TIDMWSL
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
Company's Website
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 120deg and a vertical field of view of 25deg. 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 140deg and a vertical field of view of up to
90deg. 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(TM) 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 ( ( ) , "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 No. of share options
(Note) (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 Nil Nil
Willis
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$0.034 per share under the Scheme. The
share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
Save as disclosed above, none of the above-named directors had
an interest, whether beneficial or non-beneficial, in any shares or
debentures of any Group companies at the beginning or at the end of
the year under review. Save as disclosed above, none of the
above-named directors, or members of their immediate families,
held, exercised or were awarded any right to subscribe for any
shares or debentures of any Group companies during the year.
The Board confirms that (i) the Company has complied with the
independence provisions set out in the Relationship Agreement since
it was entered into; and (ii) so far as the Company is aware, Mr
Cheong and his associates have complied with the independence
provisions set out in the Relationship Agreement since it was
entered into.
DIRECTORS' REMUNERATION
The remuneration of the directors for the year ended 31 December
2022 was as follows:
Share-based Other emoluments
Fees payment expenses Total
US$'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 GBP10,000 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 GBP10,000 per annum. The appointment may be
terminated on not less than six month notice in writing.
All directors are eligible to participate in the Group's bonus
arrangements under which bonuses may be granted at the discretion
of the Remuneration Committee and the Board. No bonus was
recommended for the year ended 31 December 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
No. of shares issued share capital
HC Investment Holdings Limited
(Note i) 20,000,000 23.5%
Yue Wai Keung 4,837,500 5.7%
Luis Chi Leung Tong 5,000,000 5.9%
Henry Ying Chew Cheong 11,722,620 13.8%
Aurora Nominees Limited (Note
ii) 18,770,000 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 The Audit Committee has (i)
interests in respect of its 50% reviewed the operational and
owned joint venture, Oasis Education financial performance and the
- At 31 December 2022, the Group latest development of Oasis
had an equity interest of US$71,000 Education and its subsidiary;
in and an amount of US$257,000 and (ii) assessed the assumptions
due from Oasis Education. These underlying the cash flow projection
carrying amounts were significant for Oasis Education and its
in the Group's context and their subsidiary as well as the reliability
valuations were subject to judgements, of such projection by comparing
estimation uncertainties and relevant historic budgets with
assumptions. actual results.
---------------------------------------
Valuation of investments classified The Audit Committee has (i)
as financial assets at fair value reviewed the operational and
through profit or loss ("FVTPL") financial performance and the
categorised within level 3 of latest development of the financial
the fair value hierarchy - At assets at FVTPL categorised
31 December 2022, the Group had within level 3 of the fair value
interests in the ICBC Shipping hierarchy; and (ii) reviewed
Fund, Animoca, the Homaer Fund, the valuation findings prepared
Innovusion, Velocity, Agrios by the management and in the
and Ayondo, all of which were case of Velocity by an independent
accounted for as financial assets valuer and discussed with the
at FVTPL categorised within the management and the independent
level 3 of the fair value hierarchy, valuer the methodologies, assumptions
totalling US$4,372,000 and carried and input parameters used in
at fair value. These carrying relation to such valuation.
amounts were significant in the
Group's context and 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
-------------------------------------------------------------------------------------
Balance Lapsed Balance Exercise
at 1 Granted Exercised Forfeited during at 31 price
Exercisable January during during during the December per share
Grantee period 2022 the year the year the year year 2022 (US$)
----------- -------------- ------------ ---------- ---------- ---------- -------- ------------ -----------
29 November
2019 to
28 May
Directors 2029 1,750,000 - - - - 1,750,000 0.034
1 June
2016 to
30 November
2025 2,500,000 - - - - 2,500,000 0.122
29 November
2019 to -
28 May
Employees 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
INDEPENT AUDITOR'S REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the consolidated financial statements of
Worldsec Limited (the "Company") and its subsidiaries (together the
"Group") set out on pages 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.
INDEPENT 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.
INDEPENT 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.
INDEPENT AUDITOR'S REPORT (CONTINUED)
____________________________________
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
AUDITOR'S responsibilitIES for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. This report is made
solely to you, as a body, in accordance with Section 90 of the
Bermuda Companies Act 1981, and for no other purpose. We do not
assume responsibility towards or accept liability to any other
person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional skepticism
throughout the audit. We also:
-- identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
-- obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group's internal
control.
-- evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the directors.
-- conclude on the appropriateness of the directors' use of
the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Group's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the
related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue
as a going concern.
-- evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner
that achieves fair presentation
-- obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
INDEPENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
We communicate with the Audit Committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, 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
Certi ed Public Accountants
Tang Tak Wah
Practising Certi cate Number P06262
Hong Kong, 25 April 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
Year ended 31 December
Notes 2022 2021
US$'000 US$'000
Revenue 7 193 145
Other income, gains and losses,
net 9 (428) 1,075
Staff costs 10 (277) (298)
Other expenses (325) (270)
Finance costs 11 (4) (8)
Share of losses of a joint venture 17 (2) (8)
(Loss)/profit before income tax
expense 12 (843) 636
Income tax expense 13 - -
---------- ------------
(Loss)/profit for the year (843) 636
---------- ------------
Other comprehensive income, net
of income tax
Items that may be reclassified subsequently
to profit or loss:
Share of other comprehensive income
of a joint venture 17 (27) 11
---------- ------------
Other comprehensive income for the
year, net of income tax (27) 11
---------- ------------
Total comprehensive income for the
year (870) 647
---------- ------------
(Loss)/profit for the year attributable
to:
Owners of the Company (843) 636
---------- ------------
Total comprehensive income for the
year attributable to:
Owners of the Company (870) 647
---------- ------------
(Loss)/earnings per share - basic 14 US (0.99) US 0.75 cent
and diluted cent
---------- ------------
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Notes 2022 2021
US$'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$'000
Capital and reserves
Share capital 23 85 85
Reserves 24 5,357 6,227
------- -------
Total equity 5,442 6,312
------- -------
The consolidated financial statements on pages 28 to 68 were
approved and authorised for issue by the Board of Directors on 25
April 2023 and signed on its behalf by:
Alastair Gunn-Forbes Henry Ying Chew Cheong
Director Director
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF changes in equity
FOR THE YEARED 31 DECEMBER 2022
Equity attributable to owners of the Company
Foreign
Contri- Share currency
Share Share buted option translation Special Accumulated
capital premium surplus reserve reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(note (note (note (note (note (note (note
23) 24) 24) 24) 24) 24) 24)
Balance at 1 January
2021 85 7,524 9,646 249 (17) 625 (12,447) 5,665
Profit for the
year - - - - - - 636 636
Other comprehensive
income for the
year
Share of other
comprehensive income
of a joint venture
(note 17) - - - - 11 - - 11
------- ------- ------- ------- ----------- ------- ----------- -------
Total comprehensive
income for the
year - - - - 11 - 636 647
Balance as at 31
December 2021 and
1 January 2022 85 7,524 9,646 249 (6) 625 (11,811) 6,312
Loss for the year - - - - - - (843) (843)
Other comprehensive
income for the
year
Share of other
comprehensive income
of a joint venture
(note 17) - - - - (27) - - (27)
Total comprehensive
income for the
year - - - - (27) - (843) (870)
Balance at 31
December 2022 85 7,524 9,646 249 (33) 625 (12,654) 5,442
------- ------- ------- ------- ----------- ------- ----------- -------
The accompanying notes form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Year ended 31 December
2022 2021
US$'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 (6 4 ) (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 YEARED 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, Annual Improvements to IFRSs 2018-2020
IFRS 9,
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 YEARED 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 Policies(1)
IFRS Practice Statement
2
Amendments to IAS 8 Definition of Accounting Estimates(1)
Amendments to IAS 12 Deferred tax related to assets
and liabilities arising from a
single transaction(1)
(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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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 YEARED 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
More than undiscounted
Within 1 1 year but cash flows Carrying
year or less than amount
on demand 5 years
US$'000 US$'000 US$'000 US$'000
As at 31 December
2022
Other payables and
accruals 160 - 160 160
Lease liabilities 56 - 56 55
----------- ------------ ----------------- ----------
216 - 216 215
----------- ------------ ----------------- ----------
Total contractual
More than undiscounted
Within 1 1 year but cash flows Carrying
year or less than amount
on demand 5 years
US$'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 YEARED 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$16,000 respectively.
The fair value of the Group's level 3 investments in the ICBC
Specialised Ship Leasing Investment Fund was estimated using income
approach with reference to their net asset value which was a
significant unobservable input.
The fair value of the Group's level 3 investments in the Homaer
Asset Management Master Fund SPC, the Hermitage Galaxy Fund SPC and
VS SPC Limited were estimated using market approach with the
significant inputs being the recent market transaction prices of
the underlying investment of the respective funds.
There were no changes in these valuation techniques during the
year ended 31 December 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
5. FINANCIAL instruments (CONTINUED)
(c) Fair value of financial instruments (Continued)
The following table provides an analysis of the Group's
financial instruments carried at fair value by level of Fair Value
Hierarchy:
2022
----------------------------------
Level Level Level Total
1 2 3
US$'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$331,000 during the year ended
31 December 2021 from level 3 to level 1 as the quoted market
prices of the underlying investment became available upon the
listing of the American depositary shares of Dingdong (Cayman)
Limited on the New York Stock Exchange.
Fair value adjustment of financial assets at FVTPL was
recognised in the line item 'other income, gains and losses, net'
on the face of the consolidated statement of profit or loss and
other comprehensive income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
6. CAPITAL RISK MANAGEMENT
The Group's objective of managing capital is to safeguard its
ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce cost of
capital.
In order to maintain or adjust the capital structure, the Group
may return capital to shareholders, issue new shares or sell assets
to reduce debts.
The capital structure of the Group consists only of equity
attributable to owners of the Company, comprising share capital and
reserves .
The gearing ratio at the end of the reporting period was as
follows:
Year ended 31 December
2022 2021
US$'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$'000
Dividend income from financial assets
at FVTPL 193 145
------------ -----------
8. SEGMENT Information
An operating segment is a component of the Group that is engaged
in business activities from which the Group may earn revenue and
incur expenses, and is identified on the basis of the internal
management reporting information that is provided to and regularly
reviewed by the Group's chief operating decision makers in order to
allocate resources and assess performance of the segment. For the
years ended 31 December 2022 and 2021, the executive directors, who
were the chief operating decision makers for the purpose of
resource allocation and assessment of performance, have determined
that the Group had only one single business component/reportable
segment as the Group was only engaged in investment holding. The
executive directors allocated resources and assessed performance on
an aggregated basis. Accordingly, no segment information is
presented.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
8. SEGMENT Information (CONTINUED)
The major operations and the revenue of the Group arise from
Hong Kong. The Board of Directors considers that most of the
non-current assets (other than the financial instruments) of the
Group are located in Hong Kong.
9. OTHER INCOME, GAINS AND LOSSES, NET
Year ended 31 December
2022 2021
US$'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$'000
Interest on lease liabilities 4 8
------------- -----------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
12. (LOSS)/PROFIT BEFORE INCOME TAX EXPENSE
(Loss)/profit before income tax expense has been arrived at
after charging:
Year ended 31 December
2022 2021
US$'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$47,000) as it is not probable that taxable
profits will be available against which the deductible temporary
differences can be utilised. The deductible temporary differences
can be carried forward indefinitely.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
14. (LOSS)/EARNINGS PER SHARE
The (loss)/earnings and weighted average number of ordinary
shares used in the calculation of basic and diluted (loss)/earnings
per share were as follows.
Year ended 31 December
2022 2021
(Loss)/earnings for the year attributable
to owners of
the Company (US$'000) (843) 636
----------- -----------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
and diluted (loss)/earnings per
share 85,101,870 85,101,870
(Loss)/earnings per share - basic US(0.99) US0.75 cent
and diluted 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. DIVIDS
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$'000
Cost
At 1 January 2021, 1 January 2022 and 31 December
2022 69
Accumulated depreciation
At 1 January 2021, 1 January 2022 and 31 December
2022 69
-------------
Carrying amount
At 31 December 2021 -
-------------
At 31 December 2022 -
-------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
17. INTEREST IN A JOINT VENTURE
2022 2021
US$'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:
Country Proportion Paid-up
of incorporation of ownership registered Principal
Name and operation interest Capital activities
---------------------- ------------------ ------------ -----------------
Direct Indirect
Oasis Education Group Investment
Limited Hong Kong 50% - HK$4,000,000 holding
( ) The People's - 50% HK$5,000,000 Provision
Republic of education
of China consulting
(the "PRC") and support
services
to kindergartens
in the PRC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
17. INTEREST IN A JOINT VENTURE (CONTINUED)
The aggregate amounts related to the joint venture that have
been included in the consolidated financial statements of the Group
as extracted from the financial statements of the joint venture,
adjusted to reflect adjustments made by the Group when applying the
equity method of accounting, are set out below:
2022 2021
Results of the joint venture for the US$'000 US$'000
year
Revenue - -
Other income - -
Expenses (3) (16)
-------- --------
Loss for the year (3) (16)
Other comprehensive income for the year (55) 22
-------- --------
Total comprehensive income for the year (58) 6
-------- --------
Share of losses of the joint venture
for the year (2) (8)
------- ------
Share of other comprehensive income
of the
joint venture for the year (27) 11
------
Accumulated share of results of the
joint venture (153) (151)
------- ------
Assets and liabilities of the joint venture at
31 December
2022 2021
US$'000 US$'000
Non-current assets - -
Current assets 738 806
Non-current liabilities - -
Current liabilities (596) (606)
-------- ------------
Net assets 142 200
-------- ------------
Included in the above amounts were:
Cash and cash equivalents 90 102
Depreciation and amortisation - -
Interest income - -
Interest expenses - -
Current financial liabilities (excluding
trade and other payables) 596 606
-------- ------------
Percentage of equity interest attributable
to the Group 50% 50%
Share of net assets of the joint venture 71 100
-------- ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2021
US$'000 US$'000
Financial assets at FVTPL
Listed investments, at fair value 134 764
Unlisted investments, at fair value 4,372 3,709
------- -------
4,506 4,473
------- -------
Less: Current portion (97) (624)
------- -------
Non-current portion (Note) 4,409 3,849
------- -------
19. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leased an office premise with a lease term of 3 years
at a fixed rate. The weighted average lessee's incremental
borrowing rate applied to lease liabilities recognised in the
consolidated statement of financial position was 5%. The carrying
amounts of the Group's right-of-use assets and lease liabilities
were as follows:
Office premises
Right-of-use Lease liabilities
assets
US$'000 US$'000
As at 1 January 2021 175 180
Lease payments - (69)
Depreciation charge (64) -
Interest expenses - 8
------------ -----------------
As at 31 December 2021 111 119
Lease payments - (68)
Depreciation charge (63) ) -
Interest expenses - 4
As at 31 December 2022 48 55
------------ -----------------
Future lease payments are due as follows:
Minimum Present
As at 31 December 2022 lease Interest value
payments
US$'000 US$'000 US$'000
Not later than one year 56 (1) 55
--------- ---------- -------
Minimum Present
As at 31 December 2021 lease Interest value
payments
US$'000 US$'000 US$'000
Not later than one year 69 (5) 64
Later than one year and
not later than five years 56 (1) 55
--------- ---------- -------
125 (6) 119
--------- ---------- -------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
20. SUBSIDIARIES
Details of the subsidiaries of the Company were as follows:
Proportion Proportion
Country of ownership of voting Principal
Name of incorporation interest power held activities
---------------------- ------------------ -------------- -----------
2022 2021 2022 2021
The British
Worldsec Financial Virgin Investment
Services Limited Islands 100% 100% 100% 100% holding
Worldsec Corporate The British 100%* 100%* 100%* 100%* Inactive
Finance Limited Virgin
Islands
Worldsec Investment Hong Kong 100%* 100%* 100%* 100%* Investment
(Hong Kong) Limited holding
Worldsec Investment The British 100%* 100%* 100%* 100%* Investment
(China) Limited Virgin holding
Islands
* Indirectly held subsidiaries
21. CASH AND CASH EQUIVALENTS
2022 2021
US$'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$'000
Other payables and accruals 160 163
------- -------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
23. SHARE CAPITAL
Number of Total
shares US$'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 YEARED 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$0.001 each in the share capital of
the Company under the Scheme. The share options vested six months
from the date of grant and were then exercisable within a period of
9.5 years.
The following table discloses the movements of the outstanding
share options under the Scheme during the years ended 31 December
2022 and 2021.
Number of options
----------------------------------------------------------------------------------
Exercise
Balance Granted Exercised Forfeited Lapsed Balance price
at during during during during at per
Exercisable 1 January the the the the 31 December share
Grantee period 2022 year year year year 2022 (US$)
----------- -------------- ------------ -------- ---------- ---------- -------- ------------- ---------
29 November
2019 to
28 May
2029
1,750,000 - - - - 1,750,000 0.034
1 June
2016 to
30 November
Directors 2025 2,500,000 - - - - 2,500,000 0.122
29 November
2019 to
28
May 2029
300,000 - - - - 300,000 0.034
1 June
2016 to
30 November
Employees 2025 450,000 - - - - 450,000 0.122
------------ -------- ---------- ---------- -------- -------------
5,000,000 - - - - 5,000,000
------------ -------- ---------- ---------- -------- -------------
Number of options
----------------------------------------------------------------------------------
Exercise
Balance Granted Exercised Forfeited Lapsed Balance price
at 1 during during during during at per
Exercisable January the the the the 31 December share
Grantee period 2021 year year year year 2021 (US$)
----------- -------------- ------------ -------- ---------- ---------- -------- ------------- ---------
29 November
2019 to
28 May
2029
1,750,000 - - - - 1,750,000 0.034
1 June
2016 to
30 November
Directors 2025 2,500,000 - - - - 2,500,000 0.122
29 November
2019 to
28
May 2029
300,000 - - - - 300,000 0.034
1 June
2016 to
30 November
Employees 2025 450,000 - - - - 450,000 0.122
------------ -------- ---------- ---------- -------- -------------
5,000,000 - - - - 5,000,000
------------ -------- ---------- ---------- -------- -------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 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$0.034 per share under the Scheme. The
share options vested six months from the date of grant and were
then exercisable within a period of 9.5 years.
26. RELATED PARTY TRANSACTIONS
Other than the compensation of key management personnel as
disclosed below, the Group did not have any related party
transactions during the years ended 31 December 2022 and 2021.
Compensation of key management personnel
Key management personnel are the directors only. The
remuneration of directors is set out in note 10 to the consolidated
financial statements.
27. CONTINGENT LIABILITIES
The Group had no material contingent liabilities at 31 December
2022 (2021: nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
28. NOTES SUPPORTING STATEMENT OF CASH FLOWS
(a) Cash and cash equivalents comprise:
2022 2021
US$'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.
BIOGRAPH ICAL 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
ACSXDLFLXZLBBBD
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