Annual Report 2001 - 2002

Certified Financial Statements

For the year ended 31 March 2002 Expressed in HK$'000

Profit and Loss Account

  Note 2002   2001
Turnover 3 405,641   430,186
Operating costs 4 (310,999)   (342,418)
Profit from operations   94,642   87,768
Other income 5 15,945   25,109
Finance cost 6 (3,467)   (7,353)
Profit before tax   107,120   105,524
Taxation 7 (15,220)   (13,235)
Profit after tax   91,900   92,289
Dividend 8 (27,570)   (27,687)
Rate of return on fixed assets 9 26.6%   25.7%

There were no recognised gains or losses other than the profit after tax for the year.

K.A. Salkeld, J.P.
Land Registrar and General Manager,
Land Registry Trading Fund

As at 31 March 2002 Expressed in HK$'000

Balance Sheet

  Note 2002   2001
ASSETS        
Non-current assets        
Fixed assets 10 353,141   360,329
Current assets        
Debtors and prepayments   12,453   14,226
Amounts due from related parties   11,535   5,211
Placements with banks   416,820   371,440
Cash and bank balances   2,185   829
  442,993   391,706
Current liabilities        
Deferred revenue 11 2,592   3,464
Short-term borrowings 12 23,660   23,660
Interest payable to Government   1,751   4,342
Customers' deposits 13 22,714   23,172
Creditors   3,210   3,489
Amounts due to related parties   24,542   22,717
Tax payable   7,411   1,150
  85,880   81,994
Net current assets   357,113   309,712
Total assets less current liabilities   710,254   670,041
Non-current liabilities        
Deferred tax 14 2,897   3,237
Government loan 15 23,660   47,320
NET ASSETS   683,697   619,484
CAPITAL AND RESERVES        
Trading fund capital 16 118,300   118,300
Retained earnings 17 537,827   473,497
Proposed dividend 8 27,570   27,687
683,697   619,484

For the year ended 31 March 2002 Expressed in HK$'000

Cash flow Statement

    Note 2002   2001
Operating activities        
Profit from operations   94,642   87,768
Depreciation and amortisation   18,036   56,315
(Decrease)/Increase in deferred revenue   (872)   400
Increase/(Decrease) in creditors and amounts due to related parties   1,546   (6,358)
(Decrease) in customers' deposits   (458)   (542)
(Increase)/Decrease in debtors and amounts due from related parties   (4,979)   10,830
Net cash inflow from operating activities   107,915   148,413
Returns on investments and servicing of finance        
Rental received   3,227   2,302
Interest received   13,146   23,335
Interest paid   (6,058)   (8,546)
Dividend paid   (27,687)   (28,714)
Net cash outflow from returns on investments and servicing of finance   (17,372)   (11,623)
Taxation        
Profits tax paid   (9,299)   (37,705)
Tax paid   (9,299)   (37,705)
Investing activities        
Net increase in placements with banks (other than cash equivalents)   (191,000)   (1,000)
Capital projects   (10,848)   (11,413)
Other assets   -   8
Net cash outflow from investing activities   (201,848)   (12,405)
Net cash (outflow)/ inflow before financing   (120,604)   86,680
Financing        
Loan repayments 18 (23,660)   (26,260)
Net cash outflow from financing   (23,660)   (26,260)
(Decrease)/Increase in cash and cash equivalents   (144,264)   60,420
Cash and cash equivalents at 1 April 2001   147,269   86,849
Cash and cash equivalents at 31 March 2002 19 3,005   147,269

Notes on the Accounts

1. Status of the Land Registry Trading Fund
The Land Registry Trading Fund was established on 1 August 1993 under the Legislative Council Resolution passed on 30 June 1993 pursuant to sections 3, 4 and 6 of the Trading Funds Ordinance (Cap. 430). The Land Registry administers a land registration system by maintaining an up-to-date Land Register and provides its customers with services and facilities for searches of the Land Register and related land records. The Land Registry also processes applications for the incorporation of owners.
2. Accounting policies

(a) Basis of accounting
The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong.
(b) Fixed assets
(i) Fixed assets appropriated to the Land Registry Trading Fund on 1 August 1993 are stated at the value contained in the Legislative Council Resolution for the setting up of the Land Registry Trading Fund. Fixed assets acquired since 1 August 1993 and costing more than $100,000 on an individual basis are stated at their costs of acquisition.
(ii) For capital projects under development, the costs include the actual direct expenditure and staff costs for planning, design and supervision during the development period.

(c) Depreciation and amortisation
  Depreciation
(i) Depreciation is provided on a straight-line basis calculated to write off the cost of assets less residual value over their estimated useful lives. The annual rates of depreciation used are :
Building 3.3%
Computer systems 20%
Equipment, furniture and fittings 10% - 20%
Office car 20%
(ii)

Land is regarded as a non-depreciating asset.

Amortisation
Capital projects are amortised over a period of five years. Full year amortisation is charged if a project starts commissioning on or before 30 September of the year, while half-year amortisation is charged for a project commissioned after 30 September.
(d) Deferred tax
Provision is made for deferred tax in respect of all material timing differences attributable to accelerated depreciation allowances on fixed assets except where it is considered that no liability will crystallise in the foreseeable future.
(e) Revenue recognition
Revenue is recognised as services are provided. Interest income is recognised on an accrual basis.
(f) Related parties
The Land Registry Trading Fund is a separate accounting entity within the Government of the Hong Kong Special Administrative Region established under the Trading Funds Ordinance (Cap. 430). During the year, the Land Registry Trading Fund has entered into transactions with various related parties, including Government bureaux and departments, trading funds and financially autonomous bodies controlled or significantly influenced by the Government, in the ordinary course of its business.
(g) Cash equivalents
Cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts of cash without notice and which were within three months of maturity when acquired.


3. Turnover
2002   2001
Registration of documents 215,670   233,870
Search 75,496   80,214
Copying 58,158   61,866
Reports on title 42,867   42,951
Owners incorporation 7,580   6,833
Others 5,870   4,452
405,641   430,186

4. Operating costs
2002   2001
Staff costs 223,176   220,642
General operating expenses 21,261   20,198
Computer service charges 22,754   20,030
Rental and management charges 23,809   23,747
Central administration overheads 1,568   1,137
Depreciation and amortisation 18,036   56,315
Audit fees 395   349
    310,999   342,418

5. Other income
2002   2001
Rental income from Government 3,227   2,302
Bank deposits interest 12,718   22,807
15,945   25,109

6. Finance cost
2002   2001
Interest on Government loans 3,467   7,353

7. Taxation

Notional profits tax is provided at the rate of 16% (2001 : 16%). A payment in lieu of profits tax calculated on the basis of the provisions of the Inland Revenue Ordinance (Cap. 112) will be made to the Government. Provision is made for deferred tax in respect of all material timing differences attributable to accelerated depreciation allowances on fixed assets except where it is considered that no liability will crystallise in the foreseeable future.

2002   2001
Notional profits tax 15,560   19,459
Under-provision in previous year -   144
Deferred tax for the year Capital allowances less than related depreciation charge (340)   (6,368)
Taxation for the year 15,220   13,235

8. Dividend

A dividend of $27.570 million being 30% of the profit after tax is proposed for the year ended 31 March 2002 (2001 : $27.687 million).

9. Rate of return on fixed assets

This is calculated as a percentage of operating profit and interest income after taxation to Average Net Fixed Assets (ANFA). The Land Registry Trading Fund is expected to meet a target return of 10% per annum on ANFA as determined by the Financial Secretary.

10. Fixed assets
Land and Buildings Computer Systems Equipment, Furniture and Fittings Office Car Set- up Costs Total
Cost or Valuation            
At 1 April 2001 350,000 364,568 23,059 192 3,800 741,619
Additions/(Adjustment) - 10,848 - - - 10,848
At 31 March 2002 350,000 375,416 23,059 192 3,800 752,467
Aggregate Depreciation/mortisation          
At 1 April 2001 29,525 327,270 20,628 67 3,800 381,290
Charge for the year 3,851 12,341 1,806 38 - 18,036
At 31 March 2002 33,376 339,611 22,434 105 3,800 399,326
Net Book Value            
At 31 March 2002 316,624 35,805 625 87 - 353,141
At 31 March 2001 320,475 37,298 2,431 125 - 360,329
11. Deferred revenue

This represents outstanding search tickets and subscription fees/other service charges received in advance of which services have not yet been rendered.

2002   2001
Search tickets 604   612
Subscription fees/other service charges
 1,988   2,852
Balance at 31 March 2002 2,592   3,464

12. Short-term borrowings
2002   2001
Government loan repayable within one year at 31 March 2002(see also note 15)      
Set-up loan 23,660   23,660

13. Customers' deposits
2002   2001
Direct Access Services customers 21,562   22,172
Government departments 1,152   1,000
Balance at 31 March 2002 22,714   23,172

14. Deferred tax
2002   2001
Balance at 1 April 2001 3,237   9,605
Transfer to current taxation (340)   (6,368)
Balance at 31 March 2002 2,897   3,237

15. Government loan
2002   2001
Government loan repayable after one year at 31 March 2002 23,660   47,320
A set-up loan of $236.6 million from the Capital Investment Fund was made in accordance with the resolution passed by the Legislative Council on 30 June 1993 to finance part of initial assets valued at $354.9 million appropriated to the Land Registry Trading Fund effective from 1 August 1993. The loan is repayable in ten equal annual instalments of 23.66 million starting from 1 August 1994. The ninth instalment due to be payable on 1 August 2002 is shown under short-term borrowings. The balance of $23.66 million shown under this item represents the balance of the loan after the ninth instalment.

A further loan facility of $160.7 million from the Capital Investment Fund was approved by the Finance Committee on 16 July 1993 to finance the capital projects under development and initial years' working capital of the Land Registry Trading Fund. The project/working capital loan was to be drawn as and when necessary during the four year period between 1993-94 and 1996-97 with a repayment period of five years. So far, only a drawdown of $13 million was made on 1 August 1995 and was fully repaid on 1 August 2000. On 21 February 1997, the Finance Committee approved an extension of the drawdown period of the estimated undrawn balance ($115 million) of the existing loan facility from 31 March 1997 to 31 March 2001. The drawdown period has now expired and no further extension of the loan facility has been made.

Interests for both loans are paid on the amount outstanding at the average of the best lending rates quoted by the continuing members of the Committee of the Hong Kong Association of Banks.

 

16. Trading fund capital

This represents the Government's investment in the Land Registry Trading Fund.

2002   2001
Balance at 1 April 2001 118,300   118,300
Addition
 -   -
Balance at 31 March 2002 118,300   118,300

17. Retained earnings
2002   2001
Balance at 1 April 2001 473,497   408,895
Profit for the year 91,900   92,289
    565,397   501,184
Proposed dividend (27,570)   (27,687)
Balance at 31 March 2002 537,827   473,497

18. Analysis of changes in financing during the year

Government loan
(including short-term borrowings)
2002   2001
Balance at 1 April 2001 70,980   97,240
Cash outflow from financing (23,660)   (26,260)
Balance at 31 March 2002 47,320   70,980

19. Analysis of the balances of cash and cash equivalents at end of year

  2002   2001
Cash and bank balances 2,185   829
Placements with banks (cash equivalents portion) 820   146,440
  3,005   147,269

20. Related party transactions
  Apart from those separately disclosed in the accounts, the other material related party transactions for the year are summarised as follows :-
  (a) Services provided to related parties included registration of land documents, search of land registers and records, supply of copies of land records and reports on title. The total revenue derived from these services amounted to $78 million (2001 : $80 million). This amount is included in Turnover under note 3.
  (b) Services received from related parties included computer services, accommodation, central administration and auditing. The total cost incurred on these services amounted to $40 million (2001 : $37 million). This amount is included in Operating Costs under note 4.
  Charging for services rendered to or received from related parties was on the same basis, that is, at the rates payable by the general public for services which were also available to the public or on a full cost recovery basis for services which were available only to related parties.

21. Capital commitments

At 31 March 2002, the Land Registry Trading Fund had capital commitments, so far as not provided for in the financial statements, as follows :
  2002   2001
Contracted for 21,900   -
Authorised but not contracted for
 149,600   209,000
  171,500   209,000

22. Operating lease commitments

At 31 March 2002, the total future minimum lease payments under operating leases of the Land Registry Trading Fund are payable as follows :
Land and Buildings
2002   2001
Operating leases which expire:      
  within one year 454   5,975
  in the second to fifth years inclusive 14,738   17,729
  over five years -   -
    15,192   23,704

23. Comparative figures

Certain comparative figures have been reclassified to conform to the current year's presentation.