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HKUST 2011-2012 Annual Report
APPENDIX IV: FINANCE
OVERVIEW
For the year just ended, the global economy was marked by
slackened economic growth and continuation of the financial
woes especially in the Eurozone countries. Under such a
complex and volatile market environment, the University
suffered a sizeable reduction in interest and investment
returns to $19 million ($343 million for 2010/11), mainly
due to a drop in the fair value of the investment portfolio
managed by fund managers. Coupled with the higher final-
year preparation costs for launching of the new 4-year
Undergraduate (UG) System in the coming year, the University
recorded a consolidated deficit of $101 million for 2011/12
(surplus of $509 million for 2010/11).
CONSOLIDATED INCOME AND EXPENDITURE
Consolidated income for the year decreased to $2,916
million ($3,186 million for 2010/11) mainly due to the
above-mentioned decrease in investment returns; but partly
offset by a growth in tuition fees, mostly from self-financing
programs.
Consolidated expenditure for the year rose to $3,020 million
($2,681 million for 2010/11). The increase included the
upward general adjustment in salaries, additional staffing and
other spending for the preparation of the new UG System,
as well as corresponding increases in expenditure for the
expanded self-financing programs and other activities.
SEGMENT RESULTS
University Grants Committee ("UGC") Block Grant-
funded Activities
The deficit of $153 million was within the approved budget
plan. It was covered by the General and Development Reserve
which had been built up during the past few years for meeting
the anticipated final-year draw-down preparing for the 4-year
UG System to be launched in the coming year.
Self-Financing Continuing Professional Education
Programs ("CPEP"), Research and Other Activities
While the operation of self-financing CPEP activities
continued to expand and contribute surplus to the University,
other income from research activities was slightly reduced.
Intensified by the decrease in investment returns, the overall
surplus of these operating segments dropped to $99 million
($215 million for 2010/11).
Donations and Related Activities
With a number of pledged donations deferred pending the
launch of a new round of Government Matching Grant
Scheme (MGS); and with the unfavorable investment returns
in 2011/12, the segment suffered a deficit of $47 million
(surplus of $233 million for 2010/11, $129 million of which
was matching grant received from UGC under the previous
round of MGS). This illustrated how the segment results
would fluctuate with or without a MGS in operation during
a financial year. Had the operating results of the donation
activities segment been removed from the other segments
which housed the otherwise recurrent activities of the
University, the variance in the consolidated operating result
would be reduced to $330 million (deficit of $54 million for
2011/12 vs surplus of $276 million for 2010/11) instead of
$610 million (deficit of $101 million for 2011/12 vs surplus of
$509 million for 2010/11).
CAPITAL EXPENDITURE
Construction projects, including the Lee Shau Kee Business
Building and Institute for Advanced Study Academic Building
are nearly completed and targeted for occupancy in the last
quarter of 2012. The new hostel with 700 student places is
progressing on schedule and is expected to be completed
before the end of 2012. The University has withdrawn from
the off-campus joint student hostel project in Ma On Shan;
for replacement, an on-campus site will be selected for
building a new student hostel with 1,200 accommodation
places. Other in-progress construction projects include the
additional teaching and research facilities, and the other off-
campus joint student hostel in Tseung Kwan O.
As at 30 June 2012, the total commitments for the approved
construction projects and other capital items amounted to
$1,851 million. Of which, $1,183 million will be supported
by approved but yet to be received UGC grants, $67 million
by pledged donations and the rest by HKUST's reserves and
deferred income on hand.
OUTLOOK
With the full implementation of the Enterprise Resources
Planning system and near completion of several capital
construction projects in a few months' time, the University is
ready to take on the challenge of the launch of the double
UG cohorts in the coming fall.
It is generally anticipated that global financial woes, especially
in the Eurozone, will remain unresolved. Management
foresees that the University will still be confronted with
challenges posed by the unstable macro economic and
financial markets environment.
