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APPENDIX IV: FINANCE
OVERVIEW
The consolidated statement of comprehensive income for the year
2014/15 shows a deficit after taxation of $5 million (surplus of
$602 million for 2013/14). The deficit for 2014/15 primarily reflects
the impact of the changes to the University’s investment income
which for 2014/15 was a loss of $132 million compared with a
gain of $512 million for 2013/14. This masked the steady progress
on underlying performance of the University. Removing the impact
of investment income the performance of the University activities
reflect a surplus for 2014/15 of $127 million compared with $90
million for 2013/14 as shown below.
Investment returns can be volatile in the short term. The University’s
Finance Committee reviews the performance of the University’s
financial investments on a regular basis and believes that the
investments are appropriately diversified to help mitigate market
volatility over the medium to long term.
The financial health of the University can be judged by the
level of its reserves. As at 30 June 2015, the University reserves
amounted to $5,401 million.
CONSOLIDATED INCOME AND EXPENDITURE
The consolidated income for 2014/15 decreased to $3,828 million
($4,198 million for 2013/14). Excluding the above mentioned
impact of investment income, the underlying consolidated income
increased to $3,960 million ($3,686 million for 2013/14) primarily
due to additional supplementary grants from the University Grants
Committee, and an increase in tuition fee income.
Consolidated expenditure for the year increased to $3,833 million
($3,604 million for 2013/14) mainly attributable to the general pay
adjustment on salaries, additional staffing and other resources for
supporting the higher student enrollment population and increased
spending on research activities.
SEGMENT RESULTS
Segment results are also distorted due to the impact of the
movements in investment income year on year. Commentary on
the underlying surplus/deficit is as follows:
University Grants Committee (“UGC”)
Block Grant-funded Activities
This operating segment showed a break-even position ($126
million surplus for 2013/14). After excluding the negative impact
2014/15
$million
2013/14
$million Variance
Surplus from
operation excluding
investment income
127
90
37
Investment income
(132)
512
(644)
(Deficit) /
Surplus for the year
(5)
602
(607)
of investment income of $29 million (positive $115 million for
2013/14), the underlying result was a surplus of $29 million
($11 million surplus for 2013/14). This was due to increases in
the operating expenses being less than the higher Block Grant/
supplementary allocation from UGC.
Self-Financing Continuing Professional Education
Programs (“CPEP”), Research and Other Activities
The operation of self-financing CPEP activities and research
activities, without allocation of investment income, showed a 56%
increase in surplus to $119 million ($76 million for 2013/14) mainly
driven by the offering of new programs, higher student enrollment
and higher tuition fees, as well as the surplus from completion of
commercial research contracts.
Other Activities showed a deficit of $35 million (surplus of $128
million for 2013/14). After excluding the negative impact of
investment income of $32 million (positive $126 million for
2013/14), the underlying performance of Other Activities was a
deficit of $3 million (surplus of $2 million for 2013/14).
Donations and Related Activities
After completion of the 6
th
Matching Grant Scheme, recognized
donations income stayed at a steady level. While this segment
showed a deficit of $89 million (surplus of $272 million for 2013/14),
after excluding the negative impact of investment income of $71
million (positive $271 million for 2013/14), the underlying result
was a deficit of $18 million (surplus of $1 million for 2013/14). This
was mainly caused by timing differences between recognition of
income and expenditure incurred.
CAPITAL EXPENDITURE
The completion of the Research andAcademic Building has enhanced
the University’s teaching and research facilities. The Conference
Lodge, a new on-campus hospitality facility, also largely completed
during the year, caters for the accommodation needs of visitors and
overseas students for various academic and research activities and
events. Other in-progress construction projects include new on-site
student residences, an additional 520 off-campus student hostel
rooms in Tseung Kwan O and the Multi-Purpose Auditorium.
As at 30 June 2015, the total commitments for approved
construction projects and other capital items amounted to
$2,087 million: $103 million of which will be funded by deferred
income on hand, $1,054 million from existing reserves, $240
million by approved but yet to be received UGC grants, $100 million
by pledged donations, and $590 million from UGC grants under
application.
OUTLOOK
Taking the opportunity of the 25
th
Anniversary of the University in
the coming year, the University will be putting concerted efforts into
fund-raising to secure further donations. With the recent unstable
environment in the investment market, the University will remain
cautious in its financial management and ensure it maintains
adequate reserves for its future plans and goals.
