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Worldsec Ld (WSL)

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Tuesday 03 May, 2011

Worldsec Ld

Annual Financial Report

RNS Number : 7217F
Worldsec Ld
29 April 2011
 



 

 

 

 

 

 

WORLDSEC LIMITED

 

 

 

 

 

 

 

 

 

 

 

     Annual Report for the year ended 31 December 2010

 

 

 



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

 

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

 


 

 

 

 

 

Page

 

 

 

Chairman's statement

 

1

Directors' report

 

2

Statement of directors' responsibilities

 

6

Independent auditors' report

 

7

Consolidated statement of comprehensive income

 

8

Consolidated statement of financial position

 

9

Statement of financial position

 

10

Consolidated statement of changes in equity

 

11

Consolidated statement of cash flows

 

12

Notes to the consolidated financial statements

 

13

Biographical notes on the directors

 

38

 

 

 

 


CHAIRMAN'S STATEMENT                                     

 

 

RESULTS

 

The audited consolidated loss for the year was US$187,000 compared with a loss of US$300,000 in previous year. Loss per share was US 1 cent (2009: Loss per share of US 2 cents).

 

 

THE YEAR IN REVIEW

 

For the year ended 31 December 2010, the Group incurred a net loss of US$187,000. This compares to the net loss of US$300,000 for the last year. The operating expenses was reduced by US$105,000 as compared to the last year. At the end of 31 December 2010, Group shareholders' funds stood at US$1.22 million as compared to US$1.41 million at the end of December 2009.

 

 

PROSPECTS

 

During the year, the Board continued to explore opportunity 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 2011

 

 

 

 



DIRECTORS' REPORT                                               

 

 

The directors submit their annual report and the financial statements for the year ended 31 December 2010.

 

 

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 Statement of Comprehensive Income 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 (resigned on 31 July 2010)

 

Brief biographical notes on the directors serving at the date of this Report are set out on page 38.

 

Save as disclosed in note 17, none of the directors had during the year or at the end of the year a material interest, directly or indirectly, in any contract of significance with the Company or any of its subsidiaries.

 

           



DIRECTORS' REPORT                                               

 

 

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 2010

At 31 December 2010



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 2010 were as follows:


Fees


Emoluments


Total


US$'000


US$'000


US$'000







Alastair Gunn-Forbes

-


-


-

Henry Ying Chew Cheong

-


-


-

Mark Chung Fong

15


-


15

Ho Soo Ching

9


-


9








24


-


24

                                                                                

 

                                                                                                     

PROVIDENT FUND AND PENSION CONTRIBUTION FOR DIRECTOR

 

During the year under review, there was no provident fund and pension contribution for the director.



DIRECTORS' REPORT                                               

 

 

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 11 March 2011, 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 two-thirds 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.



DIRECTORS' REPORT                                               

 

 

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 2011

 



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 2011

 



INDEPENDENT AUDITORS' REPORT                    

 

 

TO THE MEMBERS OF WORLDSEC LIMITED

(incorporated in Bermuda with limited liability)

 

We have audited the consolidated financial statements of Worldsec Limited (the "Company") and its subsidiaries (hereafter collectively referred to as the "Group") set out on pages 8 to 37, which comprise the consolidated and company statements of financial position as at 31 December 2010, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

 

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, and for such internal control as directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors' responsibility

 

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 consolidated financial statements give a true and fair view of the financial position of the Company and of the Group as at 31 December 2010 and of the Group's financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

 

Emphasis of matters

 

Without qualifying our opinion, 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 2011

 



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 




Year ended 31 December



Notes

2010


2009




US$'000


US$'000







Other gain


7

4


  -

Staff costs


8

(24)


(33)

Other expenses



(167)


(267)







Loss before tax


9

(187)


(300)

Income tax expense


10

-


-







Loss for the year



(187)


(300)







Total comprehensive income for the year



(187)


(300)







Loss attributable to :






Owners of the Company



(187)


(300)







Total comprehensive income attributable to :






Owners of the Company



(187)


(300)













Loss per share - basic and diluted


11

(1) cent


(2) cents

 

 

 

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.

 



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2010                                              

 

 



Notes

2010


2009




US$'000


US$'000







Current assets






Cash and bank balances


14

1,482


1,687







Current liabilities






Other payables and accruals



(264)


(282)







Net current assets



1,218


1,405







Net assets



1,218


1,405







Capital and reserves






Share capital


15

13


13

Contributed surplus



9,646


9,646

Special reserve



625


625

Accumulated losses



(9,066)


(8,879)







Total equity



1,218


1,405

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                                       

The financial statements on pages 8 to 37 were approved and authorized for issue by the Board of Directors on 20 April 2011 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.



STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2010                                              

 

 



Notes

2010


2009




US$'000


US$'000







Current assets






Interests in subsidiaries


12

2,125


2,171

Amounts due from subsidiaries


13

183


154

Cash and bank balances


14

1,424


1,612










3,732


3,937

Current liabilities






Other payables and accruals



(186)


(204)

Amounts due to subsidiaries


13

(2,328)


(2,328)










(2,514)


(2,532)







Net current assets



1,218


1,405







Net assets



1,218


1,405







Capital and reserves






Share capital


15

13


13

Contribution surplus


16

9,646


9,646

Accumulated losses


16

(8,441)


(8,254)







Total equity



1,218


1,405

 

 

 

 

                                                                                                                                                       

The financial statements on pages 8 to 37 were approved and authorized for issue by the Board of Directors on 20 April 2011 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 STATEMENT OF changes in equity

FOR THE YEAR ENDED 31 DECEMBER 2010       

 

 


Share


Contributed


Special


Accumulated





capital


surplus


reserve


losses


Total



US$'000


US$'000


US$'000


US$'000


US$'000





(Note 16)








Balance at 1 January 2009

13


9,646


625


(8,579)


1,705


Loss for the year and total comprehensive income for the year

 

-


 

-


 

-


 

(300)


 

(300)













Balance at 1 January 2010

13


9,646


625


(8,879)


1,405


Loss for the year and total comprehensive income for the year

 

-


 

-


 

-


 

(187)


 

(187)













Balance at 31 December 2010

13


9,646


625


(9,066)


1,218


           

 

 

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.



CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2010       

 

 



Year ended 31 December


Note

2010


2009



US$'000


US$'000

Cash flows from operating activities





Loss for the year


(187)


(300)








(187)


(300)

Movements in working capital





(Decrease) in other payables and accruals


(18)


(58)





Net cash used in operating activities

(205)


(358)






Net decrease in cash and cash equivalents


(205)


(358)






Cash and cash equivalents at 1 January


1,687


2,045






Cash and cash equivalents at 31 December

14

1,482


1,687

                                                                                         

  



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

1.      GENERAL INFORMATION

 

The Company is a public listed company incorporated in Bermuda and its shares are listed on the London Stock Exchange. The address of the registered office of the Company is Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda and the address of the principal place of business of the Company is 6th Floor, New Henry House, 10 Ice House Street, Central, Hong Kong.

 

The principal activity of the Company is investment holding. The principal activities of the Company's subsidiaries are set out in note 12 to the consolidated financial statement.

 

The functional currency of the Company is Hong Kong Dollars. The consolidated financial statements of the Group are presented in United States Dollars ("US$"), which is a currency widely and commonly recognised in the global economy and is freely convertible into a number of foreign currencies. Therefore, the directors consider the presentation in US$ to be more useful for its current and potential investors.

 

 

2.      Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs)

 

2.1     New and revised IFRSs applied with no material effect on the consolidated financial statements

 

The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

 

IFRS 3 (revised in 2008) Business Combinations

 

IFRS 3(2008) has been applied in the current year prospectively to business combinations for which the acquisition date is on or after 1 January 2010 in accordance with the relevant transitional provisions.

 

IFRS 3(2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition (previously referred to as 'minority' interests) either at fair value or at the non-controlling interests' share of recognised identifiable net assets of the acquiree.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.       Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.1     New and revised IFRSs applied with no material effect on the consolidated financial statements (continued)

 

IFRS 3 (revised in 2008) Business Combinations (continued)

 

IFRS 3(2008) changes the recognition and subsequent accounting requirements for contingent consideration. Previously, contingent consideration was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured reliably; any subsequent adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised Standard, contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of the acquisition only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the date of acquisition. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

 

IFRS 3(2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree.

 

IFRS 3(2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred, whereas previously they were accounted for as part of the cost of the acquisition.

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.       Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.1     New and revised IFRSs applied with no material effect on the consolidated financial statements (continued)

 

IAS 27 (revised in 2008) Consolidated and Separate Financial Statements

 

The application of IAS 27(2008) has resulted in changes in the Group's accounting policies for changes in ownership interests in subsidiaries. 

 

Specifically, the revised Standard has affected the Group's accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in profit or loss. Under IAS 27(2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.

 

When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss.

 

These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions.

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.       Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.1     New and revised IFRSs applied with no material effect on the consolidated financial statements (continued)

 

IAS 28 (revised in 2008) Investments in Associates

 

The principle adopted under IAS 27(2008) (see above) that a loss of control is recognised as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to IAS 28. Therefore, when significant influence over an associate is lost, the investor measures any investment retained in the former associate at fair value, with any consequential gain or loss recognised in profit or loss.

 

Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Additional Exemptions for First-time Adopters

 

The amendments provide two exemptions when adopting IFRSs for the first time relating to oil and gas assets, and the determination as to whether an arrangement contains a lease.

 

Amendments to IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions

 

The amendments clarify the scope of IFRS 2, as well as the accounting for group cash-settled share-based payment transactions in the separate (or individual) financial statements of an entity receiving the goods or services when another group entity or shareholder has the obligation to settle the award.

 

Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2008)

 

The amendments clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale.

 

Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

 

The amendments provide clarification on two aspects of hedge accounting: identifying inflation as a hedged risk or portion, and hedging with options.

 

IFRIC 17 Distributions of Non-cash Assets to Owners

The Interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.       Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.1     New and revised IFRSs applied with no material effect on the consolidated financial statements (continued)

 

IFRIC 18 Transfers of Assets from Customers

 

The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from 'customers' and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognise the asset at its fair value on the date of the transfer, with the credit being recognised as revenue in accordance with IAS 18 Revenue.

 

Improvements to IFRSs issued in 2009

The application of Improvements to IFRSs issued in 2009 has not had any material effect on amounts reported in the consolidated financial statements.

 

2.2    New and revised IFRSs in issue but not yet effective

 

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

 

Amendments to IFRSs

Improvements to IFRSs issued in 20101

Amendments to IFRS 1

Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters2

Amendments to IFRS 7

Disclosures - Transfers of Financial Assets3

IFRS 9 (as amended in 2010)

Financial Instruments4

Amendments to IAS 12

Deferred Tax: Recovery of Underlying Assets7

IAS 24 (revised in 2009)

Related Party Disclosures5

Amendments to IAS 32

Classification of Rights Issues6

Amendments to IFRIC 14

Prepayments of a Minimum Funding Requirement4

IFRIC 19

Extinguishing Financial Liabilities with Equity Instruments2

 

1 Effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate

2 Effective for annual periods beginning on or after 1 July 2010.

3 Effective for annual periods beginning on or after 1 July 2011.

4 Effective for annual periods beginning on or after 1 January 2013.

5 Effective for annual periods beginning on or after 1 January 2011.

6 Effective for annual periods beginning on or after 1 February 2010.

7 Effective for annual periods beginning on or after 1 January 2012.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.       Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.2    New and revised IFRSs in issue but not yet effective(continued)

 

IFRS 9 Financial Instruments issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

 

·   IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

 

·   The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognised in profit or loss.

 

IFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

 

The directors anticipate that IFRS 9 that will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard will have nosignficant impact on amounts reported in respect of the Groups' financial assets and financial liabilities.

 

The amendments to IFRS 7 titled Disclosures - Transfers of Financial Assets increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

2.      Application OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS(IFRSs) (CONTINUED)

 

2.2    New and revised IFRSs in issue but not yet effective(continued)

 

The directors do not anticipate that these amendments to IFRS 7 will have asignificant effect on the Group's disclosures. However, if the Group enters into any transactions involvingtransfers of financial assets in the future, disclosures regarding those transfers may be affected.

 

The amendments to IAS 12 titled Deferred Tax: Recovery of Underlying Assets mainly deal with the measurement of deferred tax for investment properties that are measured using the fair value model in accordance with IAS 40 Investment Property. Based on the amendments, for the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties measured using the fair value model, the carrying amounts of the investment properties are presumed to be recovered through sale, unless the presumption is rebutted in certain circumstances. The directors anticipate that the amendments to IAS 12 will have no impact on the consolidated financial statements.

 

IAS 24 Related Party Disclosures (as revised in 2009) modifies the definition of a related party and simplifies disclosures for government-related entities.

 

The disclosure exemptions introduced in IAS 24 (as revised in 2009) do not affect the Group because the Group is not a government-related entity. However, disclosures regarding related party transactions and balances in these consolidated financial statements may be affected when the revised version of the Standard is applied in future accounting periods because some counterparties that did not previously meet the defintion of a related party may come within the scope of the Standard.

 

The amendments to IAS 32 titled Classification of Rights Issues address the classification of certain rights issues denominated in a foreign currency as either an equity instrument or as a financial liability. To date, the Group has not entered into any arrangements that would fall within the scope of the amendments. However, if the Group does enter into any rights issues within the scope of the amendments in future accounting periods, the amendments to IAS 32 will have an impact on the classification of those rights issues.

 

IFRIC 19 provides guidance regarding the accounting for the extinguishment of a financial liability by the issue of equity instruments. To date, the Group has not entered into transactions of this nature. However, if the Group does enter into any such transactions in the future, IFRIC 19 will affect the required accounting. In particular, under IFRIC 19, equity instruments issued under such arrangements will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the fair value of equity instruments issued will be recognised in profit or loss.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

3.      SIGNIFICANT 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 values, as the Group no longer has a trading operation. Provision has also been made for any onerous contractual commitments at the end of the reporting period. 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 end of the reporting period. Accordingly, all assets are classified as current assets.

 

The financial statements have been prepared in accordance with International Financial ReportingStandards.

 

The principal accounting policies are set out 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.

 

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

When 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.

 

Changes in the Group's ownership interests in existing subsidiaries

 

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

   Basis of consolidation (continued)

 

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

 

Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances.

 

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income 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 on initial recognition.

 

Foreign currencies

 

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at 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 on monetary items are recognized in profit or loss in the period in which they arise except for:

 

Ÿ exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Foreign currencies (continued)

 

Ÿ exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

 

Ÿ exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

 

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into presentation currency of the Group (i.e. US dollars) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

 

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

 

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial disposals (i.e. reductions in the Group's ownership interest in associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

 

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 as reported in the consolidated statement of 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. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

 

Deferred tax

 

Deferred tax is recognized 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 profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. 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 deferred tax 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 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 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 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 amount of its assets and liabilities.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Taxation (continued)

 

Current and deferred tax for the year

 

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

 

Provisions

 

Provisions are recognized 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 recognized 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. Where 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.

 

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 recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

 

Financial instruments

 

Financial assets and financial liabilities are recognized when a group entity 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 recognized immediately in profit or loss.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial assets

 

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized 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.

 

Effective interest method

 

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

Interest income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

 

Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including bank balances and cash) are measured at amortized cost using the effective interest method, less any impairment.

 

Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

Impairment of financial assets

 

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial assets (continued)

 

Objective evidence of impairment could include:

 

Ÿ significant financial difficulty of the issuer or counterparty; or

 

Ÿ breach of contract, such as a default or delinquency in interest or principal payments; or

 

Ÿ it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

 

Ÿ the disappearance of an active market for that financial asset because of financial difficulties.

 

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

 

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognised.

 

Derecognition of financial assets

 

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralised borrowing for the proceeds received.

 

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                                                     

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial assets (continued)

 

On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Group retains control), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

 

Financial liabilities and equity instruments

 

Classification as debt or equity

 

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

 

Equity instruments

 

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

 

Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

 

Financial liabilities

 

Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.

 

Other financial liabilities

 

Other financial liabilities (including other payables and accruals) are subsequently measured at amortized cost using the effective interest method.

 

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

3.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Financial liabilities and equity instruments (continued)

 

Derecognition of financial liabilities

 

The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

 

Impairment of tangible assets

 

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their 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 for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) 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 recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

4.      FINANCIAL instruments

 

Categories of financial instruments

 


2010


2009


US$'000


US$'000

Financial assets








Loans and receivables (including cash and cash equivalents)

1,482


1,687





Financial liabilities








Amortized cost (including other payables and accruals)

264


282

 

Financial risk management objectives

 

The Group's major financial instruments include cash and bank balances, other payables and accruals. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

 

Foreign currency risk management

 

Certain financial assets and financial liabilities of the Group are denominated in foreign currencies other than the functional currency of the relevant group companies, which exposes the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

 

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the end of reporting period are as follows:

 


Liabilities


Assets


2010


2009


2010


2009


US$'000


US$'000


US$'000


US$'000









HKD

113


113


52


99

Others


15


32


26


45

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

4.      FINANCIAL instruments (continued)

 

Financial risk management objectives (continued)

 

Foreign currency risk management (continued)

 

The following table details the Group's sensitivity to a 1% (2009: 1%) increase and decrease in USD against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding monetary items which are denominated in relevant foreign currencies and adjusts its translation at the year end for a 1% (2009: 1%) change in the relevant foreign currencies exchange rates. A positive number below indicates a decrease in loss for the year where USD strengthens 1% (2009: 1%) against the relevant foreign currency. For a 1% (2009: 1%) weakening of USD against the relevant foreign currencies there would be an equal and opposite impact on the loss for the year.

 






2010


2009






US$


US$

Decrease in post-tax loss for the year







HKD impact





618


134

 

Interest rate risk management

 

The Group's exposure to changes in interest rate is mainly attributable to its bank deposits at variable interest rate. Bank deposits at variable rate expose the Group to cash flow interest rate risk.

 

The directors consider that the exposure to cash flow interest rate risk is insignificant. Hence, no sensitivity analysis on the exposure to the Group's cash flow interest rate risk is presented.

 

Credit risk

 

As at 31 December 2010, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

 

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.

 

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration of credit risk.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

4.      FINANCIAL instruments (continued)

 

Financial risk management objectives (continued)

 

Liquidity risk

 

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations in cash flows.

 

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have 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. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.

 




Total


Carrying


Less than


undiscounted


amount at


1 year


cash flows


31/12/2010


US$'000


US$'000


US$'000







Other payables and accruals

264


264


264










Total


Carrying


Less than


undiscounted


amount at


1 year


cash flows


31/12/2009


US$'000


US$'000


US$'000







Other payables and accruals

282


282


282

 

Fair value of financial instruments

 

The directors consider that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

5.      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 less cash and bank balances. Adjusted capital comprises all components of equity which includes share capital, reserves and accumulated losses.

 

The debt-to-adjusted capital ratios as at 31 December 2010 and 2009 were as follows:

 



2010


2009



US$'000


US$'000






Total debt


264


282

Less: Cash and bank balances


(1,482)


(1,687)






Net debt


-


-






Adjusted capital


1,218


1,405











Debt-to-adjusted capital ratio


0%

         

0%

 

 

                                                                                             

6.      SEGMENT Information

 

No segment analysis is presented for the years ended 31 December 2010 and 31 December 2009 as the Group has only maintained a minimum operation during the years.

 

 

7.       OTHER GAIN


Year ended 31 December


2010


2009


US$'000


US$'000





Net foreign exchange gains

4


-

 

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

8.      STAFF COSTS

 

         The aggregate cost of persons employed by the Group was as follow:

 


Year ended 31 December


2010


2009


US$'000


US$'000





Wages and salaries

24


33





Directors' remuneration was as follow:





Year ended 31 December


2010


2009


US$'000


US$'000





Fees

24


33

Other remuneration including




  contributions to pension and provident fund

-


-






24


33

 

 

9.      LOSS BEFORE TAX

 

         Loss before tax has been arrived at after charging:


Year ended 31 December


2010


2009


US$'000


US$'000





Auditors' remuneration

21


21

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010       

 

 

10.    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.

 

The tax charge for the year can be reconciled to the loss before tax per the consolidated statement of comprehensive income as follows:

 



Year ended 31 December



2010

 

2009



US$'000


US$'000






Loss before tax


187


300






Loss before tax calculated at 16.5% (2009:16.5%)


30


49

Tax effect of estimated tax losses not recognized


(30)


(49)






Tax charge for the year


-


-

 

No deferred tax has been recognized in the financial statements as the Group and the Company did not have material temporary difference arising between the tax bases of assets and liabilities and their carrying amounts as at 31 December 2010 (2009: Nil).

 

 

11.     LOSS PER SHARE      

     

The loss and weighted average number of ordinary shares used in the calculation of basic and diluted loss per share are as follows.

 



Year ended 31 December



2010

 

2009






Loss for the year attributable to owners of the Company


US$187,000


US$300,000




 


Weighted average number of ordinary shares for the purposes of basic and diluted loss per share


13,367,290


13,367,290




 


Loss per share - basic and diluted


1 cent


2 cents

 

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

12.    INTERESTS IN SUBSIDIARIES

 


2010


2009

 


US$'000


US$'000

The Company








Unlisted shares, at cost

6,450


6,450

Less: Impairment loss

(4,325)


(4,279)






2,125


2,171

 

The Company has provided an impairment loss of approximately US$46,000 (2009: US$36,000) for the year ended 31 December 2010 to write down its investments to net realisable value.

 

Details of the Company's subsidiaries at 31 December 2010 are as follows:

 

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

 

 

13.    AMOUNTS DUE FROM / (TO) SUBSIDIARIES

        

The amounts due were unsecured, non-interest bearing and have no fixed terms of repayment.

 

 

 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010                                        

 

 

14.    CASH AND cash equivalents

 

For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows:

 



The Group


The Company


       

2010


2009


2010


2009



US$'000


US$'000


US$'000


US$'000










Cash and bank balances


1,482


1,687


1,424


1,612

                                                                   

Bank balances are at market interest rates with an original maturity of three months or less.

 

 

15.    SHARE CAPITAL

 


Number of shares

 

 

US$

Authorized:




Ordinary shares of US$0.001 each as at 1 January 2009,

 

31 December 2009 and 31 December 2010

50,000,000,000


50,000,000





Called up, issued and fully paid:




Ordinary shares of US$0.001 each as at 1 January 2009,

 

31 December 2009 and 31 December 2010

13,367,290


13,367

 

 

16.    RESERVES

        

The Company







Contributed


Accumulated



surplus


losses



US$'000


US$'000






Balance as at 1 January 2009


9,646


(7,954)

Loss for the year


-


(300)






Balance as at 1 January 2010


9,646


(8,254)

Loss for the year


-


(187)






Balance as at 31 December 2010


9,646


(8,441)



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010       

 

 

16.    RESERVES (continued)

 

The contributed surplus of the Company 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 of the Company pursuant to an ordinary resolution passed on 23 July 2003.

 

 

17.    RELATED PARTY TRANSACTIONS

 

Save as those disclosed elsewhere in the consolidated financial statements, the Group entered into the following transactions with related parties during the year:

 

Name of

Nature of





related company

transaction


2010


2009




US$'000


US$'000

WAG Worldsec Corporate






  Finance Limited (Note)

Accounting fee


15


15

 

Note:

Mr. Henry Ying Chew Cheong, the director of the Company, had beneficial interest in the related company.

 

Compensation of key management personnel

 

Key management personnel of the Company are the directors of the Company only. The remuneration of directors is set out on the consolidated statement of comprehensive income and with additional disclosure in note 8.

 

 

18.    CONTINGENT LIABILITIES

 

The Group and the Company had no material contingent liabilities as at 31 December 2010 (2009: 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 66

 

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 - Executive Director and Deputy Chairman - aged 63

 

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, Creative Energy Solutions Holdings Limited, Excel Technology International Holdings Limited, Hutchison Telecommunications Hong Kong 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 is also an Independent Director of BTS Group Holdings Public Company Limited, being listed in Thailand. 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  the Advisory Committee of the Securities and Futures Commission and also a member of the Securities and Futures Appeals Tribunal in Hong Kong.  Mr. Cheong was previously a member of Disciplinary Panel A of Hong Kong Institute of Certified Public Accountants (from 2005-2011), 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 59

 

Mr. Fong is an Executive director for China development of Grant Thornton International Ltd, a corporation incorporated in England.  He has more than 30 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 aPast President of the Hong Kong Institute of Certified Public Accountants


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