REG - Worldsec Limited - Annual Financial Report Year End 31 December 2022
27/04/2023 14:45
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RNS Number : 7478X Worldsec Limited 27 April 2023
WORLDSEC LIMITED
Annual Report for the year ended 31 December 2022
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, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda
Registered Office Address
Victoria Place, 5th 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, 5th 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
10th 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 (mailto:enquiry@worldsec.com)
Company's Website
http://www.worldsec.com (http://www.worldsec.com)
CONTENTS
Page
Chairman's statement 1
Directors' report 3
Statement of directors' responsibilities 22
Independent auditor's report 23
Consolidated statement of profit or loss and other comprehensive income 28
Consolidated statement of financial position 29
Consolidated statement of changes in equity 31
Consolidated statement of cash flows 32
Notes to the consolidated financial statements 33
Investment policy 69
Biographical notes of the directors 70
Chairman's Statement
RESULTS AND REVIEW
During the year ended 31 December 2022, the audited consolidated loss of
Worldsec Limited (the "Company") and its subsidiaries (together the "Group")
was US$843,000, compared with a profit of US$636,000 in 2021. Loss per share
was US0.99 cent (2021 earnings per share: US0.75 cent). Net asset value per
share was US6.4 cents (2021: US7.4 cents). Detailed discussion of the results
and financial position of the Group is set out in the directors' report on
pages 3 to 21.
As mentioned in the Company's 2022 Interim Report, the Group made two new
investments during the year under review consisting of:
- an investment through the subscription of the Class A Participating Shares
(the "VS Class A Shares") of VS SPC Limited ("VS SPC") established by LQ
Pacific Partners Limited, in VS SPC, the sole underlying investment asset of
which is an equity interest in Animoca Brands Corporation Limited ("Animoca").
The Animoca group is principally engaged in the development and publication of
and investment in a broad portfolio of products that includes blockchain
games; and
- an investment through the subscription of the Class A Participating Shares
(the "Hermitage Class A Shares") of the Hermitage Galaxy Fund SPC attributable
to the Hermitage Fund Twelve SP (the "Hermitage Fund Twelve") established by
Hermitage Capital HK Limited, in the Hermitage Fund Twelve, the sole
underlying investment asset of which is an equity interest in Innovusion
Holdings Ltd. ("Innovusion"). The Innovusion group is principally engaged in
the development of image-grade light detection and ranging ("LiDAR") sensor
systems for the autonomous vehicle and advance driver-assistance system
markets
With these new investments acquired during the year under review, the Group
has expanded its investment portfolio with an emphasis on the technology
sector with a view to capturing the growth opportunities that are expected to
arise in the digital era.
PROSPECTS
With the general achievement of the target goals of vaccination coverage in
major economies, coupled with the progressive development of herd immunity
around the world, the COVID-19 pandemic and the spread of the coronavirus are
widely considered to be under control. This has led to the uplifting of nearly
all lockdown measures. The disruptions caused by the COVID-19 pandemic will,
however, have a long-lasting impact on the global economy. In particular,
there has been an acceleration in digital transformation, which will have
far-reaching implications for productivity and workforce requirements. The
risks and vulnerabilities inherent in the global supply chain, blatantly
exposed during the COVID-19 pandemic, have also given rise to heightened
geopolitical tensions and protectionist and nationalistic sentiments in the
name of supply chain stability and security.
Notwithstanding the gradual subsiding of the COVID-19 pandemic, 2022 was a
difficult year for investors. Inflation surged to the highest level in decades
and the aggressive and unprecedented interest rate increases by governments in
major economies caused both equity and bond prices to experience double-digit
declines. The recent collapse of a few banks has also added pressure in the
banking and financial sector making the fight for inflation more difficult and
complicated. The continuing problems of the global supply chain, the rising
geopolitical tension between China and the West and the ongoing Russia-Ukraine
war mean that robust recovery for the world economy will remain elusive.
During the first quarter of 2023, private equity activities from seed to late
stage investments slowed across all sectors. Fundraising momentum carried from
2021 into 2022 has also softened even though dry powder held in the private
equity sector remained substantial. Valuations in general experienced
contractions for the first time in many years as cost of money rose. The value
of the investment portfolio of the Group has to a certain extent suffered
accordingly. The underlying assets of the Group's investments and investee
companies, which are mostly industrial or technology-based with products
largely aiming to embrace the quality of life of consumers in the digit era,
should in the long-term benefit from the economic development trending towards
digitalisation and internet of things. The Group will continue to explore
opportunities under the changing megatrends and will make progress in
expanding and refining its investment portfolio in accordance with the
Company'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 2022. 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
25 April 2023
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 2022.
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 loss of the Company and its subsidiaries for the year
ended 31 December 2022 was US$843,000, compared with a profit of US$636,000 in
2021. Loss per share was US0.99 cent (2021 earnings per share: US0.75 cent).
The loss was primarily due to the negative change in the fair value of the
Group's financial assets that was recognised through the profit and loss
account under International Financial Reporting Standard 9.
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$97,000.
As at 31 December 2022, the net assets of the Group amounted to US$5.4 million
(2021: US$6.3 million), equivalent to US6.4 cents per share (2021: US7.4
cents). Cash and cash equivalents declined to US$0.5 million from US$1.5
million a year ago, reflecting basically the use of cash resources in
operating and investment activities.
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 28, the consolidated statement of financial position on page 29 and notes
to the consolidated financial statements on pages 33 to 68.
The Board does not propose to declare any dividend for the year ended 31
December 2022 (2021: 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. In accordance with the Company's investment policy, a copy of
which is set out on page 69, 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.
As at the date of this report, the investment portfolio of the Group,
including the two new investments, VS SPC with the sole underlying investment
asset in an equity interest in Animoca and the Hermitage Fund Twelve with the
sole underlying investment asset in an equity interest in Innovusion, acquired
during the year under review, but excluding Agrios Global Holdings Ltd.
("Agrios") and ayondo Ltd. ("Ayondo"), the two investments that had previously
been completely written off by the Group, comprises a total of seven
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 through VS SPC
Through the VS Class 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 that uses gamification, blockchain and artificial
intelligence technologies to develop and publish a broad portfolio of products
that includes, notably amongst others, The Sandbox, a decentralised gaming
virtual world. Other key business units of the Animoca group consist of
Animoca Brands KK, GAMEE, nWay, Blowfish Studios, Grease Monkey Games, REVV
Motorsport, TOWER, Quidd, Lympo, and Forj, Pixowl, Helix Accelerator, Eden
Games, Life Beyond Studios, Notre Game, TinyTap, Be Media, PIXELYNX and WePlay
Media. Animoca is also an active investor in Web3 projects with a broad and
growing portfolio of over 380 investments that includes OpenSea, a leading
non-fungible token marketplace, Axie Infinity, a popular Pokemon-inspired
blockchain-based video game, and Dapper Labs, the developer of CryptoKitties
and NBA Top Shot.
Notwithstanding the crypto winter that saw the collapse of FTX, one of the
largest cryptocurrency exchange platforms, and the meltdown of Terra, one of
the largest stablecoin ecosystems, the Animoca group continues with its
business-building trajectory:
• Taking advantage of the market weakness, the Animoca group has acquired and
invested in a multitude of crypto and crypto-related entities. At the same
time, it has also established collaboration with various strategic parties to
further strengthen its presence in the Web3 space.
• The Animoca group has rolled out a series of non-fungible token ("NFT")
centric products. Of particular note is the introduction of Mocaverse as its
official profile picture ("FP") NFT collection. The Mocaverse NFT PFPs serve
as membership passes for Animoca's team members, investors, partners and
designated token holders and are designed to empower the connections across
the ecosystem of the Animoca group and the Web3 community. In the first two
days of trading on OpenSea, the Mocaverse NFT PFP sales reached 3,552 ethers
(US$5.5 million).
• To protect the interests of and to ensure the equitable distribution of value
to creators of NFTs, the Animoca group has launched a set of three
NFT licenses. These licences, governed by and construed in accordance with
the laws of the State of New York, United States, require the payment of
creator royalties as a condition for personal, commercial or unlimited use of
the NFTs. The protection of the rights of NFT creators is believed to be
essential for value creation in and hence the development of the NFT industry.
• The Animoca group, jointly with LayerZero, have launched the
LayerZero-Animoca Brands Hackerhouse global initiative to advance cross-chain
standards and interoperability of digital assets.
• The Sandbox, operated through a major subsidiary of Animoca that has been
ranked as one of the 2022 TIME100 Most Influential Companies, has attracted
more than 400 partners, including many high-profile and well-known names, to
join its metaverse. Over 170,000 virtual land parcels have been developed and
some 70% of these land parcels have been sold. The Sandbox is also planning to
introduce other location-based metaverses in Singapore, South Korea and
Turkey.
DIRECTORS' REPORT
(CONTINUED)
To cope with its business expansion, the Animoca group has appointed a number
of senior management personnel including the chief business officer to lead
mergers and acquisitions and business development, a co-chief operating
officer to take charge of business scaling and the chief financial officer to
oversee strategic financial planning.
The Animoca group, nonetheless, has not been immune to the crypto winter
chill. With the plummet in the prices of digital assets and the plunge in the
trading of NFTs, the financials of the Animoca group have inevitably been
negatively impacted. There has also been financing outlay associated with its
business expansion. However, the Animoca group remained financially robust
with a cash balance of US$214 million as of November 1 2022 according to an
open letter from the co-founder and executive chairman of Animoca. In fact,
despite the backdrop of the crypto winter, Animoca managed to hold multiple
successful fundraising events raising a total of $565 million and was the most
funded metaverse developer in 2022 as per Nasdaq Research.
As an active and key investor with a broad and growing portfolio of over 380
investments in the web3 space, Animoca has been recognised as one of the
winners in the Venture Capital category of the inaugural Fortune Crypto 40 in
2023. Being a major driving force behind the adoption of NFTs and the
metaverse, Animoca has also been selected by nft now as an honouree on the
NFT100 2023 List. On top of these honours in the crypto industry, the business
expansion efforts of the Animoca group have further been reflected by the rise
of the ranking of Animoca from #324 in 2022 to #16 in 2023 in the High-Growth
Companies Asia-Pacific report compiled by the Financial Times and Statista.
ByteDance through the Homaer Asset Management Master Fund SPC (the "Homaer
Fund")
The Group holds an investment in the Unicorn Equity Investment Portfolio Class
A Shares of the Homaer Fund, the sole underlying investment asset of which is
an equity interest in ByteDance Ltd. ("ByteDance").
ByteDance is an unlisted holding company of a technology group that operates a
series of mobile application platforms powered by artificial intelligence
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, amongst others, Douyin, Toutiao, TikTok, Xigua Video and Helo.
Notwithstanding the challenging environment under the continued pressure from
the regulatory authorities and the resurgence of new waves of the COVID-19
infections and hence the reimplementation of the restriction measures from
time to time in China, the ByteDance group managed to achieve strong growth in
financial performance in 2022. Revenue was widely reported to have soared by
over 30% year-on-year to more than US$80 billion on the back of increased
advertising income from Douyin and TikTok and earnings before interest, tax,
depreciation and amortisation to have surged by nearly 80% year-on-year to
US$25 billion surpassing for the first time those of Alibaba and Tencent.
Under the challenging environment, however, the ByteDance group implemented
significant cost cuts and terminated certain riskier ventures in the gaming,
education and venture investment sectors. Douyin and TikTok, on the other
hand, remain the jewels of the crown of the ByteDance group with lucrative
revenue streams.
Following the rebranding and reorganising of the individual shopfront format
of Douyin Shops to the marketplace approach of Douyin Mall, gross merchandise
value ("GMV") of the e-commerce business of Douyin was reported to have
increased by 76% year-on-year to US$208 billion in 2022. Local life services
have also been introduced in the mobile application platform, allowing users
to order food, buy sightseeing tickets, book hotels, participate in
parent-child activities and sporting and fitness events with the click of a
direct link.
DIRECTORS' REPORT
(CONTINUED)
GMV of the e-commerce business of TikTok in Southeast Asia was reported to
have increased four-fold year-on-year to US$4.4 billion in 2022. TikTok Shop,
the in-platform shopping feature of TikTok, has also been launched in the
United States and the United Kingdom, and there are plans for similar launches
in other countries including Brazil and Spain.
In spite of the mounting geopolitical challenges facing TikTok around the
world, it remained the most downloaded mobile application worldwide with 672
million downloads in 2022 according to Statista and is estimated to have more
than 1 billion monthly active users in over 150 countries. The average user
spend on the platform in terms of time was 95 minutes per day in the second
quarter of 2022 based on the findings of Sensor Tower and compared favourably
with 74 minutes, 51 minutes, 49 minutes, 29 minutes and 21 minutes in the case
of YouTube, Instagram, Facebook, Twitter and Snapchat respectively. To further
enhance its functionality, TikTok has added new features such as 10-minute
videos, Search Ads, TikTok Stories, TikTok Now, TikTok Music and Photo Mode,
making it an all-in-one mobile application for social media, messaging,
services, payments and more.
Two other mobile applications of the ByteDance group have recently caught
media attention in the United States. CapCut, which provides a variety of
user-friendly editing functions and is compatible for use with TikTok, has hit
more than 500 million downloads in Google Play Store. Lemon8, a content
sharing mobile application with the combined elements of Pinterest and
Instagram, shot to the top 10 of the App Store's chart in late March 2023.
As a leading developer in the mobile application space, the ByteDance group
does have the capability and resources to further solidify its market position
in the industry.
In September 2022, ByteDance offered to buy back up to US$3 billion of its own
shares at a valuation of US$300 billion, allowing early investors to cash out
a portion of their gains. In March 2023, G42, an artificial intelligence and
cloud computing firm from Abu Dhabi, United Arab Emirates, and controlled by
the National Security Advisor of United Arab Emirates, acquired from the
secondary market a US$100m stake in ByteDance at a valuation reported to be
US$220 billion.
Dingdong (Cayman) Limited ("Dingdong")
The Group holds an investment in the American depositary shares of Dingdong
(the "Dingdong ADS").
Listed on the New York Stock Exchange, Dingdong is the holding company of a
fresh grocery e-commerce group that operates a mobile application platform,
Dingdong Fresh, providing users with fresh produce, meat, seafood, prepared
food and other food products supported by a self-operated frontline fulfilment
grid with about 60 regional processing centres and about 1,100 frontline
fulfillment stations on leased properties. The operations of the Dingdong
group cover around 30 cities across China including Beijing, Shanghai,
Shenzhen, and Guangzhou.
Since the strategic shift to focus on opitimising operation efficiency and
developing product capabilities, including strengthening product
competitiveness and refining product mix through the development of private
label and prepared food products, in the third quarter of 2021, followed by
the strategic withdrawal of operations from several lower-tier Chinese cities
that required substantial time and resources to build a meaningful presence,
the Dingdong group had achieved significant improvement in financial
performance. According to the 2022 audited consolidated accounts of the
Dingdong group, while year-on-year growth in revenue moderated to a
respectable 20%, non-GAAP net loss (considered to be a better indicator of the
underlying business trends by excluding the non-cash charges of share-based
compensation) narrowed from RMB6.1 billion in 2021 to RMB571 million in 2022.
The narrowing in non-GAAP net loss reflected the improvement in gross margin
as a result of improved product capabilities, the improvement in fulfilment
efficiency driven by the increase in average order value and improved
frontline labour productivity as well as the reduction in sales and marketing
expenses on the back of improved brand awareness.
DIRECTORS' REPORT
(CONTINUED)
During the fourth quarter of 2022, the Dingdong group reached a new milestone
delivering for the first time a non-GAAP net income of RMB116 million*. Net
cash generated from operating activities amounted to RMB682 million*. With
cash reserves including short-term investments totalling RMB6.5 billion at the
end of 2022, the Dingdong group appears to have successfully evolved from a
startup that needed external financing a few years ago to a financially
self-sustaining enterprise with the financial capabilities to pursue continued
business expansion in a highly competitive industry.
Because of the dispute on accounting firm inspection between the Chinese and
the U.S. authorities, Dingdong was one of the many China-based companies
listed on an American securities exchange that was subject to a potential risk
of delisting. There was, however, a breakthrough in December 2022 when the
Public Company Accounting Oversight Board of the United States (the "U.S.
PCAOB"), following thorough and systematic testing and compliance
verification, confirmed that complete access for the inspection and
investigation of accounting firms headquartered in mainland China and Hong
Kong had been secured. Accordingly, the Dingdong ADS will no longer be subject
to the risk of trading prohibition on the New York Stock Exchange.
Nonetheless, the U.S. PCAOB emphasised that action will be taken should access
to accounting firm inspection be obstructed in any way and at any point in the
future.
Notwithstanding the removal of the delisting risk and the significant
improvement in financial performance, the price of the Dingdong ADS has failed
to move in tandem with the ameliorating fundamentals of the Dingdong group and
has remained under pressure. An impairment in the carrying value of the
Group's investment in the Dingdong ADS has consequently been recognised for
the year ended 31 December 2022.
* based on the unaudited financial information published by Dingdong
Innovusion through the Hermitage Fund Twelve
Through the Hermitage Class A Shares, the Group holds an investment in the
Hermitage Fund Twelve, the sole underlying investment asset is an equity
interest in Innovusion.
Innovusion is an unlisted holding company of a technology group that
specialises in the development of image grade LiDAR sensor systems for the
autonomous vehicle and advance driver-assistance system markets. The
Innovusion group has developed a product portfolio that includes both
long-range front view LiDARs and mid-to-short range side view LiDARs.
Falcon is an ultralong-range high-performance front-view LiDAR, with a
detecting range of 500 metres, including the detection of objects with 10%
reflectivity up to 180 metres, and a horizontal field of view of 120° and a
vertical field of view of 25°. With ease of customisation and integration, it
is the integrated part of the standard sensor suite of the new ET7, ES7/EL7
and ET5 models introduced by Nio Inc. ("Nio") in 2022. Robin, on the other
hand, is a mid-to-short range side view LiDAR with a detecting range of
objects with 10% reflectivity of up to 180 metres and a horizontal field of
view of up to 140° and a vertical field of view of up to 90°. With a modular
design and an ultra-compact size, it can be highly customised and integrated
onto side fenders, headlamps, taillights and bumpers.
In March 2022, the Innovusion group began mass production of Falcon for the
first of the three Nio's models, ET7, the electric flagship sedan of Nio. The
respective launch of ES7/EL7, an electric sport utility vehicle, and ET5, a
mid-size electric sedan, subsequently followed. Riding on the increasing sales
of these models, the Innovusion group ramped up the production of Falcon. By
the end of 2022, more than 50,000 Falcon LiDAR units had been delivered. With
the contribution from the sales of Falson, the Innovusion group managed to
accelerate the growth in revenue albeit from a low base.
DIRECTORS' REPORT
(CONTINUED)
As a prominent developer of LiDAR sensor systems, the Innovusion group entered
into a cooperation agreement with another major industry player. In May 2022,
Innovusion formed a strategic alliance with TuSimple Holdings, Inc.
("TuSimple"), an autonomous technology company from the United States, to
explore the integration of the LiDARs of the Innovusion group into TuSimple's
self-driving trucks under the unmanned port logistics and urban freight
transport scenarios. The goal was to advance the development and large-scale
adoption of driverless technology for heavy truck freight in China.
At the 24th China Expressway Informatization Conference and Technology and
Production Exposition in July 2022, the Innovusion group announced the release
of OmniSense CD2.0, a proprietary holographic vehicle sensing solution. The
proprietary sensing solution utilises in-house developed graphic-level LiDAR
and deep learning algorithm-based perception capabilities to detect and
collect real-time information of traffic flow, vehicle speed and other road
conditions and is capable of identifying vehicles that engage in improper or
dangerous driving behaviours with a view to improving transportation
efficiency and safety.
In December 2022, Falcon was selected by Faraday Future Intelligent Electric
Inc. ("Faraday"), a global shared intelligent electric mobility ecosystem
corporation from the United States, to be integrated into the FF 91's
autonomous driving system. In anticipation of the business from Nio and
Faraday, the Innovusion group is in the process of expanding its production
capacity to 300,000 units of LiDARs per annum.
Apart from attracting commercial interests, Falcon is also highly recognised
in the trade having been honoured with the 2023 CES Innovation Award, a
recognition by the Consumer Technology Association in the United States for
outstanding design and engineering in consumer technology products, and won
the Tech.AD Europe Award 2023 in the Perception and Sensing category.
Velocity Mobile Limited ("Velocity")
Velocity, an unlisted investee company of the Group, is the holding company of
a technology group that operates a lifestyle mobile e-commerce platform
targeting premium consumers with services focusing on the sectors of high-end
travel, experiences and luxury goods.
Having taken the opportunity to invest in and upgrade its technological
capabilities during the worst of the COVID-19 pandemic, the Velocity group has
been particularly well placed to benefit from the tailwind of recovery on the
back of the gradual receding of the ill effects of the health crisis. In
particular, with the scrapping of most restriction measures, premium consumers
looking for luxury lifestyle activities and experiences that were sorely
lacking under the lockdowns have provided a boost in the demand for the
services of the Velocity group. Meantime, the proprietary concierge automation
software, Gravity, continues to drive operation efficiency and productivity.
Velocity Black, the consumer product of the Velocity group, remains in demand
as invitation for new membership has to be requested. Velocity for Business,
the enterprise product of the Velocity group, has on the other hand been
reaping the contributions from previously signed contracts the commencement of
which had been delayed because of the COVID-19 pandemic.
In March 2023, the Velocity group further expanded its experiences offer.
Through the partnership with Aston Martin Aramco Cognizant Formula One™ Team
(the "Aston Martin Team"), Velocity Black members will be offered VIP access
to races and special events and to meet the drivers of the Aston Martin Team.
Despite the encouraging development achieved by the Velocity group, based on
the valuation of the Velocity shares prepared by an independent valuer, an
impairment in the carrying value of the Group's investment in Velocity has
been recognised for the year ended 31 December 2022, reflecting the
depreciation in the British Pound Sterling and the decline in enterprise value
to sales multiples of comparable companies.
DIRECTORS' REPORT
(CONTINUED)
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
(奧偉詩教育諮詢(深圳)有限公司, "Oasis Shenzhen"), provides
consulting and support services to the Huizhou Kindergarten in the Guangdong
Province of China.
Following the graduation of 58 pupils in the summer of 2022, the Huizhou
Kindergarten enrolled 112 new pupils for the academic term that commenced in
September 2022 and another 17 new pupils for the academic term that commenced
in February 2023, thus bringing its total pupil enrolment to a record high of
315. The continued increase in total pupil enrolment is expected to have a
positive impact on the cash flow position of the Huizhou Kindergarten.
Because of the resurgence of new waves of the COVID-19 infections and hence
the reimplementation of the restriction measures, the Huizhou Kindergarten had
to suspend in-person classes for around a month, But the suspension did not
prevent the kindergarten from providing quality online distance learning
experience with active interaction with and participation from its pupils.
This has earned favourable feedback from its pupils and their parents.
In December 2021, the Huizhou Kindergarten made a repayment of RMB400,000 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. It is
expected that another repayment will be made in 2023.
Agrios
Please refer to the Company's 2021 Annual Report and 2022 Interim Report.
The Group's investment in Agrios had been completely written off in its
financial statements for the year ended 31 December 2020.
Ayondo
Please refer to the Company's 2021 Annual Report and 2022 Interim Report.
The Group's investment in Ayondo had been completely written off in its
financial statements for the year ended 31 December 2020.
PROSPECTS
According to the World Economic Outlook report published by the International
Monetary Fund in April 2023, global economic growth is forecasted to fall from
3.4% in 2022 to 2.8% in 2023 and the corresponding figures for the advanced
economies are projected to slow from 2.7% to 1.3%. Global headline inflation
is expected to remain high at 7.0% in 2023 despite a small decline from 8.7%
in 2022 due to lower commodity prices. The aggressive increases in interest
rates have started to put pressure on corporations with high levels of debts
and in particular on their cash flow management. Policy makers are facing the
conundrum as to how best to balance fiscal and monetary measures to ensure
economic growth and stability especially in the financial system.
Despite the prevailing uncertain economic environment and the ongoing
Russia-Ukraine war, the leading stock markets of the world had shown
remarkable resilience during the first quarter of 2023. Apart from market
liquidity, perhaps the anticipation of the decline in inflation rate, albeit
at a slow pace, has induced positive confidence amongst investors. The same
could be true for private equity investments. Given the sheer level of dry
powder, private equity investors view the contracting valuations as buying
opportunities and competition for quality deals are expected to remain
vigorous and intense.
DIRECTORS' REPORT
(CONTINUED)
In the developing countries, the story is somewhat different. Notably, the
growth in the Chinese economy is forecasted to accelerate to between 5% and
5.5% in 2023. The implementation of the dynamic zero-COVID policy, the
regulatory crackdown on the Internet and technology companies and the
tightening of credits to the real estate sector had over the past few years
restrained domestic aggregate demand with inflation remaining under control.
But with the strategic shift in the pandemic management approach and the
uplifting of lockdown measures, the Chinese economy is expected to be
revitalised and regain momentum and, in the absence other economic shocks, to
progressively resume its long-term growth trend. Under the relatively tame
inflationary environment, the Chinese government has launched and is expected
to further introduce stimulus measures to expand economic activities with
emphasis targeting the technology, infrastructure, clean energy,
semiconductor, healthcare and consumer sectors. Amongst the Group's underlying
investment assets, Bytedance, and Innovusion, as well as its investments in
Dingdong and Oasis Education are likely to benefit from these measures as
their operations are mainly China-focused with certain of them having
favourable exposure to the targeted sectors. Meanwhile, in spite of the sharp
increases in interest rates, the ICBC Ship Fund will continue to provide an
attractive and stable dividend contribution to the Group, while Velocity and
Animoca are well-placed to benefit from the acceleration in the digital
transformation and the shift in consumer behaviours towards online channels
brought about by the COVID-19 pandemic.
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 70 to 72.
Save as disclosed in this report and in note 26 to the consolidated financial
statements on page 67, 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.
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 11 November 2022). 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.
DIRECTORS' REPORT
(CONTINUED)
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 "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 Scheme will not affect their ability to act independently in
character and judgement.
DIRECTORS' INTERESTS
The interests of the individuals who were directors during the year under
review in the issued share capital of the Company, including the interests of
persons connected with a director (within the meaning of Sections 252, 253 to
255 of the United Kingdom Companies Act 2006 as if the Company were
incorporated in England), the existence of which was known to, or could with
reasonable diligence be ascertained by, that director, whether or not held
through another party, were as follows:
At 1 January 2022 At 31 December 2022
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
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 2022 and 31 December 2022,
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 2022 and 31 December 2022,
respectively. The Company and Mr Cheong entered into a relationship agreement
on 2 August 2013 (the "Relationship Agreement"). Pursuant to the Relationship
Agreement, Mr Cheong has agreed to exercise his rights as a shareholder at all
times, and to procure that his associates exercise their rights, so as to
ensure that the Company is capable of carrying on its business independently
of Mr Cheong or any control which Mr Cheong or his associates may otherwise be
able to exercise over the Company. Moreover, Mr Cheong has undertaken to
ensure, so far as he is able to, that all transactions, relationships and
agreements between Mr Cheong or his associates and the Company or any of its
subsidiaries are on arms' length terms on a normal commercial basis. Mr Cheong
and the Company have also agreed, amongst other things, that he will not
participate in the deliberations of the Board in relation to any proposal to
enter into any commercial arrangements with Mr Cheong or his associates.
At 1 January 2022 At 31 December 2022
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 Nil
DIRECTORS' REPORT
(CONTINUED)
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.
Subsequent to the year end 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$0.034 per
share under the Scheme. The share options vested six months from the date of
grant and were then exercisable within a period of 9.5 years.
Save as disclosed above, none of the above-named directors had an interest,
whether beneficial or non-beneficial, in any shares or debentures of any Group
companies at the beginning or at the end of the year under review. Save as
disclosed above, none of the above-named directors, or members of their
immediate families, held, exercised or were awarded any right to subscribe for
any shares or debentures of any Group companies during the year.
The Board confirms that (i) the Company has complied with the independence
provisions set out in the Relationship Agreement since it was entered into;
and (ii) so far as the Company is aware, Mr Cheong and his associates have
complied with the independence provisions set out in the Relationship
Agreement since it was entered into.
DIRECTORS' REMUNERATION
The remuneration of the directors for the year ended 31 December 2022 was as
follows:
Share-based payment expenses Other emoluments
Fees Total
US$'000 US$'000 US$'000 US$'000
Alastair Gunn-Forbes 12.0 - - 12.0
Henry Ying Chew Cheong 12.0 - - 12.0
Mark Chung Fong 12.0 - - 12.0
Ernest Chiu Shun She 12.0 - - 12.0
Martyn Stuart Wells 12.0 - - 12.0
Stephen Lister d'Anyers Willis 12.0 - - 12.0
72.0 - - 72.0
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.
DIRECTORS' REPORT
(CONTINUED)
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 Group's bonus arrangements
under which bonuses may be granted at the discretion of the Remuneration
Committee and the Board. No bonus was recommended for the year ended 31
December 2022.
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 14 March 2023, the Company was aware of the following direct or indirect
interests representing 5% or more of the Company's issued share capital:
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) 5,504,534 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.
Amongst the control measures, the key steps that have been put in place
include:
- the setting of the investment strategy and the approval of significant
investment decisions of the Group by the Board to ensure consistency with the
investment objective and compliance with the investment policy of the Company;
- the segregation of duties between the investment management and accounting
functions of the Group;
- the adoption of written procedures in relation to the operations of the bank
accounts of the Group;
DIRECTORS' REPORT
(CONTINUED)
- the adoption of written procedures to deal with conflicts of interests and
related party transactions;
- the maintenance of proper accounting records providing with reasonable
accuracy at any time information on the financial position of the Group;
- the review by the Board of the management accounts of the Group on a regular
basis; and
- the engagement of external professionals to carry out company secretarial
works for the Company and to assist the Group on compliance issues.
The Board considers the identification, evaluation and management of the
principal risks faced by the Group under the changing environment to be an
ongoing process and has kept under regular review the effectiveness of the
Group's systems of internal control and risk management. The Board is
satisfied that the arrangements that have been put in place represent an
appropriate framework to meet the internal control and risk management
requirements of the Group.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the principal risks and uncertainties that are
relevant to the Group include:
Target market risk
Under the investment policy of the Company, the Group focuses on investing in
small to medium sized trading companies based mainly in the Greater China and
South East Asian region. Consequently, a sharp or prolonged downturn in the
economic environment or a heightened uncertainty in the political environment
in these target markets could adversely and seriously affect the underlying
investments 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
Despite the sharp tightening in monetary policies and the aggressive increases
in intertest rates across major economies to control spiralling inflation,
investment capital and dry powder accumulated by the private equity sector
during the ultra-low interest rate era remain abundant. Under such an
environment, competition for quality deals, particularly under contracting
valuations, 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 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.
DIRECTORS' REPORT (CONTINUED)
Operational risks
The Group is exposed to various operational risks that are inherent in the
running of its business, including, amongst others, the failure to comply with
the investment policy of the Company, the failure to prevent misstatements,
loss or fraud due to inadequacies in the Group's internal operational
processes, and the failure to comply with applicable rules and regulations by
the Group. As mitigating measures, the Board has established and maintained
systems of internal control and risk management to safeguard the Group's
interests and assets, details of which are set out in the section headed
"Internal Control, Risk Management and Financial Reporting" on pages 13 to 14.
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 50 to 54.
COVID-19 pandemic risk
After battling with the COVID-19 pandemic for some three years, the world has
progressively returned to normality, or rather, settling 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. While
corporate global is back in business, economic and business activities remain
under the threats of the coronavirus. As an investment holding company, the
Company has through its subsidiaries invested in various business sectors in
different regional markets and would not be immune to the long COVID-19
effects as the resurgence of new waves of infections and the emergence of new
variants are expected from time to time. Nevertheless, with the the
acceleration in the digital transformation and the shift in consumer
behaviours towards online channels brought about by the COVID-19 pandemic,
certain of the investee companies and investments of the Group could take
advantage of any adverse situations as opportunities to advance and expand
their business.
VIABILITY STATEMENT
The directors have assessed the viability of the Company for the three years
to 31 December 2025.
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, amongst others:
- the investment strategy of the Group
- the current position including the existing financial status and cost
structure of the Group
- the prospects of and the industry outlook for the Group
- the economic and political environment of the Greater China and South East
Asian region, the primary target markets in which the Group focuses its
investment; and
- the potential adverse impact of the principal risks and uncertainties facing
the Group and the effectiveness of the mitigating measures that have been put
in place, details of which are described in the section headed "Principal
Risks and Uncertainties" on pages 14 to 15.
DIRECTORS' REPORT
(CONTINUED)
The directors note, in particular, that the Group:
- has a liquid amount of unrestricted cash and bank
balances;
- does not have any borrowings;
- does not have any commitments other than certain leases
with modest 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.
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 2022, 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 2022, 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.
BOARD MEETING
The Board held four meetings during the year under review and the table below
gives the attendance record.
Director Board Meeting
Alastair Gunn-Forbes 4/4
Henry Ying Chew Cheong 4/4
Ernest Chiu Shun She 4/4
Mark Chung Fong 4/4
Martyn Stuart Wells 4/4
Stephen Lister d'Anyers Willis 4/4
DIRECTORS' REPORT
(CONTINUED)
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. Any future recruitment process would also provide
an opportunity to improve the diversity of the Board. The Board is satisfied
that appropriate succession planning is in place for appointments to both the
Board and senior management.
Again, due to its small size and limited level of activities, the Board has
not appointed a senior independent director and did not consider an annual
self-evaluation to be required during the year under review. The
responsibilities normally rested with a senior independent director have been
reverted to the Board as a whole. These decisions will be re-considered
annually by the Board.
The Board established both an Audit Committee and a Remuneration Committee
upon the re-activation of the Group's business in 2013. Details of these
committees are set out below.
AUDIT COMMITTEE
The Audit Committee held two meetings during the year under review and the
table below gives the attendance record.
Director Audit Committee Meeting
Mark Chung Fong 2/2
Martyn Stuart Wells 2/2
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,
amongst others, the examination and review of the Group's risk management,
internal financial controls and financial and accounting policies and
practices, as well as overseeing and reviewing the work of the Company's
external auditor, their independence and the fees paid to them.
During the year under review, the activities undertaken by the Audit Committee
in discharge of its duties and functions included (i) the review and
recommendation to the Board of the reappointment of BDO Limited as the
Company's external auditor; (ii) the review and recommendation to the Board
for approval of the annual report of the Company and the consolidated
financial statements of the Company and its subsidiaries for the year ended 31
December 2021; 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 2022. In recommending the reappointment of BDO Limited, the
Audit Committee has taken into consideration, amongst others, BDO Limited's
independence, objectivity and terms of engagement.
DIRECTORS' REPORT
(CONTINUED)
Subsequent to the year end, the activities that have been undertaken by the
Audit Committee in relation to 2022 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 2022; (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 connection with the review of the consolidated financial statements of the
Company and its subsidiaries for the year ended 31 December 2022, 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 joint The Audit Committee has (i) reviewed the operational and financial performance
venture, Oasis Education - At 31 December 2022, the Group had an equity and the latest development of Oasis Education and its subsidiary; and (ii)
interest of US$71,000 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 2022, the Group had interests in the ICBC Shipping level 3 of the fair value hierarchy; and (ii) reviewed the valuation findings
Fund, Animoca, the Homaer Fund, Innovusion, Velocity, Agrios and Ayondo, all prepared by the management and in the case of Velocity by an independent
of which were accounted for as financial assets at FVTPL categorised within valuer and discussed with the management and the independent valuer the
the level 3 of the fair value hierarchy, totalling US$4,372,000 and carried at methodologies, assumptions and input parameters used in relation to such
fair value. These carrying amounts were significant in the Group's context and valuation.
their valuations were subject to judgements, estimation uncertainties and
assumptions.
BDO Limited was appointed as the external auditor of the Company in February
2015, since when audit services have not been tendered competitively. The
Audit Committee has concluded that a competitive tender of audit services is
not necessary at this time, but acknowledges that circumstances could arise
where a competitive tender for audit services may be desirable. The
performance of BDO Limited as the Company's external auditor will be kept
under annual review, and if satisfactory, BDO Limited will be recommended by
the Audit Committee for reappointment. There are, however, no contractual
obligations that would restrict the Audit Committee's choice of external
auditor for the Company.
DIRECTORS' REPORT
(CONTINUED)
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 2022, 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, amongst others, the
evaluation of the performance of the executive directors and senior staff, and
the comparison of the Group's remuneration policy with similar organisations
in the market to form the basis for the recommendations to the Board to
determine the remuneration packages, which may include the grant of share
options under the Scheme, for individual staff and director members.
In accordance with the Main Principle of Provision Q of the Code, no director
has been involved in deciding his own remuneration.
During the year under review, the activities undertaken by the Remuneration
Committee in discharge of its duties and functions included the review of and
recommendation to the Board to retain the Group's previous remuneration
arrangements.
DIRECTORS' REPORT
(CONTINUED)
WORLDSEC EMPLOYEE SHARE OPTION SCHEME 1997
The following table discloses the movements of the outstanding share options
under the Scheme during the year under review.
Number of options
Grantee Exercisable period Balance at 1 January 2022 Granted during the year Exercised during the year Forfeited during the year Lapsed during the year Balance at 31 December 2022 Exercise price per share
(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 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 - - - - 5,000,000
Subsequent to the year end 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 Scheme. The share options vested six months from the date of
grant and were then exercisable within a period of 9.5 years.
Further details relating to the granting of the share options are set out in
note 25 to the consolidated financial statements on pages 66 to 67.
RELATION WITH SHAREHOLDERS
Communication with shareholders is given high priority. Information about the
Group's activities is provided in the annual report and the interim report of
the Company which are sent to shareholders each year and are available on the
website of the Company. All shareholders are encouraged to attend the Annual
General Meeting at which directors are introduced and available for questions.
Enquiries are dealt with in an informative and timely manner. Directors,
including non-executive directors, are also available to meet with major
shareholders on request.
DIRECTORS' REPORT
(CONTINUED)
EXTERNAL AUDITOR
The consolidated financial statements of the Company and its subsidiaries for
the year ended 31 December 2022 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
25 April 2023
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 2022, 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 21 include a fair review of the development and
performance of the business and the position of the Company and its
subsidiaries taken as a whole together with a description of the principal
risks and uncertainties that they face.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
25 April 2023
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 28 to
68, which comprise the consolidated statement of financial position as at 31
December 2022, and the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements give a true and fair
view of the consolidated financial position of the Group as at 31 December
2022, and of its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing
("ISAs"). Our responsibilities under those standards are further described in
the 'Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements' section of our report. We are independent of the Group in
accordance with the International Ethics Standards Board for Accountants' Code
of Ethics for Professional Accountants (the "IESBA Code"), and we have
fulfilled our other ethical responsibilities in accordance with the IESBA
Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the consolidated financial statements of
the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
IMPAIRMENT ASSESSMENT OF INTEREST IN A JOINT VENTURE AND AMOUNT DUE FROM A
JOINT VENTURE
Refer to note 17 to the consolidated financial statements
The Group owns a 50% interest in a joint venture, Oasis Education Group
Limited ("Oasis Education"), which is accounted for using the equity method
less any impairment loss. The interest in this joint venture amounted to
approximately US$71,000 as at 31 December 2022 and the Group's share of its
losses amounted to approximately US$2,000 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 2022, 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:
• Obtaining an update of the latest development of Oasis Education's operation;
• Assessing the financial performance of Oasis Education based on information
provided by management;
• Evaluating management's considerations of the impairment indicators of the
investment in, and the amount due from, Oasis Education;
• Assessing the appropriateness of the management's assumptions concerning the
future cash flows to be generated from the operation of Oasis Education; and
• Assessing reliability of the joint venture's forecast by comparing historical
budget to actual performance and obtaining explanations from management on any
significant variances identified.
FAIR VALUE MEASUREMENT OF INVESTMENTS CLASSIFIED AS FINANCIAL ASSETS AT FAIR
VALUE TRHOUGH 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 2022, 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$4,372,000.
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:
• Assessing the appropriateness of valuation methodologies applied on the fair
value determination of these financial assets;
• Evaluating the reasonableness and relevance of key inputs and assumptions used
in the fair value determination; and
• Involving an auditor's expert to assist our assessment on the appropriateness
of the valuation methodologies and reasonableness of key inputs and
assumptions used in the fair value determination
Other information in the annual report
The directors are responsible for the other information. The other information
comprises the information included in the Company's annual report, but does
not include the consolidated financial statements and our auditor's report
therein.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
DirectorS' responsibilitIES for the consolidated financial statements
The directors are responsible for the preparation of the consolidated
financial statements that give a true and fair view in accordance with
International Financial Reporting Standards as adopted by the European Union,
and for such internal control as the directors determine is necessary to
enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
The directors are also responsible for overseeing the Group's financial
reporting process. The audit committee of the Company (the "Audit Committee")
assists the directors in discharging their responsibility in this regard.
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
____________________________________
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
AUDITOR'S responsibilitIES for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. This report is made solely to you, as a body, in
accordance with Section 90 of the Bermuda Companies Act 1981, and for no other
purpose. We do not assume responsibility towards or accept liability to any
other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional skepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Group's
internal control.
• evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
• conclude on the appropriateness of the directors' use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events in a
manner that achieves fair presentation
• obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
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, 25 April 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
2022
Year ended 31 December
Notes 2022 2021
US$'000 US$'000
Revenue 7 193 145
Other income, gains and losses, net 9 (428) 1,075
Staff costs 10 (277) (298)
Other expenses (325) (270)
Finance costs 11 (4) (8)
Share of losses of a joint venture 17 (2) (8)
(Loss)/profit before income tax expense 12 (843) 636
Income tax expense 13 - -
(Loss)/profit for the year (843) 636
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Share of other comprehensive income of a joint venture 17 (27) 11
Other comprehensive income for the year, net of income tax (27) 11
Total comprehensive income for the year (870) 647
(Loss)/profit for the year attributable to:
Owners of the Company (843) 636
Total comprehensive income for the year attributable to:
Owners of the Company (870) 647
(Loss)/earnings per share - basic and diluted 14 US (0.99) cent US 0.75 cent
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Notes 2022 2021
US$'000 US$'000
Non-current assets
Property, plant and equipment 16 - -
Interest in a joint venture 17 71 100
Financial assets at fair value through profit or loss
18 4,409 3,849
Right-of-use assets 19 48 111
4,528 4,060
Current assets
Other receivables 223 114
Deposits and prepayments 26 26
Financial assets at fair value through profit or loss
18 97 624
Amount due from a joint venture 17 257 257
Cash and cash equivalents 21 526 1,513
1,129 2,534
Current liabilities
Other payables and accruals 22 160 163
Lease liabilities 19 55 64
215 227
Net current assets 914 2,307
Non-current liabilities
Lease liabilities 19 - 55
Net assets 5,442 6,312
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2022
Notes 2022 2021
US$'000 US$'000
Capital and reserves
Share capital 23 85 85
Reserves 24 5,357 6,227
Total equity 5,442 6,312
The consolidated financial statements on pages 28 to 68 were approved and
authorised for issue by the Board of Directors on 25 April 2023 and signed on
its behalf by:
Alastair Gunn-Forbes Henry Ying Chew Cheong
Director Director
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF changes in equity
FOR THE YEAR ENDED 31 DECEMBER
2022
Equity attributable to owners of the Company
Foreign
Contri- Share currency
Share Share buted option translation Special Accumulated
capital premium surplus reserve reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(note 23) (note 24) (note 24) (note 24) (note 24) (note 24) (note 24)
Balance at 1 January 2021 85 7,524 9,646 249 (17) 625 (12,447) 5,665
Profit for the year - - - - - - 636 636
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17) - - - - 11 - - 11
Total comprehensive - - - - 11 - 636 647
income for the year
Balance as at 31 December 2021 and 1 January 2022 85 7,524 9,646 249 (6) 625 (11,811) 6,312
Loss for the year - - - - - - (843) (843)
Other comprehensive income for the year
Share of other comprehensive income of a joint venture (note 17)
- - (27)
- - (27) - -
Total comprehensive
income for the year - - - - (27) - (843) (870)
Balance at 31 December 2022 85 9,646 625 (12,654) 5,442
7,524 249 (33)
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
2022
Year ended 31 December
2022 2021
US$'000 US$'000
Cash flows from operating activities
(Loss)/profit before income tax expense (843) 636
Adjustments for:
Bank interest income (1) (1)
Depreciation of right-of-use assets 63 64
Interest on lease liabilities 4 8
Share of losses of a joint venture 2 8
Net realised and unrealised losses/(gains) on financial assets at fair value
through profit or loss
444 (1,080)
Operating loss before working capital changes (331) (365)
Decrease in deposits and prepayments - 4
(Increase)/decrease in other receivables (109) 168
(Decrease)/increase in other payables and accruals (3) 16
Net cash used in operating activities (443) (177)
Cash flows from investing activities
Investment in financial assets at fair value through
profit or loss (1,188) (971)
Proceeds from disposal of financial assets at fair value through profit or
loss
711 1,535
Bank interest income received 1 1
Net cash (used in)/generated from investing activities (476) 565
Cash flows from financing activities
Repayment of principal portion of lease liabilities (64) (61)
Repayment of interest portion of lease liabilities (4) (8)
Net cash used in financing activities (68) (69)
Net(decrease)/increase in cash and cash equivalents (987) 319
Cash and cash equivalents at the beginning of the year 1,513 1,194
Cash and cash equivalents at the end of the year 526 1,513
The accompanying notes form an integral part of these consolidated financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda. Its principal
place of business is Unit 607, 6th Floor, FWD Financial Centre, 308 Des Voeux
Road Central, Sheung Wan, Hong Kong.
The principal activity of the Company is investment holding. The principal
activities of the Company's subsidiaries are set out in note 20 to the
consolidated financial statements.
The functional currency of the Company is Hong Kong Dollars ("HK$"). The
consolidated financial statements of the Company and its subsidiaries
(collectively referred to as the "Group") are presented in United States
Dollars ("US$" or "USD").
The consolidated financial statements have been prepared in accordance with
all applicable International Financial Reporting Standards ("IFRS"),
International Accounting Standards ("IAS") and Interpretations adopted by the
European Union ("EU") (collectively referred to as "IFRSs").
2. APPLICATION OF NEW AND REVISED IFRSs
2.1 New and revised IFRSs applied
The following amendments to IFRSs have been applied by the Group in the
current year.
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
Amendments to IFRS 1, IFRS 9, Annual Improvements to IFRSs 2018-2020
IFRS 16
None of the application of the amendments to IFRSs in the current year had
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 2022
2. APPLICATION OF NEW AND REVISED IFRSs (CONTINUED)
2.2 New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs, potentially
relevant to the Group's financial statements, that have been issued but are
not yet effective. Certain new or revised IFRSs have yet been endorsed by the
EU.
Amendments to IAS 1 and Disclosure of Accounting Policies¹
IFRS Practice Statement 2
Amendments to IAS 8 Definition of Accounting Estimates¹
Amendments to IAS 12 Deferred tax related to assets and liabilities arising from a single
transaction¹
¹ Effective for annual periods beginning on or after 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting
Policies
The amendments seek to promote improved accounting policy disclosures that
provide more useful information to investors and other primary users of the
financial statements. Apart from clarifying that entities are required to
disclose their "material" rather than "significant" accounting policies, the
amendments provide guidance on applying the concept of materiality to
accounting policy disclosures.
The directors are currently assessing the impact that the application of the
amendments will have on the Group's consolidated financial statements.
Amendments to IAS 8, Definition of Accounting Estimates
The amendments clarify the distinction between changes in accounting policies
and changes in accounting estimates. Amongst other things, the amendments now
define accounting estimates as monetary amounts in financial statements that
are subject to measurement uncertainty, and clarify that the effects of a
change in an input or a measurement technique used to develop an accounting
estimate are changes in accounting estimates unless they result from the
correction of prior period errors.
The directors are currently assessing the impact that the application of the
amendments will have on the Group's consolidated financial statements.
Amendments to IAS 12, Deferred tax related to assets and liabilities arising
from a single transaction
The amendments narrow the scope of the recognition exemption in paragraphs 15
and 24 of IAS 12 so that it does not apply to such transactions as leases and
decommissioning provisions that, on initial recognition, give rise to equal
taxable and deductible temporary differences. Consequently, entities will need
to recognise a deferred tax asset and a deferred tax liability for temporary
differences arising on these transactions.
The directors are currently assessing the impact that the application of the
amendments will have on the Group's consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements of the Group have been prepared in
accordance with all applicable IFRSs.
Basis of preparation
The consolidated financial statements have been prepared under the historical
cost basis except for financial assets at fair value through profit or loss
("FVTPL"), which are measured at fair value as explained in the accounting
policies set out below.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries. Inter-company transactions and balances between
group companies together with unrealised profits are eliminated in full in
preparing the consolidated financial statements. Unrealised losses are also
eliminated unless the transaction provides evidence of impairment on the asset
transferred, in which case the loss is recognised in profit or loss.
Subsidiaries
A subsidiary is an investee over which the Company is able to exercise
control. The Company controls an investee if all three of the following
elements are present: (i) power over the investee, (ii) exposure, or rights,
to variable returns from the investee, and (iii) the ability to use its power
to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of
control.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Joint arrangements
The Group is a party to a joint arrangement where there is a contractual
arrangement that confers joint control over the relevant activities of the
arrangement to the Group and at least one other party. Joint control is
assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either:
- Joint venture: where the Group has rights to only the net assets of the joint
arrangement; or
- Joint operation: where the Group has both the rights to assets and obligations
for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group
considers:
- the structure of the joint arrangement;
- the legal form of the joint arrangement structured through a separate vehicle;
- the contractual terms of the joint arrangement agreement; and
- any other facts and circumstances (including any other contractual
arrangements).
Joint ventures are accounted for using the equity method whereby they are
initially recognised at cost and thereafter, their carrying amounts are
adjusted for the Group's share of the post-acquisition change in the relevant
joint venture's net assets except that losses in excess of the Group's
interest in that joint venture are not recognised unless there is a legal and
constructive obligation to make good those losses.
Profits and losses arising on transactions between the Group and its joint
ventures are recognised only to the extent of unrelated investors' interests
in the joint ventures. The investors' share in a joint venture's profits and
losses resulting from such transactions is eliminated against the carrying
value of the joint venture.
Any premium paid for an investment in a joint venture above the fair value of
the Group's share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalised and included in the carrying amount of the
investment in the joint venture. Where there is objective evidence that the
investment in a joint venture has been impaired, the carrying amount of the
investment is tested for impairment in the same way as other non-financial
assets.
The Group accounts for its interests in joint operations by recognising its
share of assets, liabilities, revenues and expenses in accordance with its
contractually conferred rights and obligations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. The cost of property, plant and equipment
includes their purchase price and the costs directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of a replaced part
is derecognised. All other repairs and maintenance are recognised as an
expense in profit or loss during the financial period in which they are
incurred.
Property, plant and equipment are depreciated so as to write off their cost
net of expected residual value over their estimated useful lives on a
straight-line basis. The useful lives, residual value and depreciation method
are reviewed, and adjusted if appropriate, at the end of each reporting
period. The useful lives are as follows:
Leasehold improvements
over the lease terms
An asset is written down immediately to its recoverable amount if its carrying
amount is higher than the asset's estimated recoverable amount.
The gain or loss on disposal of an item of property, plant and equipment is
the difference between the net sale proceeds and its carrying amount, and is
recognised in profit or loss on disposal.
Revenue recognition
Dividend income is recognised when the right to receive payment is
established.
Interest income is accrued on a time basis on the principal outstanding at the
applicable interest rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leasing
All leases (irrespective of whether they are operating leases or finance
leases) are required to be capitalised in the statement of financial position
as right-of-use assets and lease liabilities, but accounting policy choices
exist for an entity to choose not to capitalise (i) leases which are
short-term leases and/or (ii) leases for which the underlying asset is of
low-value. The Group has elected not to recognise right-of-use assets and
lease liabilities for low-value assets and leases which at the commencement
date have a lease term less than 12 months. The lease payments associated with
those leases are expensed on a straight-line basis over the lease term.
Right-of-use assets
Right-of-use assets are recognised at cost and would comprise: (i) the amount
of the initial measurement of the lease 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leasing (Continued)
Lease liabilities
Lease liabilities are recognised at the present value of the lease payments
that are not paid at the date of commencement of the lease. The lease payments
are discounted using the interest rate implicit in the lease, if that rate can
be readily determined. If that rate cannot be readily determined, the Group
uses 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.
Government grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currencies
Transactions entered into by the group entities in currencies other than the
currency of the primary economic environment in which they operate are
recorded at the rates ruling when the transactions occur. Foreign currency
monetary assets and liabilities are translated at the rates ruling at the end
of the reporting period. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
translation of monetary items, are recognised in profit or loss in the period
in which they arise.
On consolidation, income and expense items of foreign operations are
translated into the presentation currency of the Group (i.e. US$) at the
average exchange rates for the year, unless exchange rates fluctuate
significantly during the period, in which case the rates approximating to
those ruling when the transactions took place are used. All assets and
liabilities of foreign operations are translated at the rate ruling at the end
of the reporting period. Exchange differences arising, if any, are recognised
in other comprehensive income and accumulated in equity as foreign currency
translation reserve (attributed to minority interests as appropriate).
Exchange differences recognised in profit or loss of group entities' separate
financial statements on the translation of long-term monetary items forming
part of the Group's net investment in the foreign operation concerned are
reclassified to other comprehensive income and accumulated in equity as
foreign currency translation reserve.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign currency translation reserve relating to that
operation up to the date of disposal are reclassified to profit or loss as
part of the profit or loss on disposal.
Goodwill and fair value adjustments on identifiable assets acquired arising on
an acquisition of a foreign operation on or after 1 January 2005 are treated
as assets and liabilities of that foreign operation and translated at the rate
of exchange prevailing at the end of the reporting period. Exchange
differences arising are recognised in the foreign currency translation
reserve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-based payments
The Group operates equity-settled share-based compensation plans and the share
options are awarded to employees and directors providing services to the
Group.
All services received in exchange for the grant of any share-based
compensation are measured at their fair value. These are indirectly determined
by reference to the equity instruments awarded. Their value is appraised at
the grant date and excludes the impact of any non-market vesting conditions.
All share-based compensation is recognised as an expense in profit or loss
over the vesting period if vesting conditions apply, or recognised as an
expense in full at the grant date when the equity instruments granted vest
immediately unless the compensation qualifies for recognition as an asset,
with a corresponding increase in the share option reserve in equity. If
vesting conditions apply, the expense is recognised over the vesting period,
based on the best available estimate of the number of equity instruments
expected to vest. Non-market vesting conditions are included in assumptions
about the number of equity instruments that are expected to vest. Estimates
are subsequently revised, if there is any indication that the number of equity
instruments expected to vest differs from previous estimates.
At the time when the share options are exercised, the amount previously
recognised in share option reserve will be transferred to share premium. After
the vesting date, when the vested share options are forfeited or are still not
exercised at the expiry date, the amount previously recognised in share option
reserve will be transferred to retained profits.
Taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from "profit or loss before income tax expense" as reported in
the consolidated statement of profit or loss and other comprehensive income
because of items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. Current tax is
calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Taxation (Continued)
Deferred tax
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the consolidated financial statements and
the corresponding tax bases used in the computation of taxable 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
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments
(i) Financial assets
A financial asset (unless it is a trade receivable without a significant
financing component) is initially measured at fair value plus, for an item not
at FVTPL, transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is
initially measured at the transaction price.
All regular way purchases and sales of financial assets are recognised on the
trade date, 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 market place.
Financial assets with embedded derivatives are considered in their entirely
when determining whether their cash flows are solely payment of principal and
interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group's business
model for managing the assets and the cash flow characteristics of the assets.
There are two measurement categories into which the Group classifies its debt
instruments:
Amortised cost: Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and interest are
measured at amortised cost. Financial assets at amortised cost are
subsequently measured using the effective interest rate method. Interest
income, foreign exchange gains and losses and impairment are recognised in
profit or loss. Any gain on derecognition is recognised in profit or loss.
FVTPL: Financial assets at FVTPL include financial assets held for trading,
financial assets designated upon initial recognition at FVTPL, or financial
assets mandatorily required to be measured at fair value. Financial assets
are classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets with cash
flows that are not solely payments of principal and interest are classified
and measured at FVTPL, irrespective of the business model. Notwithstanding
the criteria for debt instruments to be classified at amortised cost or at
fair value through other comprehensive income ("FVOCI"), as described above,
debt instruments may be designated at FVTPL on initial recognition if doing so
eliminates, or significantly reduces, an accounting mismatch.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
(i) Financial assets (Continued)
Equity instruments
On initial recognition of an equity investment that is not held for trading,
the Group could irrevocably elect to present subsequent changes in the
investment's fair value in other comprehensive income. This election is made
on an investment-by-investment basis. Equity investments at FVOCI are measured
at fair value. Dividend income are recognised in profit or loss unless the
dividend income clearly represents a recovery of part of the cost of the
investments. Other net gains and losses are recognised in other comprehensive
income and are not reclassified to profit or loss. All other equity
instruments are classified as FVTPL, whereby changes in fair value, dividends
and interest income are recognised in profit or loss.
(ii) Impairment loss on financial assets
The Group recognises loss allowances for expected credit losses ("ECLs") on
financial assets measured at amortised cost. The ECLs are measured on either
of the following bases: (1) 12-month ECLs: these are the ECLs that result from
possible default events within the 12 months after the reporting date; and (2)
lifetime ECLs: these are ECLs that result from all possible default events
over the expected life of a financial instrument. The maximum period
considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to 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
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
(ii) Impairment loss on financial assets (Continued)
Despite the foregoing, the Group assumes that the credit risk on a debt
instrument has not increased significantly since initial recognition if the
debt instrument is determined to have low credit risk at the reporting date. A
debt instrument is determined to have low credit risk if (1) it has a low risk
of default; (2) the borrower has a strong capacity to meet its contractual
cash flow obligations in the near term; and (3) adverse changes in economic
and business conditions in the longer term may, but will not necessarily,
reduce the ability of the borrower to fulfil its contractual cash flow
obligations.
The Group considers a financial asset to be in default when: (1) the borrower
is unlikely to pay its credit obligations to the Group in full, without
recourse by the Group to actions such as realising security (if any is held);
or (2) the financial asset is more than 90 days past due.
A financial asset is credit-impaired when one or more events of default that
have a detrimental impact on the estimated future cash flows of that financial
asset have occurred. Evidence that a financial asset is credit-impaired
includes observable data about the following events:
- significant financial difficulty of the issuer or the borrower;
- a breach of contract, such as a default or past due event;
- the lender(s) of the borrower, for economic or contractual reasons relating to
the borrower's financial difficulty, having granted to the borrower a
concession(s) that the lender(s) would not otherwise consider;
- it is becoming probable that the borrower will enter bankruptcy or other
financial reorganisation; or
- the disappearance of an active market for that financial asset because of
financial difficulty of the issuer or the borrower.
Interest income on a credit-impaired financial asset is calculated based on
the amortised cost (i.e. the gross carrying amount less loss allowance) of the
financial asset. For non credit-impaired financial assets, interest income is
calculated based on the gross carrying amount.
The gross carrying amount of a financial asset is written off (either
partially or in full) to the extent that there is no realistic prospect of
recovery. This is generally the case when the Group determines that the debtor
does not have assets or sources of income that could generate sufficient cash
flows to repay the amount subject to the write-off.
Subsequent recoveries of an asset that was previously written off are
recognised as a reversal of impairment in profit or loss in the period in
which the recovery occurs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
(iii) Financial liabilities
The Group classifies its financial liabilities, depending on the purpose for
which the liabilities were incurred. Financial liabilities at FVTPL are
initially measured at fair value and financial liabilities at amortised cost
are initially measured at fair value, net of directly attributable costs
incurred.
Financial liabilities at amortised cost
Financial liabilities at amortised cost including other payables and accruals
and lease liabilities are subsequently measured at amortised cost, using the
effective interest method. The related interest expenses are recognised in
profit or loss.
Gains or losses are recognised in profit or loss when the liabilities are
derecognised as well as through the amortisation process.
(iv) Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial asset or financial liability and of allocating interest income or
interest expenses over the relevant period. The effective interest rate is
the rate that exactly discounts 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 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
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of other assets
At the end of each reporting period, the Group reviews the carrying amounts of
the following assets to determine whether there is any indication that those
assets have suffered an impairment loss or an impairment loss previously
recognised no longer exists or may have decreased:
• property, plant and equipment; and
• interest in a joint venture
If the recoverable amount (i.e. the greater of fair value less costs to
disposal and value in use) of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the
asset in prior years.
A reversal of an impairment loss is recognised in profit or loss immediately.
Value in use is based on the estimated future cash flows expected to be
derived from the asset or cash generating unit, discounted to its present
value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset or the cash
generating unit.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Related parties
(a) A person or a close member of that person's family is
related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(ii) 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);
(ii) 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
2022
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
2022
5. FINANCIAL instruments
(a) Categories of financial instruments
2022 2021
US$'000 US$'000
Financial assets
Financial assets at FVTPL 4,506 4,473
Financial assets at amortised cost 1,031 1,909
5,537 6,382
Financial liabilities
Financial liabilities at amortised cost 215 282
(b) Financial risk management objectives
Management monitors and manages the financial risks relating to the operations
of the Group through internal risk reports which analyse exposures by degree
and magnitude of risks. These risks include market risks (including foreign
currency risk, interest rate risk and price risk), credit risk and liquidity
risk. The policies on how the Group mitigates these risks are set out below.
The Group does not enter into or trade derivative financial instruments for
speculative purposes.
Market risks
The Group's activities expose it primarily to the financial risks of changes
in foreign currency exchange rates, interest rates and price risk.
There has been no change to the Group's exposure to market risks or the manner
in which these risks are managed and measured.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
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
2022 2021 2022 2021
US$'000 US$'000 US$'000 US$'000
GBP 72 91 1 1
The following table details the Group's sensitivity to a 10% (2021: 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% (2021: 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% (2021: 10%) against the relevant foreign
currency. For a 10% (2021: 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
2022
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk (Continued)
2022 2021
US$'000 US$'000
Change in post-tax profit or loss for the year
GBP/USD appreciated by 10% (USD depreciated) (7) (9)
GBP/USD depreciated by 10% (USD appreciated) 7 9
(ii) Interest rate risk
The Group's exposure to changes in interest rates is mainly attributable to
its bank deposits at variable interest rates. Bank deposits at variable rates
expose the Group to cash flow interest rate risk.
The directors consider that the exposure to cash flow interest rate risk was
insignificant. Hence, no sensitivity analysis on the exposure to the Group's
cash flow interest rate risk is presented.
(iii) Price risk
Price risk is the risk that the value of a financial instrument will fluctuate
as a result of changes in market prices (other than those arising from foreign
currency risk), whether caused by factors specific to an individual investment
or its issuer, or factors affecting all instruments.
All of the Group's unlisted investments are held for long term strategic
purposes. Their performance is assessed at least annually against performance
of any similar listed entities, based on the limited information available to
the Group, together with an assessment of their relevance to the Group's long
term strategic plans.
Sensitivity analysis
The sensitivity analysis on price risk includes the Group's financial
instruments, the fair value or future cash flows of which will fluctuate
because of changes in their corresponding equity prices. If the prices of the
Group's equity instruments had been 5% (2021: 5%) higher/lower, loss for the
year would have decreased/increased by approximately US$23,000 (2021: profit
for the year would have increased/decreased by approximately US$52,000).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
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 2022, approximately 100% (2021: 99%) of the bank
balances were deposited with a bank with a high credit rating. Other than
concentration of credit risk on liquid funds deposited with that bank, the
Group did not have any other significant concentration of credit risk.
For other receivables, deposits and amount due from a joint venture,
management makes periodic individual assessment on the recoverability based on
historical settlement records, past experience and also available reasonable
and supportive forward-looking information. Management believes that there was
no material credit risk inherent in the Group's outstanding balances of other
receivables, deposits and amount due from a joint venture. None of these
receivables have been subject to a significant increase in credit risk since
initial recognition and the expected credit loss was insignificant based on
the risk of default of those counterparties under 12-month ECLs approach as at
31 December 2022 and 31 December 2021. Thus, no loss allowance was recognised
as at 31 December 2022 and 31 December 2021.
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
2022
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$'000
As at 31 December 2022
Other payables and accruals 160 - 160 160
Lease liabilities 56 - 56 55
216 - 216 215
Total contractual undiscounted cash flows
More than 1 year but less than 5 years
Within 1 year or on demand Carrying amount
US$'000 US$'000 US$'000 US$'000
As at 31 December 2021
Other payables and accruals 163 - 163 163
Lease liabilities 69 56 125 119
232 56 288 282
(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
2022
5. FINANCIAL instruments (CONTINUED)
(c) Fair value of financial instruments (Continued)
(i) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash
equivalents, other receivables, deposits, amount due from a joint venture,
other payables and accruals and lease liabilities.
Due to their short-term nature, the carrying value of cash and cash
equivalents, other receivables, deposits, amount due from a joint venture,
other payables and accruals and lease liabilities approximated fair value.
(ii) Financial instruments measured at fair value
Financial assets at FVTPL included in the consolidated financial statements
require measurement at, and disclosure of, fair value.
The fair value of financial instruments with standard terms and conditions and
traded on active liquid markets is determined with reference to quoted market
prices.
The valuation techniques and significant unobservable inputs used in
determining the fair value measurement of level 3 financial instruments as
well as the relationship between key observable inputs and fair value are set
out in note (iii) below.
(iii) Information about level 3 fair value measurement
The fair value of the Group's level 3 equity investments in Velocity Mobile
Limited ("Velocity") was estimated using market approach with the significant
inputs being the enterprise value to sales ratio ("EV/Sales") and the recent
market transaction prices of comparable instruments at a discount due to the
lack of marketability. A 5% increase/decrease in EV/Sales with all other
variables held constant would have increased/decreased the carrying amount of
the Group's level 3 equity investment in Velocity by approximately
US$16,000/US$16,000 respectively.
The fair value of the Group's level 3 investments in the ICBC Specialised Ship
Leasing Investment Fund was estimated using income approach with reference to
their net asset value which was a significant unobservable input.
The fair value of the Group's level 3 investments in the Homaer Asset
Management Master Fund SPC, the Hermitage Galaxy Fund SPC and VS SPC Limited
were estimated using market approach with the significant inputs being the
recent market transaction prices of the underlying investment of the
respective funds.
There were no changes in these valuation techniques during the year ended 31
December 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
5. FINANCIAL instruments (CONTINUED)
(c) Fair value of financial instruments (Continued)
The following table provides an analysis of the Group's financial instruments
carried at fair value by level of Fair Value Hierarchy:
2022
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
Listed investments 134 - - 134
Unlisted investments - - 4,372 4,372
134 - 4,372 4,506
Reconciliation for level 3 financial assets at FVTPL carried at fair value
based on significant unobservable inputs are as follows:
2022 2021
US$'000 US$'000
At 1 January 3,709 3,854
Purchases 750 200
Disposal - (796)
Transfer to level 1 - (331)
Transfer to level 3 - -
Fair value adjustment (87) 782
At 31 December 4,372 3,709
The Group transferred its investment in Cambium Grove Growth Opps IV Limited
of approximately US$331,000 during the year ended 31 December 2021 from level
3 to level 1 as the quoted market prices of the underlying investment became
available upon the listing of the American depositary shares of Dingdong
(Cayman) Limited on the New York Stock Exchange.
Fair value adjustment of financial assets at FVTPL was recognised in the line
item 'other income, gains and losses, net' on the face of the consolidated
statement of profit or loss and other comprehensive income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
6. CAPITAL RISK MANAGEMENT
The Group's objective of managing capital is to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure
to reduce cost of capital.
In order to maintain or adjust the capital structure, the Group may return
capital to shareholders, issue new shares or sell assets to reduce debts.
The capital structure of the Group consists only of equity attributable to
owners of the Company, comprising share capital and reserves.
The gearing ratio at the end of the reporting period was as follows:
Year ended 31 December
2022 2021
US$'000 US$'000
Debt 215 282
Cash and cash equivalents (526) (1,513)
(311) (1,231)
Equity attributable to owners of the Company 5,442 6,312
Net debt to equity 0% 0%
7. REVENUE
The Group had no revenue from contracts with customers as defined under IFRS
15. An analysis of the Group's revenue from other sources is as follows:
Year ended 31 December
2022 2021
US$'000 US$'000
Dividend income from financial assets at FVTPL 193 145
8. SEGMENT Information
An operating segment is a component of the Group that is engaged in business
activities from which the Group may earn revenue and incur expenses, and is
identified on the basis of the internal management reporting information that
is provided to and regularly reviewed by the Group's chief operating decision
makers in order to allocate resources and assess performance of the segment.
For the years ended 31 December 2022 and 2021, the executive directors, who
were the chief operating decision makers for the purpose of resource
allocation and assessment of performance, have determined that the Group had
only one single business component/reportable segment as the Group was only
engaged in investment holding. The executive directors allocated resources and
assessed performance on an aggregated basis. Accordingly, no segment
information is presented.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
8. SEGMENT Information (CONTINUED)
The major operations and the revenue of the Group arise from Hong Kong. The
Board of Directors considers that most of the non-current assets (other than
the financial instruments) of the Group are located in Hong Kong.
9. OTHER INCOME, GAINS AND LOSSES, NET
Year ended 31 December
2022 2021
US$'000 US$'000
Bank interest income 1 1
Net realised and unrealised (losses)/gains on financial assets at FVTPL (444) 1,080
Foreign exchange gain/(loss), net 6 (6)
Others 9 -
(428) 1,075
10. STAFF COSTS
The aggregate staff costs (including directors' remuneration) of the Group
were as follows:
Year ended 31 December
2022 2021
US$'000 US$'000
Wages and salaries 270 291
Contributions to pension and provident fund 7 7
277 298
Compensation of key management personnel was as follows:
Year ended 31 December
2022 2021
US$'000 US$'000
Directors' fees 72 81
Other remuneration including
contributions to pension and provident fund - -
72 81
11. FINANCE COSTS
Year ended 31 December
2022 2021
US$'000 US$'000
Interest on lease liabilities 4 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
12. (LOSS)/PROFIT BEFORE INCOME TAX EXPENSE
(Loss)/profit before income tax expense has been arrived at
after charging:
Year ended 31 December
2022 2021
US$'000 US$'000
Auditor's remuneration 53 50
Depreciation of right-of-use assets 63 64
13. INCOME TAX EXPENSE
No provision for taxation has been made as the Group
did not generate any assessable profits that were subject to United Kingdom
Corporation Tax, Hong Kong Profits Tax or tax in other jurisdictions.
The tax charge for 2022 and 2021 can be reconciled to the (loss)/profit before
income tax expense per the consolidated statement of profit or loss and other
comprehensive income as follows:
Year ended 31 December
2022 2021
US$'000 US$'000
(Loss)/profit before income tax expense (843) 636
(Loss)/profit before tax calculated at Hong Kong Profits Tax rate of 16.5%
(2021: 16.5%)
(139) 105
Tax effect of non-deductible expenses 110 41
Tax effect of non-taxable income (34) (196)
Tax effect of share of losses of a joint venture - 1
Tax effect of estimated tax losses not recognised (63) 49
Tax charge for the year - -
As at 31 December 2022, the Group had estimated tax losses arising in Hong
Kong of approximately US$1,562,000 (2021: US$1,179,000) 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 deductible temporary differences of approximately US$44,000 (2021:
US$47,000) as it is not probable that taxable profits will be available
against which the deductible temporary differences can be utilised. The
deductible temporary differences can be carried forward indefinitely.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
14. (LOSS)/EARNINGS PER SHARE
The (loss)/earnings and weighted average number of ordinary shares used in the
calculation of basic and diluted (loss)/earnings per share were as follows.
Year ended 31 December
2022 2021
(Loss)/earnings for the year attributable to owners of (843) 636
the Company (US$'000)
( )
Number of shares ( )
Weighted average number of ordinary shares for the purposes of basic and 85,101,870 85,101,870
diluted (loss)/earnings per share
( )
(Loss)/earnings per share - basic and diluted US(0.99) cent US0.75 cent
Diluted loss per share was the same as basic loss per share for the years
ended 31 December 2022 and 2021 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 2022, nor
has any dividend been proposed since the end of the reporting period (2021:
nil).
16. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
US$'000
Cost
At 1 January 2021, 1 January 2022 and 31 December 2022 69
Accumulated depreciation
At 1 January 2021, 1 January 2022 and 31 December 2022 69
Carrying amount
At 31 December 2021 -
At 31 December 2022 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
17. INTEREST IN A JOINT VENTURE
2022 2021
US$'000 US$'000
Unlisted investment, at cost 257 257
Accumulated share of post-acquisition losses of the joint venture (153) (151)
Accumulated share of post-acquisition other comprehensive income of the joint
venture
(33) (6)
Share of net assets of the joint venture 71 100
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, 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
奧偉詩教育集團有限公司
奧偉詩教育咨詢(深圳)有限公司 The People's Republic of China (the "PRC") - 50% HK$5,000,000 Provision of education consulting and support services to kindergartens in the
PRC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
17. INTEREST IN A JOINT VENTURE (CONTINUED)
The aggregate amounts related to the joint venture that have been included in
the consolidated financial statements of the Group as extracted from the
financial statements of the joint venture, adjusted to reflect adjustments
made by the Group when applying the equity method of accounting, are set out
below:
2022 2021
Results of the joint venture for the year US$'000 US$'000
Revenue - -
Other income - -
Expenses (3) (16)
Loss for the year (3) (16)
Other comprehensive income for the year (55) 22
Total comprehensive income for the year (58) 6
Share of losses of the joint venture for the year (2) (8)
Share of other comprehensive income of the
joint venture for the year (27) 11
Accumulated share of results of the joint venture (153) (151)
Assets and liabilities of the joint venture at 31 December
2022 2021
US$'000 US$'000
Non-current assets - -
Current assets 738 806
Non-current liabilities - -
Current liabilities (596) (606)
Net assets 142 200
Included in the above amounts were:
Cash and cash equivalents 90 102
Depreciation and amortisation - -
Interest income - -
Interest expenses - -
Current financial liabilities (excluding trade and other payables)
596 606
Percentage of equity interest attributable to the Group 50% 50%
Share of net assets of the joint venture 71 100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2021
US$'000 US$'000
Financial assets at FVTPL
Listed investments, at fair value 134 764
Unlisted investments, at fair value 4,372 3,709
4,506 4,473
Less: Current portion (97) (624)
Non-current portion (Note) 4,409 3,849
19. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leased an office premise with a lease term of 3 years at a fixed
rate. The weighted average lessee's incremental borrowing rate applied to
lease liabilities recognised in the consolidated statement of financial
position was 5%. The carrying amounts of the Group's right-of-use assets and
lease liabilities were as follows:
Office premises
Right-of-use assets Lease liabilities
US$'000 US$'000
As at 1 January 2021 175 180
Lease payments - (69)
Depreciation charge (64) -
Interest expenses - 8
As at 31 December 2021 111 119
Lease payments - (68)
Depreciation charge (63) ) -
Interest expenses - 4
As at 31 December 2022 48 55
Future lease payments are due as follows:
Minimum lease Present
As at 31 December 2022 payments Interest value
US$'000 US$'000 US$'000
Not later than one year 56 (1) 55
Minimum lease Present
As at 31 December 2021 payments Interest value
US$'000 US$'000 US$'000
Not later than one year 69 (5) 64
Later than one year and not later than five years
56 (1) 55
125 (6) 119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2022
20. SUBSIDIARIES
Details of the subsidiaries of the Company were as follows:
Name Country of incorporation Principal activities
Proportion of ownership interest Proportion of voting power held
2022 2021 2022 2021
Worldsec Financial Services Limited The British 100% 100% 100% 100% Investment
Virgin holding
Islands
Worldsec Corporate Finance Limited The British 100%* 100%* 100%* 100%* Inactive
Virgin
Islands
Worldsec Investment (Hong Kong) Limited Hong Kong 100%* 100%* 100%* 100%* Investment
holding
Worldsec Investment (China) Limited
The British 100%* 100%* 100%* 100%* Investment
Virgin holding
Islands
* Indirectly held subsidiaries
21. CASH AND CASH EQUIVALENTS
2022 2021
US$'000 US$'000
Bank balances 525 1,512
Cash balances 1 1
526 1,513
Bank balances bore interest at the then prevailing market
rates ranging from 0.001% to 0.01% (2021: 0.001% to 0.01%) per annum and had
original maturities of three months or less.
22. OTHER PAYABLES AND ACCRUALS
2022 2021
US$'000 US$'000
Other payables and accruals 160 163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
23. SHARE CAPITAL
Number of Total
shares US$'000
Authorised:
Ordinary shares of US$0.001 each
At 1 January 2021, 1 January 2022 and 31 December 2022
60,000,000,000 60,000
Called up, issued and fully paid:
Ordinary shares of US$0.001 each
At 1 January 2021, 1 January 2022 and 31 December 2022
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 2022
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 "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$0.001 each in the share capital of the Company under the Scheme.
The share options vested six months from the date of grant and were then
exercisable within a period of 9.5 years.
The following table discloses the movements of the outstanding share options
under the Scheme during the years ended 31 December 2022 and 2021.
Number of options
Grantee Exercisable period Balance at Granted during the year Exercised during the Forfeited during the year Lapsed during the year Balance at Exercise price per share
1 January 2022 year 31 December 2022 (US$)
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
Number of options
Grantee Exercisable period Balance at 1 January 2021 Granted during the year Exercised during Forfeited during the year Lapsed during the year Balance at Exercise price per share
the year 31 December 2021 (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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
25. SHARE-BASED PAYMENTS (CONTINUED)
Of the total number of share options outstanding at the end of the year, all
(2021: all) had vested and were exercisable at the end of the year.
No share option was exercised during the years ended 31 December 2022 and
2021.
The weighted average remaining contractual life for the share options
outstanding at the end of the reporting period was 4.4 years (2021: 5.4 years)
Subsequent to the year end 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$0.034 per
share under the Scheme. The share options vested six months from the date of
grant and were then exercisable within a period of 9.5 years.
26. RELATED PARTY TRANSACTIONS
Other than the compensation of key management personnel as disclosed below,
the Group did not have any related party transactions during the years ended
31 December 2022 and 2021.
Compensation of key management personnel
Key management personnel are the directors only. The remuneration of directors
is set out in note 10 to the consolidated financial statements.
27.
CONTINGENT LIABILITIES
The Group had no material contingent liabilities at 31 December 2022 (2021:
nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
28. NOTES SUPPORTING STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents comprise:
2022 2021
US$'000 US$'000
Cash available on demand 526 1,513
(b) Reconciliation of liabilities arising from financing activities:
Lease liabilities
(note 19)
US$'000
At 1 January 2021 180
Changes from cash flows:
Repayment of principal portion of lease liabilities (61)
Repayment of interest portion of lease liabilities (8)
Total changes from financing cash flows (69)
Other changes:
Interest on lease liabilities 8
Addition on lease liabilities -
8
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 31 December 2022 55
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 78
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 75
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 62
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 71
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 78
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 68
Mr Willis is a financial services professional specialising in Asia and global
investing. He has been involved with Asia for over 35 years firstly with
Standard Chartered Bank and subsequently with the Asian specialist
stockbroker, Vickers da Costa and a number of other investment banking firms.
In 2011, Mr Willis founded Stelisdan Research Services to provide equity
research to high net worth investors whose assets are managed by Private
Wealth Managers. This covers all aspects of investment strategy, economics
and individual company research.
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. END ACSXDLFLXZLBBBDRecent news on Worldsec
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