Intended for individuals involved in research policy and funding in England's higher education system, this HEFCE report is a fundamental review of research policy and funding in the context of several issues addressed by the 1996 Research Assessment Exercise (RAE). The report summarizes conclusions reached by the committee enjoined to oversee HEFCE's review process. HEFCE indicates in its key findings that on many measures, UK's researchers are globally among the best. Also contained within the report's key findings is the recommendation that current arrangements for funding should remain intact, with key reform areas. Grant protection should be retained for top-rated departments. A proposal is made for a new capability development fund. RAE peer review panels should recognize diversity within research. Institutions should meet minimum standards for post-graduate training, and link staff development to research funding provided by HEFCE. Appendices A through M present data on various factors within the research funding process. (HB)