HKUST Annual Report 2023-2024

65 HKUST Annual Report 2023-2024 Appendix IV Finance Overview The financial year 2023/24 recorded a surplus of $1,162 million ($1,159 million for 2022/23). The surplus in 2023/24 was mainly due to significant investment gains resulting from better-than-expected economic data, which indicated that the central banks would lower interest rates, as well as expectations of profitability gain driven by advancements in artificial intelligence technology. By excluding the impact of investment return, the University recorded a surplus of $73 million in 2023/24 compared to $352 million in 2022/23. The University has practised Environmental, Social and Corporate Government (“ESG”) investing since 2018. Currently, over 75% of the investments are managed by fund managers who are signatories of United Nations Principles of Responsible Investment. As a result, the exposure of the University’s investments to fossil fuels is 75% lower than the benchmark and virtually zero exposure to controversial sectors such as tobacco and weapons. The University has also allocated 2.5% of its investments to climate solutions and will gradually increase it further going forward. Consolidated Income and Expenditure Consolidated income increased by $802 million to $7,517 million in 2023/24 ($6,715 million for 2022/23). The increase was primarily driven by higher government subventions and grants of $298 million due to the additional University Grants Committee (“UGC”) supplementary grants for General Pay Adjustment (“GPA”) and the increase in research and other earmarked grant income. Additionally, there was an increase in interest and net investment income of $282 million resulted from robust performance of the University’s public equity, fixed income and hedge fund investments, along with growth in tuition fees mainly from Self-financing Continuing Professional Education Programs, which amounted to $122 million as compared to last year. Consolidated expenditure increased by $784 million to $6,344 million ($5,560 million for 2022/23). The increase was mainly attributable to higher salaries and benefits costs due to the increase in headcounts of academic and research staff and GPA adjustments, as well as the increase in operating expenses due to the growth in teaching, learning and research expenses. Segment Results Commentaries on operating segments, analysed by UGC-Funded Activities and non-UGC Funded Activities, are as follows: UGC-Funded Activities UGC-Funded Activities showed a surplus of $344 million for the year ($436 million for 2022/23). After excluding the interest and net investment income of $449 million ($335 million for 2022/23), the underlying result was a deficit of $105 million (surplus of $101 million for 2022/23). Due to the favorable investment return recorded in 2023/24, the University’s UGC reserves increased to $4,629 million ($4,285 million for 2022/23). Non-UGC Funded Activities Self-Financing Continuing Professional Education Programs, Research and Other Activities Self-financing Continuing Professional Education Programs contributed a surplus of $374 million ($375 million for 2022/23), remained at the similar level as compared to last year. Research and other activities contributed a surplus of $212 million ($227 million for 2022/23), reflecting a slight decrease as compared to last year. In aggregate, the overall surplus of these operating segments amounted to $586 million ($602 million for 2022/23). Donations Activities Donations totalling $163 million were recognised as income for 2023/24 ($126 million for 2022/23). Overall, this segment showed a surplus of $232 million ($121 million for 2022/23) as contributed by the increase in investment return. The University has successfully secured $764 million new pledges in 2023/24 ($417 million in 2022/23). With the launch of The Hong Kong University of Science and Technology Foundation (“HKUST Foundation”), which is dedicated to outreach, fundraising, and donor engagement, the University anticipates that its fundraising capabilities will be further enhanced. Non-UGC Reserves Non-UGC reserve balances reached $9,998 million at the end of 2023/24 ($8,896 million for 2022/23). The increase in the reserve balance was mainly contributed by the afore-stated investment return, self-financing CPEP and other activities. Capital Expenditure More capital projects are underway to enhance the University’s facilities and infrastructure addressing the accommodation and amenity needs of students as well as supporting teaching, learning and research activities. To further enhance research capabilities for all HKUST researchers, the University has acquired advanced computing servers and established additional related infrastructure to complement our state-of-the-art high-performance computing facilities. Outlook Following the announcement in the 2023 Policy Address to double the non local student quota for the taught undergraduate programmes from 20% to 40% starting from the 2024/25 academic year, the University anticipates recruiting more students from different countries. This will promote internationalisation where local students will benefit from cultural diversity and broader global perspective. To boost innovation and entrepreneurship, the University introduced HKUST Redbird Innovation Fund (RIF), a $500 million initiative to create multiple Venture Investment Fund (VIFs) worth totally $2 billion in collaboration with investment partners. This initiative supports HKUST start-ups and aligns with the strategic focus set out in HKUST’s Vision Plan 3.0. It strengthens collaboration with universities and businesses, drives innovation, and accelerates breakthrough solutions. Being ranked 3rd in the World’s Top 600+ Young Universities in Times Higher Education Young University Rankings 2024 (1st in Hong Kong & Greater China), the University will continue to strive for excellence in education and research to become one of the top universities in the world. As of 30 June 2024, the University maintained a healthy reserve of $14.6 billion. To ensure the success of various initiatives and projects, the University will continue to exercise prudence and caution in its financial planning, ensuring that adequate resources are available for future development. Stephen YIU Kin-Wah Treasurer of the University October 28, 2024