The Review 2008

The Review 2008 The University of Hong Kong Consolidated Income and Expenditure Statement For the year ended June 30, 2008 As Restated (Expressed in thousands of Hong Kong dollars) 2008 2007 Income Government Subventions • Subventions from UGC: – Block Grants and Non-accountable Supplementary Grants 2,132,118 2,066,244 – Earmarked Grants 342,015 351,405 – Rates and Government Rent Refund 36,647 33,683 – Capital Grants and Alteration, Additions 46,843 65,946 and Improvements (‘AA & I’) Block Allocation 2,557,623 2,517,278 • Matching Grants 250,000 250,000 • Grants from Government Agencies and Related Organisations 68,751 62,697 2,876,374 2,829,975 Tuition, Programmes and Other Fees • UGC-Funded Programmes 580,890 552,297 • Non UGC-Funded Programmes 1,157,374 1,154,435 1,738,264 1,706,732 Interest and Investment Income 285,614 1,194,289 Donations and Benefactions 576,464 314,407 Auxiliary Services • Residential Halls and Hostels 55,825 58,992 • University Press 5,049 4,392 • Rental Income and Rental Contribution from Staff 95,814 83,870 • Clinics and Chinese Medicine Pharmacies 22,291 21,880 • Others 10,772 11,543 189,751 180,677 Other Income • Contract Research 90,150 81,248 • Service Income 145,725 121,759 • Outside Practice 66,721 57,569 • Miscellaneous 107,092 38,005 409,688 298,581 6,076,155 6,524,661 Expenditure Learning and Research • Instruction and Research 3,666,876 3,394,065 • Library 179,959 177,866 • Central Computing Facilities 84,954 85,573 • Other Academic Services 200,710 179,999 4,132,499 3,837,503 Institutional Suppor t • Management and General 346,386 332,899 • Premises and Related Expenses 760,425 656,569 • Student and General Education Services 169,998 157,753 • Other Activities 108,924 94,021 1,385,733 1,241,242 5,518,232 5,078,745 Surplus from Operations 557,923 1,445,916 Share of Losses of Associates (2,614) (1,640) Share of Surplus/(Losses) of Jointly Controlled Entities 18,108 (2,979) Surplus for the Year 573,417 1,441,297 Transfers (From)/ To • Restricted Funds (67,291) 439,335 • Other Funds 640,708 1,001,962 573,417 1,441,297 56 57 An Extract from the University’s Annual Accounts 2007–08 received during the year from the University Grants Committee (‘UGC’), which was based upon the planned full-time equivalent (‘FTE’) student number of 11,270 for 2007-08 (2006-07: 11,276 FTE), was $2,132 million (2006-07: $2,066 million). On the consolidated expenditure, a total of $5,518 millionwas incurred for the year (2006-07 : $5,079million), of which $4,132 million (2006-07: $3,838 million) was spent on teaching/learning and research activities of the Group. If the total depreciation and amor tization charges of $330 million (2006-07: $308 million) was excluded, the expenditure incurred for the year was approximately 8.7 per cent higher than the previous year. Financial Outlook Looking forward, the ensuing years to 2012 when the curriculum reform takes effect present great challenges to the University. The University has to accelerate the momentum in the recruitment of academic staff to prepare for the curriculum reform and to align the University’s strategic goal to scale new heights of academic excellence. In addition, the University also requires a concomitant increase in the physical space available for scholarly activities, and accommodation for the enlarged student population, both local and overseas, which are to be realized in the strategic campus development plans in a co-ordinated manner. These development projects and the consequential work for relocation require substantial resources which require careful financial management par ticularly when the economic environment becomes less conducive to fundraising activities. In combat with the economic downturn in which the University would be affected in shrinking investment return and donations, it is hopeful that the University can benefit from an environment with lower commodities and labour cost through tendering for the capital development programmes. In parallel with the physical expansion projects, there is ongoing review of existing space, including offices and quar ters, for efficiency rationalization and value maximization.With due regard to careful and prudence in financial management, the University prepares to make substantial and long-term investments to suppor t our academic endeavours by mobilizing resources, including those built up previously if needed to bridge the gap before the eventual availability of UGC and other funds. The Univer si ty’s Annual Accounts can be found at http://www.hku.hk/finance/financial_report . Any correspondence or feedback on this extract or the accounts should be addressed to e-mail: finance@fo.hku.hk . Overview The financial year 2007-08 was the third year of theTriennium 2005-08 which is to be rolled-over for one year to cover the 2008-09 academic year. The results for the year were less exciting with surplus decreased by about 60% as compared with that for last year which was par tly attributable to the sharp decrease in investment return broadly in similar por trait of the global investment markets and par tly to the budgeted increase in expenditure in preparing for the four-year structure of the curriculum reform to take effect from 2012. In preparing the financial statements, the Group has adopted cer tain new/revised Hong Kong Accounting Standards (‘HKAS’) and Hong Kong Financial Repor ting Standards (‘HKFRS’) (Collectively ‘HKFRSs’) issued by the Hong Kong Institute of Cer tified Public Accountants which are effective and relevant to the Group’s operation. The adoption of these new/revised accounting standards during the year did not result in substantial changes to the Group’s accounting policies. Results for the Year The Group’s consolidated results for the year ended June 30, 2008 are summarised as follows: 2008 2007 $ million $ million Income 6,076 6,525 Expenditure 5,518 5,079 Net Surplus for the year before 558 1,446 Share of Surplus/(Losses) of Associates and Jointly Controlled Entities Share of Surplus/(Losses) of 15 (5) Associates and Jointly Controlled Entities Net Surplus for the year after 573 1,441 Share of Surplus/(Losses) of Associates and Jointly Controlled Entities The consolidated income for the year 2007-08 dropped by $449 million, a decrease of 6.9 per cent when compared with that of the previous year. This was mainly attributable to the considerable reduction in interest and investment returns by $909 million.The effect of decrease was par tly complemented by the increase in donation of $262 million as compared with last year due to the introduction of the four th Government Matching Grant Scheme. The amount of block grant