The Land Registry- - Annual Report 2000

Annual Report 2000 - 01
Certified Financial Statements

The Land Registry Trading Fund Profit and Loss Account

For the year ended 31 March 2001 Expressed in HK$'000

	Note	2001	2000

Turnover	3	430,186	466,907
Operating costs	4	(342,418)	(366,864)

Profit from operations		87,768	100,043
Other income	5	25,109	19,585
Finance cost	6	(7,353)	(8977)

Profit before tax		105,524	110,651
Taxation	7	(13,235)	(14,939)

Profit after tax		92,289	95,712
Dividend	8	(27,687)	(28,714)



Rate of return on fixed assets	9	25.7%	23.6%

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
5 September 2001

The Land Registry Trading Fund Balance Sheet
As at 31 March 2001 Expressed in HK$'000

	Note	2001	2000

ASSETS
Non-current assets
Fixed assets	10	360,329	405,239

Current assets
Debtors and prepayments		14,226	14,629
Amounts due from related parties		5,211	16,167
Placements with banks		371,440	309,300
Cash and bank balances		829	1,549

		391,706	341,645

Current liabilities
Deferred revenue	11	3,464	3,064
Short-term borrowings	12	23,660	26,260
Interest payable to Government		4,342	5,535
Customers' deposits	13	23,172	23,714
Creditors		3,489	2,620
Amounts due to related parties		22,717	29,944
Tax payable		1,150	19,253

		81,994	110,390

Net current assets		309,712	231,255

Total assets less current liabilities		670,041	636,494
Non-current liabilities
Deferred tax	14	3,237	9,605
Government loan	15	47,320	70,980

NET ASSETS		619,484	555,909

CAPITAL AND RESERVES
Trading fund capital	16	118,300	118,300
Retained earnings	17	473,497	408,895
Proposed dividend	8	27,687	28,714

		619,484	555,909

The Land Registry Trading Fund Cash flow Statement
For the year ended 31 March 2001 Expressed in HK$'000

	Note	2001	2000

Operating activities
Profit from operations		87,768	100,043
Depreciation and amortisation		56,315	69,667
Increase/(Decrease) in deferred revenue		400	(396)
Decrease in creditors and amounts due to related parties		(6,358)	(5,199)
(Decrease) /Increase in customers' deposits		(542)	159
Decrease/(Increase) in debtors and amounts due from related parties		10,830	(6,092)

Net cash inflow from operating activities		148,413	158,182

Returns on investments and servicing of finance
Rental received		2,302	2,302
Interest received		23,335	16,180
Interest paid		(8,546)	(11,166)
Dividend paid		(28,714)	(18,899)

Net cash outflow from returns on investments and servicing of finance		(11,623)	(11,583)


Taxation
Profits tax paid		(37,705)	(11,686)

Tax paid		(37,705)	(11,686)

Investing activities
Net increase in placements with banks (other than cash equivalents)		(1,000)	(35,500)
Capital projects		(11,413)	(3,246)
Other assets		8	(693)

Net cash outflow from investing activities		(12,405)	(39,439)

Net cash inflow before financing		86,680	95,474
Financing
Loan repayments	18	(26,260)	(26,260)

Net cash outflow from financing		(26,260)	(26,260)

Increase in cash and cash equivalents		60,420	69,214
Cash and cash equivalents at 1 April 2000		86,849	17,635

Cash and cash equivalents at 31 March 2001	19	147,269	86,849

Notes on the Accounts
For the year ended 31 March 2001 Expressed in HK$'000

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.

Accounting policies

(a)

Basis of accounting
The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong.

(b)

Early adoption of Statement of Standard Accounting Practice
The Land Registry Trading Fund has adopted the revised Statement of Standard Accounting Practice No. 9 "Events After the Balance Sheet Date" issued by the Hong Kong Society of Accountants in January 2001. Following the adoption of this revised standard, dividends proposed or declared after the balance sheet date are no longer recognised as a liability at the balance sheet date but are disclosed as a separate component of equity on the face of the balance sheet. The accounting policy has been applied retrospectively. As a result, the proposed dividend of HK$28.714 million appearing in the balance sheet as at 31 March 2000 was reclassified as an item in Capital and Reserves.

(c)

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.

(d)

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 system	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.

(e)

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.

(f)

Revenue recognition
Revenue is recognised as services are provided. Interest income is recognised on an accrual basis.

(g)

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.

(h)

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.

Turnover

	2001	2000
Registration of documents	233,870	241,926
Search	80,214	83,461
Copying	61,866	77,290
Reports on title	42,951	52,928
Owners incorporation	6,833	6,691
Others	4,452	4,611

	430,186	466,907

Operating costs

	2001	2000
Staff costs	220,642	222,415
General operating expenses	20,198	20,416
Computer service charges	20,030	27,428
Rental and management charges	23,747	25,392
Central administration overhead	1,137	1,215
Depreciation and amortisation	56,315	69,667
Audit fees	349	331

	342,418	366,864

Other income

	2001	2000
Rental income from Government	2,302	2,302
Bank deposits interest	22,807	17,283

	25,109	19,585

Finance cost

	2001	2000
Interest on
Government loans repaid and repayable within one year	2,993	2,959
Government loan repayable after one year	4,360	6,018

	7,353	8,977

Taxation

Notional profits tax is provided at the rate of 16% (2000 : 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.

	2001	2000
Notional profits tax	19,459	24,261
Under-provision/(Over-provision) in previous year	144	(1)
Deferred tax for the year Capital allowances less than related depreciation charge	(6,368)	(9,321)

Taxation for the year	13,235	14,939

8.	Dividend A dividend of $27.687 million being 30% of the profit after tax is proposed for the year ended 31 March 2001 (2000 : $28.714 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 Building	Computer Systems	Equipment, Furniture and Fittings	Office Car	Set- up Costs	Total
Cost or Valuation
At 1 April 2000	350,000	353,155	24,132	192	3,800	731,279
Additions/(Adjustment)	-	11,413	(8)	-	-	11,405
Disposals	-	-	(1,065)	-	-	(1,065)

At 31 March 2001	350,000	364,568	23,059	192	3,800	741,619

Aggregate Depreciation/ Amortisation
At 1 April 2000	25,674	277,587	18,950	29	3,800	326,040
Charge for the year	3,851	49,683	2,743	38	-	56,315
Written back on disposals	-	-	(1,065)	-	-	(1,065)

At 31 March 2001	29,525	327,270	20,628	67	3,800	381,290

Net Book Value
At 31 March 2001	320,475	37,298	2,431	125	-	360,329

At 31 March 2000	324,326	75,568	5,182	163	-	405,239

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.

	2001	2000
Search tickets	612	1,909
Subscription fees/other service charges	2,852	1,155

Balance at 31 March 2001	3,464	3,064

12.

Short-term borrowings

	2001	2000
Government loan repayable within one year at 31 March 2001(see also note 15)
Set-up loan	23,660	23,660
Project/Working capital loan	-	2,600

	23,660	26,260

13.

Customers' deposits

	2001	2000
Direct Access Services customers	22,172	22,714
Government departments	1,000	1,000

Balance at 31 March 2001	23,172	23,714

14.

Deferred tax

	2001	2000
Balance at 1 April 2000	9,605	18,926
Transfer to current taxation	(6,368)	(9,321)

Balance at 31 March 2001	3,237	9,605

15.

Government loan

	2001	2000
Government loan repayable after one year at 31 March 2001	47,320	70,980


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 eighth instalment due to be payable on 1 August 2001 is shown under short-term borrowings. The balance of $47.32 million shown under this item represents the balance of the loan after the eighth 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.

	2001	2000
Balance at 1 April 2000	118,300	118,300
Addition	-	-

Balance at 31 March 2001	118,300	118,300

17.

Retained earnings

	2001	2000
Balance at 1 April 2000	408,895	341,897
Profit for the year	92,289	95,712

	501,184	437,609
Proposed dividend	(27,687)	(28,714)

Balance at 31 March 2001	473,497	408,895

18.

Analysis of changes in financing during the year

	Government loan (including short-term borrowings)
	2001	2000
Balance at 1 April 2000	97,240	123,500
Cash outflow from financing	(26,260)	(26,260)

Balance at 31 March 2001	70,980	97,240

19.

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

	2001	2000
Cash and bank balances	829	1,549
Placements with banks
(cash equivalents portion)	146,440	85,300

	147,269	86,849

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 $80 million (2000 : $90 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 $37 million (2000 : $45 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 2001, the Land Registry Trading Fund had capital commitments, so far as not provided for in the financial statements, as follows :

	2001	2000
Contracted for	-	6,600
Authorised but not contracted for	209,000	202,700

	209,000	209,300

22.

Comparative figures

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