As shown below, we met our reserves measures as at 31 March 2011.

Liquid net cash and investments Cash Investments

Undrawn amounts on secured loan facility Illiquid investments

Liquid net cash and investments

Months of future total cash outflows Policy = 2 months minimum

Adjusted net assets

Investments – financial Fixed assets – realisable Current assets

Current liabilities including provisions payable in the next 12 months

Additional pension contributions payable in the next 12 months

Adjusted net assets

% of planned annual fundraising contribution Policy = 10% minimum

31 March 2011

£143m £69m

£11m –

Restricted cash and investments and research grants deferred income (£25m)

£198m 4.9 months

31 March 2011

£69m £5m

£263m (£197m) (£8m)

£132m

31 March 2010

£154m £71m

£25m (£3m)

(£20m) £227m

5.8 months

31 March 2010

£71m £4m

£296m

(£203m) (£8m)

£160m

The headline objective of the investment policy is to meet the requirements of the reserves policy – in particular that the minimum reserves measures can be met and maintained over the planning horizon. As a result, we invest in cash and cash-like investments up to the minimum reserves levels. Only above these levels are investments that might provide higher returns considered.

Following the realignment of our investment portfolio in 2009/10, the portfolio continues to be predominantly invested in cash holdings or bonds. The returns on these asset classes over the year were either in line with or exceeded benchmarks. Cash and cash-like investments had an average return of 0.5% against a benchmark 0.5%. The Charity’s bond fund had a total return of 5.4%, against a benchmark of 5.3%, and the restricted endowment investments had an average return of 6.8%, benchmark 4.3%.

This portfolio minimises the risk of capital loss and guarantees liquidity, but reduces the opportunity for higher investment returns. In light of the anticipated reduction in reserves, and the need to preserve capital levels, this is considered the appropriate balance.

Total realised and unrealised investment gains during the year were £1 million, compared to gains of £20 million in 2009/10.

We maintain a £5 million overdraft facility with the Royal Bank of Scotland and a five-year secured facility of £11.3 million with HSBC. A three-year unsecured facility of £15 million from the Royal Bank of Scotland was cancelled in October 2010. None of these facilities were used during the year.

39% 52%

We monitor our reserves measures monthly and review the reserves policy at least annually. We continue to place particular focus on our five-year planning work, both as part of developing our new five-year strategy and in light of the economic climate.

Investment policy and performance Our investment policy is reviewed annually alongside our reserves policy. The policy focuses on the principles of liquidity and capital preservation. In particular, the policy focuses on minimising exposure to future investment losses and establishing frameworks that can provide long-term, stable income. This continuing focus on the long-term financial viability will enable us to meet our vision, purpose and goals.

Smoking causes around a third of all cancer deaths in the UK, so it is our policy not to invest in tobacco companies or related businesses.

Fixed assets and investments The move of our eight London offices into a single location in Islington was completed in December 2010, which now enables us to operate more efficiently and effectively.

We continued to develop plans for UKCMRI. During the year, we contributed a further £5 million towards designing the building for this new research institute. In November, we signed a Joint Venture Agreement with our partners. For details of this investment see ‘Subsidiaries and related parties’ on page 14. We and our partners fund the design and build by means of capital contributions and loans to UKCMRI Ltd. The total costs of this initiative to date are included in programme-related investments at £29 million (2010: £24 million). In total, we expect our investment in completing the new institute to be £160 million (including £19 million investment in land) by 2015.

Annual Report and Accounts / Our finances / 13