Financial Report

Transcription

1 香港浸會大學 HONG KONG BAPTIST UNIVERSITY 財務報告 FINANCIAL REPORT 二零零二 / 零三年度

2 Contents 1 Highlights! 2 Statistical Tables and Charts! 6 Treasurer's Report!"# 14 Report of the Auditors! 18 Financial Statements! 22 Notes to the Accounts 40 Schedules!"#$%%&'()*+ 58 Hong Kong Baptist University 1998 Superannuation Fund

3 Highlights 1 Highlights! General Income!"#$% Recurrent UGC Subventions!"# Tuition and Other Fees!"#$%&' Year ended 30 June ($ million) ! General Expenditure !"# Income on Self-financing Activities Donations Received !"# Research Projects Expenditure !"#$%&'()* UGC-funded Projects - Capital Expenditure !=! "#$% Number of Students (UGC-funded Programmes) Headcount!"#$ Full-time Equivalent 5,273 5,017 4,797 4,775 4,754 4,769 4,594 4,414 4,398 4,436!=!"#$%&' Number of Students (School of Continuing Education Courses) Headcount 50,445 46,305 42,331 38,674 45,068!"#=!"#$ Number of Full-time Staff (Full-time Equivalent) 1,363 1,331 1,281 1,036 1,031!! "#$%&'( Tuition Fees Per Annum (UGC-funded Full-time Programmes) ($) 42,100 42,100 42,100 42,100 42,100

4 ! Statistical Tables and Charts

5 ! Statistical Tables and Charts (!" Expressed in millions of dollars)! dbkbo^i=fk`ljb Statistical Tables and Charts! 3 0.5% 2.2% 3.1% 8.9% 11.0% 11.6% 62.7% 22.2% 1.5% 1.4% 74.9% 707.2!"#$% Recurrent UGC Subventions 209.4!"# Tuition and Other Fees 14.2!"#$ Interest and Investment Income 13.0! Other Income! dbkbo^i=bumbkafqrob 584.8!"# Academic & Academic Support 108.6!"#$%&' Staff Accommodation 103.0! Maintenance of Premises 83.3 Administration 29.0!"#$ Student Facilities and Amenities 20.5!"# Other Operating Expenses 4.7!"# General Education! pmb`fcf`=fk`ljb 2.1% 8.3% 8.4% 9.7% 71.5% 359.9! Self-financing Activities 48.6!"# Non-recurrent Subventions 42.5!"#$ Capital/Development Projects 41.5!" Donations and Benefactions 10.4! Research Projects 10.7% 9.5% 8.7% 2.4% 68.7%! pmb`fcf`=bumbkafqrob 263.9! Self-financing Activities 40.9!"#$ Capital/Development Projects 36.4!"#$% Expenditure met from Non-recurrent Subventions 33.6!"#$ Expenditure met from Donations and Benefactions 9.2! Research Projects

6 (!" Expressed in millions of dollars)!"#$%& déåéê~ä=fååçãé=j R=vÉ~êë=`çãé~êáëçå!"#$% Recurrent UGC Subventions!"# Tuition and Other Fees!"#$ Interest and Investment Income! Other Income 1, Statistical Tables and Charts! !"#$%& déåéê~ä=bñééåçáíìêé=j R=vÉ~êë=`çãé~êáëçå! Academic & Academic Support!"#$%&' Staff Accommodation! Maintenance of Premises Administration!"#$ Student Facilities and Amenities!"# General Education!"# Other Operating Expenses

7 (!" Expressed in millions of dollars) ! R=vÉ~êë=`çãé~êáëçå!"# fååçãé=çå=péäñjñáå~ååáåö=^åíáîáíáéë Statistical Tables and Charts! açå~íáçåë=oéåéáîéç !"# oéëé~êåü=mêçàéåíë=bñééåçáíìêé !"#$!"# rd`jñìåçéç=mêçàéåíë=j `~éáí~ä=bñééåçáíìêé

8 ! Treasurer s Report

9 ! Treasurer s Report Treasurer s Report! 7!"#$%&'()*+,-./!"!"#!"#$!"#$%&'()*+,-./01!"#$%&'()*+,-./0!"#$%!"#$%&'()*+,-.#/0!"#$%&'()*+,-./01!"#$% &'()*+,-./#!"#$%&'()*+,#-./0!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+!,-./*!"#$%&'()*+,-.)/0!"#$%&'()*+,-./01!"#$%&'()*+,- OVERVIEW The 2002/03 financial year was the second year into the current triennium. Amidst the contraction in University Grants Committee ("UGC") funding, shrinking donations due to the local economic downturn and the lackluster investment market during the year, the University was able to finish the financial year with impressive results. While Total Income has contracted by 4.8%, Total Expenditure recorded an 11% reduction, producing a record surplus of over $100.0 million for the year. The significant scaling down in activities was on capital projects which saw a short recess after the completion of the Student Residence Hall last year. Such a remarkable result was nothing accidental, and it could be attributed to the concerted efforts of the whole University community to economize on spending, to develop and improve revenue sources. Cautions was exercised in particular to uphold quality amidst cost-cutting and rapid expansion into new programmes.!"#$%&'()*+,-./01!"#$%&'()*+,$-./0!"#$%&'()*+,-./0!"#$%&'()*+,-./0!"#$%&'()*+,-./01!"#$%& '()*+ The cost-saving programmes initiated in previous two years were implemented effectively, not only producing desirable results on target, but also matching well with other academic reforms which would continue into next few years. Much planning was put into paving the way for many of the taught postgraduate programmes to turn self-financed by phases starting next financial year as advised by the UGC.!"#$%&'()*+,-.-/0!"#$%&'()* +,-./!"#$%&'()*+,-./01!"#$%&'()*+,-./ It is gratifying to note that the Audit Commission's findings indicated that the University has fared reasonably well among all UGC -funded institutions. The University will take on the recommendations of the Commission, where practicable, to further improve the use of resources within the University.!"#$%!!"#$$#%&'()*+,+-.!"#$%&'()*+,-./0! "#$%&'()*+,-./!"#$%&'(()*(+,-./ RESULTS OF UNIVERSITY OPERATIONS General Income General Income recorded a rise of $36.6 million over 2002, representing a small increase of 4%. UGC grants were increased by $22.0 million, comprising $8.9 million for the Blister Programmes for Teacher Education and $20. 1 million from the two tranches of Performance & Mission-Related Supplementary Grant for the

10 !"#$%&'()*+,-./ triennium. While tuition fee level was frozen for another!"#$%&'()*+,-./01 year as planned by the Government, over-enrolment has helped!"#$%&'()*+,-./01 to increase total tuition fee income for the year by 4%. Interest!"#$%&'()*+,-./0 and Investment Income was almost doubled with the more!"#$%&'()*+,-./01!"#$%&'()*+,-./0 aggressive use of risk-controlled products, despite the subdued interest rate throughout the year. 8!!"#$%&'()*!"!"#$%&'(!"#$%!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+&,-.'(!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+,-./01 General Expenditure General Expenditure for the year was $925.0 million (2002: $961.9 million), a reduction of 3.8% from last year. Except Student Facilities and Amenities, all expenditure categories recorded a drop. An Art and Cultural Education Programme for students aimed at enhancing and nurturing their understanding and appreciation of art and culture was launched during the year, taking advantage of more students staying longer on campus after the occupation of the Student Residence Hall. Apart from that, the relative weightings among the other expenditure categories were similar to those in the previous years. Treasurer s Report!!!"#$%&'()*+,-./0!"#$%&'())"*+!"#$%&'()!"#$!"!"#$%&'()*!"#$%&'()*+,-./!"#$%&'()*+,,+-,.!"#$%&'()*+,-./$0!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()!*+,!!"#$%&'()*+,-./!"#$!"#$%&&'()*+,-./0!"!"#$%$&!"#$%&'()*+,-"./0!"#$%"&'()*+,-./!"#$%&'()*+,-./01!"#$%& Self-financing Activities Income from Self-financing Activities broke its record again in 2003 with a 18% increase to $359.9 million (2002: $305.0 million), netting a surplus of $95.9 million (2002: $74.3 million) which was higher by 29. 1%. While part of this increase came from the full-scale operation of the Student Residence Hall in 2002/03, the sustained success in offering continuing education programmes was the key reason for such a notable achievement. The pilot learning centre in Shenzhen set up last year was producing encouraging results. A wholly foreign-owned subsidiary was being established in Shenzhen to handle the increasing operations more effectively. As the UGC has agreed to regroup the operation of the Academic Community Hall ("Hall") as UGC -funded activity with effect from 1 July 2003, this operation would be presented under Self-financed Activities for the last time in 2002/03. With this new arrangement, the Hall has become eligible for bidding for UGC funding to carry out much-needed repair and maintenance works due to its ageing.

11 Treasurer s Report! 9!"#$%&!!!"#$%&'()*!"#$!"#$%&'()*+,-. $/!"#$%&'()*+,-./0!"#$%&'()*+,-./!"#$%&'!"#$%!"#$$%&$'()*+,-.!"#$%&'()*+,-./ 0!"#$%&'()*+,-,./0!"#!$%&'()*+,-./0!"#$%&'()#*+,-./0!"#$%&'()*+,-./01!"#$%&'()*+,-./0 The improving operations of the Ng Tor Tai International House ("House"), a guesthouse operated under a wholly-owned subsidiary of the University, suffered a set back from the outbreak of Severely Acute Respiratory Syndrome in March to May Notwithstanding that, the House was able to record an operating profit of $0.2 million after depreciation (2002: $0.7 million) and the management of the House was confident of a recovery in 2003/04. A number of new self-financed Taught Postgraduate Programmes were launched during the year to pave the way for replacing those which would be defunded by the UGC in the next few years. Faculties and Schools would continue to respond to market demands in launching more self-financed academic programmes as a way to alleviate the pressure from the reduction in UGC grant. A new subsidiary company was set up during the year to explore opportunities of a patent on Chemistry laboratory teaching kits.!"#!"#$%&'()*+,-./01!"#!"#$%&'(!"#$%&'()*+,-.!"#$%&'()*+,-./0!"#$%&'()* +,-.!"#$%&'()*+,+-./!"#$%&'()*+,-!"!"#$%&'()*+,-./01 Non-recurrent Subvention During the year, the University has secured a total of $48.6 million (2002: $271. million) non-recurrent subvention from the UGC. They included, amongst others, $79. million for Teaching Development Grants projects, $14.7 million of Competitive Earmarked Research Grants, $5.0 million for Institutional Advancement earmarked grant, $2.2 million for English/Putonghua Immersion Programme (as a part of the Teachers Education programmes) and $3.6 million for the UGC -initiated Student Exchange Programme earmarked grant.!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+,-./0 Under a new initiative from the Government to promote the culture of benevolence in the society towards supporting higher education, the University secured a matching earmarked grant of $3.7 million from the UGC for the same amount of eligible donations obtained and received during the year.!"#$%&'(!"#$%&'()*+,-./01!"#$%&'()*+,-./+,!"#$!"#$%&'!"!"#$%&'(&)*+!"#$%&' UGC-funded Capital and Other Projects There were no new Capital Grant approved by the Government in the year. Only four allocations for Alterations, Additions and Improvement works totaling $40. 4 million (2002: $15. 4 million), were approved. Six projects were completed and their accounts closed during the year with the fund balances returned to the Government.

12 !"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$!%&'()*+,-.!"#$%&'()*+,-./01!"#$%&'()*+,-."/0!"#$%&'()#$*+,-./!"#$%&'()*+,-./0!"#$%&'()*+,-./01!! Two lots of land in Shek Mun, adjacent to one another, were allotted during the year to the University for establishing the HKBU affiliated school and a second campus for the College of International Education which offers associate degree programmes. The former will replace the lot at Renfrew Road adjoining the University campus which had been identified for the affiliated school previously. The latter would be operated by the School of Continuing Education of the University under a ten-year license which included an obligation to construct a purpose-built campus facility within three years and a $360.0 million interest-free construction loan from the Government repayable within the ten-year license period. 10 Treasurer s Report!!"#$%&'()*+, -+.!"#$%$&'($)*!"#$%&'()*+,-!"#$%&'()*+!"!"#$%&'()&()*'(+,!"#$%&'()*!!"#$%&'(!"#$!"#!"#$%&'()*+,-./01!"#$%& '($)*+,-./!"#$%&'()*+,-./0%!"#$%&'()!"#$%&!"#$! "#$%&'()*+,-.!"#!$%&'()!"!"!"#$%&'()*+,!"#$%&'()*+,-..!"#$%&'()*+,-./01!"#$%&'()*!"#$!!"#$%&'()*+,-!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&%'()*+,%-./ Donations and Benefactions In 2003, the University received total donations of $43. 4 million (2002: $116.1 million), including $14.2 million for capital projects (2002: $91.7 million), $ 7.9 million for student scholarship, prizes, bursaries and loan funds (2002: $6.5 million) and $3.0 million (2002: $3.3 million) towards the University Foundation Funds. Encouraged by the funding scheme initiated by the Government during the year to match donations secured by the University, the entire University community is working hard to capitalize on this opportunity with the view to attaining the designated targets within the qualifying period. CASHFLOW AND FINANCIAL STRENGTH Fund Balances and Reserves Total funds held by the University at the end of 2002/03 were $1.2 billion (2002: $1.0 billion). They included a balance of $271.4 million on General Funds, $855.2 million on Specific Funds and $33.2 million of recurrent UGC funds carried forward in the Equalization Account. The first two funds, which include University Foundation Funds, are mainly generated by the University from non-ugc sources. They have helped and will continue to help the University to cushion the impact of the impending cut in government funding in the next few years, as well as provide resources for worthwhile activities not funded by the UGC. The last fund is essentially due to a timing difference between the release of grants and the incidence of expenditure, and its balance,

13 Treasurer s Report! 11!"#$%&'()*+,-./01!"#$%&'()*+,&',-&!"#$%&'()*+,-./01!"#$%&'()*+,-./01!""!#"$%&'()*+,-!"#$%&'#()*!!"#$%&'()!"#!"#$%&'()*+,-./01!"#$%&'()(*%&+,-.!"#$%&'!"#$%! "!"#$%&'()*+!"#$%&'()*+,-./,0!"#$%&'()*+,-./01!"#$%&'( if any, is likely to be small and will be carried forward to future years as part of the General and Development Reserve Fund approved by the UGC. That Reserve Fund stands at $ million at the end of 2002/03 (2002: $108.9 million). Investment and Rates of Return With the recovery of investment markets after the war in Iraq, the investment portfolios managed by the investment managers appointed by the University recorded an overall positive return of 3% (2002: J2.2%) for the whole financial year. The University has adopted a more aggressive approach in using new risk-controlled products from the market to enhance yields from surplus working capital. Together with an improved cashflow, this approach has helped the University to reap a bigger interest income during the year. SUPERANNUATION FUNDS!"#$%%&'()!"#$%&'()*+,-./!!"#$!"#!"#$%&'()*+,-./!"#$%&'()$*+,-./)!"#!"#$%&'(!"#$%&'!"#$%&'!"#$%&'()*+,-./01!"#$%&'"()*+,-'"(!!"#$%&'()*!"#$%&!"#$!"#$%&'()*+,-./01!""!#$%&'()*+,-./!"#$%&'()*+,-.#/!"#$%&'(%)*+%&,-.!"#$!"!"!"#!"#!"# The Hong Kong Baptist University 1998 Superannuation Fund ("the Fund"), a members' choice Occupational Retirement Schemes Ordinance scheme which is exempted from the Mandatory Provident Fund ("MPF") Ordinance, and an MPF scheme, continued to operate under a trust arrangment. Returns of the thirteen investment options under the Fund ranged from -5.3% to + 7.3% for the financial year (2002: -10.5% to +2.6%), while those of the seven options under the MPF scheme ranged from % to % (2002: % to +1.5%). CHANGES IN ACCOUNTING POLICIES The University continuously seeks to improve financial information presentation and accountability. With effect from 1 July 2002, the University has adopted new accounting policies in respect of investments in securities and accrual for staff leave entitlements in order to comply with the Statements of Standard Accounting Practice ("SSAPs") No. 24 "Accounting for Investments in Securities" and No. 34 "Employee benefits" issued by the Hong Kong Society of Accountants. The effect of the changes in accounting policies is summarized in Note 2 to the accounts.

14 !"#$%&'()*+,-./0!"#$%&!"#$%&'()*+,-./01!"#$%&'(()*+,-./0!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+,-.*/0!"#$%!""#$"%&'!"#$%!"#$%&'(!)*!"#!"#$%&'()*+#,-..-!"#$%&'()*+,-./01!"#$%&'()*+,-./#0!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+,-./0)!"#$%&'()*+,-./01 LOOKING FORWARD Further economization in the use of resources while maintaining quality will be the main theme for financial planning in the next few years. As delinking with Civil Service Pay Scale sets in on 1 July 2003, the University will have greater flexibility in deploying resources while being mindful of the commitments to its staff under existing appointment contracts. In anticipation of the grant reduction for 2004/05 which has been set by the UGC as a roll-over year of the current funding triennium, the University has embarked on a series of stern cost-saving measures in 2002/03. Most of them have so far produced fruitful results while helping to ensure that programme quality is not compromised. Improvements on internal efficiency and effectiveness through flattened management structure and streamlined procedures, tightened cost controls in the deployment and use of assets, consolidation of operational units and integrating technology with people, will be gathering more momentum. Michael P K Wu Treasurer 17th December 2003 Treasurer s Report! 12!"#"$%

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16 ! " # Report of the Auditors

17 ! " # Report of the Auditors!"#$%&"'()!!"!"#$%& Auditors Report To the Council of Hong Kong Baptist University We have audited the accounts on pages 19 to 38 which have 15!"#$%&'()*+,-./01!"#$%& been prepared in accordance with accounting policies generally adopted by higher education institutions in Hong Kong.! " # Report of the Auditors!"#$%&!"#$%&'()*+,-./01!"#$%&'()*+,-./!"#$%&'()*+,-./ Respective Responsibilities of the University and Auditors The Council is responsible for preparing accounts which give a true and fair view on the basis of the accounting policies adopted. In preparing accounts of the University, it is fundamental that appropriate accounting policies are selected and applied consistently and that judgements and estimates are made which are prudent and reasonable.!"#$%&'()*+,-./01!"#$%&'()*+,-./01!"#$%&'()*+,-./)0!"#$%&'()*+,-./0 It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion solely to the Council, as a body, in accordance with section 27 of Hong Kong Baptist University Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any!"!"#$%&'(%)*+,-./0!"# $%&'()*+,* - other person for the contents of this report. Basis of Opinion We conducted our audit in accordance with Statements of Auditing!"#$%&'()*+,-./0!"#$%&'()*+,-./0!"#$%&'()*+,-==!"#$%&'()*+,-./01 Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by!" the Council in the preparation of the accounts, and of whether the accounting policies are appropriate to the University's circumstances, consistently applied and adequately disclosed.!"#$%&'()*+,-./01!"#$%&'()!*+,-.!"#$%&'()*+,-./01!"#$%&'()"*+,-!./!"#$%&'()*+,-./0 We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material!"#$!%&'()*+,-./!"#$% misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion.

18 !"#$%&'()*+,"-./0!"#$%&'()*+,-./0!"##$%&'$()*+,-./!"#$%&'()*+,-./01!"!"#$%&!""#$%!&%'( Opinion In our opinion, the accounts have been properly prepared in accordance with accounting policies generally adopted by higher education institutions in Hong Kong and, on that basis, give a true and fair view of the state of the University's affairs as at 30th June 2003 and of its results and cash flows for the year then ended. KPMG Certified Public Accountants Hong Kong, 17th December 2003! " # 16 Report of the Auditors

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20 ! Financial Statements!"!" Balance Sheet Income and Expenditure Statement Cash Flow Statement

21 ! " Balance Sheet!"# $%&'()* Balance Sheet as at 30th June 2003 (!) Note Restated (Expressed in thousands of dollars) ! FIXED ASSETS 3 268, ,389! " 19 Balance Sheet INVESTMENTS 4 250, ,476! CURRENT ASSETS Investments 4 780, ,064!"#$ Accounts Receivable and Prepayments 5 20,321 15,011!"# UGC Holding Account 8 2,472 -!"#$ Utility and Other Deposits 3,955 3,829! Term Deposits 177, ,147!" Cash and Cash Equivalents 13 89, ,773 1,074, ,824! CURRENT LIABILITIES!"#$% Accounts Payable and Accruals 6 194, ,804!"#$%&' Current Portion of Long Term Loan 7 8,620 8,620! Sundry Deposits 3,641 3,721! Deferred Income 61,661 59,616!"# Advances for UGC-funded Capital!"#$%& and Other Projects 9 50,077 55,711!"# UGC Holding Account 8-8, , ,723!"# NET CURRENT ASSETS 755, ,101!" NON-CURRENT LIABILITIES! Long Term Loan 7 68,961 77,581!"#$ Provision for Staff Benefits 45,092 43, , ,501 1,159,904 1,011,465! REPRESENTED BY! General Funds , ,746! Specific Funds , ,719!"# UGC Equalization Account 12 33,231-1,159,904 1,011,465!"#$%$#&'()*+,-.(/012 The notes set out on pages 23 to 38 form an integral part of the accounts.!"##$%&"'&()*+,-./01 Approved and authorised for issue by the Council on 17th December Michael P K Wu Ng Ching Fai Alex P C Shuen Treasurer President & Vice-Chancellor Director of Finance

22 Income and Expenditure Statement!!"#$%"&'(#)*+, Income and Expenditure Statement for the year ended 30th June 2003 (!) Note Restated Sch (Expressed in thousands of dollars) ! GENERAL INCOME!"#$% Recurrent UGC Subventions 707, ,149 1!"# Tuition and Other Fees 209, ,472!"#$ Interest and Investment Income 14,238 7,407! Other Income 12,969 14, , ,232! SPECIFIC INCOME , ,233 TOTAL INCOME 1,446,759 1,519,465! GENERAL EXPENDITURE Administration 83,294 85,192 8!"# Academic & Academic Support 584, ,969 9! Maintenance of Premises 102, ,757 10!"# General Education 4,679 5,508 11!"#$ Student Facilities and Amenities 29,005 27,598 12!"#$%&' Staff Accommodation 108, ,599 13!"# Other Operating Expenses 20,542 22, Income and Expenditure Statement 933, ,350!"#$%& Less: Overhead Recovered 8,899 8, , ,923! SPECIFIC EXPENDITURE , ,379 TOTAL EXPENDITURE 1,309,013 1,470,302!" SURPLUS BEFORE TRANSFERS 137,746 49,163 EF TRANSFER FROM / (TO) :!"# Advances for UGC-funded Capital!"#$%& and Other Projects 5,634 (18,515)!" SURPLUS FOR THE YEAR 143,380 30,648 EF NET TRANSFERS (TO)/ FROM :! General Funds 10 (7,246) 749! Specific Funds 11 (105,300) (81,494) Reserves ,397 50,097!"# NET SURPLUS TRANSFERRED TO!"# UGC EQUALIZATION ACCOUNT 12 33,231 -!"#$%$#&'()*+,-.(/012 The notes set out on pages 23 to 38 form an integral part of the accounts.

23 ! " Cash Flow Statement!!"#$%"&'(#)*+,-. Cash Flow Statement for the year ended 30th June 2003 (!) Note Restated (Expressed in thousands of dollars) Cash Flow Statement! " 21! Operating Activities!" Surplus Before Transfers 137,746 49,163! Interest Income (18,503) (17,072) Depreciation 13,785 15,107!"!#$ Re-investment of Investment Income 7,818 21,165!"#$% Unrealised Gain on Investments (30,523) (13,298)!"#$ Loss on Disposal of Fixed Assets !"#$%&'"#() Exchange Loss on Purchase of Certificates of Deposit 43 18!"#$ /!" Amortization of Discount/Premium of Certificates of Deposit 857 (144)!"#$%&' Increase in Utility and Other Deposits (126) (735)!"#$!%&' Increase in Accounts Receivable and Prepayments (3,555) (1,050)!"#$()/ (Increase)/Decrease in UGC Holding Account (10,723) 19,279!"()/ (Decrease)/Increase in Sundry Deposits (80) 612!"#!$%&' / () Increase/(Decrease) in Accounts Payable & Accruals 17,633 (46,982)!"#$ / () Increase/(Decrease) in Deferred Income 2,045 (75,031)!"#$ Increase in Reserves - (79) /()!"#$%&'( Transfer from /(to) UGC-funded Capital Projects 5,634 (18,515)!"#$%&'() Transfer to University-funded Capital Projects (7,194) (19,115)! Endowment Received 5,059 4,267!"#$!" LEF Net Cash Inflow/(Outflow) from Operating Activities 119,941 (81,853)! Investing Activities! Interest Received 16,748 15,787 Dividend Received 62 27!"()/ (Increase)/Decrease in Term Deposits (70,571) 98,340! Increase in Fund Invested (138) (1,123)!"# Payment for Purchase of Invesment Securities (347) -!"# Payment to Acquire Fixed Assets (4,481) (27,164)!" Payment to Acquire Certificate of Deposit (315,985) (155,277)!"#$%&' Proceeds from Matured Certificates of Deposit 194,249 91,000!"#$%&'() Net Cash Inflow from Disposal of Investments - 6,746!"#$%&'() Net Cash Outflow from Purchase of Investments (5,988) - (186,451) 28,336! Capital Projects!"#$%&' Grants Received for UGC-funded Capital Projects 28, ,082!"#$%&' Payment for UGC-funded Capital Projects (34,069) (140,881)!"#$%&' Funds Received for University-funded Capital Projects 14,447 88,542!"#$%&' Payment for University-funded Capital Projects (7,204) (69,468)!"#$%&' Net Cash Inflow from Capital Projects 1,224 37,275!"#$% EFL Net Cash (Outflow)/Inflow from Investing Activities (185,227) 65,611! Financing Activities!" New Long Term Loan - 86,201!"# Repayment of Long Term Loan (8,620) -!"#$%&'(EFL Net Cash (Outflow)/Inflow from Financing Activities (8,620) 86,201!"#EFL (Decrease)/Increase in Cash and Cash Equivalents (73,906) 69,959!"!" Cash and Cash Equivalents, Opening Balance 163,773 93,814!"!" Cash and Cash Equivalents, Closing Balance 13 89, ,773!"#$%$#&'()*+,-.(/012 The notes set out on pages 23 to 38 form an integral part of the accounts.

24 ! Notes to the Accounts!"# 23 Principal Accounting Policies!"#$ 26 Changes in Accounting Policies! 28 Fixed Assets 29 Investments!"#$ 30 Accounts Receivable and Prepayments!"#$% 30 Accounts Payable and Accruals! 31 Long Term Loan!"# 31 UGC Holding Account!"#$%&'()*+, 32 Advances for UGC-funded Capital and Other Projects! 33 General Funds! 34 Specific Funds!"# 35 UGC Equalization Account!" 36 Cash and Cash Equivalents!"#!"# Analysis of Specific Income and Expenditure Capital Commitments Tax!" 37 Superannuation Fund and MPF Scheme!"#$% 37 Related Parties Transactions

25 ! Notes to the Accounts NK!"# NKN! 1. PRINCIPAL ACCOUNTING POLICIES 1.1 Fixed Assets á!"#$%&'() (i) Fixed assets acquired for UGC-funded activities 23 Notes to the Accounts!!"#$%&'$()*$%+!"!"#$%&'!"#$%&'()*+,-.!"#$%&'()*+,-.! áá!"#$%&'( (ii) As allowed by SSAP 17 "Property, plant and equipment" issued by the Hong Kong Society of Accountants, the University has elected to write off all the fixed assets acquired for UGC -funded activities, including those funded by UGC and University Capital Funds, in the year of acquisition through the Income and Expenditure Statement. Fixed assets acquired for self-financing activities!"#$%&'()*+,- Fixed assets acquired for self-financing activities are!"#$%&$'(#)*+ capitalized at cost, with the donation elements of the!"#$% &'()*+, expenditure written off in the same year, less accumulated!"#$%&'()*+,-.w depreciation and impairment losses. Depreciation is calculated to write off the remaining cost of these fixed assets over their estimated useful lives as follows:!!! " Leasehold land the remaining lease terms!" Buildings 25 to 50 years!" Furniture and Fixtures 10 years!"#$! Office Equipment 5 years Computing/Teaching Equipment 3 to 4 years NKO!"#$% 1.2 Subsidiary Companies and Consolidation!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%&'() Investments in subsidiary companies are stated at cost less any impairment losses. No consolidated financial statements are prepared in view of immateriality of the amounts involved. NKP!!"#$%&'%()*+,-!"#$%&'()*+,-+!"#$%&'()*+,-!" 1.3 Impairment of Assets Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased: ====J=!"# ====J=!"#$% - Fixed assets; and - Investments in subsidiaries

26 !"# $%&'()*+,- If any such indication exists, the asset's recoverable amount!"#$%&'()*+,-. is estimated. An impairment loss is recognised whenever!"#$%&'()*+, the carrying amount of an asset exceeds its recoverable amount.!"#$%&'()*$+,- The recoverable amount of an asset is the greater of its net 24 selling price and value in use. An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. 1.4 Investments In Securities All debt securities acquired with an intention to hold to maturity are classified as Held-to-Maturity securities. Such Notes to the Accounts!!"#$%&'()*+,-.!"#$%&'()*+,-!"#$%&'()*+ NKQ!!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%&'()*)+,-!"#$%&'()"#*()!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%&'(!")*+, securities are stated at amortised cost less any provision for diminution in value, which is other than temporary. Equity securities that are held on a continuing basis for an identified long term purpose are classified as Investment Securities and are stated in the balance sheet at cost less any provisions for diminution in value. Securities held with Fund Managers are classified as Other Investments, which are stated in the balance sheet at fair value. Changes in their fair value are recognized in the Income and Expenditure Statement as they arise. NKR L!L!"!"#$ L!L!"#$%& 1.5 Interest on Certificates of Deposit / Debt Securities and Fixed & Call Deposits Interest on certificates of deposit, debt securities, and fixed & call deposits is accounted for on an accrual basis and is!"#$%&'( )*+,-!"#$%&'($)*+,-!"#$%&!"#$%&'()*+,- credited to the Income and Expenditure Statement. NKS!" 1.6 UGC Subventions UGC subventions mainly consist of block grants,!"#$%&'(!")*+!!"#$%&'(&)* supplementary grants, reserved supplementary grants, earmarked grants and capital grants. All UGC subventions!"# $%&'()*+ are recognised on an accrual basis.

27 NKT!"# 1.7 Tuition and Other fees 25 Notes to the Accounts!!"#$%&'()*+,-!"#$%&'!()*+,-!" NKU!"!"#$%&'"#()*&+!"#$%&'()*+,-.!"#$%&'()*%!"#$%&' NKV!"!"#$%&'()*+,!"#$%&'()*+!!"#$%&'()*'+,!"#$%& NKNM!"!"#$%&'()*+,-!"#$%&'()*+!"#$%&'()*+,-#!"#$%&$'()*+, NKNN!"#!"#$%&'()*+,-!"#$%&'()*+,-.!"#$%& NKNO!!"#$%&'()*+, &!"#$%&'()*+,-!"#$%&'()*%&+!"#$%&'(!)*+,!"#$ Tuition and other fees are recognised on an accrual basis. Unearned fees are treated as deferred income on the balance sheet. 1.8 Donations and Gifts Donations and gifts in cash, excluding those of an endowment nature, are credited through the Income and Expenditure Statement to the relevant fund accounts when the University becomes entitled to the donations and gifts and it is probable that they will be received which is generally upon receipt of cash. Donations and gifts in kind are not recognized in the accounts. 1.9 Cash and Cash Equivalents Cash and Cash equivalents comprise cash at bank and on hand, short-term & call deposits that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within one month of maturity at acquisition Staff Benefits Liabilities for all vested staff benefits including gratuities, superannuation provision, leave, passage and allowances are duly recognized up to the balance sheet date and the increase in such liabilities are recognized as expenses in the Income and Expenditure Statement Commitments and Expenditure Expenditure in the accounts is recognized on an accrual basis and includes commitments of goods for which purchase orders have been placed by the University on or before the balance sheet date Foreign Currencies Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Hong Kong dollars at the market rates of exchange ruling at the balance sheet date. Foreign currency transactions during the year are

28 NKNP!!"#$%&'()*+,-.!"#$% &'()$* NKNQ!"#!"#$%&'()* +,-!"#$%&'()*+,-!"#$%&'($)*+,!"#$%&'()*+,-.!"#$%&'()*+,-!"#$%&"'()*+,- NKNR!!"#$ %&'()*+,-!"#$%&'()*+,-!"# O!"#$ OKN!"#$%&'()*+,-.!"#$%&'()*+,)-!"#$%&'()*+&,,!"#$%&'()*+,-.!"#$%&'NKQ!"#!"#$%!"&$%'()*!"#$%&'()*+,-!"#$%&'()*+,-.!"#$%&'()*+ translated into Hong Kong dollars at the market rates of exchange ruling at the transaction dates. Differences in foreign currency translation are dealt with in the Income and Expenditure Statement Fund Accounts Major fund balances are invested and income earned thereon is credited through the Income and Expenditure Statement to the respective fund accounts UGC Equalization Account During the triennium, the difference between funds released for a grant year by UGC and the actual requirements of the University is carried forward to the next grant year through the UGC Equalization Account. Any surplus on the UGC Equalization Account at the end of the triennium is normally refundable to the UGC and any deficit at the end of the triennium shall be met from the University's other resources. Balances of grants will only be carried forward with the approval of UGC Deferred Income Deferred income represents tuition fees and government subvention received in advance and is recognized in the Income and Expenditure Statement of the period to which they relate. 2 CHANGES IN ACCOUNTING POLICIES 2.1 Investments In prior years, investments that are held for long term are stated at cost less provision for permanent diminution in value. With effect from 1 July 2002, the University adopted the new accounting policy for investments as stated in note 1.4 to the accounts in order to comply with SSAP 24 issued by the Hong Kong Society of Accountants. Investments that are other than Held-to-Maturity securities and Investment Securities are stated in the balance sheet at fair value. Changes in fair value are recognised in the Income and Expenditure Statement. The new accounting policy has been applied retrospectively, with the opening fund balances and the comparative information adjusted for the amount relating to prior years. 26 Notes to the Accounts!

29 OKO!"#$%&'( 2.2 Untaken Staff Leave Entitlements 27 Notes to the Accounts!!"#$%&'()*!+!"#$%&'()*+,-.!"#$%&'()*+,-!"#$%&'()*+,-.!!"#$%&'()*+,-.!"#$%&'!()*+!"#$% (!) (Expressed in thousands of dollars)!"!"# Balance as at 1 July 2001 With effect from 1 July 2002, the University accrues all the outstanding liabilities arising from the untaken leave entitlements of their staff. No such accruals were made in prior years. The new accounting policy has been applied retrospectively, with the opening fund balances and the comparative information adjusted for the amount relating to prior years. As a result of the above changes in accounting policies, the University has made the following adjustments to its financial results for the year ended 30 June 2002:!! "!"#$% Year ended 30 June 2002!!"# Balance as at 1 July 2002!!!"#!"#!! General Specific General Specific General Specific Funds Funds Funds Funds Funds Funds Income Income! As Previously Reported 279, , , ,935!"#$%&'() Prior-Period Adjustments in respect of:!"#$%&'( Adoption of SSAP24!"#$%&'( Adoption of SSAP34 (9,333) (8,107) 6,445 6,708 (2,888) (1,399) (13) (92,817) - - (13) (92,817) (9,346) (100,924) 6,445 6,708 (2,901) (94,216) As Restated 270, , , ,719

30 PK! FIXED ASSETS!"#"$%&'()*(+,-./(!"#$%&'()*+,-./,01234,5) : Fixed assets not fully written-off against grants or donations immediately upon acquisitions, namely those funded by loans, endowment funds or self-financing activities, include : (!) (Expressed in thousands of dollars)!"!" Furniture Senior Staff Buildings Equipment & Fixtures Quarters Carparks Total Cost! Opening Balance 296,759 19,870 36,029 93, ,673!" Additions for the year 548 2, ,481!" Disposals for the year - (562) (9) - - (571)! Closing Balance 297,307 22,274 36,987 93, ,583! Accumulated Depreciation! Opening Balance 56,453 12,924 6,135 93, ,284!" Charges for the year 6,713 4,040 3, ,785! Written back on disposal - (543) (3) - - (546)! Closing Balance 63,166 16,421 9,158 93, ,523! Net book value! Closing Balance 234,141 5,853 27, ,060! Opening Balance 240,306 6,946 29, ,389!"#$%&'()*+,)*-.-/012& 34567,89:;<=>:9? Fixed assets fully written-off against grants from the UGC or specific funds immediately upon acquisition can be found in Schedule 15 on page Notes to the Accounts!

31 QK INVESTMENTS (!) Note Restated (Expressed in thousands of dollars) Notes to the Accounts!!" Non-Current Investment!"# Investments In Subsidiaries a * *!"#$ Held-to-Maturity Securities b 249, ,407! Investment Securities c , ,476! Current Investment!"#$ Held-to-Maturity Securities b 63,446 -!"# Other Investments d 716, , , ,064 1,030, ,540 *! * $2 in value a : HKBU Holdings Ltd HKBU Nominee Ltd!"#$%&'()*+,#$)*"-./01213#4256 Note a : HKBU Holdings Ltd and HKBU Nominee Ltd are wholly owned by the University. Particulars of the companies and their subsidiaries are set out in schedule 16 on page 55. b :!"#$%&'()*+,-./ : (!"#$%&'()*+) Note b : The Market Value of Held-to-Maturity Securities was $319.6 million (2002 : $193.5 million) at the end of financial year. c :!"#$%&'()*+,-./0! (!") Note c : The Market Value of Investment Securities, which are listed in Hong Kong, was $0.4 million (2002 : Nil) at the end of financial year. d :!"#$%"#&'(')*+,-./ (!"#$%$&'()*) Note d : Other Investments include Investments held with Fund Managers aggregated to $716.8 million (2002 : $688.1 million).

32 RK!"#$ ACCOUNTS RECEIVABLE AND PREPAYMENTS (!) Restated (Expressed in thousands of dollars) SK! Accounts Receivable 17,789 13,083! Prepayments 2,532 1,928!"#$% ACCOUNTS PAYABLE AND ACCRUALS 20,321 15,011 (!) Restated (Expressed in thousands of dollars) Notes to the Accounts!!"# Commitment in respect of Outstanding Purchase Orders 51,722 49,331!"#$%&' Accrued Staff Salaries and Benefits 88,756 83,026!"#$% Creditors and Accruals 18,526 14,209!"#$ Amount Due to Partners on Joint Courses 12,215 7,950!"#$% Retentions Payable 6,816 7,251 Sundry Creditors 16,894 17, , ,804

33 TK! LONG TERM LOAN (!) (Expressed in thousands of dollars) Note Notes to the Accounts! 31 Payable : a Within 1 year 8,620 8,620 After 1 year but within 2 years 8,620 8,620!" After 2 years but within 5 years 25,860 25,860 After 5 years 34,481 43,101 68,961 77,581 77,581 86,201 a :!"#$%&'()*+,-./0#1#234567$)*8,9:-;<+=>?@ABCDEAFG7 Note a : The long term loan is an interest-free loan from the Government for the development of associate degree programmes. It is secured on properties and repayable in equal annual instalments over a period of ten years. UK!"# UGC HOLDING ACCOUNT (!) (Expressed in thousands of dollars) L=EF=!"# Amount receivable from/(payable to) UGC!"#$% Reserved Supplementary Grants (1,342) (3,033)!" Government Rent and Rates (159) 2,385!"# Home Financing Scheme (27) (7,654)!"# Matching Grant 3,703 - Others ,472 (8,251)

34 VK!"#$%&'()*+, ADVANCES FOR UGC-FUNDED CAPITAL AND OTHER PROJECTS (!) (Expressed in thousands of dollars)!" Approved Allocations :!! Capital Projects Other Projects Total!! "#$%& up to 1st July ,082, ,362 1,281,743 during the year 4,212 40,429 44,641!"#$% less: projects closed - (81,411) (81,411)!!"#$%"&' up to 30th June ,086, ,380 1,244, Notes to the Accounts!!" Net Subventions :!! "#$%& up to 1st July , ,218 1,077,941 during the year 3,878 24,172 28,050!"#$ less: projects closed - (71,052) (71,052)!!"#$%"&' up to 30th June , ,338 1,034,939!" Deduct: Expenditure!! "#$%&() up to 1st July 2002 (Restated) 885, ,478 1,022,230 during the year 11,279 22,405 33,684!"#$ less: projects closed - (71,052) (71,052)!!"#$%"&' up to 30th June ,031 87, ,862!"# $%&' Balance at 30th June ,570 15,507 50,077!"#$%&' Balance at 30th June 2002! As Previously Reported 41,981 13,740 55,721! Prior-Period Adjustments (10) - (10) As Restated 41,971 13,740 55,711

35 33 Notes to the Accounts! NMK! GENERAL FUNDS!! =! = =! =! = Opening Balance Opening Transferred Transferred! As Previously Prior-period Balance to General to Closing University Foundation Funds Reported Adjustments As Restated Endowment Expenditure Specific Funds Income Expenditure Balance E!F (Expressed in thousands of dollars) 24,163 (311) 23, ,761 2,653 (32) 2, , ,604 (1,111) 110, (828) 3,376 (113) 112,960 2,277 (3) 2, (47) 85 (61) 2,578 2,661 (26) 2, ,735 3,634 (43) 3, ,728!"#!" Au Shue Hung Foundation Fund!"#$ Mr Y C Cheng Fund!! General Donation - University Foundation Fund!!"#$%&'( Hang Seng Bank - HKBU Credit Card Fund!"#$" Hang Seng Bank Golden Jubilee Fund!"#$ Mr Jeffrey T C Li Endowment Fund!"#$%&'( Sir Run Run Shaw University Development Fund!"#$%& Sir Run Run Shaw Endowment Fund!"# Wing Lung Bank Fund!"#$%&'() Wu Shun Him Fund!"#$ Wu Yee Sun Education Fund 69,483 (741) 68, ,032 (257) 70,517 20,634 (222) 20, (798) 20,368 24,631 (329) 24, ,228 1,150 (11) 1, ,182 1,827 (15) 1, , ,717 (2,844) 261, (875) 8,530 (1,229) 268,658 7,930 (57) 7, (5,026) 77 (147) 2,777! General Reserve 272,647 (2,901) 269, # (5,901) 8,607# (1,376)# 271,435 #!"#$%&'()*+,-./0 The aggregate of these figures represents a net transfer of $7.246 million from Income and Expenditure Statement. :!"#$%&'()*+,-./01 Note : No administration fee is charged on these fund balances.

36 NNK! SPECIFIC FUNDS (!) (Expressed in thousands of dollars)!!! = =!!! = Opening Transferred Balance Opening from/ (to) Transferred Transferred Transferred As Previously Prior-period Balance General from from/ (to) Net from/ (to) Closing Sch Reported Adjustments As Restated Endowment Expenditure General Funds Specific Funds Transfer Reserve Income Expenditure Balance 444,344 (7,342) 437,002 - (2,849) 1,028 1, (4,366) 359,853 (263,927) 528, ,234 (573) 30, ,618 (36,428) 42, ,814 (45) 10, ,447 (7,253) 17, ,820 (516) 86,304 2,684 (92) (127) (743) (962) - 21,606 (21,921) 87, ,979 (151) 26, (376) (376) (5,055) 10,469 (9,181) 22, ,972 (44) 23,928 2,031-5,000 (731) 4,269-11,290 (10,247) 31,271 1,404 (11) 1, ,729! Self-financing Activities!"# Non-recurrent Subventions!"#$%&'( University-funded - Capital/Development Projects!" Endowment and Others! Research Projects!!" #! Scholarships, Prizes & Bursaries and Loan Funds!"# (!"#) Teaching Development Projects (Funded by Block Grant) 625,567 (8,682) 616,885 4,715 (2,941)# 5,901-2,960 (9,085)# 466,283# (348,957)# 732, ,368 (85,534) 124,834-1, ,293 98,187 - (101,877) 122,437 ( 11.1) Reserves (Note 11.1) 835,935 (94,216) 741,719 4,715 (1,648) 5,901-4,253 89, ,283 (450,834) 855,238 #!"#$%&'()*+,-./ The aggregate of these figures represents a net transfer of $105.3 million from Income and Expenditure Statement. 34 Notes to the Accounts!

37 NNKN RESERVES (!) (Expressed in thousands of dollars) 35 Notes to the Accounts!!"#$%& General and Development Reserve Fund!!! Opening Balance Opening As Previously Prior-period Balance Net Closing Reported Adjustments As Restated Transfer Balance 194,429 (85,534) 108,895 (6,763) 102,132!"#$%&'() School of Continuing Education 10,790-10,790 3,000 13,790 Premises Maintenance Reserve!"#$% University Quarters Operating Reserve 4,533-4,533 1,293 5,826!"#$%&'()*+,-./ Equipment Replacement Reserve for SSQ Club House & Swimming Pool 210,368 (85,534) 124,834 (2,397)# 122,437 #!"#$%&'()*+,-./0 The aggregate of these figures represents a net transfer of $2.397million to Income and Expenditure Statement. NOK!"# UGC EQUALIZATION ACCOUNT (!) (Expressed in thousands of dollars) ! Opening Balance - - Transfer from Income and Expenditure Statement 33,231 -! Closing Balance 33,231 -

38 NPK!" CASH AND CASH EQUIVALENTS (!) Restated (Expressed in thousands of dollars) !"#$ Cash at Bank and in Hand 23,286 32,448! Short-term Deposits 66, ,325 :!"#$% %&'()*+,-./ : Note : Cash and Cash Equivalents represent cash in hand and liquid instruments with maturities due within one month. NQK!"# ANALYSIS OF SPECIFIC INCOME AND EXPENDITURE 89, , Notes to the Accounts! (!) Restated Sch (Expressed in thousands of dollars) ! SPECIFIC INCOME! Self-financing Activities 359, ,007 2!"#$ Capital/Development Projects 42, ,781 3!"# Non-recurrent Subventions 48,618 27,064 4!" Donations and Benefactions 41,503 26,639 5! Research Projects 10,469 5, , ,233! SPECIFIC EXPENDITURE! Self-financing Activities 263, ,705 2!"#$ Capital/Development Projects 40, ,994 3!"#$% Expenditure met from Non-recurrent Subventions 36,428 32,846 4!"#$ Expenditure met from Donations and Benefactions 33,544 25,419 5! Research Projects 9,181 9, , ,379

39 37 Notes to the Accounts! NRK!"# NSK!"#$%&'()*+,-.!"#$%!""#$%!"#$%&' NTK!"!"#$!%&'()*+,-!"#$%&'()*+,!"#$#%&'(!!"#$!%&'()*+,-.!"#$%&#'(!"#$%&'()*+!"#$%&'()!"""#$!%&'()*+!"#$%&'!"#$%&'()*!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%&'()*+,-.!!"#$%&'(!"#$%&'()*+,-.!"#$%&'()*+,-.!"#$%& '()*+,!"#$%&'()*+,-!"#$%&'() 15. CAPITAL COMMITMENTS As at 30th June 2003, the total value of outstanding capital works authorized but not contracted for amounted to $307.1 million (2002: $290.9 million); the total value of outstanding capital works contracted for but not yet executed amounted to $47.1 million (2002: $43.4 million). 16. TAX The University is an approved charitable institution exempted from Hong Kong tax under Section 88 of the Inland Revenue Ordinance (Cap. 112). 17. SUPERANNUATION FUND AND MPF SCHEME The University operates a superannuation fund ("the Fund") registered under the Occupational Retirement Schemes Ordinance. The Fund has been operated as an exempted scheme under the Mandatory Provident Fund Schemes Ordinance ("MPFO") from 1st December The assets of the Fund are held separately from those of the University in an independently administered fund. Contribution paid by the University to the Fund for the year amounted to $69.8 million (2002: $71.4 million). In compliance with the MPFO, the University has participated in a master trust Mandatory Provident Fund ("MPF") scheme to provide MPF benefit to staff who are not eligible to join the Fund. Contribution paid by the University to the MPF scheme for the year amounted to $4.1 million (2002: $3.8 million). 18. RELATED PARTIES TRANSACTIONS 18.1 During the year, the University received fee income from its various subsidiary companies for service provided, the amount of which was not material. NUK!"#$% NUKN!"#$%&'()*+,-.!"#$%&'()

40 NUKO!"#$%&'()*+!", 18.2 During the year, the University received a repayment of!"#$%&'()*+,-. $1.0 million from one of its subsidiary companies on advance!"#$%&'()$%*+ made in earlier years to the company. Advances made to!"#$%&'()*+,-. these companies were fully written-off as part of investment!"#$%&'()*+,- loss of the University in the year of advancement if they were considered not recoverable. The repayment was 38 accounted for as investment gain of the University in the Income and Expenditure Account of the year. Notes to the Accounts!

41

42 Schedules!"#$%! /!!"#!"! -!"! Recurrent UGC Subventions Self-financing Activities Capital/Development Projects Non-recurrent Subventions Donations and Benefactions Specific Funds - Endowment and Others Research Projects Administration!"# 49 Academic & Academic Support! 52 Maintenance of Premises!"# 52 General Education!"#$ 53 Student Facilities and Amenities!"#$%&' 53 Staff Accommodation!"# 54 Other Operating Expenses! 54 Fixed Assets!"#$% 55 Information on University Subsidiary Companies! 56 Other Information!"#$%&'()*+,- Note : The schedules do not form part of the accounts.

43 Schedules NK!"#$% RECURRENT UGC SUBVENTIONS (!) (Expressed in thousands of dollars) Schedules!"#$ Recurrent Block Grant!"#$%&'()* Net Reserved Supplementary Grants for Cost-of-living Adjustments!"#$%&' Earmarked Grant for Home Financing Scheme!"#$%&'()*+,-./01 Earmarked Grant for Housing Related Expenses other than Home Financing Scheme 534, ,026 8,519 25,582 95,811 94,499 9,648 15,713!"#$% Blister Teacher Education Programmes 11,100 2,220! Supplementary Grant 36,925 -!"#$ Rates and Government Rent Refund 10,353 12, , ,149

44 OK! SELF-FINANCING ACTIVITIES (!) (Expressed in thousands of dollars)!!!"!!" EF Opening Balance Opening Net Surplus/ As Previously Prior-period Balance Expenditure/ (Deficit) Closing Reported Adjustments As Restated Transfer Income Appropriations for the Year Balance 319,173 (6,380) 312,793 (12,539) 263,389 (189,343) 61, ,300 5,165-5, ,296 (4,320) (999) 4,166 61,728 (177) 61,551 14,578 10,657 (19,497) 5,738 67,289 12,452 (119) 12,333 (500) (56) 12,277 21,087 (117) 20,970 3,763 9,943 (9,976) 3,730 24,700 24,739 (549) 24,190 (9,673) 72,124 (40,791) 21,660 45,850!"# School of Continuing Education! Academic Community Hall!"#$% Departmental Discretionary Funds!"#$%&'()* David C Lam Institute for East-West Studies!"#$%& Consultancy Work & Outside Practice Others 444,344 (7,342) 437,002 (4,346) 359,853 (263,927) 91, ,582 :!"#$%&'()*+,-.%/%0!12 Note : These activities are self-financing activities and are not within the scope of UGC-funded activities. 42 Schedules