HKUST Annual Report 2017-18

A N N U A L R E P O R T 2 0 1 7 - 1 8 75 HKUST APPENDIX 3 FINANCE OVERVIEW The financial year 2017/18 recorded a surplus of $568 million ($581 million for 2016/17). The marginally lower surplus for 2017/18 was mainly attributable to a lower investment return, partly offset by increased contribution from Self-Financing Continuing Professional Education Programs (“CPEP”). CONSOLIDATED INCOME AND EXPENDITURE The consolidated income increased by $184 million to $5,061 million in 2017/18 ($4,877 million in 2016/17), contributed by a growth in auxiliary services and other income for $52 million, a reduction in interest and investment income of $92 million, with the remaining increase mainly due to the usual additional University Grants Committee (“UGC”) supplementary grants for General Pay Adjustment (“GPA”) on salaries, and an increase in tuition fee income. The consolidated expenditure increased by $192 million to $4,496 million ($4,304 million in 2016/17) which was mainly attributable to higher salary costs arising from General Pay Adjustment, general increases in teaching and research activities, growth in student expenses on scholarships, 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 $76 million ($186 million for 2016/17). The lower surplus for 2017/18 was mainly due to decrease in investment income and increase in operating expenses. The University has continued to build up the UGC reserves which stood at $2,617 million ($2,541 million in 2016/17). Non-UGC Funded Activities Self-Financing Continuing Professional Education Programs, Research and Other Activities Self-financing CPEP activities contributed a surplus of $171 million ($103 million for 2016/17) mainly driven by higher student enrollment and higher tuition fees. Non-UGC funded research contributed a surplus of $12 million ($14 million for 2016/17), mainly from completed commercial research projects and government subsidies. The operating surplus from other non-UGC funded activities, excluding donations achieved $193 million ($156 million for 2016/17). In aggregate, the overall surplus of these operating segments amounted to $376 million ($273 million for 2016/17). Donations Activities Donations totalling $60 million were recorded as income for 2017/18 ($66 million for 2016/17). Overall the segment showed a surplus of $116 million ($122 million for 2016/17). The University has successfully secured $275 million new pledges in 2017/18 ($181 million in 2016/17). Non-UGC Reserves Non-UGC reserve balances stood at $5,733 million at the end of 2017/18 ($5,236 million for 2016/17). The growth in the reserve balance was mainly attributable to the aforestated self-financing activities. CAPITAL EXPENDITURE A number of construction projects are underway to enhance the University’s facilities to cater for accommodation and amenity needs of students, as well as infrastructure for academic and research activities. They include a multi-purpose auditorium, new student residences, indoor sports centre, waterfront facilities, animal care facility and the Innovation Building. As at 30 June 2018, total commitments for approved construction projects and other capital items amounted to $4,010 million: $2,397 million of which is from existing University’s Funds, $1,011 million by approved but yet to be received UGC grants, $533 million by pledged donations, and $69 million will be funded by deferred income on hand. OUTLOOK The University’s financial position continues to strengthen which provides a good foundation to pursue the University’s academic mission. Considering large capital commitments which will consume some of its preexisting reserves, the University plans to rebuild its financial resources to ensure that it will continue to have sufficient funds to meet future demands.