Report of the Treasurer to the Council on the Group’s Financial Statements for the Financial Year from 1 July 2010 to 30 June 2011

Overview
The Institute continued to move steadily towards becoming an Education-focused, multidisciplinary and research-strong institution. After the launching of new UGC-funded non-Education degree programmes, the Institute was in the process of launching new self-financed non-Education programmes, at both undergraduate and postgraduate levels, to enrich the range of programmes offered to the community.

Following the significant reduction in expenditure of last year (2009/10) as compared with the previous year (2008/09) after the strengthening of various cost controls, the expenditure in current year (2010/11) continued to decrease, in spite of an increase in income. As a result, the Institute had turned the net funding deficit of $62 million in 2009/10 to a net surplus of $82 million for this year.

Academic Programmes and Student Numbers
There were five new progammes launched during the year. New UGC-funded programmes were Bachelor of Arts (Honours) in Language Studies and Bachelor of Social Sciences (Honours) in Global and Environmental Studies. For the self-financed programmes, they were Bachelor of Health Education (Honours), International Executive Master of Arts in Educational Leadership and Change, and Master of Arts in Music Education.

The total number of UGC-funded students in Full-Time Equivalent (“FTE”) terms studying at the Institute as at June 2011 increased by about 6.5% from 2009/10 to about 4,897 FTE students in 2010/11. The increase mainly came from undergraduate programmes, of about 8.4%, but was slightly offset by a decrease of about 1.6% in students at postgraduate level.

Among the non UGC-funded programmes, the Master of Education continued to be the most popular programme with student enrolment of about 421 FTE students. The Doctor of Education programme had 76 FTE students.

The HKIEd School of Continuing and Professional Education Limited (“SCPE”) continued to offer the Project Yi Jin Programmes (“PYJ”), with about 1,013 FTE students, and the Pre-Associate Degree Foundation Certificate Programmes (“Pre- AD”) and Associate Degree Programmes (“AD”) with about 526 FTE students in 2010/11.

Income and Expenditure
The Group adopts the Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants. For details of the changes in accounting policy in relation to the new standards, please refer to Note 2 of the Consolidated Financial Statements of the Institute.

Income
There were net increases in the UGC Block Grants and Earmarked Grants of about $42 million and $29 million respectively, as compared to 2009/10. The increase in UGC Block Grants was mainly due to increased student enrolment, whilst the increase in UGC Earmarked Grants was mainly because of the receipt of Matching Grant during the period and the increase in research projects. However, there was a decrease in donation of about $7 million. With the growth in student numbers, Tuition, Programmes and Other Fees of the Institute had increased by about $32 million. Regarding investment, the Institute continued to invest in bank deposits with a diversity of banks, as the global economy remained to be unstable. With the anticipation of appreciation of the Renminbi, new deposits in Renminbi had been made over the year which had contributed positively to the investment return for the year. The Institute will continuously oversee its investment strategy and will make adjustments where appropriate in response to the changing global economic conditions.

At the subsidiary level, the SCPE had a total income of about $70.3 million in 2010/11, which was $7.9 million lower than that of 2009/10 and was mainly due to lower student intake.

Over the year, the Group’s non-UGC-funded income had steadily increased by $12 million to about $293 million. The increase was mainly attributable to increase in tuition fees from self-financed programmes and more tendered training and consultancy contracts awarded by several government agencies.

Expenditure
The expenditure of the Group decreased by about $43 million as compared to last year to a total of about $1,116 million. The expenditure at the Institute reduced by about $33 million while the expenditure of its subsidiaries decreased by about $10 million in 2010/11.

At the Institute, all of the expenditure categories had experienced decreases, except for Other Academic Services which showed a small increase. The decrease of about $14 million in Learning and Research was mainly due to the reduction in staff costs following the retirement of academic staff members as well as staff turnover. With regard to the small increase in Other Academic Services, more resources were deployed to support the new academic programmes and the preparation for the New Undergraduate Programme under the 3+3+4 Academic Structure.

Under Institutional Support, a total saving of about $19 million was achieved. The majority of the savings was contributed by a reduction in Premises and Related Expenses of about $11 million, as a result of a decrease in repair and maintenance works, utilities, cleaning and security expenses, after a review of the service requirements done in April 2010.

At the subsidiary level, the SCPE had a total expenditure of about $61.9 million in 2010/11 which was $9.9 million lower than that of 2009/10. The decrease was mainly due to decreased course fees paid to PYJ partners as a result of the decreased number of PYJ students, and lower staff costs.

Superannuation Scheme
Membership of The Hong Kong Institute of Education Superannuation Scheme (“Superannuation Scheme”) stood at 393 and the Superannuation Scheme had total net assets of approximately $482 million as at 30 June 2011.

In addition, a total of 1,575 members of staff participated in the Mandatory Provident Fund Scheme with an approximate total fund balance of $82 million as at 30 June 2011.

Outlook
Through prudent financial planning, the Institute has maintained a healthy financial position, and is ready to meet the challenges of curriculum reform in the next triennium. Contingency funding is built into the 2011/12 budget, to empower management to make swift decisions to address any unforeseeable risks in the preparation for the double cohort in 2012. Under the 3+3+4 Academic Structure, students of our core Bachelor of Education programme will experience a new five-year undergraduate curriculum, whereas students pursuing other Bachelor degree programmes will study for four years. This will be an exciting journey for the Institute in providing our students with different pathways, which enhance the breadth and depth in their learning to meet the changing needs of contemporary society in the era of globalisation and knowledge revolution.

Dr Eric LI Ka-cheung, GBS, JP
Treasurer
The Council of The Hong Kong Institute of Education
14 October 2011