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TRANSCRIPT
€I# CONTENTS
ZJj$R% .................................................................................................. 1 - 3
Treasurer's Report
gg$g$gm%fg ........................................................................................ 4 - 5
Independent Auditor's Report
s&J&zBs ............................................................................................ 6 - 7
Consolidated Income and Expenditure Statement
jiEf3J&s%s ............................................................................................. 8 - 9
University Income and Expenditure Statement
$$eBER@s ....................................................................................... 10 - 11
Consolidated Balance Sheet
j i @ g B g @ s .......................................................................................... 12 - 13
University Balance sheet
& .......................................................................................... 14 - 15
Consolidated Statement of Changes in Fund Balances
& ................................................................................... 16 - 17
University Statement of Changes in Fund Balances
& .......................................................................................... 18 - 19
Consolidated Cash Flow Statement
j$jB%sms ............................................................................................. 20 - 67
Notes to the Financial Statements
THE HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007
3BSS TREASURER'S REPORT
%&BB~R Operating Results for the Year
f l ~ ~ w # @ & , k s ~ k - s & ~ @ n After having achieved a record-high surplus of $802.2 802,200,000 ZBB BJE!?E%B %H2006107 million in the last financial year, the University &B BE R S @ ~ 4 8 7 , 6 0 O y 0 O 0 3 ~ ~ ~ P B continued to produce a handsome surplus of $487.6
million for 2006107 as a result of the UGC Matching Grant Schemes.
#&!!&A Consolidated Income
Consolidated income for the year was $2,721.1 million ($3,040.6 million in 2005106), comprising $1,647.7 million (60.6%) from government subventions, $537.6 million (19.8%) fiom tuition and program fees, $141.5 million (5.2%) fiom interest and investment income, $194.6 million (7.1%) from donations, $136.8 million (5.0%) from auxiliary services and other income of $62.9 million (2.3%). The decline in consolidated income in 2006107 was mainly attributable to the decrease in donations and related matching grants received under the third Matching Grant Scheme.
2 With the continuous expansion in self-financing sf1m@BR%%@Br$fia7k!$3m@g rBH* education programs and activities, additional revenue ~ 2 F 4 @ t ? l B b P 2 0 0 5 1 0 6 F & ~ , f i U ~ 1 i % was collected hlition and pro- fees. B a m r $ G , k e E E l R $ J , B k E m @ g B G
Investment and interest income has also increased due to a higher average bank interest rate than that of 2005106 and the growth in surplus cash balance.
kQE2006F2fl EJ%%E%ZBEH#@J&% Shortly after the successful completion of the second 11 (2005/06&B ' kb#~%TW700,000,00O Matching Grant Scheme in February 2006 (a total of ZWEBililbBRIRfflgi) ' *'lQEaf3' some $700 million of donations and related matching E ~ M ~ & ~ ~ T & 2 0 0 6 1 0 7 & B ; b a ~ 7 W ~ o o , o o o , o o o ~ ~ ~ ~ R ~ ~ E ~ ~ ~ & grants had been received for 2005/06), the University
secured further donations and related matching grants of some $300 million under the third Matching Grant Scheme for 2006/07.
~~~~ Consolidated Expenditure
~ ~ ~ ~ ~ ~ ~ ~ 2 , 2 3 7 y 6 ~ ~ y ~ ~ ~ ~ (2005/06FB Consolidated expenditure for the year was $2,237.6 232414l,goo,ooo 3 ) ' a * ' 1~659~ooo,ooo 3 million ($2,241.9 million in 2005/06), comprising
(74.2%)&@lR@fBgIQ , 114,6009OOO~(5.1%) 1,659 million (74.2%) for learning and research &BWR-1Bft%f 334,400,0003(14.9%)&~ ~g 83 , 129,600,000 z(5,8%) a ga a activities, $1 14.6 million (5.1%) for management and
E l 0 general expenditure, $334.4 million (14.9%) for premises and related expenses, and $129.6 million (5.8%) for other items.
~ ~ f i ~ ~ ~ ~ * ~ ~ ~ ~ ~ , ~~~~~~~ While the total expenditure was maintained at a steady
gfi7;# 9 )Ta@B@!$i# - ffgE!$i&#j# level, there was a decrease in salaries expense which SBBzBmmmfiB#O was offset by an increase in operating expenditwe for
learning and research, as well as student activities.
m % s s % N B H m B 3 a m - 3 B % a * 8 s A one-off voluntary redundancy (VR) payment was
2005/~ & m 5 8 % 3 ,Q made in 2005106 resulting in the unusually high level 2005/~ & B m Q @ iif' @j , Tfij gj -J of salaries expenditure in that year. While salaries 2006/07&BEl#&%m 9 BB53&32007&4H@ saving was achieved in 2006107 as a result of the ~ ! B ~ % R ~ ~ U % ~ H % B # O 2005106 VR Scheme, it was partly offset by an upward
cost of living salary adjustment made in line with that for the civil servants effective April 2007.
mmm#4b UGC-funded Activities
~%~$2Pkl%B%~1,611,500,0005C 9 f&BR# UGC grants accounted for $1,611.5 million or 97.8% Bb El97.8% , f3%%!iS&l!##&% 121 6,400,000 2 of government subventions. This included recurrent - - % @ # ~ ~ ~ ~ @ * block grant of $1,2 16.4 million; earmarked grants for ' J t m ~ ~ @ 3 E 2 7 9 9 0 0 0 ~ o o 0 ~ ' a*Es*WB housing, research, capital works and rates and ~ ~ 1 1 6 , 1 0 0 , 0 0 0 ~ 0 government rent r e h d s of $279.0 million; and extra
matching grants of $1 16.1 million.
!@ % @ # @ 3 R * B!$i R 8t ff!! rtk A % %J The recurrent block grant together with tuition fees and 17601,900,000 * Pkl @ Pkl @f @ % @ 5 other income totalled $1,601.9 million for the year, and 1,50392007000 ' J@ a @J 31 ' related expenditure amounted to $1,503.2 million. The 9 8 , 7 0 0 , 0 0 0 ~ ( 2 0 0 5 / 0 6 ~ ~ ~ ~ , ~ ~ ~ , ~ ~ ~ ~ ) ~ ~ ~ surplus of $98.7 million ($47.7 million in 2005/06) was E##BS-#fi%E%# R2007%6H308 , transferred to the General and Development Reserve in ~#~@%Jl,019,600,000 2 0 accordance with University Grants Committee's
guidelines. As at 30 June 2007, the reserve balance stood at $1,019.6 million.
@%dl3 Capital Projects
To facilitate the University's planned development, a number of capital projects are in the pipeline. New student halls and academic extensions will be constructed to cope with the anticipated increasing demand for on-campus residence and academic space as a result of the change in the tertiary education system to a 4-year UG-program. Other on-campus development projects include the Institute for Advanced Study (IAS) Building and Residences as well as the Lee Shau Kee Business Building. Across the border in the Mainland, the Fok Ying Tung Graduate School in Nansha and the HKUST IER (Industry- Education-Research) Building in Shenzhen are also underway.
Outlook
The capital projects for the development of the campus physical infrastructure in preparation for the 4-year UG-program in 2012 is part of the University Strategic Plan 2005-2020 to ensure our teaching and research goals are met. To m e r support the University ' s pursuit of excellence in teaching and research, an efficient and effective administration supported by a state-of-the-art information infrastructure is also very important. The University has been assessing commercial Enterprise Resources Planning (ERP) system packages as part of its Information System (IS) Strategy roll-out. The implementation of the strategy will enable the University to provide better and faster services to students and staff, and enhance the quality of management information for senior management's decision making.
These physical and information hhstructure developments are made possible by capital grants to be provided by UGC under the 4-year UG-program system. The University will also draw on its non-UGC resources as well as its UGC reserves to supplement the development. To facilitate the University to make continuous improvement on its internal resources allocation for recurrent grants to be received under the 4-year UG-program, a taskforce has been established recently to review and make recommendations on budgetary methodologies and models. The University will also continue to strengthen its fund-raising capability and uphold a prudent financial management approach to ensure a healthy financial position in its transition to the 4-year UG-program system and beyond.
SIGNED David Tak-Kei SUN Treasurer of the University 9 November 2007
?803SBl8Bt%f INDEPENDENT AUDITOR'S REPORT
Deloitte.
To : The Council of The Hong Kong University of Science and Technology
*%BlrSli6aE%&S%SR%6SiS%67Sibm We have audited the financial statements of The Hong ~ a ~ ~ A b ~ * g " l B 3 f ~ m f i ~ [ H ~ ~ ~ 1 1 Kong University of Science and Technology (the 'H"1m*'3sld ' 'P$*'3sld@'R27 "University") and its subsidiaries (collectively referred to 6H30E3 FiJS~BBBRSRAdBBBRS 7
~ ~ ~ 7 + ~ ~ 3 ~ & ~ @ ~ & @ 3 ~ s g ~ 4 k @ @ as the "Group") set out on pages 6 to 67, which comprise 3 R s - f$&2jg&~&$@~!!$lg&&~ij&sgJ4 the consolidated and University balance sheets as at 30 & 3 % June 2007, and the consolidated and University income ft!llSf%BB o and expenditure statements, the consolidated and
University statements of changes in f h d balances and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
i im!m%~~%f@~~ Council's responsibility for the fmancial statements
*Esl%BBBmB%talrSli6%%@~m@% The Council of the University is responsible for the
%%%SdN 7 @lBBSfiFm99jBSM preparation and the true and fair presentation of these ~ % % o G ~ f E @ % % % - ~ ~ & @ # R P financial statements in accordance with Hong Kong SBBSmfiT%S9JWS%dGBmb%B Financial Reporting Standards issued by the Hong Kong Ei 9 uE%s%sFGa&R#%s#~GlB 2sABBm%-B#*BHBB@Ba&
Institute of Certified Public Accountants (the "HKICPA").
% ; E E + m ~ R - F ~ ~ e a m e % # 3 0 This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the fmancial statements that are free fiom material misstatement, whether due to fiaud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. .
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Council, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the state of affairs of the University and of the Group as at 30 June 2007 and of the results of the University and the Group and the Group's cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards.
SIGNED Deloitte Touche Tohmatsu Certified Public Accountants HONG KONG 9 November 2007
eertft3Bs ~ ~ 0 0 7 ~ 6 H 3 0 ElkqB
CONSOLIDATED INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 30 JUNE 2007
lf!RE 2007 2006 Notes $'OOO $'OOO
JIkA Income
aR#m Government Subventions
bB-%@E#rn%B Tuition, Programmes and Other Fees
$!de\RBl%h Interest and Investment Income
%W#% Donations and Benefactions
#am% Auxiliary Services
##%A Other Income
m?* Expenditure
4RRH% Learning and Research
abRH% Instruction and Research
WBB Library
+*@HB# Central Computing Facilities
#rnaQmB Other Academic Services
BB3B Institutional Support
erram-msa Management and General
@+?BGM%J€J Premises and Related Expenses
B*E-maBmB Student and General Education Services
#ith%B Other Activities
WIITRBRme Surplus from operation for the year
CONSOLIDATED INCOME AND EXPENDITURE STATEMENT (Cont'd) FOR THE YEAR ENDED 30 JUNE 2007
IfGI% 2007 2006 Notes $'OOO $'OOO
%+&%H@#JMBrn@B%@ Share of Result of a Jointly Controlled Entity
~ 4 ~ ~ m 3 rng~ma Share of Result of an Associate
**BBBHaB Surplus for the year before transfers
: Transfers to :
RizB& Restricted Funds
ENB& Other Funds
A*rtftSS% ~Z!2007%6H30 ElkWt
UNIVERSITY INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 30 JUNE 2007
mik 2007 Notes 5'000
RA Income
istlfj*m Government Subventions
%a-%f2B#it!l@a Tuition, Programmes and Other Fees
;IrJ1BBftlrIkh Interest and Investment Income
fiWR% Donations and Benefactions
#am% Auxiliary S e ~ c e s
##ah Other Income
m3i Expenditure
bti?iBH% Learning and Research
SbRW% Instruction and Research
sf% Library
'+'*~RS# Central Computing Facilities
#it!lS*rnS Other Academic Services
@f3B Institutional Support
BB!B--&*% Management and General
@%BGIAS%M Premises and Related Expenses
**E--BSBrnS Student and General Education Services
##sm Other Activities
mriTIbma Surplus for the year before transfers
**rlst3%SCS) ~ S 2 0 0 7 ~ f l 3 0 E l k ~ ! ! 2
UNIVERSITY INCOME AND EXPENDITURE STATEMENT (Cont'd) FOR THE YEAR ENDED 30 JUNE 2007
le'% 2007 2006 Notes S'OOO $ ' 000
mas : Transfers to :
EiZBi% Restricted Funds
SiEB& Other Funds
R&BBBMS 2007q6H 30 El
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007
~~ 2007 2006 Notes $'OOO $'OOO
*%rnB% Non-Current Assets
B%EBQ Property and Equipment
@SHffBEIMBITIB Held-to-Maturity Financial Assets
q#&BMBPil& Available-for-Sale Financial Assets
RrnB2dB& Interest in an Associate
R&Pil&%#& Interest in a Joint Venture
ZffBGB Bank Deposits
amss Current Assets
aa Stocks
Accounts Receivable and Prepayments
@fi%ryiES& Bank and Cash
Current Liabilities
Accounts Payable and Accruals
~RSB*JBQ Provision of Staff Benefits
SBrlZt& Deferred Income
%rn*S#B Net Current Assets
Total Assets Less Current Liabilities
2007~6B30 El CONSOLIDATED BALANCE SHEET (Cont'd)
AS AT 30 JUNE 2007
Em 2007 2006 Notes $'OOO $'OOO
#BrnB@ Non-Current Liabilities
35t%HS@J@# Provision of Staff Benefits
IEVD NET ASSETS
liiIlBB#S& Deferred Capital Funds
RES@ Restricted Funds
S.ftfiS& Other Funds
s&Ha TOTAL FUNDS
~ s m 2 0 0 7 ~ 1 la9 H B ~ ~ ~ E ~ R S Approved by the Council on 9 November 2007
E#* BBB
*S8@ SIGNED
David T.K. SUN Treasurer of the University
E3.S *@is @B
SIGNED Paul C.W. CHU
President
E.8 BfkFP; MBBBB SIGNED
Philip S.P. WONG Director of Finance
*%ass Non-Current Assets
CSEi5tB Property and Equipment
fc*SSBrnS 2007%6)3 30 El
UNIVERSITY BALANCE SHEET AS AT 30 JUNE 2007
i$f% 2007 2006 Notes $'OOO $ ' 000
Held-to-Maturity Financial Assets
@JA~EHBBE Available-for-Sale Financial Assets
BBRrnBB4 Investment in an Associate
EBRMrn53 Investments in Subsidiaries
zme% Bank Deposits
%BSB Current Assets
el3 Stocks
E&@%EBflZ@ Accounts Receivable and Prepayments
@fi%aEs& Bank and Cash
Current Liabilities
EH%sEEaBm Accounts Payable and Accruals
aBtlbS&Ha*JBQ Provision of Staff Benefits
SBrtft& Deferred Income
BSlbSBSB Net Current Assets
*E#B#BBBerP Total Assets Less Current Liabilities
2 0 0 7 ~ 6 8 3 0 El UNIVERSITY BALANCE SHEET (Cont'd)
AS AT 30 JUNE 2007
m& 2007 2006 Notes $'OOO $'OOO
#BrnB@ Non-Current Liabilities
a@Ha*JBm Provision of Staff Benefits
IE#B NET ASSETS
HEiStfB5BS Deferred Capital Funds
RZS& Restricted Funds
SMS& Other Funds
S&MN TOTAL FUNDS
CONSOLIDATED STATEMENT OF CHANGES IN FUND BALANCES
SB&# a&
Deferred ESS& S S&#%l Capital Restricted Other Total Funds Funds Funds Funds $'OOO $'OOO $'OOO $'OOO
2005&7H 1 El Z%@ Balance as at 1 July 2005
*%EB@ Surplus for the year
%*PS@A Endowment Funds received
RRr#fflBHBBd*ftBXBfl Unrealised gain on Available-for-Sale Financial Assets
HBfflBHBB&XARBB$JRfflBR#@IEHBS@jt:RS Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure
R%&E&W@&m#aE#%M#BfC%E%# 122,899 Subventions and donations received and receivable during the year for Property and Equipment
~HUaR#%MSWCSE%#%%~BX%4;i~BJEE@X (139,537) PSlS Amount transferred to income and expenditure statement representing the depreciation charge on Property and Equipment funded by subventions and donations
Rlsm~%fA%zaaBStLB Change in share of statutory reserves of an Associate
tS#Q#BStL% Change in exchange reserve
S&MB Inter-fund transfer
2006&6830Elf &!i@ Balance as at 30 June 2006
CONSOLIDATED STATEMENT OF CHANGES -IN FUND BALANCES (Conttd)
2006%6830 Balance as at 30 June 2006
$+EBB Surplus for the year
B$S&lIlth Endowment Funds received
~a~maaam*aaxaa Unrealised gain on Available-for-Sale Financial Assets
SSSQ %&
Deferred IWZdE* Silk&& dbm Capital Restricted Other Total Funds Funds Funds Funds $'000 $lo00 $loo0 $lo00
2,836,579 1,344,415 1,778,950 5,959,944
WWBBHBI&X*IaB$JRmR@#OIBS881SlIltX%A 0 (25,956) 0 (25,956) Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure
HqfiERBIRWU@BM%W#BIBSBSB Subventions and donations received and receivable during the year for Property and Equipment
%Hl@BM%liW%SBS#H%fiBX%dfi#B3%3 %& Amount transferred to income and expenditure statement representing the depreciation charge on Property and Equipment funded by subventions and donations
HIBaslHf&%zI#2Lm Change in share of statutory reserves of an Associate
EWl#XLm Change in exchange reserve
&&&@881 Inter-fund transfer
200796830 EIX@% Balance as at 30 June 2007
A@s&sas UNIVERSITY STATEMENT OF CHANGES IN FUND BALANCES
SSSiBCBO
Deferred BSaE;$ ff@S& %&#%I Capital Restricted Other Total Funds Funds Funds Funds S'OOO S'OOO S'OOO $'OOO
2005q7H 1 EIX%l& Balance as at 1 July 2005
Surplus for the year
%*S&tA Endowment Funds received
RWEfflBHBIBHZ%XB@J Unrealised gain on Available-for-Sale Financial Assets
w B m ~ ~ B ~ ~ x * s a B a E ~ ~ e ~ ~ s E a P s ~ s ~ a r Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure
E&@E&B&#~#~~#%~#lCIOf~~B%% 122,899 Subventions and donations received and receivable during the year for Property and Equipment
&H#MER%RS~bSEBM&%R%t%dmdrilBE&X (139,537) Sard Amount transferred to income and expenditure statement representing the depreciation charge on Property and Equipment funded by subventions and donations
S&#B Inter-fund transfer
2006&6830 Hz%& Balance as at 30 June 2006
UNIVERSITY STATEMENT OF CHANGES IN FUND BALANCES (Cont'd)
ssaCIP Sjft
Deferred WZSjft #4U&k bE42BRl Capital Restricted Other Total Funds Funds Funds Funds S'OOO S'OOO S'OOO S'OOO
200686H 30 ElZi%f& Balance as at 30 June 2006
2wi%Eai# Surplus for the year
@ ~ P & J & h Endowment Funds received
RKrlr?k~BH%B&*saza@J Unrealised gain on Available-for-Sale Financial Assets
q#&b%BBbX*Ba%$JE&B@#@%B#as&3%% 0 (25,956) 0 (25,956) Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure
R%mEJ&BIJ&m#aBM%M#IICSB%# 93,199 0 0 93,199 Subventions and donations received and receivable during the year for Property and Equipment
Amount transferred to income and expenditure statement representing the depreciation charge on Property and Equipment funded by subventions and donations
S&#B Inter-fund transfer
2007%6H30 ElXi%f& Balance as at 30 June 2007
eeaMms %3Z20074F6830 EllEWB
CONSOLIDATED CASH n o w STATEMENT FOR THE YEAR ENDED 30 JITNE 2007
CT#j%3b Operating Activities
*&BSBB Net Surplus for the year
8% Depreciation
@@*# Bad debt written off
tflBBSXtCliStSfl Gain on disposal of Property and Equipment
flBBBB@A Interest and Investment Income
REHaElHf BSSNgCI 1 ( E l ) Amortisation of premium I (discount) on Held-to-Maturity Financial Assets
H{,!iaB2a 1 %HMSW@BSS Share of results of an Associate / a Jointly Controlled Entity
SBB%Pet#SS Transfer from Deferred Capital Fund
#*2S Operating
algs*erlm Increase in Stocks
IaEsXJFIiflsdf@erlm Increase in Accounts Receivable and Prepayments
ENssWE#Rmt*erlm Increase in Accounts Payable and Accruals
BPeanx mu 1 ( ~ 9 ) Increase 1 (Decrease) in Deferred Income
gklR%flB%tl9 Decrease in Provision of StafFBenefits
B 3 B S ~ R M A Net Cash from Operating Activities
eeBdmBs(m iBi&S2007~6fi30 Bk$E
CONSOLIDATED CASH FLOW STATEMENT (Cont'd) FOR THE YEAR ENDED 30 JUNE 2007
2007 2006 S'OOO S'OOO
BB%!m Investing Activities
rn$C1WS# Payment for purchase of Property and Equipment
wtmaaaxaRa%sBm Increase in Bank Deposits maturing after three months
ms%samH%%Bs Purchase of Held-to-maturity Financial Assets
EBRV#rnB%%BS2MbU Increase in Investments in Availablelfor-Sale Financial Assets
E~E9lBElL!if%lbE!?@2M~&h Proceeds from redemption of Held-to-Maturity Financial Assets
fflBC%Ws#taA Proceeds from disposal of Property and Equipment
f 1REl&h Interest and investment income received
Bi%MS&%tfl Net Cash Used in Investing Activities
aim Financing Activities
Bdra&%A Endowments received
m ~ ~ s ~ s w s a ~ u a a a a a ~ Subventions and donations received for purchase of Property and Equipment
I#%MS&(#tIf) 1 #A Net Cash from Financing Activities
S&WSAS&ZB#Ila Net Increase in Cash and Cash Equivalents
W;tl&Bt%AS& Cash and Cash Equivalents at the Beginning of the Year
B#SrnLbxBI Effect of Foreign Exchange Rate Changes
m?f l&Bt@AS& Cash and Cash Equivalents at the End of the Year
9;tfi&S2S&R8t$Al& Analysis of Cash and Cash Equivalents at the End of the Year
@e%5tdRs& Bank and Cash
#: Less
Rd+@9JB2@H@% Bank Deposits maturing after one year
RZBlHB9lN2BBB% Bank Deposits maturing after three months
WBSSlSJS 2007q6H30 El
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2007
SeH%RS.$%BS@%6fl30 Elk ~fiBk4@@2~f.B~H%RSo BM#%ASG#SBSB@rnHS BBBBR Ba#%BBa*J& o
1. PRINCIPAL ACTIVITIES
The principal activities of the University are offering programmes leading to the award of first degrees and postgraduate qualifications particularly in science, technology, engineering, management and business studies; and collaborating closely with government, business, industry as well as other higher education institutions to assist the economic and social development of Hong Kong. The principal activities and other particulars of the subsidiaries are set out in note 15.
The registered address and principal place of operation is Clear Water Bay, Hong Kong.
The financial statements are presented in Hong Kong dollars, which is the same as the functional currency of the University.
2. PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared on the historical cost basis except for available-for- sale financial assets which are measured at fair value. The financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). The principal accounting policies adopted are as follows:
2.1 Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the University and entities controlled by the University made up to 30 June each year. Control is achieved where the University has the power to govern the financial and operating policies of an entity so as to obtain benefits fiom its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income and expenditure statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All significant transactions and balances between group entity are eliminated on consolidation.
Investments in Subsidiaries
Investments in subsidiaries are included in the University's balance sheet at cost less any identified impairment loss.
Interest in an Associate
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
The results and assets and liabilities of an associate are incorporated in the consolidated financial statements using the equity method of accounting. Interest in an associate is carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associate, less any impairment loss.
Where a group entity transacts with an associate of the Group, unrealized profits or losses are eliminated to the extent of the Group's interest in the relevant associate, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognized.
Interest in a Joint Venture
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.
A joint venture arrangement that involves the establishment of a separate entity in which each venturer has an interest are referred to as a jointly controlled entity. The results and assets and liabilities of a jointly controlled entity are incorporated in the consolidated financial statements using the equity method of accounting. Interest in a jointly controlled entity is carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the profit or loss and of changes in equity of the jointly controlled entity, less any impairment loss.
Where the Group transacts with its jointly controlled entity, unrealised profits or losses are eliminated to the extent of the Group's interest in the jointly controlled entity, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognized.
2.5 Property and Equipment
Property and equipment, other than construction in progress, are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is provided to write off the cost of property and equipment, other than construction in progress, over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method.
Construction in progress is stated at cost less any identified impairment loss and is not depreciated until completion of construction. Cost of completed construction works is transferred to appropriate categories of property, plant and equipment.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise ftom the continued use of the asset. The gain or loss arising fiom disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income and expenditure statement.
E~BR#@RBZM%~H&B~R Expenses on property and equipment funded by ~QY!JBB$?EIH 7 ifii#Blff9&%@ government subventions and s~ecific donations - %A%BSQS&~O%WGI~S are capitalised and credited to Deferred Capital R%Q2@BBMrn&%R@*&% @%#S&@SR%%S*o Funds. Each year, an amount equal to the
depreciation charges for the respective property and equipment is transferred fiom Deferred Capital Funds and credited to the income and expenditure statement.
2.6 & ~ I B 2.6 Financial Instruments
B%~&B&RIRe&@*2BR %@Y!!!!M~B@R%M~BBBH Financial assets and financial liabilities are
%~%@B%B%BBEBBBBoB recognised on the Group's balance sheet when the BB@mmBfi@8a%@H@@M Group becomes a party to the contractual &fifE~fi%fOR~gb%fiH% provisions of the instrument. Financial assets and B&mHBRBrnB@2aRMBB $HiE%R#ABBBS2&fiBbE
financial liabilities are initially measured at fair
BBBHrn&&B+aR(BM%BM value. Transaction costs that are directly
532) 0 attributable to the acquisition or issue of financial .. -,
assets and financial liabilities are added to or deducted fiom the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
2.6 (a) ERMBWEfJIIfi4IHRd 2.6 (a) Accounts receivable and amounts due from subsidiaries
Accounts receivable and amounts due from subsidiaries are measured at initial recognition at fair value, and are subsequently measured at mortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income and expenditure statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
2.6 @) wf 2.6 (b) Investments
BBm~B&fiBmJ=BBRa%a Investments are recognised and derecognised on a
&$4E@2%HSb@%RMR@1 trade date basis where the purchase or sale of an 7J%H~%%@$%~&22R~~ investment is under a contract which terms ZT&&Rk o require delivery of the investment within the
timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs.
At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in income and expenditure statement when there is objective evidence that the asset is impaired, and is measured as the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the recognition of the impairment loss, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.
Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for-sale, and are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, gains and losses arising fiom changes in fair value are included in income and expenditure statement for the period. For available-for-sale investments, gains and losses arising £rom changes in fair value are recognised directly in fund balances, until the security is disposed of or is determined to be impaired, at which time the cumulative gains or losses previously recognised in f h d balances are included in the income and expenditure statement for the period.
For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in income and expenditure statement when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not be reversed in subsequent periods.
Impairment losses recognised in income and expenditure statement for equity investments classified as available-for-sale are not subsequently reversed through income and expenditure statement. Impairment losses recognised in income and expenditure statement for debt instruments classified as available-for- sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
2.6 (c) B+J@~BBMRF~J . )#gg#~g~@ 2.6 (c) Accounts payable and accruals, deferred MmmfC%d income and amounts due to subsidiaries
[email protected]@%&rn Accounts payable and accruals, deferred income
BfidERR@@@BfifiB*B7 and amounts due to subsidiaries are initially H B @ ~ R I ~ ~ $ J ~ % 8 ? $ ~ E # # measured at fair value, and are subsequently B~F"@ o measured at mortised cost, using the effective
interest rate method.
2.6 (dl $miZasHS& 2.6 (d) Cash and cash equivalents
B&&%Hs&aBeRsfi2*s Cash and cash equivalents comprise cash on hand
@B&B~B.f~H%~@lfli%MTL% and demand deposits with an original maturity of Bfiili@$J$2%rnBR three months or less at prevailing market rate.
2.6 (e) Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Stocks
Stocks held for resale in respect of self-financing operations are valued at the lower of cost and net realisable value. Cost is calculated using the weighted average method.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.
Income
Government subventions and designated donations are recognised as income over the periods necessary to match them with the related expenditure. Any Recurrent Block Grant in excess of related expenditure is recognised as income and transferred to the General and Development Reserve Fund in accordance with the prevailing University Grant Committee ' s guidelines.
Subventions and donations for depreciable property and equipment are recognised as Deferred Capital Funds and are mortised over the estimated useful lives of the related assets in accordance with the policies as stated in notes 2.5 and 11.
General donations are recognised as income when the amounts have been received or are receivable fiom the donors.
Tuition fees, auxiliary services and rental income are recognised when services are provided.
Interest income fiom a financial asset is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable, which is the rate that exactly discount the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Endowments are credited to restricted funds in the year in which they are received. Income generated fiom endowments are recognised in the income and expenditure statement. Endowments are transferred fiom restricted funds and credited to the income and expenditure statement when the condition for maintenance of the principal amounts has expired or been waived by donors.
Income fiom contract research is recognized on a percentage of completion basis when the fee notes are issued.
2.10 Operating Leases
2.10 (a) The Group as lessor
Rental income fiom operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incmed in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
2.10 (b) The Group as lessee
Rentals payable under operating leases are charged to income and expenditure statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
Retirement Benefits Costs
Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered service entitling them to the contribution.
Foreign Currencies
The individual financial statements of each member of the Group are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Hong Kong Dollars, which is the functional currency of the University and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income and expenditure statement for the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income and expenditure statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in fund balances. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in fund balances.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group's operations outside Hong Kong are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognized as a separate component of fund balances (the translation reserve). Such exchange differences are recognized in the income and expenditure statement in the period in which the foreign operation is disposed of.
2-13 mHfj;s&in'mY'd*sMIIs*M["ssHaIs*ntl] APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARD ("HKFRSsbt)
In the current year, the Group has applied, for the first time, a number of new standards, amendments and interpretations ("new HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") that are effective for the Group's financial year beginning 1 July 2006. The adoption of the new HKFRSs had no material effect on how the Group's results and financial position for the current or prior accounting years have been prepared and presented. Accordingly, no prior period adjustment has been required.
The Group has not early applied the following new and revised standards, amendments and interpretations that have been issued by the Hong Kong Institute of Certified Public Accountants, but are not yet effective. The Group anticipates that the application of these new and revised standards, amendments and interpretations will have no material impact on the financial position of the Group:
B S @ 8 5 M % l S (Ern HKAS 1 (Amendment)
%B@#VM%23S ( I m HKAS 23 (Revised)
B*BS1 Capital disclosures'
~ffa*2 Borrowing
PBIW : as1 Financial instruments: ~isclosures'
81B12 Operating segments2
+ i w m e ~ % 9 6 t % ~ w ~ a r z ~ e ) - amo ~BH%#%RS@~ HK(IFRIC) - INTlO Interim Financial Reporting and impairment3
B%($RH%B%@MBRSR@) - S R l l f BHBB%@Rl%2# - %HB@@~ft.fft%B~ HK(IFRIC) - INT 11 HKFRS 2 - Group and Treasury Share rans sac ti on$
%%($li6f%%B%%HJBRBB@) - $2812 P % I B 1 X 1 5 HK(IFRIC) - INT 12 Service Concession ~rran~ements'
%B(HIBa%%%%*MB~SBC) - B e 1 3 % p s # B # a 6 HK(IFRIC) - INT 13 Customer Loyalty ~rogramn~es~
+ B ~ ~ ( ~ ~ B ~ M B B S ~ & M B R ~ I ~ ) - ~ ~ 1 4 SB@#~$!M%~~S - Z~KS'JBE~RH - SBRS?ZZ%B~~~ZB IfiS
HK(IFRIC) - INT 14 HKAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding
Requirements and their Interaction5
R2007+181 E lSN&MEf FBMW&B Effetive for accounting periods beginning on or after January 1,2007.
* R2009FlH 1 ElSN&AI2+BMW&B Effective for accounting periods beginning on or after January 1,2009.
~ 2 0 0 6 + 1 1 ~ 1 a s H ~ n M x & B t 9 s m & Effetive for accounting periods beginning on or after November 1,2006.
.I R2007&3H 1 E l 1 N ~ A @ X $ B B I % B Effective for accounting periods beginning on or after March 1,2007.
R2008&1H 1 E ISN&lEX~BMI&B Effective for accounting periods beginning on or after January 1,2008.
R2008+7H 1 E l S N & A l 2 + d M W & B Effetive for accounting periods beginning on or after July 1,2008.
3- aR#a GOVERNMENT SUBVENTIONS
Et3 Consolidated
@Be#@ Subventions fiom University Grants Committee (UGC)
!!I!!S@RB% m*B% Recurrent Block Grant 1 Supplementary Grants
RZ@% Earmarked Grants
;raf% Research
SB@$J Housing Benefits
sft!l Others
%Bg@ERjFfi. Rates and Government Rent Refunds
BSB%&@%&@ - ~ U B & ~ ~ 1 ~ 2 ~ 3 @ ~ Capital Grants and Alterations, Additions & Improvements Block Allocation
E%B% Matching Grants
@RGRSlB% Grants fiom Government Agencies
3- igtR#B(B) GOVERNMENT SUBVENTIONS (Cont'd)
AS University
alcum Subventions fiom University Grants Committee (UGC)
B%t%B% 1 #uB% Recurrent Block Grant / Supplementary Grants
BZR% Earmarked Grants
W% Research
BBB@J Housing Benefits
sf@ Others
BBsMRaa Rates and Government Rent Refunds
BBB%R@%BB-;baBRRB71@2~SB% Capital Grants and Alterations, Additions & Improvements Block Allocation
E%R% Matching Grants
i!B@+ilB#B% Grants fiom Government Agencies
4. - %SBSrn@B TUITION, PROGRAMMES AND OTHER FEES
Be Consolidated
8lClrn%S UGC-Funded Programmes
9 B Tuition Fees
A9msBgMlIPB Application and Other Fees
*SBCBrn%S Non UGC-Funded Programmes
8B@BrnSS UGC-Funded Programmes
9B Tuition Fees
h9~1ESM@B Application and Other Fees
*8BClrn%S Non UGC-Funded Programmes
A* University
5- @JB&BSJRA INTEREST AND INVESTMENT INCOME
ee Consolidated
#J4@.@ h Interest Income
NEi.flf5H%BE2BRBZB#JBBB&h Realized gains and investment income on Available-for-Sale Financial Assets
@RMB&32Ble.@h Dividend received fiom an Associate
$J,@.@ h Interest Income
N#tltBHBBS2ESBB$JBBB@h Realized gains and investment income on Available-for-Sale Financial Assets
~R@Be32E4e.@h Dividend received from an Associate
A49 University
6. %B#% DONATIONS AND BENEFACTIONS
S&&A* Consolidated and Universitv
B3aH Capital Projects
%9&&@9& Scholarships and Bursaries
smztwzga(tws) Learning and Research Activities (Note)
Note :
SCRd8#f HSS%F'IbBSE%PP&HS#2lZOWZ(2W : %#433695Z)#.iR 0 I#&&% 9 S%S I@BSd%B&Bf &I#36 l93,859Z(2W : ##I4 63Z395f ) I .A4RB#S###Ip~Lb 9 3 4 W d E I &Y&?&fB@&& ; RA?# E?Rd9$Sb26428,723Z(2W : %#24 026032Z) 7 A Q # ~ B i o ~ o 1 o g y ~esa i rh Copzition Limited(BRc)~#~~~~H%X~~ B#.diE#AQ2@A o
The amount included a donation of $217,000 (2006: $943.695) JLom the Hong Kong Jockey Club Chananties Trust. Apart fiom this, the Hong Kong Jockey Club Charities Trust donated $36,193,859 (2006: $14,637,395) for construction of the University's Enterprise Center, which amount was recognised in d e f i e d income; and a total sum of $26,428,723 (2006: $20,026,032) through the University to the Biotechnology Research Corporation Limited (BRC) for conduction of biotechnology research activities, which amount was not recognised as income of the University.
7- BClimms AUXILIARY SERVICES
2007 2006 $'OOO $ ' 000
Be Consolidated
S%@% Residence Halls
BBBB Catering Services
E&a% Souvenir Shop
B&@A Rental Income
3!kBAB#2B& Rental Contribution from Staff
BB Others
~ * % * Residence Halls
BBB% Catering Services
,%&la% Souvenir Shop
#H&Jl?lA Rental Income
3!kBRBB2B& Rental Contribution from Staff
BB Others
A* University
50,937 50,117
8- S.ttfr#c;r, OTHER INCOME
ee Consolidated
R%em Contract Research
S M Others
HRem Contract Research
sffh Others
A!@ University
9,064 15,500
9- m3i EXPENDITURE
8#2&H% Learning and Research
asEH% Instruction and Research
DIP1 Library
~RIBBLI'$# Central Computing Facilities
#iI!eSM% Other Academic Services
f.\% Subtotal
es3a Institutional Support
B@R--#S% Management and General
B-$EftMIR Premises and Related Expenses
e w i - m t a M B Student and General Education Services
#m!ab Other Activities
fJ\% Subtotal
2007W&BM3 Total Expenditure for Year 2007
2006~ES!W3i Total Expenditure for Year 2006
1Rzsl2&aa Salaries and
Benefits $'OOO
SB3ctr Operating Expenses
$ ' 000
ss Depreciation
$'OOO
gre Consolidated
2007 a* Total $'OOO
2006 a* Total $'OOO
tHEtfl~%S%8HQH+B;I;bI#&3IJBiXflX#R~l16,300,000Z(2006 : 118,800,000Z) Included in Salaries and Benefits was a total sum of $1 16.3 million (2006: $1 18.8 million) representing the Group's contributions towards retirement benefits schemes for the respective accounting period.
9. rnS(#) EXPENDITURE (Cont'd)
m~taa ~l~~~ 2007 2006 Salaries and Operating %i% #tit mf
Benefits Expenses Depreciation Total Total $ ' 000 S'OOO S'OOO $'OOO S'OOO
k8 University
3#mF% Learning and Research
@@RW% Instruction and Research
la%@ Library
'i!'*SB%# Central Computing Facilities
#M89B% Other Academic Services
f j m Subtotal
@%3%l Institutional Support
BBRd19StT% Management and General
@*RGrag%rn Premises and Related Expenses
@!kR--B%B1161% Student and General Education Services
RL%@ Other Activities
fJ\# Subtotal
2 0 0 7 ~ B B M 3 Total Expenditure for Year 2007
2 0 0 6 ~ E @ H 3 Total Expenditure for Year 2006
9-1 BJRAHI REMUNERATION OF HIGHER PAID STAFF
a@ABI@aRHFaNm: The remunerations of higher paid staff were within the following bands
Number of Employees 2007 2006
&&Wkb Consolidated and University
35 31 14 12 15 14 9 8 6 2 4 1 1 0 0 1 1 1 1 0 0 1 1 0
9.2 Bs3mB# ANALYSIS OF OPERATING EXPENSES
2007 2006 $lo00 $'OOO
&* Consolidated
wmH% Learning and Research
-B#&S 1 a9RRwBM 1 %# General Office I Teaching and Research Expenses I Equipment
m+flElssWflrJPJ Library Books and Periodicals
ff%%rnb& Postgraduate Studentships
Management and General
~ 4 e c t @ l & Auditors' Remuneration
MBSM Financial Charges
-#Him General Insurance
-B#&S%M 1 B# General Ofice Expenses I Equipment
%BBM Legal Fee
9.2 BB%rnB#(rn ANALYSIS OF OPERATING EXPENSES (Cont'd)
2007 2006 S'OOO $ ' 000
m Consolidated
B*E~BROBW Premises and Related Expenses
-B#&SB83 I%# General Office Expenses / Equipment
@%#a Property Insurance
Bllml!!a Rates and Government Rent
E@RRB 1 fJe.t!!IB Repair and Maintenance / Minor Works
&%S%-SSRR%3ffl Utilities, Cleaning and Security Services Expenses
4LE-B#4?8MZ!8 Student and General Education Services
-B#&SRM 1 B# General Office Expenses / Equipment
b*sBEgiFFR@ Medical and Dental Care for Students
@* Residence Halls
%4!%3&&6S Scholarships and Bursary
b*%@ Student Activities
Riel3%3ib Other Activities
9-2 Bf[ii3f453gi(Q ANALYSIS OF OPERATING EXPENSES (Cont'd)
A@ University
Learning and Research
-B#&S 1 $vfwm$fBM 1 233,276 General Office / Teaching and Research Expenses / Equipment n MS%f SRBPJ Library Books and Periodicals
laf%*MS& Postgraduate Studentships
~ E - l a t F ~ Management and General
B#!m!in& Auditors' Remuneration
WBBar Financial Charges
-BR@ General Insurance
-B#&SSH13@ General Office Expenses / Equipment
%#BM Legal Fee
9.2 BB3BIB#f(#) ANALYSIS OF OPERATING EXPENSES (Cont'd)
S'OOO 5'000
kb University
B*ERIROIM Premises and Related Expenses
-R#2SBM / %#a General Office Expenses / Equipment
B%RR Property Insurance
SrnR%% Rates and Government Rent
BBRRB 1 fJ\@I@ Repair and Maintenance / Minor Works
~%s%-ssER%3a Utilities, Cleaning and Security Services Expenses
**E-aZtftBma Student and General Education Services
-B#%SBM / %#a General Office Expenses / Equipment
b*B@R%HRB Medical and Dental Care for Students
i'Bs Residence Halls
%@&Rltbb& Scholarships and Bursary
4*%@ Student Activities
~ft!lSrn Other Activities
TRANSFERS TO RESTRICTED 1 OTHER FUNDS * & ~ ~ @ A ~ ~ ~ B J ~ ~ & R Z M @ I ~ ~ - B W B ~ ~ ~ ; ~ ~ ~ B ~ B A R Z S & ~ M B ~ R ~ B A ~ M ~ & O Income and expenditure for the year are categorised between specific use and general use. Any surplus &om the former category is transferred to Restricted Funds and the latter to Other Funds.
Restricted Other Restricted Other Funds Funds Funds Funds S'OOO S'OOO S'OOO S'OOO
#!e Consolidated
Jim Income
im3sBb Government Subventions
9R*%QB#fl!l@l Tuition, Programmes and Other Fees
jBJQIltBB@A Interest and Investment Income
*%#Hikt Donations and Benefactions
Sam% Auxiliary Services
#M@A Other Income
mx Expenditure
@#iEH% Learning and Research
@@EH% Instruction and Research
mtllll Library
'+'*BllsllSt# Central Computing Facilities
#Magma Other Academic Services
@BXS Institutional Support
eP%E--WBSI Management and General
@%BQBBeH Premises and Related Expenses
9*B--WBaa@B Student and General Education Services
#fl!l%lb Other Activities
* B t C I m Surplus from operation for the year
HGIB5i3 1 BRB@bEBRa Share of Results of an Associate 1 a Jointly Controlled Entity
emJmE2aB Surplus for the year available for transfers
TRANSFERS TO RESTRICTED / OTHER FUNDS (Cont'd)
Restricted Other Restricted Other Funds Funds Funds Funds $'OOO S'OOO S'OOO S'OOO
A+ University
JEA Income
iLmf%L Government Subventions
@R-%.iSE#MBB Tuition, Programmes and Other Fees
fl.'aEEB%A Interest and Investment Income
Donations and Benefactions
@La% Auxiliary Services
#@@?A Other Income
m* Expenditure
@ma% Learning and Research
%@EM% Instruction and Research
HB1IEI Library
cP*BBS# Central Computing Facilities
#M%brn% Other Academic Services
@B3@ Institutional Support
BBW-BFI Management and General
@%BGMPW Premises and Related Expenses
s&E--asBm% Student and General Education Services
Other Activities
* & E ~ U ~ 4 L Surplus for the year available for transfers
11. rnSBiig# PROPERTY AND EQUIPMENT
m!Il (8tRBaIil #* Construction Fixtures and a#
Buildings in progress equipment Total S'OOO S'OOO S'OOO $'OOO
le Consolidated
mb COST
2005F78 1 E l f %@ 4,268,115 15,066 1,661,997 5,945,178
Balance as at 1 July 2005
SF3 1,337 76,114 50,736 128,187 Additions
%#%a o o 47 47 Exchange translation difference
t t l f I M 3 R 0 0 (74,030) (74,030) Disposals /Written Off
2006&6830Elf9@ 4,269,452 91,180 1,638,750 5,999,382
Balance as at 30 June 2006
BE7 2,920 38,327 64,038 105,285 Additions
el1 125,567 (125,567) 0 0 Transfen
%#%a 0 0 112 112
Exchange translation difference
m f l a # 0 0 (84,478) (84,478) Disposals / Written Off
2007-8 30 Elf9B 4,397,939 3,940 1,618,422 6,020,301
Balance as at 30 June 2007
m DEPRECIATION
2005q78 1 E l f 1,032,490 0 1,570,121 2,602,611 Balance as at 1 July 2005
*qlm)8f gs 87,173 0 68,403 155,576 Provided for the year
%#fa 0 0 2 2
Exchange translation difference
b f 1 M# 0 0 (73,836) (73,836) Disposals I Written Off
2006&683OEIfP@ 1,119,663 0 1,564,690 2,684,353
Balance as at 30 June 2006
*&b3P;Sf 8s 88,134 0 54,764 142,898 Provided for the year
%#%%! 0 0 14 14
Exchange translation difference
t t l f 1 M# 0 0 (84,428) (84,428) Disposals / Written Off
2007%830Elf %@ 1,207,797 0 1,535,040 2,742,837
Balance as at 30 June 2007
smm NET BOOK VALUES
2007W830E l f %k@ 3,190,142 3,940 83,382 3,277,464
Balance as at 30 June 2007 - - 2006&68 30 El f 9 @ 3,149,789 91,180 74,060 3,3 15,029
Balance as at 30 June 2006
HkfBSBS#dHBdl&AMTfl&t'ff.REB: The above items of property and equipment are depreciated on straight-line basis at the following rates per atmum:
#? Buildings
IWRBBft Fixtwe.s and equipment
Q q 2 % 2% per Bnnum
@4520% - 25 % 20% - 25% per annum
11. BSRist.tliO<@) PROPERTY AND EQUIPMENT (Cont'd)
am3H BRBtaiU #$ Construction Fixtures and a#
Buildings in progress equipment Total 5'000 S'OOO S'OOO S'OOO
A+ University
a* COST
2005F78 1 El f%@ 4,268,115 15,066 1,653,374 5,936,555 Balance as at 1 July 2005
%f 1,337 76,114 49,715 127,166 Additions
ffl%l#% 0 0 (74,030) (74,030) Disposals /Written Off
2006q6R30 Elkd%@ 4,269,452 91,180 1,629,059 5,989,691 Balance as at 30 June 2006
%if 2,920 38,327 58,920 100,167 Additions
#a 125,567 (125,567) 0 0 Transfers
f f l B l # l 0 o (84,478) (84,478) Disposals / Written Off
2007%6fl30 E l f St% 4,397,939 3,940 1,603,501 6,005,380 Balance as at 30 June 2007
@a DEPRECIATION
2005q78 1 E l f %I% 1,032,490 0 1,566,673 2,599,163 Balance as at 1 July 2005
$lr&m?3t@% 87,173 0 66,569 153,742 Provided for the year
file3 1 a% 0 0 (73,836) (73,836) Disposals / Written Off
2006q6J330 E l t % B 1,119,663 0 1,559,406 2,679,069 Balance as at 30 June 2006
$&B#f-Wt@% 88,134 0 52,509 140,643 Provided for the year
f f l B / i # 0 0 (84,428) (84,428) Disposals / Written Off
2007q6fl30 EliZ%l% 1,207,797 0 1,527,487 2,735,284 Balance as at 30 June 2007
]$fiiIiM NET BOOK VALUES
2007&6H 30 E l f %@ 3,190,142 3,940 76,014 3,270,096 Balance as at 30 June 2007
2006q6fl30 Elz&!i@ 3,149,789 91,180 69,653 3,310,622 Balance as at 30 June 2006
4 - k$LL%%H?§f B60&#i;5fW 9 EB@Rif&%P;il&f f f l 9 %fgg58& 9 E204796R30Eld The University campus located in Sai Kung of approximately 60 hectares was granted by the Government at a nominal rent for 58 years through 30 June 2047.
HkfBtB3#@H&E%&BMTH9*'ItB8a: The above items of property and equipment are depreciated on straight-line basis at the following rates per mum:
84% @&2% Buildings 2% per annum
B?ElEB# Q+20% - 25 % Fixtures and equipment 20% - 25% per annum
12. JwaIE FINANCIAL ASSETS
ffzafgg HaBBs Held-to-Maturity Financial Assets
W R m B M B B s Available-for-Sale Financial Assets
# k s t i r n B R t f &tcE(lw%l) Unlisted, at fair value (Note 1)
9Fk$MSld2R*(W%2) Unlisted, at cost (Note 2)
k s t i H B l B 2 s t i E Listed, at market value
eg Consolidated
NS : Notes :
(4 #~$V#HBW%SE~&~BAS%%R$USL&IW%BIBWO The unlisted available-fr-sale financial assets at fair value were determined by reference to bid prices quoted in active markets or by fund managers.
The unlisted available-for-sale fiMncia1 assets at cost represents investment in an unlisted equity security issued by a private entity. It is m e m e d at cost less impairment at each balance sheet date. The range of reasonable fair value of the asset is quite wide. Management of the Group is of the opinion that its fair value cannot be measured reliably.
%St University
%Earn HMBBB Held-to-Maturity Financial Assets
w t w i j a a a B d ( m s ) Available-for-Sale Financial Assets (Note)
%ks t iMBBB2&fiE Unlisted, at fair value
k $ a B B & X % E 16,670 8,225 Listed, at market value
969,257 855,901
N# : Note :
R4SBk#8~Sa62$W#SIP~AB#rtBHSSb~2~8IF~tB@I& oS&a&-RBSW#NX#B*BRIR@ ##&a 0 Badl&S7..BCHB@B 9 R4SI8d#I&BXB#fiBLSCMflBBBH~&B2 9 ZdR#-$##Z? NEBS H&ZS~WZ.#likHBRI The University holds, prima focie, a partial interest in Hong Kong R&l Centre for Logistics and Supply Chain Management Enabling Technologies Limited ("LSCM'?, a company incorporated in Hong Kong and limited by guarantee and not having a share capital. However, p a n t to the Memorandum and Articles ofAssociation of LSCM the University has no control or signifcant influence over the operating and financial policies of LSCM and has no entitlement to share in its profits and assets. T h e r e , LSCM is classifed as an unlisted available-for-sale financial asset.
The University holds, prima facie, 100% interest in Nano and Advanced Materials Institute Limited ("NAMI'I), a company incorporated in Hong Kong and limited by guarantee and not having a share capital. However, pursuant to the Memorandum and Articles of Association of NAM, the University has no control over the operating andfinancial policies of NAM and has no entitlement to share in its prof6 and assets. Therefore, NAMI is classijied as an unlisted available-for-sale financial asset.
13. RmB&qrna INTEREST IN AN ASSOCIATE
$k*%SE*E Unlisted shares, at cost
H4AJIkBBBfl , %#B#UbEQR.B Share of post-acquisition profits, reserves and net of dividends received
%#%BE Share of net assets
$k*fftlR*I Unlisted shares, at cost
2007 2006 3'000 3'000
e.% Consolidated
9,430 9,430
A+ University
9,430 9,430
m 3W BWm 1 Proportion of
%#Sf amah5 Nominal Value of Form of Place of Incorporation 1 Issued Capital
8M!Mkq Business Principal Place Directly Held by Class of 39%!im Associate Structure of Operation the University Shares Held Principal Aciivity
PKU-HKUST Limited People's Republic of Shenzhen-Hong Liability China Kong Institution Company
Capital To foster the development contribution of high technologies in
Shenzhen and to cultivate highquality human resources
2007 2006 S'OOO S'000
T*@9J%lSfi32Hf l N # S : The summarised financial information in respect of an Associate is set out below:
#BE Total assets
BE3R Total liabilities
BE%l Net assets
%Ml4Ald&3Xll$St Group's share of net assets of the associate
B%@! Turnover
$+Baa Profit for the year
%H+&l&rnBfi33# Group's share of results of the associate for the year
14. BPes*sma INTEREST IN A JOINT VENTURE
Be Consolidated
#Warn= Jointly controlled entity
#k*BB@*#i Unlisted shares, at cost
%Bllkm~la Share of post-acquisition profits
%&SPPS Share of net assets
ssi%rng Form of
# W % f l ~ Business Name of Entity Structure
*E%Nk%SSB7af w+e# %%GRfi3 Zhejiang Advanced Sino-foreign Manufacturing joint venture Institute of HKUST Co. Ltd. ("ZAMI")
Bum! 1 mlBtm 4813!Ha Proportion of j&mHrj&
Country of Nominal Value AM Incorporation I jf$#m of Issued Percentage of mBs
and Class of Capital Held by Voting Power Nature of Operation Shares Held the Group of the Board Business
People's Capital Republic of contribution
China
Promotion of manufacturing research
a. The Group holds 51% of the share capital of ZAMI and has appointed 3 out of 5 directors in the Board representing 60% of voting power of the Board However, under the memorandum and articles and shareholders' agreement of ZAMI, all significant events including financial and operating policies must be mutually agreed by the Group and the other significant shareholder. Therefore, ZAMI is classified as a jointly controlled entity of the Group.
15- aBRmB&a INVESTMENTS IN SUBSIDIARZES
A 4 University
RkslifftB&*B Unlisted shares, at cost
#Wrn I us Place / Country
WMQstl of Subsidiaries Incorporation
BBNBk3#~SB3RGRfi3 73% HKUST College of Lifelong Learning Hong Kong Limited
BBHk8!@;FSR23 HKUST Properties Limited
B % Hong Kong
Hong Kong University of Science and Hong Kong Technology R and D Corporation Limited (,,,C")
RM73%Hkff%ASGRfi4 HKUST R and D Corporation (Guangzhou) Limited
%Nkff%AI(R?I)GRfi3 HKUST R and D Corporation (Shenzhen) Limited
RMsli73%Nkt%%ff%R Guangzhou HKUST Fok Ying Tung Research Institute
'+ShE#+u$ People's
Republic of China
$VAW#~$ People's
Republic of China
'+SAW#aH People's
Republic of China
SEiRrn Proportion of
Nomind Value of Issued I Registered Capital
Held by the University
BWw m W w Direct Indirect
msm Principal Activity
W1WIIBHBZdll8 Conducting educational courses and programs
+%@J Dormant
@ k @ 6 l B % d H & G l S b f l S B B#ikBESBB To engage in developing scientific and technical innovations produced by university research projects into commercial ventures
s R B % B m S m a Provision of research and development services
8#B%Bm48[8% Provision of research and development services
R#B%BWSIIB1B Provision of research and development services
16. STOCKS
E&a"a%2BB Stocks held by Souvenir Shop
SeRA* Consolidated and University
RqB%I#3m2GR&%b383,611Z (2006q : %b329,634Z) o
The amount of stocks recognised as an expense during the year was HK$383,611 (2006: HK$329,634).
17. mJtk@aEaHaa ACCOUNTS RECEIVABLE AND PREPAYMENTS
2007 2006 $'OOO $'OOO
ee Consolidated
-lFlifl%SE@S Prepayments and Deposits
3%BBEfl%@ Amount due from UGC
E@E% Accounts Receivable
-lFlifl%SE@& Prepayments and Deposits
aBeEH%a Amount due from UGC
E@@% Accounts Receivable
A 3 University
13,268 14,361
E@E%R%&ttfM@a3m%Bo Accounts receivable are repayable on demand.
la* @fiRa&s& BANK AND CASH
2007 2006 S'OOO S'OOO
s3& Consolidated
w ~ a % Bank Deposits
RZQH ikJ3JirJfg;J Maturing within three months
R=QH&3JJPI Maturing after three months
$?-+@am Maturing after one year
Xfl!@!fiBrfZ&&B Other Bank and Cash Balances
5)tim-F : Analysis as follows:
3Jrn l3BBd+2sirJfg;Je% Bank Deposits with maturity after one year shown under noncurrent assets
@fi%@B%& Bank and Cash
@fie% Bank Deposits
RZQH ikl9JirJfg;J Maturing within three months
RZtHH B3JirJfg;J Maturing after three months
R-&B3JirJfg;J Maturing after one year
#ff!4WfiB%&%f% Other Bank and Cash Balances
University
53mIl-F : Analysis as follows:
nnma-+aznas Bank Deposits with maturity after one year shown under non-current assets
@fi%ORdBS& Bank and Cash
2,520,5 13 2,065,773
#%@tTW%&S&.$%ESSBikB%f 3% R2007%6830 El RS%B%%3(2006 : BG) Other bank and cash balances included cheques issued but not yet presented for payment. There was no physical overdraft at 30 June 2007 (2006: nil).
19. BHE#(BB%BH ACCOUNTS PAYABLE AND ACCRUALS
Be Consolidated
Other Accounts Payable and Accruals
alBl%8@ Amount due to UGC
Other Accounts Payable and Accruals
altlCE@%@ Amount due to UGC
A 3 University
175,857 158,008
20. amH#aa# PROVISION OF STAFF BENEFITS
B@& Gratuities
I-e@rn&BRM Leave Pay and Others
2007 2006 $'OOO $'OOO
ee Consolidated
30,40 1 26,866
Em? : Payable:
-+I% Within 1 year
-*@ Afier 1 year
B@& Gratuities
RmrnBBRM Leave Pay and Others
A* University
ENEt : Payable:
-+I% Within 1 year
-F% After 1 year
21. J % M c % i DEFERRED INCOME
2005$7H 1 l32%@# Balance as at 1 July 2005
)Ffirn@# Subventions received
%A@3%% Credited to income and expenditure statement
#A%Bg#S% Transferred to Deferred Capital Funds
2006q6H30 HZ%@$ Balance as at 30 June 2006
Urn@# Subventions received
#-A@3%S Credited to income and expenditure statement
#A%B%#B& Transferred to Deferred Capital Funds
2007q6H 30 El Z%@ Balance as at 30 June 2007
R(tR3Qlrnrn I#i
@#*#a Grants from UGC Government ##i @a.
Subventions Agencies Donations Total S'OOO 5'000 $'OOO $'OOO
Consolidated and University
22. f$hB%#B& DEFERRED CAPITAL FUNDS
2007 2006 S'OOO S'OOO
grggtks Consolidated and University
7 f l l El2%B Balance as at 1 July
BT Buildings
BBB%f# Fixtures and equipment
H+hE@Bl@NUBEH#MfiBi&SEB% Subventions and donations received and receivable during the year for Property and Equipment
BT Buildings
@WBBf# Fixtures and equipment
&HUBBHRIINCSB~#fiS~Bf#@~BSE@3~d(W~) Amount transferred to income and expenditure statement representing the depreciation charge on Property and Equipment funded by subventions and donations (Notes)
#T Buildings
BWB'$f# Fixtures and equipment
6fl30 H2%B Balance as at 30 June
BT Buildings
@8BB# Fixtures and equipment
MA? : Notes :
(I) ~~II~P~#Br&BfS~WIb&~~#~WIRoS~dHII&I~S~WIb&~~~RiltiPI~1A0 Deferred Capital Fun& represent subventions and donations used specifically for the acquisition of property and equipment. The amounts are recognised as income to match the depreciation charge on the property and equipment acquired
(2) 89RS.45erf'#d&124371,000Z(zLW+ : 139,53Z0002.) J #Ip8lI93S,LW2.@LW~ : P4241,0002.)8~H~H#~2 13 4%$43jl,0002(2LW+ : 4J,Z%lKXl;rZ)MNAfffl#R o
Out of $126.371 million (2006: $139.537 million) trmfewed to income and expenditure statement, $81.938 million (2006: $94.241 million) has been included in Government Subventions and $44.433 million (2006: $45.296 million) in Donations and Benefactions.
23. ~~S~ RESTRICTED FUNDS
BPP #% m!i#I# 181ssi
Investment Other Revaluation Restricted
Reserve Funds $'OOO $'OOO
ti%+? Consolidated
50,108 704,192
%*S& Endowment
Funds S'OOO
a% Total S'OOO
2005&7fl1 ElZ%e Balance as at 1 July 2005
Surplus for the year
W*SSJI!th Endowment Funds received
HW#&BMBldASatBfl Unrealised gain on Available-for-Sale Financial Assets
Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure statement
S&HB Inter-fund transfer
2006&6J3 30 El 2SB Balance as at 30 June 2006
*&EBB Surplus for the year
%*a4S@A Endowment Funds received
RW#mBHBB&*SsXPfl o Unrealised gain on Available-for-Sale Financial Assets
Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expendim statement
S&HB Inter-fund transfer
2007&6fl30Elf #iB Balance as at 30 June 2007
23- RZS&(B) RESTRICTED FUNDS (Cont'd)
a* ## IftBrn58 mbE5i2
Investment Other Revaluation Restricted
Reserve Funds S'OOO S'OOO
ka University
W * S I Endowment
Funds S'OOO
#at Total S'OOO
2005&7H 1 E l f E#$ Balance as at 1 July 2005
~&BBEP& Surplus for the year
%aamJfZA Endowment Funds received
HqR&BH%ld*BSXBEPN Unrealised gain on Available-for-Sale Financial Assets
Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure statement
P&@l Inter-fund transfer
2006&68 30 El f@#$ Balance as at 30 June 2006
~&BBEP#$ Surplus for the year
%*%&&A Endowment Funds received
R N # & B H B l B * B S 2 B @ ! Unrealised gain on Available-for-Sale Financial Assets
Recognition of unrealised gain on disposal of Available-for-Sale Financial Assets transferred to income and expenditure statement
2maa Inter-fund transfer
2 0 0 7 ~ 6 8 3 0 ElX@%t& Balance as at 30 June 2007
24. smsa OTHER FUNDS
-@EltSSII M#S& W 1 General & -mi!if&
Development Other m-f Reserve Fund General Funds Total
$'OOO $'OOO $'OOO
e.& Consolidated
2005$7fl1 El f%@ Balance as at 1 July 2005
*&bP& Surplus for the year
Change in share of statutory reserves of an Associate
Change in exchange reserve
B&@B Inter-fund transfer
2006&6830 El &&!it& Balance as at 30 June 2006
*&Bllt& Surplus for the year
R1BB3Hf&SZIQXSI 0 (1,292) (1,292) Change in share of statutory reserves of an Associate
%%&Q2S@ Change in exchange reserve
&i?BB Inter-fund transfer
2007&6fl30 El 2&& Balance as at 30 June 2007
A@ University
873,267 450,058 1,323,325 2005&78 1 El&%&$ Balance as at 1 July 2005
*&bPlt& Surplus for the year
B&@B Inter-fund transfer
2006&6fl30 EI f%& Balance as at 30 June 2006
*&Bas Surplus for the year
Inter-fund transfer
2007&6H30EIfS& Balance as at 30 June 2007
MATCHING GRANTS AND RELATED DONATIONS
The University Grants Committee (UGC) has arranged Matching Grant Schemes under which qualified donations raised by institutions are matched by UGC grants. The amounts of grants and donations raised and expenses incurred under the Schemes have been included in the income and expenditure statement and unspent balances of grants and donations have been retained in the respective funds. In compliance with UGC's requirement for separate disclosure of the matching grants and related donations, details of income and expenditure are extracted and set out below:
a#* a#* imiimt ls!sms
UGC l!ew'#ak UGC E!s#Jak Matching Matched Matching Matched
Grant Donations Grant Donations $'OOO S'OOO $'OOO S'OOO
Be
7HlElf &!iB Balance as at 1 July
rtkh Income
B3 #3 Grants / Donations
&!B 1 fl,a&h Investment / Interest Income
Consolidated
381,341 595,363 127,055 1 18,576
3& Expenditure
WB%4BH% Teaching and Research Enhancement
~#BfiBR3%MrStB Academic Strength and Niche Area Development
MEfiB~*%%~al**rStMl%9&/B*& Internationalization and Student Exchange Activities I Student Development I Scholarship I Bursary
6H30Elf &!iB Balance as at 30 June
279 COMMITMENTS
(a) BSSl Capital Commitments
~~aw&wa~aafimqRzs*Sa: Outstanding capital commitmenb not provided for in the financial statements were as follows:
MBtk+ Consolidated and University
EBB Contracted for
EIBIBWik%& Authorised but not contracted for
(b) BBRrntSl Operating Lease Commitments
ef3 Consolidated
(i) ~ E R f l ~ + H k ~ # H W ~ V ~ ~ B ~ ~ B X Q O c % f ; B i B Z t H Y i ~ R ~ ~ % ~ ~ ~ 7 ; : As at 30 June, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:
E+h In the first year
%2S%5%h In the second to fifth years inclusive
(ii) aEhfl3+Hk~#lSGFV%#Bf%IRXElYBRE11@A2%Paf;: As at 30 June, the Group had future aggregate minimum lease income under non-cancellable operatiing leases as follows:
S&h In the first year
%2S%5&h In the second to fifth years inclusive
27- *#(a) COMMITMENTS (Cont'd)
0) aBBs2Sacm Operating Lease Commitments (Conrd)
2007 2006 S'OOO S'OOO
'$&la In the first year
%28%5&W In the second to fifth years inclusive
(0 ~ERH3+Hb~k~H~W~@gSiI#tH%7;%BZ;tB&f~Bfffl%~%MT: As at 30 June, the University had future aggregate minimum lease payments under non-cancellable operating leases as follows:
The University leases surplus on-campus accommodations to outsiders at commercial market rent. As at 30 June, the University had future aggregate minimum lease income under non-cancellable operating leases as follows:
S&B In the first year
%2S%5%W In the second to fifth years inclusive
28. B?zi TAXATION
k~@8lt@%B~E~%88EX%Z~~S~~Bd~Bltl;$Q#fflB#~ No taxation is provided as the University is exempt from taxation by virtue of Section 88 of the Inland Revenue Ordinance.
29. FINANCIAL INSTRUMENTS
29(a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Credit risk
The Group ' s principal financial assets are cash and cash equivalents, accounts receivable, prepayments, held-to- maturity financial assets and investments, which represent the Group ' s maximum exposure to credit risk in relation to financial assets.
The Group's credit risk is primarily attributable to its accounts receivable. The amounts represented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated by the Group ' s management based on past experience and their assessment of the c m n t economy.
The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit-ratings assigned by international credit-ratings agencies. AU held-to-maturity financial assets are of investment grade and investments are managed by experienced fund managers who are selected and monitored by the Finance Committee.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties.
Interest rate risk
The Group has exposure to interest rate risk through the impact of the rate changes on bank balances.
Price risk
The Group's available-for-sale financial assets are measured at fair value at each balance sheet date. Therefore, the Group is exposed to price risk. In order to manage this exposure, the management has appointed professional parties to arrange a portfolio of investments with different risk profiles.
Foreign currency risk
The Group's foreign currency exposures arise mainly fiom the exchange rate movements of the Hong Kong dollars and Reminbi.
The Group does not enter into any derivative foreign exchange contracts to hedge its foreign currency risk, as the Reminbi assets and operations of the Group is not significant.
Liquidity risk
The Group has sufficient funds to finance its ongoing working capital requirements.
65
29. FINANCIAL INSTRUMENTS (Cont'd)
The fair value of financial assets and financial liabilities are determined as follows:
. the fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices fiom observable current market transactions.
The Council considers that the carrying amounts of financial assets and financial liabilities recorded at amortized cost in the financial statements approximate the fair value.
30. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
In determining the carrying amounts of some assets and liabilities, the Group makes assumptions of the effects of uncertain future events on those assets and liabilities at the balance sheet date. These estimates involve assumptions about such items as risk adjustment to cash flows or discount rates used, future changes in salaries and future changes in prices affecting other costs. The Group's estimates and assumptions are based on historical experience and expectations of future events and are reviewed periodically. In addition to assumptions and estimations of future events, judgements are also made during the process of applying the Group's accounting policies.
#g%g,@#s Held-to-maturity financial assets
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity financial assets if the Group has the intention and ability to hold them until maturity. In evaluating whether the requirements to classify a financial asset as held-to-maturity are met, management make significant judgements. Failure in correctly assessing the Group's intention and ability to hold specific investments until maturity may result in reclassification of the whole portfolio as available-for-sale financial assets.
Allowances for bad and doub@l debts
The provision policy for bad and doubt5.d debts of the Group is based on the evaluation of collectibility and aging analysis of accounts and on management's judgement. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
