REG - Worldsec Limited - Annual Financial Report
30/04/2024 14:30
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RNS Number : 6554M Worldsec Limited 30 April 2024
WORLDSEC LIMITED
Annual Report for the year ended 31 December 2023
CORPORATE INFORMATION
Board of Directors
Non-Executive Chairman
Alastair GUNN-FORBES*
Executive Directors
Henry Ying Chew CHEONG (Deputy Chairman)
Ernest Chiu Shun SHE
Non-Executive Directors
Mark Chung FONG*
Martyn Stuart WELLS*
Stephen Lister d¡¯Anyers WILLIS*
* independent
Company Secretary
Vistra Company Secretaries Limited
First Floor, Templeback, 10 Temple Back, Bristol, BS1 6FL, United Kingdom
Assistant Company Secretary
Ocorian Services (Bermuda) Limited
Victoria Place, 5(th) Floor, 31 Victoria Street, Hamilton HM 10, Bermuda
Registered Office Address
Victoria Place, 5(th) Floor, 31 Victoria Street, Hamilton HM 10, Bermuda
Registration Number
EC21466 Bermuda
Principal Bankers
The Hongkong and Shanghai Banking Corporation Limited
1 Queen¡¯s Road, Central, Hong Kong
External Auditor
BDO Limited
25th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong
Principal Share Registrar and Transfer Office
Ocorian Management (Bermuda) Limited
Victoria Place, 5(th) Floor, 31 Victoria Street, Hamilton HM 10, Bermuda
International Branch Registrar
Link Market Services (Jersey) Limited
12 Castle Street, St Helier, JE2 3RT, Jersey, Channel Islands
United Kingdom Transfer Agent
Link Group
10(th) Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL, United
Kingdom
Investor Relations
For further information about Worldsec Limited, please contact:
Henry Ying Chew CHEONG
Executive Director, Worldsec Group
Unit 607, 6th Floor, FWD Financial Centre, 308 Des Voeux Road Central, Sheung
Wan, Hong Kong
enquiry@worldsec.com
Company¡¯s Website
http://www.worldsec.com
CONTENTS
Page
Chairman¡¯s statement 1
Directors¡¯ report 3
Statement of directors¡¯ responsibilities 25
Independent auditor¡¯s report 26
Consolidated statement of profit or loss and other comprehensive income 31
Consolidated statement of financial position 32
Consolidated statement of changes in equity 34
Consolidated statement of cash flows 35
Notes to the consolidated financial statements 36
Investment policy 72
Biographical notes of the directors 73
Chairman¡¯s Statement
RESULTS AND REVIEW
For the year ended 31 December 2023, the audited consolidated profit of
Worldsec Limited (the ¡°Company¡±) and its subsidiaries (together the
¡°Group¡±) was US$58,000 compared with a loss US$843,000 in 2022. Earnings
per share were US0.07 cent (2022 loss per share: US0.99 cent). Net asset value
per share was US6.5 cents (2022: US6.4 cents). Detailed discussion of the
results and financial position of the Group is set out in the directors¡¯
report on pages 3 to 24.
During the year under review, one of the Group¡¯s investee companies,
Velocity Mobile Limited (¡°Velocity¡±), was taken over by Capital One
Financial Corporation in the United States. Under the takeover bid, the Group
was able to dispose of its entire investment in Velocity (the ¡°Velocity
Disposal¡±) at a valuation that led to a gain of US$913,000. The cash
proceeds from the Velocity Disposal have also provided the Group with
additional wherewithal for future investment opportunities.
For the year ended 31 December 2023, there was a net negative change in the
fair value of the Group¡¯s listed and unlisted financial assets amounting to
US$396,000. As at the end of 2023, cash and cash equivalent amounted to
US$1.12 million against US$526,000 as at the end of 2022 following the
Velocity Disposal.
PROSPECTS
The worry of a possible recession, particularly in the United States, due to
disruptions caused by the COVID-19 pandemic, rising interest rates, inflation
and supply chain problems appear to have gradually subsided. The growth of
global economy in 2023, estimated at 3.2% in the latest World Economic Outlook
Report published by the International Monetary Fund in April 2024 (the ¡°IMF
Report¡±) continued to show resilience. The IMF Report also forecasts the
global economy to grow at 3.2%, the same level as that of 2023, in 2024 and
2025, with a slight acceleration in the growth of the advanced economies
offset by a modest slowdown in the growth of the emerging market and
developing economies. The headline rate of global inflation is forecast to
decline from 6.8% in 2023 to 5.9% and 4.2% in 2024 and 2025, respectively.
Notwithstanding a recent string of economic data suggesting lingering pressure
on prices in the United States, the inflationary trend appears to remain in a
sustainable path moving towards levels that could eventually lead to a lower
interest rate environment.
2023 was a challenging year for the private equity and venture capital sectors
as they faced, among others, a mini banking crisis, rising capital costs,
geopolitics and technopolitics and intractable valuation gaps between buyers
and sellers. The introduction of new regulatory rules and compliance
requirements in areas of transparency, competition and efficiency in the
private fund market have also kept private equity and venture capital managers
on their toes. Overall deal value at US$1.3 trillion in 2023 showed
substantial decline of 23% and 40% when compared with the US$1.7 trillion and
US$2.2 trillion recorded in 2022 and 2021, respectively. In line with the
decline in overall deal value, fundraising by the private equity and venture
capital sectors also dropped in 2023 to US$804 billion against US$909 billion
in 2022 and US$1,032 billion in 2021. Rising capital costs and uncertain
economic outlook were the main reasons for the difficulty in fundraising
especially for the medium and small sized fund managers.
Of the different private equity asset classes, buyout, add-on and carve out
activities performed better as companies short of fundings were prepared to
accept lower valuation. Private debt financing also posted reasonably good
returns as most of the private debt securities were based on floating rate
structure which benefited from the high interest rate environment.
General market consensus points to an improved outlook for private equity
investment in 2024. With liquidity in the traditional markets remaining tight,
there would be opportunities for the private equity market to provide fundings
given its massive dry powder of US$3.7 trillion. While the anticipation of
interest rate cuts and the improving economic visibility are likely to
increase merger and acquisition activities, the ¡°carbon-neutral¡±
directive and the ¡°environmental, social and governance¡± compliance
requirements have shifted the investment landscape. It is expected that
businesses in the areas of decarbonisation, renewable energy, diversifications
and investments in supply chain, infrastructure, in addition to technology
particularly under the AI frenzy, would attract special attention from private
equity fund and venture capital managers. There is generally a cautiously
optimistic mood in the private equity market and 2024 is expected to
experience higher levels of deal transactions and increasing fundraising
activities.
With the additional wherewithal generated from the Velocity Disposal, the
Group will continue to explore investment opportunities under the changing
investment environment in accordance with the Group¡¯s investment policy.
NOTE OF APPRECIATION
I wish to thank my fellow directors and staff for their efforts and
contributions made during the year ended 31 December 2023. I would also like
to extend a note of appreciation to shareholders for their continued support
of the Company.
Alastair Gunn-Forbes
Non-Executive Chairman
30 April 2024
DIRECTORS¡¯ REPORT
The directors submit the annual report of the Company and the audited
consolidated financial statements of the Company and its subsidiaries for the
year ended 31 December 2023.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The Company and
its subsidiaries are principally engaged in investment in unlisted companies
in the Greater China and South East Asian region.
RESULTS AND FINANCIAL POSITION
The audited consolidated profit of the Company and its subsidiaries for the
year ended 31 December 2023 was US$58,000, compared with a loss of US$843,000
in 2022. Earnings per share were US0.07 cent (2022 loss per share: US0.99
cent). The turn from loss to profit was attributed to the contribution of the
gain of US$913,000 arising from the Velocity Disposal.
During the year under review, the Group¡¯s Investment in the ICBC
Specialised Ship Leasing Investment Fund (the ¡°ICBC Shipping Fund¡±)
continued to provide a stable return, generating dividend income totalling
US$96,000. In addition, there were dividends aggregated from its stock market
investment portfolio that amounted to US$16,000.
As at 31 December 2023, the net assets of the Group stood at US$5.5 million
(2022: US$5.4 million), equivalent to US6.5 cents per share (2022: US6.4
cents). Reflecting in part the Velocity Disposal, unlisted financial assets at
fair value through profit or loss decreased from US$4.4 million to US$3.7
million and cash and cash equivalents increased from US$0.5 million to US$1.1
million during the year under review. There was also a net negative change in
the fair value of the listed and unlisted financial assets of the Group
amounting to US$396,000.
Further details of the Group¡¯s results and financial position are set out
in the consolidated statement of profit or loss and other comprehensive income
on page 31, the consolidated statement of financial position on page 32 and
notes to the consolidated financial statements on pages 36 to71.
The Board does not propose to declare any dividend for the year ended 31
December 2023 (2022: nil).
REVIEW
The Company is a closed-ended investment company with a premium listing under
Chapter 15 of the Listing Rules of the Financial Conduct Authority in the
United Kingdom (the ¡°Listing Rules¡±). In accordance with the
Company¡¯s investment policy, a copy of which is set out on page 72, the
investment strategy of the Group focuses on investing in small to medium sized
trading companies based mainly in the Greater China and South East Asian
region with a view to building a diversified portfolio of minority investments
in such companies. The investment objective of the Company is to achieve
attractive investment returns through capital appreciation on a medium to long
term horizon. To spread the investment risk of the Group, none of the
Group¡¯s investments at the time when made exceeded 20% of its gross assets.
After the Velocity Disposal during the year under review and at the date of
this report, the investment portfolio of the Group comprises a total of six
investments and investee companies.
DIRECTORS¡¯ REPORT (CONTINUED)
ICBC Shipping Fund
The Group¡¯s investment in the ICBC Shipping Fund, which is involved in
marine vessel leasing, continued to provide a stable contribution generating
dividend income amounting to US$96,000.
Animoca Brands Corporation Limited (¡°Animoca¡±) through VS SPC Limited
(¡°VS SPC¡±)
Through the VS Class Participating A Shares, the Group holds an investment in
VS SPC, the sole underlying investment asset of which is an equity interest in
Animoca.
Incorporated in Australia, Animoca is an unlisted holding company of a
technology group engaged in in gamification and blockchain activities with a
mission to advance digital property rights and contribute to building the open
metaverse. It has a rapidly growing portfolio of over 400 investments in Web3
projects. Key assets of the Animoca group include The Sandbox, REVV RACING,
GAMEE, BLOWFISH, quidd, nWAY, TinyTap and DAREWISE. Other of its major
subsidiaries, joint ventures and strategic partnerships include Animoca Brands
Japan, Yuga Labs, OneFootball, Anichess, Cool Cats NFT and ONE Championship.
Animoca was a winner of the Fortune Crypto 40, named as one of the high growth
companies in Asia-Pacific in a report compiled by the Financial Times and
Statista and a honouree on the NFT100 List prepared by nft now in 2023.
Cryptocurrencies experienced a significant recovery in 2023 after a harsh
crypto winter in 2022 marked by widespread sell-offs, contagion concerns and
frauds around the world. According to TradingView data, the total
cryptocurrency market capitalisation doubled from $798 billion at the
beginning of the year to to $1.6 trillion by the end of year and subsequently
reached over $2.6 trillion in March 2024.
The significant recovery in cryptocurrencies has naturally extended to the
crypto assets of the Animoca group. In the update on financial position
released by Animoca on 17 April 2024, it disclosed that the unaudited cash and
digital asset balances of the Animoca group on 31 March 2024 consisted of $291
million in cash and stablecoins, $558 million in digital assets and $1.8
billion in off-balance sheet token reserves.
During 2023, Animoca continued to expand and diversify its rapidly growing
portfolio acquiring interests in more than 15 investments across various
sectors in the Web3 space. This broad and multifaceted investment approach
underscores the active participation of Animoca in shaping the future of
decentralised technologies and solidifies its role as a major influencer in
the rapid evolution of the digital asset landscape.
Certain of the Animoca group¡¯s recent business highlights include the
following:
· The Animoca group has investments in more than 30 AI startups three
of which are particularly worth highlighting.
² SEOUL ROBOTIS - a B2B provider of 3D modeling and object recognition used
for infrastructure and smart city applications;
² Clare.AI - a B2B chatbot solution for small and medium businesses built on
WhatsApp to enhance customer communication and marketing; and
² Finhay - a micro-investing and savings app in Vietnam with AI applications
in content curation and customer support.
DIRECTORS¡¯ REPORT (CONTINUED)
Ÿ In January 2024, Animoca and HashKey Exchange executed a memorandum of
understanding to form a strategic partnership to work on, among other
initiatives, the education of the public on Web3 and the potential listing of
virtual assets on HashKey Exchange. Animoca would open an account with HashKey
Exchange to emphasise the mutual commitment to compliant virtual asset
trading. HashKey Exchange was among the first batch of licensed virtual asset
platforms to offer retail services in Hong Kong under the licences for Type 1
(Dealing in Securities) and Type 7 (Providing Automated Trading Services)
regulated activities granted by the Securities and Futures Commission of Hong
Kong.
Ÿ In October 2023, Animoca entered into a conditional memorandum of
understanding for a strategic partnership with NEOM, a company established
under the sovereign wealth fund of Saudi Arabia for the development of a mega
futuristic city at the northern tip of the Red Sea. The mission of the
strategic partnership would be to drive the regional Web3 initiatives,
including the collaboration on building enterprise service capabilities with
global commercial applicability and the setting up of a hub in the NEOM city
to nurture the local ecosystem, in line with the Saudi Vision 2030 plan.
Additionally, along with the strategic partnership, a convertible note
financing terms sheet was signed with the NEOM Investment Fund proposing to
invest US$50 million in Animoca. Half of the US$50 million financing would be
made through the subscription of convertible notes at a conversion cap price
of A$4.50 per Animoca share issued by Animoca and the remaining would be used
to purchase Animoca shares on the secondary market. Furthering its commitment
to the Web3 regulatory supportive nation, Animoca also entered into a
memorandum of understanding with King Abdulaziz City for Science and
Technology, an independent government entity established for and dedicated to
the advancement of science and technology and the promotion of cooperation
among scientific institutions in Saudi Arabia. The strategic partnership would
involve the setting up of a hub in Riyadh to incubate Web 3 startups and
blockchain technologies in the region and cover the collaboration on joint
research in Web3, blockchain, gaming, AI and the metaverse with local
universities.
Ÿ In September 2023, Animoca raised the first tranche of funding of US$20
million for Mocaverse, the marquee membership network project of the Animoca
group, through the issue of simple agreements for future equity
(¡°SAFEs¡±) with various sophisticated and professional investors at a
price of A$4.50 per Animoca share. SAFEs would be automatically converted to
shares of Animoca after six months. As part of the raise, participating
investors had also been granted a free-attaching utility token warrant at a
nominal price on a 1:1 dollar basis with a 30-month vesting schedule. In
December 2023, Animoca proceeded with the second tranche of fundraising of
US$11.9 million for the Mocaverse (https://www.mocaverse.xyz/) project on the
same terms. The new capital raised by Animoca amounted to a total of $31.9
million and would be used by Mocaverse for product development and to
facilitate Web3 adoption and to fund ecosystem network expansion. The
Mocaverse project empowers members to create their own digital identity,
accrue reputation and earn and spend loyalty points by engaging within the
Mocaverse ecosystem, seeded by the over 400 portfolio companies of Animoca and
its partner network with more than 700 million addressable users.
Ÿ Subsequent to the two tranches of fundraising in 2023, Mocaverse entered
into various partnership agreements for strategic partner network expansion in
South Korea, another market that is Web3 regulatory supportive. Through a
multi-partner activation plan, the Mocaverse community would be able to access
a curated catalog of experiences provided in partnership with some of South
Korea¡¯s biggest brands including Cube Entertainment, IPX, Planetarium
Labs, Gomble Games and Bellygom, the flagship NFT initiative launched
by Lotte and operated by Daehong Communications. Animoca had previously
entered into a memorandum of understanding with Daehong Communications, a
marketing and advertising subsidiary of Lotte, for a strategic commercial
partnership. Through the collaborations with the Animoca group and Mocaverse,
the strategic commercial partnership would foster the growth of Daehong
Communications in the Web3 space the ecosystem of Lotte beginning with the
Bellygom NFT initiative.
DIRECTORS¡¯ REPORT (CONTINUED)
· The Sandbox, a leading project of the Animoca group that operates a
decentralised gaming virtual world, continued to expand geographically with
the introduction of or participation through various partnerships in
location-based metaverses in Thailand, Turkey, India and Dubai, with a
collaboration to nurture Web3 gaming talents in Saudi Arabia and with an
acquisition of a game development studio in Germany. There were also the
launches of Infinite Pulse, a music hub, Cinerama LAND, a movie-themed
neighbourhood and McNuggets® Land, a platform to interact with the gaming
characters of McDonald's Chicken McNuggets in the virtual world of The
Sandbox. In addition, The Sandbox has joined forces with Forkast Labs to
produce metaverse indexes that enable more than 400 of The Sandbox¡¯s brand
partners, including Warner Music, Ubisoft and Gucci Vault, to track the market
performance of their digital assets in real-time using Forkast Labs¡¯
full-stack Web3 data infrastructure.
ByteDance Ltd. (¡°ByteDance¡±) through the Homaer Asset Management Master
Fund SPC (the ¡°Homaer Fund¡±)
Through the Unicorn Equity Investment Portfolio Class A Shares, the Group
holds an investment in the Homaer Fund, the sole underlying investment asset
of which is an equity interest in ByteDance.
ByteDance is an unlisted holding company of a technology group that operates a
series of mobile app platforms powered by AI across cultures and geographies.
The ByteDance group has a portfolio of products that are available in over 150
markets and 75 languages and that includes, among others, Douyin, Toutiao,
TikTok, Xigua Video and Helo.
In spite of the lack of momentum in the Chinese economy and the inimical
conditions and elevated regulatory scrutiny in key markets from the United
States to India, the ByteDance group managed to achieve robust growth in 2023.
Revenue was reported to have crossed the US$110 billion mark on the back of
its fledgling e-commerce business. 80% of the sales were estimated to have
come from the domestic market as Douyin capitalised on the burgeoning trend of
livestream e-commerce. In the United States, with around 170 million users,
TikTok was reported to have generated revenue of US$16 billion. It remained as
one of the most downloaded apps with over 1 billion downloads worldwide in
2023 according to Statista.
The growth path of the ByteDance group has certainly not been plain sailing.
Regulatory scrutiny regarding TikTok in particular continues to be a major
hindrance and remains unabated and amplified due to concerns over user data
management and privacy on top of what is deemed to be a connection that could
not be severed with China. In October 2023, TikTok was forced to suspend its
online shopping service in Indonesia because of new government regulations
separating e-commerce from social media platforms, citing the need to protect
small merchants and user data. In February 2024, ByteDance finalised an
agreement to acquire a 75.01% majority stake in Tokopedia, Indonesia's largest
e-commerce marketplace, for US$840 million. By integrating TikTok Shop into
Tokopedia, TikTok was able to relaunch its online shopping operations in
Indonesia in compliance with the new local regulations. Meantime, the
regulatory issue has also been compounded and aggravated by the ongoing
geopolitical tensions. The escalating discord between China and other
countries, particularly the United States, is having a significant impact on
the operations and strategic decisions of the ByteDance group. In April 2024,
following a legislative manoeuvre to bundle the ban-or-divest bill on TikTok
with a pivotal foreign aid package for Ukraine, Israel and Taiwan, the bundled
legislation was passed by the House of Representatives and Senate of the U.S.
Congress and signed into law by the President of the U.S. The provision
targeting TikTok stipulates a potential nationwide ban on TikTok if its
operations in the United States are not divested by ByteDance in a period of
nine months with an optional extension of up to three months should there be
an active sale process in place. This could lead to a protracted legal battle
with lawsuits expected from TikTok and its American users. Amid such complex
interplay of technology, economics, politics and international relations,
ByteDance must navigate the web of regulatory environment, national interests
and market dynamics to find a path to sustainable growth.
DIRECTORS¡¯ REPORT (CONTINUED)
As reflected by the AI-powered algorithms that have contributed to the success
of its flagship apps, including Douyin, Toutiao and TikTok, the ByteDance
group has been an ardent advocate of AI since being established in 2012. It
has also been moving into the generative AI arena in a meaningful way. Within
a matter of months, the ByteDance group has rolled out a wide array of
products. Embracing a strategy of trial and error, the ByteDance group trains
its self-developed large language models, endeavouring for a breakthrough
associated with the success achieved by its flagship apps. Among the notable
AI products that it has rolled out include DouBao, Cici, ChitChop, XiaoWuKong,
Coze, KouZi, BagelBell, SDXL-Lightning and MagicVideo-V2. DouBao and Cici
serve as AI chatbots, with DouBao centring on providing accurate responses and
understanding complicated rationale, whereas Cici caters to an international
audience offering services such as knowledge Q&A and content generation.
ChitChop stands out as a creative and entertainment tool developed by Poligon,
a subsidiary of ByteDance, featuring over 200 smart applications across
domains like AI creation and drawing. As an AI tool platform, XiaoWuKong
offers 192 public tools categorised into creation, productivity and
entertainment. Coze and its Chinese version KouZi enable users to integrate
various plugins and develop AI bots without coding, highlighting the strategic
vision of ByteDance for the integration of generative AI capabilities into
various existing products such as Doubao, Feishu and WeChat. BagelBell is a
virtual world where interactive fictional stories could be generated.
SDXL-Lightning and MagicVideo-V2 are innovative AI solutions for converting
text to high quality images and videos. The wide array of products rolled out
by the ByteDance group demonstrates its commitment to pushing the boundaries
of AI innovation in a broad range of applications.
As part of the strategic shift to prioritise the expansion into the AI arena,
ByteDance decided to cut down the resources for two of the divisions of the
ByteDance group, reflecting a departure from a previous expansion strategy
that also encompassed the healthcare and gaming sectors. In January 2024, the
ByteDance group discontinued the operation of the Baikemy website, a leading
provider of online medical information and healthcare knowledge. The Baikemy
website was acquired in mid-2020 at an undisclosed amount shortly after the
outbreak of COVID-19 pandemic. Towards the end of 2023, notwithstanding a
number of successful game launches over the years, the ByteDance group
underwent a strategic restructuring of its gaming division. The restructuring
process involved, among other things, sizable job cuts at Nuverse and Pico,
the game publisher and the VR headset manufacturer of the ByteDance group, as
well as the sale, closure or phasing out of certain gaming projects. Moreover,
ByteDance has confirmed discussion with potential buyers for Moonton, the
mobile game studio acquired for US$4 billion in 2021. The restructuring,
however, is not expected to have a meaningful adverse impact on the ByteDance
group as gaming revenue has been relatively marginal. Rather, the steps
undertaken would enable ByteDance to refocus on the AI initiatives and the
core businesses of Douyin, Toutiao and TikTok.
With massive cash holdings accumulated from the operations of the ByteDance
group, ByteDance surely has the wherewithal for share buybacks. In March 2024,
ByteDance was reported to have launched a new round of employee buyback offer
to buy back shares from the employees of the ByteDance group at a price of
US$170.81 per share. In December 2023, ByteDance was reportedly offering to
buy back up to US$5 billion worth of shares from shareholders at US$160 per
share. This was similar to the buyback price offered to the employees of the
ByteDance group in November last year, valuing ByteDance at a reported US$268
billion. Accordingly, the valuation of ByteDance did record a correction
during 2023 under the weak equity market environment in China and Hong Kong,
even though it had outperformed its major peers based on available financial
and operational information. An impairment in the carrying value of the
Group¡¯s investment in the Homaer Fund has consequently been recognised for
the year ended 31 December 2023.
Dingdong (Cayman) Limited (¡°Dingdong¡±)
Subsequent to the listing of Dingdong on the New York Stock Exchange, the
Group directly holds its investment in the American depositary shares of
Dingdong (the ¡°Dingdong ADS¡±).
DIRECTORS¡¯ REPORT (CONTINUED)
Dingdong is the holding company of an e-commerce group that operates a mobile
app, Dingdong Fresh, providing users with fresh produce, prepared food and
other food products supported by a self-operated frontline fulfillment grid
with some 45 regional processing centres and about 1,000 frontline fulfillment
stations on leased properties. The operations of the Dingdong group cover 25
cities across China with a significant portion of revenue derived from the
Yangtze River Delta Megalopolis.
During 2023, the Dingdong group continued to achieve robust progress with
improving financial metrics. It has, in fact, evolved in a matter of years
from a startup that needed external financing to a self-sustaining business
with an established position in a highly competitive industry. According to
the founder and chief executive officer of Dingdong, the Dingdong group has
become the first to achieve profitability among the leading companies
competing in the online grocery sector.
Based on the 2023 audited consolidated accounts of the Dingdong group, revenue
decreased by 17.3% from RMB24.2 billion in 2022 to RMB20.0 billion in 2023.
The strategic decision the Dingdong group to withdraw operations from several
cities where substantial time and resources would be required to build a
meaningful presence, compounded with the high base effect arising from the
strong sales driven by a surge in demand for online grocery shopping under the
pandemic impact during the previous year, were the main culprits for the
decrease in revenue. Gross profit margin, on the other hand, remained stable
at above 30%* throughout the four quarters in 2023. Expense ratios were also
optimised. Notably, fulfillment expenses as a percentage of revenue were cut
from 25.2% in 2022 to 23.5% in 2023, thanks to the improved processing
efficiency and frontline worker productivity. As a result, the Dingdong group
was able to achieve the first full-year non-GAAP profitability** in 2023 and,
including the fourth quarter of 2022, five consecutive quarterly non-GAAP
profitability**. Furthermore, during the second half of 2023, cash flows from
operating activities returned to positive levels, raising net cash balance,
calculated by deducting short-term borrowings from the sum of cash and cash
equivalents, restricted cash and short-term investments, to over RMB2 billion
by the end of the year.
One factor that could have helped contribute to the stability of gross profit
margin during 2023 under the post-pandemic environment with readjusting
consumer behaviours could be attributable to the increasing contribution from
private label products. Since July 2020, the Dingdong group has launched a
total of over 30 private labels. The private label products that have been
launched span across a variety of food categories focusing on prepared food,
rice and noodles, fresh groceries and baked goods. Signature private labels of
the Dingdong group include Cai Chang Qing, Good Craftsman Noodles, Fresh
Everyday Pork, Black Diamond Family and You Dou Zhi. During 2023, contribution
from private label products increased to 20% of total gross merchandise value
and accounted for more than 30% under the non-fresh-grocery. In November 2023,
at the 7th PLF Gold Star Awards, an annual award ceremony that honours
excellence in the domestic private brand sector in China, the Dingdong group
was recognised for its success in private label development, winning a total
of 13 awards with 11 in the product category and one each in the team and
trader categories.
To broaden its reach to consumers within the areas it operates and to expand
its source of revenue, the Dingdong group started in 2023 selling private
label and supply chain products through external channels including Douyin and
Ele.me, generating sales of RMB500 million within a year. Capitalising on the
reputation as a leading online grocery retailer it has developed over the
years, the Dingdong group has also opened the first outlet store in its home
base, Shanghai. This outlet would better position the Dingdong group to
understand and respond to changing consumer behaviours and preferences under
the post-pandemic environment and to reach the previously underserved market
segment among the non-tech-savvy and elderly consumers.
DIRECTORS¡¯ REPORT (CONTINUED)
With a promising and propitious start in 2024, the Dingdong group appeared to
have regained the sales momentum with a strong first-quarter financial
performance beyond the expectation of its management. In particular, during
the slightly more than two weeks from the Eve of Chinese New Year to the
Lantern Festival, overall same-store order volume increased by 6% on a
year-on-year basis. The increase recorded for a period within a traditional
low season for the retail sector with a legion of outbound residents away from
home was indeed encouraging.
On 29 January 2024, Dingdong announced a share repurchase programme of up
to US$20.0 million that might be implemented after the publication of the
2023 audited consolidated accounts of the Dingdong group and until 28 January
2025. The share repurchase would be funded by internal resources, reflecting
the confidence of its management on the financial position and the cash flow
generating capabilities of the Dingdong group.
* based on the unaudited financial results for the four quarters of 2023
published by Dingdong
** considered to be a useful indicator of the underlying business trend by
excluding the non-cash charges of share-based compensation
Seyond Holdings Ltd. (¡°Seyond¡±, formerly Innovusion Holdings Ltd.
(¡°Innovusion¡±)) through the Hermitage Fund Twelve SP (the ¡°Hermitage
Fund Twelve¡±)
Through the Class A Participating Shares, the Group holds an investment in the
Hermitage Galaxy Fund SPC attributable to the Hermitage Fund Twelve, the sole
underlying investment asset of which is an equity interest in Seyond.
Founded and headquartered in Silicon Valley in California in the United
States, Seyond is an unlisted holding company of a technology group that
specialises in the development of image grade light detection and ranging
(¡°LiDAR¡±) sensor systems for notably the autonomous vehicle and advance
driver-assistance system markets with strategically placed research and
manufacturing facilities across the globe. The product portfolio of the Seyond
group includes both long-range front view LiDAR sensors and mid-to-short range
side view LiDAR sensors.
In December 2023, Innovusion underwent a significant rebranding, adopting the
new English name ¡°Seyond¡± and introducing a new logo under the new name.
The new name, a combination of ¡°See¡± and ¡°Beyond¡±, encapsulates
the essence of the LiDAR technology of the Seyond group, symbolising its
ability to uncover the unseen with unparalleled precision and exceptional
clarity.
The flagship ultra long-range front view LiDAR sensor of the Seyond group,
Falcon, is a standard configuration of the Aquila system for eight NIO¡¯s
models, including ET7, ES7 and ET5, and is also integrated into Faraday
Future¡¯s FF91 Futurist electric vehicles. In addition, its compact side
view LiDAR sensor, Robin-W, is used in NIO¡¯s ET9 model. In November 2023,
the Seyond group achieved a major milestone with cumulative shipments of LiDAR
units reaching the 200,000 mark, and according to Yole
Intelligence¡¯s Global Automotive LiDAR Market and Technology Report 2023,
the Seyond group had the majority of LiDAR market share in 2022 for passenger
cars and light commercial vehicles.
The Seyond group is currently running three automotive grade manufacturing
lines with an annual production capacity of more than 300,000 units of LiDAR
sensors. The manufacturing process is about 90% automated, maintaining high
product qualities and consistent precision performance and ensuring timely and
efficient production. Given the rapidly growing demand for vehicle-based
LiDAR¡¯s across the globe with total revenue expected to skyrocket to over
US$4.6 billion by 2028 from US$332 million in 2022 according to Yole
Intelligence¡¯s Global Automotive LiDAR Market and Technology Report 2023,
the Seyond group will continue to expand its manufacturing lines with an
end-of-2024 target of an annual production capacity to exceed 500,000 units of
LiDAR sensors in the foreseeable future.
DIRECTORS¡¯ REPORT (CONTINUED)
During the past twelve months, the Seyond group has entered into a number of
strategic partnerships with a view to broadening the application of its LiDAR
technologies across the automotive, intelligent transportation system
(¡°ITS¡±) and shipping industries. The collaboration with Wideye aims to
jointly develop innovative solutions for the seamless integration of LiDARs
and camera modules behind the windshield. The teaming up with Exwayz focuses
on integrating the Seyond group¡¯s LiDAR capabilities with Exwayz¡¯s
proprietary LiDAR simultaneous localisation and mapping (¡°SLAM¡±) system
to enhance SLAM performance and accelerate SLAM convergence. Through
participating in A2RL, the Autonomous Car Racing League organised by the Abu
Dhabi¡¯s Advanced Technology Research Council, the Seyond group would be
given the opportunity to integrate its LiDARs into all of the competing
vehicles to ensure that navigation and manoeuvres at thrilling speeds of up
to 300 km/h would be executed with precision and safety. In the field of ITS,
the partnership arrangements with D2 Traffic and Outsight involve the
optimisation of traffic management through the adoption of 3D perception
technologies, contributing to the development of the autonomous vehicle and
advanced safety markets. Moreover, together with Avikus, a startup established
by HD Hyundai specialising in ship autonomous navigation, the Seyond group is
exploring the use of LiDARs for advanced navigation assist and improved
autonomous functionality. Apart from these strategic partnerships, the Seyond
group has also been actively cooperating with a multitude of other companies,
including NIO, TuSimple, EACON, Deepway, AUTRA TECH, Zhito Technology, Plus,
Driveblocks, EaseControl Autonomous, Waytous Technologies, Zhiji Tech and MOGO
Auto. This demonstrates the commitment of Seyond to pushing the boundaries and
applications of its LiDAR technology across various industries.
Oasis Education Group Limited (¡°Oasis Education¡±)
Oasis Education is a 50% joint venture of the Group. The operating subsidiary
of Oasis Education, Oasis Education Consulting (Shenzhen) Company Limited
(奧偉詩½ÌÓý諮詢(ÉîÛÚ)ÓÐÏÞ¹«Ë¾, ¡°Oasis Shenzhen¡±),
provides consulting and support services to the Huizhou Kindergarten in the
Guangdong Province of China.
Following the graduation of 128 pupils in the summer of 2023, the Huizhou
Kindergarten enrolled 81 new pupils for the academic term that commenced in
September 2023 and another 15 new pupils for the academic term that commenced
in February 2024, thus bringing its total pupil enrolment to a 261.
In April 2023, the Huizhou Kindergarten made a repayment of RMB600,000 to
Oasis Shenzhen to retire part of its borrowings which were related to the
set-up costs incurred at the time when the kindergarten was established.
PROSPECTS
Despite the continuing Russia-Ukraine war and the ongoing conflict between
Israel and Hamas in the Gaza Strip, the stock markets in Europe have shown
surprise resilience while the U.S. and Japanese markets have performed
exceptionally well, trading at high levels during 2023 and record levels
throughout most of 2024. Apart from market liquidity, the diversification of
certain supply chains to reduce reliance on China, the interest rate cut
expectations, the robust economic data, the improving corporate earnings and
the boom in the technology sector on the back of the AI frenzy have been the
driving force for the stock market performance. However, the same was not seen
in the private equity market with both overall deal value and fundraising
activities declining substantially in 2023. Lower numbers of merger and
acquisition and initial public offering deals also meant reduced exit
opportunities and hence distributions to limited partner investors. This has
in turn affected new fundraising in the private equity market negatively.
DIRECTORS¡¯ REPORT (CONTINUED)
There is, however, an air of optimism among the private equity fund and
venture capital managers that the outlook for 2024 would be improved. The
¡°carbon-neutral¡± directive and the ¡°environmental, social and
governance¡± compliance requirements have shifted the investment landscape.
Companies and products which are identified to operate in the decarbonisation
space would be better favoured. Deglobalisation would be another theme that
would attract investor attention as countries move to rebuild and modernise
their infrastructure under heightened geopolitical tensions. It is expected
that a fair amount of the US$3.7 trillion dry powder would be deployed in
these areas along with projects in digital technology especially AI.
In recent years, the Sino-U.S. relations have undergone a period of escalating
discord and contention. The deteriorations in the bilateral ties could be
attributable to a broad spectrum of factors ranging from the fundamental
differences in core values, to economic and political issues including the
trade war, the supply chain disruptions, the increasing technology
competition, the conflicting foreign policies and the territorial disputes in
the Taiwan Strait and the South China Sea, to specific events in the cases of
the COVID-19 pandemic outbreak and the balloon incident. Following the summit
meeting between the Presidents of China and the United States in November
2023, however, the Sino-U.S. relations appear to have stabilised with the
resumption of certain high-level dialogues between the two powers.
Nonetheless, with improved and closer cooperation among the United States and
its allies under the Biden Administration, concerted efforts on the part of
the West to institute measures to contain China¡¯s political clout and
economic development are likely to continue if not intensify. Affected by this
geopolitical environment, the performance of the Group¡¯s investment
portfolio, with its underlying assets largely China-focused, would depend on
the continued development of the domestic economy. In this regards, the Board
remains confident on the long-term potential of these investments, which are
expected to benefit from the strength of China¡¯s economy in the long-term.
Meanwhile, the Board will continue to look for new opportunities to expand the
investment portfolio of the Group in accordance with the Company¡¯s
investment policy.
Directors
The directors during the year under review and up to the date of this report
were and are:
Non-Executive Chairman
Alastair Gunn-Forbes*
Executive Directors
Henry Ying Chew Cheong
Ernest Chiu Shun She
Non-Executive Directors
Mark Chung Fong*
Martyn Stuart Wells*
Stephen Lister d¡¯Anyers Willis*
* independent
Brief biographical notes of the directors serving at the date of this report
are set out on pages 73 to 75.
Save as disclosed in this report and in note 26 to the consolidated financial
statements on page 70, none of the directors had during the year under review
or at the end of the year a material interest, directly or indirectly, in any
contract of significance with the Company or any of its subsidiaries.
DIRECTORS¡¯ REPORT (CONTINUED)
Messrs Alastair Gunn-Forbes, Mark Chung Fong and Martyn Stuart Wells have
served on the Board for more than nine years. (In accordance with Provision 21
of the UK Corporate Governance Code on corporate governance published in July
2018 by the Financial Reporting Council of the United Kingdom (the
¡°Code¡±), Messrs Alastair Gunn-Forbes, Mark Chung Fong and Martyn Stuart
Wells retired by rotation and were re-elected to office by separate
resolutions passed at the Annual General Meeting held on 30 June 2023). During
the past ten-year period, however, none of them has had any major interest in
the issued share capital of the Company, has been an employee or involved in
the daily management of any of the Group companies, or has had any material
relationship with any of the Group companies or any of the major shareholders
or managers of any such companies other than being a member of the Board.
Accordingly, and in accordance with Provision 10 of the Code, the Board has
determined that their independence and objectivity have not been impaired and
that they will therefore be able to continue to act independently in character
and judgement.
At the Annual General Meeting held on 29 September 2014, shareholders approved
the inclusion of the Group¡¯s non-executive directors as eligible
participants of the Worldsec Employee Share Option Scheme 1997 (the ¡°Option
Scheme¡±). As explained in the 2014 annual report of the Company, the reason
for such inclusion was to enable the Group to reward its non-executive
directors for their commitments to the Company beyond the nominal annual fees
that the Group could afford to pay during its development stage. Accordingly,
and in accordance with Provision 10 of the Code, given that such circumstances
have basically remained unchanged as the Group has yet to make a profit on a
consistent basis, the Board has determined that the participation of Messrs
Alastair Gunn-Forbes, Mark Chung Fong, Martyn Stuart Wells and Stephen Lister
d¡¯Anyers Willis in the Option Scheme will not affect their ability to act
independently in character and judgement.
Apart from the Option Scheme, the Group also operates a bonus scheme (the
¡°Bonus Scheme¡±), which was approved by shareholders at the Special
General Meeting held on 30 August 2013. All directors and employees of the
Group are eligible to participate in the Bonus Scheme. Up to 20 per cent. of
the operating profit, before payment of tax, of the Group in each financial
year (the ¡°Bonus Pool¡±) may be employed in paying bonuses to directors
and the Group¡¯s employees at the discretion of the Remuneration Committee.
In making decisions on the award of bonuses, the Remuneration Committee takes
into consideration an individual¡¯s overall performance and contribution to
the business of the Group. Award of bonuses are entirely discretionary and
the Remuneration Committee may elect to award only part of the Bonus Pool if
the Remuneration Committee sees fit. No director or employee of the Group is
contractually entitled to a share of the Bonus Pool, and the Bonus Pool may be
awarded in its entirety to a single director or employee should the
Remuneration Committee so resolve.
DIRECTORS¡¯ INTERESTS
The interests of the individuals who were directors during the year under
review in the issued share capital of the Company, including the interests of
persons connected with a director (within the meaning of Sections 252, 253 to
255 of the United Kingdom Companies Act 2006 as if the Company were
incorporated in England), the existence of which was known to, or could with
reasonable diligence be ascertained by, that director, whether or not held
through another party, were as follows:
At 1 January 2023 At 31 December 2023
No. of shares No. of shares
Alastair Gunn-Forbes 45,000 45,000
Henry Ying Chew Cheong (Note i) 11,722,620 11,722,620
Mark Chung Fong Nil Nil
Ernest Chiu Shun She 550,095 550,095
Martyn Stuart Wells Nil Nil
Stephen Lister d¡¯Anyers Willis 16,000 16,000
DIRECTORS¡¯ REPORT (CONTINUED)
Note: Mr Henry Ying Chew Cheong (¡°Mr Cheong¡±) wholly owns HC Investment
Holdings Limited (¡°HCIH¡±). HCIH beneficially owned 20,000,000 ordinary
shares of US$0.001 each in the Company at 1 January 2023 and 31 December 2023,
respectively.
In total, Mr Cheong and his associates were the legal and beneficial owners of
31,722,620 ordinary shares of US$0.001 each in the Company, representing 37.3%
of the Company¡¯s issued share capital, at 1 January 2023 and 31 December
2023, respectively. The Company and Mr Cheong entered into a relationship
agreement on 2 August 2013 (the ¡°Relationship Agreement¡±). Pursuant to
the Relationship Agreement, Mr Cheong has agreed to exercise his rights as a
shareholder at all times, and to procure that his associates exercise their
rights, so as to ensure that the Company is capable of carrying on its
business independently of Mr Cheong or any control which Mr Cheong or his
associates may otherwise be able to exercise over the Company. Moreover, Mr
Cheong has undertaken to ensure, so far as he is able to, that all
transactions, relationships and agreements between Mr Cheong or his associates
and the Company or any of its subsidiaries are on arms¡¯ length terms on a
normal commercial basis. Mr Cheong and the Company have also agreed, among
other things, that he will not participate in the deliberations of the Board
in relation to any proposal to enter into any commercial arrangements with Mr
Cheong or his associates.
At 1 January 2023 At 31 December 2023
No. of share options (Note) No. of share options (Note)
Alastair Gunn-Forbes 850,000 850,000
Henry Ying Chew Cheong 850,000 850,000
Mark Chung Fong 850,000 850,000
Ernest Chiu Shun She 850,000 850,000
Martyn Stuart Wells 850,000 850,000
Stephen Lister d¡¯Anyers Willis Nil 350,000
Note: 500,000 of the share options granted on 1 December 2015 entitle the holders to
subscribe on a one for one basis new ordinary shares of US$0.001 each in the
Company at an exercise price of US$0.122 per share. These share options vested
six months from the date of grant and were then exercisable within a period of
9.5 years. 350,000 of the share options granted on 29 May 2019 entitle the
holders to subscribe on a one for one basis new ordinary shares of US$0.001
each in the Company at an exercise price of US$0.034 per share. These share
options vested six months from the date of grant and were then exercisable
within a period of 9.5 years.
On 20 February 2023, the Company granted 350,000 share options to Mr. Willis
to subscribe on a one for one basis new ordinary shares of US$0.001 each in
the Company at an exercise price of US$0.034 per share under the Option
Scheme. The share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
Save as disclosed above, none of the above-named directors had an interest,
whether beneficial or non-beneficial, in any shares or debentures of any Group
companies at the beginning or at the end of the year under review. Save as
disclosed above, none of the above-named directors, or members of their
immediate families, held, exercised or were awarded any right to subscribe for
any shares or debentures of any Group companies during the year.
The Board confirms that (i) the Company has complied with the independence
provisions set out in the Relationship Agreement since it was entered into;
and (ii) so far as the Company is aware, Mr Cheong and his associates have
complied with the independence provisions set out in the Relationship
Agreement since it was entered into.
DIRECTORS¡¯ REPORT (CONTINUED)
DIRECTORS¡¯ REMUNERATION
The remuneration of the directors for the year ended 31 December 2023 was as
follows:
Share-based payment expenses Other emoluments
Fees Total
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
Alastair Gunn-Forbes 12.7 - - 12.7
Henry Ying Chew Cheong 12.7 - - 12.7
Mark Chung Fong 12.7 - - 12.7
Ernest Chiu Shun She 12.7 - - 12.7
Martyn Stuart Wells 12.7 - - 12.7
Stephen Lister d¡¯Anyers Willis 12.7 - - 12.7
76.2 - - 76.2
PROVIDENT FUND AND PENSION CONTRIBUTIONS FOR DIRECTORS
During the year under review, there was no provident fund and pension
contributions for the directors.
LETTERS OF APPOINTMENT/SERVICE CONTRACTS
Messrs Alastair Gunn-Forbes, Mark Chung Fong and Martyn Stuart Wells, each has
entered into a letter of appointment with the Company dated 28 November 2017,
and Mr Stephen Lister d¡¯Anyers Willis has entered into a letter of
appointment with the Company dated 3 June 2019, to serve as non-executive
director. Each of them is entitled to a fee of £10,000 per annum. The
appointment may be terminated on one month notice in writing.
Messrs Henry Ying Chew Cheong and Ernest Chiu Shun She, each has entered into
a letter of appointment with the Company dated 2 August 2013 to serve as
executive director. Each of them is entitled to a fee of £10,000 per annum.
The appointment may be terminated on not less than six-month notice in
writing.
All directors are eligible to participate in the Option Scheme under which
share options may be granted at the discretion of the Remuneration Committee.
Except for the 350,000 share options granted to Mr. Willis as disclosed above,
no share options were granted for the year ended 31 December 2023.
All directors are eligible to participate in the Bonus Scheme under which
bonuses may be granted at the discretion of the Remuneration Committee. No
bonuses were recommended for the year ended 31 December 2023.
Save as disclosed above, there are no existing or proposed letters of
appointment or service contracts between any of the directors and the Company
or any of its subsidiaries which cannot be determined without payment of
compensation (other than any statutory compensation) within one year.
MAJOR INTERESTS IN SHARES
At 11 March 2024, the Company was aware of the following direct or indirect
interests representing 5% or more of the Company¡¯s issued share capital:
DIRECTORS¡¯ REPORT (CONTINUED)
Percentage of
issued share capital
No. of shares
HC Investment Holdings Limited (Note i) 20,000,000 23.5%
Yue Wai Keung 4,837,500 5.7%
Luis Chi Leung Tong 5,000,000 5.9%
Henry Ying Chew Cheong 11,722,620 13.8%
Aurora Nominees Limited (Note ii) 18,770,000 22.1%
Vidacos Nominees Limited (Note ii) 5,524,534 6.5%
Notes: (i) Mr Cheong is the legal and beneficial owner of the entire issued share capital
of HCIH.
(ii) Aurora Nominees Limited and Vidacos Nominees Limited act as custodians for
their customers, to whom they effectively pass all rights and entitlements,
including voting rights.
INTERNAL CONTROL, RISK MANAGEMENT AND FINANCIAL REPORTING
The Board is responsible for establishing and maintaining appropriate systems
of internal control and risk management to safeguard the Group¡¯s interests
and assets. The control measures that have been put in place cover key areas
of operations, finance and compliance and aim to manage rather than eliminate
risks that are inherent in the running of the business of the Group.
Accordingly, the Group¡¯s
systems of internal control and risk management are expected to provide
reasonable but not absolute assurance against material misstatements, loss or
fraud.
Among the control measures, the key steps that have been put in place include:
- the setting of the investment strategy and the approval of significant
investment decisions of the Group by the Board to ensure consistency with the
investment objective and compliance with the investment policy of the Company;
- the segregation of duties between the investment management and
accounting functions of the Group;
- the adoption of written procedures in relation to the operations of the
bank accounts of the Group;
- the adoption of written procedures to deal with conflicts of interests
and related party transactions;
- the maintenance of proper accounting records providing with reasonable
accuracy at any time information on the financial position of the Group;
- the review by the Board of the management accounts of the Group on a
regular basis; and
- the engagement of external professionals to carry out company
secretarial works for the Company and to assist the Group on compliance
issues.
The Board considers the identification, evaluation and management of the
principal risks faced by the Group under the changing environment to be an
ongoing process and has kept under regular review the effectiveness of the
Group¡¯s systems of internal control and risk management. The Board is
satisfied that the arrangements that have been put in place represent an
appropriate framework to meet the internal control and risk management
requirements of the Group.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group adopts a risk management strategy that encompasses the proactive
detection and assessment of emerging risks. Its internal control and risk
management framework is designed to be dynamic and responsive with a view to
enabling prompt adaption to new challenges and opportunities.
DIRECTORS¡¯ REPORT (CONTINUED)
The process adopted by the Group for identifying emerging risks involves the
monitoring and review of the Group¡¯s control measures and operating
procedures and activities, the scanning of the development and evolving trends
across various sectors including the economic, political and investment
domains and the leveraging of industry information and insights relevant to
the Group¡¯s operations. Potential threats identified are assessed, analysed
and evaluated and, where appropriate, mitigation measures, such as those
described in the paragraphs below on pages 16 to 17, would be implemented.
The Board receives updates on emerging risks and conducts regular review to
ensure that the risk management and mitigation efforts are effective and
aligned with its oversight. The Audit Committee also plays a crucial role,
providing additional scrutiny and guidance on risk-related matters.
In the risk assessment undertaken, the Board has identified the principal
risks and uncertainties that are relevant to the Group which include:
Target market risk
Under the investment policy of the Company, the Group focuses on investing in
small to medium sized trading companies based mainly in the Greater China and
South East Asian region. Consequently, a sharp or prolonged downturn in the
economic environment or a heightened uncertainty in the political environment
in these target markets could adversely and seriously affect the underlying
investments of the Group. This is clearly a risk factor beyond the Group¡¯s
control. Nevertheless, in line with the investment policy of the Company, the
Board would seek to invest in and maintain a diversified portfolio in order to
spread the investment risk of the Group.
Investment opportunity risk
Investment capital and dry powder accumulated by the private equity sector
during the ultra-low interest rate era prior to the tightening in monetary
policies across major economies to control spiralling inflation remain
abundant. Under such an environment, competition for quality deals is expected
to continue to be vigorous and intense. This would limit the availability of
attractive investment opportunities for the Group. However, the Company has
maintained a broadened investment policy. This would offer greater flexibility
for the Group to make investment choices from a broader range of opportunities
to achieve the Company¡¯s investment objective.
Key person risk
As the Group does not engage any external investment manager, the Board is
responsible for overseeing the Group¡¯s investment management activities
with frontline management duties delegated to the executive directors. The
Group is therefore heavily dependent on the executive directors¡¯ abilities
to identify and evaluate investment targets, execute and implement investment
decisions, monitor investment performance and execute and implement exit
decisions. Both of the executive directors, Messrs Henry Ying Chew Cheong and
Ernest Chiu Shun She, have entered into a letter of appointment with the
Company with a termination clause of not less than six-month written notice.
Moreover, Mr Cheong is also the deputy chairman and a major shareholder
beneficially holding a substantial interest in the Company¡¯s issued share
capital.
Operational risks
The Group is exposed to various operational risks that are inherent in the
running of its business, including, among others, the failure to comply with
the investment policy of the Company, the failure to prevent misstatements,
loss or fraud due to inadequacies in the Group¡¯s internal operational
processes, and the failure to comply with applicable rules and regulations by
the Group. As mitigating measures, the Board has established and maintained
systems of internal control and risk management to safeguard the Group¡¯s
interests and assets, details of which are set out in the section headed
¡°Internal Control, Risk Management and Financial Reporting¡± on page 15.
DIRECTORS¡¯ REPORT (CONTINUED)
Financial risks
The Group is exposed to a variety of financial risks, including market risks,
credit risk and liquidity risk, which arise from its operating and investment
management activities. The Group¡¯s management of such risks is coordinated
at the office of Worldsec Investment (Hong Kong) Limited, the principal
operating subsidiary of the Group, in close cooperation with the Board.
Details of the Group¡¯s approach on financial risk management are described
in note 5(b) to the consolidated financial statements on pages 52 to 56.
COVID-19 pandemic risk
After battling with the COVID-19 pandemic for a number of years, the world has
basically returned to normality, or rather, settled down in a new normal under
the legacies of the health crisis that include a profound change in the daily
lives of a vast proportion of the population across the globe. Furthermore, in
the post-pandemic era, with an expanding armamentarium of vaccines and
therapeutics in the fight against the disease, the threat of the coronavirus
to economic and business activities is generally considered to be manageable.
Against this backdrop, the Group would strive to maintain a diversified
portfolio geographically and across industries in order to minimise any
adverse impact that may be caused by the resurgence of new waves of infections
or the emergence of new variants from time to time.
VIABILITY STATEMENT
The directors have assessed the viability of the Company for the three years
to 31 December 2026.
The directors consider that, for the purposes of this viability statement, a
three-year period is appropriate taking into account the Group¡¯s investment
horizon under its investment strategy. Besides, there should unlikely be any
significant change to most of the principal risks and uncertainties facing the
Group over the timeframe selected for the assessment.
In assessing the viability of the Company and its ability to meet liabilities
as they fall due, the directors have taken into consideration, among others:
- the investment strategy of the Group;
- the current position including the existing financial status and cost
structure of the Group;
- the prospects of and the industry outlook for the Group;
- the economic and political environment of the Greater China and South
East Asian region, the primary target markets in which the Group focuses its
investments; and
- the potential adverse impact of the principal risks and uncertainties
facing the Group and the effectiveness of the mitigating measures that have
been put in place, details of which are described in the section headed
¡°Principal Risks and Uncertainties¡± on pages 15 to 17.
The directors note, in particular, that the Group:
- has a liquid amount of unrestricted cash and bank balances;
- does not have any borrowings;
- does not have any commitments other than certain leases with modest
lease liabilities; and
- has low operating expenses with a small but stable team under stringent
cost control.
Accordingly, the directors are confident that the Company will be able to
continue in operation and meet its liabilities as they fall due over the
assessment period.
DIRECTORS¡¯ REPORT (CONTINUED)
GOING CONCERN
After making careful enquiries, the directors have formed a judgement, at the
time of approving the consolidated financial statements of the Company and its
subsidiaries for the year ended 31 December 2023, that there was a reasonable
expectation that the Group would have adequate resources to carry out its
operations for a period of at least twelve months from the date of approving
the consolidated financial statements. For this reason, the directors have
adopted the going concern basis in preparing the consolidated financial
statements.
CORPORATE GOVERNANCE
As a company with a premium listing on the Main Market of the London Stock
Exchange, its business is subject to the principles contained in the Code, a
copy of which is available on the website of the Financial Reporting Council
of the United Kingdom. The Board confirms that, throughout the accounting
period from 1 January to 31 December 2023, the Group complied with the
relevant provisions of the Code, apart from certain exceptions set out and
explained below.
The Board, comprising a non-executive chairman, three non-executive directors
and two executive directors, is committed to maintaining a high standard of
corporate governance. All non-executive directors are considered by the Board
to be independent of management and free from any business or other
relationship which could materially interfere with the exercise of their
independent judgement. All directors are able to take independent professional
advice in furtherance of their duties, if necessary.
The Board is responsible for establishing strategic directions and setting
objectives for the Company and making significant investment decisions and
monitoring the performance of the Group. The management is responsible for the
day to day running of the Group¡¯s operations.
The Board recognises the importance of a healthy corporate culture and its
impact on the performance and reputation of the Group. As a small organisation
with a stable workforce, the Group has identified and implemented a number of
measures, including the monitoring and review of cultural metrics and
workplace behaviours as well as the gathering and collection of employee
engagement feedback. The Board from time to time discusses the outcomes of
these measures to ensure that the Group¡¯s corporate culture is aligned with
its core values and objectives.
The Board also recognises the importance of the contribution of the workforce
of the Group. In this connection, an incentive program, including the Bonus
Scheme, details of which are set out on page 12, and the Option Scheme,
details of which are set out in note 25 to the consolidated financial
statements on pages 68 to 69, has been put in place. In addition, the
Group¡¯s approach to incentivising its workforce extends beyond financial
rewards. Embracing the evolving trends of the workplace, the Group offers
flexible working arrangements. This initiative supports work-life balance and
has improved employee satisfaction. Remote work, flexible working hours and
compressed workweeks allow staff members to tailor work schedules to fit their
personal needs.
At the end of the period under review, the Company had not met the gender
diversity targets of having (i) at least 40% of the individuals on the Board
to be women; and (ii) at least one of the senior positions, including the
chair, the chief executive, the senior independent director, or the chief
financial officer, on the Board to be held by a woman. On the other hand,
three members of the Board were Asian/Asian British.
Given the Group¡¯s small-scale operations which have yet to achieve a track
record of consistent profitability, the Group has encountered difficulties in
meeting the gender diversity targets as woman candidates with appropriate
experience and qualifications to fill board positions are highly sought-after.
DIRECTORS¡¯ REPORT (CONTINUED)
Since the end of the period under review, there have been no changes to the
Board that have affected the Company's ability to meet the gender diversity
targets.
Table for reporting on gender identity or sex
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Number in executive management Percentage of executive management
Men 6 100 100 2 100
Women 0 0 0 0 0
Not specified / prefer not to say 0 0 0 0 0
Table for reporting on ethnic background
Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Number in executive management Percentage of executive management
White British or other White (including minority-white groups) 3 50 1 0 0
Mixed/Multiple Ethnic Groups 0 0 0 0 0
Asian/Asian British 3 50 0 2 100
Black/African/Caribbean/Black British 0 0 0 0 0
Other ethnic group, including Arab 0 0 0 0 0
Not specified/ prefer not to say 0 0 0 0 0
Board and executive management diversity data was collected directly from the
directors and the executive management through voluntary self-disclosures of
their gender and ethnicity and was only used for the purposes of preparing the
information required to be disclosed under LR 9.8.6 R(9)
(https://www.handbook.fca.org.uk/handbook/LR/9/8.html#D129064) and (10)
(https://www.handbook.fca.org.uk/handbook/LR/9/8.html#D129065) of the Listing
Rules of the Financial Conduct Authority in the United Kingdom.
BOARD MEETING
The Board held four meetings during the year under review and the table below
gives the attendance record.
DIRECTORS¡¯ REPORT (CONTINUED)
Director Board Meeting
Alastair Gunn-Forbes 3/4
Henry Ying Chew Cheong 4/4
Ernest Chiu Shun She 4/4
Mark Chung Fong 4/4
Martyn Stuart Wells 4/4
Stephen Lister d¡¯Anyers Willis 4/4
Although the Board notes the requirement for a Nomination Committee (Provision
17 of the Code) to make recommendations to the Board on all new board
appointments and to reassure shareholders of the suitability of a chosen
director, the Board considers that, due to its small size and limited level of
activities, it is not necessary to establish such a committee. The Board as a
whole remains responsible for ensuring that a transparent, formal and rigorous
process would be followed for any future board appointments, which would be
made following a full review of the Board¡¯s balance of skills, experience,
independence and knowledge. The Board is satisfied that appropriate succession
planning is in place for appointments to both the Board and senior management.
Again, due to its small size and limited level of activities, the Board has
not appointed a senior independent director and did not consider an annual
self-evaluation to be required during the year under review. The
responsibilities normally rested with a senior independent director have been
reverted to the Board as a whole. These decisions will be re-considered
annually by the Board.
The Board established both an Audit Committee and a Remuneration Committee
upon the re-activation of the Group¡¯s business in 2013. Details of these
committees are set out below.
AUDIT COMMITTEE
The Audit Committee held two meetings during the year under review and the
table below gives the attendance record.
Director Audit Committee Meeting
Mark Chung Fong 2/2
Martyn Stuart Wells 2/2
Stephen Lister d¡¯Anyers Willis 2/2
The Audit Committee is chaired by Mr Mark Chung Fong and its other current
members are Messrs Martyn Stuart Wells and Stephen Lister d¡¯Anyers Willis.
The Audit Committee is appointed by the Board and the committee¡¯s
membership is comprised wholly of non-executive directors.
The terms of reference of the Audit Committee (copies of which are available
at the Company¡¯s registered office and the Company¡¯s website) generally
follow, where applicable, those stated in the provisions of the Code.
The Audit Committee meets a minimum of two times a year and may be convened at
other times if required. The responsibilities of the Audit Committee include,
among others, the examination and review of the Group¡¯s risk management,
internal financial controls and financial and accounting policies and
practices, as well as overseeing and reviewing the work of the Company¡¯s
external auditor, their independence and the fees paid to them.
The Audit Committee has a formal process in place to assess the independence
and effectiveness of the external audit. This process includes an evaluation
of the Company¡¯s external auditor's compliance with relevant ethical and
independence guidelines, the robustness of their audit plan and the
thoroughness of their audit report. In assessing independence, the Audit
Committee also considers the tenure of the Company¡¯s external auditor and
their lead audit partner. In addition, feedback from the management involved
in the audit is solicited to gauge the effectiveness and impartiality of the
external audit process.
DIRECTORS¡¯ REPORT (CONTINUED)
During the year under review, the activities undertaken by the Audit Committee
in discharge of its duties and functions included (i) the review and
recommendation to the Board of the reappointment of BDO Limited as the
Company¡¯s external auditor; (ii) the review and recommendation to the Board
for approval of the annual report of the Company and the consolidated
financial statements of the Company and its subsidiaries for the year ended 31
December 2022; and (iii) the review and recommendation to the Board for
approval of the interim report of the Company and the unaudited consolidated
financial statements of the Company and its subsidiaries for the six months
ended 30 June 2023. In recommending the reappointment of BDO Limited, the
Audit Committee has taken into consideration, among others, BDO Limited¡¯s
independence, objectivity and terms of engagement.
Subsequent to the year end, the activities that have been undertaken by the
Audit Committee in relation to 2023 included (i) the review and recommendation
to the Board of the annual report of the Company and the consolidated
financial statements of the Company and its subsidiaries for the year ended 31
December 2023; (ii) the monitoring of the effectiveness of the Group¡¯s risk
management and internal financial controls; and (iii) the assessment of the
effectiveness of the external audit process through feedback from the
management involved in the audit and through interactions with and
observations and review of the level of audit services provided.
As the scale of the operations of the Group remains relatively insubstantial,
the Board has decided and the Audit Committee concurs that it would not be
necessary or cost-effective to set up an internal audit function. In the
absence of an internal audit function, internal assurance is achieved through
the implementation of systems of internal controls and risk management,
details of which are set out in the section headed ¡°Internal Control, Risk
Management and Financial Reporting¡± on page 15. These control measures are
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements. The Audit
Committee also reviews both internal assurance and external audit findings to
ensure a cohesive approach to financial integrity and risk management.
In connection with the review of the consolidated financial statements of the
Company and its subsidiaries for the year ended 31 December 2023, the Audit
Committee has identified and reviewed two issues which it considered
significant and details on these matters are set out in the table below.
Significant Reporting Issue Review and Assessment
Impairment review of the Group¡¯s interests in respect of its 50% owned The Audit Committee has (i) reviewed the operational and financial performance
joint venture, Oasis Education - At 31 December 2023, the Group had an equity and the latest development of Oasis Education and its subsidiary; and (ii)
interest of US$61,000 in and an amount of US$257,000 due from Oasis Education. assessed the assumptions underlying the cash flow projection for Oasis
These carrying amounts were significant in the Group¡¯s context and their Education and its subsidiary as well as the reliability of such projection by
valuations were subject to judgements, estimation uncertainties and comparing relevant historic budgets with actual results.
assumptions.
Valuation of investments classified as financial assets at fair value through The Audit Committee has (i) reviewed the operational and financial performance
profit or loss (¡°FVTPL¡±) categorised within level 3 of the fair value and the latest development of the financial assets at FVTPL categorised within
hierarchy - At 31 December 2023, the Group had interests in the ICBC Shipping level 3 of the fair value hierarchy.
Fund, Animoca, ByteDance and Seyond, all of which were accounted for as
financial assets at FVTPL categorised within the level 3 of the fair value
hierarchy, totalling US$3,734,000 and carried at fair value. These carrying
amounts were significant in the Group¡¯s context and their valuations were
subject to judgements, estimation uncertainties and assumptions.
DIRECTORS¡¯ REPORT (CONTINUED)
BDO Limited was appointed as the external auditor of the Company in February
2015, since when audit services have not been tendered competitively. The
Audit Committee has concluded that a competitive tender of audit services is
not necessary at this time, but acknowledges that circumstances could arise
where a competitive tender for audit services may be desirable. The
performance of BDO Limited as the Company¡¯s external auditor will be kept
under annual review, and if satisfactory, BDO Limited will be recommended by
the Audit Committee for reappointment. There are, however, no contractual
obligations that would restrict the Audit Committee¡¯s choice of external
auditor for the Company.
As advised by the Audit Committee and concurred with by the Board, the annual
report of the Company and the audited consolidated financial statements for
the year ended 31 December 2023, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Group¡¯s position and performance, business model and strategy.
REMUNERATION COMMITTEE
In accordance with Provision 32 of the Code, the Company has set up a
Remuneration Committee. The Remuneration Committee held one meeting during the
year under review and the table below gives the attendance record.
Director Remuneration Committee Meeting
Martyn Stuart Wells 1/1
Alastair Gunn-Forbes 1/1
Mark Chung Fong 1/1
Stephen Lister d¡¯Anyers Willis 1/1
The Remuneration Committee is chaired by Mr Martyn Stuart Wells and its other
current members are Messrs Alastair Gunn-Forbes, Mark Chung Fong and Stephen
Lister d¡¯Anyers Willis. The Remuneration Committee is appointed by the
Board and the committee¡¯s membership is comprised wholly of non-executive
directors.
The terms of reference of the Remuneration Committee (copies of which are
available at the Company¡¯s registered office and the Company¡¯s website)
generally follow, where applicable, those stated in the provisions of the
Code. They provide for the Remuneration Committee to meet at least two times a
year. However, as the Group has a very small and stable workforce, the
Remuneration Committee did not consider it meaningful or necessary to hold
more than one meeting during the year under review.
The Remuneration Committee¡¯s responsibilities include, among others, the
evaluation of the performance of the executive directors and senior staff, and
the comparison of the Group¡¯s remuneration policy with similar
organisations in the market to form the basis for the recommendations to the
Board to determine the remuneration packages, which may include the grant of
share options under the Option Scheme and the grant of bonuses under the Bonus
Scheme, for individual staff and director members.
In accordance with the Main Principle of Provision Q of the Code, no director
has been involved in deciding his own remuneration.
DIRECTORS¡¯ REPORT (CONTINUED)
During the year under review, the activities undertaken by the Remuneration
Committee in discharge of its duties and functions included (i) the review of
and recommendation to the Board to retain the Group¡¯s existing remuneration
arrangements; and (ii) the recommendation to the Board not to award any bonus
or grant any share options (other than the 350,000 share options granted to
Mr. Wills in accordance with the approval of the Board resolution dated 20
February 2023) following a review of the financial performance and position of
the Group. In reviewing the Group¡¯s existing remuneration arrangements, the
Remuneration Committee noted the policy and structure of the remuneration for
the executive directors encompassing a low level of director¡¯s fee enhanced
by the entitlements to participate in the Bonus Scheme and the Option Scheme
which, in the opinion of the Remuneration Committee, was appropriate given
that the Group had yet to achieve consistent profitability.
WORLDSEC EMPLOYEE SHARE OPTION SCHEME 1997
The following table discloses the movements of the outstanding share options
under the Option Scheme during the year under review.
Number of options
Grantee Exercisable period Balance at 1 January 2023 Granted during the year Exercised during Forfeited during the year Lapsed during the year Balance at 31 December 2023 Exercise price per share
the year (US$)
Directors 20 August 2023 to 19 February
2033
- 350,000 - - - 350,000 0.034
29 November 2019 to 28 May 2029
1,750,000 - - - - 1,750,000 0.034
1 June 2016 to 30 November 2025
2,500,000 - - - - 2,500,000 0.122
Employees 29 November 2019 to 28 May 2029
300,000 - - - - 300,000 0.034
1 June 2016 to 30 November 2025
450,000 - - - - 450,000 0.122
5,000,000 350,000 - - - 5,350,000
On 20 February 2023, the Company granted 350,000 share options to Mr. Willis
to subscribe on a one for one basis new ordinary shares of US$0.001 each in
the Company at an exercise price of US$0.034 per share under the Option
Scheme. The share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
DIRECTORS¡¯ REPORT (CONTINUED)
Further details relating to the granting of the share options are set out in
note 25 to the consolidated financial statements on pages 68 to 69.
RELATION WITH SHAREHOLDERS
Communication with shareholders is given high priority. Information about the
Group¡¯s activities is provided in the annual report and the interim report
of the Company which are sent to shareholders each year and are available on
the website of the Company. All shareholders are encouraged to attend the
Annual General Meeting at which directors are available for questions.
Enquiries are dealt with in an informative and timely manner. Directors,
including non-executive directors, are also available to meet with major
shareholders on request.
EXTERNAL AUDITOR
The consolidated financial statements of the Company and its subsidiaries for
the year ended 31 December 2023 have been audited by BDO Limited.
A resolution will be submitted to the next Annual General Meeting to reappoint
BDO Limited as the Company¡¯s external auditor.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
30 April 2024
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 2023, 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 25 include a fair review of the development
and performance of the business and the position of the Compan
(https://www.handbook.fca.org.uk/handbook/glossary/G627.html) y 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
30 April 2024
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 31 to 71, which comprise the consolidated statement of financial
position as at 31 December 2023, 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 material
accounting policy information.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Group as at 31
December 2023, and its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board (¡°IFRS
Accounting Standards¡±) and 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$61,000 as at 31 December 2023 and the Group¡¯s share of
its losses amounted to approximately US$3,000 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 2023, 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 2023, 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$3,734,000.
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 and fair presentation of
these consolidated financial statements in accordance with IFRS Accounting
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, 30 April 2024
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
2023
Year ended 31 December
Notes 2023 2022
US$¡¯000 US$¡¯000
Revenue 7 112 193
Other income, gains and losses, net 9 521 (428)
Staff costs 10 (286) (277)
Other expenses (283) (325)
Finance costs 11 (3) (4)
Share of losses of a joint venture 17 (3) (2)
Profit/(loss) before income tax expense 12 58 (843)
Income tax expense 13 - -
Profit/(loss) for the year 58 (843)
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to
profit or loss:
Share of other comprehensive income of a
joint venture 17 (7) (27)
Other comprehensive income for the year,
net of income tax (7) (27)
Total comprehensive income for the year 51 (870)
Profit/(loss) for the year attributable to:
Owners of the Company 58 (843)
Total comprehensive income for the year
attributable to:
Owners of the Company 51 (870)
Earnings/(loss) per share - basic and diluted 14 US 0.07 cent US (0.99) cent
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Notes 2023 2022
US$¡¯000 US$¡¯000
Non-current assets
Property, plant and equipment 16 - -
Interest in a joint venture 17 61 71
Financial assets at fair value through profit or loss
18 3,764 4,409
Right-of-use assets 19 113 48
3,938 4,528
Current assets
Other receivables 247 223
Deposits and prepayments 26 26
Financial assets at fair value through profit or loss
18 190 97
Amount due from a joint venture 17 257 257
Cash and cash equivalents 21 1,122 526
1,842 1,129
Current liabilities
Other payables and accruals 22 157 160
Lease liabilities 19 70 55
227 215
Net current assets 1,615 914
Non-current liability
Lease liabilities 19 55 -
Net assets 5,498 5,442
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
Notes 2023 2022
US$¡¯000 US$¡¯000
Capital and reserves
Share capital 23 85 85
Reserves 24 5,413 5,357
Total equity 5,498 5,442
The consolidated financial statements on pages 31 to 71 were approved and
authorised for issue by the Board of Directors on 30 April 2024 and signed on
its behalf by:
Alastair Gunn-Forbes Henry Ying Chew Cheong
Director Director
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF changes in equity
FOR THE YEAR ENDED 31 DECEMBER
2023
Equity attributable to owners of the Company
Foreign
Contri- Share currency
Share Share buted option translation Special Accumulated
capital premium surplus reserve reserve reserve losses Total
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
(note 23) (note 24) (note 24) (note 24) (note 24) (note 24) (note 24)
Balance at 1 January 2022 85 7,524 9,646 249 (6) 625 (11,811) 6,312
Loss for the year - - - - - - (843) (843)
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17) - - - - (27) - - (27)
Total comprehensive - - - - (27) - (843) (870)
income for the year
Balance as at 31 December 2022 and 1 January 2023 85 7,524 9,646 249 (33) 625 (12,654) 5,442
Profit for the year - - - - - - 58 58
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17)
- - (7)
- - (7) - -
Total comprehensive
income for the year - - - - (7) - 58 51
- - - 5 - - - 5
Recognition of share-based
payments (note 25)
Balance at 31 December 2023 85 9,646 625 (12,596) 5,498
7,524 254 (40)
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
2023
Year ended 31 December
2023 2022
US$¡®000 US$¡®000
Cash flows from operating activities
Profit/(loss) before income tax expense 58 (843)
Adjustments for:
Bank interest income (7) (1)
Depreciation of right-of-use assets 65 63
Interest on lease liabilities 3 4
Share of losses of a joint venture 3 2
Share option expenses 5 -
Net realised and unrealised (gains)/losses on financial assets at fair value
through profit or loss
(517) 444
Operating loss before working capital changes (390) (331)
Increase in other receivables (24) (109)
Decrease in other payables and accruals (3) (3)
Net cash used in operating activities (417) (443)
Cash flows from investing activities
Investment in financial assets at fair value through
profit or loss (170) (1,188)
Proceeds from disposal of financial assets at fair value through profit or
loss
1,239 711
Bank interest income received 7 1
Net cash generated from/(used in) investing activities 1,076 (476)
Cash flows from financing activities
Repayment of principal portion of lease liabilities (60) (64)
Repayment of interest portion of lease liabilities (3) (4)
Net cash used in financing activities (63) (68)
Net increase/(decrease) in cash and cash equivalents 596 (987)
Cash and cash equivalents at the beginning of the year 526 1,513
Cash and cash equivalents at the end of the year 1,122 526
The accompanying notes form an integral part of these consolidated financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
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, 308 Central
Des Voeux, 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 ¡°IFRS Accounting Standards¡±).
2. APPLICATION OF NEW AND REVISED IFRS ACCOUNTING STANDARDS
2.1 New and revised IFRS Accounting Standards applied
The following amendments to IFRS Accounting Standards relevant to the
Group¡¯s accounting policies have been applied by the Group in the current
year.
Amendments to IAS 1 and Disclosure of Accounting Policies
IFRS Practice Statement 2
Amendments to IAS 8 Definition of Accounting Estimates
The application of the amendments to IFRS Accounting Standards in the current
year has had no material impact on the Group¡¯s performance and financial
positions for the current and prior years and/or on the disclosures in the
consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
2. APPLICATION OF NEW AND REVISED IFRS ACCOUNTING STANDARDS (CONTINUED)
2.2 New and revised IFRS Accounting Standards in issue but not yet
effective
The Group has not applied the following new and revised IFRS Accounting
Standards, potentially relevant to the Group¡¯s financial statements, that
have been issued but are not yet effective. Certain new or revised IFRS
Accounting Standards have yet been endorsed by the EU.
Amendments to IAS 1 Classification of Liabilities as Current or Non-Current(1)
Amendments to IAS 1 Non-current Liabilities with Covenants(1)
(1) Effective for annual periods beginning on or after 1 January 2024
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 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 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, Non-current Liabilities with Covenants
This update relates to the publication of Non-current Liabilities with
Covenants (Amendments to IAS 1 ¡°Presentation of Financial Statements¡±)
(¡°2022 Amendments¡±). The 2022 Amendments deal with the classification of
long-term loan arrangements with covenants by specifying that covenants to be
complied with after the reporting date do not affect the classification of
loan arrangements as current or non-current at the reporting date. Instead,
companies are required to disclose information about these covenants in the
notes to the financial statements.
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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION
Statement of compliance
The consolidated financial statements of the Group have been prepared in
accordance with all applicable IFRS Accounting Standards.
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
FOR THE YEAR ENDED 31 DECEMBER 2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER 2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER 2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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 liabilities (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
liabilities.
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 its 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER 2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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 profits.
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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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, i.e. 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 asset within the period generally
established by regulation or convention in the marketplace.
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, 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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED)
Financial instruments (Continued)
(i) Financial assets (Continued)
Equity instruments
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 the 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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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 the 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 Instruments.
Financial liabilities are derecognised when the obligations specified in the
relevant contract are discharged, cancelled or expire.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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
FOR THE YEAR ENDED 31 DECEMBER
2023
3. MATERIAL ACCOUNTING POLICY INFORMATION (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);
(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); or
(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
FOR THE YEAR ENDED 31 DECEMBER
2023
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
FOR THE YEAR ENDED 31 DECEMBER
2023
5. FINANCIAL instruments
(a) Categories of financial instruments
2023 2022
US$¡¯000 US$¡¯000
Financial assets
Financial assets at FVTPL 3,954 4,506
Financial assets at amortised cost 1,652 1,031
5,606 5,537
Financial liabilities
Financial liabilities at amortised cost 282 215
(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 market price of
the investments.
There has been no change to the Group¡¯s exposure to market risks or the
manner in which these risks are managed and measured.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
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.
Foreign currency risk arises primarily from volatility in the 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
2023 2022 2023 2022
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
GBP 87 72 1 1
The following table details the Group¡¯s sensitivity to a 10% (2022: 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% (2022:
10%) change in the relevant foreign currency rate. A positive number below
indicates an increase in profit or a decrease in loss for the year and a
decrease in accumulated losses had USD strengthened 10% (2022: 10%) against
the relevant foreign currency. For a 10% (2022: 10%) weakening of USD against
the relevant foreign currency, there would have been an equal and opposite
impact on profit or loss for the year and on accumulated losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk (Continued)
2023 2022
US$¡¯000 US$¡¯000
Change in post-tax profit or loss for the year
GBP/USD appreciated by 10% (USD depreciated) (9) (7)
GBP/USD depreciated by 10% (USD appreciated) 9 7
(ii) Interest rate risk
The Group¡¯s exposure to changes in interest rates is mainly attributable to
its bank deposits at variable interest rates. Bank deposits at variable rates
expose the Group to cash flow interest rate risk.
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% (2022: 5%) higher/lower, profit for
the year would have increased/decreased by approximately US$11,000 (2022: loss
for the year would have decreased/increased by approximately US$23,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
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 the failures 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 2023, approximately 100% (2022: 100%) 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 2023 and 31 December 2022. Thus, no loss allowance was recognised
as at 31 December 2023 and 31 December 2022.
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
FOR THE YEAR ENDED 31 DECEMBER
2023
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.
Total contractual undiscounted cash flows
More than 1 year but less than 5 years
Within 1 year or on demand Carrying amount
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
As at 31 December 2023
Other payables and accruals 157 - 157 157
Lease liabilities 75 56 131 125
232 56 288 282
Total contractual undiscounted cash flows
More than 1 year but less than 5 years
Within 1 year or on demand Carrying amount
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
As at 31 December 2022
Other payables and accruals 160 - 160 160
Lease liabilities 56 - 56 55
216 - 216 215
(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
FOR THE YEAR ENDED 31 DECEMBER
2023
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 and
other payables and accruals.
Due to their short-term nature, the carrying value of cash and cash
equivalents, other receivables, deposits, amount due from a joint venture and
other payables and accruals 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 investments in the ICBC Specialised
Ship Leasing Investment Fund and VS SPC Limited were estimated with reference
to their net asset value which was a significant unobservable input. The Group
has determined that the reported net asset value represents fair value at the
end of the report period.
The fair value of the Group¡¯s level 3 investments in the Homaer Asset
Management Master Fund SPC and the Hermitage Galaxy Fund SPC were estimated
using market approach with the significant inputs being the recent market
transaction prices of the underlying investment of the respective funds. The
Group has determined that the recent market transaction prices represent fair
value at the end of the reporting period.
There were no changes in these valuation techniques during the year ended 31
December 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
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:
2023
Level 1 Level 2 Level 3 Total
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
Listed investments 220 - - 220
Unlisted investments - - 3,734 3,734
220 - 3,734 3,954
2022
Level 1 Level 2 Level 3 Total
US$¡¯000 US$¡¯000 US$¡¯000 US$¡¯000
Listed investments 134 - - 134
Unlisted investments - - 4,372 4,372
134 - 4,372 4,506
Reconciliation for level 3 financial assets at FVTPL carried at fair value
based on significant unobservable inputs are as follows:
2023 2022
US$¡¯000 US$¡¯000
At 1 January 4,372 3,709
Purchases - 750
Disposal (326) -
Fair value adjustment (312) (87)
At 31 December 3,734 4,372
Fair value adjustment of financial assets at FVTPL was recognised in the line
item ¡®other income, gains and losses, net¡¯ on the face of the
consolidated statement of profit or loss and other comprehensive income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
6. CAPITAL RISK MANAGEMENT
The Group¡¯s objective of managing capital is to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure
to reduce cost of capital.
In order to maintain or adjust the capital structure, the Group may return
capital to shareholders, issue new shares or sell assets to reduce debts.
The capital structure of the Group consists only of equity attributable to
owners of the Company, comprising share capital and reserves.
The gearing ratio at the end of the reporting period was as follows:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Debt 282 215
Cash and cash equivalents (1,122) (526)
(840) (311)
Equity attributable to owners of the Company 5,498 5,442
Net debt to equity 0% 0%
7. REVENUE
The Group had no revenue from contracts with customers as defined under IFRS
15 Revenue from Contracts with Customers. An analysis of the Group¡¯s
revenue from other sources is as follows:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Dividend income from financial assets at FVTPL 112 193
8. SEGMENT Information
An operating segment is a component of the Group that is engaged in business
activities from which the Group may earn revenue and incur expenses, and is
identified on the basis of the internal management reporting information that
is provided to and regularly reviewed by the Group¡¯s chief operating
decision makers in order to allocate resources and assess performance of the
segment. For the years ended 31 December 2023 and 2022, the executive
directors, who were the chief operating decision makers for the purpose of
resource allocation and assessment of performance, have determined that the
Group had only one single business component/reportable segment as the Group
was only engaged in investment holding. The executive directors allocated
resources and assessed performance on an aggregated basis. Accordingly, no
segment information is presented.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
8. SEGMENT Information (CONTINUED)
The major operations and the revenue of the Group arise from Hong Kong. The
Board of Directors considers that most of the non-current assets (other than
the financial instruments) of the Group are located in Hong Kong.
9. OTHER INCOME, GAINS AND LOSSES, NET
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Bank interest income 7 1
Net realised and unrealised gains/(losses) on financial assets at FVTPL 517 (444)
Foreign exchange (loss)/gain, net (3) 6
Others - 9
521 (428)
10. STAFF COSTS
The aggregate staff costs (including directors¡¯
remuneration) of the Group were as follows:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Wages and salaries 274 270
Contributions to pension and provident fund 7 7
Share-based payment 5 -
286 277
Compensation of key management personnel (included in the above amounts) was
as follows:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Directors¡¯ fees 76 72
Share-based payment 5 -
81 72
11. FINANCE COSTS
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Interest on lease liabilities 3 4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
12. PROFIT/(LOSS) BEFORE INCOME TAX EXPENSE
Profit/(Loss) before income tax expense has been arrived at
after charging:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Auditor¡¯s remuneration 55 53
Depreciation of right-of-use assets 65 63
13. INCOME TAX EXPENSE
No provision for income tax has been made as the Group
did not generate any assessable profits that were subject to United Kingdom
Corporation Tax, Hong Kong Profits Tax or taxes in other jurisdictions.
The tax charge for 2023 and 2022 can be reconciled to the profit/(loss) before
income tax expense per the consolidated statement of profit or loss and other
comprehensive income as follows:
Year ended 31 December
2023 2022
US$¡¯000 US$¡¯000
Profit/(loss) before income tax expense 58 (843)
Profit/(loss) before tax calculated at Hong Kong Profits Tax rate of 16.5%
(2021: 16.5%)
9 (139)
Tax effect of non-deductible expenses 111 110
Tax effect of non-taxable income (170) (34)
Tax effect of estimated tax losses not recognised 50 63
Tax charge for the year - -
As at 31 December 2023, the Group had estimated tax losses arising in Hong
Kong of approximately US$1,864,000 (2022: US$1,562,000) that can be carried
forward indefinitely under Hong Kong tax law. 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 other deductible temporary differences of approximately US$41,000
(2022: US$44,000) as it is not probable that taxable profits will be available
against which the deductible temporary differences can be utilised. The
deductible temporary differences can be carried forward indefinitely.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
14. EARNINGS/(LOSS) PER SHARE
The earnings/(loss) and weighted average number of ordinary shares used in the
calculation of basic and diluted earnings/(loss) per share were as follows.
Year ended 31 December
2023 2022
Earnings/(loss) for the year attributable to owners of 58 (843)
the Company (US$¡¯000)
( )
Number of shares ( )
Weighted average number of ordinary shares for the purposes of basic and 85,101,870 85,101,870
diluted earnings/(loss) per share
( )
Earnings/(loss) per share - basic and diluted US0.07 cent US(0.99) cent
Diluted earnings/(loss) per share was the same as basic earnings/(loss) per
share for the years ended 31 December 2023 and 2022 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 2023, nor
has any dividend been proposed since the end of the reporting period (2022:
nil).
16. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
US$¡¯000
Cost
At 1 January 2022, 1 January 2023 and 31 December 2023 69
Accumulated depreciation
At 1 January 2022, 1 January 2023 and 31 December 2023 69
Carrying amount
At 31 December 2022 -
At 31 December 2023 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
17. INTEREST IN A JOINT VENTURE
2023 2022
US$¡¯000 US$¡¯000
Unlisted investment, at cost 257 257
Accumulated share of post-acquisition losses of the joint venture (156) (153)
Accumulated share of post-acquisition other comprehensive income of the joint
venture
(40) (33)
Share of net assets of the joint venture 61 71
Amount due from the joint venture 257 257
The amount due from the joint venture was unsecured,
interest-free and repayable on demand.
On 12 December 2014, the Group entered into a subscription agreement with an
independent third party and Oasis Education Group Limited (¡°Oasis
Education¡±) pursuant to which the Group made an investment by way of
capital contribution and shareholder¡¯s loan, for a 50% interest in Oasis
Education.
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 Joint Arrangements, this joint arrangement was
classified as a joint venture and has been included in the consolidated
financial statements using the equity method.
Details of the joint venture were as follows:
Name Country of incorporation and operation Paid-up registered Principal activities
Proportion of ownership interest Capital
Direct Indirect
Oasis Education Group Limited Hong Kong 50% - HK$4,000,000 Investment holding
奧偉詩½ÌÓý¼¯團ÓÐÏÞ¹«Ë¾
奧偉詩½ÌÓý×É詢(ÉîÛÚ)ÓÐÏÞ¹«Ë¾ The People¡¯s - 50% HK$5,000,000 Provision of education consulting and support services to kindergartens in the
PRC
Republic
of China
(the ¡°PRC¡±)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
17. INTEREST IN A JOINT VENTURE (CONTINUED)
The aggregate amounts related to the joint venture that have been included in
the consolidated financial statements of the Group as extracted from the
financial statements of the joint venture, adjusted to reflect adjustments
made by the Group when applying the equity method of accounting, are set out
below:
2023 2022
Results of the joint venture for the year US$¡¯000 US$¡¯000
Revenue - -
Other income - -
Expenses (6) (3)
Loss for the year (6) (3)
Other comprehensive income for the year (15) (55)
Total comprehensive income for the year (21) (58)
Share of losses of the joint venture for the year (3) (2)
Share of other comprehensive income of the
joint venture for the year (7) (27)
Accumulated share of results of the joint venture (156) (153)
Assets and liabilities of the joint venture at 31 December
2023 2022
US$¡¯000 US$¡¯000
Non-current assets - -
Current assets 715 738
Non-current liabilities - -
Current liabilities (594) (596)
Net assets 121 142
Included in the above amounts were:
Cash and cash equivalents 171 90
Depreciation and amortisation - -
Interest income - -
Interest expenses - -
Current financial liabilities (excluding trade and other payables) 594 596
Percentage of equity interest attributable to the Group 50% 50%
Share of net assets of the joint venture 61 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2023 2022
US$¡¯000 US$¡¯000
Financial assets at FVTPL
Listed investments, at fair value 220 134
Unlisted investments, at fair value 3,734 4,372
3,954 4,506
Less: Current portion (190) (97)
Non-current portion 3,764 4,409
19. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leased an office premise with a lease term of 2 years at a fixed
rate. The weighted average lessee¡¯s incremental borrowing rate applied to
lease liabilities recognised in the consolidated statement of financial
position was 5%. The carrying amounts of the Group¡¯s right-of-use assets
and lease liabilities were as follows:
Office premises
Right-of-use assets Lease liabilities
US$¡¯000 US$¡¯000
As at 1 January 2022 111 119
Lease payments - (68)
Depreciation charge (63) -
Interest expenses - 4
As at 31 December 2022 48 55
Lease modification 130 130
Lease payments - (63)
Depreciation charge (65) ) -
Interest expenses - 3
As at 31 December 2023 113 125
Future lease payments are due as follows:
Minimum lease Present
As at 31 December 2023 payments Interest value
US$¡¯000 US$¡¯000 US$¡¯000
Not later than one year 75 (5) 70
Later than one year and not later than five years
56 (1) 55
131 (6) 125
Minimum lease Present
As at 31 December 2022 payments Interest value
US$¡¯000 US$¡¯000 US$¡¯000
Not later than one year 56 (1) 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
20. SUBSIDIARIES
Details of the subsidiaries of the Company were as follows:
Name Country of incorporation Principal activities
Proportion of ownership interest Proportion of voting power held
2023 2022 2023 2022
Worldsec Financial Services Limited The British 100% 100% 100% 100% Investment
Virgin holding
Islands
Worldsec Corporate Finance Limited The British 100%* 100%* 100%* 100%* Inactive
Virgin
Islands
Worldsec Investment (Hong Kong) Limited Hong Kong 100%* 100%* 100%* 100%* Investment
holding
Worldsec Investment (China) Limited
The British 100%* 100%* 100%* 100%* Investment
Virgin holding
Islands
* Indirectly held subsidiaries
21. CASH AND CASH EQUIVALENTS
2023 2022
US$¡¯000 US$¡¯000
Bank balances 480 525
Cash balances 1 1
Time deposits with original maturity within three months 641 -
1,122 526
Bank balances bore interest at the then prevailing market
rates ranging from 0.001% to 0.01% (2022: 0.001% to 0.01%) per annum and had
original maturities of three months or less. Time deposits bore interest
ranging from 4.5% to 5% (2022: nil) per annum and had original maturities
within three months.
22. OTHER PAYABLES AND ACCRUALS
2023 2022
US$¡¯000 US$¡¯000
Other payables and accruals 157 160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
23. SHARE CAPITAL
Number of Total
shares US$¡¯000
Authorised:
Ordinary shares of US$0.001 each
At 1 January 2022, 1 January 2023 and 31 December 2023
60,000,000,000 60,000
Called up, issued and fully paid:
Ordinary shares of US$0.001 each
At 1 January 2022, 1 January 2023 and 31 December 2023
85,101,870 85
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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 on a one for one basis new ordinary
shares of US$0.001 each in the share capital of the Company under the Worldsec
Employee Share Option Scheme 1997 (the ¡°Option Scheme¡±) which was
revised on 24 September 2014. The share options vested six months from the
date of grant and were then exercisable within a period of 9.5 years.
On 29 May 2019, the Company granted to certain eligible persons a total of
2,050,000 share options to subscribe on a one for one basis new ordinary
shares of US$0.001 each in the share capital of the Company under the Option
Scheme. The share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
On 20 February 2023, the Company granted 350,000 share options to a director
to subscribe on a one for one basis new ordinary shares of US$0.001 each in
the Company at an exercise price of US$0.034 per share under the Option
Scheme. The share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
The following table discloses the movements of the outstanding share options
under the Option Scheme during the years ended 31 December 2023 and 2022.
Number of options
Grantee Exercisable period Balance at Granted during the year Exercised during the Forfeited during the year Lapsed during the year Balance at Exercise price per share
1 January 2023 year 31 December 2023 (US$)
Directors 20 August
2023 to 19 February 2033 - 350,000 - - - 350,000 0.034
29 November 2019 to 28 May 2029
1 June 2016 to 30 November 2025 1,750,000 - - - - 1,750,000 0.034
2,500,000 - - - - 2,500,000 0.122
Employees 29 November - - - 300,000 0.034
2019 to 28
May 2029 300,000 -
1 June 2016 to 30 November 2025 - - - 450,000 0.122
450,000 -
5,000,000 350,000 - - - 5,350,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
25. SHARE-BASED PAYMENTS (CONTINUED)
Number of options
Grantee Exercisable period Balance at 1 January 2022 Granted during the year Exercised during Forfeited during the year Lapsed during the year Balance at Exercise price per share
the year 31 December 2022 (US$)
Directors 29 November
2019 to 28 May 2029
1,750,000 - - - - 1,750,000 0.034
1 June 2016 to 30 November 2025
2,500,000 - - - - 2,500,000 0.122
Employees 29 November - - - 300,000 0.034
2019 to 28
May 2029 300,000 -
1 June 2016 to 30 November 2025 - - - 450,000 0.122
450,000 -
5,000,000 - - - - 5,000,000
The share-based payment expenses of US$5,000 were charged to profit or loss
account of the Group during the year ended 31 December 2023 (2022: nil).
Of the total number of share options outstanding at the end of the year, all
(2022: all) had vested and were exercisable at the end of the year.
No share option was exercised during the years ended 31 December 2023 and
2022.
The weighted average remaining contractual life for the share options
outstanding at the end of the reporting period was 3.7 years (2022: 4.4 years)
The following information is relevant in the determination of the fair value
of options granted during the year under the Option Scheme.
Option pricing model used Black Scholes
Share price at grant date US2.55 cents
Exercise price US$0.034
Expected volatility 100.588%
Risk-free rate 3.469%
Expected dividend yield 0%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
26. RELATED PARTY TRANSACTIONS
Other than the compensation of key management personnel as disclosed below,
the Group did not have any related party transactions during the years ended
31 December 2023 and 2022.
Compensation of key management personnel
Key management personnel are the directors only. The remuneration of directors
is set out in note 10 to the consolidated financial statements.
27.
CONTINGENT LIABILITIES
The Group had no material contingent liabilities at 31
December 2023 (2022: nil).
28. NOTES SUPPORTING STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents comprise:
2023 2022
US$¡¯000 US$¡¯000
Cash available on demand 1,122 526
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
28. NOTES SUPPORTING STATEMENT OF CASH FLOWS (CONTINUED)
(b) Reconciliation of liabilities arising from financing activities:
Lease liabilities
(note 19)
US$¡¯000
At 1 January 2022 119
Changes from cash flows:
Repayment of principal portion of lease liabilities (64)
Repayment of interest portion of lease liabilities (4)
Total changes from financing cash flows (68)
Other changes:
Interest on lease liabilities 4
4
At 1 January 2023 55
Changes from cash flows:
Repayment of principal portion of lease liabilities (60)
Repayment of interest portion of lease liabilities (3)
Total changes from financing cash flows (63)
Other changes:
Interest on lease liabilities 3
Lease modification 130
133
At 31 December 2023 125
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 79
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 76
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 63
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 fundraising 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 72
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 79
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 69
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.
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