In terms of our business, 2003/04 was a year in two halves. The first half continued the previous three years of decline in property market activity. The second saw a marked turn-around that has led to an unexpectedly strong financial performance for last year and opens up better prospects for the coming year. In terms of our strategic change plan, the year was one of hard work to address a variety of obstacles. Steady progress was made that contributed to securing the passage of the Land Titles Bill in July 2004 and gives us growing confidence that the long awaited centralized registration service, supported by the Integrated Registration Information System (IRIS), will be delivered later in the year.

For 2002/03 the Trading Fund's revenue was 20% lower than it had been in 1999/00, reflecting a third full year of decline in property market activity. For the first quarter of 2003/04, revenue was nearly 14% below our budget and over 20% down on the equivalent quarter in 2002/03. The second quarter was marginally better but revenue for the first half year was still over 15% down on the same period in the previous year. October saw a big jump in business due to increased transactions in both the primary and the secondary residential markets. Residential sector activity remained at a relatively high level for the remainder of the year leading to greater demand for services to the private sector over the year as a whole as compared with 2002/03. Only the impact of weaker demand for services to Government Departments, reflecting their tight budgetary situation, and very low return on deposits, reflecting very low interest rates, left us at the end of the year still slightly short of 2002/03's overall revenue.

Against the threat of reduced revenue we had aimed to reduce expenditure significantly so as to keep down costs to customers. This was achieved. Overall expenses came down by 5.2%, the major contribution to which came from reduced staff costs.

The combined effect of recovery in our business volumes and reduction in our core costs puts the trading fund in a strong position for the coming year.

Central Registration

In my last report I anticipated that the reorganization of the department to deliver a unified registration and information service for the whole territory would be implemented in January 2004. This target was not achieved. The integrated registration information system (IRIS) on which the reorganization depends, was not ready to enter service then. Testing for the system is still continuing. It is expected that this will now be completed in the summer. Before IRIS can be put into service, a commencement day for the main parts of the Land Registration (Amendment) (2002) Bill has to be approved by the Legislative Council. This cannot be sought until all testing is satisfactorily completed. Given the legislative procedures that have to be satisfied, the earliest commencement date for the central registration service and IRIS will be in December 2004.

I regret this delay in introducing the major service improvements for our customers that these will represent. All of us in the Department, together with our contractors, are working hard to ensure that our pledge to transform the quality of our service will be met without any further delay.

I reported last year that the Land Titles Bill had faced significant challenges when re-introduced into the Legislative Council. The mechanism to bring existing property under the new legislation and the provisions on indemnity and rectification were the areas most questioned in the Bills Committee. During the year the Land Registry legal team, with invaluable assistance from two experienced private sector solicitors engaged as consultants, developed a new approach to conversion in discussions with the Law Society working party on title registration. The new scheme, dubbed 'daylight conversion' won widespread support which opened the way for passage of the Bill.

The extent of the changes that were needed to the Bill, not just to give effect to the new conversion mechanism but also to address a wide variety of other issues raised during the 39 meetings of the Bills Committee required a massive redrafting exercise within only a few weeks. I would like to pay tribute to the outstanding work of Mr. Jeffrey Gunter and his team at the Law Drafting Division of the Department of Justice on this task. I would also like to thank the Law Society working party, under the Chairmanship of Mr. Peter Aherne for their willingness to volunteer so much time and to give such helpful comment and support to the development of the legislation. Many thanks are also due to Ms. Monica Lo, the Senior Solicitor in the Land Registry, who with her small team dealt with a prodigious demand for advice, papers and presentations over the last year. I am delighted that all their efforts have been rewarded with success.

Passage of the legislation holds out the promise of title registration being introduced into Hong Kong, giving owners and purchasers increased security and improving the efficiency of conveyancing. Before that promise can be realized, a great deal of further work is required and I expect that it will be at least two years before the legislation can be brought into effect. There are a number of issues on the legislation itself that we have undertaken to examine further with various parties. Regulations need to be drafted. Extensive guidance notes for professionals and public education material need to be prepared and presented. Further development of the IRIS will be needed. This work is already beginning and will place substantial demands on the Land Registry's management and manpower over the coming few years. We will be increasing our management strength to deal with this.

The major priority for this year is the successful conclusion of the system testing for IRIS and setting a firm date for implementing central registration. We will be reviewing our fees in the run up to the launch of central registration, taking account of the improved business position and the additional investments and commitments arising from passage of the Land Titles Ordinance. We will also be setting new standards for service delivery under the central registration system and for internet services after IRIS goes live. The preparation work for introduction of title registration will be divided into several streams. The further legal work is already beginning. Other aspects will only begin to pick up after we have got central registration up and running smoothly. Underlying all our work is our shared understanding of the need to maintain trust, improve service and increase the value that we give to the people of Hong Kong. That is reflected in the theme for staff development training this year, 'Upholding Integrity, Striving for Service Excellence' and I trust that it will be apparent to all who work with us and all who come to us for services during the year.