TIDMWSL
RNS Number : 4265X
Worldsec Ld
29 April 2019
WORLDSEC LIMITED
Annual Report for the year ended 31 December 2018
CORPORATE INFORMATION
Board of Directors
Non-Executive Chairman
Alastair GUNN-FORBES*
Executive Directors
Henry Ying Chew CHEONG (Deputy Chairman)
Ernest Chiu Shun SHE
Non-Executive Directors
Mark Chung FONG*
Martyn Stuart WELLS*
* independent
Company Secretary
Vistra Company Secretaries Limited
First Floor, Templeback, 10 Temple Back, Bristol, BS1 6FL,
United Kingdom
Assistant Company Secretary
Estera Services (Bermuda) Limited
Canon's Court, 22 Victoria Street, Hamilton, HM 12, Bermuda
Registered Office Address
Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda
Registration Number
EC21466 Bermuda
Principal Bankers
The Hongkong and Shanghai Banking Corporation Limited
1 Queen's Road, Central, Hong Kong
External Auditor
BDO Limited
25th Floor, Wing On Centre, 111 Connaught Road Central, Hong
Kong
Principal Share Registrar and Transfer Office
Estera Management (Bermuda) Ltd.
Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda
International Branch Registrar
Link Market Services (Jersey) Limited
12 Castle Street, St Helier, JE2 3RT, Jersey, Channel
Islands
United Kingdom Transfer Agent
Link Asset Services
The Registry, 34 Beckenham Rd, Beckenham, Kent, BR3 4TU, United
Kingdom
Investor Relations
For further information about Worldsec Limited, please
contact:
Henry Ying Chew CHEONG
Executive Director, Worldsec Group
Unit 607, 6th Floor, FWD Financial Centre, 308 Des Voeux Road
Central, Sheung Wan, Hong Kong
enquiry@worldsec.com
Company's Website
http://www.worldsec.com
CONTENTS
Page
Chairman's statement 1
Directors' report 2
Statement of directors' responsibilities 17
Independent auditor's report 18
Consolidated statement of profit or loss and other comprehensive
income 23
Consolidated statement of financial position 24
Consolidated statement of changes in equity 25
Consolidated statement of cash flows 26
Notes to the consolidated financial statements 27
Investment policy 78
Biographical notes of the directors 79
Chairman's Statement
RESULTS AND REVIEW
During the year ended 31 December 2018, the audited consolidated
loss of Worldsec Limited (the "Company") and its subsidiaries
(together the "Group") was US$803,000, compared with a loss of
US$424,000 in 2017. Loss per share was US1.03 cents (2017: US0.75
cent). Net asset value per share was US6.3 cents (2017: US4.5
cents). Detailed discussion of the results and financial position
of the Group is set out in the directors' report on pages 2 to
16.
With the support of shareholders, the Company successfully
completed an open offer by way of the issue of new ordinary shares
in April 2018. This has strengthened the Company's capital base to
further the growth of Group.
Following the completion of the open offer, the Group expanded
its investment portfolio by acquiring two new investments
consisting of:
- an equity interest in Agrios Global Holdings Ltd. ("Agrios"),
the holding company of a data analytics driven agriculture
technology group that leases and manages properties and equipment
for eco-sustainable agronomy and provides advisory services to
support aeroponic cultivation in the cannabis sector; and
- an interest in an offshore term loan issued by Trillion Glory
Limited, a Hong Kong indirect wholly-owned subsidiary of Guangzhou
R&F Properties Co., Ltd. ("R&F Properties") which is a
Chinese property company listed on the Main Board of the Stock
Exchange of Hong Kong.
PROSPECTS
While China and the United States are making significant
progress in resolving their trade dispute to allay market concern
of a protracted and damaging standoff between the world's two
largest economic powers, Britain has, after extended and tortuous
discussion and debate and notwithstanding the passing of the
original withdrawal deadline, yet to be able to end the political
deadlock and uncertainty by plotting a path to withdraw from the
European Union. Meantime, in reaction to the global economy showing
signs of flagging, major central banks are generally taking a
dovish approach towards monetary accommodation that continues to
provide liquidity and support asset valuations in a historic low
interest rate era, posing continued challenges for private equity
investors to find investments with attractive returns within
acceptable risk limits. Coupled with the slowing momentum in the
economic growth in China where an ambitious reform agenda is being
pursued, the outlook for the investment market, particularly in the
Greater China and South East Asian region, remains challenging.
Nonetheless, with the strengthening of the Group's financial
resources following the successful completion of the open offer, I
am confident that the Group would be capable of further expanding
and diversifying its investment portfolio while meeting the
investment objective of the Company.
NOTE OF APPRECIATION
I wish to thank my fellow directors and staff for their efforts
and contributions made during the year ended 31 December 2018. I
would also like to extend a note of appreciation to shareholders
for their continued support of the Company.
Alastair Gunn-Forbes
Non-Executive Chairman
29 April 2019
DIRECTORS' REPORT
The directors submit the annual report of the Company and the
audited consolidated financial statements of the Company and its
subsidiaries for the year ended 31 December 2018.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The
Company and its subsidiaries are primarily engaged in investment in
unlisted companies in the Greater China and South East Asian
region.
RESULTS AND FINANCIAL POSITION
The audited consolidated loss of the Company and its
subsidiaries for the year ended 31 December 2018 was US$803,000,
compared with a loss of US$424,000 in 2017. Loss per share was
US1.03 cents (2017: US0.75 cent). The increase in the loss was
principally due to the negative change in the fair value of
financial assets that was recognised through the profit and loss
account in accordance with the newly adopted International
Financial Reporting Standard 9(*) . Excluding such negative change,
the loss would have been US$474,000.
During the year under review, dividends received from the
Group's investment in ICBC Specialised Ship Leasing Investment Fund
continued to provide a stable return, generating revenue in the
amount of US$96,000. In addition, interest income received from the
Group's investment in the term loan issued by a subsidiary of
R&F Properties amounted to US$40,000.
During the year under review, the Company raised additional
equity capital through the issue of new ordinary shares under an
open offer. This contributed to the increase in the net assets of
the Group, which stood at US$5.4 million as at 31 December 2018,
compared with US$2.5 million at the end of 2017. As the new
ordinary shares were issued at a premium to the underlying net
asset value, net asset value per share increased to US6.3 cents
(2017: US4.5 cents).
The additional equity capital raised by the Company through the
open offer also contributed to the increase in cash and cash
equivalents, which stood at US$2.6 million as at 31 December 2018,
compared with US$260,000 at the end of 2017.
Further details of the Group's results and financial position
are set out in the consolidated statement of profit or loss and
other comprehensive income on page 23, the consolidated statement
of financial position on page 24 and notes to the consolidated
financial statements on pages 27 to 77.
The Board does not propose to declare any dividend for the year
ended 31 December 2018 (2017: nil).
(*) Please refer to note 2.1(a) to the consolidated financial
statements on pages 28 to 33 for detailed discussion.
REVIEW
The Company is a closed-ended investment company with a premium
listing under Chapter 15 of the Listing Rules of the Financial
Conduct Authority (the "FCA") in the United Kingdom (the "UK"). In
accordance with the Company's investment policy, a copy of which is
set out on page 78, the investment strategy of the Group focuses on
investing in small to medium sized trading companies based mainly
in the Greater China and South East Asian region with a view to
building a diversified portfolio of minority investments in such
companies. The investment objective of the Company is to achieve
attractive investment returns through capital appreciation on a
medium to long term horizon. To spread the investment risk of the
Group, none of the Group's investments at the time when made
exceeded 20% of its gross assets.
DIRECTORS' REPORT (CONTINUED)
Velocity Mobile Limited ("Velocity"), one of the Group's
investee companies, is the holding company of a technology group
that provides real-time lifestyle mobile applications for premium
consumers focusing in the areas of dining, travel, experiences and
luxury goods. During the year under review, the Velocity group
continued to achieve strong growth in revenue on the back of
increased customer spend and engagement as well as significant
productivity gain driven by automation. In the third quarter of
2018, the Velocity group launched Velocity for Business, which is a
white-label product designed for enterprise customers. By the
fourth quarter of 2018, the Velocity group had secured three
corporate clients, including a world-renowned automobile
manufacturer, on multi-year, multi-million dollar global deals. The
launch of Velocity for Business is expected to enable the Velocity
group to meaningfully scale customer numbers thereby further
monetising the Velocity platform.
ayondo Ltd. ("Ayondo"), another of the Group's investee
companies, is the holding company of a financial technology group
that provides self-directed trading and social trading services for
contract-for-differences and spread betting. During the latter part
of the year under review, the Ayondo group focussed on pursuing its
B2B strategy in Asia. In October 2018, the Ayondo group secured two
separate contracts to collaborate with white-label partners by
providing the Ayondo trading platform services to their clients in
China and Cambodia. Subsequent to the year end, Ayondo requested in
January 2018 suspension of trading in its shares on Catalist of the
Singapore Exchange. In an announcement in February 2019, Ayondo
explained in length that ayondo Markets Limited ("AML"), a 99.91%
owned subsidiary of the Ayondo group operating a brokerage business
and regulated in the UK, was seeking clarification from the FCA on
certain accounting treatments in relation to a prescribed ratio for
the purpose of compliance. Ayondo also announced the entering into
with BUX Holding B.V. ("BUX"), one of the white-label partners of
the Ayondo group, of a non-binding heads of terms for the disposal
of AML to BUX (the "Proposed AML Disposal") in case there is a
capital shortfall in AML which may arise from regulatory or working
capital requirements. The Proposed AML Disposal will be subject to
the entry into a definitive agreement between the parties, the
approval by Ayondo shareholders and various conditions stipulated
in a notice of compliance received from the Singapore Exchange
Regulation. Ayondo further announced in February 2019 the entering
into with Golden Nugget Jinzhuan Limited ("iMaibo"), a Chinese
operator of a social trading platform with free content from key
opinion leaders, of non-binding strategic alliance terms that may
involve the eventual injection of an equity stake in iMaibo into
Ayondo. In March 2019, Ayondo applied for an extension of time for
the release of the financial statements of the Ayondo group for the
year ended 31 December 2018, and in April 2019, Ayondo issued a
profit warning in respect of such financial statements indicating
an increase in loss due mainly to the impairment of certain
intangible assets as tightening regulatory measures implemented in
Europe had adversely affected the contract-for-difference market.
Trading in the shares of Ayondo remains suspended. The last traded
price of the Ayondo shares was S$0.048 recorded on 29 January
2019.
In China, Oasis Education Consulting (Shenzhen) Company Limited
( ( ) ), a subsidiary of the 50% joint venture of the Group, Oasis
Education Group Limited ("Oasis Education"), continued to provide
consulting and support services to the Huizhou Kindergarten, which
graduated 52 pupils in the summer of 2018. For the academic term
commencing in February 2019, 35 new pupils have enrolled with the
Huizhou Kindergarten, raising its total pupil enrolment to more
than 250.
During the period under review, the Company raised new equity
capital of US$4.3 million to strengthen its capital base with a
view to furthering the development and expansion of the Group's
investment portfolio. This was accomplished in April 2018 through
an open offer of 28,367,290 new ordinary shares at US$0.15 per
share to shareholders on the basis of one new share for every two
existing shares held. In addition, the Company also proposed to
carry out subsequent placings of up to 100,000,000 new ordinary
shares should investor demand arise. No such placings, however,
took place and the placing programme lapsed on 12 March 2019.
Details relating to the fund raising exercise of the Company can be
found in the Company's open offer and subsequent placings
prospectus dated 13 March 2018, a copy of which is available on the
website of the Company.
DIRECTORS' REPORT (CONTINUED)
Following the completion of the open offer, the Group made two
new investments:
In June 2018, the Group invested CAD330,000 (equivalent to
US$249,000) in the equity capital of Agrios, the holding company of
a data analytics driven agriculture technology group that provides
property and equipment for lease and enhanced ancillary services to
the cannabis industry. The Agrios group holds various leasing,
consulting and service agreements with a producer and production
license holder under the Washington State Liquor and Cannabis Board
in the State of Washington of the United States. The services
provided by the Agrios group to the licensee include property lease
and management services, aeroponic equipment rentals, consulting
services for agronomy, bio and video monitoring as well as nutrient
and supplies procurement. In the fourth quarter of the year under
review, the Agrios group completed the acquisition of Greenfields
Agritech Limited, which has a 65% ownership interest in a joint
venture in the Yunnan Province (the "Yunnan Province") in China.
Once the required licenses are in place, the joint venture intends
to make use of the low cost supply of hemp fibre to develop
household products for the Chinese consumer market. In November
2018, Agrios was successfully listed and its shares commenced
trading on the Canadian Securities Exchange.
At about the same time of its investment in Agrios, the Group
also invested US$1 million in the offshore term loan bearing
interest at 8.5% per annum issued by Trillion Glory Limited, a Hong
Kong indirect wholly-owned subsidiary of R&F Properties which
is a Chinese property company listed on the Main Board of the Stock
Exchange of Hong Kong. The first 15% of the principal of the term
loan of US$150,000 was repaid on 15 October 2018, and the remaining
85% of the outstanding amount of US$850,000 will be due on 15
October 2019, which may be extended for no more than one year
subject to all lenders' consent. The interest is payable in arrears
on a quarterly basis.
As mentioned in the section headed "Results and Financial
Position" on page 2, during the year under review, the Group's
investment in the term loan issued by the subsidiary of R&F
Properties contributed interest income amounting to US$40,000 while
its investment in ICBC Specialised Ship Leasing Investment Fund
generated dividend income amounting to US$96,000.
PROSPECTS
Amongst the Group's investee companies, Velocity shows
relatively encouraging prospects, particularly following the launch
of Velocity for Business with several multi-year, multi-million
dollar global deals that could meaningfully contribute to continued
growth in customer base and revenue for the Velocity group.
Subsequent to the year end, Agrios has expanded its business
through the establishment of a subsidiary unit in the State of
Missouri of the United States to provide consulting services in
relation to medical cannabis. The Agrios group has also teamed up
with Kunming University of Science and Technology to conduct
research on hemp fibre and products that could help facilitate the
business development of its joint venture in the Yunnan Province.
The outlook for Ayondo, however, appears somewhat uncertain
pending, amongst other matters, the outcome of the clarification
from the FCA on the compliance-related accounting treatment issue.
But should the Proposed AML Disposal and the proposed transaction
with iMaibo proceed in due course, the Ayondo group would be able
to refocus its resources on the social trading activities.
Nonetheless, as Velocity and Agrios remains at early phases in
developing their business, they are not expected to generate any
substantial contributions to the Group in the short term whereas
the uncertainty surrounding Ayondo could adversely affect its fair
value under the International Financial Reporting Standard 9.
DIRECTORS' REPORT (CONTINUED)
Meantime, with a steady track record, the Huizhou Kindergarten
is positioned to further attract new pupils and raise pupil
enrolment. This could help improve the scale of operations of the
Huizhou Kindergarten although any such improvement is not expected
to have a material impact on the financial performance of Oasis
Education in the short term. The Group's investments in ICBC
Specialised Ship Leasing Investment Fund and in the term loan
issued by a subsidiary of R&F Properties, on the other hand,
will continue to generate a stable stream of recurrent income under
the persistently low interest rate environment.
On a broader perspective, the long anticipated deadline on which
Britain was originally slated to withdraw from the European Union
has passed. Yet labourious and toilsome attempts to forge consensus
on an exit deal have repeatedly failed. While Britain remains mired
in a quandary over its withdrawal from the European Union, China
and the United States appear to be on the path to resolving their
trade dispute that has threatened to disrupt global economic growth
and roiled financial markets across the globe. Nonetheless, there
have been signs of a slowdown in the world economy and major
central banks, including the Federal Reserve in the United States
which has indicated a pause in rate hiking, are generally adopting
a dovish stance towards monetary policy normalisation to safeguard
liquidity conditions. China has also acted to boost bank lending
and rolled out massive tax and fee cuts in response to the slowing
momentum in its economic growth. Under this mixed and challenging
outlook, the Group will continue to exercise care and diligence in
identifying appropriate investments with a view to further
expanding and diversifying its investment portfolio in accordance
with the Company's investment policy.
Directors
The directors during the year under review and up to the date of
this report were:
Non-Executive Chairman
Alastair Gunn-Forbes*
Executive Directors
Henry Ying Chew Cheong
Ernest Chiu Shun She
Non-Executive Directors
Mark Chung Fong*
Martyn Stuart Wells*
* independent
Brief biographical notes of the directors serving at the date of
this report are set out on pages 79 to 80.
Save as disclosed in this report and in note 25 to the
consolidated financial statements on page 77, none of the directors
had during the year under review or at the end of the year a
material interest, directly or indirectly, in any contract of
significance with the Company or any of its subsidiaries.
DIRECTORS' REPORT (CONTINUED)
Messrs Alastair Gunn-Forbes and Mark Chung Fong have served on
the Board for more than nine years. (In accordance with Provision
B.7.1 of the UK Corporate Governance Code on corporate governance
published in April 2016 by the Financial Reporting Council of the
United Kingdom (the "Code"), both Messrs Alastair Gunn-Forbes and
Mark Chung Fong retired by rotation and were re-elected to office
by separate resolutions passed at the Annual General Meeting held
on 2 November 2018.) During the past nine year period, however,
neither of them has had any major interest in the issued share
capital of the Company, has been an employee or involved in the
daily management of any of the Group companies, or has had any
material relationship with any of the Group companies or any of the
major shareholders or managers of any such companies other than
being a member of the Board. Accordingly, and in accordance with
Provision B.1.1 of the Code, the Board has determined that their
independence and objectivity have not been impaired and that they
will therefore be able to continue to act independently in
character and judgement.
At the Annual General Meeting held on 29 September 2014,
shareholders approved the inclusion of the Group's non-executive
directors, including Messrs Alastair Gunn-Forbes, Mark Chung Fong
and Martyn Stuart Wells, as eligible participants of the Worldsec
Employee Share Option Scheme 1997 (the "Scheme"). As explained in
the 2014 annual report of the Company, the reason for such
inclusion was to enable the Group to reward its non-executive
directors for their commitments to the Company beyond the nominal
annual fees that the Group could afford to pay during its
development stage. Accordingly, and in accordance with Provision
B.1.1 of the Code, given such circumstances, the Board has
determined that the participation of Messrs Alastair Gunn-Forbes,
Mark Chung Fong and Martyn Stuart Wells in the Scheme will not
affect their ability to act independently in character and
judgement.
DIRECTORS' INTERESTS
The interests of the individuals who were directors during the
year under review in the issued share capital of the Company,
including the interests of persons connected with a director
(within the meaning of Sections 252, 253 to 255 of the United
Kingdom Companies Act 2006 as if the Company were incorporated in
England), the existence of which was known to, or could with
reasonable diligence be ascertained by, that director, whether or
not held through another party, were as follows:
At 1 January 2018 At 31 December
2018
No. of shares No. of shares
Alastair Gunn-Forbes 30,000 45,000
Henry Ying Chew Cheong (Note
i) 3,054,873 11,722,620
Mark Chung Fong Nil Nil
Ernest Chiu Shun She 366,730 550,095
Martyn Stuart Wells Nil Nil
Notes: Mr Henry Ying Chew Cheong ("Mr Cheong") wholly owns HC
(i) Investment Holdings Limited ("HCIH"). HCIH beneficially
owned 10,000,000 and 20,000,000 ordinary shares of US$0.001
each in the Company at 1 January 2018 and 31 December
2018, respectively.
In total, Mr Cheong and his associates were the legal
and beneficial owners of 19,504,873 and 31,722,620 ordinary
shares of US$0.001 each in the Company, representing
34.4% and 37.3% of the Company's issued share capital,
at 1 January 2018 and 31 December 2018, respectively.
The Company and Mr Cheong entered into a relationship
agreement on 2 August 2013 (the "Relationship Agreement").
Pursuant to the Relationship Agreement, Mr Cheong has
agreed to exercise his rights as a shareholder at all
times, and to procure that his associates exercise their
rights, so as to ensure that the Company is capable of
carrying on its business independently of Mr Cheong or
any control which Mr Cheong or his associates may otherwise
be able to exercise over the Company. Moreover, Mr Cheong
has undertaken to ensure, so far as he is able to, that
all transactions, relationships and agreements between
Mr Cheong or his associates and the Company or any of
its subsidiaries are on arms' length terms on a normal
commercial basis. Mr Cheong and the Company have also
agreed, amongst other things, that he will not participate
in the deliberations of the Board in relation to any
proposal to enter into any commercial arrangements with
Mr Cheong or his associates.
DIRECTORS' REPORT (CONTINUED)
(ii) In April 2018, the Company raised new equity capital
through an open offer of new ordinary shares to shareholders
on the basis of one new ordinary share of US$0.001 each
in the Company for every two existing ordinary shares
held at the open offer price of US$ 0.15 per share. As
a result, the directors' interests in the Company have
changed since 4 April 2018.
At 1 January 2018 At 31 December 2018
No. of share options No. of share options
(Note) (Note)
Alastair Gunn-Forbes 500,000 500,000
Henry Ying Chew Cheong 500,000 500,000
Mark Chung Fong 500,000 500,000
Ernest Chiu Shun She 500,000 500,000
Martyn Stuart Wells 500,000 500,000
Note: The share options entitle the holders to subscribe on
a one for one basis new ordinary shares of US$0.001 each
in the Company at an exercise price of US$0.122 per share.
The share options vested six months from the date of
grant on 1 December 2015 and were then exercisable within
a period of 9.5 years.
Save as disclosed above, none of the above named directors had
an interest, whether beneficial or non-beneficial, in any shares or
debentures of any Group companies at the beginning or at the end of
the year under review. Save as disclosed above, none of the above
named directors, or members of their immediate families, held,
exercised or were awarded any right to subscribe for any shares or
debentures of any Group companies during the year.
The Board confirms that (i) the Company has complied with the
independence provisions set out in the Relationship Agreement since
it was entered into; and (ii) so far as the Company is aware, Mr
Cheong and his associates have complied with the independence
provisions set out in the Relationship Agreement since it was
entered into and since 1 January 2018.
DIRECTORS' REMUNERATION
The remuneration of the directors for the year ended 31 December
2018 was as follows:
Share-based Other emoluments
Fees payment expenses Total
US$'000 US$'000 US$'000 US$'000
Alastair Gunn-Forbes 12.8 - - 12.8
Henry Ying Chew Cheong 12.8 - - 12.8
Mark Chung Fong 12.8 - - 12.8
Ernest Chiu Shun She 12.8 - - 12.8
Martyn Stuart Wells 12.8 - - 12.8
-----------------
64.0 - - 64.0
======= ================= ================ =======
PROVIDENT FUND AND PENSION CONTRIBUTION FOR DIRECTORS
During the year under review, there was no provident fund and
pension contribution for the directors.
DIRECTORS' REPORT (CONTINUED)
LETTERS OF APPOINTMENT/ SERVICE CONTRACTS
Messrs Alastair Gunn-Forbes, Mark Chung Fong and Martyn Stuart
Wells, each has entered into a letter of appointment with the
Company dated 28 November 2017 to serve as non-executive director.
Each of them is entitled to a fee of GBP10,000 per annum. The
appointment may be terminated on one month notice in writing.
Messrs Henry Ying Chew Cheong and Ernest Chiu Shun She, each has
entered into a letter of appointment with the Company dated 2
August 2013 to serve as executive director. Each of them is
entitled to a fee of GBP10,000 per annum. The appointment may be
terminated on not less than six month notice in writing.
All directors are eligible to participate in the Group's bonus
arrangements under which bonuses may be granted at the discretion
of the Remuneration Committee and the Board. No bonus was
recommended for the year ended 31 December 2018.
Save as disclosed above, there are no existing or proposed
letters of appointment or service contracts between any of the
directors and the Company or any of its subsidiaries which cannot
be determined without payment of compensation (other than any
statutory compensation) within one year.
MAJOR INTERESTS IN SHARES
At 25 March 2019, the Company was aware of the following direct
or indirect interests representing 5% or more of the Company's
issued share capital:
Percentage of
No. of shares issued share capital
HC Investment Holdings Limited
(Note i) 20,000,000 23.5%
Yue Wai Keung 4,837,500 5.7%
Luis Chi Leung Tong 5,000,000 5.9%
Henry Ying Chew Cheong 11,722,620 13.8%
Aurora Nominees Limited (Note
ii) 18,750,000 22.0%
Vidacos Nominees Limited (Note
ii) 5,500,000 6.5%
Notes: Mr Cheong is the legal and beneficial owner of the entire
(i) issued share capital of HC Investment Holdings Limited.
(ii) Aurora Nominees Limited and Vidacos Nominees Limited
act as custodians for their customers, to whom they effectively
pass all rights and entitlements, including voting rights.
INTERNAL CONTROL, RISK MANAGEMENT AND FINANCIAL REPORTING
The Board is responsible for establishing and maintaining
appropriate systems of internal control and risk management to
safeguard the Group's interests and assets. The control measures
that have been put in place cover key areas of operations, finance
and compliance and aim to manage rather than eliminate risks that
are inherent in the running of the business of the Group.
Accordingly, the Group's systems of internal control and risk
management are expected to provide reasonable but not absolute
assurance against material misstatements, loss or fraud.
DIRECTORS' REPORT (CONTINUED)
Amongst the control measures, the key steps that have been put
in place include:
- the setting of the investment strategy and the approval of
significant investment decisions of the Group by the Board to
ensure consistency with the investment objective and compliance
with the investment policy of the Company;
- the segregation of duties between the investment management
and accounting functions of the Group;
- the adoption of written procedures in relation to the
operations of the bank accounts of the Group;
- the adoption of written procedures to deal with conflicts of
interests and related party transactions;
- the maintenance of proper accounting records providing with
reasonable accuracy at any time information on the financial
position of the Group;
- the review by the Board of the management accounts of the Group on a regular basis; and
- the engagement of external professionals to carry out company
secretarial works for the Company and to assist the Group on
compliance issues.
The Board considers the identification, evaluation and
management of the principal risks faced by the Group under the
changing environment to be an ongoing process and has kept under
regular review the effectiveness of the Group's systems of internal
control and risk management. The Board is satisfied that the
arrangements that have been put in place represent an appropriate
framework to meet the internal control and risk management
requirements of the Group.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties
that are relevant to the Group include:
Target market risk
Under the investment policy of the Company, the Group focuses on
investing in small to medium sized trading companies based mainly
in the Greater China and South East Asian region. Consequently, a
sharp or prolonged downturn in the economic environment or a
heightened uncertainty in the political environment in these target
markets could adversely and seriously affect the underlying
investments and hence the cash flows of the Group. This is clearly
a risk factor beyond the Group's control. Nevertheless, in line
with the investment policy of the Company, the Board will seek to
invest in and maintain a diversified portfolio in order to spread
the investment risk of the Group.
Investment opportunity risk
Given the abundance of liquidity under the new normal of a
persistently low interest rate environment, the private equity
space has been awash with investment capital and dry powder
competing for quality deals. This has been driving up valuations
and narrowing the spreads of investment returns, thereby limiting
the availability of attractive investment opportunities for the
Group. Under such circumstances, with the approval from
shareholders, the Company broadened its investment policy in the
latter part of 2014. This offers greater flexibility for the Group
to make investment choices from a broader range of opportunities to
achieve the Company's investment objective under the persistently
challenging and competitive environment.
DIRECTORS' REPORT (CONTINUED)
Key person risk
As the Group does not engage any external investment manager,
the Board is responsible for overseeing the Group's investment
management activities with frontline management duties delegated to
the executive directors. The Group is therefore heavily dependent
on the executive directors' abilities to identify and evaluate
investment targets, execute and implement investment decisions,
monitor investment performance and execute and implement exit
decisions. Both of the executive directors, Messrs Henry Ying Chew
Cheong and Ernest Chiu Shun She, have entered into a letter of
appointment with the Company with a termination clause of not less
than six month notice. Moreover, Mr Cheong is also the deputy
chairman and a major shareholder beneficially holding a substantial
interest in the Company's issued share capital.
Operational risks
The Group is exposed to various operational risks that are
inherent in the running of its business, including, amongst others,
the failure to comply with the investment policy of the Company,
the failure to prevent misstatements, loss or fraud due to
inadequacies in the Group's internal operational processes, and the
failure to comply with applicable rules and regulations by the
Group. As mitigating measures, the Board has established and
maintained systems of internal control and risk management to
safeguard the Group's interests and assets, details of which are
set out in the section headed "Internal Control, Risk Management
and Financial Reporting" on pages 8 to 9.
Financial risks
The Group is exposed to a variety of financial risks, including
market risks, credit risk and liquidity risk, which arise from its
operating and investment management activities. The Group's
management of such risks is coordinated at the office of Worldsec
Investment (Hong Kong) Limited, the principal operating subsidiary
of the Group, in close cooperation with the Board. Details of the
Group's approach on financial risk management are described in note
5(b) to the consolidated financial statements on pages 56 to
60.
VIABILITY STATEMENT
The directors have assessed the viability of the Company for the
three years to 31 December 2021.
The directors consider that, for the purpose of this viability
statement, a three year period is appropriate taking into account
the Group's investment horizon under its investment strategy.
Besides, there should unlikely be any significant change to most if
not all of the principal risks and uncertainties facing the Group
over the timeframe selected for the assessment.
In assessing the viability of the Company and its ability to
meet liabilities as they fall due, the directors have taken into
consideration, amongst others:
- the investment strategy of the Group;
- the current position including the existing financial status and cost structure of the Group;
- the prospects of and the industry outlook for the Group;
- the economic and political environment of the Greater China
and South East Asian region, the primary target markets in which
the Group focuses its investment; and
- the potential adverse impact of the principal risks and uncertainties facing the Group and the effectiveness of the mitigating measures that have been put in place, details of which are described in the section headed "Principal Risks and Uncertainties" on pages 9 to 10.
DIRECTORS' REPORT (CONTINUED)
The directors note, in particular, that the Group:
- has a liquid amount of unrestricted cash and bank balances;
- does not have any borrowings;
- does not have any commitments other than certain leases with
modest outstanding rental payments; and
- has low operating expenses with a small but stable team under stringent cost control.
Accordingly, the directors are confident that the Company will
be able to continue in operation and meet its liabilities as they
fall due over the assessment period.
GOING CONCERN
After making enquiries, and taking into account the increase in
the equity capital of the Company following the completion of an
open offer of new ordinary shares on 4 April 2018, the directors
have formed a judgement, at the time of approving the consolidated
financial statements of the Company and its subsidiaries for the
year ended 31 December 2018, that there was a reasonable
expectation that the Group would have adequate resources to carry
out its operations for a period of at least twelve months from the
date of approving the consolidated financial statements. For this
reason, the directors have adopted the going concern basis in
preparing the consolidated financial statements.
CORPORATE GOVERNANCE
As a company with a premium listing on the Main Market of the
London Stock Exchange, its business is subject to the principles
contained in the Code, a copy of which is available on the website
of the Financial Reporting Council of the United Kingdom. The Board
confirms that, throughout the accounting period from 1 January to
31 December 2018, the Group complied with the relevant provisions
of the Code, apart from certain exceptions set out and explained
below.
The Board, comprising a non-executive chairman, two
non-executive directors and two executive directors, is committed
to maintaining a high standard of corporate governance. All
non-executive directors are considered by the Board to be
independent of management and free from any business or other
relationship which could materially interfere with the exercise of
their independent judgement. All directors are able to take
independent professional advice in furtherance of their duties, if
necessary.
The Board is responsible for establishing strategic directions
and setting objectives for the Company and making significant
investment decisions and monitoring the performance of the Group.
The management is responsible for the day to day running of the
Group's operations.
BOARD MEETING
The Board held four meetings during the year under review and
the table below gives the attendance record.
Director Board Meeting
Alastair Gunn-Forbes 4/4
Henry Ying Chew Cheong 4/4
Ernest Chiu Shun She 4/4
Mark Chung Fong 4/4
Martyn Stuart Wells 4/4
DIRECTORS' REPORT (CONTINUED)
Although the Board notes the requirement for a Nomination
Committee (Provision B.2.1 of the Code), to make recommendations to
the Board on all new board appointments and to reassure
shareholders of the suitability of a chosen director, the Board
considers that, due to its small size and limited level of
activities, it is not necessary to establish such a committee. The
Board as a whole remains responsible for ensuring that a
transparent, formal and rigorous process would be followed for any
future board appointments, which would be made following a full
review of the Board's balance of skills, experience, independence
and knowledge. Any future recruitment process would also provide an
opportunity to improve the diversity of the Board. The Board is
satisfied that appropriate succession planning is in place for
appointments to both the Board and senior management.
Again, due to its small size and limited level of activities,
the Board has not appointed a senior independent director and did
not consider an annual self-evaluation to be required during the
year under review. The responsibilities normally rested with a
senior independent director have been reverted to the Board as a
whole. These decisions will be re-considered annually by the
Board.
The Board established both an Audit Committee and a Remuneration
Committee upon the re-activation of the Group's business in 2013.
Details of these committees are set out below.
AUDIT COMMITTEE
The Audit Committee held two meetings during the year under
review and the table below gives the attendance record.
Director Audit Committee Meeting
Mark Chung Fong 2/2
Martyn Stuart Wells 2/2
The Audit Committee is chaired by Mr Mark Chung Fong and its
other current member is Mr Martyn Stuart Wells. The Audit Committee
is appointed by the Board and the committee's membership is
comprised wholly of non-executive directors.
The terms of reference of the Audit Committee (copies of which
are available at the Company's registered office and the Company's
website) generally follow, where applicable, those stated in the
provisions of the Code.
The Audit Committee meets a minimum of two times a year and may
be convened at other times if required. The responsibilities of the
Audit Committee include, amongst others, the examination and review
of the Group's risk management, internal financial controls and
financial and accounting policies and practices, as well as
overseeing and reviewing the work of the Company's external
auditor, their independence and the fees paid to them.
During the year under review, the activities undertaken by the
Audit Committee in discharge of its duties and functions included
(i) the review and recommendation to the Board of the reappointment
of BDO Limited as the Company's external auditor; (ii) the review
and recommendation to the Board for approval of the annual report
of the Company and the consolidated financial statements of the
Company and its subsidiaries for the year ended 31 December 2017;
and (iii) the review and recommendation to the Board for approval
of the interim report of the Company and the unaudited consolidated
financial statements of the Company and its subsidiaries for the
six months ended 30 June 2018. In recommending the reappointment of
BDO Limited, the Audit Committee has taken into consideration,
amongst others, BDO Limited's independence, objectivity and terms
of engagement.
DIRECTORS' REPORT (CONTINUED)
Subsequent to the year end, the activities that have been
undertaken by the Audit Committee in relation to 2018 included (i)
the review and recommendation to the Board of the annual report of
the Company and the consolidated financial statements of the
Company and its subsidiaries for the year ended 31 December 2018;
(ii) the monitoring of the effectiveness of the Group's risk
management and internal financial controls; and (iii) the
assessment of the effectiveness of the external audit process
through feedback from the management involved in the audit and
through interactions with and observations and review of the level
of audit service provided.
As the scale of the operations of the Group remains relatively
insubstantial, the Board has decided and the Audit Committee
concurs that it would not be necessary or cost-effective to set up
an internal audit function.
In connection with the review of the consolidated financial
statements of the Company and its subsidiaries for the year ended
31 December 2018, the Audit Committee has identified and reviewed
two issues which it considered significant and details on these
matters are set out in the table below.
Significant Reporting Issue Review and Assessment
Impairment review of the Group's The Audit Committee has (i)
interests in respect of its 50% reviewed the operational and
owned joint venture, Oasis Education financial performance and the
- At 31 December 2018, the Group latest development of Oasis
had an equity interest of US$106,000 Education and its subsidiary;
in and an amount of US$257,000 and (ii) assessed the assumptions
due from Oasis Education. These underlying the cash flow projection
carrying amounts were significant for Oasis Education and its
in the Group's context and their subsidiary as well as the reliability
valuation was subject to judgments, of such projection by comparing
estimates and assumptions. relevant historic budgets with
actual results.
---------------------------------------
Valuation of unlisted equity The Audit Committee has (i)
investments classified as financial reviewed the operational and
assets at fair value through financial performance and the
profit or loss ("FVTPL") - At latest development of the unlisted
31 December 2018, the Group had Financial Assets at FVTPL; and
unlisted equity interests in (ii) reviewed the valuation
ICBC Specialised Ship Leasing finding of Velocity prepared
Investment Fund and Velocity, by an independent professional
which were all accounted for valuer and discussed with the
as financial assets at FVTPL valuer the methodologies, assumptions
totalling US$1,342,000 and carried and input parameters used in
at fair value (together the "unlisted relation to such valuation.
Financial Assets at FVTPL").
These carrying amounts were significant
in the Group's context and their
valuation was subject to judgments
and assumptions.
---------------------------------------
BDO Limited was appointed as the external auditor of the Company
in February 2015, since when audit services have not been tendered
competitively. The Audit Committee has concluded that a competitive
tender of audit services is not necessary at this time, but
acknowledges that circumstances could arise where a competitive
tender for audit services may be desirable. The performance of BDO
Limited as the Company's external auditor will be kept under annual
review, and if satisfactory, BDO Limited will be recommended by the
Audit Committee for reappointment. There are, however, no
contractual obligations that would restrict the Audit Committee's
choice of external auditor for the Company.
DIRECTORS' REPORT (CONTINUED)
Any non-audit services that are to be provided by the Company's
external auditor are reviewed in order to safeguard the auditor's
objectivity and independence. During the year under review, BDO
Financial Services Limited, an affiliate of BDO Limited, was
engaged to act as the reporting accountant in connection with the
Company's fund raising exercise that was completed in April 2018.
Taking into account the nature and fee of the work that was
involved, the Board has confirmed to the Audit Committee that,
during the reporting period and subsequently thereafter, there had
not been any non-audit services that were considered to have
impaired the objectivity and independence of the external auditor
of the Company.
As advised by the Audit Committee and concurred with by the
Board, the annual report of the Company and the audited
consolidated financial statements for the year ended 31 December
2018, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group's position and performance, business model and strategy.
REMUNERATION COMMITTEE
In accordance with Provision D.2.1 of the Code, the Company has
set up a Remuneration Committee. The Remuneration Committee held
one meeting during the year under review and the table below gives
the attendance record.
Director Remuneration Committee Meeting
Martyn Stuart Wells 1/1
Mark Chung Fong 1/1
Alastair Gunn-Forbes 1/1
The Remuneration Committee is chaired by Mr Martyn Stuart Wells
and its other current members are Messrs Alastair Gunn-Forbes and
Mark Chung Fong. The Remuneration Committee is appointed by the
Board and the committee's membership is comprised wholly of
non-executive directors.
The terms of reference of the Remuneration Committee (copies of
which are available at the Company's registered office and the
Company's website) generally follow, where applicable, those stated
in the provisions of the Code. They provide for the Remuneration
Committee to meet at least two times a year. However, as the Group
has a very small and stable workforce with no personnel change
since 31 December 2017, the Remuneration Committee did not consider
it meaningful or necessary to hold more than one meeting during the
year under review.
The Remuneration Committee's responsibilities include, amongst
others, the evaluation of the performance of the executive
directors and senior staff, and the comparison of the Group's
remuneration policy with similar organisations in the market to
form the basis for the recommendations to the Board to determine
the remuneration packages, which may include the grant of share
options under the Scheme, for individual staff and director
members.
In accordance with the Main Principle of Provision D.2 of the
Code, no director has been involved in deciding his own
remuneration.
During the year under review, the activities undertaken by the
Remuneration Committee in discharge of its duties and functions
included the review of and recommendation to the Board to retain
the Group's previous remuneration arrangements.
DIRECTORS' REPORT (CONTINUED)
AD HOC COMMITTEE
In accordance with Bye-law 98 of the Company, the Board set up
in February 2018 an additional committee comprising of a minimum of
two directors, to whom it delegated responsibility to deal with all
matters relating to the Company's fund raising exercise. Details of
the Company's fund raising exercise can be found in the open offer
and subsequent placings prospectus of the Company dated 13 March
2018, a copy of which is available on the website of the
Company.
WORLDSEC EMPLOYEE SHARE OPTION SCHEME 1997
On 1 December 2015, the Company granted to certain eligible
persons a total of 2,950,000 share options to subscribe for new
ordinary shares of US$0.001 each in the Company under the Scheme.
The share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
The following table discloses the movements of the outstanding
share options under the Scheme during the year under review.
Number of options
---------------------------------------------------------------------------------
Balance Forfeited Lapsed Balance Exercise
at 1 Granted Exercised during during at 31 price
Exercisable January during during the the December per share
Grantee period 2018 the year the year year year 2018 (US$)
----------- -------------- ---------- ---------- ---------- ---------- -------- ---------- -----------
1 June
2016 to
30 November
Directors 2025 2,500,000 - - - - 2,500,000 0.122
1 June
2016 to
30 November
Employees 2025 450,000 - - - - 450,000 0.122
---------- ---------- ---------- ---------- -------- ----------
2,950,000 - - - - 2,950,000
========== ========== ========== ========== ======== ==========
Further details relating to the granting of the share options
are set out in note 24 to the consolidated financial statements on
pages 75 to 76.
RELATION WITH SHAREHOLDERS
Communication with shareholders is given high priority.
Information about the Group's activities is provided in the annual
report and the interim report of the Company which are sent to
shareholders each year and are available on the website of the
Company. All shareholders are encouraged to attend the Annual
General Meeting at which directors are introduced and available for
questions. Enquiries are dealt with in an informative and timely
manner. Directors, including non-executive directors, are also
available to meet with major shareholders on request.
DIRECTORS' REPORT (CONTINUED)
EXTERNAL AUDITOR
The consolidated financial statements of the Company and its
subsidiaries for the year ended 31 December 2018 have been audited
by BDO Limited.
A resolution will be submitted to the next Annual General
Meeting to reappoint BDO Limited as the Company's external
auditor.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
29 April 2019
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are required under the Bermuda Companies Act 1981
to prepare consolidated financial statements for each financial
year. The directors acknowledge responsibility for the preparation
of the consolidated financial statements for the year ended 31
December 2018, which give a true and fair view of the financial
position of the Group as at the end of that financial year and of
the financial performance of the Group for that year and which
provide the necessary information for shareholders to assess the
business activities and performance of the Group during that year.
In preparing these consolidated financial statements, the directors
are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether the consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union; and
- prepare the consolidated financial statements on a going
concern basis unless it is inappropriate to presume that the Group
will continue in business.
The directors confirm that the above requirements have been
met.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group. They are also responsible for the
Group's system of internal financial controls, for safeguarding the
assets of the Group and hence for taking reasonable steps for the
prevention and detection of frauds and other irregularities.
The directors further confirms that, to the best of their
knowledge and understanding, the chairman's statements on page 1
and the directors' report on pages 2 to 16 include a fair review of
the development and performance of the business and the position of
the Company and its subsidiaries taken as a whole together with a
description of the principal risks and uncertainties that they
face.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
29 April 2019
INDEPENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the consolidated financial statements of
Worldsec Limited (the "Company") and its subsidiaries (together the
"Group") set out on pages 23 to 77, which comprise the consolidated
statement of financial position as at 31 December 2018, and the
consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and
notes to the consolidated financial statements, including a summary
of significant accounting policies.
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of the
Group as at 31 December 2018 and of its consolidated financial
performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards as
adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' Code of
Ethics for Professional Accountants (the "IESBA Code"), and we have
fulfilled our other ethical responsibilities in accordance with the
IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
impairment review of interest in a joint venture and amount due
from a joint venture
Refer to note 16 to the consolidated financial statements
The Group owns 50% in Oasis Education Group Limited ("Oasis
Education"), which is accounted for using the equity method and
considered for impairment if there is any indication that the
investment may be impaired. The interest in the joint venture
amounted to approximately US$106,000 as at 31 December 2018 and the
Group's share of its losses of approximately US$11,000 for the year
then ended.
Further, the Group has advanced an amount of approximately
US$257,000 to Oasis Education as at 31 December 2018, which is
subject to an impairment assessment.
The impairment review of investment in, and amount due from,
Oasis Education is significant to our audit due to the significance
of the carrying amounts subject to impairment review comparing to
the Group's net loss, and judgement applied in determining if an
impairment in carrying amounts is necessary.
INDEPENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Key Audit Matters (Continued)
impairment review of interest in a joint venture and amount due
from a joint venture (CONTINUED)
Our response:
Our audit procedures included:
Understanding Oasis Education's operation and latest
development;
Assessing the financial performance of Oasis Education based on
information available to us;
Evaluating management's considerations of the impairment
indicators of the investment in, and the amount due from, Oasis
Education;
Assessing the appropriateness of the management's assumptions
concerning the future cash flow to be generated from the operation
of Oasis Education; and
Assessing reliability of the joint venture's forecast by
comparing historical budget to actual performance and challenging
management on any significant variances.
VALUATION OF UNLISTED EQUITY INVESTMENTS classified as financial
assets at fair value through profit or loss ("FVTPL")
Refer to note 17 to the consolidated financial statements
The Group owns unlisted equity interests in ICBC Specialised
Ship Leasing Investment Fund ("ICBC Shipping Fund") and Velocity
Mobile Limited ("Velocity"), which are all accounted for as
financial assets at FVTPL totalling approximately US$1,342,000 as
at 31 December 2018 carried at fair value.
The valuations of unlisted equity investments classified as
financial assets at FVTPL had been determined by management, who
was assisted by an independent professional valuer. Such valuations
involve the determination of the valuation models and the selection
of the different inputs and the assumptions made in the valuation
models by management. Any changes in valuation models adopted and
input and assumptions applied could lead to significant changes in
amounts reported as fair value in the consolidated financial
statements.
We identified valuations of unlisted equity investments
classified as financial assets at FVTPL as a key audit matter
because the valuation of financial instruments without a quoted
price is a complex area and involves a higher degree of estimation,
uncertainty and judgement. These financial assets are material to
the Group.
INDEPENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Key Audit Matters (Continued)
VALUATION OF UNLISTED EQUITY INVESTMENTS classified as financial
assets at fair value through profit or loss ("FVTPL")
(CONTINUED)
Our response:
Our audit procedures included:
Assessing the valuation methodologies applied on the unlisted
equity investments;
Understanding and evaluating the reasonableness of key
assumptions in the valuations;
Evaluating the reasonableness and relevance of the key input
data used in the valuations;
Involving an auditor's expert to assist our assessment on the
reasonableness and appropriateness of the valuation methodologies
and key assumptions; and
Evaluating the competence, capabilities and objectivity of the
independent professional valuer appointed by the Group and
auditor's expert.
Other information in the annual report
The directors are responsible for the other information. The
other information comprises the information included in the
Company's annual report, but does not include the consolidated
financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Directors' responsibilitIES for the consolidated financial
statements
The directors are responsible for the preparation of the
consolidated financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as the
directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
The directors are also responsible for overseeing the Group's
financial reporting process. The audit committee of the Company
(the "Audit Committee") assists the directors in discharging their
responsibility in this regard.
INDEPENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Auditor's responsibilitIES for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. This report is made
solely to you, as a body, in accordance with Section 90 of the
Bermuda Companies Act 1981, and for no other purpose. We do not
assume responsibility towards or accept liability to any other
person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional skepticism
throughout the audit. We also:
identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by the directors.
conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a
going concern.
evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
INDEPENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
Auditor's responsibilitIES for the audit of the consolidated
financial statements (CONTINUED)
We communicate with the Audit Committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our
auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
REPORT ON OTHER REGULATORY REQUIREMENTS
Under the listing rules of the Financial Conduct Authority in
the United Kingdom (the "Listing Rules"), we are required to review
the part of the Corporate Governance Statement relating to the
Company's compliance with the provisions of the UK Corporate
Governance Code specified for our review in accordance with Listing
Rule 9.8.10R(2). We have nothing to report arising from our
review.
BDO Limited
Certi ed Public Accountants
Alfred Lee
Practising Certi cate Number P04960
Hong Kong, 29 April 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
Year ended 31 December
Notes 2018 2017
US$'000 US$'000
Revenue 7 136 96
Other income, gains and losses,
net 9 (327) 3
Staff costs 10 (268) (233)
Other expenses (333) (286)
Share of losses of a joint venture 16 (11) (4)
Loss before income tax expense 11 (803) (424)
Income tax expense 12 - -
----------- -----------
Loss for the year (803) (424)
----------- -----------
Other comprehensive income, net
of income tax
Items that may be reclassified subsequently
to
profit or loss:
Share of other comprehensive (loss)/income
of a
joint venture 16 (19) 17
----------- -----------
Other comprehensive (loss)/income
for the year,
net of income tax (19) 17
----------- -----------
Total comprehensive loss for the
year (822) (407)
=========== ===========
Loss for the year attributable to:
Owners of the Company (803) (424)
=========== ===========
Total comprehensive loss for the
year
attributable to:
Owners of the Company (822) (407)
=========== ===========
Year ended 31 December
Notes 2018 2017
Loss per share - basic and diluted 13 US (1.03) US (0.75)
cents cent
=========== ===========
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
Notes 2018 2017
US$'000 US$'000
Non-current assets
Property, plant and equipment 15 - -
Interest in a joint venture 16 106 136
Financial assets at fair value
through profit or loss 17 1,649 -
Available-for-sale financial
assets 17 - 1,784
------- -------
1,755 1,920
------- -------
Current assets
Other receivables 8 8
Deposits and prepayments 30 234
Other financial assets at amortised
cost 18 850 -
Amount due from a joint venture 16 257 257
Cash and cash equivalents 20 2,607 260
3,752 759
------- -------
Current liabilities
Other payables and accruals 21 138 148
------- -------
Net current assets 3,614 611
------- -------
Net assets 5,369 2,531
======= =======
Capital and reserves
Share capital 22 85 57
Reserves 23 5,284 2,474
------- -------
Total equity 5,369 2,531
======= =======
The consolidated financial statements on pages 23 to 77 were
approved and authorised for issue by the Board of Directors on 29
April 2019 and signed on its behalf by:
Alastair Gunn-Forbes Henry Ying Chew Cheong
Director Director
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF changes in equity
FOR THE YEARED 31 DECEMBER 2018
Equity attributable to owners of the Company
Foreign
Contri- Share currency
Share Share buted option translation Special Accumulated
capital premium surplus reserve reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(note (note (note (note (note (note (note 23)
22) 23) 23) 23) 23) 23)
Balance at 1 January
2017 57 3,837 9,646 206 (28) 625 (11,405) 2,938
Loss for the year - - - - - - (424) (424)
Other comprehensive
income for the
year
Share of other
comprehensive loss
of a joint venture
(note 16) - - - - 17 - - 17
------- ------- ------- ------- ----------- ------- ----------- -------
Total comprehensive
loss for the year - - - - 17 - (424) (407)
------- ------- ------- ------- ----------- ------- ----------- -------
Balance at 31 December
2017 as originally
presented 57 3,837 9,646 206 (11) 625 (11,829) 2,531
Initial application
of
IFRS 9 (note 2.1(a)) - - - - - - (55) (55)
------- ------- ------- ------- ----------- ------- ----------- -------
Restated balance
as at
1 January 2018 57 3,837 9,646 206 (11) 625 (11,884) 2,476
Loss for the year - - - - - - (803) (803)
Other comprehensive
income for the
year
Share of other
comprehensive income
of a joint venture
(note 16) - - - - (19) - - (19)
Total comprehensive
loss for the year - - - - (19) - (803) (822)
------- ------- ------- ------- ----------- ------- ----------- -------
Issue of new shares
by way of open
offer (note 22) 28 4,227 - - - - - 4,255
Transaction costs
attributable to
issue of new shares - (540) - - - - - (540)
------- ------- ------- ------- ----------- ------- ----------- -------
Transactions with
owners 28 3,687 - - - - - 3,715
Balance at 31 December
2018 85 7,524 9,646 206 (30) 625 (12,687) 5,369
======= ======= ======= ======= =========== ======= =========== =======
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2018
Year ended 31 December
2018 2017
US$'000 US$'000
Cash flows from operating activities
Loss before income tax expense (803) (424)
Adjustments for:
Bank interest income (1) -
Depreciation of property, plant and equipment - 21
Share of losses of a joint venture 11 4
Change in fair value of financial asset
at fair value 329 -
through profit or loss
Operating loss before working capital
changes (464) (399)
Increase in deposits and prepayments (2) (6)
(Decrease)/increase in other payables
and accruals (10) 23
----------- -----------
Net cash used in operating activities (476) (382)
----------- -----------
Cash flows from investing activities
Purchase of financial assets at fair
value through (249) -
profit or loss
Investment in other financial assets
at amortised cost (1,000) -
Repayment of other financial assets at
amortised cost 150 -
Bank interest income received 1 -
Net cash used in investing activities (1,098) -
----------- -----------
Cash flows from financing activities
Proceeds from issue of new shares 4,255 -
Payment for share issue costs (334) -
Prepaid share issue expenses - (206)
----------- -----------
Net cash from/(used in) financing activities 3,921 (206)
----------- -----------
Net increase/(decrease) in cash and cash
equivalents 2,347 (588)
Cash and cash equivalents at the beginning
of the year 260 848
Cash and cash equivalents at the end
of the year 2,607 260
=========== ===========
The accompanying notes form an integral part of these
consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
1. GENERAL INFORMATION
Worldsec Limited (the "Company") is a public listed company
incorporated in Bermuda and its shares are listed on the Main
Market of the London Stock Exchange. The address of the registered
office of the Company is Canon's Court, 22 Victoria Street,
Hamilton HM12, Bermuda. Its principal place of business is Unit
607, 6th Floor, FWD Financial Centre, 308 Des Voeux Road Central,
Sheung Wan, Hong Kong.
The principal activity of the Company is investment holding. The
principal activities of the Company's subsidiaries are set out in
note 19 to the consolidated financial statements.
The functional currency of the Company is Hong Kong Dollars
("HK$"). The consolidated financial statements of the Company and
its subsidiaries (collectively referred to as the "Group") are
presented in United States Dollars ("US$" or "USD").
The consolidated financial statements have been prepared in
accordance with all applicable International Financial Reporting
Standards ("IFRS"), International Accounting Standards ("IAS") and
Interpretations adopted by the European Union ("EU") (collectively
referred to as the "IFRSs").
2. APPLICATION OF NEW AND REVISED IFRSs
2.1 New and revised IFRSs applied
The following new and revised IFRSs have been applied by the
Group in the current year.
IFRS 9 Financial instruments
IFRS 15 Revenue from Contracts with Customers
Amendments to IFRS Revenue from Contracts with Customers
15 (Clarification to IFRS 15)
Annual Improvements Amendments to IAS 28, Investments in
to IFRSs 2014-2016 Associates and Joint Ventures
Cycle
Amendments to IFRS Classification and Measurement of Share-based
2 Payment Transactions
International Financial Foreign Currency Transactions and Advance
Reporting Interpretations Consideration
Committee ("IFRIC")
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and
Measurement" for annual periods beginning on or after 1 January
2018, bringing together all three aspects of the accounting for
financial instruments: (1) classification and measurement; (2)
impairment and (3) transition. The adoption of IFRS 9 from 1
January 2018 has resulted in changes in the accounting policies of
the Group and the amounts recognised in the consolidated financial
statements.
(i) Classification and measurement of financial instruments
The following table summarises the impact, net of tax, of
transition to IFRS 9 on the opening balance of accumulated losses
as at 1 January 2018 as follows:
Accumulated losses US$'000
Balance as 31 December 2017 (11,829)
Reclassify investments from unlisted equity
investments to fair value through profit
or loss ("FVTPL") (55)
---------
Restated balance as at 1 January 2018 (11,884)
=========
IFRS 9 carries forward the recognition, classification and
measurement requirements for financial liabilities from IAS 39,
except for financial liabilities designated at FVTPL, where the
amount of change in fair value attributable to change in credit
risk of the liability is recognised in other comprehensive income
unless that would create or enlarge an accounting mismatch. In
addition, IFRS 9 retains the requirements in IAS 39 for
derecognition of financial assets and financial liabilities.
However, it eliminates the previous IAS 39 categories for financial
assets of held-to-maturity financial assets, loans and receivables
and available-for-sale financial assets. The adoption of IFRS 9 had
no material impact on the Group's accounting policies related to
financial liabilities and derivative financial instruments. The
impact of IFRS 9 on the Group's classification and measurement of
financial assets is set out below.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments (Continued)
(i) Classification and measurement of financial instruments (Continued)
Under IFRS 9, except for certain trade receivables (that the
trade receivables do not contain a significant financing component
in accordance with IFRS 15), an entity shall, at initial
recognition, measure a financial asset at its fair value plus, in
the case of a financial asset not at FVTPL, transaction costs. A
financial asset is classified as: (i) financial assets at amortised
cost; (ii) financial assets at fair value through other
comprehensive income ("FVOCI"); or (iii) financial assets at FVTPL.
The classification of financial assets under IFRS 9 is generally
based on two criteria: (i) the business model under which the
financial asset is managed and (ii) its contractual cash flow
characteristics (the "solely payments of principal and interest
criterion", also known as "SPPI criterion"). Under IFRS 9, embedded
derivatives is no longer required to be separated from a host
financial asset. Instead, the hybrid financial instrument is
assessed as a whole for the classification.
A financial asset is measured at amortised cost if it meets both
of the following conditions and it has not been designated as at
FVTPL:
- It is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows;
and
- The contractual terms of the financial asset give rise on
specified dates to cash flows that meet the SPPI criterion.
On initial recognition of an equity investment that is not held
for trading, the Group could irrevocably elect to present
subsequent changes in the investment's fair value in other
comprehensive income. This election is made on an
investment-by-investment basis. All other financial assets not
classified at amortised cost or FVOCI as described above are
classified as FVTPL. This includes all derivative financial assets.
On initial recognition, the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be
measured at amortised cost or FVOCI at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would
otherwise arise.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments (Continued)
(i) Classification and measurement of financial instruments (Continued)
The following accounting policies would be applied to the
Group's financial assets as follows:
Financial assets Financial assets at FVTPL are subsequently
at FVTPL measured at fair value. Changes in fair
value, dividends and interest income are
recognised in profit or loss.
Financial assets Financial assets at amortised cost are
at amortised subsequently measured using the effective
cost interest rate method. Interest income,
foreign exchange gains and losses and impairment
are recognised in profit or loss. Any gain
on derecognition is recognised in profit
or loss.
As of 1 January 2018, certain unlisted equity investments were
reclassified from available-for-sale financial assets at cost to
financial assets at FVTPL. These unlisted equity instruments had no
quoted price in an active market. The Group intends to hold these
unlisted equity investments for long term strategic purposes. The
Group designated such unlisted equity instruments at the date of
initial application as measured at FVTPL. As at 1 January 2018, the
difference between the previous carrying amount and the fair value
of US$55,000 had been included in the opening accumulated
losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments (Continued)
(i) Classification and measurement of financial instruments (Continued)
The following table summarises the original measurement
categories under IAS 39 and the new measurement categories under
IFRS 9 for each class of the Group's financial assets as at 1
January 2018:
Carrying Carrying
amount as amount as
at 1 at 1
Original New January 2018 January 2018
classification classification under IAS under IFRS
39 9
Financial under IAS under IFRS US$'000 US$'000
assets 39 9
Unlisted equity Available-for-sale
investments (at cost) FVTPL 1,784 1,729
Loans and Amortised
Other receivables receivables cost 8 8
Loans and Amortised
Deposits receivables cost 28 28
Amount due
from a joint Loans and Amortised
venture receivables cost 257 257
Cash and cash Loans and Amortised
equivalents receivables cost 260 260
(ii) Impairment of financial assets
The adoption of IFRS 9 has changed the Group's impairment model
by replacing the IAS 39 "incurred loss model" to the "expected
credit losses ("ECLs") model". IFRS 9 requires the Group to
recognise ECLs for financial assets at amortised cost earlier than
IAS 39. Cash and cash equivalents are subject to ECL model but no
impairment was recognised for the year as major counterparties at
which cash and cash equivalents were held were banks with high
credit ratings assigned by international credit-rating
agencies.
Under IFRS 9, the losses allowances are measured on either of
the following bases: (1) 12-month ECLs: these are the ECLs that
result from possible default events within the 12 months after the
reporting date; and (2) lifetime ECLs: these are ECLs that result
from all possible default events over the expected life of a
financial instrument.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments (Continued)
(ii) Impairment of financial assets (Continued)
Measurement of ECLs
ECLs are based on the difference between the contractual cash
flows due in accordance with the contract and all the cash flows
that the Group expects to receive. The shortfall is then discounted
at an approximation to the asset's original effective interest
rate.
For debt financial assets, the ECLs are based on the 12-month
ECLs. The 12-month ECLs is the portion of the lifetime ECLs that
results from default events on a financial instrument that are
possible within 12 months after the reporting date. However, when
there has been a significant increase in credit risk since
origination, the allowance will be based on the lifetime ECLs. When
determining whether the credit risk of a financial asset has
increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Group's historical experience and
informed credit assessment and including forward-looking
information.
The Group assumes that the credit risk on a financial asset has
increased significantly if it is more than 30 days past due.
The Group considers a financial asset to be in default when: (1)
the borrower is unlikely to pay its credit obligations to the Group
in full, without recourse by the Group to actions such as realising
security (if any is held); or (2) the financial asset is more than
90 days past due.
The maximum period considered when estimating ECLs is the
maximum contractual period over which the Group is exposed to
credit risk.
Presentation of ECLs
Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(a) IFRS 9 - Financial Instruments (Continued)
(ii) Impairment of financial assets (Continued)
Impact of the ECL model
Impairment of other receivables, deposits, other financial
assets at amortised cost and amount due from a joint venture
Financial assets at amortised cost of the Group include other
receivables, deposits, other financial assets at amortised cost and
amount due from a joint venture. Applying the ECL model, no
additional impairment for other receivables, deposits, other
financial assets at amortised cost and amount due from a joint
venture as at 1 January 2018 and 31 December 2018 was recognised as
the amount of additional impairment measured under the ECL model
was immaterial.
(iii) Transition
The Group has applied the transitional provision in IFRS 9 such
that IFRS 9 was generally adopted without restating comparative
information. This means that differences in the carrying amounts of
financial assets and financial liabilities resulting from the
adoption of IFRS 9 were recognised in reserves as at 1 January
2018. Accordingly, the information presented for 2017 does not
reflect the requirements of IFRS 9 but rather those of IAS 39.
The following assessments were made on the basis of the facts
and circumstances that existed at the date of initial application
of IFRS 9 (the "DIA"):
- The determination of the business model within which a financial asset was held; and
- The designation of certain investments in equity investments not held for trading as at FVTPL.
If an investment in a debt investment had low credit risk at the
DIA, then the Group assumed that the credit risk on the asset had
not increased significantly since its initial recognition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(b) Others
IFRS 15 - Revenue from Contracts with Customers
The new standard establishes a single revenue recognition
framework. The core principle of the framework is that an entity
should recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods and services. IFRS 15 supersedes existing
revenue recognition guidance including IAS 18 "Revenue", IAS 11
"Construction Contracts" and related interpretations.
IFRS 15 requires the application of a 5-step approach to revenue
recognition:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to each performance
obligation
Step 5: Recognise revenue when each performance obligation is
satisfied
IFRS 15 includes specific guidance on particular revenue related
topics that may change the current approach taken under IFRS. The
standard also significantly enhances the qualitative and
quantitative disclosures related to revenue.
The adoption of IFRS 15 had no impact on these financial
statements as the Group did not have revenue from contracts with
customers.
Amendments IFRS 15 - Revenue from Contracts with Customers
(Clarifications to IFRS 15)
The amendments to IFRS 15 included clarifications on
identification of performance obligations; application of principal
versus agent; licenses of intellectual property; and transition
requirements.
The adoption of these amendments had no impact on these
financial statements as the Group had not previously adopted IFRS
15 and took up the clarifications in this, its first, year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.1 New and revised IFRSs applied (Continued)
(b) Others (Continued)
Annual Improvements to IFRSs 2014-2016 Cycle - Amendments to IAS
28, Investments in Associates and Joint Ventures
The amendments issued under the annual improvements process make
small, non-urgent changes to standards where they are currently
unclear. They include amendments to IAS 28, clarifying that a
venture capital organisation's permissible election to measure its
associates or joint ventures at fair value is made separately for
each associate or joint venture.
The adoption of these amendments had no impact on these
financial statements as the Group was not a venture capital
organisation.
Amendments to IFRS 2 - Classification and Measurement of
Share-based Payment Transactions
The amendments provide requirements on the accounting for the
effects of vesting and non-vesting conditions on the measurement of
cash-settled share-based payments; share-based payment transactions
with a net settlement feature for withholding tax obligations; and
a modification to the terms and conditions of a share-based payment
that changes the classification of the transaction from
cash-settled to equity-settled.
The adoption of these amendments had no impact on these
financial statements as the Group did not have any cash-settled
share-based payment transaction and had no share-based payment
transaction with net settlement features for withholding tax.
IFRIC 22 - Foreign Currency Transactions and Advance
Consideration
The interpretation provides guidance on determining the date of
the transaction for determining an exchange rate to use for
transactions that involve advance consideration paid or received in
a foreign currency and the recognition of a non-monetary asset or
non-monetary liability. The interpretation specifies that the date
of the transaction for the purpose of determining the exchange rate
to use on initial recognition of the related asset, expense or
income (or part thereof) is the date on which the entity initially
recognises the non-monetary asset or non-monetary liability arising
from the payment or receipt of advance consideration.
The adoption of this interpretation had no impact on these
financial statements as the Group had not paid or received advance
consideration in a foreign currency.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs,
potentially relevant to the Group's financial statements, that have
been issued but are not yet effective. Certain new or revised IFRSs
have yet been endorsed by the EU.
Annual Improvements to IFRSs Amendments to IFRS 3, Business
2015-2017 Cycle Combinations(1)
Annual Improvements to IFRSs Amendments to IAS 12, Income Taxes(1)
2015-2017 Cycle
Annual Improvements to IFRSs Amendments to IAS 23, Borrowing
2015-2017 Cycle Costs(1)
IFRS 16 Leases(1)
Amendments to IAS 1 and Definition of Material(2*)
IAS 8
Amendments to IAS 19 Plan Amendment, Curtailment or
Settlement(1)
Amendments to IAS 28 Long-term Interests in Associates
and Joint Ventures(1)
Amendments to IFRS 3 Definition of a Business(3*)
Amendments to IFRS 9 Prepayment Features with Negative
Compensation(1)
Amendments to IFRS 10 and Sale or Contribution of Assets
IAS 28 between an Investor and its Associate
or Joint Venture(#)
IFRIC 23 Uncertainty over Income Tax Treatments(1)
(1) Effective for annual periods beginning on or after
1 January 2019
(2) Effective for annual periods beginning on or after
1 January 2020
(3) Effective for business combinations and asset acquisitions
which the acquisition date is on or after the beginning
annual period beginning on or after 1 January 2020
(#) The amendments were originally intended to be effective
for annual periods beginning on or after 1 January
2016. The effective date has now been deferred/removed.
Early application of the amendments continues to
be permitted.
(*) Not yet endorsed by the EU
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
Annual Improvements to IFRSs 2015-2017 Cycle - Amendments to
IFRS 3, Business Combinations
The amendments issued under the annual improvements process make
small, non-urgent changes to standards where they are currently
unclear. They include amendments to IFRS 3 which clarify that when
a joint operator of a business obtains control over a joint
operation, this is a business combination achieved in stages and
the previously held equity interest should therefore be remeasured
to its acquisition date fair value.
Annual Improvements to IFRSs 2015-2017 Cycle - Amendments to IAS
12, Income Taxes
The amendments issued under the annual improvements process make
small, non-urgent changes to standards where they are currently
unclear. They include amendments to IAS 12 which clarify that all
income tax consequences of dividends are recognised consistently
with the transactions that generated the distributable profits,
either in profit or loss, other comprehensive income or directly in
equity.
Annual Improvements to IFRSs 2015-2017 Cycle - Amendments to IAS
23, Borrowing Costs
The amendments issued under the annual improvements process make
small, non-urgent changes to standards where they are currently
unclear. They include amendments to IAS 23 which clarify that a
borrowing made specifically to obtain a qualifying asset which
remains outstanding after the related qualifying asset is ready for
its intended use or sale would become part of the funds an entity
borrows generally and therefore included in the general pool.
IFRS 16 - Leases
IFRS 16, which upon the effective date will supersede IAS 17
"Leases" and related interpretations, introduces a single lessee
accounting model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value. Specifically, under
IFRS 16, a lessee is required to recognise a right-of-use asset
representing its right to use the underlying leased asset and a
lease liability representing its obligation to make lease payments.
Accordingly, a lessee should recognise depreciation of the
right-of-use asset and interest on the lease liability, and also
classifies cash repayments of the lease liability into a principal
portion and an interest portion and presents them in the statement
of cash flows. Also, the right-of-use asset and the lease liability
are initially measured on a present value basis. The measurement
includes non-cancellable lease payments and also includes payments
to be made in optional periods if the lessee is reasonably certain
to exercise an option to extend the lease, or not to exercise an
option to terminate the lease. This accounting treatment is
significantly different from the lessee accounting for leases that
are classified as operating leases under the predecessor standard,
IAS 17.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRS 16 - Leases (Continued)
In respect of the lessor accounting, IFRS 16 substantially
carries forward the lessor accounting requirements in IAS 17.
Accordingly, a lessor continues to classify its leases as operating
leases or finance leases, and to account for those two types of
leases differently.
The Group has performed a preliminary assessment of potential
impact of the adoption of IFRS 16 on the Group. As set out in note
26 to the consolidated financial statements, the total operating
lease commitment of the Group in respect of rented office premises
and warehouse as at 31 December 2018 amounted to approximately
US$137,000. The directors anticipate that the adoption of IFRS 16
would not result in significant impact on the Group's results but
expect that the above operating lease commitments will be
recognised as right-of-use assets and lease liabilities in the
Group's consolidated financial statements.
Amendments to IAS 1 and IAS 8 - Definition of Material
The amendments provide a new definition of material. The new
definition states that information is material if omitting,
misstating or obscuring it could reasonably be expected to
influence decisions that the primary users of general purpose
financial statements make on the basis of those financial
statements. The amendments clarify that materiality will depend on
the nature or magnitude of information. A misstatement of
information is material if it could reasonably be expected to
influence decisions made by the primary users.
Amendments to IAS 28 - Long-term Interests in Associates and
Joint Ventures
The amendment clarifies that IFRS 9 applies to long-term
interests ("LTI") in associates or joint ventures which form part
of the net investment in the associates or joint ventures and
stipulates that IFRS 9 is applied to these LTI before the
impairment losses guidance within IAS 28.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
Amendments to IFRS 3 - Definition of a Business
The amendments clarify and provide additional guidance on the
definition of a business. The amendments clarify that for an
integrated set of activities and assets to be considered a
business, it must include, at a minimum, an input and a substantive
process that together significantly contribute to the ability to
create outputs. A business can exist without including all of the
inputs and processes needed to create outputs. The amendments
remove the assessment of whether market participants are capable of
acquiring the business and continue to produce outputs. Instead,
the focus is on whether acquired inputs and acquired substantive
processes together significantly contribute to the ability to
create outputs. The amendments have also narrowed the definition of
outputs to focus on goods or services provided to customers,
investment income or other income from ordinary activities.
Furthermore, the amendments provide guidance to assess whether an
acquired process is substantive and introduce an optional fair
value concentration test to permit a simplified assessment of
whether an acquired set of activities and assets is not a
business.
Amendments to IFRS 9 - Prepayment Features with Negative
Compensation
The amendments clarify that prepayable financial assets with
negative compensation can be measured at amortised cost or at FVOCI
if specified conditions are met - instead of at FVTPL.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
The amendments clarify the extent of gains or losses to be
recognised when an entity sells or contributes assets to its
associate or joint venture. When the transaction involves a
business, the gain or loss is recognised in full; conversely when
the transaction involves assets that do not constitute a business,
the gain or loss is recognised only to the extent of the unrelated
investors' interests in the joint venture or associate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective (Continued)
IFRIC 23 - Uncertainty over Income Tax Treatments
The interpretation supports the requirements of IAS 12 by
providing guidance over how to reflect the effects of uncertainty
in accounting for income taxes.
Under the interpretation, the entity shall determine whether to
consider each uncertain tax treatment separately or together based
on which approach better predicts the resolution of the
uncertainty. The entity shall also assume the tax authority will
examine amounts that it has a right to examine and have full
knowledge of all related information when making those
examinations. If the entity determines it is probable that the tax
authority will accept an uncertain tax treatment, then the entity
should measure current and deferred tax in line with its tax
filings. If the entity determines it is not probable, then the
uncertainty in the determination of tax is reflected using either
the "most likely amount" or the "expected value" approach,
whichever better predicts the resolution of the uncertainty.
Except for IFRS 16, the directors anticipate that the adoption
of other new or revised standards would not result in significant
impact on amounts reported in the consolidated financial statements
of the Group.
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements of the Group have been
prepared in accordance with all applicable IFRSs issued by the
International Accounting Standards Board as adopted by the EU.
Basis of preparation
The consolidated financial statements have been prepared under
the historical cost basis except for financial assets at FVTPL,
which are measured at fair values as explained in the accounting
policies set out below.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries. Inter-company
transactions and balances between group companies together with
unrealised profits are eliminated in full in preparing the
consolidated financial statements. Unrealised losses are also
eliminated unless the transaction provides evidence of impairment
on the asset transferred, in which case the loss is recognised in
profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Subsidiaries
A subsidiary is an investee over which the Company is able to
exercise control. The Company controls an investee if all three of
the following elements are present: (1) power over the investee,
(2) exposure, or rights, to variable returns from the investee, and
(3) the ability to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
Joint arrangements
The Group is a party to a joint arrangement where there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as
either:
- Joint venture: where the Group has rights to only the net
assets of the joint arrangement; or
- Joint operation: where the Group has both the rights to assets
and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
- The structure of the joint arrangement;
- The legal form of the joint arrangement structured through a separate vehicle;
- The contractual terms of the joint arrangement agreement; and
- Any other facts and circumstances (including any other contractual arrangements).
Joint ventures are accounted for using the equity method whereby
they are initially recognised at cost and thereafter, their
carrying amount are adjusted for the Group's share of the
post-acquisition change in the joint ventures' net assets except
that losses in excess of the Group's interest in the joint venture
are not recognised unless there is a legal and constructive
obligation to make good those losses.
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the joint ventures. The investors' share in
a joint venture's profits and losses resulting from such
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in the joint
venture. Where there is objective evidence that the investment in a
joint venture has been impaired, the carrying amount of the
investment is tested for impairment in the same way as other
non-financial assets.
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues and expenses
in accordance with its contractually conferred rights and
obligations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. The
cost of property, plant and equipment includes their purchase price
and the costs directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are recognised as an expense in
profit or loss during the financial period in which they are
incurred.
Property, plant and equipment are depreciated so as to write off
their cost net of expected residual value over their estimated
useful lives on a straight-line basis. The useful lives, residual
value and depreciation method are reviewed, and adjusted if
appropriate, at the end of each reporting period. The useful lives
are as follows:
Leasehold improvements over the lease terms
An asset is written down immediately to its recoverable amount
if its carrying amount is higher than the asset's estimated
recoverable amount.
The gain or loss on disposal of an item of property, plant and
equipment is the difference between the net sale proceeds and its
carrying amount, and is recognised in profit or loss on
disposal.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
The Group as lessee
The total rentals payable under the operating leases are
recognised in profit or loss on a straight-line basis over the
lease term. Lease incentives received are recognised as an
integrated part of the total rental expense, over the term of the
lease.
Revenue recognition
Dividend income is recognised when the right to receive payment
is established.
Interest income is accrued on a time basis on the principal
outstanding at the applicable interest rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currencies
Transactions entered into by the group entities in currencies
other than the currency of the primary economic environment in
which they operate are recorded at the rates ruling when the
transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the end of the
reporting period. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the translation of monetary items, are recognised in
profit or loss in the period in which they arise.
On consolidation, income and expense items of foreign operations
are translated into the presentation currency of the Group (i.e.
US$) at the average exchange rates for the year, unless exchange
rates fluctuate significantly during the period, in which case, the
rates approximating to those ruling when the transactions took
place are used. All assets and liabilities of foreign operations
are translated at the rate ruling at the end of the reporting
period. Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated in equity as foreign
currency translation reserve (attributed to minority interests as
appropriate). Exchange differences recognised in profit or loss of
group entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the foreign operation concerned are reclassified to other
comprehensive income and accumulated in equity as foreign currency
translation reserve.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign currency translation reserve
relating to that operation up to the date of disposal are
reclassified to profit or loss as part of the profit or loss on
disposal.
Goodwill and fair value adjustments on identifiable assets
acquired arising on an acquisition of a foreign operation on or
after 1 January 2005 are treated as assets and liabilities of that
foreign operation and translated at the rate of exchange prevailing
at the end of the reporting period. Exchange differences arising
are recognised in the foreign currency translation reserve.
Share-based payments
The Group operates equity-settled share-based compensation plans
and the share options are awarded to employees and directors
providing services to the Group.
All services received in exchange for the grant of any
share-based compensation are measured at their fair values. These
are indirectly determined by reference to the equity instruments
awarded. Their value is appraised at the grant date and excludes
the impact of any non-market vesting conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-based payments (Continued)
All share-based compensation is recognised as an expense in
profit or loss over the vesting period if vesting conditions apply,
or recognised as an expense in full at the grant date when the
equity instruments granted vest immediately unless the compensation
qualifies for recognition as an asset, with a corresponding
increase in the share option reserve in equity. If vesting
conditions apply, the expense is recognised over the vesting
period, based on the best available estimate of the number of
equity instruments expected to vest. Non-market vesting conditions
are included in assumptions about the number of equity instruments
that are expected to vest. Estimates are subsequently revised, if
there is any indication that the number of equity instruments
expected to vest differs from previous estimates.
At the time when the share options are exercised, the amount
previously recognised in share option reserve will be transferred
to share premium. After the vesting date, when the vested share
options are forfeited or are still not exercised at the expiry
date, the amount previously recognised in share option reserve will
be transferred to retained profits.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'loss before income tax expense'
as reported in the consolidated statement of profit or loss and
other comprehensive income because of items of income or expense
that are taxable or deductible in other years and items that are
never taxable or deductible. Current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from initial recognition (other than in a business combination) of
assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxation (Continued)
Deferred tax (Continued)
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is
material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Cash and cash equivalents
For the purposes of the consolidated statement of cash flows,
cash and cash equivalents included cash on hand and in banks.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied from 1 January
2018)
(i) Financial assets
A financial asset (unless it is a trade receivable without a
significant financing component) is initially measured at fair
value plus, for an item not at FVTPL, transaction costs that are
directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
All regular way purchases and sales of financial assets are
recognised on the trade date, that is, the date that the Group
commits to purchase or sell the asset. Regular way purchases or
sales are purchases or sales of financial assets that require
delivery of assets within the period generally established by
regulation or convention in the market place.
Financial assets with embedded derivatives are considered in
their entirely when determining whether their cash flows are solely
payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the
Group's business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement
categories into which the Group classifies its debt
instruments:
Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost.
Financial assets at amortised cost are subsequently measured using
the effective interest rate method. Interest income, foreign
exchange gains and losses and impairment are recognised in profit
or loss. Any gain on derecognition is recognised in profit or
loss.
FVOCI: Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the assets' cash
flows represent solely payments of principal and interest, are
measured at FVOCI. Debt investments at FVOCI are subsequently
measured at fair value. Interest income calculated using the
effective interest rate method, foreign exchange gains and losses
and impairment are recognised in profit or loss. Other net gains
and losses are recognised in other comprehensive income. On
derecognition, gains and losses accumulated in other comprehensive
income are reclassified to profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied from 1 January
2018) (Continued)
(i) Financial assets (Continued)
FVTPL: Financial assets at FVTPL include financial assets held
for trading, financial assets designated upon initial recognition
at FVTPL, or financial assets mandatorily required to be measured
at fair value. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in
the near term. Derivatives, including separated embedded
derivatives, are also classified as held for trading unless they
are designated as effective hedging instruments. Financial assets
with cash flows that are not solely payments of principal and
interest are classified and measured at FVTPL, irrespective of the
business model. Notwithstanding the criteria for debt instruments
to be classified at amortised cost or at FVOCI, as described above,
debt instruments may be designated at FVTPL on initial recognition
if doing so eliminates, or significantly reduces, an accounting
mismatch.
Equity instruments
On initial recognition of an equity investment that is not held
for trading, the Group could irrevocably elect to present
subsequent changes in the investment's fair value in other
comprehensive income. This election is made on an
investment-by-investment basis. Equity investments at FVOCI are
measured at fair value. Dividend income are recognised in profit or
loss unless the dividend income clearly represents a recovery of
part of the cost of the investments. Other net gains and losses are
recognised in other comprehensive income and are not reclassified
to profit or loss. All other equity instruments are classified as
FVTPL, whereby changes in fair value, dividends and interest income
are recognised in profit or loss.
(ii) Impairment loss on financial assets
The Group recognises loss allowances for ECLs on financial
assets measured at amortised cost. The ECLs are measured on either
of the following bases: (1) 12-month ECLs: these are the ECLs that
result from possible default events within the 12 months after the
reporting date; and (2) lifetime ECLs: these are ECLs that result
from all possible default events over the expected life of a
financial instrument. The maximum period considered when estimating
ECLs is the maximum contractual period over which the Group is
exposed to credit risk.
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the difference between all
contractual cash flows that are due to the Group in accordance with
the contract and all the cash flows that the Group expects to
receive. The shortfall is then discounted at an approximation to
the asset's original effective interest rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied from 1 January
2018) (Continued)
(ii) Impairment loss on financial assets (Continued)
For debt financial assets, the ECLs are based on the 12-month
ECLs. However, when there has been a significant increase in credit
risk since origination, the allowance will be based on the lifetime
ECLs.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
analysis, based on the Group's historical experience and informed
credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial asset has
increased significantly if it is more than 30 days past due.
Despite the foregoing, the Group assumes that the credit risk on
a debt instrument has not increased significantly since initial
recognition if the debt instrument is determined to have low credit
risk at the reporting date. A debt instrument is determined to have
low credit risk if (1) it has a low risk of default; (2) the
borrower has a strong capacity to meet its contractual cash flow
obligations in the near term; and (3) adverse changes in economic
and business conditions in the longer term may, but will not
necessarily, reduce the ability of the borrower to fulfil its
contractual cash flow obligations.
The Group considers a financial asset to be in default when: (1)
the borrower is unlikely to pay its credit obligations to the Group
in full, without recourse by the Group to actions such as realising
security (if any is held); or (2) the financial asset is more than
90 days past due.
A financial asset is credit-impaired when one or more events of
default that have a detrimental impact on the estimated future cash
flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data about
the following events:
- significant financial difficulty of the issuer or the borrower;
- a breach of contract, such as a default or past due event;
- the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower's financial difficulty, having
granted to the borrower a concession(s) that the lender(s) would
not otherwise consider;
- it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or
- the disappearance of an active market for that financial asset
because of financial difficulty of the issuer or the borrower.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied from 1 January
2018) (Continued)
(ii) Impairment loss on financial assets (Continued)
Interest income on credit-impaired financial assets is
calculated based on the amortised cost (i.e. the gross carrying
amount less loss allowance) of the financial asset. For non
credit-impaired financial assets interest income is calculated
based on the gross carrying amount.
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery. This is generally the case when the
Group determines that the debtor does not have assets or sources of
income that could generate sufficient cash flows to repay the
amount subject to the write-off.
Subsequent recoveries of an asset that was previously written
off are recognised as a reversal of impairment in profit or loss in
the period in which the recovery occurs.
(iii) Financial liabilities
The Group classifies its financial liabilities, depending on the
purpose for which the liabilities were incurred. Financial
liabilities at FVTPL are initially measured at fair value and
financial liabilities at amortised cost are initially measured at
fair value, net of directly attributable costs incurred.
Financial liabilities at amortised cost
Financial liabilities at amortised cost including other payables
and accruals are subsequently measured at amortised cost, using the
effective interest method. The related interest expense is
recognised in profit or loss.
Gains or losses are recognised in profit or loss when the
liabilities are derecognised as well as through the amortisation
process.
(iv) Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset or financial liability and of
allocating interest income or interest expense over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts or payments through the
expected life of the financial asset or liability, or where
appropriate, a shorter period.
(v) Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied from 1 January
2018) (Continued)
(vi) Derecognition
The Group derecognises a financial asset when the contractual
rights to the future cash flows in relation to the financial asset
expire or when the financial asset has been transferred and the
transfer meets the criteria for derecognition in accordance with
IFRS 9.
Financial liabilities are derecognised when the obligations
specified in the relevant contract are discharged, cancelled or
expire.
Financial instruments (accounting policy applied until 31
December 2017)
Financial assets and financial liabilities are recognised when a
group entity becomes a party to the contractual provisions of the
instruments.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate,
on initial recognition.
Financial assets
The Group classifies its financial assets at initial
recognition, depending on the purpose for which the assets were
acquired. Regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. A regular way
purchase or sale is a purchase or sale of a financial asset under a
contract whose terms require delivery of the asset within the time
frame established generally by regulation or convention in the
marketplace concerned.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Loans and receivables (including cash and bank balance) are
measured at amortised cost using the effective interest method,
less any impairment.
Interest income is recognised by applying the effective interest
rate, except for short-term receivables when the effect of
discounting is immaterial.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied until 31
December 2017) (Continued)
Available-for-sale financial assets
These assets are non-derivative financial assets that are
designated as available-for-sale or are not included in other
categories of financial assets. When the fair value of unlisted
equity securities cannot be reliably measured because (a) the
variability in the range of reasonable fair value estimates is
significant for that investment or (b) the probabilities of the
various estimates within the range cannot be reasonably assessed
and used in estimating fair value, such securities are stated at
cost less any impairment losses.
Impairment of financial assets
The Group assesses, at the end of each reporting period, whether
there is any objective evidence that a financial asset is impaired.
A financial asset is impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
after the initial recognition of the asset and that event has an
impact on the estimated future cash flows of the financial asset
that can be reliably estimated.
Evidence of impairment may include:
-- significant financial difficulty of the debtor;
-- a breach of contract, such as a default or delinquency in
interest or principal payments;
-- granting a concession(s) to a debtor because of the debtor's
financial difficulty; or
-- it becoming probable that the debtor will enter bankruptcy or
other financial reorganisation.
For loans and receivables
An impairment loss is recognised in profit or loss when there is
objective evidence that the asset is impaired, and is measured as
the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the original
effective interest rate. The carrying amount of a financial asset
is reduced through the use of an allowance account. When any part
of a financial asset is determined as uncollectible, it is written
off against the allowance account for the relevant financial
asset.
Impairment losses are reversed in subsequent periods when an
increase in the asset's recoverable amount can be related
objectively to an event occurring after the impairment was
recognised, subject to a restriction that the carrying amount of
the asset at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been
recognised.
For available-for-sale financial assets
For available-for-sale equity investments that are carried at
cost, the amount of impairment loss is measured as the difference
between the carrying amount of the asset and the present value of
estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment loss shall
not be reversed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (accounting policy applied until 31
December 2017) (Continued)
Derecognition of financial assets
Financial assets are derecognised when the contractual rights to
receive cash ows from the assets expire, or the nancial assets are
transferred and the Group has transferred substantially all the
risks and rewards of ownership of the nancial assets.
On derecognition of a nancial asset, the difference between the
asset's carrying amount and the sum of the consideration received
and receivable, and the cumulative gain or loss that had been
recognised in other comprehensive income is reclassified to pro t
or loss.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by a group entity are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities (including other payables and accruals)
are subsequently measured at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or where appropriate a shorter period, to the
net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is
recognised in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of other assets
At the end of each reporting period, the Group reviews the
carrying amounts of the following assets to determine whether there
is any indication that those assets have suffered an impairment
loss or an impairment loss previously recognised no longer exists
or may have decreased:
-- property, plant and equipment; and
-- interest in a joint venture
If the recoverable amount (i.e. the greater of fair value less
costs to disposal and value in use) of an asset is estimated to be
less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset in prior
years.
A reversal of an impairment loss is recognised in profit or loss
immediately.
Value in use is based on the estimated future cash flows
expected to be derived from the asset or cash generating unit,
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset or the cash generating
unit.
Related parties
(a) A person or a close member of that person's family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of key management personnel of the Group or the Company's parent.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Related parties (Continued)
(b) An entity is related to the Group if any of the following
conditions apply:
(i) The entity and the Group are members of the same group
(which means that each parent, subsidiary and fellow subsidiary is
related to the others);
(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a group of
which the other entity is a member);
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the
other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit
of the employees of the Group or an entity related to the
Group;
(vi) The entity is controlled or jointly controlled by a person identified in (a); or
(vii) A person identified in (a)(i) has significant influence
over the entity or is a member of key management personnel of the
entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a
part, provides key management personnel services to the Group or to
the Company's parent.
Close members of the family of a person are those family members
who may be expected to influence, or be influenced by, that person
in his dealings with the entity and include:
(i) that person's children and spouse or domestic partner;
(ii) children of that person's spouse or domestic partner; and
(iii) dependents of that person or that person's spouse or domestic partner.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are
described in note 3 to the consolidated financial statements,
management is required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
underlying assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to an accounting estimate 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are as follows:
(i) Impairment of financial assets (including amount due from a joint venture)
The loss allowances for financial assets are based on
assumptions about risk of default and expected loss rates. The
Group uses judgement in making these assumptions and selecting the
inputs to the impairment calculation, based on the Group's past
history, existing market conditions as well as forward looking
estimates at the end of each reporting period.
(ii) Impairment of non-financial assets (including interest in a joint venture)
The Group assesses whether there are any indications of
impairment for all non-financial assets at each reporting date.
Non-financial assets are tested for impairment when there are
indications that the carrying amounts may not be recoverable.
(iii) Estimation of fair value of unlisted equity investments
The fair value of equity investments that are not traded in an
active market is determined using valuation techniques. The Group
uses its judgement to select a variety of methods and make
assumptions that are mainly based on market conditions existing at
the end of each reporting period. Details of the key assumptions
used and the impact of changes to these assumptions are disclosed
in note 5(c) to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments
(a) Categories of financial instruments
2018 2017
US$'000 US$'000
Financial assets
Financial assets at FVTPL 1,649 -
Financial assets at amortised cost 3,749 -
Loans and receivables - 553
Available-for-sale financial assets - 1,784
------- -------
5,398 2,337
======= =======
Financial liabilities
Financial liabilities at amortised cost 138 148
======= =======
(b) Financial risk management objectives
Management monitors and manages the financial risks relating to
the operations of the Group through internal risk reports which
analyse exposures by degree and magnitude of risks. These risks
include market risks (including foreign currency risk, interest
rate risk and price risk), credit risk and liquidity risk. The
policies on how to mitigate these risks are set out below. The
Group does not enter into or trade derivative financial instruments
for speculative purposes.
Market risks
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates, interest rates
and price risk.
There has been no change to the Group's exposure to market risks
or the manner in which these risks are managed and measured.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk
Certain financial assets and financial liabilities of the Group
are denominated in foreign currencies other than the functional
currency of the relevant group entities, which exposes the Group to
foreign currency risk. The Group currently does not have a foreign
currency hedging policy. However, management monitors foreign
exchange exposure and will consider hedging significant foreign
currency exposure should the need arise. Under the Linked Exchange
Rate System in Hong Kong, HK$ is currently pegged to the USD within
a narrow range, the directors therefore consider that there is no
significant foreign exchange risk with respect to the USD.
The currency giving rise to this risk was primarily British
Pound Sterling ("GBP"). The carrying amounts of the Group's foreign
currency denominated monetary assets and monetary liabilities at
the end of reporting period were as follows:
Liabilities Assets
2018 2017 2018 2017
US$'000 US$'000 US$'000 US$'000
GBP 72 81 1 7
======= ======= ======= =======
The following table details the Group's sensitivity to a 10%
(2017: 10%) increase and decrease in USD against the relevant
foreign currency. 10% is the sensitivity rate used when reporting
foreign currency risk internally to key management personnel and
represents management's assessment of the reasonably possible
change in the relevant foreign exchange rate. The sensitivity
analysis includes only outstanding foreign currency denominated
monetary items and adjusts its translation as at year end for a 10%
(2017: 10%) change in the relevant foreign currency rate. A
positive number below indicates a decrease in loss for the year and
in accumulated losses where USD strengthens 10% (2017: 10%) against
the relevant foreign currency. For a 10% (2017: 10%) weakening of
USD against the relevant foreign currency there would have been an
equal and opposite impact on loss for the year and on accumulated
losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk (Continued)
2018 2017
US$'000 US$'000
Change in post-tax loss for the year
GBP impact 7 7
======= =======
(ii) Interest rate risk
The Group's exposure to changes in interest rates is mainly
attributable to its bank deposits at variable interest rates. Bank
deposits at variable rates expose the Group to cash flow interest
rate risk. Debt investments measured at amortised cost at fixed
rates expose the Group to fair value interest rate.
The directors consider that the exposure to cash flow interest
rate risk was insignificant. Hence, no sensitivity analysis on the
exposure to the Group's cash flow interest rate risk is
presented.
(iii) Price risk
Price risk is the risk that the value of a financial instrument
will fluctuate as a result of changes in market prices (other than
those arising from foreign currency risk), whether caused by
factors specific to an individual investment or its issuer, or
factors affecting all instruments.
All of the Group's unlisted investments are held for long term
strategic purposes. Their performance is assessed at least annually
against performance of any similar listed entities, based on the
limited information available to the Group, together with an
assessment of their relevance to the Group's long term strategic
plans.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
(iii) Price risk (Continued)
Sensitivity analysis
The sensitivity analysis on price risk includes the Group's
financial instruments, which fair value or future cash flows will
fluctuate because of changes in their corresponding or underlying
asset's equity price. If the prices of the Group's equity
instruments had been 5% higher/lower, loss for the year and
accumulated losses would have decreased/increased by approximately
US$82,000.
The directors consider that the exposure to price risk was
insignificant for the year ended 31 December 2017. Hence, no
sensitivity analysis on the exposure to the Group's price risk is
presented.
Credit risk
The Group's maximum exposure to credit risk which could cause a
financial loss to the Group due to failure to discharge an
obligation by the counterparties arises from the carrying amount of
the respective recognised financial assets as stated in the
consolidated statement of financial position.
The credit risk on liquid funds is limited because the major
counterparties are banks with high credit ratings assigned by
international credit-rating agencies. As at 31 December 2018,
approximately 99% (2017: 94%) of the bank balances were deposited
with a bank with a high credit rating. Other than concentration of
credit risk on liquid funds deposited with that bank, the Group did
not have any other significant concentration of credit risk.
For other receivables, deposits, other financial assets at
amortised cost and amount due from a joint venture, management
makes periodic individual assessment on the recoverability based on
historical settlement records, past experience, and also available
reasonable and supportive forward-looking information starting from
1 January 2018. Management believes that there was no material
credit risk inherent in the Group's outstanding balance of other
receivables, deposits, other financial assets at amortised cost and
amount due from a joint venture.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has established an appropriate
liquidity risk management framework to meet the Group's short,
medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves,
by regularly monitoring forecast and actual cash flows and by
matching the maturity profiles of financial assets and
liabilities.
Liquidity table
The following table details the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
repayment periods. The table has been drawn up based on the
undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay.
On demand or
less than 1 year
2018 2017
US$'000 US$'000
Other payables and accruals 138 148
======== ========
(c) Fair value of financial instruments
The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair
value measurements are categorised into different levels based on
how observable the inputs used in the valuation technique utilised
are (the "fair value hierarchy"):
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(c) Fair value of financial instruments (Continued)
(i) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash
and cash equivalents, other receivables, deposits, other financial
assets at amortised cost, amount due from a joint venture and other
payables and accruals.
Due to their short term nature, the carrying value of cash and
cash equivalents, other receivables, deposits, other financial
assets at amortised cost, amount due from a joint venture and other
payables and accruals approximates fair value.
(ii) Financial instruments measured at fair value
Financial assets at FVTPL included in the consolidated financial
statements require measurement at, and disclosure of, fair
value.
The fair value of financial instruments with standard terms and
conditions and traded on active liquid markets are determined with
reference to quoted market prices.
The valuation techniques and significant unobservable inputs
used in determining the fair value measurement of level 3 financial
instruments, as well as the relationship between key observable
inputs and fair value are set out in note (iii) below.
(iii) Information about level 3 fair value measurement
The fair value of the Group's unlisted equity investment in
Velocity (as defined in note 17) was estimated using market
approach.
Significant unobservable input
Enterprise value to sales ratio ("EV/Sales") 14.3x
A 5% increase/decrease in EV/Sales and holding all other
variables constant would have increased/decreased the carrying
amount of the Group's unlisted equity investment in Velocity (as
defined in note 17) by approximately US$27,000/US$27,000
respectively.
The fair value of the Group's unlisted equity investment in ICBC
Shipping Fund (as defined in note 17) was estimated using the net
asset value. There was no significant unobservable input.
There were no changes in these valuation techniques during the
year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
5. FINANCIAL instruments (CONTINUED)
(c) Fair value of financial instruments (Continued)
The following table provides an analysis of the Group's
financial instruments carried at fair value by level of fair value
hierarchy:
2018
----------------------------------
Level Level Level Total
1 2 3
US$'000 US$'000 US$'000 US$'000
Listed equity investments 307 - - 307
Unlisted equity investments - - 1,342 1,342
------- ------- ------- -------
307 - 1,342 1,649
======= ======= ======= =======
No fair value hierarchy is presented for the year ended 31
December 2017 as all of the Group's equity investments were
classified as available-for-sale financial assets measured at cost
under IAS 39.
During the year, the Group transferred its equity investments of
Ayondo (as defined in note 17) and Agrios (as defined in note 17)
totalling approximately US$307,000 as at 31 December 2018 from
Level 3 to Level 1 as their quoted market prices became available
upon their listings on the respective stock exchanges in Singapore
and Canada.
Reconciliation for financial assets at FVTPL carried at fair
value based on significant unobservable inputs (Level 3) are as
follows:
2018 2017
US$'000 US$'000
At 1 January under IAS 39 - -
Reclassification from available-for-sale
financial assets measured at cost 1,784 -
(note 2.1(a)(i))
Remeasurement of financial assets
at FVTPL (note 2.1(a)(i)) (55) -
------- -------
At 1 January under IFRS 9 1,729 -
Purchase 249 -
Transfer to Level 1 (607) -
Fair value adjustment (29) -
At 31 December 1,342 -
======= =======
Fair value adjustment of financial assets at FVTPL was
recognised in the line item "other income, gains and losses, net"
on the face of the consolidated statement of profit or loss and
other comprehensive income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
6. Capital risk management
The Group's objective of managing capital is to safeguard the
Group's ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce cost of
capital.
In order to maintain or adjust the capital structure, the Group
may return capital to shareholders, issue new shares or sell assets
to reduce debts.
The capital structure of the Group consists only of equity
attributable to owners of the Company, comprising share capital and
reserves.
7. REVENUE
The Group's revenue represents dividend income from financial
assets at FVTPL/available-for-sale financial assets and interest
income from other financial assets at amortised cost for the year.
The Group had no revenue from contracts with customers. An analysis
of the Group's revenue from principal activities is as follows:
Year ended 31 December
2018 2017
US$'000 US$'000
Dividend income from financial assets
at
FVTPL/available-for-sale financial
assets 96 96
Interest income from other financial
assets at
amortised cost 40 -
------------ -----------
136 96
============ ===========
8. SEGMENT Information
An operating segment is a component of the Group that is engaged
in business activities from which the Group may earn revenue and
incur expenses, and is identified on the basis of the internal
management reporting information that is provided to and regularly
reviewed by the Group's chief operating decision makers in order to
allocate resources and assess performance of the segment. For the
years ended 31 December 2018 and 2017, the executive directors, who
were the chief operating decision makers for the purpose of
resource allocation and assessment of performance, have determined
that the Group had only one single business component / reportable
segment as the Group was only engaged in investment holding. The
executive directors allocated resources and assessed performance on
an aggregated basis. Accordingly, no operating segment is
presented.
The major operations and the revenue of the Group arise from
Hong Kong. The Board of Directors considers that most of the
non-current assets (other than the financial instruments) of the
Group are located in Hong Kong.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
9. OTHER INCOME, GAINS AND LOSSES, NET
Year ended 31 December
2018 2017
US$'000 US$'000
Bank interest income 1 -
Sundry income - 3
Change in fair value of financial (329) -
assets at FVTPL
Foreign exchange gain 1 -
------------ -----------
(327) 3
============ ===========
10. STAFF COSTS
The aggregate staff costs (including directors' remuneration) of
the Group were as follows:
Year ended 31 December
2018 2017
US$'000 US$'000
Wages and salaries 261 228
Contributions to pension and provident
fund 7 5
268 233
=========== ===========
Compensation of key management personnel was as follows:
Year ended 31 December
2018 2017
US$'000 US$'000
Directors' fees 64 68
Other remuneration including
contributions to pension and provident - -
fund
-----------
64 68
=========== ===========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
11. LOSS BEFORE INCOME TAX EXPENSE
Loss before income tax expense has been arrived at after
charging/(crediting):
Year ended 31 December
2018 2017
US$'000 US$'000
Auditor's remuneration 45 42
Depreciation of property, plant and
equipment - 21
Foreign exchange (gain)/loss (1) 5
Operating lease rental expenses in
respect of office
premises and warehouse 80 68
=========== ===========
12. INCOME TAX EXPENSE
No provision for taxation has been made as the Group did not
generate any assessable profits for United Kingdom Corporation Tax,
Hong Kong Profits Tax or tax in other jurisdictions.
The tax charge for 2018 and 2017 can be reconciled to the loss
before income tax expense per the consolidated statement of profit
or loss and other comprehensive income as follows:
Year ended 31 December
2018 2017
US$'000 US$'000
Loss before income tax expense (803) (424)
=========== ===========
Loss before tax calculated at 16.5%
(2017: 16.5%) (132) (70)
Tax effect of non-deductible expenses 101 82
Tax effect of non-taxable income (16) (16)
Tax effect of deductible temporary
differences - 3
Tax effect of share of losses of
a joint venture 2 1
Tax effect of estimated tax losses
not recognised 45 -
Tax charge for the year - -
=========== ===========
The estimated tax losses of approximately US$274,000 (2017: nil)
can be carried forward indefinitely. No deferred tax asset has been
recognised in respect of the unused tax losses due to the
unpredictability of future profit streams. No deferred tax asset
has been recognised in relation to the deductible temporary
differences of approximately US$55,000 (2017: US$58,000) as it is
not probable that taxable profits will be available against which
the deductible temporary differences can be utilised. The
deductible temporary differences can be carried forward
indefinitely.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
13. LOSS PER SHARE
The loss and weighted average number of ordinary shares used in
the calculation of basic and diluted loss per share were as
follows.
Year ended 31 December
2018 2017
Loss for the year attributable to
owners of the
Company (US$'000) (803) (424)
============ ===========
Weighted average number of ordinary
shares for
the purposes of basic and diluted
loss per share 77,874,040 56,734,580
============ ===========
Loss per share - basic and diluted (1.03) cents (0.75) cent
============ ===========
The weighted average of 77,874,040 ordinary shares for the year
ended 31 December 2018 was derived from 56,734,580 ordinary shares
issued as at 1 January 2018 after taking into account the effect of
the completion in April 2018 of the open offer of 28,367,290
ordinary shares, details of which are set out in note 22 to the
consolidated financial statements. The weighted average number of
ordinary shares for the year ended 31 December 2017 has not been
retrospectively adjusted for the open offer since the open offer
price was higher than the market price of the shares on the date of
the open offer.
Diluted loss per share was the same as basic loss per share for
the years ended 31 December 2018 and 2017 as the impact of the
potential dilutive ordinary shares outstanding had an anti-dilutive
effect on the basic loss per share presented for the years ended 31
December 2018 and 2017.
14. DIVIDS
No dividend was paid or proposed during the year, nor has any
dividend been proposed since the end of the reporting period (2017:
nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
15. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
US$'000
Cost
At 1 January 2017 69
Additions -
----------------------
At 31 December 2017 and 1 January 2018 69
Additions -
At 31 December 2018 69
======================
Accumulated depreciation
At 1 January 2017 48
Depreciation 21
----------------------
At 31 December 2017 and 1 January 2018 69
Depreciation -
----------------------
At 31 December 2018 69
======================
Carrying amount
At 31 December 2017 -
======================
At 31 December 2018 -
======================
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
16. INTEREST IN A JOINT VENTURE
2018 2017
US$'000 US$'000
Unlisted investment, at cost 257 257
Share of post-acquisition losses (121) (110)
Share of post-acquisition other comprehensive
loss (30) (11)
------- -------
Share of net assets 106 136
======= =======
Amount due from a joint venture 257 257
=== ===
The amount due from a joint venture was unsecured, interest-free
and repayable on demand.
Details of the joint venture at 31 December 2018 were as
follows:
Country Proportion Paid-up
of incorporation of ownership registered Principal
Name and operation interest capital activities
------------------------- ------------------ ------------ -----------------
Direct Indirect
Oasis Education Group
Limited
Investment
("Oasis Education") Hong Kong 50% - HK$4,000,000 holding
( ) The People's - 50% HK$5,000,000 Provision
Republic of education
of China consulting
(the "PRC") and support
services
to kindergartens
in the PRC
The contractual arrangement provides the Group with only the
rights to the net assets of the joint arrangement, with the rights
to the assets and obligations for the liabilities of the joint
arrangement resting primarily with Oasis Education. Under IFRS 11,
this joint arrangement was classified as a joint venture and has
been included in the consolidated financial statements using the
equity method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
16. INTEREST IN A JOINT VENTURE (CONTINUED)
The aggregate amounts relating to the joint venture that have
been included in the consolidated financial statements of the Group
as extracted from relating financial statements of the joint
venture, adjusted to reflect adjustments made by the Group when
applying the equity method of accounting are set out below:
2018 2017
Results of the joint venture for the US$'000 US$'000
year
Revenue - -
Other income - 20
Expenses (22) (28)
-------- --------
Loss for the year (22) (8)
Other comprehensive (loss)/income for
the year (38) 34
-------- --------
Total comprehensive (loss)/income for
the year (60) 26
======== ========
Share of losses of the joint venture
for the year (11) (4)
======= ======
Share of other comprehensive (loss)/income
of the
joint venture for the year (19) 17
======
Accumulated share of results of the joint
venture (121) (110)
======= ======
Assets and liabilities of the joint venture at
31 December
2018 2017
US$'000 US$'000
Non-current assets - -
Current assets 809 872
Non-current liabilities - -
Current liabilities (598) (601)
-------- --------
Net assets 211 271
======== ========
Included in the above amounts were:
Cash and cash equivalents 48 51
Depreciation and amortisation - -
Interest income - -
Interest expense - -
Current financial liabilities (excluding
trade and other payables) - -
======== ========
Percentage of equity interest attributable
to the Group 50% 50%
Share of net assets of the joint venture 106 136
==== ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
17. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS/AVAILABLE-FOR-SALE FINANCIAL ASSETS
2018 2017
US$'000 US$'000
Financial assets at FVTPL
Listed equity investments, at fair
value 307 -
Unlisted equity investments, at fair
value 1,342 -
------- -------
1,649 -
======= =======
Available-for-sale financial assets
Unlisted equity investments, at cost - 1,784
======= =======
During the year ended 31 December 2015, the Group acquired
equity interest in ayondo Holding AG ("Ayondo AG") for a total cash
consideration of CHF320,000 (equivalent to approximately
US$325,000). During the year ended 31 December 2016, the Group
acquired additional equity interest in Ayondo AG for a total cash
consideration of CHF160,050 (equivalent to approximately
US$163,000). In connection with the listing in March 2018 of ayondo
Ltd. ("Ayondo"), the holding company of Ayondo AG, on Catalist, the
sponsor-supervised listing platform of the Singapore Exchange
Securities Trading Limited, the Group exchanged its equity interest
in Ayondo AG into the equity interest in Ayondo under a pre-listing
restructuring. Ayondo is a company incorporated in Singapore and is
involved in self-directed trading and social trading services for
contract-for-differences and spread betting.
During the year ended 31 December 2016, the Group acquired
equity interest in Velocity Mobile Limited ("Velocity") for a total
cash consideration of GBP337,120 (equivalent to approximately
US$496,000). Velocity is a company incorporated in England and
Wales and provides real-time lifestyle mobile applications for
premium consumers focusing in the areas of dining, travel,
experiences and luxury goods.
During the year, the Group invested CAD333,000 (equivalent to
approximately US$249,000) in the equity capital of Agrios Global
Holdings Ltd. ("Agrios"), the holding company of a data analytics
driven agriculture technology group that provides property and
equipment for lease and enhanced ancillary services to the cannabis
industry. In November 2018, Agrios was listed on the Canadian
Securities Exchange operated by CNSX Markets Inc..
As at 31 December 2018 and 2017, the Group also owned equity
interest in ICBC Specialised Ship Leasing Investment Fund ("ICBC
Shipping Fund") in an amount of US$800,000.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
17. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS/AVAILABLE-FOR-SALE FINANCIAL ASSETS (CONTINUED)
The Group's equity interests in Ayondo AG, Velocity and ICBC
Shipping Fund were designated as available-for-sale financial
assets until 31 December 2017. The investments were measured at
cost less impairment at each reporting date because the investments
did not have quoted market prices in an active market*, the
variability in the range of reasonable fair value estimates for the
investments was significant and therefore their fair value could
not be reliably measured. These investments were reclassified to
financial assets at FVTPL upon initial application of IFRS 9 at 1
January 2018. Detailed discussion is set out in note 2.1(a)(i) to
the consolidated financial statements.
The directors had no intention to dispose of the financial
assets at FVTPL at the end of the reporting period.
* During the year, the holding company of Ayondo AG, Ayondo,
became listed on Catalist in Singapore.
18. OTHER FINANCIAL ASSETS AT AMORTISED COST
During the year, the Group invested US$1,000,000 in the offshore
term loan bearing interest at 8.5% per annum issued by Trillion
Glory Limited, a Hong Kong indirect wholly-owned subsidiary of
Guangzhou R& F Properties Co., Ltd which is a Chinese property
company listed on the Main Board of The Stock Exchange of Hong Kong
Limited. During the year, the first 15% of the principal of the
term loan of US$150,000 was repaid, and the remaining 85% of the
outstanding amount of US$850,000 will be due on 15 October 2019,
which may be extended for no more than one year subject to all
lenders' consent.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
19. SUBSIDIARIES
Details of the subsidiaries of the Company at 31 December 2018
were as follows:
Proportion
Country Proportion of voting
of incorporation of ownership power Principal
Name and operation interest held activities
----------------------- ------------------ ------------- ---------- -----------
The British
Worldsec Financial Virgin Investment
Services Limited Islands 100% 100% holding
Worldsec Corporate The British 100%* 100%* Inactive
Finance Limited Virgin
Islands
Worldsec International Netherlands 100%* 100%* Inactive
NV Antilles
Worldsec Investment Hong Kong 100%* 100%* Investment
(Hong Kong) Limited holding
Worldsec Investment The British 100%* 100%* Investment
(China) Limited Virgin holding
Islands
Indirectly held subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
20. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the end of the reporting period as
shown in the consolidated statement of financial position were as
follows:
2018 2017
US$'000 US$'000
Bank balances 2,606 259
Cash balances 1 1
2,607 260
======= =======
Bank balances bore interest at the then prevailing market rates
ranging from 0.001% to 0.01% (2017: 0.001% to 0.01%) per annum and
had original maturities of three months or less.
21. OTHER PAYABLES AND ACCRUALS
2018 2017
US$'000 US$'000
Other payables and accruals 138 148
======= =======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
22. SHARE CAPITAL
Number of Total value
shares US$'000
Authorised:
Ordinary shares of US$0.001 each
At 1 January 2017, 31 December
2017,
1 January 2018 and 31 December
2018 60,000,000,000 60,000
================= ============
Called up, issued and fully paid:
Ordinary shares of US$0.001 each
At 1 January 2017, 31 December
2017 and
1 January 2018 56,734,580 57
Issue of new shares by way of
open offer (Note) 28,367,290 28
----------------- ------------
At 31 December 2018 85,101,870 85
================= ============
Note:
In April 2018, the Company issued 28,367,290 ordinary shares of
US$0.001 each in the share capital of the Company at a price of
US$0.15 per share by way of open offer on the basis of 1 new share
for every 2 ordinary share held by qualifying shareholders, giving
rise to gross proceeds of approximately US$4,255,000, comprising
share capital of approximately US$28,000 and share premium of
approximately US$4,227,000.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
23. RESERVES
(a) The share premium account represents the premium arising
from the issue of shares of the Company at a premium.
(b) The contributed surplus represents the amount arising from
the reduction in the nominal value of the authorised and issued
shares of the Company and the reduction in the share premium
account pursuant to an ordinary resolution passed on 23 July
2003.
(c) Share option reserve comprises the fair value of the
Company's share options granted which have yet to be exercised, as
further explained in the accounting policy for share-based payment
transactions in note 3 to the consolidated financial statements.
The amount will either be transferred to the issued capital account
and the share premium account when the related options are
exercised, or be transferred to accumulated losses should the
related options expire or be forfeited.
(d) Exchange differences relating to the translation of the net
assets of the Group's foreign operations (including a joint
venture) from their functional currencies to the Group's
presentation currency were recognised directly in other
comprehensive income and accumulated in the foreign currency
translation reserve. Such exchange differences accumulated in the
foreign currency translation reserve will be reclassified to profit
or loss on the disposal of the foreign operations.
(e) The special reserve represents the amount arising from the
difference between the nominal value of the issued share capital of
each subsidiary and the nominal value of the issued share capital
of the Company along with the surplus arising in a subsidiary on
group reorganisation completed on 26 February 2007.
(f) Accumulated losses represent accumulated net gains and
losses recognised in the profit or loss of the Group.
24. SHARE-BASED PAYMENTS
The Company operates an equity-settled share-based remuneration
scheme for the employees and directors.
On 1 December 2015, the Company granted to certain eligible
persons a total of 2,950,000 share options to subscribe for new
ordinary shares of US$0.001 each in the share capital of the
Company under the Worldsec Employee Share Option Scheme 1997 (the
"Scheme") which was revised on 24 September 2014. The options
vested six months from the date of grant and were then exercisable
within a period of 9.5 years.
The following table discloses the movements of the outstanding
share options under the Scheme during the years ended 31 December
2018 and 2017.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
24. SHARE-BASED PAYMENTS (CONTINUED)
Number of options
---------------------------------------------------------------------------------
Balance Exercised Forfeited Lapsed Balance Exercise
at 1 Granted during during during at 31 price
Exercisable January during the the the December per share
Grantee period 2018 the year year year year 2018 (US$)
----------- -------------- ---------- ---------- ---------- ---------- -------- ---------- -----------
1 June
2016 to
30 November
Directors 2025 2,500,000 - - - - 2,500,000 0.122
1 June
2016 to
30 November
Employees 2025 450,000 - - - - 450,000 0.122
---------- ---------- ---------- ---------- -------- ----------
2,950,000 - - - - 2,950,000
========== ========== ========== ========== ======== ==========
Number of options
---------------------------------------------------------------------------------
Balance Exercised Forfeited Lapsed Balance Exercise
at 1 Granted during during during at 31 price
Exercisable January during the the the December per share
Grantee period 2017 the year year year year 2017 (US$)
----------- -------------- ---------- ---------- ---------- ---------- -------- ---------- -----------
1 June
2016 to
30 November
Directors 2025 2,500,000 - - - - 2,500,000 0.122
1 June
2016 to
30 November
Employees 2025 450,000 - - - - 450,000 0.122
---------- ---------- ---------- ---------- -------- ----------
2,950,000 - - - - 2,950,000
========== ========== ========== ========== ======== ==========
No share-based payment expenses were charged to the profit or
loss during the year ended 31 December 2018 (2017: nil).
The options outstanding as at 31 December 2018 had a weighted
average remaining contractual life of 6.5 years (2017: 7.5 years)
and a weighted average exercise price of US$0.122 (2017:
US$0.122).
Of the total number of options outstanding at the end of the
year, all (2017: all) had vested and were exercisable at the end of
the year.
No option was exercised during the years ended 31 December 2018
and 2017.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
25. RELATED PARTY TRANSACTIONS
Other than the compensation of key management personnel and the
underwriting of certain open offer shares as disclosed below, the
Group did not have any related party transactions during the years
ended 31 December 2018 and 2017.
Compensation of key management personnel
Key management personnel are the directors only. The
remuneration of directors is set out in note 10 to the consolidated
financial statements.
Underwriting of open offer
In April 2018, the Company completed an open offer of 28,367,290
new ordinary shares of US$0.001 each in the share capital of the
Company at US$0.15 per share. Of these, 18,416,489 shares were
underwritten by Mr Henry Ying Chew Cheong, an executive director of
the Company, in his personal capacity. As there was no underwriting
consideration involved, the underwriting was not subject to the
rules contained in Chapter 11 of the Listing Rules of the Financial
Conduct Authority in the United Kingdom. Details relating to the
open offer can be found in note 22 to the consolidated financial
statements.
26. OPERATING LEASE COMMITMENTS
Operating leases - lessee
At the reporting date, the Group had future aggregate minimum
lease payments under non-cancellable operating leases in respect of
office premises and warehouse as follows:
2018 2017
US$'000 US$'000
Not later than one year 79 79
Later than one year and not later than
five years 58 137
137 216
======= =======
The leases run for an initial period of 2 to 3 years (2017: 2 to
3 years), with an option to renew the office premises lease upon
expiry when all terms are renegotiated.
27. CONTINGENT LIABILITIES
The Group had no material contingent liabilities at 31 December
2018 (2017: nil).
INVESTMENT POLICY
The Company will invest in small to medium sized trading
companies, being companies, both start-up/early stage growth and
established, with a turnover typically up to US$20 million, based
mainly in the Greater China and South East Asian region, and
thereby create a portfolio of minority investments in such
companies.
The Company's investment objective is to achieve attractive
investment returns through capital appreciation on a medium to long
term horizon. The Directors consider between 2 to 4 years to be
medium term and long term to be over 4 years. The Directors intend
to build an investment portfolio of small to medium sized companies
based mainly in the Greater China and South East Asian regions. The
Company may also take advantage of opportunities to invest in
companies in other jurisdictions, such as the United Kingdom, which
have close trading links with Greater China and South East Asia.
Investments will normally be in equity or preferred equity but if
appropriate convertible loans or preference shares may be
utilised.
The Company has no intention to employ gearing, but reserves the
right to gear the Company to a maximum level of 25 per cent. of the
last published Net Asset Value of the Group should circumstances
arise where, in the opinion of the Directors, the use of debt would
be to the advantage of the Company and the Shareholders as a
whole.
The investment portfolio will consist primarily of unlisted
companies but the Directors will also consider investing in
undervalued listed companies, if and when such an opportunity
arises. Where suitable opportunities are identified, investment in
companies considering a stock market listing at the pre-initial
public offering stage will be considered.
No more than 20 per cent. of the gross assets of the Group will
be invested in any single investment. The Directors consider that
opportunities will arise to invest in investee companies by the
issue of new Ordinary Shares at a discount of no more than 10 per
cent. of the mid market price at the time of agreement of their
issue in exchange for new equity, preferred equity or convertible
instrument in the investee company. Target sectors are financial
services, consumer retail distribution, natural resources and
infrastructure but the Company will seek to take advantage of
opportunities in other sectors if these arise.
The Company's portfolio in due course will comprise at least
five different investee companies, thereby reducing the potential
impact of poor performance by any individual investment.
The Company does not intend to take majority interests in any
investee company, save in circumstances where the Company exercises
any rights granted under legal agreements governing its investment.
Each investment by the Company will be made on terms individually
negotiated with each investee company, and the Company will seek to
be able to exercise control over the affairs of any investee
company in the event of a default by the investee company or its
management of their respective obligations under the legal
agreements governing each investment. Where appropriate, the
Company will seek representation on the board of companies in which
it invests. Where board representation is secured in an investee
company, remuneration for such appointment will be paid to the
benefit of the Company thereby enhancing returns on the investment.
There will be no intention to be involved in the day to day
management of the investee company but the skills and connections
of the board representative will be applied in assisting the
development of the investee company, with the intention of
enhancing shareholder value. The Company will
arrange no cross funding between investee companies and neither
will any common treasury function operate for any investee company;
each investee company will operate independently of each other
investee company.
Where the Company has cash awaiting investment, it will seek to
maximise the return on such sums through investment in floating
rate notes or similar instruments with banks or other financial
institutions with an investment grade rating or investment in
equity securities issued by companies which have paid dividends for
each of the previous three years.
Any material change to the Investment Policy may only be made
with the prior approval of the Shareholders.
BIOGRAPHICAL NOTES OF THE DIRECTORS
The Board of Directors has ultimate responsibility for the
Group's affairs.
Brief biographical notes of the directors are set out below:
Alastair Gunn-Forbes - Non-Executive Chairman - aged 74
Mr Gunn-Forbes has been associated with Asian regional stock
markets since 1973 when he was a fund manager at Brown Shipley Ltd.
Subsequently, he was a director of W I Carr, Sons & Co.
(Overseas) Ltd until 1985, since when he held directorships with
other Asian securities firms in the United Kingdom prior to joining
the Group in 1993. Mr Gunn-Forbes is the Chairman of Opera Holdings
Limited, a recruitment company.
Henry Ying Chew Cheong - Executive Director and Deputy Chairman
- aged 71
Mr Cheong holds a Bachelor of Science (Mathematics) degree from
Chelsea College, University of London and a Master of Science
(Operational Research and Management) degree from Imperial College,
University of London.
Mr Cheong has over 40 years of experience in the securities
industry. Mr Cheong and The Mitsubishi Bank in Japan (now known as
The Bank of Tokyo-Mitsubishi UFJ Ltd) founded the Worldsec Group in
1991. In late 2002, Worldsec Group sold certain securities
businesses to UOB Kay Hian Holdings Limited and following that Mr
Cheong became the Chief Executive Officer of UOB Asia (Hong Kong)
Ltd until early 2005. Prior to the formation of the Worldsec Group,
Mr Cheong was a director of James Capel (Far East) Ltd for five
years with overall responsibility for Far East Sales. His earlier
professional experience includes 11 years with Vickers da Costa
Limited in Hong Kong, latterly as Managing Director.
Mr Cheong was a member of the Securities and Futures Appeals
Tribunal and a member of the Advisory Committee of the Securities
and Futures Commission in Hong Kong ("SFC")(from 2009-2015). Mr
Cheong was previously a member of Disciplinary Panel A of Hong Kong
Institute of Certified Public Accountants (from 2005-2011). He was
a member of the Corporate Advisory Council of the Hong Kong
Securities Institute (from 2002-2009), a member of the Advisory
Committee to the SFC (from 1993-1999), a member of the board of
directors of the Hong Kong Future Exchange Limited (from
1994-2000), a member of GEM Listing Committee and Main Board
Listing Committee of Hong Kong Exchange and Clearing Limited
("HKEX") (from May 2002-May 2006), a member of Derivatives Market
Consultative Panel of HKEX (from April 2000-May 2006), a member of
the Process Review Panel for the SFC (from November 2000-October
2006) and a member of the Committee on Real Estate Investment Trust
of the SFC (from September 2003-August 2006).
Mr Cheong is an Independent Non-Executive Director of CK Asset
Holdings Limited, CK Infrastructure Holdings Limited, CNNC
International Limited, Greenland Hong Kong Holdings Limited,
Hutchison Telecommunications Hong Kong Holdings Limited, New World
Department Store China Limited, Skyworth Digital Holdings Limited
and TOM Group Limited, all being listed companies in Hong Kong. Mr
Cheong is also an Independent Director of BTS Group Holdings Public
Company Limited, being listed in Thailand.
BIOGRAPHICAL NOTES OF THE DIRECTORS (CONTINUED)
Ernest Chiu Shun She - Executive Director - aged 58
Mr She is an investment banker with extensive experience in the
field of corporate finance having covered a broad and diverse range
of financial advisory and fund raising activities in the Asian
regional equity markets and having previously held executive
management positions and directorships at various investment banks
and financial institutions including, among others, Worldsec
Corporate Finance Limited and UOB Asia (Hong Kong) Limited.
Since rejoining the Group to assist in the reactivation of its
business operations in 2013, Mr She has been an Executive Director
of the Company working on private equity investments.
Mr She has a deep-rooted and long-standing connection with the
Worldsec group of companies being one of the co-founding team
members at the time when the entities were established in the early
1990s. For more than a decade that followed and until the disposal
by the Group of certain securities businesses to UOB Kay Hian
Holdings Limited in 2002, Mr She held senior management positions
at Worldsec Corporate Finance Limited and Worldsec International
Limited with the main responsibility of developing and overseeing
the Group's corporate finance activities.
Prior to his tenure at the Worldsec group of companies, Mr She
was an Investment Analyst and an Associate Director at James Capel
(Far East) Limited where he was primarily responsible for equity
research in the real estate sector.
Mr She graduated from the University of Toronto with a Bachelor
of Applied Science degree in Industrial Engineering and obtained
from the Imperial College of Science and Technology a Master of
Science degree in Management Science specialising in Operational
Research. Mr She is a Chartered Financial Analyst.
From 2004 to 2010, Mr She served as an Independent Non-Executive
Director and the Chairman of the Audit Committee of New Island
Printing Holdings Limited, a company listed on the Main Board of
The Stock Exchange of Hong Kong Limited.
Mark Chung Fong - Non-Executive Director - aged 67
Mr Fong was an Executive Director for China development of Grant
Thornton International Ltd, a corporation incorporated in England
and had retired from Grant Thornton effective from 1 January 2014.
He has more than 40 years' experience in the accounting profession.
Mr Fong obtained a bachelor's degree in science from the University
College, London in August 1972 and a Master's degree in science
from the University of Surrey in December 1973. He has been a
Fellow of the Institute of Chartered Accountants in England and
Wales since January 1983 and a Fellow of the Hong Kong Institute of
Certified Public Accountants ("HKICPA") since March 1986. He was
the President of the HKICPA in 2007. He has been appointed as the
Chairman of the Audit Committee of HKICPA from 2016 to January 2019
and has also served on the Council of the Institute of Chartered
Accountants in England and Wales from 2016 to 2018.
Martyn Stuart Wells - Non-Executive Director - aged 74
Mr Wells was formerly an Executive Director of Citicorp
International Limited and has over 30 years' experience in the
securities industry. In 1969 he joined Vickers da Costa,
international stockbrokers. He was involved in the fund management
industry for 20 years and participated in the launch of several
country funds investing in the Asian region, serving as a director
or as a member of the investment advisory councils of several of
those funds. He lived in Hong Kong for almost 28 years and since
2000 has resided in England.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UKOARKOASUAR
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