CO129-562-8 Hong Kong University- Engineering Faculty 16-6-1937 - 5-4-1938 — Page 9

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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 investments. In each case mortgages form

the predominant factor, and we cannot consider, in

present circumstances, that such a form of investment,

especially in the case of Shanghai mortgages, is as safe

as we should desire.

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 31%. 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 expansion is to be contemplated in the University's activities, and we are

more than reluctant to believe that such a decision is

inevitable, 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.