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7. All the witnesses who were good enough to give us their views. whether members of the University staff or others, understood clearly that those views would be treated in the very strictest confidence. For this reason we do not propose either to give the names of such witnesses or to disclose the system upon. which we pursued our inquiries; and our considered conclusions will in general be given without any statement of the grounds on which they are based.
Finance.
8. In accordance with the first of our terms of reference we have made a very close examination of the present financial position of the University. On the assumption that the subsidy from the public funds of the Colony can be maintained at its present figure of $350,000 per annum, and on the further assumption that the income from fees will remain at its present figure of about $200,000 we may say at once that the existing position is not unsatisfactory.
9. The only other considerable source of income is, of course, the interest on the endowment funds (in which for convenience we have included certain special benefactions), and these in the immediate future may be expected to yield nearly $440,000 per annum.
10. With the economies now in force the total running expenses of the University come to only a few thousand dollars over $1,000,000; and it will be seen from this that, for once in its existence, there is no need for the University to panic.
11. We hasten to add that, taking the long view which we are specifically instructed to do, we consider the financial position unsatisfactory. We cannot but think that financially the University has in the past existed far too much from hand to mouth and we consider it to be our duty to face future possibilities steadily.
12. As regards the endowment funds more than one half of the income comes from sterling securities which we are satisfied are good. Of the balance approximately one-third comes from Hong Kong investments and two-thirds from Shanghai invest- In each case mortgages form the predominant factor, and we cannot con- sider, in present circumstances, that such a form of investment, especially in the case of Shanghai mortgages, is as safe as we should desire.
ments.
13. The present book value of the total endowment fund investments is just over ten million dollars; and we consider that it would be prudent to anticipate, not an appreciation in the capital value, but rather a gradual decline in the total yield to the "gilt-edged" basis of about 3%. If this anticipation is justified the $440,000 mentioned above must be reduced by at least $66,000 per annum.
14. Furthermore even if no expension is to be contemplated in the University's activities, and we are more than reluctant to believe that such a decision is inevit- able, it is to be remembered that nothing has been allowed in successive budgets for depreciation on buildings, some of them now growing old, and that there is no reserve fund whatever. It is our considered opinion that the University should no longer be content to live from hand to mouth but should at the earliest possible moment start including a surplus figure of at least $15,000 in every annual budget to go to reserve.
15. If the above is accepted we are at once faced with the necessity of sug- gesting economies of a "long-term" nature even if we need not recommend the emergency methods that have too often been unavoidable in the past.
16. Two comparatively minor economies present themselves. The House Allow ances paid to members of the staff who live out at present average about $20,000 per annum. We suggest that the allowances now paid to married men with families, married men without families and bachelors respectively are too high if