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 2021, 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 judgements 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 confirm that, to the best of their knowledge and understanding, the chairman's statements on pages 1 to 2 and the directors' report on pages 3 to 20 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

26 April 2022

 

 

 

 

 

 

 

INDEPENDENT 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 27 to 71, which comprise the consolidated statement of financial position as at 31 December 2021, 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 2021, 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 ASSESSMENT of interest in a joint venture and amount due from a joint venture

 

Refer to note 17 to the consolidated financial statements

 

The Group owns a 50% interest in a joint venture, Oasis Education Group Limited ("Oasis Education"), which is accounted for using the equity method less any impairment loss. The interest in this joint venture amounted to approximately US$100,000 as at 31 December 2021 and the Group's share of its losses amounted to approximately US$8,000 for the year then ended.

 

In addition, the Group has advanced an amount of approximately US$257,000 to Oasis Education as at 31 December 2021, which is subject to an impairment assessment by management.

 

The impairment assessment of investment in, and amount due from, Oasis Education is considered by us as a key audit matter due to significant judgement made by management over the assumptions on the future cash flows to be generated from the operation of Oasis Education.

 

INDEPENDENT AUDITOR'S REPORT (CONTINUED)                                                                     
 

TO THE MEMBERS OF WORLDSEC LIMITED

(incorporated in Bermuda with limited liability)

 

Key Audit Matters (Continued)

 

impairment ASSESSMENT of interest in a joint venture and amount due from a joint venture (CONTINUED)

 

Our response:

 

Our audit procedures in relation to this matter included:

 

Ÿ Obtaining an update of the latest development of Oasis Education's operation;

 

Ÿ Assessing the financial performance of Oasis Education based on information provided by management;

 

Ÿ Evaluating management's considerations of the impairment indicators of the investment in, and the amount due from, Oasis Education;

 

Ÿ Assessing the appropriateness of the management's assumptions concerning the future cash flows to be generated from the operation of Oasis Education; and

 

Ÿ Assessing reliability of the joint venture's forecast by comparing historical budget to actual performance and obtaining explanations from management on any significant variances identified.

 

 

FAIR VALUE MEASUREMENT OF INVESTMENTS classified as financial assets at fair value through profit or loss ("FVTPL") CATEGORISED WITHIN LEVEL 3 OF THE FAIR VALUE HIERARCHY

 

Refer to notes 5(c)(iii) and 18 to the consolidated financial statements

 

As at 31 December 2021, the Group held a number of financial assets at fair value through profit or loss, with measurement categorised within the level 3 of the fair value hierarchy, totalling approximately US$3,709,000.

 

The fair value determination of these financial assets at the end of the reporting period involves the determination of appropriate valuation models as well as the selection of inputs and assumptions made by management. Different valuation models, as well as inputs and assumptions applied may lead to a significant change in the fair value of these financial assets.

 

We identified fair value determination of these financial assets as a key audit matter because it involves a high degree of estimation uncertainty and judgement; and their aggregate carrying value is material to the Group's consolidated financial statements taken as a whole.

 

 

 

INDEPENDENT AUDITOR'S REPORT (CONTINUED)                                                                  
 

TO THE MEMBERS OF WORLDSEC LIMITED

(incorporated in Bermuda with limited liability)

 

Key Audit Matters (Continued)

 

FAIR VALUE MEASUREMENT OF INVESTMENTS classified as financial assets at fair value through profit or loss CATEGORISED WITHIN LEVEL 3 OF THE FAIR VALUE HIERARCHY (CONTINUED)

 

Our response:

 

Our audit procedures in relation to this matter included:

 

Ÿ Assessing the appropriateness of valuation methodologies applied on the fair value determination of these financial assets;

 

Ÿ Evaluating the reasonableness and relevance of key inputs and assumptions used in the fair value determination; and

 

Ÿ Involving an auditor's expert to assist our assessment on the appropriateness of the valuation methodologies and reasonableness of key inputs and assumptions used in the fair value determination.

 

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 therein.

 

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.

 

INDEPENDENT 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:

 

Ÿ 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.

 

Ÿ 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.

 

Ÿ evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

 

Ÿ 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.

 

Ÿ 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.

 

Ÿ 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.

 

 

 

INDEPENDENT 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, actions taken to eliminate threats or safeguards applied.

 

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

Certified Public Accountants

Tang Tak Wah

Practising Certificate Number P06262

Hong Kong, 26 April 2022

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

 

			Year ended 31 December
	Notes		2021		2020
			US$'000		US$'000
Revenue	7		145		96
Other income, gains and losses, net	9		1,075		1,400
Staff costs	10		(298)		(286)
Other expenses			(270)		(252)
Finance costs	11		(8)		(4)
Share of losses of a joint venture	17		(8)		(10)
Profit before income tax expense	12		636		944
Income tax expense	13		-		-
Profit for the year			636		944
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Share of other comprehensive income of a joint venture	17		11		20
Other comprehensive income for the year, net of income tax			11		20
Total comprehensive income for the year			647		964
Profit for the year attributable to:
Owners of the Company			636		944
Total comprehensive income for the year attributable to:
Owners of the Company			647		964
Earnings per share ¡V basic and diluted	14		US 0.75 cent		US 1.10 cents

 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

		Notes	2021		2020
			US$'000		US$'000
Non-current assets
Property, plant and equipment		16	-		-
Interest in a joint venture		17	100		97
Financial assets at fair value through profit or loss		18	3,849		3,854
Right-of-use asset		19	111		175
			4,060		4,126
Current assets
Other receivables			114		282
Deposits and prepayments			26		30
Financial assets at fair value through profit or loss		18	624		103
Amount due from a joint venture		17	257		257
Cash and cash equivalents		21	1,513		1,194
			2,534		1,866
Current liabilities
Other payables and accruals		22	163		147
Lease liabilities		19	64		61
			227		208
Net current assets			2,307		1,658
Non-current liabilities
Lease liabilities		19	55		119
Net assets			6,312		5,665

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

 

		Notes	2021		2020
			US$'000		US$'000
Capital and reserves
Share capital		23	85		85
Reserves		24	6,227		5,580
Total equity			6,312		5,665

                                                                                                                                                       

The consolidated financial statements on pages 27 to 71 were approved and authorised for issue by the Board of Directors on 26 April 2022 and signed on its behalf by:

 

 

 

 

 

 

Alastair Gunn-Forbes Director		Henry Ying Chew Cheong Director

 

The accompanying notes form an integral part of these consolidated financial statements.

 

CONSOLIDATED STATEMENT OF changes in equity

 

	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 23)		(note 24)		(note 24)		(note 24)		(note 24)		(note 24)		(note 24)
Balance at 1 January 2020	85		7,524		9,646		249		(37)		625		(13,391)		4,701
Profit for the year	-		-		-		-		-		-		944		944
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17)	-		-		-		-		20		-		-		20
Total comprehensive    income for the year	-		-		-		-		20		-		944		964
Balance as at 31 December 2020 and 1 January 2021	85		7,524		9,646		249		(17)		625		(12,447)		5,665
Profit for the year	-		-		-		-		-		-		636		636
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17)	-		-		-		-		11		-		-		11
Total comprehensive    income for the year	-		-		-		-		11		-		636		647
Balance at 31 December 2021	85		7,524		9,646		249		(6)		625		(11,811)		6,312

 

 

 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

							Year ended 31 December
							2021		2020
							US$'000		US$'000
Cash flows from operating activities
Profit before income tax expense							636		944
Adjustments for:
Bank interest income							(1)		(1)
Depreciation of right-of-use asset							64		74
Interest on lease liabilities							8		4
Share of losses of a joint venture							8		10
Net realised and unrealised gain on financial assets at fair value through profit or loss							(1,080)		(1,377)
Operating loss before working capital changes							(365)		(346)
Decrease/(increase) in deposits and prepayments							4		(2)
Decrease in other receivables							168		111
Increase in other payables and accruals							16		2
Net cash used in operating activities							(177)		(235)
Cash flows from investing activities
Investment in financial assets at fair value through      profit or loss							(971)		(527)
Proceeds from disposal of financial assets at fair value through profit or loss							1,535		417
Bank interest income received							1		1
Net cash generated from/(used in) investing activities							565		(109)
Cash flows from financing activities
Repayment of principal portion of lease liabilities							(61)		(70)
Repayment of interest portion of lease liabilities							(8)		(4)
Net cash used in financing activities							(69)		(74)
Net increase/(decrease) in cash and cash equivalents							319		(418)
Cash and cash equivalents at the beginning of the year							1,194		1,612
Cash and cash equivalents at the end of the year							1,513		1,194

 

The accompanying notes form an integral part of these consolidated financial statements.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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 Victoria Place, 5^th Floor, 31 Victoria Street, Hamilton HM 10, 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 20 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 "IFRSs").

 

 

2.      APPLICATION OF NEW AND REVISED IFRSs

 

2.1    New and revised IFRSs applied

 

The following amendments to IFRSs have been applied by the Group in the current year.

 

Amendment to IFRS 16	Covid-19 - Related Rent Concessions
Amendment to IFRS 16	Covid-19 - Related Rent Concessions beyond 30 June 2021
Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16	Interest Rate Benchmark Reform ¡V Phase 2

 

Other than the amendment to IFRS 16 - Covid-19 - Related Rent Concessions beyond 30 June 2021, the Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

 

The application of the amendments had no impact on the consolidated financial statements in the current year.

 

 

 

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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.

 

Amendments to IFRS Standards	Annual Improvements to IFRS Standards 2018–20201
Amendments to IFRS 3	Reference to the conceptual framework1
Amendments to IAS 16	Proceeds before intended use1
Amendments to IAS 37	Onerous contracts —  cost of fulfilling a contract1
Amendments to IAS 1	Classification of Liabilities as Current or Non-current2
Amendments to IAS 1 and IFRS Practice Statement 2	Disclosure of Accounting Policies2
Amendments to IAS 8	Definition of Accounting Estimates2
Amendments to IAS 12	Deferred tax related to assets and liabilities arising from a single transaction2

 

1 2	Effective for annual periods beginning on or after 1 January 2022 Effective for annual periods beginning on or after 1 January 2023

 

Amendments to IFRS Standards, Annual Improvements to IFRS Standards 2018-2020

 

The annual improvements amend a number of standards, including:

 

Ÿ IFRS 1, First-time Adoption of Hong Kong Financial Reporting Standards, which permit a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent's date of transition to IFRSs.

 

Ÿ IFRS 9, Financial Instruments, which clarify the fees included in the ¡¥10 per cent' test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability, explaining that only fees paid or received between the entity and the lender, including fees paid or received by either the entity or the lender on other's behalf are included.

 

Ÿ IFRS 16, Leases, which amend Illustrative Example 13 to remove the illustration of reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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, Reference to the conceptual framework

 

The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for obligations within the scope of IAS 37, an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date.

 

Finally, the amendments add an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

Amendments to IAS 16, Proceeds before Intended Use

 

The amendments prohibit a company from deducting from the cost of property, plant and equipment any proceeds received from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management.  Instead, the proceeds from selling such items and the cost of producing those items are recognised in profit or loss.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

Amendments to IAS 37, Onerous Contracts —  Cost of Fulfilling a Contract

 

The amendments specify that the 'cost of fulfilling' a contract comprises the 'costs that relate directly to the contract'.  Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (e.g. direct labour and materials) or an allocation of other costs that relate directly to fulfilling that contract (e.g. the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling that contract).

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

2.       APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)

 

2.3    New and revised IFRSs in issue but not yet effective (Continued)

 

Amendments to IAS 1, Classification of Liabilities as Current or Non-current

 

The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and explain that rights are in existence if covenants are complied with at the end of the reporting period.  The amendments also introduce a definition of ¡¥settlement' to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policies

 

The amendments seek to promote improved accounting policy disclosures that provide more useful information to investors and other primary users of the financial statements. Apart from clarifying that entities are required to disclose their "material" rather than "significant" accounting policy, the amendments provide guidance on applying the concept of materiality to accounting policy disclosures.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

Amendments to IAS 8, Definition of Accounting Estimates

 

The amendments clarify the distinction between changes in accounting policies and changes in accounting estimates. Amongst other things, the amendments now define accounting estimates as monetary amounts in financial statements that are subject to measurement uncertainty, and clarify that the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates unless they result from the correction of prior period errors.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

Amendments to IAS 12, Deferred tax related to assets and liabilities arising from a single transaction

 

The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it does not apply to such transactions as leases and decommissioning provisions that, on initial recognition, give rise to equal taxable and deductible temporary differences. Consequently, entities will need to recognise a deferred tax asset and a deferred tax liability for temporary differences arising on these transactions.

 

The directors are currently assessing the impact that the application of the amendments will have on the Group's consolidated financial statements.

 

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES

 

Statement of compliance

                                        

The consolidated financial statements of the Group have been prepared in accordance with all applicable IFRSs.

 

Basis of preparation

              

The consolidated financial statements have been prepared under the historical cost basis except for financial assets at fair value through profit or loss ("FVTPL"), which are measured at fair value 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.

 

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: (i) power over the investee, (ii) exposure, or rights, to variable returns from the investee, and (iii) 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.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 amounts are adjusted for the Group's share of the post-acquisition change in the relevant joint venture's net assets except that losses in excess of the Group's interest in that 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

 

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 a 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.

 

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

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Leasing

 

All leases (irrespective of whether they are operating leases or finance leases) are required to be capitalised in the statement of financial position as right-of-use assets and lease liabilities, but accounting policy choices exist for an entity to choose not to capitalise (i) leases which are short-term leases and/or (ii) leases for which the underlying asset is of low-value. The Group has elected not to recognise right-of-use assets and lease liabilities for low-value assets and leases which at the commencement date have a lease term less than 12 months. The lease payments associated with those leases are expensed on a straight-line basis over the lease term.

 

Right-of-use assets

 

Right-of-use assets are recognised at cost and would comprise: (i) the amount of the initial measurement of the lease liability (see below for the accounting policy to account for lease liabilities); (ii) any lease payments made at or before the commencement date, less any lease incentives received; (iii) any initial direct costs incurred by the lessee; and (iv) an estimate of the costs to be incurred by the lessee in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The Group measures the right-of-use assets applying a cost model. Under the cost model, the Group measures the right-to-use at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of the lease liability.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Leasing (Continued)

 

Lease liabilities

 

Lease liabilities are recognised at the present value of the lease payments that are not paid at the date of commencement of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the Group's incremental borrowing rate.

 

The following payments for the right-to-use the underlying asset during the lease term that are not paid at the commencement date of the lease are considered to be lease payments: (i) fixed payments less any lease incentives receivable; (ii) variable lease payments that depend on an index or a rate, initially measured using the index or the rate as at the commencement date; (iii) amounts expected to be payable by the lessee under residual value guarantees; (iv) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and (v) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

 

Subsequent to the commencement date, the Group measures lease liabilities by: (i) increasing the carrying amount to reflect interest on the lease liability; (ii) reducing the carrying amount to reflect the lease payments made; and (iii) remeasuring the carrying amount to reflect any reassessment or lease modifications, e.g., a change in future lease payments arising from a change in an index or a rate, a change in the lease term, a change in the in substance fixed lease payments or a change in assessment to purchase the underlying asset.

 

Government grants

 

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 value. 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.

 

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 'profit or 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.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Taxation (Continued)

 

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 assets to be recovered.

 

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 amounts 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 that 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

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial instruments

 

(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 the 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 assets and the cash flow characteristics of the assets. There are two 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.

 

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 fair value through other comprehensive income ("FVOCI"), as described above, debt instruments may be designated at FVTPL on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial instruments (Continued)

 

(i)       Financial assets (Continued)

 

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 expected credit losses ("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.

 

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.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial instruments (Continued)

 

(ii)      Impairment loss on financial assets (Continued)

 

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.

 

Interest income on a credit-impaired financial asset 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.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial instruments (Continued)

 

(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 and lease liabilities are subsequently measured at amortised cost, using the effective interest method.  The related interest expenses are 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 expenses 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.

 

(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.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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 its 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.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

(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.

        

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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.

           

         Key sources of estimation uncertainty

 

The key sources of estimation uncertainty that have a significant risk of resulting in material adjustments 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 its 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 amount may not be recoverable.

 

(iii)    Fair value measurement of investments classified as FVTPL categorised within level 3 of the Fair Value Hierarchy (as defined in note 5(c))

 

The fair value of 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

 

5.      FINANCIAL instruments

 

(a)  Categories of financial instruments

 

	2021		2020
	US$'000		US$'000
Financial assets
Financial assets at FVTPL	4,473		3,957
Financial assets at amortised cost	1,909		1,761
	6,382		5,718
Financial liabilities
Financial liabilities at amortised cost	282		327

 

(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 the Group mitigates 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

 

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
	2021		2020		2021		2020
	US$'000		US$'000		US$'000		US$'000
GBP	91		91		1		1

 

The following table details the Group's sensitivity to a 10% (2020: 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% (2020: 10%) change in the relevant foreign currency rate. A positive number below indicates an increase in profit for the year and a decrease in accumulated losses had USD strengthened 10% (2020: 10%) against the relevant foreign currency. For a 10% (2020: 10%) weakening of USD against the relevant foreign currency, there would have been an equal and opposite impact on profit for the year and on accumulated losses.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

5.      FINANCIAL instruments (CONTINUED)

 

(b)  Financial risk management objectives (Continued)

 

                  Market risks (Continued)

 

(i)      Foreign currency risk (Continued)

 

			2021		2020
			US$'000		US$'000
Change in post-tax profit or loss for the year
GBP appreciated		(USD depreciated 10%)	(9)		(9)
GBP depreciated		(USD appreciated 10%)	9		9

 

(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.

 

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. 

 

Sensitivity analysis

 

The sensitivity analysis on price risk includes the Group's financial instruments, the fair value or future cash flows of which will fluctuate because of changes in their corresponding equity prices.  If the prices of the Group's equity instruments had been 5% (2020: 5%) higher/lower, profit for the year would have increased/decreased by approximately US$52,000 (2020: US$35,000).

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

5.      FINANCIAL instruments (CONTINUED)

 

(b)  Financial risk management objectives (Continued)

 

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 amounts 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 2021, approximately 100% (2020: 99%) 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 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. Management believes that there was no material credit risk inherent in the Group's outstanding balances of other receivables, deposits and amount due from a joint venture. None of these receivables have been subject to a significant increase in credit risk since initial recognition and the expected credit loss was insignificant based on the risk of default of those counterparties under 12-month ECLs approach as at 31 December 2021 and 31 December 2020. Thus, no loss allowance was recognised as at 31 December 2021 and 31 December 2020.

 

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.

 

          

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

5.      FINANCIAL instruments (CONTINUED)

 

(b)  Financial risk management objectives (Continued)

 

         Liquidity risk (Continued)

 

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.

 

	Within 1 year or on demand		More than 1 year but less than 5 years		Total contractual undiscounted cash flows		Carrying amount
	US$'000		US$'000		US$'000		US$'000
As at 31 December 2021
Other payables and accruals	163		-		163		163
Lease liabilities	69		56		125		119
	232		56		288		282

 

	Within 1 year or on demand		More than 1 year but less than 5 years		Total contractual undiscounted cash flows		Carrying amount
	US$'000		US$'000		US$'000		US$'000
As at 31 December 2020
Other payables and accruals	147		-		147		147
Lease liabilities	69		125		194		180
	216		125		341		327

 

(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 assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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, amount due from a joint venture, other payables and accruals and lease liabilities.

 

Due to their short term nature, the carrying value of cash and cash equivalents, other receivables, deposits, amount due from a joint venture, other payables and accruals and lease liabilities approximated 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 is 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 level 3 equity investments in Velocity Mobile Limited ("Velocity") was estimated using market approach with the significant inputs being the enterprise value to sales ratio (¡§EV/Sales¡¨) and the recent market transaction prices of comparable instruments at a discount due to the lack of marketability. A 5% increase/decrease in EV/Sales with all other variables held constant would have increased/decreased the carrying amount of the Group's level 3 equity investment in Velocity by approximately US$20,000/US$20,000 respectively.

 

The fair value of the Group's level 3 equity investments in ayondo Ltd and Agrios Global Holdings Ltd. ("Agrios") was estimated using market approach with the significant inputs being the recent market transaction prices of similar instruments at a discount due to the lack of marketability.

 

The fair value of the Group's level 3 investments in the ICBC Specialised Ship Leasing Investment Fund was estimated using income approach with reference to their net asset value which was a significant unobservable input.

 

The fair value of the Group's level 3 investments in the Homaer Asset Management Master Fund SPC (the "Homaer Fund") was estimated using market approach with the significant inputs being the recent market transaction prices of the underlying investment of the Homaer Fund.

 

There were no changes in these valuation techniques during the year ended 31 December 2021.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

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:

 

	2021
	Level 1		Level 2		Level 3		Total
	US$'000		US$'000		US$'000		US$'000
Listed investments	764		-		-		764
Unlisted investments	-		-		3,709		3,709
	764		-		3,709		4,473

 

Reconciliation for level 3 financial assets at FVTPL carried at fair value based on significant unobservable inputs are as follows:

 

	2021		2020
	US$'000		US$'000
At 1 January	3,854		2,388
Purchases	200		-
Disposal	(796)		-
Transfer to level 1	(331)		-
Transfer to level 3	-		82
Fair value adjustment	782		1,384
At 31 December	3,709		3,854

 

The Group transferred its investment in Cambium Grove Growth Opps IV Limited of approximately US$331,000 during the year ended 31 December 2021 from level 3 to level 1 as the quoted market prices of the underlying investment became available upon the listing of the American depositary shares of Dingdong (Cayman) Limited on the New York Stock Exchange.

 

The Group transferred its equity investment in Agrios of approximately US$82,000 during the year ended 31 December 2020 from level 1 to level 3 as the quoted market prices of Agrios became unavailable upon the suspension of its share trading on the Canadian Securities Exchange.

 

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

 

6.      CAPITAL RISK MANAGEMENT

 

The Group's objective of managing capital is to safeguard its 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.

 

The gearing ratio at the end of the reporting period was as follows:

 

	Year ended 31 December
		2021		2020
		US$'000		US$'000
Debt		282		327
Cash and cash equivalents		(1,513)		(1,194)
		(1,231)		(867)
Equity attributable to owners of the Company		6,312		5,665
Net debt to equity ratio		N/A		N/A

 

 

7.      REVENUE

 

The Group had no revenue from contracts with customers as defined under IFRS 15. An analysis of the Group's revenue from other sources is as follows:

 

	Year ended 31 December
		2021		2020
		US$'000		US$'000
Dividend income from financial assets at FVTPL		145		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 2021 and 2020, 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

 

9.      OTHER INCOME, GAINS AND LOSSES, NET

 

	Year ended 31 December
		2021		2020
		US$'000		US$'000
Bank interest income		1		1
Net realised and unrealised gains on financial assets at FVTPL		1,080		1,377
Foreign exchange loss, net		(6)		2
Others		-		20
		1,075		1,400

 

 

10.    STAFF COSTS

 

         The aggregate staff costs (including directors' remuneration) of the Group were as follows:

 

	Year ended 31 December
	2021		2020
	US$'000		US$'000
Wages and salaries	291		279
Contributions to pension and provident fund	7		7
	298		286
Compensation of key management personnel was as follows:
	Year ended 31 December
	2021		2020
	US$'000		US$'000
Directors' fees	81		81
Other remuneration including
contributions to pension and provident fund	-		-
	81		81

 

 

11.    FINANCE COSTS

 

		Year ended 31 December
		2021		2020
		US$'000		US$'000
Interest on lease liabilities		8		4

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

12.    PROFIT BEFORE INCOME TAX EXPENSE

 

         Profit before income tax expense has been arrived at after charging:

 

	Year ended 31 December
	2021		2020
	US$'000		US$'000
Auditor's remuneration	50		40
Depreciation of right-of-use asset	64		74

 

 

13.    INCOME TAX EXPENSE

 

            No provision for taxation has been made as the Group did not generate any assessable profits that were subject to United Kingdom Corporation Tax, Hong Kong Profits Tax or tax in other jurisdictions.

 

The tax charge for 2021 and 2020 can be reconciled to the profit before income tax expense per the consolidated statement of profit or loss and other comprehensive income as follows:

 

		Year ended 31 December
		2021		2020
		US$'000		US$'000
Profit before income tax expense		636		944
Profit before tax calculated at Hong Kong Profits Tax rate of 16.5% (2020: 16.5%)		105		156
Tax effect of non-deductible expenses		41		39
Tax effect of non-taxable income		(196)		(247)
Tax effect of share of losses of a joint venture		1		2
Tax effect of estimated tax losses not recognised		49		50
Tax charge for the year		-		-

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

13.    INCOME TAX EXPENSE (CONTINUED)

 

As at 31 December 2021, the Group had estimated tax losses arising in Hong Kong of approximately US$1,179,000 (2020: US$882,000) that 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$47,000 (2020: US$62,000) 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.

 

 

14.     EARNINGS PER SHARE       

     

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share were as follows.

 

		Year ended 31 December
		2021		2020
Earnings for the year attributable to owners of the Company (US$'000)		636		944
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share		85,101,870		85,101,870
Earnings per share - basic and diluted		US0.75 cent		US1.10 cents

 

Diluted earnings per share were the same as basic earnings per share for the years ended 31 December 2021 and 2020 as there were no potential dilutive ordinary shares outstanding at the end of both years.

 

 

15.     DIVIDENDS

 

No dividend was paid or proposed during the year ended 31 December 2021, nor has any dividend been proposed since the end of the reporting period (2020: nil).

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

16.     PROPERTY, PLANT AND EQUIPMENT     

     

	Leasehold improvements
	US$'000
Cost
At 1 January 2020, 1 January 2021 and 31 December 2021	69
Accumulated depreciation
At 1 January 2020, 1 January 2021 and 31 December 2021	69
Carrying amount
At 31 December 2020	-
At 31 December 2021	-

 

17.     INTEREST IN A JOINT VENTURE

 

	2021		2020
	US$'000		US$'000
Unlisted investment, at cost	257		257
Accumulated share of post-acquisition losses of the joint venture	(151)		(143)
Accumulated share of post-acquisition other comprehensive income of the joint venture	(6)		(17)
Share of net assets of the joint venture	100		97

 

Amount due from the joint venture

257

257

 

         The amount due from the joint venture was unsecured, interest-free and repayable on demand.

 

         Details of the joint venture at 31 December 2021 were as follows:

Name		Country of incorporation and operation		Proportion of ownership interest			Paid-up registered capital		Principal activities
				Direct	Indirect
Oasis Education Group Limited 奧偉詩教育集團有限公司 ("Oasis Education")		Hong Kong		50%	-		HK$4,000,000		Investment holding
奧偉詩教育咨詢(深圳)有限公司		The People's   Republic   of China   (the "PRC")		-	50%		HK$5,000,000		Provision of education consulting 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

 

17.     INTEREST IN A JOINT VENTURE (CONTINUED)

 

The aggregate amounts related to the joint venture that have been included in the consolidated financial statements of the Group as extracted from the 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:

 

	2021		2020
Results of the joint venture for the year	US$'000		US$'000
Revenue	-		-
Other income	-		-
Expenses	(16)		(21)
Loss for the year	(16)		(21)
Other comprehensive income for the year	22		42
Total comprehensive income for the year	6		21

 

Share of losses of the joint venture for the year	(8)		(10)
Share of other comprehensive income of the  joint venture for the year	11		20
Accumulated share of results of the joint venture	(151)		(143)

 

Assets and liabilities of the joint venture at 31 December
	2021		2020
	US$'000		US$'000
Non-current assets	-		-
Current assets	806		797
Non-current liabilities	-		-
Current liabilities	(606)		(603)
Net assets	200		194
Included in the above amounts were:
Cash and cash equivalents	102		41
Depreciation and amortisation	-		-
Interest income	-		-
Interest expenses	-		-
Current financial liabilities (excluding trade and other payables)	606		603

 

Percentage of equity interest attributable to the Group	50%		50%
Share of net assets of the joint venture	100		97

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

18.     FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

	2021		2020
	US$'000		US$'000
Financial assets at FVTPL
Listed investments, at fair value	764		103
Unlisted investments, at fair value	3,709		3,854
	4,473		3,957
Less: Current portion	(624)		(103)
Non-current portion (Note)	3,849		3,854

 

Note:

 

The directors had no intention to dispose of the financial assets at FVTPL classified as non-current assets at the end of the reporting period.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

19.     RIGHT-OF-USE ASSET AND LEASE LIABILITIES

 

The Group leased an office premise with a lease term of 3 years at a fixed rate. The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the consolidated statement of financial position was 5%. The carrying amounts of the Group's right-of-use asset and lease liabilities were as follows:

 

	Office premises
	Right-of-use asset		Lease liabilities
	US$'000		US$'000
As at 1 January 2020	59		60
Addition	190		190
Lease payments	-		(74)
Depreciation charge	(74)		-
Interest expenses	-		4
As at 31 December 2020	175		180
Lease payments	-		(69)
Depreciation charge	(64)	)	-
Interest expenses	-		8
As at 31 December 2021	111		119

 

Future lease payments are due as follows:

 

As at 31 December 2021	Minimum lease payments		Interest		Present value
	US$'000		US$'000		US$'000
Not later than one year	69		(5)		64
Later than one year and not later than five years	56		(1)		55
	125		(6)		119

 

As at 31 December 2020	Minimum lease payments		Interest		Present value
	US$'000		US$'000		US$'000
Not later than one year	69		(8)		61
Later than one year and not later than five years	125		(6)		119
	194		(14)		180

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

20.    SUBSIDIARIES

 

         Details of the subsidiaries of the Company as at 31 December 2021 were as follows:

 

Name		Country of incorporation		Proportion of ownership interest			Proportion of voting power held			Principal activities
				2021	2020		2021	2020
Worldsec Financial Services Limited		The British  Virgin  Islands		100%	100%		100%	100%		Investment  holding
Worldsec Corporate Finance Limited		The British  Virgin  Islands		100%*	100%*		100%*	100%*		Inactive
Worldsec Investment (Hong Kong) Limited   Worldsec Investment (China) Limited		Hong Kong     The British  Virgin  Islands		100%*     100%*	100%*     100%*		100%*     100%*	100%*     100%*		Investment  holding   Investment  holding

 

*  Indirectly held subsidiaries

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

 

21.    CASH AND CASH EQUIVALENTS

 

		2021		2020
		US$'000		US$'000
Bank balances		1,512		1,193
Cash balances		1		1
		1,513		1,194

 

         Bank balances bore interest at the then prevailing market rates ranging from 0.001% to 0.01% (2020: 0.001% to 0.01%) per annum and had original maturities of three months or less.

 

 

22.    OTHER PAYABLES AND ACCRUALS

 

		2021		2020
		US$'000		US$'000
Other payables and accruals		163		147

 

 

23.    SHARE CAPITAL

 

		Number of shares		Total US$'000
Authorised:
Ordinary shares of US$0.001 each
At 1 January 2020, 1 January 2021 and 31 December 2021		60,000,000,000		60,000
Called up, issued and fully paid:
Ordinary shares of US$0.001 each
At 1 January 2020, 1 January 2021 and 31 December 2021		85,101,870		85

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

24.    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 which have been granted but 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.

 

 

25.    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.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

25.    SHARE-BASED PAYMENTS (CONTINUED)

 

On 29 May 2019, the Company granted to certain eligible persons a total of 2,050,000 share options to subscribe for new ordinary shares of US$0.001 each in the share capital of the Company under the Scheme. 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 2021 and 2020.

 

		Number of options
Grantee	Exercisable period	Balance at 1 January 2021	Granted during the year	Exercised during the year	Forfeited during the year	Lapsed during the year	Balance at 31 December 2021	Exercise price per share (US$)
Directors	29 November 2019 to 28 May 2029   1 June 2016 to 30 November 2025	1,750,000       2,500,000	-       -	-       -	-       -	-       -	1,750,000       2,500,000	0.034       0.122
Employees	29 November 2019 to 28 May 2029   1 June 2016 to 30 November 2025	300,000       450,000	-       -	-       -	-       -	-       -	300,000       450,000	0.034       0.122
		5,000,000	-	-	-	-	5,000,000

 

		Number of options
Grantee	Exercisable period	Balance at 1 January 2020	Granted during the year	Exercised during  the year	Forfeited during the year	Lapsed during the year	Balance at  31 December 2020	Exercise price per share (US$)
Directors	29 November 2019 to 28 May 2029   1 June 2016 to 30 November 2025	1,750,000       2,500,000	-       -	-       -	-       -	-       -	1,750,000       2,500,000	0.034       0.122
Employees	29 November 2019 to 28 May 2029   1 June 2016 to 30 November 2025	300,000       450,000	-       -	-       -	-       -	-       -	300,000       450,000	0.034       0.122
		5,000,000	-	-	-	-	5,000,000

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

25.    SHARE-BASED PAYMENTS (CONTINUED)

 

Of the total number of share options outstanding at the end of the year, all (2020: all) had vested and were exercisable at the end of the year.

 

No share option was exercised during the years ended 31 December 2021 and 2020.

 

The weighted average remaining contractual life for the share options outstanding at the end of the reporting period was 5.4 years (2020: 6.4 years)

 

 

26.    RELATED PARTY TRANSACTIONS

 

Other than the compensation of key management personnel as disclosed below, the Group did not have any related party transactions during the years ended 31 December 2021 and 2020.

 

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.

 

 

27.                                                                                                                            CONTINGENT LIABILITIES

 

          The Group had no material contingent liabilities at 31 December 2021 (2020: nil).

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

28.       NOTES SUPPORTING STATEMENT OF CASH FLOWS

 

(a)     Cash and cash equivalents comprise:

 

	2021		2020
	US$'000		US$'000
Cash available on demand	1,513		1,194

 

(b)     Reconciliation of liabilities arising from financing activities:

 

			Lease liabilities (note 19)
			US$'000
At 1 January 2020			60
Changes from cash flows:
Repayment of principal portion of lease liabilities			(70)
Repayment of interest portion of lease liabilities			(4)
Total changes from financing cash flows			(74)
Other changes: Interest on lease liabilities			4
Addition on lease liabilities			190
			194
At 1 January 2021			180
Changes from cash flows:
Repayment of principal portion of lease liabilities			(61)
Repayment of interest portion of lease liabilities			(8)
Total changes from financing cash flows			(69)
Other changes:
Interest on lease liabilities			8
			8
At 31 December 2021			119

 

 

 

 

 

 

 

 

 

 

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 of the Company 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 77

 

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 74

 

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, New World Department Store China Limited, and Skyworth Digital Holdings 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.   He was previously an Independent Non-Executive Director of CNNC International Limited, Greenland Hong Kong Holdings Limited, Hutchison Telecommunications Hong Kong Holdings Limited and TOM Group Limited, all being listed companies in Hong Kong.

 

BIOGRAPHICAL NOTES OF THE DIRECTORS (CONTINUED)                                  

 

Ernest Chiu Shun She - Executive Director - aged 61

 

Mr She is an investment banker with extensive experience in the field of corporate finance.  In his executive management roles at various investment banks and financial institutions, including notably Worldsec Corporate Finance Limited where he had a long and committed stint, Mr She has covered a broad and diverse range of financial advisory and fund raising activities in the Asian regional equity markets.

 

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 and a fellow of the Hong Kong Securities and Investment Institute.

 

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 70

 

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.

 

 

 

 

 

BIOGRAPHICAL NOTES OF THE DIRECTORS (CONTINUED)                                

 

 

Martyn Stuart Wells - Non-Executive Director - aged 77

 

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.

 

 

Stephen Lister d'Anyers Willis - Non-Executive Director - aged 67

Mr Willis is a financial services professional specialising in Asia and global investing.  He has been involved with Asia for over 35 years firstly with Standard Chartered Bank and subsequently with the Asian specialist stockbroker, Vickers da Costa and a number of other investment banking firms. In 2011, Mr Willis founded Stelisdan Research Services to provide equity research to high net worth investors whose assets are managed by Private Wealth Managers.  This covers all aspects of investment strategy, economics and individual company research.