HKUST Annual Report 2016-17

78 HKUST 2016-2017 Annual Report OVERVIEW The Financial year 2016/17 recorded a surplus of $581 million ($316 million for 2015/16). The higher surplus for 2016/17 was mainly attributable to a very favourable investment return, but partly offset by lower donation following the conclusion of the 25th Anniversary fund-raising campaign. CONSOLIDATED INCOME AND EXPENDITURE The consolidated income increased by $559 million to $4,877 million in 2016/17 ($4,318 million in 2015/16), contributed by a growth in investment income for $652 million, a reduction in donation income of $250 million, with the remainder increase mainly due to the usual additional University Grants Committee (“UGC”) supplementary grants for General Pay Adjustment (“GPA”) on salaries. The consolidated expenditure increased by $286 million to $4,304 million ($4,018 million in 2015/16) which was mainly attributable to higher salary costs arising from GPA, general increases in teaching and research activities, growth in student expenses on scholarships and operating expenses for expanded student accommodation, as well as higher repair and maintenance costs for campus buildings. SEGMENT RESULTS Commentary on the operating segments, analysed by UGC-Funded Activities and non-UGC Funded Activities, is as follows: UGC-Funded Activities UGC-Funded Activities showed a surplus of $186 million (deficit $28 million for 2015/16). The 2016/17 surplus primarily came from the favourable investment return. The University has continued to build up the UGC reserves which stood at $2,541 million ($2,355 million in 2015/16). Non-UGC Funded Activities Self-Financing Continuing Professional Education Programs (“CPEP”), Research and Other Activities Self-financing CPEP activities contributed a surplus of $103 million ($135 million for 2015/16) to the University. Non-UGC funded research contributed a surplus of $14 million ($17 million for 2015/16), mainly from completed commercial research projects and government subsidies. The operating surplus from other non-UGC funded activities excluding donation achieved $156 million (deficit of $3 million for 2015/16), contributed by higher investment returns from the retained non-UGC reserves. In aggregate, the overall surplus of these operating segments amounted to $273 million ($149 million for 2015/16). Donations Activities After the phenomenal success of the 25th Anniversary fund raising campaign in the previous year, income from donation dipped to $66 million for 2016/17 ($316 million for 2015/16). The reduction in donation income in the year was partly compensated by the higher investment return. Overall the segment showed a surplus of $122 million ($195 million for 2015/16). Non-UGC Reserves Non-UGC reserve balances stood at $5,236 million at the end of 2016/17 ($4,440 million for 2015/16). Apart from surpluses from the aforestated self-financing activities, the growth in the reserve balances was partly attributable to recognition in the Investment Revaluation Reserve, with an un-realised gain close to $400 million arising from investment in an unlisted company. CAPITAL EXPENDITURE A number of construction projects are underway for enhancing the University’s facilities to cater for accommodation and amenity needs of students, as well as infrastructure for academic and research activities. They include the multi-purpose auditorium, residence apartment for research postgraduate students, indoor sports centre, waterfront facilities and animal care facility. As at 30 June 2017, the total commitments for approved construction projects and other capital items amounted to $1,713 million: $51 million of which will be funded by deferred income on hand, $1,238 million from existing University’s Funds, $89 million by approved but yet to be received UGC grants, and $335 million by pledged donations. OUTLOOK The University has started to incorporate environment, social and corporate governance (ESG) factors in its investment policy. The University’s financial position is healthy and the Management is actively enhancing and improving its infrastructure to cater for the University’s long term needs. The University is also exploiting opportunities to invest in innovative initiatives and projects, in pursuit of the University’s academic mission. APPENDIX 3 FINANCE