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Financial Report

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Certified Financial Statements
PROFIT  AND  LOSS  ACCOUNT
for the year ended 31 March 2006
(Expressed in thousands of Hong Kong dollars)
  Note 2006 2005
Turnover 4 432,466 435,291
Operating costs 5 (285,270)
(272,973)
Profit from operations   147,196 162,318
Other income 6 18,116
3,763
Profit before tax   165,312 166,081
Taxation 7 (25,809)
(27,954)
Profit after tax   139,503
138,127
Dividend 8 (69,752)
(69,064)
Rate of return on fixed assets 9 31.5%
32.0%




BALANCE  SHEET
as at 31 March 2006
(Expressed in thousands of Hong Kong dollars)
  Note 2006 2005
ASSETS      
Non-current assets      
Property, plant and equipment 10 376,180 364,774
Intangible assets 11 69,307 76,185
Held-to-maturity securities 12 99,451
     -      
    544,938 440,959
Current assets      
Debtors and prepayments   15,467 13,462
Amounts due from related parties   5,358 5,279
Placements with banks   454,700 406,500
Cash and bank balances   7,936
90,624
    483,461
515,865
Current liabilities      
Deferred revenue 13 3,030 1,588
Customers’ deposits 14 22,982 22,733
Creditors   22,727 8,316
Amounts due to related parties   1,460 4,194
Provision for employee benefits   2,184 6,634
Tax payable   6,383
17,230
    58,766
60,695
Net current assets   424,695
455,170
Total assets less current liabilities   969,633 896,129
Non-current liabilities      
Deferred tax 15 23,710 22,337
Provision for employee benefits   65,296
63,604
NET ASSETS   880,627
810,188
CAPITAL AND RESERVES      
Trading fund capital 16 118,300 118,300
Retained earnings 17 692,575 622,824
Proposed dividend 8 69,752
69,064
    880,627
810,188




K.A. SALKELD, J.P.
Land Registrar and General Manager,
Land Registry Trading Fund
13 September 2006




STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2006
(Expressed in thousands of Hong Kong dollars)  
  Note 2006 2005
Balance at beginning of year   810,188 716,833
Profit after tax for the year   139,503 138,127
Dividend paid during the year   (69,064)
(44,772)
Balance at end of year   880,627
810,188




CASH  FLOW  STATEMENT
for the year ended 31 March 2006
(Expressed in thousands of Hong Kong dollars)
  Note 2006 2005

Cash flows from operating activities

    

Profit from operations

   147,196 162,318

Depreciation and amortisation

   42,054 23,665

Increase/(Decrease) in deferred revenue

   1,442 (132)

Increase/(Decrease) in creditors and amounts due to related parties

   11,677 (14,914)

(Decrease)/Increase in provision for employee benefits

   (2,758) 387

Increase in customers’ deposits

   249 1,462

(Increase)/Decrease in debtors and amounts due from related parties

   (1,132) 1,924

Profits tax refund

   - 7,809

Profits tax paid

   (35,283)
(6,718)

Net cash from operating activities

   163,445
175,801
Cash flows from investing activities      
Decrease/(Increase) in placements with banks (other than cash equivalents)   402,000 (1,000)
Capital projects   (46,582) (42,105)
Purchase of held-to-maturity securities   (99,466) -
Interest received   17,179
3,275
Net cash from/(used in) investing activities   273,131
(39,830)
       
Cash flows from financing activities      
Dividend paid   (69,064)
(44,772)
Net cash used in financing activities   (69,064)
(44,772)
       
Net increase in cash and cash equivalents   367,512 91,199
       
Cash and cash equivalents at beginning of year   95,124
3,925
       
Cash and cash equivalents at end of year 18 462,636
95,124


NOTES  TO  THE  ACCOUNTS
(Amounts expressed in thousands of Hong Kong dollars unless otherwise stated)


1. General
 
  The Land Registry Trading Fund (“LRTF”) 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.

Significant accounting policies
 


2.1
Statement of compliance
    
    These financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong and all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), a collective term which includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).  A summary of the significant accounting policies adopted by the LRTF is set out below.
   
The HKICPA has issued a number of new and revised HKFRSs that are effective or available for early adoption for accounting periods beginning on or after 1 January 2005.  Information on the changes in accounting policies resulting from initial application of these new and revised HKFRSs for the current and prior accounting periods reflected in these financial statements is provided in note 3.

 

2.2

 Basis of preparation of the financial statements
    
    The measurement basis used in the preparation of the financial statements is historical cost.
     
    The preparation of financial statements in conformity with HKFRSs requires the management of LRTF to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
     
    The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
   
There are no critical accounting judgements involved in the application of the LRTF’s accounting policies.  There are also no key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next year.


  2.3 Financial assets and financial liabilities
 
2.3.1
Initial recognition
       
    The LRTF classifies its financial assets and financial liabilities into different categories at inception, depending on the purpose for which the assets were acquired or the liabilities were incurred.  The categories are : loans and receivables, held-to-maturity securities and other financial liabilities.
    
    Financial assets and financial liabilities are measured initially at fair value, which normally equals to the transaction prices, plus transaction costs for loans and receivables, held-to-maturity securities and other financial liabilities that are directly attributable to the acquisition of the financial asset or issue of the financial liability.
 
    The LRTF recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument.  Regular way purchases and sales of financial assets are accounted for at settlement date.
 

 
2.3.2 		Categorisation
   



2.3.2.1
Loans and receivables
         
        Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which the LRTF has no intention of trading.  This category includes debtors, amounts due from related parties, placements with banks, cash and bank balances.
  
        Loans and receivables are carried at amortised cost using the effective interest method less impairment losses, if any (note 2.3.4).
       
   

 

 2.3.2.2 Held-to-maturity securities
         
        Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturity which the LRTF has the positive intention and ability to hold to maturity, other than those that meet the definition of loans and receivables.
       
        Held-to-maturity securities are carried at amortised cost using the effective interest method less impairment losses, if any (note 2.3.4).

      2.3.2.3 Other financial liabilities
          
                  Other financial liabilities are measured at amortised cost using the effective
            interest method.
         
   

2.3.3

Derecognition

  
         
      A financial asset is derecognised when the contractual rights to receive the cash flows from the financial asset expire, or where the financial asset together with substantially all the risks and rewards of ownership have been transferred.
          
      A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
          
   

2.3.4

Impairment of financial assets
         
      The carrying amount of loans and receivables and held-to-maturity securities are reviewed at each balance sheet date to determine whether there is objective evidence of impairment.  If any impairment evidence exists, a loss is recognised in the profit and loss account as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.  If in a subsequent period, the amount of such impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the profit and loss account.
 
 

2.4

Property, plant and equipment

  
    Property, plant and equipment appropriated to the LRTF on 1 August 1993 were measured initially at deemed cost equal to the value contained in the Legislative Council Resolution for the setting up of the LRTF.  Property, plant and equipment acquired since 1 August 1993 are capitalised at their costs of acquisition.
      
    The following property, plant and equipment are stated in the balance sheet at cost less accumulated depreciation and any impairment losses (note 2.6) :
 
    - buildings held for own use appropriated to the LRTF on 1 August 1993; and
 
    - plant and equipment, including computer equipment, furniture and fittings and other equipment.
  

 

 Depreciation is calculated to write off the cost of property, plant and equipment, less their estimated residual value, on a straight line basis over the estimated useful lives as follows :

 

 

 

 

  - Buildings 30 years

 

  

 

  

 

  - Plant and equipment 5 years

 

  

 

 

 

  - The land on which the LRTF’s buildings are situated as appropriated to the LRTF on 1 August 1993 is regarded as a non-depreciating asset.
 

 

 

 

 

 

 Gains or losses arising from the disposal of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in the profit and loss account at the date of disposal.

 

2.5

 Intangible assets
   

Intangible assets include acquired computer software licences and capitalised development costs of computer software programmes.  Expenditure on development of computer software programmes is capitalised if the programmes are technically feasible and the LRTF has sufficient resources and the intention to complete development.  The expenditure capitalised includes the direct labour and costs of materials.  Intangible assets are stated at cost less accumulated amortisation and any impairment losses (note 2.6).
     
   

Amortisation of intangible assets is charged to the profit and loss account on a straight-line basis over the assets’ estimated useful lives of 5 years.
     
 

2.6

Impairment of fixed assets

  
   

The carrying amounts of fixed assets, including property, plant and equipment and intangible assets, are reviewed at each balance sheet date to identify any indication of impairment.  If there is an indication of impairment, an impairment loss is recognised in the profit and loss account whenever the carrying amount of an asset exceeds its recoverable amount.  The recoverable amount of an asset is the greater of its net selling price and value in use.


  2.7 Cash equivalents

  
    Cash equivalents are short-term highly liquid investments that are readily convertible into known amounts of cash and subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.
  2.8 Employee benefits
       
    Salaries and annual leave are accrued and recognised as an expense in the year in which the associated services are rendered by the staff.  Staff oncosts including pensions, housing and non-monetary benefits provided to the staff by the Government of the Hong Kong Special Administrative Region (“the Government”) are charged to the LRTF and recognised as an expense in the year in which the associated services are rendered.

 

2.9

 Income tax
   

(i)

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities.  Income tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
       
   

(ii)

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
       
   

(iii)

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.  Deferred tax assets also arise from unused tax losses and unused tax credits.
       
     

All deferred tax liabilities, and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the assets can be utilised, are recognised.
       
     

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.  Deferred tax assets and liabilities are not discounted.

      The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised.  Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.
       
    (iv)

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset.  Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities if, and only if, the LRTF has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met :
       
      -  in the case of current tax assets and liabilities, the LRTF intends to settle them on a net basis; or
       
      -  in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority.

  2.10 Revenue recognition
       
    Revenue is recognised as services are provided.  Interest income is recognised as it accrues using the effective interest method.
     
    The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period.  The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.  When calculating the effective interest rate, the LRTF estimates cash flows considering all contractual terms of the financial instruments but does not consider future credit losses.  The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

  2.11 Foreign currency translation  
       
    Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in the profit and loss account.
     
  2.12 Related parties  
       
    The LRTF is a separate accounting entity within the Government established under the Trading Funds Ordinance.  During the year, the LRTF 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.

3. Changes in accounting policies
  
  The HKICPA has issued a number of new and revised HKFRSs that are effective for accounting periods beginning on or after 1 January 2005.
   
  The accounting policies of the LRTF after the adoption of these new and revised HKFRSs have been summarised in note 2.  The following sets out information on the significant changes in accounting policies for the current and prior accounting periods reflected in these financial statements.
   
  The LRTF has not applied any new standard or interpretation that is not yet effective for the current accounting period (note 24).
   
  3.1 Financial instruments (HKASs 32 and 39, Financial instruments)
     
    With effect from 1 April 2005, in order to comply with HKAS 32, the LRTF has provided additional disclosures of terms, conditions, accounting policies, risk and fair values of financial assets and financial liabilities throughout the notes to the financial statements and, in particular, in note 20.  In order to comply with HKAS 39, the LRTF has changed its accounting policies relating to financial assets and financial liabilities to those set out in note 2.3.  Details of the changes are as follows :

    (a) Financial instruments
   
  In prior years, all financial assets were carried at cost less provision for diminution in value.  All financial liabilities were carried at cost.
     
    With effect from 1 April 2005 and in accordance with HKAS 39, financial instruments are recognised according to the following categories : loans and receivables, held-to-maturity securities and other financial liabilities as set out in note 2.3.2.
     
  (b) Impairment of financial assets
     
    In prior years, provisions were made by the LRTF against financial assets when evidence showed that a diminution in value was other than temporary.
     
    With effect from 1 April 2005, in order to comply with HKAS 39, the LRTF has changed its accounting policies relating to impairment of financial assets to those set out in note 2.3.4.
     
  (c) Description of transitional provisions and effect of adjustments
         
      According to the transitional provisions in HKAS 39, the changes in accounting policies of the above items should be adopted by way of opening balance adjustments to reserves and restatement of comparative amounts is prohibited.
 
      The LRTF has found that no opening balance adjustments are required and that the changes in accounting policies have no effect on the line items on the face of the financial statements for the year ended 31 March 2006.
 
 

3.2

 Changes in presentation (HKAS 1, Presentation of financial statements and HKAS 38, Intangible assets)
      
    In prior years, computer software licences and capitalised development costs were classified as fixed assets.  With effect from 1 April 2005, in order to comply with HKAS 1 and HKAS 38, the LRTF has changed the presentation and these items are now presented separately as “intangible assets” on the balance sheet.
     
    The new accounting policy has been applied retrospectively with comparatives reclassified.
4. Turnover      
      2006 2005
  Registration of documents   241,071 233,720
  Search   72,891 85,297
  Copying   68,372 66,958
  Reports on title   39,118 38,235
  Owners incorporation   5,787 5,761
  Others  
5,227
5,320
     
432,466
435,291

5. Operating costs      
      2006 2005
  Staff costs   190,496 189,117
  General operating expenses   16,823 20,815
  Computer service charges   18,242 17,372
  Rental and management charges   15,506 19,828
  Central administrative overheads   1,550 1,783
  Depreciation and amortisation   42,054 23,665
  Audit fees  
599
393
     
285,270
272,973

6. Other income      
      2006 2005
  Bank deposits interest   18,131 3,763
  Net exchange losses  
(15)
-
     
18,116
3,763


7. Taxation
  (i) Notional profits tax is provided at 17.5% of the estimated assessable profits for the year.  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.  The amount of taxation charged to the profit and loss account represents :
    2006 2005
    Current tax    
    Notional profits tax 24,384 23,948
    Under/(Over)-provision in previous year
52
(452)
     
24,436
23,496
         
    Deferred tax    
    Origination and reversal of temporary differences
1,373
4,458
         
    Total income tax expense
25,809
27,954

 



(ii)



Reconciliation between tax expense and accounting profit at applicable tax rates :
       
2006
2005
    Profit before tax
165,312
166,081
         
    Notional tax on profit before tax 28,929 29,064
    Under/(Over)-provision in previous year 52 (452)
    Tax effect of non-taxable revenue
(3,172)
(658)
    Actual tax expense
25,809
27,954


     
8. Dividend 
           
  A dividend of $69.752 million (2005 : $69.064 million) being 50% of the profit after tax is proposed for the year ended 31 March 2006. 

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”).  Fixed assets comprise property, plant and equipment and intangible assets.  The LRTF is expected to meet a target return of 10% per annum on ANFA as determined by the Financial Secretary.

       
10. Property, plant and equipment
        Equipment,  
    Land   Furniture  
    and Computer and  
Buildings Equipment Fittings Total
  Cost        
           
  At 1 April 2004 350,000 129,615 15,103 494,718
  Additions - 21,262 1,776 23,038
  Disposal - - (6,011) (6,011)
  At 31 March 2005 350,000 150,877 10,868 511,745
           
  At 1 April 2005 350,000 150,877 10,868 511,745
  Additions - 34,298 3,069 37,367
  Disposal - (80,120) (2,128) (82,248)
  At 31 March 2006 350,000 105,055 11,809 466,864
             
  Accumulated depreciation        
           
  At 1 April 2004 41,078 85,559 14,948 141,585
  Charge for the year 3,851 7,150 396 11,397
  Disposal - - (6,011) (6,011)
  At 31 March 2005 44,929 92,709 9,333 146,971
           
  At 1 April 2005 44,929 92,709 9,333 146,971
  Charge for the year 3,851 21,103 1,007 25,961
  Disposal - (80,120) (2,128) (82,248)
  At 31 March 2006 48,780 33,692 8,212 90,684
           
  Net book value        
           
  At 31 March 2006 301,220 71,363 3,597 376,180
           
  At 31 March 2005 305,071 58,168 1,535 364,774
           

11. Intangible assets      

 
      Computer software licenses
      and system development costs
         
      2006 2005
  Cost      
         
  At beginning of year   359,528 340,461
  Additions   9,215 19,067
  Disposal  
(256,223)
-
  At end of year  
112,520
359,528
         
  Accumulated amortisation      
         
  At beginning of year   283,343 271,075
  Charge for the year   16,093 12,268
  Disposal  
(256,223)
-
  At end of year  
43,213
283,343
         
  Net book value      
         
  At end of year  
69,307
76,185

12.

Held-to-maturity securities

    

 
      2006  2005

 

At amortised cost

 

 

 

Listed :

 

 

 

- in Hong Kong

54,967 -

 

- outside Hong Kong
14,943
-

 

 

 69,910 -

 

Unlisted
29,541
-

 

 
99,451
-


13. Deferred revenue  
     
  This represents outstanding search tickets and subscription fees/other service charges received in advance of which services have not yet been rendered.
         
      2006 2005
         
  Search tickets   375 416
  Subscription fees/other service charges  
2,655
1,172
  Balance at end of year  
3,030
1,588


14. Customers’ deposits      
      2006 2005
  Online services subscribers   21,871 21,477
  Government departments  
1,111
1,256
  Balance at end of year  
22,982
22,733


  
15. Deferred tax
   
  Major components of deferred tax recognised in the balance sheet and the movements during the year are as follows :


    Depreciation allowances in excess of the related depreciation Other temporary differences Total
         
 

Balance at 1 April 2004

 17,986 (107) 17,879
         
  Charged to profit and loss account
4,418
40
4,458
         
 

Balance at 31 March 2005
22,404
(67)
22,337

 

Balance at 1 April 2005

 22,404 (67) 22,337
         
  Charged to profit and loss account
1,372
1
1,373
         
 

Balance at 31 March 2006
23,776
(66)
23,710

     
16. Trading fund capital  
     
  This represents the Government’s investment in the LRTF.
         
17. Retained earnings      
      2006 2005
  Balance at beginning of year   622,824 553,761
         
  Profit after tax for the year  
139,503
138,127
         
      762,327 691,888
         
  Proposed dividend  
(69,752)
(69,064)
         
  Balance at end of year  
692,575
622,824
         
18. Cash and cash equivalents    
    2006 2005
  Cash and bank balances   7,936 90,624
  Placements with banks (cash equivalents portion)  
454,700
4,500
  Cash and cash equivalents at end of year  
462,636
95,124

19. Related party transactions
     
  Apart from those separately disclosed in the accounts, the other material related party transactions for the year are summarised as follows :
   
  (i) 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 $72 million (2005 : $68 million).  This amount is included in Turnover under note 4.
   
  (ii) Services received from related parties included computer services, accommodation, central administration and auditing.  The total cost incurred on these services amounted to $19 million (2005 : $29 million).  This amount is included in Operating costs under note 5.
   
    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.

20.

 Financial instruments

 

 
  (i) Investment policy  

 

 
    LRTF maintains a conservative approach on investments in securities.  Investment decisions are made according to the guidelines from the Secretary for Financial Services and the Treasury, Hong Kong Monetary Authority and other relevant regulations. Invested securities are issued by the Hong Kong SAR Government or quasi-government bodies in Hong Kong with sound credit ratings and are in general held to maturity.
     
  (ii) Credit risk
     
    The LRTF’s credit risk is primarily attributable to debtors and debt investments. The LRTF has a credit policy in place and the exposure to these credit risks are monitored on an ongoing basis.
     
    In respect of debtors, deposits are required from our online services subscribers.
     
    Investments are made in debt securities from issuers with sound credit ratings and therefore the LRTF does not expect any investment counterparty to fail to meet its obligations.
     
    At the balance sheet date, the LRTF does not have significant concentrations of credit risk.  The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.
     
  (iii) Liquidity risk
     
    Under the Trading Funds Ordinance, the LRTF is responsible for its own cash management, including short term and long term investment of cash surpluses, subject to approval by the Secretary for Financial Services and the Treasury. The LRTF’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.
     
  (iv) Interest rate risk
     
    Interest rate risk refers to the risk of loss arising from changes in market interest rates.  This can be further classified into fair value interest rate risk and cash flow interest rate risk.
     
    Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates.  Since the LRTF’s held-to-maturity securities and placements with banks bear interest at fixed rates, their fair values will fall when market interest rates increase.  However, as all the held-to-maturity securities and placements with banks are stated at amortised cost, their carrying amounts will not be affected by changes in market interest rates.
     
    Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The LRTF’s financial instruments are not exposed to cash flow interest rate risk because they do not bear interest at a floating rate.
     
The table below sets out the effective interest rates of the LRTF’s major interest bearing assets stated at carrying amounts and categorised by maturity dates.

             
  Effective
interest
rate		 Up to
3 months		 3 months
to
1 year		 1 - 5
years		 5 - 10
years 		Total
             
2006            
             

Held-to-maturity securities

 5.26% - - - 99,451 99,451

Placements with banks

 3.95% 454,700 - - - 454,700
    454,700 - - 99,451 554,151
             
2005            
             

Held-to-maturity securities

 - - - - - -
Placements with banks 1.41% 4,500 402,000 - - 406,500
    4,500 402,000 - - 406,500

 

 

 

 

 (v) Foreign currency risk

 

 

 

   The normal business transactions are denominated in Hong Kong dollars and therefore do not give rise to foreign currency risk.

 

 

 

   In respect of investments which are denominated in United States dollars, the LRTF does not expect that there will be any significant currency risk associated.

 

 

 

   At the balance sheet date, financial assets totalling $99 million (2005 : Nil) were denominated in United States dollars.  The remaining financial assets and all financial liabilities were denominated in Hong Kong dollars.

 

 
  (vi) Fair values

 

  

 

   The fair values of financial instruments traded in active markets are their quoted prices at the balance sheet date.  In the absence of such quoted market prices, fair values are estimated using present value or other valuation techniques, using inputs based on market conditions existing at the balance sheet date.

 

   The fair values of held-to-maturity securities at the balance sheet date are as follows :

 

 
    Carrying value  Fair value
      
    2006 2005  2006 2005
           
    Held-to-maturity securities 99,451 - 98,105 -
      

 

   Other financial instruments are stated in the balance sheet at amounts equal to or not materially different from their fair values.


21. Capital commitments
  
  At 31 March 2006, the LRTF had capital commitments, so far as not provided for in the financial statements, as follows :
           
    2006  2005
       
  Authorised and contracted for 45,515 70,100
  Authorised but not yet contracted for
64,920
45,850
   
110,435
115,950


22. Operating lease commitments
  
  At 31 March 2006, the total future minimum lease payments under non-cancellable operating leases for land and buildings are payable as follows :
 
      2006 2005
         
  Within one year   3,497 4,230
  In the second to fifth years inclusive  
2,649
6,245
     
6,146
10,475


 

 

 
23. Comparative figures

 

 

 

 

Certain comparative figures have been reclassified as a result of the changes in accounting policies.  Further details are disclosed in note 3.

 

 

 
24. Possible impact of amendments, new standards and interpretations issued but not yet effective for the annual accounting period ended 31 March 2006

 

 

 

 

Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards and interpretations which are not yet effective for the accounting period ended 31 March 2006 and which have not been adopted in these financial statements :


 

 

 

Effective for accounting periods beginning on or after

 

 

 

 

 

HKFRS 1, First-time adoption of Hong Kong
Financial Reporting Standards (revised)

 1 January 2006

 

    

 

HKFRS 6, Exploration for and evaluation of
mineral resources

 1 January 2006

 

    

 

HK(IFRIC)-Int 4, Determining whether
an arrangement contains a lease

 1 January 2006

 

    

 

HK(IFRIC)-Int 5, Rights to interests arising from
decommissioning, restoration and
environmental rehabilitation funds

 1 January 2006

 

    

 

HK(IFRIC)-Int 6, Liabilities arising from
participating in a specific market - Waste
electrical and electronic equipment

 1 December 2005

 

    

 

    

 

HK(IFRIC)-Int 7, Applying the restatement
approach under HKAS 29 Financial reporting
in hyperinflationary economies

 1 March 2006

 

    

 

 HK(IFRIC)-Int 8, Scope of HKFRS 2 1 May 2006

 

    

 

HK(IFRIC)-Int 9, Reassessment of embedded
derivatives

 1 June 2006

 

    

 

Amendment to HKAS 19, Employee benefits –
Actuarial gains and losses, group plans and disclosures

 1 January 2006

 

    

 

Amendment to HKAS 21, The effects of changes in
foreign exchange rate – Net investment in a foreign operation

 1 January 2006

 

    

 

Amendment to HKAS 39, Financial instruments :
Recognition and measurement :

  

 

    

 

 – Cash flow hedge accounting of
forecast intragroup transactions		 1 January 2006

 

    

 

 –The fair value option 1 January 2006

 

    

 

 –Financial guarantee contracts 1 January 2006

 

    

 

    

 

Amendment, as a consequence of the Hong Kong
Companies (Amendment) Ordinance 2005, to :

  

 

    

 

 –HKAS 1, Presentation of financial statements 1 January 2006

 

    

 

 –HKAS 27, Consolidated and separate financial
statements		 1 January 2006

 

    

 

 –HKFRS 3, Business combinations 1 January 2006

 

    

 

 HKFRS 7, Financial instruments : disclosures 1 January 2007

 

    

 

Amendment to HKAS 1, Presentation of financial
statements : capital disclosures

 1 January 2007

 

 

 

 

The LRTF is in the process of making an assessment of the impact expected of these amendments, new standards and interpretations in the period of initial application.  So far it has concluded that the adoption of HK(IFRIC)-Int 4, HK(IFRIC)-Int 9, HKFRS 7 and the amendment to HKAS 1 is unlikely to have a significant impact on the LRTF’s results of operations and financial position.  The other amendments, new standards and interpretations are not applicable to the LRTF’s operations.

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