This report provides a summary of the English higher education sector's annual operating statements (AOSs) for 2001-2002 and gives financial projections for the sector covering 2001-2002 to 2005-2006. It is based on information provided by higher education institutions in July 2002. The AOS information relates to Higher Education Funding Council for England (HEFCE) special initiatives in four areas: (1) widening participation; (2) learning and teaching; (3) business and the community; and (4) rewarding and developing staff. Analysis of these AOSs shows that the great majority of institutions have demonstrated that they are making good progress with their plans in each of the areas of strategic special funding. Overall, the forecasts appear to have been prepared on broadly reasonable assumptions, although these forecasts may be challenging for some institutions and unduly optimistic for others. (SLD)