Report of the Treasurer to the Council on the Institute's Financial Statements for the Financial Year from 1 July 2005 to 30 June 2006

Overview
2005/06 was the first year of the 2005-08 triennium, in which Block Grants from the University Grants Committee ("UGC" was reduced by $126 million or 21% as compared with the level in 2004/05. Despite the significant reduction in the UGC funding, the Institute managed to generate a surplus of $53 million from the Block Grants and transferred this amount to the General and Development Reserve Fund ("Reserve"). I am grateful to the management team of the Institute for their prudent financial management and unfailing effort in achieving cost savings. The Reserve has now been built up to $621 million, which is a comfortable level that can support the Institute in meeting the many challenges in the coming years, such as the development of a new curriculum or other new changes brought on by the upcoming "3+3+4" education system.

During the year, the Legislative Council decided to shelve the originally planned 5% reduction in funding for the UGC-funded institutions for the year 2007/08. As a result, the Institute will experience a mild reduction in the Block Grants pertaining to the decline in the number of Full-Time Equivalent ("FTE") students of the Institute. At the same time, since the Education and Manpower Bureau ("EMB") had relaxed the eligibility for its early retirement scheme to include also secondary teachers, the applications from government school teachers applying for early retirement had increased substantially in the year. This indirectly created a short-term increase in the demand of teachers.

Although the cut in funding for the 2005-08 triennium has become a less pressing issue, the Institute will continue to, as always, strike a good balance between costs and quality of education provided to our students.

Academic Programmes and Student Numbers
As at June 2006, the total UGC-funded student number in FTE terms of the Institute had reduced by 12% from the 2004/05 level to about 4,408. Among these, about 3,000 FTE students were at degree level, 400 FTE students at post-graduate level and the rest were at sub-degree certificate level or in-service professional development programmes.

In 2006/07, the Institute will start a new Bachelor of Arts (Honours) English Studies and Education collaborative programme with the Chinese University of Hong Kong. This is in addition to a number of ongoing collaborative degree programmes with other local sister institutions.

Apart from the UGC-funded programmes, the Institute has launched a number of self-financing programmes. Among these, the most popular programme is the Master of Education programme which recorded a student enrolment of 144 (or 72 in terms of FTE) in its first year. Most encouragingly, student enrolment for this Master of Education programme further increased to 238 in 2006/07. I am pleased with the successful development of this programme and am glad to see the Institute offering an additional channel for serving teaching professionals to further upgrade themselves.

During the year, the Institute's Division of Continuing Professional Education ("CPE") was incorporated as a company limited by guarantee in the name of HKIEd School of Continuing and Professional Education Limited ("SCPE"). It will continue to operate, in conjunction with the HKIEd, as a non-profit making organisation for the promotion and advancement of professional, technical, and continuing education.