REG - Worldsec Ld - Annual Financial Report 2016 <Origin Href="QuoteRef">WSL.L</Origin> - Part 3
28/04/2017 12:37
- Part 3: For the preceding part double click ID:nRSb7103Db
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of
discounting is immaterial.
Available-for-sale financial assets
These assets are non-derivative financial assets that are designated as available-for-sale or are not included in other
categories of financial assets. When the fair value of unlisted equity securities cannot be reliably measured because (a)
the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities
of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities
are stated at cost less any impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Impairment of financial assets
The Group assesses, at the end of each reporting period, whether there is any objective evidence that a financial asset is
impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that
has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of
the financial asset that can be reliably estimated.
Evidence of impairment may include:
• significant financial difficulty of the debtor;
• a breach of contract, such as a default or delinquency in interest or principal payments;
• granting concession to a debtor because of debtor's financial difficulty; or
• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.
For loans and receivables
An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is
measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows
discounted at the original effective interest rate. The carrying amount of a financial asset is reduced through the use of
an allowance account. When any part of a financial asset is determined as uncollectible, it is written off against the
allowance account for the relevant financial asset.
Impairment losses are reversed in subsequent periods when an increase in the asset's recoverable amount can be related
objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of
the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment
not been recognised.
For available-for-sale financial assets
For available-for-sale equity investments that are carried at cost, the amount of impairment loss is measured as the
difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the
current market rate of return for a similar financial asset. Such impairment loss shall not be reversed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (Continued)
Derecognition of financial assets
Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire, or the financial
assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial
assets.
On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration
received and receivable, for available-for-sale investments, and the cumulative gain or loss that had been recognised in
other comprehensive income is reclassified to profit or loss.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue
costs.
Financial liabilities
Financial liabilities (including other payables and accruals) are subsequently measured at amortised cost using the
effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial liability, or where
appropriate a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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.
Related parties
(a) A person or a close member of that person's family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of key management personnel of the Group or the Company's parent.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Related parties (Continued)
(b) An entity is related to the Group if any of the following conditions apply:
(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others);
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a
group of which the other entity is a member);
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit of the employees of the Group or an entity related to
the Group;
(vi) The entity is controlled or jointly controlled by a person identified in (a); or
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel
of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the
Group or to the Company's parent.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by,
that person in their dealings with the entity and include:
(i) that person's children and spouse or domestic partner;
(ii) children of that person's spouse or domestic partner; and
(iii) dependents of that person or that person's spouse or domestic partner.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described in note 3, management is required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to an accounting estimate are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are as follows:
(i) Depreciation
The Group depreciates property, plant and equipment using the straight-line method over the estimated useful lives,
starting from the date on which the assets are available for use. The estimated useful lives reflect the directors'
estimate of the periods that the Group intends to derive future economic benefits from the use of the property, plant and
equipment of the Group. The carrying amount of property, plant and equipment is disclosed in note 15.
(ii) Impairment of receivables (including amount due from a joint venture)
The Group maintains an allowance for estimated loss arising from the inability of its debtors to make the required
payments. The Group makes its estimates based on the ageing of its receivable balances, debtors' creditworthiness, and
historical write-off experience. If the financial condition of its debtors was to deteriorate so that the actual
impairment loss might be higher than expected, the Group would be required to revise the basis of making the allowance and
its future results would be affected.
(iii) Impairment of non-financial assets (including interest in a joint venture)
The Group assesses whether there are any indications of impairment for all non-financial assets at each reporting date.
Non-financial assets are tested for impairment when there are indications that the carrying amounts may not be
recoverable.
(iv) Impairment of available-for-sale financial assets
The directors review available-for-sale investments at the end of each reporting period to assess whether they are
impaired. The Group records impairment charges on available-for-sale equity investments when there is objective evidence
that an impairment indicator exists. The determination of whether the impairment indicator exists requires judgement. In
making this judgement, management of the Group takes into account factors such as significant changes with an adverse
effect that has taken place in technological, market, economic or legal environment in which the investee operates, and
that indicates that the cost of the investment in the equity instrument may not be recovered.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
5. FINANCIAL instruments
(a) Categories of financial instruments
2016 2015
US$'000 US$'000
Financial assets
Loans and receivables 1,135 2,266
Available-for-sale financial assets 1,784 1,125
2,919 3,391
Financial liabilities
Financial liabilities measured at amortised cost 125 441
(b) Financial risk management objectives
Management monitors and manages the financial risks relating to the operations of the Group through internal risk reports
which analyse exposures by degree and magnitude of risks. These risks include market risks (including foreign currency
risk, interest rate risk and price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are
set out below. The Group does not enter into or trade derivative financial instruments for speculative purposes.
Market risks
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest
rates and price risk.
There has been no change to the Group's exposure to market risks or the manner in which these risks are managed and
measured.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 are no significant
foreign exchange risk with respect to the USD.
The currencies giving rise to this risk were primarily Euro ("EUR") and 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
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
EUR - 83 - 13
GBP 73 84 - -
The following table details the Group's sensitivity to a 10% (2015: 10%) increase and decrease in USD against the relevant
foreign currencies. 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 foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts its translation as
at year end for a 10% (2015: 10%) change in the relevant foreign currencies rates. A positive number below indicates a
decrease in loss for the year where USD strengthens 10% (2015: 10%) against the relevant foreign currency. For a 10% (2015:
10%) weakening of USD against the relevant foreign currencies there would be an equal and opposite impact on the loss for
the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Market risks (Continued)
(i) Foreign currency risk (Continued)
2016 2015
US$'000 US$'000
Change in post-tax loss for the year
EUR impact - 7
GBP impact 7 8
(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 unquoted 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.
The directors consider that the exposure to price risk was insignificant. Hence, no sensitivity analysis on the exposure to
the Group's price risk is presented.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Credit risk
The Group's maximum exposure to credit risk which could cause a financial loss to the Group due to failure to discharge an
obligation by the counterparties arises from the carrying amount of the respective recognised financial assets as stated in
the consolidated statement of financial position.
The credit risk on liquid funds is limited because the major counterparties are banks with high credit ratings assigned by
international credit-rating agencies. As at 31 December 2016, approximately 94% (2015: 98%) 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 does not have any other significant concentration of credit risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an
appropriate liquidity risk management framework to meet the Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves, by regularly monitoring
forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
Liquidity table
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with
agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
5. FINANCIAL instruments (CONTINUED)
(b) Financial risk management objectives (Continued)
Liquidity table (Continued)
On demand or
less than 1 year
2016 2015
US$'000 US$'000
Other payables and accruals 125 441
(c) Fair value of financial instruments
The directors consider that the carrying amounts of loans and receivables and financial liabilities recognised in the
consolidated financial statements approximated their fair values.
6. Capital risk management
The Group's objective of managing capital is to safeguard the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
cost of capital.
In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or
sell assets to reduce debts.
The capital structure of the Group consists of equity attributable to owners of the Company only, comprising share capital
and reserves.
7. REVENUE
The Group's revenue represents dividend income from available-for-sale financial assets for the year. An analysis of the
Group's revenue from principal activities is as follows:
Year ended 31December
2016 2015
US$'000 US$'000
Dividend income from available-for-sale
financial assets 96 96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
8. SEGMENTInformation
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 2016 and 2015, the executive directors, who were the chief
operating decision makers for the purpose of resource allocation and assessment of performance, have determined that the
Group had only one single business component / reportable segment as the Group was only engaged in investment holding. The
executive directors allocated resources and assessed performance on an aggregated basis. Accordingly, no operating segment
is presented.
The major operations and the revenue of the Group arise from Hong Kong. The Board of Directors considers that most of the
non-current assets (other than the financial instruments) of the Group are located in Hong Kong.
9. OTHER INCOME
Year ended 31December
2016 2015
US$'000 US$'000
Other payables written back 99 -
10. STAFF COSTS
The aggregate staff costs (including directors' remuneration) of the Group were as follows:
Year ended 31 December
2016 2015
US$'000 US$'000
Wages and salaries 208 188
Contributions to pension and provident fund 5 3
Share-based payment expenses (note 23) 172 34
385 225
Compensation of key management personnel was as follows:
Year ended 31 December
2016 2015
US$'000 US$'000
Directors' fees 62 75
Share-based payment expenses 152 30
Other remuneration including
contributions to pension and provident fund - -
214 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
11. LOSS BEFORE INCOME TAX EXPENSE
Loss before income tax expense has been arrived at after charging:
Year ended 31 December
2016 2015
US$'000 US$'000
Auditor's remuneration 40 38
Depreciation of property, plant and equipment 23 23
Foreign exchange loss - 1
Loss on dissolution of subsidiaries (note 24) 12 -
Operating lease rental expenses in respect of office premises and warehouse 58 80
12. INCOME TAX EXPENSE
No provision for taxation has been made as the Group did not generate any assessable profits for United Kingdom Corporation
Tax, Hong Kong Profits Tax and tax in other jurisdictions.
The tax charge for 2016 and 2015 can be reconciled to the loss before income tax expense per the consolidated statement of
profit or loss and other comprehensive income as follows:
Year ended 31 December
2016 2015
US$'000 US$'000
Loss before income tax expense (514) (644)
Loss before tax calculated at 16.5% (2015: 16.5%) (85) (106)
Tax effect of non-deductible expenses 74 74
Tax effect of non-taxable income (32) (16)
Tax effect of deductible temporary differences 3 3
Tax effect of share of losses of a joint venture 1 9
Tax effect of estimated tax losses not recognised 39 36
Tax charge for the year - -
The tax losses of approximately US$481,000 (2015: US$244,000) can be carried forward indefinitely. No deferred tax asset
has been recognised in respect of the unused tax losses due to the unpredictability of future profit streams. No deferred
tax has been recognised in the consolidated financial statements as the Group did not have material temporary difference
arising between the tax bases of assets and liabilities and their carrying amounts as at 31 December 2016 and 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
13. LOSS PER SHARE
The loss and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share were as
follows.
Year ended 31 December
2016 2015
Loss for the year attributable to owners of theCompany (US$'000) (514) (644)
Weighted average number of ordinary shares forthe purposes of basic and diluted loss per share 56,734,580 56,734,580
Loss per share - basic and diluted (US) (0.91) cent (1.14) cents
Diluted loss per share was the same as basic loss per share for the years ended 31 December 2016 and 2015 as the exercise
price of the Company's share options (note 23) was higher than the average market price for shares for the year ended 31
December 2016 and the impact of the exercise of the Company's share options outstanding (note 23) had an anti-dilutive
effect on the basic loss per share presented for the year ended 31 December 2015.
14. DIVIDENDS
No dividend was paid or proposed during the year, nor has any dividend been proposed since the end of the reporting period
(2015: nil).
15. PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
US$'000
Cost
At 1 January 2015 69
Additions -
At 31 December 2015 and 1 January 2016 69
Additions -
At 31 December 2016 69
Accumulated depreciation
At 1 January 2015 2
Depreciation 23
At 31 December 2015 and 1 January 2016 25
Depreciation 23
At 31 December 2016 48
Carrying amount
At 31 December 2015 44
At 31 December 2016 21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
16. INTEREST IN A JOINT VENTURE
2016 2015
US$'000 US$'000
Unlisted investment, at cost 257 257
Share of post-acquisition losses (106) (101)
Share of post-acquisition other comprehensive loss (28) (19)
Share of net assets 123 137
Amount due from a joint venture 257 257
The amount due from a joint venture was unsecured, interest-free and repayable on demand.
Details of the joint venture at 31 December 2016 were as follows:
Name Country of incorporation and operation Proportion of ownership interest Paid-up registered capital Principal activities
Direct Indirect
Oasis Education Group Limited奧偉詩教育集團有限公司("Oasis Education") Hong Kong 50% - HK$4,000,000 Investment holding
奧偉詩教育咨詢(深圳)有限公司 The People's Republic of China (the "PRC") - 50% HK$5,000,000 Provision of education consulting and support services to kindergartens in the PRC
The contractual arrangement provides the Group with only the rights to the net assets of the joint arrangement, with the
rights to the assets and obligation for the liabilities of the joint arrangement resting primarily with Oasis Education.
Under IFRS 11, this joint arrangement is classified as a joint venture and has been included in the consolidated financial
statements using the equity method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
16. INTEREST IN A JOINT VENTURE (CONTINUED)
The aggregate amounts relating to the joint venture that have been included in the consolidated financial statements of the
Group as extracted from relating financial statements of the joint venture, adjusted to reflect adjustments made by the
Group when applying the equity method of accounting are set out below:
2016 2015
Results of the joint venture for the year US$'000 US$'000
Revenue - -
Other income 42 -
Expenses (52) (105)
Loss for the year (10) (105)
Other comprehensive loss for the year (18) (38)
Total comprehensive loss for the year (28) (143)
Share of losses of the joint venture for the year (5) (53)
Share of other comprehensive loss of the joint venture for the year (9) (19)
Accumulated share of results of the joint venture (106) (101)
Assets and liabilities of the joint venture at 31 December
2016 2015
US$'000 US$'000
Non-current assets - -
Current assets 844 835
Non-current liabilities - -
Current liabilities (599) (562)
Net assets 245 273
Included in the above amounts were:
Cash and cash equivalents 60 22
Depreciation and amortisation - -
Interest income - -
Interest expense - -
Current financial liabilities (excluding trade and other payables) - -
Percentage of equity interest attributable to the Group 50% 50%
Share of net assets of the joint venture 123 137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
17. AVAILABLE-FOR-SALE FINANCIAL ASSETS
2016 2015
US$'000 US$'000
Unlisted equity investments, - at cost 1,784 1,125
During the year ended 31 December 2015, the Group acquired equity interest in ayondo Holding AG ("Ayondo") for a total cash
consideration of CHF320,000 (equivalent to approximately US$325,000). During the year ended 31 December 2016, the Group
acquired additional equity interest in Ayondo for a total cash consideration of CHF160,050 (equivalent to approximately
US$163,000). Ayondo is a company incorporated in Switzerland and is involved in social trading and broking services for
contract-for-differences.
During the year ended 31 December 2016, the Group acquired equity interest in Velocity Mobile Limited ("Velocity") for a
total cash consideration of GBP337,120 (equivalent to approximately US$496,000). Velocity is a company incorporated in
England and Wales and offers a mobile application to consumers to discover and make real-time reservations and settle bills
at premier restaurants.
As at 31 December 2016 and 2015, the Group also owned equity interest in ICBC Specialised Ship Leasing Investment Fund in
an amount of US$800,000.
These investments were designated as available-for-sale financial assets. The investments are measured at cost less
impairment at each reporting date because the investments do not have quoted market prices in an active market, the
variability in the range of reasonable fair value estimates for the investments is significant and therefore their fair
value cannot be reliably measured. The directors had no intention to dispose of the available-for-sale financial assets at
the end of the reporting period.
The directors have assessed the impacts on the recoverable amount of the financial assets and concluded that no impairment
loss needed to be made.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
18. SUBSIDIARIES
Details of the subsidiaries of the Company at 31 December 2016 were as follows:
Name Country of incorporation and operation Proportion of ownership interest Proportion Principal activities
of voting power held
Worldsec Financial Services Limited British Virgin Islands 100% 100% Investment holding
Worldsec Corporate Finance Limited British Virgin Islands 100%* 100%* Inactive
Worldsec International NV Netherlands Antilles 100%* 100%* Inactive
Worldsec Investment (Hong Kong) Limited Worldsec Investment (China) Limited Hong Kong British Virgin Islands 100%* 100%* 100%* 100%* Investment holding Investment holding
* Indirectly held subsidiaries
19. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of financial position
were as follows:
2016 2015
US$'000 US$'000
Bank balances 847 1,987
Cash balances 1 1
848 1,988
Bank balances bore interest at the then prevailing market rates ranging from 0.001% to 0.01% (2015: 0.001% to 0.01%) per
annum and had original maturities of three months or less.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
20. OTHER PAYABLES AND ACCRUALS
2016 2015
US$'000 US$'000
Other payables (note) - 308
Accruals 125 133
125 441
Note:
During the year ended 31 December 2016, dividends declared by the Company which were unclaimed over a period of twelve
years from the date of declaration totalling approximately US$147,000 (2015: nil) were forfeited and transferred to
accumulated losses in accordance with the Bye-Laws of the Company.
21. SHARE CAPITAL
Number of shares Total valueUS$'000
Authorised:
Ordinary shares of US$0.001 each
At 1 January 2015, 31 December 2015, 1 January 2016 and 31 December 2016 60,000,000,000 60,000
Called up, issued and fully paid:
Ordinary shares of US$0.001 each
At 1 January 2015, 31 December 2015, 1 January 2016 and 31 December 2016 56,734,580 57
22. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
22. RESERVES (CONTINUED)
(c) Share option reserve comprises the fair value of the Company's share options granted which have yet to be exercised,
as further explained in the accounting policy for share-based payment transactions in note 3 to the consolidated financial
statements. The amount will either be transferred to the issued capital account and the share premium account when the
related options are exercised, or be transferred to accumulated losses should the related options expire or be forfeited.
(d) Exchange differences relating to the translation of the net assets of the Group's foreign operations (including a
joint venture) from their functional currencies to the Group's presentation currency were recognised directly in other
comprehensive income and accumulated in the foreign currency translation reserve. Such exchange differences accumulated in
the foreign currency translation reserve will be reclassified to profit or loss on the disposal of the foreign operations.
(e) The special reserve represents the amount arising from the difference between the nominal value of the issued share
capital of each subsidiary and the nominal value of the issued share capital of the Company along with the surplus arising
in a subsidiary on group reorganisation completed on 26 February 2007.
(f) Accumulated losses represent accumulated net gains and losses recognised in the profit or loss of the Group.
23. SHARE-BASED PAYMENTS
The Company operates an equity-settled share-based remuneration scheme for the employees and directors.
On 1 December 2015, the Company granted to certain eligible persons a total of 2,950,000 share options to subscribe for
ordinary shares of US$0.001 each in the share capital of the Company under the Worldsec Employee Share Option Scheme 1997
(the "Scheme") which was revised on 24 September 2014. The options vest six months from the date of grant and are then
exercisable within a period of 9.5 years.
The following table discloses the movements of the outstanding share options under the Scheme during the years ended 31
December 2016 and 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
23. SHARE-BASED PAYMENTS (CONTINUED)
Number of options
Grantee Exercisable period Balance at 1 January 2016 Granted during the year Exercised during the year Forfeited during the year Lapsed during the year Balance at 31 December 2016 Exercise price per share(US$)
Directors 1 June 2016 to 30 November 2025 2,500,000 - - - - 2,500,000 0.122
Employees 1 June 2016 to 30 November 2025 450,000 - - - - 450,000 0.122
2,950,000 - - - - 2,950,000
Number of options
Grantee Exercisable period Balance at 1 January 2015 Granted during the year Exercised during the year Forfeited during the year Lapsed during the year Balance at 31 December 2015 Exercise price per share(US$)
Directors 1 June 2016 to 30 November 2025 - 2,500,000 - - - 2,500,000 0.122
Employees 1 June 2016 to 30 November 2025 - 450,000 - - - 450,000 0.122
- 2,950,000 - - - 2,950,000
The fair value of options granted during the year ended 31 December 2015 was approximately US$206,000 and was determined at
the grant date using the Black-Scholes Option Pricing Model.
Significant inputs into the calculation included the weighted average share price of US$0.136, expected dividend yield of
0.000% and a volatility rate of 56.850%. The volatility assumption was based on the historical share price volatility
during the year ended 31 December 2015. Risk-free annual interest rate was determined at 1.762%.
The share-based payment expenses of approximately US$172,000 were charged to the profit or loss during the year ended 31
December 2016 (2015: US$34,000).
The options outstanding as at 31 December 2016 had a weighted average remaining contractual life of 8.5 years (2015: 9.5
years) and a weighted average exercise price of US$0.122 (2015: US$0.122).
Of the total number of options outstanding at the end of the year, all (2015: nil) had vested and were exercisable at the
end of the year.
No option was exercised during the years ended 31 December 2016 and 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
24. DISSOLUTION OF SUBSIDIARIES
On 7 December 2016, Worldsec International (Netherlands) B.V. and Worldsec International (PH) B.V., the then subsidiaries
of the Company, were dissolved. The net assets of these then subsidiaries at the date of dissolution were as follows:
2016
US$'000
Net assets of the subsidiaries under dissolution -
Foreign currency translation reserve released 12
Loss on dissolution of subsidiaries (12)
-
Net inflow of cash and cash equivalents in respect of the dissolution of subsidiaries -
25. RELATED PARTY TRANSACTIONS
The Group entered into the following transactions with a related party during the years ended 31 December 2016 and 2015:
Name of related company Nature of transaction
2016 2015
US$'000 US$'000
WAG Worldsec Corporate
Finance Limited (note) Accounting fee - 5
Note: Mr. Henry Ying Chew Cheong, a director of the Company, had beneficial interest (approximately 34%) in the related
company until 30 June 2016.
There was no outstanding balance with the related party as at 31 December 2015.
Compensation of key management personnel
Key management personnel of the Company are the directors of the Company only. The remuneration of directors is set out on
the consolidated statement of profit or loss and other comprehensive income and with additional disclosure in note 10 to
the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
26. OPERATING LEASE COMMITMENTS
Operating leases - lessee
At the reporting date, the Group had future aggregate minimum lease payments under non-cancellable operating leases in
respect of office premises and warehouse as follows:
2016 2015
US$'000 US$'000
Not later than one year 44 58
Later than one year and not later than five years - 44
44 102
The leases run for an initial period of 2 to 3 years (2015: 2 to 3 years), with an option to renew the office premises
lease upon expiry when all terms are renegotiated.
27. CONTINGENT LIABILITIES
The Group had no material contingent liabilities at 31 December 2016 (2015: nil).
INVESTMENT POLICY
The Company will invest in small to medium sized trading companies, both start-up/early stage growth and established, being
companies 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 region, where economic growth is expected to remain strong. The Company may also take advantage of
opportunities to invest in companies in other jurisdictions, such as the United Kingdom, which have close trading links
with Greater China and South East Asia. Investments will normally be in equity or preferred equity but if appropriate
convertible loans or preference shares may be utilised.
The Company has no intention to employ gearing, but reserves the right to gear the Company to a maximum level of 25 per
cent. of the last published net asset value of the Group should circumstances arise where, in the opinion of the Directors,
the use of debt would be to the advantage of the Company and the Shareholders as a whole.
The investment portfolio will consist primarily of unlisted companies but the Directors will also consider investing in
undervalued listed companies, if and when such an opportunity arises. Where suitable opportunities are identified,
investment in companies considering a stock market listing at the pre-initial public offering stage will be considered.
No more than 20 per cent. of the gross assets of the Group will be invested in any single investment. The Directors
consider that opportunities will arise to invest in investee companies by the issue of new Ordinary Shares at a discount of
no more than 10 per cent. of the mid market price at the time of agreement of their issue in exchange for new equity,
preferred equity or convertible instrument in the investee company.
Initial 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 will invest in 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.
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-ExecutiveChairman - aged 72
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 has 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, a recruitment company and also the Chairman of FutureBiogas, a green energy company.
Henry Ying Chew Cheong - Executive Director andDeputy Chairman - aged69
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 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 is an Independent Non-Executive Director of Cheung Kong Property Holdings Limited, Cheung Kong Infrastructure
Holdings Limited, CNNC International Limited, Greenland Hong Kong Holdings Limited,
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