Financial Report AIT ASIAN INSTITUTE OF TECHNOLOGY 27 April 2006

Contents Financial Reporting – Main Issues, Initiatives & Results Net Loss Trend – Overview Un-audited FY2005 Measures to Address Financial Results FY 2006 Proposed Budget

To ensure that financial statements: provide a true & fair view of the financial results and position are presented in accordance with generally acceptable accounting principles Financial Reporting – Main Issues

Presentation of statutory reporting is line with reporting of Higher Education Institutions in the US & UK and IFRS Rectify incorrect past accounting practices - agency fund as custodian fund - separation of UNEP.RRC.AP - excess funds of active sponsored programs record as advances/debtors - all residuals in general reserve fund Financial Reporting – Initiatives

Close inactive accounts & completed sponsored programs Identify overspending/losses in agency fund & Baht 66 mil write-off Revise management reporting Financial Reporting – Initiatives

Financial Reporting – Results Financial statements give actual state of financial affairs can be relied upon for future planning

Major factor: Tuition fees ↓ 20% in Aug 2003 Net tuition fees: ↓ Baht 260 Mio over 3 years ↑ Student enrolments: ↑ but not enough Other factors: AIT fellowships, salaries, overhead recovery from sponsored programs ↑ AIT Fellowships: ↑ ↑ Salaries: ↑ Overhead recovery: ↓ ↑ Trend : NET LOSS ↑ Net Results Trend Analysis (2002–2005)

Student Enrolments (excluding students on exchange & extension)

Net Tuition Fees

Overhead Income (from sponsored programs)

F10 Headcount (Faculty & Staff)

Salaries – Operating Fund (Fund10)

Profit & Loss – Operating Fund (Fund 10)

Comparison of Semi-annual Results (all funds)

Comparison of 1 st Quarter Results (all funds)

Announce financial problems in July budget ↓ 10% Salary freeze in 2006 Recruitment freeze for resignations/retirements Set up 3 task forces Appoint KPMG Sweden for institutional assessment Restructure central administration Revise 2006 budget process Revise 2006 overhead recovery & faculty honorarium formula for sponsored programs 2005 Measures Taken

Major Findings & Recommendations Governance, internal control & risk management Efficiency of administrative processes Relations between schools & administration Roles of administrative offices Financial management processes Responsibility Centre Management concept Institutional Assessment By KPMG Sweden

Major Findings Management information system Employee & compensation structure Program management processes AITCV Strategic planning & budgeting process Implementation of recommendations by June 06 Institutional Assessment By KPMG Sweden

2005 Un-audited Results Revenue ↓ Bht 29 Mio (3%) to Bht 1,121 Mio ↑ Expenses ↑ Bht 1 Mio to Bht 1,222 Mio ↑ Operating deficit ↑ Bht 30 Mio (42%) to Baht 101 Mio ↑ Net deficit ↑ Bht 12 mio (8%) to Baht 172 Mio Cash ↓ Bht 231 Mio (35%) to Baht 423 Mio Reserves ↓ Bht 179 Mio (62%) to Baht 109 Mio

Financial Situation CRITICAL

2006 interim cost budget ↓ 4% Provident Fund Contribution ↓ from 10% to 5% (savings Bht 13 mio) Salary ↓ by up to 10% (savings Bht 20 mio) Downsize admin & support staff headcount ↓ by up to 24% ↑ Tuition fees for new intake ↑ 14% in Aug 2006 Interim capital budget ↓ 43% 2006 Immediate Measures

Proposed 2006 Budget - Overview Total Operating Revenue Baht 1.3 Bil Total Operating Expenses Baht 1.2 Bil Operating Surplus Baht 56 Mil Net Deficit Baht 42 Mil Capital Budget Baht 25 Mil

2006 Proposed Operating Budget

2006 Proposed Operating Budget by Fund

2006 Proposed School F10 Operating Budget (excluding indirect costs & depreciation)

2006 Proposed Admin Offices F10 Operating Budget (excluding depreciation)

2006 Projected Cash & Reserves

2006 Proposed Capital Budget

AIT ASIAN INSTITUTE OF TECHNOLOGY