Last checked at 29 Apr 2009 11:02
WORLDSEC LIMITED
Annual Report for the year ended 31 December 2008
CORPORATE INFORMATION
Board of Directors
Non-Executive Chairman
Alastair GUNN-FORBES
Executive Director
Henry Ying Chew CHEONG (Deputy Chairman)
Non-Executive Directors
Mark Chung FONG
HO Soo Ching
Company Secretary
May Yim CHAN
Registered Office Address
Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda
Registration Number
EC21466 Bermuda
Principal Bankers
The Hongkong and Shanghai Banking Corporation Limited
1 Queen's Road, Central, Hong Kong
Auditors
HLB Hodgson Impey Cheng
Chartered Accountants, Certified Public Accountants
31st Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong
Solicitors
Linklaters
One, Silk Street, London EC2Y 8HQ, England
Principal Share Registrar and Transfer Office
Appleby Management (Bermuda) Ltd.
Argle House, 41A Cedar Avenue, Hamilton HM12, Bermuda
International Branch Registrar
Capita Registers (Jersey) Limited
12 Castle Street, St Helier, Jersey, JE2 3RT
United Kingdom Transfer Agent
Capita Registrars
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England
Investor Relations
For further information about Worldsec Limited, please contact:
Henry Ying Chew CHEONG
Executive Director
Worldsec Group
6th Floor, New Henry House, 10 Ice House Street, Central, Hong Kong
| CONTENTS | ||
| Page | ||
| Chairman's statement | 1 | |
| Directors' report | 2 | |
| Statement of directors' responsibilities | 6 | |
| Independent Auditors' report | 7 | |
| Consolidated income statement | 8 | |
| Consolidated statement of recognized income and expense | 9 | |
| Consolidated balance sheet | 10 | |
| Balance sheet | 11 | |
| Consolidated cash flow statement | 12 | |
| Notes to the consolidated financial statements | 13 | |
| Biographical notes on the directors | 28 | |
CHAIRMAN'S STATEMENT
RESULTS
The audited consolidated loss for the year was US$258,000 compared with a loss of US$217,000 in previous year. Loss per share was US 2 cents (2007: Loss per share of US 2 cents).
THE YEAR IN REVIEW
For the year ended 31 December 2008, the Group incurred a net loss of US$258,000. This compares to the net loss of US$217,000 for the last year. At the end of 31 December 2008, Group shareholders' funds stood at US$1.71 million as compared to US$1.96 million at the end of December 2007.
PROSPECTS
During the year, the Board looked at few investment opportunities in Asia but found those valuation were relatively high. The financial crisis in the fourth quarter of 2008 saw prices returned to a more reasonable level and hence a better investment environment. The Board will continue to explore opportunities in the financial services and other new suitable business. Shareholders will be informed as soon as the Board has evaluated a suitable business proposition.
Alastair GUNN-FORBES
Non-Executive Chairman
20 April 2009
DIRECTORS' REPORT
The directors submit their annual report and the financial statements for the year ended 31 December 2008.
PRINCIPAL ACTIVITIES
The principal activity of Worldsec Limited (the "Company") is investment holding. Prior to the sale of most of its undertakings in the last quarter of 2002, the Group was engaged in agency broking in securities, futures and options dealing and provided corporate finance, financial advisory and nominee services.
REVIEW AND PROSPECTS
The results of the Company and its subsidiaries (the "Group") for the year are set out in the Consolidated Income Statement on page 8.
As stated in the Chairman's statement on page 1, the Board continues to explore opportunities in the financial services and other new suitable business. Shareholders will be informed as soon as the Board has evaluated a suitable business proposition.
DIRECTORS
The directors during the year and up to the date of this report were:
Non-Executive Chairman
Alastair Gunn-Forbes
Executive Director
Henry Ying Chew Cheong
Non-Executive Directors
Mark Chung Fong
Ho Soo Ching
Brief biographical notes on the directors serving at the date of this Report are set out on page 28.
Save as disclosed in note 17, none of the directors had during the year or at the end of the year material interest, directly or indirectly, in any contract of significance with the Company or any of its subsidiaries.
In accordance with the Bye-Laws of the Company, Mr. Alastair Gunn-Forbes will retire by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election.
DIRECTORS' INTERESTS
The interests of the individuals who were directors during the year in the issued share capital of the Company, including the interests of persons connected with a director (within the meaning of Section 346 of the United Kingdom Companies Act 1985 (as amended) as if the Company were incorporated in England), the existence of which is known to, or could with reasonable diligence be ascertained by, that director, whether or not held through another party, are as follows:
| At 1 January 2008 | At 31 December 2008 | ||
| No. of shares | No. of shares | ||
| Alastair Gunn-Forbes | 15,000 | 15,000 | |
| Henry Ying Chew Cheong | 950,000 | (Note) 950,000 | |
| Mark Chung Fong | Nil | Nil | |
| Ho Soo Ching | Nil | Nil |
| Note: | Henry Ying Chew Cheong owns, in addition to the beneficial interest in 950,000 ordinary shares of US$0.001 each in the Company, 2 ordinary shares of US$1 each in Grand Acumen Holdings Limited ("GAH"), representing 25% of the issued share capital of GAH. GAH beneficially owns 3,225,000 ordinary shares of US$0.001 each in the Company. |
| In addition, HC Investment Holdings Limited ("HCIH") is wholly owned by Henry Ying Chew Cheong. HCIH beneficially owns 2,751,000 ordinary shares of US$0.001 each in the Company. |
Save as disclosed above, none of the directors named above had an interest, whether beneficial or non-beneficial, in any shares or debentures of any group company at the beginning or at the end of the year. None of the directors named above, or members of their immediate families, held, exercised or were awarded any right to subscribe for any shares or debentures of the group companies during the year.
DIRECTORS' REMUNERATION
The remuneration of the directors of the Company for the year ended 31 December 2008 were as follows:
| Fees | Emoluments | Total | |||
| US$'000 | US$'000 | US$'000 | |||
| Alastair Gunn-Forbes | - | - | - | ||
| Henry Ying Chew Cheong | - | - | - | ||
| Mark Chung Fong | 17 | - | 17 | ||
| Ho Soo Ching | 17 | - | 17 | ||
| 34 | - | 34 |
PROVIDENT FUND AND PENSION CONTRIBUTION FOR DIRECTOR
During the year under review, there was no provident fund and pension contribution for the director.
SERVICE CONTRACTS
There are no existing 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). It is anticipated that service contracts between Company and its executive directors will be proposed together with the proposal to re-active the business activities of the Group.
MAJOR INTERESTS IN SHARES
At 14 April 2009, being the latest practicable date prior to the notice of meeting at which this annual report and financial statements are to be laid before the Company in general meeting, the Company was aware of the following direct or indirect interests (other than directors' interests) representing 3 per cent, or more of the Company's issued share capital:
| No. of shares | Percentage of issued share capital | ||
| Grand Acumen Holdings Limited | 3,225,000 | 24.10% | |
| HC Investment Holdings Limited | 2,751,000 | 20.60% | |
| First Taisec Securities (Asia) Limited | 630,000 | 4.70% | |
| The Bank of New York (Nominees) Limited | 550,000 | 4.10% |
GOING CONCERN
After making enquiries, the directors have considered that it is appropriate to prepare the financial statements on a basis other than that of a going concern as the Group no longer has a trading operation during the year. Details of the basis of preparation are set out in note 3 to the financial statements.
CORPORATE GOVERNANCE
The Company is eligible for exemption from the Financial Services Authority's requirements relating to corporate governance disclosures but the directors have decided to provide certain disclosures which are set out as below.
The board, with an independent non-executive chairman and three quarter of its members being non-executive directors, is committed to high standards of corporate governance. The Company has in the past applied all the principles set out in the Combined Code on Corporate Governance ("the Combined Code"). However, since the Group's withdrawal from its main business, certain aspects of the Combined Code became increasingly not applicable in the form that had been previously been applied. As a result, the responsibilities of the board committees including the remuneration and audit committees reverted to the board.
Following the decision in 2003 to liquidate Worldsec International Limited, the Group's main operating company in the past, certain aspects of the Group's established internal control procedures also became inapplicable as these procedures were formerly designed to cater for a trading operation. The board has implemented suitable alternative measures to safeguard the Group's assets. The spirit of corporate governance continues in effect but previous operating procedures have been modified as and when they became inapplicable.
POLICY ON REMUNERATION
As the Group has practically ceased business operations, the previous policy on remuneration for employees and directors which was designed to motivate employees' performance is no longer applicable. A new remuneration policy will be adopted as and when appropriate.
The Group's remuneration packages for directors are reviewed from time to time by, and are subject to approval by the board. Details of the directors' remuneration and provident fund and pension fund contributions are set out in this report on page 3.
WORLDSEC EMPLOYEE SHARE OPTION SCHEME 1997
No share options have been granted under the scheme since its adoption in a general meeting on 26 February 1997. No director held any option to subscribe for shares in the Company during the year.
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 which are sent to shareholders. There is regular dialogue with institutional investors and enquiries are dealt with in an informative and timely manner. All shareholders are encouraged to attend the Annual General Meeting at which directors are introduced and available for questions.
AUDITORS
The financial statements have been audited by Messrs. HLB Hodgson Impey Cheng. A resolution to re-appoint Messrs. HLB Hodgson Impey Cheng as auditors of the Company will be proposed at the forthcoming Annual General Meeting.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
20 April 2009
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimate that are reasonable and prudent;
- state whether applicable accounting standards have been followed; and
- prepare the financial statements on a going concern basis unless it is inappropriate to
presume that the Group will continue in business.
The directors confirm that they have met the above requirements.
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 control, for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
On behalf of the Board
Henry Ying Chew Cheong
Executive Director
20 April 2009
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF WORLDSEC LIMITED
(incorporated in Bermuda with limited liability)
We have audited the accompanying balance sheet of Worldsec Limited (the "Company") and the consolidated balance sheet of the Company and its subsidiaries (hereafter collectively referred to as the "Group") as at 31 December 2008 and the consolidated income statement, the consolidated statement of recognized income and expense and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors' responsibility for the consolidated financial statements
The directors of the Company are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and with the requirements of Section 90 of the Bermuda Companies Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors' responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume responsibility towards or accept liability to any other person of the contents of this report. We conducted our audit in accordance with International Standards on Auditing issued by the International Federation of Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of the Company and of the Group as at 31 December 2008 and of the Group's loss and cash flows for the year then ended in accordance with International Financial Reporting Standards.
Other matters
In forming our opinion, which is not qualified, we draw your attention to note 3 to the consolidated financial statements which states that the consolidated financial statements have been prepared on the basis that the Company is no longer a going concern.
HLB Hodgson Impey Cheng
Chartered Accountants
Certified Public Accountants
Hong Kong, 20 April 2009
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
| Year ended 31 December | |||||
| Notes | 2008 | 2007 | |||
| US$'000 | US$'000 | ||||
|
| |||||
| Interest income | 6 | 3 | 39 | ||
| Staff costs | 7 | (34) | (40) | ||
| Other expenses | (227) | (216) | |||
| Loss before tax | 8 | (258) | (217) | ||
| Income tax expense | 9 | - | - | ||
| Loss for the year | (258) | (217) | |||
| Loss per share - basic and diluted | 10 | (2) cents | (2) cents | ||
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 DECEMBER 2008
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Net income recognized directly in equity | - | - | |
| Loss for the year | (258) | (217) | |
| Total recognized income and expense for the year | (258) | (217) | |
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2008
| Notes | 2008 | 2007 | |||
| US$'000 | US$'000 | ||||
| Current assets | |||||
| Cash and bank balances | 13 | 2,045 | 2,282 | ||
| Current liabilities | |||||
| Other payables and accruals | 14 | (340) | (319) | ||
| Net current assets | 1,705 | 1,963 | |||
| Net assets | 1,705 | 1,963 | |||
| Capital and reserves | |||||
| Share capital | 15 | 13 | 13 | ||
| Contributed surplus | 16 | 9,646 | 9,646 | ||
| Special reserve | 16 | 625 | 625 | ||
| Accumulated losses | 16 | (8,579) | (8,321) | ||
| Equity shareholders' funds | 1,705 | 1,963 |
The financial statements on pages 8 to 27 were approved and authorized for issue by the Board of Directors on 20 April 2009 and signed on its behalf by:
| Alastair Gunn-Forbes Director | Henry Ying Chew Cheong Director |
The accompanying notes form an integral part of these financial statements.
BALANCE SHEET
AT 31 DECEMBER 2008
| Notes | 2008 | 2007 | |||
| US$'000 | US$'000 | ||||
| Current assets | |||||
| Interests in subsidiaries | 11 | 2,207 | 2,278 | ||
| Amounts due from subsidiaries | 12 | 98 | 30 | ||
| Cash and bank balances | 13 | 1,925 | 2,220 | ||
| 4,230 | 4,528 | ||||
| Current liabilities | |||||
| Other payables and accruals | 14 | (197) | (237) | ||
| Amounts due to subsidiaries | 12 | (2,328) | (2,328) | ||
| (2,525) | (2,565) | ||||
| Net current assets | 1,705 | 1,963 | |||
| Net assets | 1,705 | 1,963 | |||
| Capital and reserves | |||||
| Share capital | 15 | 13 | 13 | ||
| Contribution surplus | 16 | 9,646 | 9,646 | ||
| Accumulated losses | 16 | (7,954) | (7,696) | ||
| Equity shareholders' funds | 1,705 | 1,963 |
The financial statements on pages 8 to 27 were approved and authorized for issue by the Board of Directors on 20 April 2009 and signed on its behalf by:
| Alastair Gunn-Forbes Director | Henry Ying Chew Cheong Director |
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
| Year ended 31 December | |||||||||
| Note | 2008 | 2007 | |||||||
| US$'000 | US$'000 | ||||||||
| Cash flows from operating activities | |||||||||
| Loss for the year | (258) | (217) | |||||||
| Interest income | (3) | (39) | |||||||
| (261) | (256) | ||||||||
| Movements in working capital | |||||||||
| Decrease in other receivables | - | 2 | |||||||
| Increase/(decrease) in other payables and accruals | 21 | (9) | |||||||
| Net cash used in operating activities | (240) | (263) | |||||||
| Cash flows from investing activities | |||||||||
| Interest received | 3 | 39 | |||||||
| Net cash generated from investing activities | 3 | 39 | |||||||
| Net decrease in cash and cash equivalents | (237) | (224) | |||||||
| Cash and cash equivalents as at 1 January | 2,282 | 2,506 | |||||||
| Cash and cash equivalents as at 31 December Cash and bank balances | 13 | 2,045 | 2,282 | ||||||
The accompanying notes form an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
1. GENERAL INFORMATION
The Company is a public listed company incorporated in Bermuda and its shares are listed on the London Stock Exchange. The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information to the annual report.
The principal activity of the Company is investment holding. The principal activities of the Company's subsidiaries are set out in note 11.
2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the "IASB") and the International Financial Reporting Interpretations Committee (the "IFRIC") of the IASB that are relevant to its operations and effective for annual reporting periods beginning on 1 March 2007. The adoption of these new and revised Standards and Interpretations has no significant impact on the financial statements of the Group.
At the date of authorization of these financial statements, the following Standards and Interpretations were in issue but not yet effective:
| IAS 1 (Revised) | Presentation of Financial Statements 1 |
| IAS 23 (Revised) | Borrowing Costs 1 |
| IAS 27 (Revised) | Consolidated and Separate Financial Statements 2 |
| IFRS 8 | Operating Segments 1 |
| IFRIC - Int 15 | Agreements for the Construction of Real Estate 1 |
1 Effective for annual periods beginning on or after 1 January 2009.
2 Effective for annual periods beginning on or after 1 July 2009.
The directors anticipate that the adoption of these Standards and Interpretations in the future periods will have no material financial impact on the financial statements of the Group.
3. ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared on a basis other than that of a going concern which includes, where appropriate, writing down the Company's assets to net realisable value. Provision has also been made for any onerous contractual commitments at the balance sheet date. The financial statements do not include any provision for the future costs of terminating the business of the Company except to the extent that such costs were committed at the balance sheet date. Accordingly, all assets are classified as current assets.
The financial statements have been prepared in accordance with International Financial Reporting Standards. The Group's principal accounting policies are described below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Investments in subsidiaries are stated at cost less impairment losses in the Company's balance sheet.
Revenue
Revenue of the Group comprises agency commissions received and receivable from securities dealing on behalf of clients and income received and receivable from investment advisory businesses.
Revenue recognition
Commission income on dealing in securities is recognized on a trade date basis.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Revenue for rendering of services is recognized when the service is rendered.
Foreign currencies
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in United States Dollars ("USD"), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the period in which they arise except for:
- exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings;
- exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
- exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognized in the foreign currency translation reserve and recognized in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are expressed in USD using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such exchange differences are recognized in profit or loss in the period in which the foreign operation is disposed of.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the income statement.
Financial assets
The Company's financial assets are classified as loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of the financial assets are set out below.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired, and is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Under IAS 39, financial liabilities are generally classified as financial liabilities at fair value through profit or loss and other financial liabilities. The Company's financial liabilities are all classified as other financial liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.
Other financial liabilities
Other financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Company has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised directly in equity is recognised in income statement.
For financial liabilities, they are removed from the Company's balance sheet (when the obligation specified in the relevant contract is discharged, cancelled or expires). The difference between the carrying amount of the financial liability derecognised and the consideration received or receivable is recognised in the income statement.
Cash and bank balances
Cash and bank balances comprise cash at bank and on hand, demand deposits with banks and other short-term highly liquid investments that are directly convertible to a known amount of cash and are insignificant risk of change in value.
Trade and other receivables
Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest rate method, less impairment losses for bad and doubtful debts.
The impairment losses recognized is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Other payables
Other payables are initially measured at fair value and subsequently measured at the present value of the estimated future cash outflows.
Impairment of investment in a subsidiary
Assets that have an indefinite useful life or are not yet available for use are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Income tax
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 as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized 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 utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date 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 asset 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 realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. 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 reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Provisions
Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligations. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
4. FINANCIAL RISK MANAGEMENT
The Group employs a conservative strategy regarding its risk management. As the Group's exposure to market risk is kept at a minimal level, the Group has not used any derivatives or other instruments for hedging purposes. The Group does not hold or issue derivative financial instruments for trading purposes.
At 31 December 2008, the Group's principal financial instruments mainly consisted of cash and bank balances, and other payables and accruals.
Categories of financial instruments
| Financial assets | |||
| 2008 | 2007 | ||
| Loans and receivables (including cash and cash equivalents) | 2,045 | 2,282 | |
| Financial liabilities | |||
| Other payables and accruals (at amortized cost) | 340 | 319 |
Cash flow interest rate risk
At 31 December 2008, the Company's cash flow interest rate risk arises mainly from bank deposits, which is primarily short-term in nature.
At 31 December 2008, if interest rates on US dollar-denominated bank deposits had been 100 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been US$30 (2007: US$390) lower/higher, mainly as a result of higher/lower interest income on bank deposits.
Foreign currency risk
Certain financial assets and financial liabilities of the Group are denominated in foreign currencies. It did not have material transactions in foreign currency, nor did it enter into any foreign exchange forward contracts.
The carrying amounts of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date are as follows:
| Liabilities | Assets | |||||||
| 2008 | 2007 | 2008 | 2007 | |||||
| US$'000 | US$'000 | US$'000 | US$'000 | |||||
| HKD | 113 | 114 | 158 | 235 | ||||
| Others | 93 |
| 46 | 84 |
| 59 | ||
At 31 December 2008, if US dollar had weakened/strengthened by 1% against the HK dollar with all other variables held constant, post-tax profit for the year would have been US$455 (2007: US$1,214) higher/lower, mainly as a result of foreign exchange gains/losses on translation of HK Dollar-denominated bank balances and other payables and accruals. Profit is less sensitive to movement in US dollar/HK dollar exchange rates in 2008 than 2007 because of the decreased amount of US dollar denominated bank balances and other payables and accruals.
In virtue of the exposure on other foreign currency risk being minimal, the respective quantitative disclosures have not been prepared.
Capital risk management
The Group monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt which includes other payables and accruals as disclosed in note 14, less cash and bank balances as disclosed in note 13. Adjusted capital comprises all components of equity which includes share capital, reserves and retained earnings as disclosed in notes 15 and 16 respectively.
During 2008, the Group's strategy, which was unchanged from 2007, was to maintain zero debt-to-adjusted capital ratio. The debt-to-adjusted capital ratio as at 31 December 2008 and 2007 was as follows:
| 2008 | 2007 | |||
| Total debt | 340 | 319 | ||
| Less: Cash and bank balances | (2,045) | (2,282) | ||
| Net debt | - | - | ||
| Total equity and adjusted capital | 1,705 | 1,963 | ||
| Debt-to-adjusted capital ratio |
| 0% |
| 0% |
5. BUSINESS AND GEOGRAPHICAL SEGMENTS
No business and geographical segment analysis are presented for the years ended 31 December 2008 and 31 December 2007 as the Group has only maintained a minimum operation during the years.
6. INTEREST INCOME
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Interest income | |||
| Bank interest receivable | 3 | 39 | |
7. STAFF COSTS
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Wages and salaries | 34 | 40 | |
| Contributions to provident fund | - | - | |
| 34 | 40 | ||
| Directors' remuneration was as follow: | |||
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Fees | 34 | 40 | |
| Other remuneration including | |||
| contributions to pension and provident fund | - | - | |
| 34 | 40 | ||
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Salary excluding redundancy payment | - | - | |
| Contributions to provident fund | - | - | |
| - | - | ||
Disclosures on directors' remuneration, share options, long-term incentive schemes, pension contributions and pension entitlements are detailed under the headings of directors' remuneration, service contracts and provident fund and pension contributions for directors on page 3 and 4 of the Directors' Report.
8. LOSS BEFORE TAX
Loss before tax has been arrived at after charging/(crediting):
| Year ended 31 December | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Auditors' remuneration | 21 | 24 | |
| Operating lease rentals - premises | - | - | |
| Net exchange loss/(gain) | 3 |
| (5) |
9. INCOME TAX EXPENSE
No provision for taxation has been made as the Group did not generate any assessable profit for UK Corporation Tax, Hong Kong Profits Tax and tax in other jurisdictions.
No deferred tax liabilities are recognized in the financial statements as the Group and the Company did not have material temporary difference arising between the tax bases of liabilities and their carrying amounts as at 31 December 2008 (2007: Nil).
The taxation for the year can be reconciled to the loss before tax per the consolidated income statement as follows:
| Year ended 31 December | ||||
| 2008 | 2007 | |||
| US$'000 | US$'000 | |||
| Loss before tax | 258 | 217 | ||
| Loss before tax calculated at 16.5% (2007:17.5%) | 43 | 38 | ||
| Tax effect of estimated tax losses not recognized | (44) | (45) | ||
| Tax effect of income not taxable for tax purpose | 1 | 7 | ||
| Total current tax charge for the year | - | - | ||
10. LOSS PER SHARE
| Calculation of loss per share was based on the following: | ||||
| Year ended 31 December | ||||
| 2008 | 2007 | |||
| Loss for the year | (US$258,000) | (US$217,000) | ||
| Weighted average number of shares in issue | 13,367,290 | 13,367,290 | ||
| Loss per share - basic and diluted | (2) cents | (2) cents | ||
No diluted effect in loss per share as no diluting events occurred during either year.
11. INTERESTS IN SUBSIDIARIES
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| The Company | |||
| Unlisted investment in | |||
| a subsidiary at cost less impairment | 2,207 | 2,278 |
The following companies were subsidiaries of the Company as at 31 December 2008:
| Name | Country of incorporation and operation | Proportion of ownership interest | Proportion of voting power held | Principal activities | ||||
| Worldsec Financial Services Limited | British Virgin Islands | 100 | 100 | Investment holding | ||||
| Worldsec Corporate Finance Limited | British Virgin Islands | 100* | 100* | Inactive | ||||
| Worldsec International NV | Netherlands Antilles | 100* | 100* | Investment holding | ||||
| Worldsec International (Netherlands) BV | Netherlands | 100* | 100* | Investment holding | ||||
| Worldsec International (PH) BV | Netherlands | 100* | 100* | Investment holding |
* Indirectly held subsidiary
12. AMOUNTS DUE FROM / (TO) SUBSIDIARIES
The amounts were non-interest bearing, unsecured and have no fixed terms of repayment.
13. ANALYSIS OF CASH AND BANK BALANCES
| The Group | The Company | |||||||
|
| 2008 | 2007 | 2008 | 2007 | ||||
| US$'000 | US$'000 | US$'000 | US$'000 | |||||
| Cash and bank balances | ||||||||
| (excluding time deposits) | 2,045 | 2,282 | 1,925 | 2,220 | ||||
| Time deposits of maturity exceeding | ||||||||
| 1 day and less than 3 months | - | - | - | - | ||||
| Cash and bank balances | 2,045 | 2,282 | 1,925 | 2,220 | ||||
Cash and bank balances are at market interest rates with an original maturity of three months or less. The effective interest rate of the bank deposits is 0.14% per annum (2007: 1.63%).
14. OTHER PAYABLES AND ACCRUALS
The amounts are non-interest bearing, unsecured and repayable on demand.
15. SHARE CAPITAL
| US$ | |||
| Authorized: | |||
| Ordinary shares of US$0.001 each as at 1 January 2007, | |||
| 31 December 2007 and 31 December 2008 | 50,000,000 | ||
| Called up, issued and fully paid: | |||
| Ordinary shares of US$0.001 each as at 1 January 2007, | |||
| 31 December 2007 and 31 December 2008 | 13,367 | ||
16. RESERVES
Movements on reserves were as follows:
| Contributed | Special | Accumulated | Currency translation | ||||
| surplus | reserve | losses | reserve | ||||
| US$'000 | US$'000 | US$'000 | US$'000 | ||||
| The Group | |||||||
| Balance as at 1 January 2007 | 9,646 | 625 | (8,104) | - | |||
| Loss for the year | - | - | (217) | - | |||
| Balance as at 1 January 2008 | 9,646 | 625 | (8,321) | - | |||
| Loss for the year | - | - | (258) | - | |||
| Balance as at 31 December 2008 | 9,646 | 625 | (8,579) | - |
| Contributed | Accumulated | ||||||
| surplus | losses | ||||||
| US$'000 | US$'000 | ||||||
| The Company | |||||||
| Balance as at 1 January 2007 | 9,646 | (7,479) | |||||
| Loss for the year | - | (217) | |||||
| Balance as at 1 January 2008 | 9,646 | (7,696) | |||||
| Loss for the year | - | (258) | |||||
| Balance as at 31 December 2008 | 9,646 | (7,954) |
17. RELATED PARTY TRANSACTIONS
Save as those disclosed elsewhere in the financial statements, the contracts to which the Group and the Company was a party and in which a director, Mr. Henry Ying Chew Cheong, had material interests during the year, as disclosable under International Accounting Standard No. 24, is as follow:
| Name of | Nature of | ||||
| related party | transaction | 2008 | 2007 | ||
| US$'000 | US$'000 | ||||
| WAG Worldsec Corporate | |||||
| Finance Limited | Accounting fee | 15 | 11 |
Key management personnel of the Company are the directors of the Company only. The remuneration of directors is set out on the consolidated income statement and with additional disclosure in note 7.
18. CONTINGENT LIABILITIES
As at 31 December 2008, the Group and the Company had no material contingent liabilities (2007: Nil).
----------- End of notes -------------
BIOGRAPHICAL NOTES ON THE DIRECTORS
The Board has ultimate responsibility for the Group's affairs.
Brief biographical notes on the directors of the Company are set out below:
Alastair Gunn-Forbes - Non-Executive Chairman - aged 64
Mr. Gunn-Forbes has been associated with Asian regional stock markets since 1973 when he was a fund manager at Brown Shipley Ltd. Subsequently, he was a director of W.I Carr, Sons & Co. (Overseas) Ltd until 1985, since when he has held directorships with other Asian securities firms in the United Kingdom prior to joining the group in 1993.
Henry Ying Chew Cheong - Non-Executive Director and Deputy Chairman - aged 61
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 30 years of experience in the securities industry. Mr. Cheong and The Mitsubishi Bank in Japan (now known as The Bank of Tokyo-Mitsubishi UFJ Ltd) founded the Worldsec Group in 1991. In late 2002, Worldsec Group sold certain securities businesses to UOB Kay Hian and following that Mr. Cheong became the Chief Executive Officer of UOB Asia (Hong Kong) Ltd until early 2005. Prior to the formation of the Worldsec Group, Mr. Cheong was a director of James Capel (Far East) Ltd for five years with overall responsibility for Far East Sales. His earlier professional experience includes 11 years with Vickers da Costa Limited in Hong Kong latterly as Managing Director.
Mr. Cheong is an Independent Non-Executive Director of Cheung Kong (Holdings) Limited, Cheung Kong Infrastructure Holdings Limited, CNNC International Limited, Excel Technology International Holdings Limited, New World Department Store China Limited, SPG Land (Holdings) Limited and TOM Group Limited, all being listed companies in Hong Kong. Mr. Cheong was previously an independent non-executive director of FPP Japan Fund Inc. (formerly known as FPP Golden Asia Fund Inc. and Jade Asia Pacific Fund Inc.), a company listed in Ireland (resigned on 21 October 2008).
Mr. Cheong is , a member of Discipline Committee A of the Hong Kong Institute of Certified Public Accountants and also a member of the Securities and Futures Appeals Tribunal in Hong Kong. Mr. Cheong was a member of the Corporate Advisory Council of the Hong Kong Securities Institute (from 2002-2009), a member of the Advisory Committee (from 1993-1999) to the Securities and Futures Commission ("SFC"), a member of the board of Director 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).
BIOGRAPHICAL NOTES ON THE DIRECTORS
Mark Chung Fong - Non-Executive Director - aged 57
Mr. Fong is a partner of Grant Thornton, Certified Public Accountants, Hong Kong. He has over 20 years' experience in the accounting profession. Mr. Fong holds a Master of Science degree from the University of Surrey. He is a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow and a Past President of the Hong Kong Institute of Certified Public Accountants.
Ho Soo Ching - Non-Executive Director - aged 59
Mr. Ho has been a non-executive director of Worldsec since 1997. He is currently the chief executive officer of Manhattan Resources Limited, a Singapore public company involving in providing services to the coal mining sector in Indonesia. He has been involved in the financial services sector, principally in Singapore, for a number of years prior to joining Manhattan Resources in 2006.