future scheme liabilities (calculated at a discount rate set in line with high quality corporate bonds) less the income generated from scheme assets. Under FRS 17, the income on assets was calculated according the type and mix of assets and different rates of income were assumed on each separate class of asset. Under FRS 102, there is no change in Service Charge but returns on assets are calculated using the same rate used to discount the liabilities and no investment premium can be assumed. The resultant increase in Finance Charge for 2014/15 was £4.3m. (c) The profit and loss account movement in the holiday accrual in 2014/15 was a charge of £0.3m. (d) Deferred tax on unremitted earnings recognised in the profit and loss account in 2014/15 was a £0.1m credit.

33 Financial Statements of DPRF for the year ended 31 March 2017

1

DELEGATES’ PROPERTY AND RESERVE FUND

ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2017

OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Oxford University Press (the “Press”) is committed to providing information relating to corporate governance in its published accounts, consistent with developments in those of listed companies and other public interest bodies, and with the relevant and applicable sections of the UK Corporate Governance Code (the “Code”). Many of the principles of the Code that apply to companies with shares and shareholders are not relevant to the Press. The Press is committed to implementing best practice in this area, insofar as it is appropriate to the Press’s circumstances. Although the Press is exempt from the requirements of the Code, the Delegates have decided to provide the following information.

Summary of Oxford University Press's Structure of Governance

1. The Press is a department of the University of Oxford whose governance structure is set out in the Statutes and Regulations of the University. The Delegates of the Press have overall responsibility for the affairs of the Press, including its publishing policy and academic standards. Pursuant to the Statutes, the Delegacy has established a Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press. The Delegacy appoints a Secretary to the Delegates to act as the Chief Executive of the Press with executive responsibility for the management of the Press. Authority to act within the Press is given through powers of attorney granted by the Chief Executive.

2. The Delegates of the Press are chosen from senior academics at the University, and their terms of appointment and tenure are in accordance with the provisions of the Statutes of the University. The Delegacy meets regularly throughout the year, receives reports on the management of the Press from the Chief Executive and Finance Committee, and reviews and authorizes publications.

3. The Finance Committee of the Delegacy consists of a chair elected by the Delegates, the Vice-Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. Terms of office are stipulated within the Statutes and Regulations of the University.

4. The governance structure of the Press contains a clear separation between the executive responsibility for the management of the Press which rests with the Chief Executive, and the Chairmanship of the Delegacy (which is held by the Vice-Chancellor) and of the Finance Committee (which is held by a senior academic of the University).

5. The Chief Executive is supported in the day to day control of the Press by an Executive Committee which monitors the detailed performance of the divisions of the Press. The Chief Executive is responsible for advising on governance matters and ensuring good information flows to Delegates and relevant committees. 6. The accounts of the Press are prepared under the direction of the Finance Committee, and are presented annually to the Delegacy by the Finance Committee. There is no Annual General Meeting but the audited accounts of the Press, as approved by the Delegacy, are submitted to the University’s Finance Committee and Council. An abstract of the audited accounts is published in the University Gazette and in the Financial Statements of the University of Oxford.

7. Pursuant to the Regulations of the University, the Finance Committee is entitled to establish such subcommittees as it may from time to time think fit. It has established the Press’s Audit Committee as a sub-committee of Finance Committee. The Audit Committee meets at least four times a year, with the external and internal auditors normally in attendance. The Audit Committee provides independent oversight of audit activities and reports to the Finance Committee on issues of internal control, governance, operational effectiveness, risk management, legal affairs, regulatory matters, and external audit. The Audit Committee reviews the effectiveness of the financial, risk management, and other internal control systems of the Press, including both the scope and the effectiveness of the work of both Internal and External Audit The Audit Committee comprises some Delegate members of the Finance Committee and some external members of the Finance Committee. Although senior officers of the Press attend meetings of the Audit Committee as necessary, they are not members of the Committee. The Audit Committee reports to the Finance Committee following its meeting. 8. The Press's Remuneration Committee, another sub-committee of Finance Committee and one which includes the Vice-Chancellor of the University, reviews the salaries, benefits, bonuses, and fees of the Press's senior officers and Finance Committee members.

9. The Press’s Nominations Committee, another sub-committee of Finance Committee and one which is chaired by the Vice-Chancellor of the University, proposes names in connection with vacancies on Finance Committee, Audit Committee and Remuneration Sub-Committee and with any vacancy of the Chair of OUP Pension Trustees.

1 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Corporate Governance and Internal Control

The Press acknowledges and endorses the principles of corporate governance, including the adoption of a risk-based approach to the review of internal controls.

● The Press has implemented a global risk-based approach to the design, application and review of its risk management systems and internal controls. A Risk Register has been developed for all of the Press's operations, including major overseas branches and subsidiaries; this register identifies, evaluates, and manages all the material risks facing the Press.

● The Finance Committee is responsible for the Press's system of risk management and internal control and for reviewing its effectiveness. The Press's system of internal controls is designed to manage rather than eliminate the risk of failure to achieve operational objectives, and inevitably can only provide reasonable and not absolute assurance against material misstatement or loss.

● The Press’s risk assessment practices are incorporated into its wider business planning, budgeting, and financial reporting processes.

● The Finance Committee, through the Audit Committee, regularly reviews the effectiveness of the Group's system of risk management and internal control. The Finance Committee's monitoring covers all controls, including financial, operational and compliance controls. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed, and controlled and whether any significant weaknesses are promptly remedied or need extensive monitoring.

● The Press has established a framework for dealing with concerns that staff might raise on potential improprieties in financial reporting and other areas.

● The Press's management controls the operations of the enterprise through annual planning and budgeting, with monthly monitoring processes to ensure that operations are performing as expected. The Press's management hierarchy operates through a divisional structure to ensure adequate control of individual operating and trading entities within the Press.

● A number of key management matters, as formally set out in a Group Levels of Authority document, are reserved for the decision of the Finance Committee.

2 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

INTRODUCTORY NOTE

The Fund was established during the year ended 31 March 1984 in order to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to its Trading Operations. The Fund holds and manages the properties of the Press together with the income arising therefrom.

The main purpose of the Fund is to manage, in the short and medium term, the economic impact on the Press, and consequently on the University, of the realisation of material economic risks in the Press.

There were two constituent reserves within the Fund at 31 March 2017:

The Strategic Property Reserve holds properties which the Press intends to retain for its use, or to safeguard for future use (in the UK or overseas), and any associated debt.

The Effective Operating Reserve comprises both liquid and liquefiable assets including investment properties.

3 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

STATEMENT OF THE RESPONSIBILITIES OF THE DELEGATES OF OXFORD UNIVERSITY PRESS

Under the University’s Statutes and Regulations, the Delegates of the University Press are responsible for the affairs of the Press. Through the Finance Committee, the Delegates have responsibility for the direction of the finance and management of the Press’s activity.

The Delegates, through the Finance Committee, are responsible for preparing these non-statutory accounts for the year ended 31 March 2017 which are intended by them to give a true and fair view of the state of affairs of the Delegates' Property and Reserve Fund and of the statement of financial activities for that period.

The Finance Committee, on behalf of the Delegates, have elected to prepare the non-statutory accounts in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities and on the basis of the financial reporting framework UK Accounitng Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland. In preparing these non-statutory accounts, the Delegates are required to:

● select suitable accounting policies and then apply them consistently; ● make judgements and accounting 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 non-statutory accounts; and ● prepare the non-statutory accounts on the going concern basis unless it is inappropriate to presume that the Press will continue in business.

The Delegates are responsible for keeping adequate accounting records that are sufficient to show and explain the Press’s transactions and disclose with reasonable accuracy at any time the financial position of the Press. They are also responsible for safeguarding the assets of the Press and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities including the maintenance of an appropriate system of internal controls.

Signed on behalf of the Delegates by

Sir John Vickers, Chair of Finance Committee 30 May 2017

4 INDEPENDENT AUDITOR'S REPORT TO THE DELEGATES OF OXFORD UNIVERSITY PRESS – DELEGATES’ PROPERTY AND RESERVE FUND

We have audited the non-statutory accounts of the Delegates Property and Reserve Fund of Oxford University Press (the “DPRF”) for the year ended 31 March 2017, which comprise the statement of financial activities, the balance sheet, the cash flow statement and the related notes. These non-statutory accounts have been prepared for the reasons set out in note 1 to the non-statutory accounts and on the basis of the financial reporting framework UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, as prescribed by the Statutes of the University and according to instructions received from the Delegates. Our report has been prepared solely for the Delegates as a body, in accordance with Council Regulation 20 of 2002 of Oxford University. It has been released to the Delegates on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Delegates' own internal purposes) or in part, without our prior written consent.

Our report was designed to meet the agreed requirements of the Delegates determined by the Delegates' needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Delegates for any purpose or in any context. Any party other than the Delegates who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG LLP will accept no responsibility or liability in respect of our report to any other party.

Respective responsibilities of the Delegates and the auditor

As explained more fully in the Statement of the Responsibilities of the Delegates of Oxford University Press set out on page 4, the Delegates, through the Finance Committee, are responsible for the preparation of the non-statutory accounts, which are intended by them to give a true and fair view. Our responsibility is to audit, and express an opinion on, the non-statutory accounts in accordance with the terms of our engagement letter dated 6th April 2017 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the non-statutory accounts

An audit involves obtaining evidence about the amounts and disclosures in the non-statutory accounts sufficient to give reasonable assurance that the non-statutory accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the DPRF's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Delegates; and the overall presentation of the non-statutory accounts.

In addition, we read all the financial and non-financial information in the Corporate Governance statement attached to the non-statutory combined accounts of the DPRF to identify material inconsistencies with the audited non-statutory accounts and to identify any information that is apparently materially incorrect. If we become aware of any apparent material misstatements or inconsistencies, we consider the implication for our report. Opinion on non-statutory accounts

In our opinion, the non-statutory accounts: ● give a true and fair view of the state of the DPRF's affairs as at 31 March 2017, and of its net incoming resources for the year then ended; and ● have been properly prepared in accordance with UK Generally Accepted Accounting Practice. Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where under the terms of our engagement we are required to report to you if, in our opinion: ● adequate accounting records have not been kept by the DPRF and that the returns adequate for our audit have not been received from branches not visited by us; ● the DPRF balance sheet and statement of financial activities are not in agreement with the accounting records returns; ● the information in the Finance Committee’s report to the Delegates is not consistent with that in the financial statements; and ● we have not obtained all the information and explanations which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG LLP Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD 30 May 2017

5 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

STATEMENT OF FINANCIAL ACTIVITIES FOR THE YEAR ENDED 31 MARCH 2017

Notes 2017 2016

Strategic Effective Total Total Property Operating Reserve Reserve £'m £'m £'m £'m INCOME Rental income from properties 14.8 3.4 18.2 17.8 Income from investments 0.2 0.1 0.3 0.3 Transfer from Trading Operations - 40.0 40.0 44.9

TOTAL INCOME 15.0 43.5 58.5 63.0 EXPENDITURE Costs of generating funds Other resources expended 4 (8.4) (1.1) (9.5) (9.2) Expenditure on charitable activities Transfer of funds to the rest of the University: - Cash - (40.0) (40.0) (44.9) - Property - (2.3) (2.3) - - Benefits in kind (1.0) - (1.0) (1.0)

TOTAL EXPENDITURE (9.4) (43.4) (52.8) (55.1)

Gains on investment properties 5 (a) 8.0 6.8 14.8 15.8

NET INCOME 13.6 6.9 20.5 23.7 Transfer between funds (9.0) 9.0 - -

NET INCOMING RESOURCES FOR THE YEAR 4.6 15.9 20.5 23.7 Currency translation differences on foreign currency net investments 11.3 - 11.3 1.4

NET MOVEMENT IN FUNDS 15.9 15.9 31.8 25.1

RECONCILIATION OF FUNDS TOTAL FUNDS BROUGHT FORWARD 195.4 100.3 295.7 270.6

TOTAL FUNDS CARRIED FORWARD 211.3 116.2 327.5 295.7

The above results relate to continuing operations. The notes on pages 9 to 14 form part of these non-statutory accounts.

6 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

BALANCE SHEET AS AT 31 MARCH 2017

Notes 2017 2016

Strategic Effective Total Total Property Operating Reserve Reserve £‘m £‘m £‘m £‘m FIXED ASSETS Properties 5 (a,b) 187.4 89.7 277.1 252.3 Investments 6 24.0 25.3 49.3 30.2

211.4 115.0 326.4 282.5 CURRENT ASSETS Debtors 7 0.3 1.3 1.6 0.3 Cash at bank and in hand 8.0 - 8.0 29.3 8.3 1.3 9.6 29.6

Creditors: Amounts falling due within one year 8 (8.4) (0.1) (8.5) (16.4)

NET CURRENT ASSETS (0.1) 1.2 1.1 13.2

TOTAL ASSETS LESS CURRENT LIABILITIES 211.3 116.2 327.5 295.7

Creditors: Amounts falling due after more than one year - - - -

NET ASSETS 211.3 116.2 327.5 295.7

RECONCILIATION OF FUNDS Opening balance 195.4 100.3 295.7 270.6 Net movement in funds 15.9 15.9 31.8 25.1

TOTAL FUNDS 211.3 116.2 327.5 295.7

The notes on pages 9 to 14 form part of these non-statutory accounts.

The non-statutory accounts on pages 6 to 14 were approved by Finance Committee on 30 May 2017 and were signed on its behalf by:

Nigel Portwood Giles Spackman Chief Executive and Secretary to the Delegates Group Finance Director 30 May 2017 30 May 2017

7 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

CASH FLOW STATEMENT AS AT 31 MARCH 2017

Notes 2017 2016

£'m £'m £'m £'m

CASH FLOWS FROM OPERATING ACTIVITIES Net Income 20.5 23.7 Adjustments for: Depreciation - 0.1 Foreign exchange losses (2.2) (0.2) Change in the value of investment property (13.3) (15.8) Interest receivable and similar income (0.3) (0.4) Transfer to University (Property) 2.3 -

7.0 7.4

(Increase)/decrease in debtors (1.3) (0.1) Increase in creditors (2.9) 0.5

2.8 7.8

Interest paid 0.1 0.1

Net cash from operating activities 2.9 7.9

CASH FLOWS FROM INVESTING ACTIVITIES Net interest received 0.2 0.3 Acquisition of tangible fixed assets (0.8) (1.2)

(0.6) (0.9) CASH FLOWS FROM FINANCING ACTIVITIES Transfer from Trading Ops 40.0 44.9 Transfer to University (40.0) (44.9)

- -

Net increase/(decrease in cash and cash equivalents 2.3 7.0 Cash and cash equivalents at 1st April 49.8 42.8 Effect of exchange rate fluctuations on cash held 0.5 -

Cash and cash equivalents at 31st March 52.6 49.8

The notes on pages 9 to 14 form part of these non-statutory accounts.

8 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

1. Delegates' Property and Reserve Fund Oxford University Press ("the Press") is a department of the University of Oxford (“the University”). These non-statutory accounts are presented for the Delegates' Property and Reserve Fund of the Press (“the DPRF”). Separate non- statutory accounts are presented for the trading operations of the Press ("the Trading Operations”), which are defined as the Press excluding the DPRF. The DPRF was established in order to distinguish more clearly the property investment operations of the Press from the trade, assets and liabilities relating to its publishing operations. The DPRF holds and manages the property and investment portfolio of the Press, including the relevant assets, liabilities, income and expenses of the Press and the subsidiaries listed in note 3, but excluding the Trading Operations as noted above. The DPRF comprises the Strategic Property Reserve and the Effective Operating Reserve. The Strategic Property Reserve holds those properties which the Press intends to retain for its use; or to safeguard against future use (in the UK or overseas); and any associated debt. The Effective Operating Reserve holds a mix of investments including investment property. Its main purpose is to protect the Press and thus the rest of the University from any unplanned or unagreed calls on its cash created by the realization of economic risks or liquidity shocks. It is also currently the subject of a charge to the UK Group Scheme pension fund of the Press. The activities of the DPRF are managed separately from those of the Trading Operations and separate accounting records are maintained. The Annual Report of the Delegates of the University Press is a separately available document that sets out how the Trading Operations and the DPRF have furthered the University's charitable purposes for the public benefit. The University is a charity and its income is therefore generally exempt from UK taxation. Therefore no provision is made in respect of such taxation as regards the DPRF. The exemption does not extend to subsidiary companies of the DPRF. Whilst a number of overseas branches and affiliates have charitable status, certain of these branches may suffer local taxation. 2. Principal Accounting Policies The principal accounting policies are summarized below. (a) Basis of Accounting These non-statutory accounts are prepared under the historical cost convention with the exception of quoted investments, unit trusts, and investment properties that are stated at fair value (see (d) and (f) below) in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) issued on 16 July 2014 and the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (FRS 102). The functional currency of the Press is Pounds Sterling, the currency of the United Kingdom, the primary economic environment in which the Press operates. The Combined non-statutory accounts are therefore presented in Pounds Sterling. Foreign operations are included in the non-statutory accounts in accordance with the policies set out in policy (e). The Finance Committee has reviewed the forecast future performance of the DPRF and the resources available to it and based on this review believes it is appropriate to prepare the non-statutory accounts on the going concern basis. The Finance Committee has a reasonable expectation that the Press has adequate resources to continue in operational existence for the foreseeable future. Thus the Press continues to adopt the going concern basis in preparing the annual non-statutory accounts. (b) Principles adopted in the Non-statutory Accounts The non-statutory accounts are prepared in the form of a combined statement of financial activities, combined balance sheet and combined cash flow statement. The accounting principles therein are in accordance with FRS 102 and with the Charities Statement of Recommended Practice (FRS 102): Accounting and Reporting by Charities 2014. No trustees' report is included, as the Press is a department of the University of Oxford and not a separate charity. An abstract of the DPRF non-statutory accounts is included in the non-statutory accounts of Oxford University. There are no restricted funds within the DPRF, therefore the reserves are unrestricted. (c) Rents Receivable [FRS 102 section 23] Rents receivable represent rental income earned during the year and they are recognized in the period to which they relate. (d) Properties [FRS 102 section 16] Properties held for investment are included at fair value and any movements on fair value are shown in the statement of financial activities. Investment properties are valued by qualified chartered surveyors every three years and updated annually by them in the intervening years.

9 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2. Principal Accounting Policies (continued) (e) Foreign Currencies [FRS 102 section 30] The results of overseas branches and subsidiaries are translated into sterling at the average rates of exchange prevailing during the financial year, and their balance sheets are translated into sterling at the rates prevailing at the date of the combined balance sheet. Exchange differences arising from this translation of foreign operations are dealt with in the statement of financial activities. Individual transactions denominated in foreign currency are translated into the local currency of the respective entity at the rates ruling at the dates of the transactions. Investments, amounts receivable and payable at the balance sheet date are translated at the year-end rates, and all exchange differences arising from transactions relating to trading items are dealt with in the statement of financial activities. (f) Investments [FRS 102 section 11] Quoted investments (including options, unit trusts, and common investment funds) are stated at fair value, i.e. the mid- market value prevailing at the end of the financial year. For other investments fair value is deemed to be the lower of cost or management's valuation. Changes in fair value, or valuation of other investments, during the year are taken directly to the statement of financial activities in the year in which they arise and are included in the figures for income from investments. Interest income is accounted for on an accruals basis. (g) Transactions with Related Parties [FRS 102 section 33] FRS 102 requires a disclosure of all material transactions between the reporting entity and any related parties. These are addressed in note 12. (h) Pension Costs Employees are entitled to become members of the Group Pension Scheme, which is a defined benefit scheme. There is not sufficient information available to identify the DPRF's share of the underlying assets and liabilities of the Scheme, and accordingly it accounts for the Scheme as a defined contribution scheme in accordance with Section 28 of FRS 102. Further details are disclosed in the non-statutory accounts of the Trading Operations. 3. Subsidiary Companies Country of Proportion of nominal incorporation value of issued shares Dentingan Kejayaan Sdn Bhd Malaysia 100%held 3,723,002 shares of Malaysian MYR1 Property management

OUP SA (Properties) Ltd South Africa 100% 121 shares of South African Rand R1 Property management

OUP (Developments) Ltd (formerly Oxford Read Write Ltd) UK 100% 2 shares of £1 Dormant

Included in the DPRF are net assets of £105.8m (2016: £92.8m) held outside the UK.

10 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

4. Other Resources Expended 2017 2016 £'m £'m

Interest payable 0.1 0.1 Other costs 9.4 9.1

9.5 9.2

Auditor's remuneration for the period was £13,000 (2016: £13,000) and no fees were paid in respect of non-audit services.

Included in 'Other Costs' above are the following costs of employment: 2017 2016 £'m £'m

Wages and salaries 0.8 0.8 Other pension costs 0.1 0.1

0.9 0.9

The average number of persons employed by the DPRF at 31 March 2017 was 30 (2016: 30). All of these were employed in the UK in providing facilities services to the UK occupied properties. Retirement benefits are provided by the Group Pension Scheme, a defined benefit scheme, details of which are disclosed in full in the non-statutory accounts of the Trading Operations of the Press. As the underlying assets and liabilities of the Group Pension Scheme and associated service cost are deemed immaterial to the DPRF, in accordance with Section 28 of FRS 102, it is accounted for as if it were a defined contribution plan. The net deficit on the Group Pension Scheme at 31 March 2017 was £189.8m (2016: £126.7m). The agreed employer contribution rate for the year ended 31 March 2017 was 19% (2016: 19%). The Delegates of the Press have not received any remuneration from the DPRF in the years ended 31 March 2016 and 2017, therefore, the only cost of governance is the audit fee as disclosed above. An element of key management personnel charge is included within the £400k management fee charged by Trading Operations to the DPRF, this has not been quantified separately as it is an immaterial proportion of those individual's time and hence emoluments.

5. Tangible Fixed Assets

2017 2016 £'m £'m Investment properties at fair value: Effective Operating Reserve 89.7 84.8 Strategic Property Reserve 187.3 167.2 277.0 252.0

Equipment at amortised cost 0.1 0.3 277.1 252.3

(a) Properties held for investment are included at fair value. Movements in the value of investment properties are as follows: Effective Operating Strategic Property Reserve Reserve Total 2017 2016 2017 2016 2017 2016 £'m £'m £'m £'m £'m £'m

Fair value at 1 April 84.8 78.1 167.2 155.5 252.0 233.6 Capital expenditure 0.4 0.6 0.4 - 0.8 0.6 Exchange adjustments - - 13.2 1.6 13.2 1.6 Transferred from tangible fixed assets - - - 0.4 0.0 0.4 Revaluation 6.8 6.1 6.5 9.7 13.3 15.8 Transferred to the University (2.3) - - - (2.3) -

Fair value at 31 March 89.7 84.8 187.3 167.2 277.0 252.0

Investment properties were valued at 31 March 2017 by the management of the Press (31 March 2016: by the management of the Press). The historic cost of investment properties was £69.8m (2016: 69.0m). The historic value of the property transferred to the University was £5,925 (purchased between 1924-25 as part of a parcel of land in North Oxford).

11 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

5. Tangible Fixed Assets (continued) Equipment (b) Tangible Fixed Assets £'m Cost At 1 April 2016 1.0 Exchange adjustments (0.1)

At 31 March 2017 0.9

Depreciation At 1 April 2016 0.7 Exchange adjustments 0.1

At 31 March 2017 0.8

Net Book Value

At 31 March 2017 0.1

At 31 March 2016 0.3

6. Investment assets

Details of investment assets are as follows: 2017 2016 Fair Value Fair Value £'m £'m

Investment deposits 49.3 30.2

Investments held during the year were a mixture of fixed-rate term deposits and variable-rate deposits and include accrued interest.

7. Debtors: Amounts falling due within one year 2017 2016 £'m £'m

Other debtors 1.6 0.3

8. Creditors: Amounts falling due within one year 2017 2016 £'m £'m

Bank loans and overdrafts (unsecured) - 9.7 Amounts owing to related parties 4.7 - Other creditors 2.3 5.3 Deferred Tax Liability 1.5 1.4

8.5 16.4

12 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

9. Financial Instruments

The carrying amounts of the financial assets and liabilities include:

2017 2016 Note £'m £'m

Assets measured at undiscounted amount receivable: Investment assets 6 49.3 30.2 Trade and other debtors 7 1.6 0.3

50.9 30.5

Liabilities measured at undiscounted amount payable: Bank loans and overdrafts (unsecured) 8 - (9.7) Other creditors 8 (2.3) (5.3) Bonds repayable in instalments 8 (1.5) (1.4)

(8.5) (16.4)

Total Financial Instruments 42.4 14.1

The DPRF's income and expense in respect of financial instruments are summarized below:

2017 2016 £'m £'m

Interest income and expense Income from investments 0.3 0.3 Interest payable (0.1) (0.1)

0.2 0.2

13 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

10. Capital Commitments

At 31 March 2017 there were outstanding commitments for the purchase of fixed assets, not provided for in these non- statutory accounts, amounting to £0.4m (2016: £0.4m).

11. Contingent Liabilities

Oxford University Press is a department of the University of Oxford. It is the responsibility of the Delegates of the University Press to prepare non-statutory accounts and have them audited. However, the Statutes and Regulations of the University do not permit the inclusion of these non-statutory accounts in the financial statements of the rest of the University. In the unlikely event of the rest of the University not having sufficient assets to meet its liabilities, those liabilities would fall to be met by the Press, including the DPRF. At 31 July 2016, the date of its latest audited balance sheet, the rest of the University of Oxford had total liabilities of £958.9m (2015: £904.8m) and net assets after deducting such liabilities of £3,012.6m (2015: £2,839.7m). As noted on page 3, the DPRF was established to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Press's Trading Operations. In the unlikely event of the Trading Operations not having sufficient assets to meet its liabilities those liabilities would fall to be met by the DPRF. At 31 March 2017 the Trading Operations of the Press had total liabilities of £485.3m (2016: £366.2m) and net assets after deducting such liabilities of £215.1m (2016: £234.4m). On 29 June 2007, the Press entered into an agreement with the Trustees of the OUP Group Pension Scheme. The Press granted a floating charge in favour of the Trustees over the assets located in the United Kingdom which are allocated to the OUP Effective Operating Reserve subject to a maximum of £50.0m. The Press is subject to a number of legal claims and other matters, the outcomes of which are uncertain and may give rise to liabilities or other adverse consequences which cannot currently be quantified.

12. Subsequent Events

On 7 April 2017 the Trading Operations acquired the assets of Sinauer Associates Inc., a biology, psychology, and neuroscience publisher headquartered in Massachusetts, USA, for £14.3m, and the DPRF acquired a building and property from Sinauer, LLC for £0.8m.

13. Transactions with Related Parties

The DPRF holds certain properties which are occupied by the Trading Operations of the Press and has borrowed certain funds from the Trading Operations. Rents are charged at prevailing market rates on these properties and interest is charged at an appropriate rate on the loan. From 1 April 2003 the DPRF provided property-related services to the Trading Operations, recharging these at cost. Rents and service charges receivable during the year for occupancy of properties held within the Strategic Property Reserve from the Press's Trading Operations amounted to £13.6m (2016: £13.8m). During the year £40.0m (2016: £44.9m) was transferred from the Trading Operations to Delegates' Property and Reserve Fund. During the year the Delegates' Property and Reserve Fund transferred £40.0m in cash (2016: £44.9m), £2.3m in property (2016: £nil) and £1.0m benefits in kind including printing (2016: £1.0m) to the rest of the University of Oxford. During the year £0.2m (2016: £0.2m) rent was paid to the rest of the University of Oxford, and £0.1m (2016: £0.1m) rental income was received from the rest of the University of Oxford. There are no other transactions that need to be disclosed.

14 Financial Statements of DPRF for the year ended 31 March 2016

1

DELEGATES’ PROPERTY AND RESERVE FUND

ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2016

OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Oxford University Press (the “Press”) is committed to providing information relating to corporate governance in its published accounts, consistent with developments in those of listed companies and other public interest bodies, and with the relevant and applicable sections of the UK Corporate Governance Code (the “Code”). Many of the principles of the Code that apply to companies with shares and shareholders are not relevant to the Press. The Press is committed to implementing best practice in this area, insofar as it is appropriate to the Press’s circumstances. Although the Press is exempt from the requirements of the Code, the Delegates have decided to provide the following information.

Summary of Oxford University Press's Structure of Governance

1. The Press is a department of the University of Oxford whose governance structure is set out in the Statutes and Regulations of the University. The Delegates of the Press have overall responsibility for the affairs of the Press, including its publishing policy and academic standards. Pursuant to the Statutes, the Delegacy has established a Finance Committee which, under the general authority of the Delegates, directs and manages the business, assets, and finances of the Press. The Delegacy appoints a Secretary to the Delegates to act as the Chief Executive of the Press with executive responsibility for the management of the Press. Authority to act within the Press is given through powers of attorney granted by the Chief Executive.

2. The Delegates of the Press are chosen from senior academics at the University, and their terms of appointment and tenure are in accordance with the provisions of the Statutes of the University. The Delegacy meets regularly throughout the year, receives reports on the management of the Press from the Chief Executive and Finance Committee, and reviews and authorizes publications.

3. The Finance Committee of the Delegacy consists of a chair elected by the Delegates, the Vice-Chancellor, the Senior Proctor, six Delegates, and four individuals possessing high qualifications in business or finance (comparable to independent non-executive directors on corporate boards), together with the Chief Executive, the Press Finance Director and up to five senior officers of the Press appointed by the Delegates. Terms of office are stipulated within the Statutes and Regulations of the University.

4. The governance structure of the Press contains a clear separation between the executive responsibility for the management of the Press which rests with the Chief Executive, and the Chairmanship of the Delegacy (which is held by the Vice-Chancellor) and of the Finance Committee (which is held by a senior academic of the University).

5. The Chief Executive is supported in the day to day control of the Press by an Executive Committee which monitors the detailed performance of the divisions of the Press. The Chief Executive is responsible for advising on governance matters and ensuring good information flows to Delegates and relevant committees. 6. The accounts of the Press are prepared under the direction of the Finance Committee, and are presented annually to the Delegacy by the Finance Committee. There is no Annual General Meeting but the audited accounts of the Press, as approved by the Delegacy, are submitted to the University’s Finance Committee and Council. An abstract of the audited accounts is published in the University Gazette and in the Financial Statements of the University of Oxford.

7. Pursuant to the Regulations of the University, the Finance Committee is entitled to establish such subcommittees as it may from time to time think fit. It has established the Press’s Audit Committee as a sub-committee of Finance Committee. The Audit Committee meets at least four times a year, with the external and internal auditors normally in attendance. The Audit Committee provides independent oversight of audit activities and reports to the Finance Committee on issues of internal control, governance, operational effectiveness, risk management, legal affairs, regulatory matters, and external audit. The Audit Committee reviews the effectiveness of the financial, risk management, and other internal control systems of the Press, including both the scope and the effectiveness of the work of both Internal and External Audit The Audit Committee comprises some Delegate members of the Finance Committee and some external members of the Finance Committee. Although senior officers of the Press attend meetings of the Audit Committee as necessary, they are not members of the Committee. The Audit Committee reports to the Finance Committee following its meeting. 8. The Press's Remuneration Committee, another sub-committee of Finance Committee and one which includes the Vice-Chancellor of the University, reviews the salaries, benefits, bonuses, and fees of the Press's senior officers and Finance Committee members.

9. The Press’s Nominations Committee, another sub-committee of Finance Committee and one which includes the Vice- Chancellor of the University, proposes names in connection with vacancies on Finance Committee, Audit Committee and Remuneration Sub-Committee and with any vacancy of the Chair of OUP Pension Trustees.

1 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

OXFORD UNIVERSITY PRESS – CORPORATE GOVERNANCE STATEMENT

Corporate Governance and Internal Control

The Press acknowledges and endorses the principles of corporate governance, including the adoption of a risk-based approach to the review of internal controls.

● The Press has implemented a global risk-based approach to the design, application and review of its risk management systems and internal controls. A Risk Register has been developed for all of the Press's operations, including major overseas branches and subsidiaries; this register identifies, evaluates, and manages all the material risks facing the Press.

● The Finance Committee is responsible for the Press's system of risk management and internal control and for reviewing its effectiveness. The Press's system of internal controls is designed to manage rather than eliminate the risk of failure to achieve operational objectives, and inevitably can only provide reasonable and not absolute assurance against material misstatement or loss.

● The Press’s risk assessment practices are incorporated into its wider business planning, budgeting, and financial reporting processes.

● The Finance Committee, through the Audit Committee, regularly reviews the effectiveness of the Group's system of risk management and internal control. The Finance Committee's monitoring covers all controls, including financial, operational and compliance controls. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed, and controlled and whether any significant weaknesses are promptly remedied or need extensive monitoring.

● The Press has established a framework for dealing with concerns that staff might raise on potential improprieties in financial reporting and other areas.

● The Press's management controls the operations of the enterprise through annual planning and budgeting, with monthly monitoring processes to ensure that operations are performing as expected. The Press's management hierarchy operates through a divisional structure to ensure adequate control of individual operating and trading entities within the Press.

● A number of key management matters, as formally set out in a Group Levels of Authority document, are reserved for the decision of the Finance Committee.

2 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

INTRODUCTORY NOTE

The Fund was established during the year ended 31 March 1984 in order to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to its Trading Operations. The Fund holds and manages the properties of the Press together with the income arising therefrom.

The main purpose of the Fund is to manage, in the short and medium term, the economic impact on the Press, and consequently on the University, of the realisation of material economic risks in the Press.

There were two constituent reserves within the Fund at 31 March 2016:

The Strategic Property Reserve holds properties which the Press intends to retain for its use, or to safeguard for future use (in the UK or overseas), and any associated debt.

The Effective Operating Reserve comprises both liquid and liquefiable assets including investment properties.

3 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

STATEMENT OF THE RESPONSIBILITIES OF THE DELEGATES OF OXFORD UNIVERSITY PRESS

Under the University’s Statutes and Regulations, the Delegates of the University Press are responsible for the affairs of the Press. Through the Finance Committee, the Delegates have responsibility for the direction of the finance and management of the Press’s activity.

The Delegates, through the Finance Committee, are responsible for preparing these non-statutory accounts for the year ended 31 March 2016 which are intended by them to give a true and fair view of the state of affairs of the Delegates' Property and Reserve Fund and of the statement of financial activities for that period.

The Finance Committee, on behalf of the Delegates, have elected to prepare the non-statutory accounts in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) issued on 16 July 2014 and the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (FRS 102), and applicable law. In preparing these non-statutory accounts, the Delegates are required to:

● select suitable accounting policies and then apply them consistently; ● make judgements and accounting 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 non-statutory accounts; and ● prepare the non-statutory accounts on the going concern basis unless it is inappropriate to presume that the Press will continue in business.

The Delegates are responsible for keeping adequate accounting records that are sufficient to show and explain the Press’s transactions and disclose with reasonable accuracy at any time the financial position of the Press. They are also responsible for safeguarding the assets of the Press and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities including the maintenance of an appropriate system of internal controls.

Signed on behalf of the Delegates by

Sir John Vickers, Chair of Finance Committee 31 May 2016

4 INDEPENDENT AUDITOR'S REPORT TO THE DELEGATES OF OXFORD UNIVERSITY PRESS – DELEGATES’ PROPERTY AND RESERVE FUND

We have audited the non-statutory accounts of the Delegates Property and Reserve Fund of Oxford University Press (the “DPRF”) for the year ended 31 March 2016, which comprise the statement of financial activities, the balance sheet, the cash flow statement and the related notes. These non-statutory accounts have been prepared for the reasons set out in note 1 to the non-statutory accounts and in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) issued on 16 July 2014 and the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (FRS 102), as prescribed by the Statutes of the University and according to instructions received from the Delegates. Our report has been prepared solely for the Delegates as a body, in accordance with Council Regulation 20 of 2002 of Oxford University. It has been released to the Delegates on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Delegates' own internal purposes) or in part, without our prior written consent.

Our report was designed to meet the agreed requirements of the Delegates determined by the Delegates' needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Delegates for any purpose or in any context. Any party other than the Delegates who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, KPMG LLP will accept no responsibility or liability in respect of our report to any other party.

Respective responsibilities of the Delegates and the auditor

As explained more fully in the Statement of the Responsibilities of the Delegates of Oxford University Press set out on page 4, the Delegates, through the Finance Committee, are responsible for the preparation of the non-statutory accounts, which are intended by them to give a true and fair view. Our responsibility is to audit, and express an opinion on, the non-statutory accounts in accordance with the terms of our engagement letter dated 15th April 2015 and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the non-statutory accounts

An audit involves obtaining evidence about the amounts and disclosures in the non-statutory accounts sufficient to give reasonable assurance that the non-statutory accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the DPRF's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Delegates; and the overall presentation of the non-statutory accounts.

In addition, we read all the financial and non-financial information in the Corporate Governance statement attached to the non-statutory combined accounts of the DPRF to identify material inconsistencies with the audited non-statutory accounts and to identify any information that is apparently materially incorrect. If we become aware of any apparent material misstatements or inconsistencies, we consider the implication for our report. Opinion on non-statutory accounts

In our opinion, the non-statutory accounts: ● give a true and fair view of the state of the DPRF's affairs as at 31 March 2016, and of its net movement in funds for the year then ended; and ● have been properly prepared in accordance with UK Generally Accepted Accounting Practice, including FRS 102 the Financial Reporting Standard applicable in the UK and Republic of Ireland. Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where under the terms of our engagement we are required to report to you if, in our opinion: ● adequate accounting records have not been kept by the DPRF and that the returns adequate for our audit have not been received from branches not visited by us; ● your balance sheet and statement of financial activities are not in agreement with the accounting records and returns; ● the information in the Finance Committee’s report to the Delegates is not consistent with that in the financial statements; and ● we have not obtained all the information and explanations which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG LLP Chartered Accountants Arlington Business Park, Theale, Reading, RG7 4SD 31 May 2016

5 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

STATEMENT OF FINANCIAL ACTIVITIES FOR THE YEAR ENDED 31 MARCH 2016

Notes 2016 2015

Strategic Effective Total Total Property Operating Reserve Reserve £'m £'m £'m £'m INCOME Rental income from properties 14.8 3.0 17.8 17.7 Income from investments 0.2 0.1 0.3 0.4 Transfer from Trading Operations - 44.9 44.9 145.9

TOTAL INCOME 15.0 48.0 63.0 164.0 EXPENDITURE Costs of generating funds Other resources expended 4 (8.3) (0.9) (9.2) (9.1) Expenditure on charitable activities Transfer of funds to the rest of the University: - Cash - (44.9) (44.9) (165.9) - Benefits in kind (1.0) - (1.0) (0.9)

TOTAL EXPENDITURE (9.3) (45.8) (55.1) (175.9)

Gains on investment properties 5 (a) 9.7 6.1 15.8 27.8

NET INCOME 15.4 8.3 23.7 15.9 Transfer between funds 9.6 (9.6) - - NET INCOMING/(OUTGOING) RESOURCES FOR THE YEAR 25.0 (1.3) 23.7 15.9 Currency translation differences on foreign currency net investments 1.4 - 1.4 5.8

NET MOVEMENT IN FUNDS 26.4 (1.3) 25.1 21.7

RECONCILIATION OF FUNDS TOTAL FUNDS BROUGHT FORWARD 169.0 101.6 270.6 248.9

TOTAL FUNDS CARRIED FORWARD 195.4 100.3 295.7 270.6

The above results relate to continuing operations. The notes on pages 9 to 17 form part of these non-statutory accounts.

6 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

BALANCE SHEET AS AT 31 MARCH 2016

Notes 2016 2015

Strategic Effective Total Total Property Operating Reserve Reserve £‘m £‘m £‘m £‘m FIXED ASSETS Properties 5 (a,b) 167.5 84.8 252.3 233.8 Investments 6 5.0 25.2 30.2 40.1

172.5 110.0 282.5 273.9 CURRENT ASSETS Debtors 7 0.2 0.1 0.3 0.2 Cash at bank and in hand 29.3 - 29.3 14.6 29.5 0.1 29.6 14.8

Creditors: Amounts falling due within one year 8 (6.6) (9.8) (16.4) (18.1)

NET CURRENT ASSETS/(LIABILITIES) 22.9 (9.7) 13.2 (3.3)

TOTAL ASSETS LESS CURRENT LIABILITIES 195.4 100.3 295.7 270.6

Creditors: Amounts falling due after more than one year - - - -

NET ASSETS 195.4 100.3 295.7 270.6

RECONCILIATION OF FUNDS Opening balance 169.0 101.6 270.6 248.9 Net movement in funds 26.4 (1.3) 25.1 21.7

TOTAL FUNDS 195.4 100.3 295.7 270.6

The notes on pages 9 to 17 form part of these non-statutory accounts.

The non-statutory accounts on pages 6 to 17 were approved by Finance Committee on 31 May 2016 and were signed on its behalf by:

Nigel Portwood Giles Spackman Chief Executive and Secretary to the Delegates Group Finance Director 31 May 2016 31 May 2016

7 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

CASH FLOW STATEMENT AS AT 31 MARCH 2016

Notes 2016 2015

£'m £'m £'m £'m

CASH FLOWS FROM OPERATING ACTIVITIES Net Income 23.7 15.9 Adjustments for: Depreciation 0.1 - Foreign exchange losses (0.2) (0.3) Change in the value of investment property (15.8) (27.8) Interest receivable and similar income (0.4) (0.4)

7.4 (12.6)

(Increase)/decrease in debtors (0.1) 0.1 Increase in creditors 0.5 4.7

7.8 (7.8)

Interest paid 0.1 0.1 Transfer from Trading Ops (44.9) (145.9) Transfer to University 44.9 165.9

Net cash from operating activities 7.9 12.3

CASH FLOWS FROM INVESTING ACTIVITIES Net interest received 0.3 0.3 Acquisition of tangible fixed assets (1.2) (4.3) Transfer from Trading Ops 44.9 145.9 Transfer to University (44.9) (165.9)

(0.9) (24.0)

Net increase/(decrease in cash and cash equivalents 7.0 (11.7) Cash and cash equivalents at 1st April 42.8 54.5

Cash and cash equivalents at 31st March 49.8 42.8

The notes on pages 9 to 17 form part of these non-statutory accounts.

8 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

1. Delegates' Property and Reserve Fund Oxford University Press ("the Press") is a department of the University of Oxford (“the University”). These non-statutory accounts are presented for the Delegates' Property and Reserve Fund of the Press (“the DPRF”). Separate non- statutory accounts are presented for the trading operations of the Press ("the Trading Operations”), which are defined as the Press excluding the DPRF. The DPRF was established in order to distinguish more clearly the property investment operations of the Press from the trade, assets and liabilities relating to its publishing operations. The DPRF holds and manages the property and investment portfolio of the Press, including the relevant assets, liabilities, income and expenses of the Press and the subsidiaries listed in note 3, but excluding the Trading Operations as noted above. The DPRF comprises the Strategic Property Reserve and the Effective Operating Reserve. The Strategic Property Reserve holds those properties which the Press intends to retain for its use; or to safeguard against future use (in the UK or overseas); and any associated debt. The Effective Operating Reserve holds a mix of investments including investment property. Its main purpose is to protect the Press and thus the rest of the University from any unplanned or unagreed calls on its cash created by the realization of economic risks or liquidity shocks. It is also currently the subject of a charge to the UK Group Scheme pension fund of the Press. The activities of the DPRF are managed separately from those of the Trading Operations and separate accounting records are maintained. The Annual Report of the Delegates of the University Press is a separately available document that sets out how the Trading Operations and the DPRF have furthered the University's charitable purposes for the public benefit. The University is a charity and its income is therefore generally exempt from UK taxation. Therefore no provision is made in respect of such taxation as regards the DPRF. The exemption does not extend to subsidiary companies of the DPRF. Whilst a number of overseas branches and affiliates have charitable status, certain of these branches may suffer local taxation. 2. Principal Accounting Policies The principal accounting policies are summarized below. (a) Basis of Accounting These non-statutory accounts are prepared under the historical cost convention with the exception of quoted investments, unit trusts, and investment properties that are stated at fair value (see (d) and (f) below) in accordance with the Statement of Recommended Practice: Accounting and Reporting by Charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) issued on 16 July 2014 and the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (FRS 102).

This is the first year that the Press has presented its non-statutory accounts under FRS 102 SORP. The Press has consequently applied the first-time adoption requirements. The prior year non-statutory accounts have been restated for material adjustments on adoption of FRS 102 SORP in the current year [FRS 102 section 35]. An explanation of how the transition has affected the reported financial position and the financial performance of the combined non- statutory accounts is provided in note 15. The functional currency of the Press is Pounds Sterling, the currency of the United Kingdom, the primary economic environment in which the Press operates. The Combined non-statutory accounts are therefore presented in Pounds Sterling. Foreign operations are included in the non-statutory accounts in accordance with the policies set out in policy (e). The Finance Committee has reviewed the forecast future performance of the DPRF and the resources available to it and based on this review believes it is appropriate to prepare the non-statutory accounts on the going concern basis. The Finance Committee has a reasonable expectation that the Press has adequate resources to continue in operational existence for the foreseeable future. Thus the Press continues to adopt the going concern basis in preparing the annual non-statutory accounts. (b) Principles adopted in the Non-statutory Accounts The non-statutory accounts are prepared in the form of a combined statement of financial activities, combined balance sheet and combined cash flow statement. The accounting principles therein are in accordance with FRS 102 and with the Charities Statement of Recommended Practice (FRS 102): Accounting and Reporting by Charities 2014. No trustees' report is included, as the Press is a department of the University of Oxford and not a separate charity. An abstract of the DPRF non-statutory accounts is included in the non-statutory accounts of Oxford University. There are no restricted funds within the DPRF, therefore the reserves are unrestricted. (c) Rents Receivable [FRS 102 section 23] Rents receivable represent rental income earned during the year and they are recognized in the period to which they relate. (d) Properties [FRS 102 section 16] Properties held for investment are included at fair value and any movements on fair value are shown in the statement of financial activities. Investment properties are valued by qualified chartered surveyors every three years and updated annually by them in the intervening years.

9 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

2. Principal Accounting Policies (continued) (e) Foreign Currencies [FRS 102 section 30] The results of overseas branches and subsidiaries are translated into sterling at the average rates of exchange prevailing during the financial year, and their balance sheets are translated into sterling at the rates prevailing at the date of the combined balance sheet. Exchange differences arising from this translation of foreign operations are dealt with in the statement of financial activities. Individual transactions denominated in foreign currency are translated into the local currency of the respective entity at the rates ruling at the dates of the transactions. Investments, amounts receivable and payable at the balance sheet date are translated at the year-end rates, and all exchange differences arising from transactions relating to trading items are dealt with in the statement of financial activities. (f) Investments [FRS 102 section 11] Quoted investments (including options, unit trusts, and common investment funds) are stated at fair value, i.e. the mid- market value prevailing at the end of the financial year. For other investments fair value is deemed to be the lower of cost or management's valuation. Changes in fair value, or valuation of other investments, during the year are taken directly to the statement of financial activities in the year in which they arise and are included in the figures for income from investments. Interest income is accounted for on an accruals basis. (g) Transactions with Related Parties [FRS 102 section 33] FRS 102 requires a disclosure of all material transactions between the reporting entity and any related parties. These are addressed in note 12. (h) Pension Costs Employees are entitled to become members of the Group Pension Scheme, which is a defined benefit scheme. It is not reasonably practicable to identify the DPRF's share of the underlying assets and liabilities of the Scheme, and accordingly it accounts for the Scheme as a defined contribution scheme in accordance with Section 28 of FRS 102. Further details are disclosed in the non-statutory accounts of the Trading Operations. 3. Subsidiary Companies Country of Proportion of nominal incorporation value of issued shares Dentingan Kejayaan Sdn Bhd Malaysia 100%held 3,723,002 shares of Malaysian MYR1 Property management

OUP SA (Properties) Ltd South Africa 100% 121 shares of South African Rand R1 Property management

OUP (Developments) Ltd (formerly Oxford Read Write Ltd) UK 100% 2 shares of £1 Dormant

Included in the DPRF are net assets of £92.8m (2015: £77.7m) held outside the UK.

10 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

4. Other Resources Expended 2016 2015 £'m £'m

Interest payable 0.1 0.1 Other costs 9.1 9.0

9.2 9.1

Auditor's remuneration for the period was £13,000 (2015: £13,000) and no fees were paid in respect of non-audit services.

Included in 'Other Costs' above are the following costs of employment: 2016 2015 £'m £'m

Wages and salaries 0.8 0.8 Other pension costs 0.1 0.1

0.9 0.9

The average number of persons employed by the DPRF at 31 March 2016 was 30 (2015: 30). All of these were employed in the UK in providing facilities services to the UK occupied properties. Retirement benefits are provided by the Group Pension Scheme, a defined benefit scheme, details of which are disclosed in full in the non-statutory accounts of the Trading Operations of the Press. As the underlying assets and liabilities of the Group Pension Scheme and associated service cost are deemed immaterial to the DPRF, in accordance with Section 28 of FRS 102, it is accounted for as if it were a defined contribution plan. The net deficit on the Group Pension Scheme at 31 March 2016 was £126.7m (2015: £135.8m). The agreed employer contribution rate for the year ended 31 March 2016 was 19% (2015: 19%). The Delegates of the Press have not received any remuneration from the DPRF in the years ended 31 March 2015 and 2016, therefore, the only cost of governance is the audit fee as disclosed above. An element of key management personnel charge is included within the £400k management fee charged by Trading Operations to the DPRF, this has not been quantified separately as it is an immaterial proportion of those individual's time and hence emoluments.

5. Tangible Fixed Assets

2016 2015 £'m £'m Investment properties at fair value: Effective Operating Reserve 84.8 78.1 Strategic Property Reserve 167.2 155.5 252.0 233.6

Equipment at amortised cost 0.3 0.2 252.3 233.8

(a) Properties held for investment are included at fair value. Movements in the value of investment properties are as follows: Effective Operating Strategic Property Reserve Reserve Total 2016 2015 2016 2015 2016 2015 £'m £'m £'m £'m £'m £'m

Fair value at 1 April 78.1 66.6 155.5 128.8 233.6 195.4 Capital expenditure 0.6 3.3 - - 0.6 3.3 Exchange adjustments - - 1.6 6.1 1.6 6.1 Transferred from tangible fixed assets - - 0.4 1.0 0.4 1.0 Revaluation 6.1 8.2 9.7 19.6 15.8 27.8

Fair value at 31 March 84.8 78.1 167.2 155.5 252.0 233.6

Investment properties were valued at 31 March 2016 by the management of the Press (31 March 2015: by Savills Plc, Chartered Surveyors). The historic cost of investment properties was £69.0m (2015: 68.0m).

11 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

5. Properties (continued) Equipment (b) Tangible Fixed Assets £'m Cost At 1 April 2015 0.9 Additions 0.6 Disposals (0.1) Transferred to investment properties (0.4)

At 31 March 2016 1.0

Depreciation At 1 April 2015 0.7 Charge for year 0.1 Disposals (0.1)

At 31 March 2016 0.7

Net Book Value

At 31 March 2016 0.3

At 31 March 2015 0.2

6. Investment assets

Details of investment assets are as follows: 2016 2015 Fair Value Fair Value £'m £'m

Investment deposits 30.2 40.1

Investments held during the year were a mixture of fixed-rate term deposits and variable-rate deposits and include accrued interest.

7. Debtors: Amounts falling due within one year 2016 2015 £'m £'m

Other debtors 0.3 0.2

8. Creditors: Amounts falling due within one year 2016 2015 £'m £'m

Bank loans and overdrafts (unsecured) 9.7 11.9 Other creditors 5.3 4.7 Deferred Tax Liability 1.4 1.5

16.4 18.1

12 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

9. Financial Instruments

The carrying amounts of the financial assets and liabilities include:

2016 2015 Note £'m £'m

Assets measured at undiscounted amount receivable: Investment assets 6 30.2 40.1 Trade and other debtors 7 0.3 0.2

30.5 40.3

Liabilities measured at undiscounted amount payable: Bank loans and overdrafts (unsecured) 8 (9.7) (11.9) Other creditors 8 (5.3) (4.7) Bonds repayable in instalments 8 (1.4) (1.5)

(16.4) (18.1)

Total Financial Instruments 14.1 22.2

The DPRF's income and expense in respect of financial instruments are summarized below:

2016 2015 Note £'m £'m

Interest income and expense Income from investments 0.3 0.4 Interest payable (0.1) (0.1)

0.2 0.3

13 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

10. Capital Commitments

At 31 March 2016 there were outstanding commitments for the purchase of fixed assets, not provided for in these non- statutory accounts, amounting to £0.4m (2015: £0.4m).

11. Contingent Liabilities

Oxford University Press is a department of the University of Oxford. It is the responsibility of the Delegates of the University Press to prepare non-statutory accounts and have them audited. However, the Statutes and Regulations of the University do not permit the inclusion of these non-statutory accounts in the financial statements of the rest of the University. In the unlikely event of the rest of the University not having sufficient assets to meet its liabilities, those liabilities would fall to be met by the Press, including the DPRF. At 31 July 2015, the date of its latest audited balance sheet, the rest of the University of Oxford had total liabilities of £1,376.8m (2014: £1,134.3m) and net assets after deducting such liabilities of £2,312.2m (2014: £1,898.7m). As noted on page 3, the DPRF was established to distinguish more clearly the reserve investments of the Press from the assets and liabilities relating to the Press's Trading Operations. In the unlikely event of the Trading Operations not having sufficient assets to meet its liabilities those liabilities would fall to be met by the DPRF. At 31 March 2016 the Trading Operations of the Press had total liabilities of £366.2m (2015: £377.0m) and net assets after deducting such liabilities of £234.4m (2015: £202.2m). On 29 June 2007, the Press entered into an agreement with the Trustees of the OUP Group Pension Scheme. The Press granted a floating charge in favour of the Trustees over the assets located in the United Kingdom which are allocated to the OUP Effective Operating Reserve subject to a maximum of £50.0m. The Press is subject to a number of legal claims and other matters, the outcomes of which are uncertain and may give rise to liabilities or other adverse consequences which cannot currently be quantified.

12. Transactions with Related Parties

The DPRF holds certain properties which are occupied by the Trading Operations of the Press and has borrowed certain funds from the Trading Operations. Rents are charged at prevailing market rates on these properties and interest is charged at an appropriate rate on the loan. From 1 April 2003 the DPRF provided property-related services to the Trading Operations, recharging these at cost. Rents and service charges receivable during the year for occupancy of properties held within the Strategic Property Reserve from the Press's Trading Operations amounted to £13.8m (2015: £13.9m). During the year £44.9m (2015: £145.9m) was transferred from the Trading Operations to Delegates' Property and Reserve Fund. During the year £0.2m (2015: £0.2m) rent was paid to the rest of the University of Oxford, and £0.1m (2015: £0.1m) rental income was received from the rest of the University of Oxford. There are no other transactions that need to be disclosed.

14 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

13. Explanation of transition to FRS 102 SORP from old UK GAAP

As stated in note 2, these are the DPRF's first non-statutory accounts prepared in accordance with FRS 102 SORP. The accounting policies set out in note 2 have been applied in preparing the non-statutory accounts for the year ended 31 March 2016 and the comparative information presented in these non-statutory accounts for the year ended 31 March 2015. In preparing its FRS 102 SORP Balance Sheet, the DPRF has adjusted amounts reported previously in the non- statutory accounts prepared in accordance with its previous basis of accounting, old UK GAAP. An explanation of how the transition from old UK GAAP has affected the DPRF's financial position and financial performance is set out in the following tables.

Reconciliation of equity Note 31 March 2015 Old UK Effect of FRS 102 GAAP transition SORP £m £m £’m FIXED ASSETS Properties (a) 131.0 102.8 233.8 Investments 40.1 - 40.1

171.1 102.8 273.9 CURRENT ASSETS Debtors 0.2 - 0.2 Cash at bank and in hand 14.6 - 14.6 14.8 - 14.8

Creditors: Amounts falling due within one year (b) (16.7) (1.4) (18.1)

NET CURRENT ASSETS (1.9) (1.4) (3.3)

TOTAL ASSETS LESS CURRENT LIABILITIES 169.2 101.4 270.6

Creditors: Amounts falling due after more than one year - - -

NET ASSETS 169.2 101.4 270.6

RECONCILIATION OF FUNDS Opening balance 172.4 76.5 248.9 Net movement in funds (3.2) 24.9 21.7

TOTAL FUNDS 169.2 101.4 270.6

15 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

13. Explanation of transition to FRS 102 SORP from old UK GAAP (continued)

Reconciliation of equity Note 01 April 2014 Old UK Effect of FRS 102 GAAP transition SORP £m £m £’m FIXED ASSETS Properties (a) 117.9 77.7 195.6 Investments 47.0 - 47.0

164.9 77.7 242.6 CURRENT ASSETS Debtors 0.4 - 0.4 Cash at bank and in hand 22.7 - 22.7 23.1 - 23.1

Creditors: Amounts falling due within one year (b) (15.5) (1.2) (16.7)

NET CURRENT LIABILITIES 7.6 (1.2) 6.4

TOTAL ASSETS LESS CURRENT LIABILITIES 172.5 76.5 249.0

Creditors: Amounts falling due after more than one year (0.1) - (0.1)

NET ASSETS 172.4 76.5 248.9

RECONCILIATION OF FUNDS Opening balance 152.8 - 152.8 Net movement in funds 19.6 76.5 96.1

TOTAL FUNDS 172.4 76.5 248.9

Notes on reconciliation of equity (a) Strategic properties, regardless of their occupation for business use, are treated as Investment Properties in the non- statutory accounts, as the exemption under old UK GAAP for properties held by other companies within a group has been removed in FRS 102. The movement in the fair value of investment properties is recognised in the Statement of Financial Activities (including investment properties already held at fair value in the EOR). The fair value of properties, based on management opinion, at 1st April 2014 increased the net assets of the DPRF balance sheet by £77.7m as they were previously recognised at depreciated cost. At 31st March 2015 the revaluation of the strategic properties, based on professional advice, increased the value of properties by a further £25.1m. (b) FRS 102 section 29 requires deferred tax to be recognised in respect of all timing differences at the reporting date. The recognition of deferred tax for timing differences arising on a revaluation is recognised consistent with the accounting itself, therefore, the upward revaluation of an asset gives rise to a deferred tax liability. Under FRS 19, asset revaluations did not give rise to deferred tax assets and liabilities where gains and losses were recorded in the SOFA unless there was a binding commitment to sell, and the resulting gain/loss on disposal was recognised in the non- statutory accounts. At 1st April 2014 the deferred tax liability on the movement in property valuation in taxable jurisdictions was £1.2m (31st March 2015: £1.5m).

16 OXFORD UNIVERSITY PRESS – DELEGATES' PROPERTY AND RESERVE FUND NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2016

13. Explanation of transition to FRS 102 SORP from old UK GAAP (continued)

Reconciliation of Statement of Financial Activities Note Year ended 31 March 2015 Old UK Effect of FRS 102 GAAP transition SORP £'m £'m £'m INCOME Rental income from properties (a) 18.0 (0.3) 17.7 Income from investments 0.4 - 0.4 Transfer from Trading Operations 145.9 - 145.9

TOTAL INCOME 164.3 (0.3) 164.0

EXPENDITURE Costs of generating funds Other resources expended (a),(b),(c) (10.7) 1.6 (9.1) Expenditure on charitable activities Transfer of funds to the rest of the University: - Cash (165.9) - (165.9) - Benefits in kind (0.9) - (0.9)

TOTAL EXPENDITURE (177.5) 1.6 (175.9)

Gains on investment properties (b) - 27.8 27.8

NET (LOSS)/INCOME (13.2) 29.1 15.9

Other gains/(losses): Surplus on revaluation of investment properties (b) 8.2 (8.2) - Currency translation differences on foreign currency net investments (a),(c) 1.8 4.0 5.8

NET MOVEMENT IN FUNDS (3.2) 24.9 21.7

RECONCILIATION OF FUNDS TOTAL FUNDS BROUGHT FORWARD 172.4 76.5 248.9

TOTAL FUNDS CARRIED FORWARD 169.2 101.4 270.6

Notes: (a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and statement of financial activities were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognised within the net movement in funds. The retranslation of total income for the year ended 31st March 2015 to average rates reduced total income by £0.3m compared to what was previously reported under old UK GAAP. (b) As investment properties are recognised at market value, depreciation that would previously have been charged was added back to other resources expended. Gains on the revaluation of investment properties were recognised within net income on the statement of financial activities as well as the gain on EOR investment properties which was previously shown within the net movement of funds. (c) An increase in the deferred tax liability of £0.3m on revaluation gains of investment properties was recognised within other resources expended.

17

THE ISSUER

University of Oxford University Offices Wellington Square Oxford OX1 2JD

LEAD MANAGER

J.P. Morgan Securities plc 25 Bank Street Canary Wharf London E14 5JP

PRINCIPAL PAYING AGENT

HSBC Bank plc 8 Canada Square London E14 5HQ

TRUSTEE

HSBC Corporate Trustee Company (UK) Limited Level 28 8 Canada Square London E14 5HQ

LEGAL ADVISERS

To the Issuer as to English law

Linklaters LLP One Silk Street London EC2Y 8HQ

To the Lead Manager and the Trustee as to English law

Clifford Chance LLP 10 Upper Bank Street London E14 5JJ

AUDITORS TO THE ISSUER

KPMG LLP One Snowhill Snow Hill Queensway Birmingham B4 6GH

FINANCIAL ADVISER TO THE ISSUER

Gleacher Shacklock LLP Cleveland House 33 King Street London SW1Y 6RJ

217938-4-19984-v2.0 70-40665162