NOTE OF APPRECIATION

I wish to thank my fellow directors and staff for their efforts and contributions made during the year ended 31 December 2019. I would also like to extend a note of appreciation to shareholders for their continued support of the Company.

                                                                                               Alastair Gunn-Forbes

                                                                                               Non-Executive Chairman

                                                                                               24 April 2020

The directors submit the annual report of the Company and the audited consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The Company and its subsidiaries are primarily engaged in investment in unlisted companies in the Greater China and South East Asian region.

RESULTS AND FINANCIAL POSITION

The audited consolidated loss of the Company and its subsidiaries for the year ended 31 December 2019 was US$704,000, compared with a loss of US$803,000 in 2018. Loss per share was US0.83 cent (2018: US1.03 cents). The decrease in the loss was principally due to a reduction in the negative change in the fair value of financial assets that was recognised through the profit and loss account in accordance with International Financial Reporting Standard 9 ("IFRS 9").

During the year under review, dividends received from the Group's investment in the ICBC Specialised Ship Leasing Investment Fund (the "ICBC Shipping Fund") continued to provide a stable return, generating revenue in the amount of US$96,000. In addition, interest income received from the Group's investment in the term loan issued by a subsidiary of Guangzhou R&F Properties Co., Ltd.  (the "Term Loan") amounted to US$44,000. The amount of the Term Loan of US$850,000 that remained outstanding was due for repayment on 15 October 2019 but was redeemed on 2 August 2019 under an early redemption clause.

As at 31 December 2019, the net assets of the Group amounted to US$4.7 million (2018: US$5.4 million), equivalent to US5.5 cents per share (2018: US6.3 cents).  Cash and cash equivalents declined to US$1.6 million from US$2.6 million a year ago, reflecting basically the use of cash resources in operating and investing activities. While the outstanding amount of US$850,000 of the Group's investment in the Term Loan, which was previously carried as other financial assets at amortized cost, was early redeemed, the Group made a new investment of US$1 million in ByteDance through the Homaer Fund, which was classified under financial assets at fair value through profit and loss.

Further details of the Group's results and financial position are set out in the consolidated statement of profit or loss and other comprehensive income on page 25, the consolidated statement of financial position on page 26 and notes to the consolidated financial statements on pages 29 to 73.

The Board does not propose to declare any dividend for the year ended 31 December 2019 (2018: nil).

REVIEW

The Company is a closed-ended investment company with a premium listing under Chapter 15 of the Listing Rules of the Financial Conduct Authority in the UK. In accordance with the Company's investment policy, a copy of which is set out on page 74, the investment strategy of the Group focuses on investing in small to medium sized trading companies based mainly in the Greater China and South East Asian region with a view to building a diversified portfolio of minority investments in such companies. The investment objective of the Company is to achieve attractive investment returns through capital appreciation on a medium to long term horizon. To spread the investment risk of the Group, none of the Group's investments at the time when made exceeded 20% of its gross assets.

Velocity Mobile Limited ("Velocity"), an unlisted investee company of the Group, is the holding company of a technology group that provides real-time lifestyle mobile applications for premium consumers focusing on the areas of dining, travel, experiences and luxury goods. As reflected by the increase in revenue generated per employee during the year under review, the Velocity group continued to achieve productivity gains thanks to the efficacy and efficiency of its proprietary technology.  There was also strong growth in gross profit margin, largely driven by the rising contribution from Velocity for Business, a white-label product designed for enterprise customers which was launched in the third quarter of 2018, as well as improved working capital terms with key suppliers. As a result, the financial performance of the Velocity group continued to show encouraging progress.  In December 2019, the Velocity group secured another round of fundraising through the issue of an unsecured convertible loan note.

ayondo Ltd ("Ayondo") - Ayondo, an investee company of the Group listed on the Catalist of the Singapore Exchange, is the holding company of a financial technology group that focused on social trading activity.  The financial performance of the Ayondo group in 2018 and 2019 was negatively impacted due to changes relating to product intervention imposed by European and UK regulators, including in particular the limiting of leverages for contracts-for-difference which was the core product of the Ayondo group.  Under the financial difficulty and stress that ensued, the Ayondo group proceeded with a restructuring of its business. During the year under review, the Ayondo group disposed of ayondo Markets Ltd., a key operating subsidiary, and filed for the insolvency of ayondo GmBH, another key operating subsidiary. In the absence of continued contributions from these subsidiaries, the Ayondo group had minimal operating activities. Meanwhile, as part of its restructuring initiatives and with the intention to shift its focus to Asia, the Ayondo group entered into and subsequently secured shareholder approval for a number of conditional agreements involving the issue of three separate convertible notes (the "Convertible Notes") totalling S$9.9 million with a conversion price of S$0.007 per share to Golden Nugget Jinzhuan Limited ("GN") and a GN shareholder.  GN operates a social investing platform, iMaibo.net, for Asian, European and other global contracts-for-difference to facilitate investment-related business, via its network of social media influencers, key opinion leaders and their followers, and third party service and product providers.  Since its inception in 2013, GN's platform has built a user base with over 3.5 million registered users. 

Trading in the shares of Ayondo has been suspended since February 2019. In view of the conversion price of the Convertible Notes, however, further downward adjustment to the fair value of the Group's investment in Ayondo was made as at 31 December 2019.

Agrios Global Holdings Ltd. ("Agrios") - Agrios, an investee company of the Group listed on the Canadian Securities Exchange, is the holding company of a data analytics driven agriculture technology and service group that owns, leases and manages properties and equipment for eco-sustainable agronomy and provides advisory services for aeroponic cultivation to the cannabis industry. During the year under review, the Agrois group generated under various contracts with a client in the Washington State of the U.S. quarterly rental, product and service fees of between US$708,000 and US$1.5 million. However, as the majority of such revenue had not been collected and was carried under accounts receivable, the cash resources of the Agrios group had been adversely affected. To fund the short term needs of its operations, the Agrios group raised, through the issue of a number of unsecured convertible debentures with a conversion price of between C$0.37 and C$0.50 per share, a total of US$3.2 million (including two drawdowns totalling US$1.5 million under a convertible credit facility of US$5.5 million). Furthermore, in order to cut down operating expenses, the Agrios group had taken steps to reduce its administrative employee levels and its outside consulting commitments. Meanwhile, the 65%-owned joint venture of the Agrios group, Yunnan Hua Ma Biological Development Co. Ltd., successfully obtained an industrial hemp cultivation permit, an import and export permit and a food trading permit in the Yunnan Province in China.  

In line with the correction in the Canadian Marijuana Index which tracks the share price performance of leading cannabis stocks operating in Canada, the share price of Agrios fell during the year under review closing at C$0.21. Accordingly, further downward adjustment to the fair value of the Group's investment in Agrios was made as at 31 December 2019.

Oasis Education Group Limited ("Oasis Education") - Oasis Education is a 50% joint venture of the Group. The operating subsidiary of Oasis Education, Oasis Education Consulting (Shenzhen) Company Limited (奧偉詩教育諮詢(深圳)有限公司),"Oasis Shenzhen"provides consulting and support services to the Huizhou Kindergarten in the Guangdong Province in China. The Huizhou Kindergarten, which graduated 78 pupils in the summer of 2019, has enrolled 18 new pupils for the academic term commencing in February 2020, bringing its total pupil enrolment to 209. During the year under review, a Notice issued by the State Council of the People's Republic of China (the "State Council") specified that existing private kindergartens in urban communities should be handed over to local education authorities and turned into public kindergartens or non-profit, inclusive private ones.  However, details relating to the implementation of the requirements set out in the Notice remain unclear.

ByteDance through the Homaer Fund - During the year under review, the Group invested US$1 million in the Homaer Fund, the sole investment of which is an equity interest in ByteDance. Headquartered in Beijing, China, ByteDance is a technology group operating machine learning-enabled content platforms across cultures and geographies. It has a portfolio of mobile applications that is available in over 150 markets and 75 languages and that includes Toutiao, Helo, TikTok, Douyin, News Republic, Vigo Video, Huoshan, Xigua Video, TopBuzz, BuzzVideo and FaceU. Launched in 2016, Douyin, a video-sharing social platform, is generally regarded as the most popular mobile applications of ByteDance and has an international version known as TikTok. Downloaded 738 million times in 2019 raising the total number of downloads to over 1.5 billion, TikTok was the seventh-most downloaded mobile applications of the 2010s. As of July 2019, Bytedance had daily active users exceeding 700 million and monthly active users of more than 1.5 billion around the world.

As mentioned in the section headed "Results and Financial Position" on page 3, during the year under review, the Group's investment in the ICBC Shipping Fund generated dividend income amounting to US$96,000 while its investment in the Term Loan contributed interest income amounting to US$44,000.

Subsequent to the year end, Worldsec International N.V., a wholly-own-wholly-owned subsidiary of the Group, which was engaged in the agency stockbroking services in the 1990s, completed its voluntary liquidation.

PROSPECTS

In this torrid time of the COVID-19 pandemic, the Group's investment in the ICBC Shipping Fund will continue to generate a steady recurring income at a favourable yield particularly under the renewed accommodative easing environment. The outlook for the other investments of the Group, with the exception of ByteDance, is however less than sanguine in the short term. 

With its mobile applications focusing on the sectors of dining, travel, experiences and luxury goods that have been hard hit by the COVID-19 pandemic and the consequent lockdown measures, the Velocity group is expected to face serious challenges.  Nevertheless, the Velocity group has demonstrated a track record capable of monetizing its captured user base of premium consumers under rapidly changing and challenging circumstances.

The Ayondo group is in the process of rebuilding its business. It has recently entered into a non-binding term sheet in relation to the proposed acquisition (the "Proposed Acquisition") of a licensed moneylender, Rich Glory International Investment Ltd, in Hong Kong (the "Moneylender"). The Proposed Acquisition will be subject to shareholder approval and, if undertaken and completed, will involve the issue of Ayondo shares to the vendor of the Moneylender who will become a controlling shareholder of Ayondo. As the Proposed Acquisition was introduced by GN, there would be the possibility that certain cross business relationships would eventually be established with GN who, through the conversion of the Convertible Notes, could also become a significant and possibly a controlling shareholder of Ayondo.

The impact of the COVID-19 pandemic on the cannabis industry appears to be mixed. Although there are reports of sales spikes of cannabis in certain regions in the United States and Canada due to stockpiling by consumers, there are equally reports of plunges in sales in other regions because of the lockdown measures to control the spread of the coronavirus. Smoking marijuana could also increase the risk of complications caused by COVID-19 according to various medical opinions. While reading the cannabis leaves will not provide any insight into the Agrios group's future financial performance, the Agrios group, with a substantial amount of the previously arranged US$5.5 million convertible credit facility remaining available, does have strengthened wherewithal that could help weather the pandemic storm.

The outlook for the Huizhou Kindergarten, to which Oasis Shenzhen provides consulting and support services, remains somewhat uncertain pending the clarification of the State Council's Notice on the future development and operations of kindergartens in urban communities. The requirements set out in the Notice, if implemented fully, may have an adverse impact on the levels of kindergarten tuition fees that may be charged. Meanwhile, kindergarten classes across China, including those of the Huizhou Kindergarten, remain suspended. But with the number of new confirmed cases of coronavirus significantly reduced and contained, the suspension of education activities is expected to ease gradually.

The suppression measures to control the spread of COVID-19, including in particular, the lockdowns and social distancing, have kept people homebound and have consequently led to increased online communications and entertainment.  On this note, positive development by Bytedance on the global market could be anticipated.  Benefitting from homebound audiences, Tiktok has seen surges in viewerships and downloads during the lockdown period. Capitalizing on the rapidly growing reputation and market share of TikTok, Bytedance has been active in expanding its operations geographically and towards other realms. In its quest for continued global expansion, the most challenging task of ByteDance is to convince users and foreign governments that its system of control is adequate to protect user privacy and freedom of speech. Given the rise in national protectionism, this would certainly not be a task to envy.

globalization and avoid disintegration.  However, the reverberation of the political responses to the COVID-19 pandemic seems to indicate that there will be changes in the world order, probably not for the better.  For a long term and sustainable recovery, collaboration among governments of leading economies is essential.  In this torrid and uncertain time of the COVID-19 pandemic with asset prices under pressure, the Group will continue to exercise care and diligence in identifying appropriate investments with good return potential to further expand its investment portfolio in accordance with the Company's investment policy.

Directors

The directors during the year under review and up to the date of this report were:

Non-Executive Chairman

Alastair Gunn-Forbes*

Executive Directors

Henry Ying Chew Cheong

Ernest Chiu Shun She

Non-Executive Directors

Mark Chung Fong*

Martyn Stuart Wells*

Stephen Lister d'Anyers Willis*

* independent

Brief biographical notes of the directors serving at the date of this report are set out on pages 75 to 77.

Save as disclosed in this report and in note 27 to the consolidated financial statements on page 71, none of the directors had during the year under review or at the end of the year a material interest, directly or indirectly, in any contract of significance with the Company or any of its subsidiaries.

As previously announced, in order to strengthen the Board, the Company has appointed Mr Stephen Lister d'Anyers Willis as non-executive director and member of the Audit Committee and the Remuneration Committee. His appointment was subsequently confirmed by shareholders in the Annual General Meeting held on 12 July 2019.

Messrs Alastair Gunn-Forbes and Mark Chung Fong have served on the Board for more than nine years. (In accordance with Provision 21 of the UK Corporate Governance Code on corporate governance published in July 2018 by the Financial Reporting Council of the United Kingdom (the "Code"), both Messrs Alastair Gunn-Forbes and Mark Chung Fong retired by rotation and were re-elected to office by separate resolutions passed at the Annual General Meeting held on 12 July 2019.) During the past nine year period, however, neither of them has had any major interest in the issued share capital of the Company, has been an employee or involved in the daily management of any of the Group companies, or has had any material relationship with any of the Group companies or any of the major shareholders or managers of any such companies other than being a member of the Board. Accordingly, and in accordance with Provision 10 of the Code, the Board has determined that their independence and objectivity have not been impaired and that they will therefore be able to continue to act independently in character and judgement.

At the Annual General Meeting held on 29 September 2014, shareholders approved the inclusion of the Group's non-executive directors as eligible participants of the Worldsec Employee Share Option Scheme 1997 (the "Scheme"). As explained in the 2014 annual report of the Company, the reason for such inclusion was to enable the Group to reward its non-executive directors for their commitments to the Company beyond the nominal annual fees that the Group could afford to pay during its development stage. Accordingly, and in accordance with Provision 10 of the Code, given such circumstances, the Board has determined that the participation of Messrs Alastair Gunn-Forbes, Mark Chung Fong, Martyn Stuart Wells and Stephen Lister d'Anyers Willis in the Scheme will not affect their ability to act independently in character and judgement.

DIRECTORS' INTERESTS

The interests of the individuals who were directors during the year under review in the issued share capital of the Company, including the interests of persons connected with a director (within the meaning of Sections 252, 253 to 255 of the United Kingdom Companies Act 2006 as if the Company were incorporated in England), the existence of which was known to, or could with reasonable diligence be ascertained by, that director, whether or not held through another party, were as follows:

Save as disclosed above, none of the above named directors had an interest, whether beneficial or non-beneficial, in any shares or debentures of any Group companies at the beginning or at the end of the year under review. Save as disclosed above, none of the above named directors, or members of their immediate families, held, exercised or were awarded any right to subscribe for any shares or debentures of any Group companies during the year.

The Board confirms that (i) the Company has complied with the independence provisions set out in the Relationship Agreement since it was entered into; and (ii) so far as the Company is aware, Mr Cheong and his associates have complied with the independence provisions set out in the Relationship Agreement since it was entered into and since 1 January 2019.

DIRECTORS' REMUNERATION

The remuneration of the directors for the year ended 31 December 2019 was as follows:

PROVIDENT FUND AND PENSION CONTRIBUTION FOR DIRECTORS

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

LETTERS OF APPOINTMENT/ SERVICE CONTRACTS

Messrs Alastair Gunn-Forbes, Mark Chung Fong and Martyn Stuart Wells, each has entered into a letter of appointment with the Company dated 28 November 2017, and Mr Stephen Lister d'Anyers Willis has entered into a letter of appointment with the Company dated 3 June 2019 to serve as non-executive director. Each of them is entitled to a fee of £10,000 per annum. The appointment may be terminated on one month notice in writing.

Messrs Henry Ying Chew Cheong and Ernest Chiu Shun She, each has entered into a letter of appointment with the Company dated 2 August 2013 to serve as executive director. Each of them is entitled to a fee of £10,000 per annum. The appointment may be terminated on not less than six month notice in writing.

All directors are eligible to participate in the Group's bonus arrangements under which bonuses may be granted at the discretion of the Remuneration Committee and the Board. No bonus was recommended for the year ended 31 December 2019.

Save as disclosed above, there are no existing or proposed letters of appointment or service contracts between any of the directors and the Company or any of its subsidiaries which cannot be determined without payment of compensation (other than any statutory compensation) within one year.

MAJOR INTERESTS IN SHARES

At 10 March 2020, the Company was aware of the following direct or indirect interests representing 5% or more of the Company's issued share capital:

INTERNAL CONTROL, RISK MANAGEMENT AND FINANCIAL REPORTING

The Board is responsible for establishing and maintaining appropriate systems of internal control and risk management to safeguard the Group's interests and assets. The control measures that have been put in place cover key areas of operations, finance and compliance and aim to manage rather than eliminate risks that are inherent in the running of the business of the Group. Accordingly, the Group's systems of internal control and risk management are expected to provide reasonable but not absolute assurance against material misstatements, loss or fraud.

Amongst the control measures, the key steps that have been put in place include:

-    the setting of the investment strategy and the approval of significant investment decisions of the Group by the Board to ensure consistency with the investment objective and compliance with the investment policy of the Company;

-    the segregation of duties between the investment management and accounting functions of the Group;

-    the adoption of written procedures in relation to the operations of the bank accounts of the Group;

-    the adoption of written procedures to deal with conflicts of interests and related party transactions;

-    the maintenance of proper accounting records providing with reasonable accuracy at any time information on the financial position of the Group;

-    the review by the Board of the management accounts of the Group on a regular basis; and

-    the engagement of external professionals to carry out company secretarial works for the Company and to assist the Group on compliance issues.

The Board considers the identification, evaluation and management of the principal risks faced by the Group under the changing environment to be an ongoing process and has kept under regular review the effectiveness of the Group's systems of internal control and risk management. The Board is satisfied that the arrangements that have been put in place represent an appropriate framework to meet the internal control and risk management requirements of the Group.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board considers that the principal risks and uncertainties that are relevant to the Group include:

Target market risk

Under the investment policy of the Company, the Group focuses on investing in small to medium sized trading companies based mainly in the Greater China and South East Asian region. Consequently, a sharp or prolonged downturn in the economic environment or a heightened uncertainty in the political environment in these target markets could adversely and seriously affect the underlying investments and hence the cash flows of the Group. This is clearly a risk factor beyond the Group's control. Nevertheless, in line with the investment policy of the Company, the Board will seek to invest in and maintain a diversified portfolio in order to spread the investment risk of the Group.

Investment opportunity risk

Notwithstanding the tightening in credit conditions for investment financing under the COVID-19 pandemic, the private equity space continues to be awash with investment capital and dry powder. Competition for quality deals therefore remains intense and aggressive, thus limiting the availability of investment opportunities for the Group. With the approval from shareholders, however, the Company has broadened its investment policy. This offers greater flexibility for the Group to make investment choices from a broader range of opportunities to achieve the Company's investment objective. 

Key person risk

As the Group does not engage any external investment manager, the Board is responsible for overseeing the Group's investment management activities with frontline management duties delegated to the executive directors. The Group is therefore heavily dependent on the executive directors' abilities to identify and evaluate investment targets, execute and implement investment decisions, monitor investment performance and execute and implement exit decisions. Both of the executive directors, Messrs Henry Ying Chew Cheong and Ernest Chiu Shun She, have entered into a letter of appointment with the Company with a termination clause of not less than six month notice. Moreover, Mr Cheong is also the deputy chairman and a major shareholder beneficially holding a substantial interest in the Company's issued share capital.

Operational risks

The Group is exposed to various operational risks that are inherent in the running of its business, including, amongst others, the failure to comply with the investment policy of the Company, the failure to prevent misstatements, loss or fraud due to inadequacies in the Group's internal operational processes, and the failure to comply with applicable rules and regulations by the Group. As mitigating measures, the Board has established and maintained systems of internal control and risk management to safeguard the Group's interests and assets, details of which are set out in the section headed "Internal Control, Risk Management and Financial Reporting" on pages 10 to 11.

Financial risks

The Group is exposed to a variety of financial risks, including market risks, credit risk and liquidity risk, which arise from its operating and investment management activities. The Group's management of such risks is coordinated at the office of Worldsec Investment (Hong Kong) Limited, the principal operating subsidiary of the Group, in close cooperation with the Board. Details of the Group's approach on financial risk management are described in note 5(b) to the consolidated financial statements on pages 50 to 54.

COVID-19 pandemic risk

The COVID-19 pandemic and the consequent suppression measures have disrupted economic and business activities across the globe in unprecedented ways. This poses grave consequences seriously affecting the operations and financial performance of the corporate sector. The investee companies and other investments of the Group would not be immune to the ill effects of the COVID-19 pandemic. The disruptions in world financial markets also have a negative impact for investors to carry out investment exit strategies. Nonetheless, with the development of treatment drugs and vaccines for and the gradual easing of the suppression measures to control the spread of the coronavirus, the economic, business and investment environment is expected to gradually normalize and the risk associated with the COVID-19 pandemic would eventually subside.

VIABILITY STATEMENT

The directors have assessed the viability of the Company for the three years to 31 December 2022.

The directors consider that, for the purpose of this viability statement, a three year period is appropriate taking into account the Group's investment horizon under its investment strategy. Besides, there should unlikely be any significant change to most if not all of the principal risks and uncertainties facing the Group over the timeframe selected for the assessment.

In assessing the viability of the Company and its ability to meet liabilities as they fall due, the directors have taken into consideration, amongst others:

-    the investment strategy of the Group;

-    the current position including the existing financial status and cost structure of the Group;

-    the prospects of and the industry outlook for the Group;

-    the economic and political environment of the Greater China and South East Asian region, the primary target markets in which the Group focuses its investment; and

-    the potential adverse impact of the principal risks and uncertainties facing the Group and the effectiveness of the mitigating measures that have been put in place, details of which are described in the section headed "Principal Risks and Uncertainties" on pages 11 to 12.

The directors note, in particular, that the Group:

-    has a liquid amount of unrestricted cash and bank balances;

-    does not have any borrowings;

-    does not have any commitments other than certain leases with modest outstanding rental payments; and

-    has low operating expenses with a small but stable team under stringent cost control. 

Accordingly, the directors are confident that the Company will be able to continue in operation and meet its liabilities as they fall due over the assessment period.

GOING CONCERN

After making careful enquiries, the directors have formed a judgement, at the time of approving the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019, that there was a reasonable expectation that the Group would have adequate resources to carry out its operations for a period of at least twelve months from the date of approving the consolidated financial statements. For this reason, the directors have adopted the going concern basis in preparing the consolidated financial statements.

CORPORATE GOVERNANCE

As a company with a premium listing on the Main Market of the London Stock Exchange, its business is subject to the principles contained in the Code, a copy of which is available on the website of the Financial Reporting Council of the United Kingdom. The Board confirms that, throughout the accounting period from 1 January to 31 December 2019, the Group complied with the relevant provisions of the Code, apart from certain exceptions set out and explained below.

The Board, comprising a non-executive chairman, three non-executive directors and two executive directors, is committed to maintaining a high standard of corporate governance. All non-executive directors are considered by the Board to be independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. All directors are able to take independent professional advice in furtherance of their duties, if necessary.

The Board is responsible for establishing strategic directions and setting objectives for the Company and making significant investment decisions and monitoring the performance of the Group. The management is responsible for the day to day running of the Group's operations.

BOARD MEETING

The Board held two meetings during the year under review and the table below gives the attendance record.

Although the Board notes the requirement for a Nomination Committee (Provision 17 of the Code), to make recommendations to the Board on all new board appointments and to reassure shareholders of the suitability of a chosen director, the Board considers that, due to its small size and limited level of activities, it is not necessary to establish such a committee. The Board as a whole remains responsible for ensuring that a transparent, formal and rigorous process would be followed for any future board appointments, which would be made following a full review of the Board's balance of skills, experience, independence and knowledge. Any future recruitment process would also provide an opportunity to improve the diversity of the Board. The Board is satisfied that appropriate succession planning is in place for appointments to both the Board and senior management.

Again, due to its small size and limited level of activities, the Board has not appointed a senior independent director and did not consider an annual self-evaluation to be required during the year under review. The responsibilities normally rested with a senior independent director have been reverted to the Board as a whole. These decisions will be re-considered annually by the Board.

The Board established both an Audit Committee and a Remuneration Committee upon the re-activation of the Group's business in 2013. Details of these committees are set out below.

AUDIT COMMITTEE

The Audit Committee held two meetings during the year under review and the table below gives the attendance record.

The Audit Committee is chaired by Mr Mark Chung Fong and its other current members are Messrs Martyn Stuart Wells and Stephen Lister d'Anyers Willis. The Audit Committee is appointed by the Board and the committee's membership is comprised wholly of non-executive directors.

The terms of reference of the Audit Committee (copies of which are available at the Company's registered office and the Company's website) generally follow, where applicable, those stated in the provisions of the Code.

The Audit Committee meets a minimum of two times a year and may be convened at other times if required. The responsibilities of the Audit Committee include, amongst others, the examination and review of the Group's risk management, internal financial controls and financial and accounting policies and practices, as well as overseeing and reviewing the work of the Company's external auditor, their independence and the fees paid to them.

During the year under review, the activities undertaken by the Audit Committee in discharge of its duties and functions included (i) the review and recommendation to the Board of the reappointment of  BDO Limited as the Company's external auditor; (ii) the review and recommendation to the Board for approval of the annual report of the Company and the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2018; and (iii) the review and recommendation to the Board for approval of the interim report of the Company and the unaudited consolidated financial statements of the Company and its subsidiaries for the six months ended 30 June 2019. In recommending the reappointment of BDO Limited, the Audit Committee has taken into consideration, amongst others, BDO Limited's independence, objectivity and terms of engagement.

Subsequent to the year end, the activities that have been undertaken by the Audit Committee in relation to 2019 included (i) the review and recommendation to the Board of the annual report of the Company and the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019; (ii) the monitoring of the effectiveness of the Group's risk management and internal financial controls; and (iii) the assessment of the effectiveness of the external audit process through feedback from the management involved in the audit and through interactions with and observations and review of the level of audit service provided. 

As the scale of the operations of the Group remains relatively insubstantial, the Board has decided and the Audit Committee concurs that it would not be necessary or cost-effective to set up an internal audit function.

In connection with the review of the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019, the Audit Committee has identified and reviewed two issues which it considered significant and details on these matters are set out in the table below.

BDO Limited was appointed as the external auditor of the Company in February 2015, since when audit services have not been tendered competitively. The Audit Committee has concluded that a competitive tender of audit services is not necessary at this time, but acknowledges that circumstances could arise where a competitive tender for audit services may be desirable. The performance of BDO Limited as the Company's external auditor will be kept under annual review, and if satisfactory, BDO Limited will be recommended by the Audit Committee for reappointment. There are, however, no contractual obligations that would restrict the Audit Committee's choice of external auditor for the Company.

As advised by the Audit Committee and concurred with by the Board, the annual report of the Company and the audited consolidated financial statements for the year ended 31 December 2019, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

REMUNERATION COMMITTEE

In accordance with Provision 32 of the Code, the Company has set up a Remuneration Committee. The Remuneration Committee held one meeting during the year under review and the table below gives the attendance record.

The Remuneration Committee is chaired by Mr Martyn Stuart Wells and its other current members are Messrs Alastair Gunn-Forbes, Mark Chung Fong and Stephen Lister d'Anyers Willis. The Remuneration Committee is appointed by the Board and the committee's membership is comprised wholly of non-executive directors.

The terms of reference of the Remuneration Committee (copies of which are available at the Company's registered office and the Company's website) generally follow, where applicable, those stated in the provisions of the Code. They provide for the Remuneration Committee to meet at least two times a year. However, as the Group has a very small and stable workforce, the Remuneration Committee did not consider it meaningful or necessary to hold more than one meeting during the year under review.

The Remuneration Committee's responsibilities include, amongst others, the evaluation of the performance of the executive directors and senior staff, and the comparison of the Group's remuneration policy with similar organisations in the market to form the basis for the recommendations to the Board to determine the remuneration packages, which may include the grant of share options under the Scheme, for individual staff and director members.

In accordance with the Main Principle of Provision Q of the Code, no director has been involved in deciding his own remuneration.

During the year under review, the activities undertaken by the Remuneration Committee in discharge of its duties and functions included the review of and recommendation to the Board to retain the Group's previous remuneration arrangements.

WORLDSEC EMPLOYEE SHARE OPTION SCHEME 1997

During the year under review, the Company granted to certain eligible persons a total of 2,050,000 share options to subscribe for new ordinary shares of US$0.001 each in the Company under the Scheme. The share options vested six months from the date of grant and were then exercisable within a period of 9.5 years.

The following table discloses the movements of the outstanding share options under the Scheme during the year under review.

Further details relating to the granting of the share options are set out in note 26 to the consolidated financial statements on pages 69 to 71.

RELATION WITH SHAREHOLDERS

Communication with shareholders is given high priority. Information about the Group's activities is provided in the annual report and the interim report of the Company which are sent to shareholders each year and are available on the website of the Company. All shareholders are encouraged to attend the Annual General Meeting at which directors are introduced and available for questions. Enquiries are dealt with in an informative and timely manner. Directors, including non-executive directors, are also available to meet with major shareholders on request.

EXTERNAL AUDITOR

The consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019 have been audited by BDO Limited.

A resolution will be submitted to the next Annual General Meeting to reappoint BDO Limited as the Company's external auditor.

On behalf of the Board

Henry Ying Chew Cheong

Executive Director

24 April 2020