HKUST Annual Report 2019-2020

APPENDIX IV FINANCE CONSOLIDATED INCOME AND EXPENDITURE Consolidated income increased by $1,257 million to $6,389 million in 2019/20 ($5,132 million in 2018/19), contributed primarily by donations of $679 million, matching grants under the 8th MGS of $600 million, additional University Grants Committee (“UGC”) supplementary grants for General Pay Adjustment (“GPA”) on salaries, and an increase in tuition fee income, against a reduction in interest and investment income of $246 million compared to the previous year. Consolidated expenditure increased modestly by $191 million to $4,982 million ($4,791 million in 2018/19) which was mainly attributable to higher salary costs arising from GPA, increases in premises maintenance costs and growth in student expenses on studentship. SEGMENT RESULTS Commentary on 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 $536 million (deficit of $26 million for 2018/19). The 2019/20 surplus primarily came from matching grant income which is not a recurrent funding source. If this one-off income is excluded, UGC-Funded Activities would have a deficit of $64 million. As at 30 June 2020, the University had UGC reserves of $3,127 million ($2,591 million in 2018/19). Non-UGC Funded Activities Self-Financing Continuing Professional Education Programs, Research and Other Activities Self-financing CPEP activities contributed a surplus of $298 million ($287 million for 2018/19), mainly driven by higher student enrolment and higher tuition fees. Non-UGC funded research activities contributed a surplus of $42 million ($16 million for 2018/19), mainly arising from completed commercial research projects and government subsidies. Other activities incurred a loss of $53 million (surplus of $45 million for 2018/19) which was mainly due to a drop in allocated investment income. In aggregate, the overall surplus of these operating segments amounted to $287 million ($348 million for 2018/19). Donations Activities Donations totalling $741 million were recorded as income for 2019/20 ($62 million for 2018/19). Overall the segment showed a surplus of $587 million ($21 million for 2018/19). The University has successfully secured $240 million new pledges in 2019/20 ($1,055 million in 2018/19). OVERVIEW The financial year 2019/20 recorded a surplus of $1,410 million. The higher surplus for 2019/20 was mainly contributed by strong performance in donation income, taking full advantage of the matching grants under the 8th Matching Grant Scheme (MGS). This income helped to offset the impact from lower investment return due to extreme market volatilities arising from COVID-19 and higher operating expenses. Non-UGC Reserves Non-UGC reserve balances reached $7,022 million at the end of 2019/20 ($6,150 million for 2018/19). The growth in the reserve balance was mainly contributed by the afore-stated self-financing activities and donation income. CAPITAL EXPENDITURE A number of construction projects are underway to enhance the University’s facilities and infrastructure to cater for accommodation and amenity needs of students as well as for academic and research activities. The largest construction project is the New 1551-bed Student Hostel which is expected to complete by 2023. Due to the outbreak of COVID-19, several construction projects suffered delay. However, the University has managed to catch up and all projects are on track. As at 30 June 2020, total commitments for approved construction projects and other capital items amounted to $5,041 million; $3,590 million of which will come from existing University’s Funds, $1,057 million will be funded by deferred income on hand, $282 million from pledged donations and $112 million from approved but yet to be received UGC grants. OUTLOOK The societal events and coronavirus pandemic have presented exceptional challenges to the running of the University on multiple fronts. With the dedicated efforts of the management team and responsive Council directions and support, the University has coped well, overcoming difficulties for example by conducting online teaching and providing self-quarantine facilities for students with hostel places who returned from overseas. The financial position of the University is very healthy and the total funds have breached the $10 billion historical mark. Amidst headwinds in the investment climate and substantial capital expenditure ahead to enhance campus facilities, we have set aside sufficient funds to make sure that the University remains financially robust and sustainable. Following the ground breaking ceremony held on 26 September 2019, we have commenced preparation works for the establishment of Hong Kong University of Science and Technology (Guangzhou) (“HKUST(GZ)”), including academic planning, organisational planning and campus building and development of HKUST(GZ). The GZ campus is planned to be opened in September 2022 and will be operating under the concept of one unified HKUST system and two complementary campuses. The University is actively pursuing this initiative, which would place HKUST in a pioneer position in research and application endeavours in science and technology. As we enter the new 2020/21 academic and financial year, our University continues to face an uncertain time, due to the impact of a likely prolonged economic downturn caused by the coronavirus pandemic. Our University shall remain cautious in managing its resources to ensure financial sustainability. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For The Year Ended 30 June 2020 2020 ($million) 2019 ($million) Income Government Subventions and Grants 3,386 2,632 Tuition, Programs and Other Fees 1,436 1,384 Interest and Investment Income 102 348 Donations and Benefactions 741 62 Auxiliary Services and Other Income 459 449 Transfers from Deferred Capital Funds 265 257 6,389 5,132 Expenditure Teaching, Learning and Research Teaching and Research 3,074 2,994 Library 125 124 Central Computing Facilities 137 140 Other Academic Services 106 104 3,442 3,362 Institutional Support Management and General 442 386 Premises and Related Expenses 769 706 Student and General Education Services 297 300 Other Activities 32 37 1,540 1,429 4,982 4,791 Surplus from operation for the year 1,407 341 Share of Result of an Associate 6 4 Surplus for the year before taxation 1,413 345 Taxation (3) (2) Surplus for the year after taxation 1,410 343 Other comprehensive income for the year Items that may be reclassified subsequently to income and expenditure: Exchange differences arising from translation (9) (8) (9) (8) Item that will not be reclassified to income and expenditure: Unrealised gain /(loss) on equity securities at fair value through other comprehensive income 7 (1) (2) (9) Total comprehensive income for the year 1,408 334 Transfers to: UGC Funds 536 (26) Restricted Funds 138 (6) Other Funds 734 366 1,408 334 HKUST ANNUAL REPORT 2019-2020 61 60 APPENDICES