Future Data Group Limited — Annual Report 2020

Mar 30, 2021

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A N N U A L R E P O R T

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report for which the directors (the “Directors”) of Future Data Group Limited (the “Company”), collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the “GEM Listing Rules”) for the purpose of giving information with regard to the Company and its subsidiaries (collectively refer to as the “Group”). The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

CONTENTS

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Corporate Information 2
Chairman’s Statement 4
Management Discussion and Analysis 7
Biographical Details of Directors and
16
Senior Management
Corporate Governance Report 21
Report of the Directors 35
Independent Auditor’s Report 49
Consolidated Statement of
56
Comprehensive Income
Consolidated Statement of
57
Financial Position
Consolidated Statement of
59
Changes in Equity
Consolidated Statement of
60
Cash Flows
Notes to the Consolidated
62
Financial Statements
Summary of Financial Information 152
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CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Suh Seung Hyun (Chairman)

Mr. Phung Nhuong Giang (Deputy Chairman) Mr. Lee Seung Han (Chief Executive Officer) Mr. Ryoo Seong Ryul (Chief Financial Officer)

Independent Non-executive Directors

Mr. Wong Sik Kei Mr. Sum Chun Ho Mr. Yung Kai Tai

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN KOREA

Unit 801–809, 822 Mullae SK V1 Center 10, Seonyu-ro 9-gil Yeongdeungpo-gu Seoul Korea

COMPANY SECRETARY

Ms. Cheung Yuet Fan

AUTHORISED REPRESENTATIVES

Mr. Phung Nhuong Giang Ms. Cheung Yuet Fan

BOARD COMMITTEES

Audit Committee

Mr. Sum Chun Ho (Chairman) Mr. Wong Sik Kei Mr. Yung Kai Tai

Remuneration Committee

AUDITOR

BDO Limited Certified Public Accountants 25/F, Wing On Centre 111 Connaught Road Central Hong Kong

Mr. Wong Sik Kei (Chairman) Mr. Sum Chun Ho Mr. Yung Kai Tai

Nomination Committee

Mr. Yung Kai Tai (Chairman) Mr. Sum Chun Ho Mr. Wong Sik Kei

COMPLIANCE OFFICER

Mr. Lee Seung Han

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Future Data Group Limited Annual Report 2020

CORPORATE INFORMATION

LEGAL ADVISERS TO OUR COMPANY

As to Hong Kong law: Michael Li & Co. Solicitors, Hong Kong 19/F, Prosperity Tower 39 Queen’s Road Central Central, Hong Kong

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

PRINCIPAL BANK

As to Korean law: Shin & Kim Attorneys-at-law, Korea 23/F, D-Tower (D2) 17 Jongno 3-gil, Jongno-gu, Seoul 03155 Korea

Woori Bank 51, Sogong-ro Jung-gu Seoul, 04632 Korea

COMPANY WEBSITE ADDRESS

www.futuredatagroup.com

REGISTERED OFFICE IN THE CAYMAN ISLANDS

Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

STOCK CODE

8229

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Suite 1507–08, 15/F Two Chinachem Exchange Square 338 King’s Road North Point, Hong Kong

3

CHAIRMAN’S STATEMENT

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Dear Shareholders,

I am pleased to inform you that Future Data Group Limited (the “Group”) has achieved the 5th consecutive year of profitability after being listed on GEM of the Stock Exchange of Hong Kong in 2016, by delivering HK$7.5 million of profit after tax for the fiscal year ended 31 December 2020.

Here is my report of the Group’s financials for 2020:

The business environment where the Group operates was challenging due to the prolonged global viral pandemic. In this challenging environment, the Group have decided to cut non-productive costs where possible including headquarters; to scarify margins to win key projects in the field to maintain market share, and to compensate the margin loss in key projects by hiring more engineers by increasing higher margin maintenance services. Our results reflected the adoption of these strategies.

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Future Data Group Limited Annual Report 2020

CHAIRMAN’S STATEMENT

For the year ended 31 December 2020, the Group generated revenue of approximately HK$679.1 million, which represented an increase of HK$32.6 million or 5.0% compared to the corresponding period in the previous year. A substantial portion of the increase in revenue was contributed by the rising revenue in the maintenance services segment, which accounted for 24.2% of the Group’s revenue.

Our gross margin contracted by 2.1 percentage point to 11.3% to in 2020 relative to 13.5% in the prior year. This loss of gross margin was compensated by a 2.6 percentage point cut in selling and administrative expenses to 10.9% from 13.3% in the year before. This showed our ability to control costs while maintaining market share, resulting in the profit before income tax of HK$9.0 million and profit after tax of HK$7.5 million for the year ended 31 December 2020. This translated to earnings per share attributable to the owners of the Company to 1.97 HK cents in 2020 versus 1.09 HK cents in 2019 (total number of shares is unchanged at 400 million).

We have added HK$13.2 million to the Group’s net assets and shareholder equity, which stood at approximately HK$143.4 million as at 31 December 2020, or equity per share of approximately 35.8 HK cents in 2020 versus 32.5 HK cents in 2019.

Our operations generated more than HK$18.7 million of positive cash flow from operating activities before working capital changes and income tax paid. This amount is slightly lower than HK$21.6 million to that of 2019, resulting in the Group’s accumulative cash flow from operating activities before working capital changes and income tax paid for the past 2 years was more than HK$40 million, showing impressive free cash flow and indicating our financial strength to support business expansion beyond the Korea and Hong Kong markets using internal financial resources.

Taking into account working capital changes, net cash used from investing and financing activities, our cash and cash equivalents were lower by HK$19.9 million compared to 31 December 2019, and stood at HK$96.2 million as at 31 December 2020, or cash per share of approximately 24.0 HK cents.

5

CHAIRMAN’S STATEMENT

Below are other notable highlights for 2020:

• Won a contract from a media foundation amounting to KRW3.2 billion (equivalent to HK$21.1 million)

• Won a contract from a finance corporation amounting to KRW2.6 billion (equivalent to HK$17.1 million)

• Won a contract from a Korean bank amounting to KRW2.3 billion (equivalent to HK$15.1 million)

• Won a contract from a Korea’s leading mobile operator amounting to KRW1.4 billion (equivalent to HK$9.2 million)

• Won a contract from a Korean university amounting to KRW1.4 billion (equivalent to HK$9.2 million)

As I write this report to you, our valued shareholders, the viral pandemic is still happening. We shall continue to see disruption to the business, as we face travel restrictions and business meeting cancellations and hence this will have impact to our business in the first half of 2021. However, in these challenging months, we see opportunities related to the nature of our business which are to deliver more capacity to support higher demand for online businesses; and to protect online transactions. As such, we anticipate a recovery in the second half of 2021, as we have done before in 2020.

On behalf of the Board, I would like to express my gratitude to our management team and staff members for their continued support and contribution to the Group during this past year and I am looking forward to a 6th consecutive profitable year in 2021.

• Won a contract from a Korea’s top search engine company amounting to KRW1.0 billion (equivalent to HK$6.6 million)

Suh Seung Hyun Chairman

22 March 2021

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Future Data Group Limited Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

STATEMENT OF PROFIT OR LOSS ANALYSIS

For the year ended 31 December 2020

	2020 HK$’000	2019 HK$’000	Change HK$’000	Change %
Revenue Cost of sales and services	679,053	646,470	32,583	5.0%
	(602,131)	(559,441)	42,690	7.6%
Grossprofit Other income Selling and administrative expenses Finance costs	76,922	87,029	(10,107)	(11.6%)
	6,558	4,974	1,584	31.8%
	(73,707)	(86,297)	(12,590)	(14.6%)
	(746)	(1,445)	(699)	(48.4%)
Profit before income tax Income tax expense	9,027	4,261	4,766	111.9%
	(1,514)	(220)	1,294	588.2%
Profit for the year	7,513	4,041	3,472	85.9%

REVENUE

Despite the global economic environment challenge caused by viral of pandemic, the Directors are pleased to report that the Group recorded an increase in revenue by HK$32.6 million or 5.0% to HK$679.1 million for the year ended 31 December 2020 when compared to HK$646.5 million achieved in the corresponding period in last year. Our analysis on revenue is presented below:

• The increase in revenue was due to contribution from both Korea and Hong Kong operations. Korea contributed HK$652.0 million in revenue for the year ended 31 December 2020, which was HK$30.5 million or 4.9% higher compared to HK$621.5 million a year ago. During the year, Hong Kong operations contributed HK$27.0 million, which was HK$2.1 million or 8.3% higher compared to HK$24.9 million a year ago.

• The Group recorded an increase in revenue on all segments. Compared to last year, revenue from system integration, maintenance services and cyber security services for the year ended 31 December 2020 increased by HK$3.4 million, HK$27.1 million and HK$2.1 million respectively.

• Public sector contributed HK$330.9 million, which was HK$53.9 million or 19.5% growth while private sector contributed HK$348.1 million, which was HK$21.3 million decrease as compared to a year ago.

The increase in revenue has been driven by strong demand for online activities in Korea’s market. Examples of contracts awarded during the year included contracts from:

• A media foundation amounting to KRW3.2 billion (equivalent to HK$21.1 million)

7

MANAGEMENT DISCUSSION AND ANALYSIS

• A finance corporation amounting to KRW2.6 billion (equivalent to HK$17.1 million)

• A Korean bank amounting to KRW2.3 billion (equivalent to HK$15.1 million)

OTHER INCOME

Other income increased by HK$1.6 million or 31.8% to HK$6.6 million for the year ended 31 December 2020 mainly attributable to the yearend foreign currencies’ translation gain.

SELLING AND ADMINISTRATIVE EXPENSES

• Korea’s leading mobile operator amounting to KRW1.4 billion (equivalent to HK$9.2 million)

• A Korean university amounting to KRW1.4 billion (equivalent to HK$9.2 million)

• Korea’s top search engine company amounting to KRW1.0 billion (equivalent to HK$6.6 million)

GROSS PROFIT AND GROSS PROFIT MARGIN

Gross profit shrank by approximately HK$10.1 million from HK$87.0 million for the year ended 31 December 2019 to HK$76.9 million for the year ended 31 December 2020. In terms of gross profit margin, the ratio decreased by 2.2% from 13.5% in 2019 to 11.3% in 2020. The decrease resulted from the acceptance of low margin system integration projects with strategic customers.

For the year ended 31 December 2020, the management team was able to lower selling and administrative expenses by HK$12.6 million or 14.6% from HK$86.3 million a year ago. The decrease was mainly attributable to impairment of trade receivables was not provided.

PROFIT FOR THE YEAR

Despite the lower gross profit, the Group’s profit before income tax stood at HK$9.0 million for the year ended 31 December 2020 which was HK$4.8 million or 111.9% higher than corresponding year in 2019.

After a provision of HK$1.5 million for tax expenses, the Group posted profit after tax for the year of HK$7.5 million, representing HK$3.5 million or 85.9% increase compared to a year ago. This profit is the highest record since the Company’s shares were successfully listed in 2016 and constitutes the fifth consecutive profitable year.

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Future Data Group Limited Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

STATEMENT OF FINANCIAL POSITION ANALYSIS

As at 31 December 2020

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2020 2019 Change Change
HK$’000 HK$’000 HK$’000 %
Property, plant and equipments 9,959 6,715 3,244 48.3%
Intangible assets 8,095 13,854 (5,759) (41.6%)
Goodwill 7,534 7,534 – 0.0%
Other financial assets 7,407 5,000 2,407 48.1%
Loan to ultimate holding company 8,869 – 8,869 100.0%
Deposits for acquisition of properties 10,498 – 10,498 100.0%
Guarantee deposits 3,901 4,671 (770) (16.5%)
Deferred tax assets 8,500 7,160 1,340 18.7%
Non-current assets 64,763 44,934 19,829 44.1%
Inventories 15,812 9,729 6,083 62.5%
Trade and other receivables 79,813 89,794 (9,981) (11.1%)
Contract assets 24,679 21,623 3,056 14.1%
Prepayments 14,273 10,748 3,525 32.8%
Pledged bank deposits – 3,372 (3,372) (100.0%)
Fixed bank deposits 4,536 4,316 220 5.1%
Cash and cash equivalents 96,189 116,075 (19,886) (17.1%)
Current assets 235,302 255,657 (20,355) (8.0%)
Trade and other payables 96,698 115,966 (19,268) (16.6%)
Contract liabilities 23,960 30,443 (6,483) (21.3%)
Lease liabilities 2,398 993 1,405 141.5%
Bank borrowings 24,722 20,582 4,140 20.1%
Tax payable 916 239 677 283.3%
Current liabilities 148,694 168,223 (19,529) (11.6%)
Lease liabilities 2,052 661 1,391 210.4%
Bank borrowings 5,568 – 5,568 100.0%
Defined benefit obligations 166 1,181 (1,015) (85.9%)
Deferred tax liabilities 217 378 (161) (42.6%)
Non-current liabilities 8,003 2,220 5,783 260.5%
Net assets 143,368 130,148 13,220 10.2%
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9

MANAGEMENT DISCUSSION AND ANALYSIS

NON-CURRENT ASSETS

As at 31 December 2020, the Group recorded non-current assets of HK$64.8 million representing an increase of approximately HK$19.8 million or 44.1% when compared to that as at 31 December 2019. This was mainly due to additions of a loan to ultimate holding company and deposits for acquisition of properties. Details of these transactions were disclosed in the Company’s announcements dated 7 July 2020, 10 August 2020 and 15 October 2020 respectively and circular dated 13 November 2020.

CURRENT ASSETS

As at 31 December 2020, the Group recorded HK$235.3 million in current assets which was HK$20.4 million lower than that as at 31 December 2019 of HK$255.7 million. This resulted from a combination of decrease in trade and other receivables and decrease in cash and cash equivalents.

NON-CURRENT LIABILITIES

The Group’s non-current liabilities significantly increased by HK$5.8 million or 260.5% was mainly attributable to bank borrowings granted to the Group for the payment of deposits for acquisition of properties as mentioned in noncurrent assets section.

NET ASSETS

The Group’s net assets stood at HK$143.4 million as at 31 December 2020 which was HK$13.2 million higher than HK$130.1 million as at 31 December 2019.

The Group recorded an exchange gain arising on translation of foreign operations of approximately HK$6.5 million due to favourable exchange rate change of KRW against US$ in the second half of 2020. As a result, total comprehensive income of the Group stood at HK$13.2 million.

The Group’s cash position stood at HK$96.2 million as at 31 December 2020. Cash to current liabilities ratio decreased slightly from 69.0% in 2019 to 64.7% in 2020. The ratio representing the Group has strong ability to settle its current liabilities obligation when they become due.

CURRENT LIABILITIES

The Group’s current liabilities decreased by approximately HK$19.5 million from HK$168.2 million as at 31 December 2019 to HK$148.7 million as at 31 December 2020. The decrease was due to a decrease in trade and other payables by HK$19.3 million.

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Future Data Group Limited Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

STATEMENT OF CASH FLOWS ANALYSIS

For the year ended 31 December 2020

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2020 2019 Change Change
HK$’000 HK$’000 HK$’000 %
Profit before income tax expenses 9,027 4,261 4,766 111.9%
Total adjustments for operating activities 9,697 17,361 (7,664) (44.1%)
Operating profit before working
capital changes 18,724 21,622 (2,898) (13.4%)
Changes on:
– Inventories (7,664) (3,365) 4,299 127.8%
– Trade and other receivables 12,879 27,721 (14,842) (53.5%)
– Contract assets (1,938) 1,232 (3,170) (257.3%)
– Prepayments (2,894) (4,285) (1,391) (32.5%)
– Trade and other payables (21,495) (58,408) (36,913) (63.2%)
– Contract liabilities (6,975) 19,186 (26,161) (136.4%)
– Defined benefit obligations (2,058) (1,822) 236 13.0%
Cash (used in)/generated from operations (11,421) 1,881 (13,302) (707.2%)
Income taxes paid (1,364) (6,034) (4,670) (77.4%)
Income taxes refunded 1,161 108 1,053 975.0%
Interest received 453 612 (159) (26.0%)
Net cash used in operating activities (11,171) (3,433) 7,738 225.4%
Net cash outflows from acquisition through
business combination – (2,843) (2,843) (100.0%)
–
Research and development expenditures (2,854) (2,854) (100.0%)
Purchases of property, plant and equipment (1,825) (1,519) 306 20.1%
–
Deposits paid for acquisition of properties (15,562) (15,562) (100.0%)
Proceeds from deposits transferred upon
disposals of properties 5,809 – 5,809 100.0%
Purchases of other financial assets (1,873) (228) 1,645 721.5%
Proceeds from disposal of property,
plant and equipment 5 98 (93) (94.9%)
Decrease in fixed bank deposits 3,293 – 3,293 100.0%
(Increase)/decrease in loan to/amount due
from ultimate holding company (8,239) 5,874 (14,113) (240.3%)
Net cash used in investing activities (18,392) (1,472) 16,920 1,149.5%
Proceeds from bank borrowings 138,475 145,304 (6,829) (4.7%)
Repayments of bank borrowings (130,431) (146,834) (16,403) (11.2%)
Interest paid (746) (1,445) (699) (48.4%)
Repayments of principal portion
of the lease liabilities (2,171) (1,941) 230 11.8%
–
Dividend paid (5,880) (5,880) (100.0%)
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11

MANAGEMENT DISCUSSION AND ANALYSIS

	2020 HK$’000	2019 HK$’000	Change HK$’000	Change %
Net cash generated from/(used in) financing activities	5,127	(10,796)	(15,923)	(147.5%)
Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes	(24,436)	(15,701)	8,735	55.6%
	116,075	136,134	(20,059)	(14.7%)
	4,550	(4,358)	(8,908)	(204.4%)
Cash and cash equivalents at end of year	96,189	116,075	(19,886)	(17.1%)

CASH FLOWS FROM OPERATING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

The Group generated HK$18.7 million positive cash flows from operating activities before working capital changes and income tax paid in 2020, which is HK$2.9 million lower than that in 2019. After changes in working capital and income tax paid, cash outflows of HK$11.2 million was recorded.

The Group recorded net cash inflow from financing activities of HK$5.1 million for the year ended 31 December 2020 resulting from proceeds from bank borrowings exceeded repayments of bank borrowings, reversing a net cash outflow of HK$10.8 million in 2019.

Cash flows used in operating activities increased by HK$7.7 million from HK$3.4 million for the year ended 31 December 2019 to HK$11.2 million for the year ended 31 December 2020. The increase was mainly due to the cash used in settlement of trade and other payables has exceeded the cash generated from the collection of trade and other receivables during the year in 2020.

As a result, the Group incurred a net decrease in cash and cash equivalents of HK$24.4 million for the year ended 31 December 2020. Mitigated by favourable exchange rate change of KRW against HK$, the Group’s cash and cash equivalents decreased by HK$19.9 million or 17.1% to approximately HK$96.2 million as at 31 December 2020 compared to that of 2019.

CASH FLOWS FROM INVESTING ACTIVITIES

The Group’s net cash outflow from investing activities rebounded to HK$18.4 million in 2020 from HK$1.5 million in 2019. The substantial increase is due to payments of deposits paid for acquisition of properties and a loan facility granted to ultimate holding company.

OTHER INFORMATION

Liquidity and Financial Resources

As at 31 December 2020, the Group’s net current assets of HK$86.6 million indicated a strong liquidity. The liquidity ratio, represented by a ratio of current assets over current liabilities, was 1.6 times (as at 31 December 2019: 1.5 times), reflecting the adequacy of financial resources.

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Future Data Group Limited Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

The Group expresses its gearing ratio as a percentage of total debt over total equity. As at 31 December 2020, the gearing ratio increased to 21.1% (as at 31 December 2019: 17.1%). The Group had variable rate bank borrowings in US$ and KRW of approximately US$3.2 million and KRW785.5 million respectively, which were equivalent to approximately HK$30.3 million (as at 31 December 2019: approximately HK$20.6 million). Certain banking borrowings are guaranteed by Korea Credit Guarantee Fund which is a public financial institution independent of the Group.

As at 31 December 2020, the Group recorded cash and cash equivalents of approximately HK$96.2 million (as at 31 December 2019: approximately HK$116.1 million), which included approximately KRW11,978 million, HK$4.2 million, US$0.9 million and small amount of Singapore Dollars.

The above reflected that the Group has healthy liquidity and adequate financial resources.

Foreign Exchange Exposure

The Group’s business in Korea was exposed to currency risk that mainly arose from the currency difference between our revenue receipts (which are denominated in KRW) and some of our payments for purchases (which are in US$). In preparing the costing of our system integration project in which procurement of components in US$ is required, we would add on a margin to the relevant cost items of the

project as a cushion to safeguard against any unfavourable foreign exchange movement in KRW against US$ between the costing date and the relevant settlement date. During the year of 2020, we experienced an unfavourable foreign exchange movement in the Korean operation, and hence, recorded an increase in cost of goods sold.

Revenue and cost of our Hong Kong operation are mainly denominated in HK$. Hence, there is no significant currency risk arising from it.

Charges on Group’s Assets

None of the Group’s assets were charged as at 31 December 2020 after the fixed deposits pledged with KSFC for bidding, contract, defect, prepayment and payment guarantees provided by KSFC on behalf of the Group were released in June 2020.

Material Investments and Capital Assets

On 14 May 2020, Global Telecom Company Limited (“Global Telecom”) entered into seventeen agreements with Korea Trust Company Limited, SK D&D Company Limited and Taeyoung Engineering and Construction Company Limited to purchase seventeen properties. Details of these transactions were disclosed in the Company’s announcements dated 7 July 2020 and 10 August 2020 and circular dated 13 November 2020.

The Group did not have other material investments and capital assets for the year ended 31 December 2020.

13

MANAGEMENT DISCUSSION AND ANALYSIS

As at 31 December 2020, the carrying amount of the Group’s unlisted equity securities accounted for approximately 1.6% of the Group’s total assets and was not significant. The unlisted equity securities mainly represent the investment in KSFC (a cooperative established pursuant to the Software Industry Promotion Act with the purpose of promoting the development of the IT industry in Korea) for its membership. Depending on the amount of investment in KSFC, a member of KSFC is granted a certain amount of guarantee limit by KSFC for use in its operation.

The Group did not have any plan for material investments or capital asset as at 31 December 2020 as well.

Significant Acquisitions and Disposals

As aforementioned, our wholly-owned Korean subsidiary, Global Telecom, purchased seventeen properties in Seoul. On 8 December 2020, Global Telecom disposed six properties out of these seventeen properties. Each of LeeHanNS Co., Ltd. and i-Cloud Co, Ltd. purchased three properties at a consideration of KRW473,960,000 and KRW461,586,000 respectively. Details of these transactions were disclosed in the Company’s announcement dated 8 December 2020 and circular dated 25 January 2021.

Save for the abovesaid purchase of properties made on 14 May 2020 and disposal of properties made on 8 December 2020, the Group had not made any significant acquisition or disposal for the year ended 31 December 2020.

Contingent Liabilities

The Group did not have any significant contingent liabilities as at 31 December 2020.

Capital Commitment

As at 31 December 2020, the Group has outstanding capital commitments of KRW6,284,080,000 (equivalent to approximately HK$44.5 million) mainly related to the agreements entered for properties purchase in Korea which is not provided for in the Group’s financial statements.

Business Review

	HK$’000
Opening backlog as at 1 January 2020	104,451
New booking during the year	740,726
Revenue recognised during the year	679,053
Closing backlog as at 31 December 2020	166,124

Majority of the Group’s revenue was derived from the provision of system integration solution services. Revenue from this segment increased by HK$3.4 million or 0.7% to HK$488.0 million for the year ended 31 December 2020 when compared to HK$484.6 million for the year ended 31 December 2019. The major customers included Korea’s leading mobile operator, financial institutions and messaging app company.

Following the increase in system integration projects, it drove higher demand for maintenance services and an increase in revenue by HK$27.1 million to HK$164.1 million for the year ended 31 December 2020.

Cyber security services business was carried out by subsidiaries in Hong Kong. Even affected by containment measure, revenue from this segment continuously increased by HK$2.1 million or 8.3% from HK$24.9 million for the year ended 31 December 2019 to HK$27.0 million for the year ended 31 December 2020 while the backlog of this segment as at yearend date was approximately HK$18.9 million.

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Future Data Group Limited Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

Key Performance Indicators

	2020	2019	Change
	KRW’million	KRW’million	%
Average productivity per operating staff – Korea	739/employee	863/employee	-14.4%
	HK$’000	HK$’000	%
Average productivity per operating staff – Hong Kong	1,501/employee	1,425/employee	+5.3%
	KRW’million	KRW’million	%
Average contract price for system integration project	102	94	+8.5%
	Number of	Number of	Number of
	projects	projects	projects
Number of new system integration projects awarded	511	867	-356

Under the pressure of economic downturn in 2020, the Group has accepted low profit margin system integration projects with strategic customers to gain higher market share. As a result, the Group awarded projects with higher average contract price. Meanwhile, the Group employed more engineers to accommodate contracts awarded which lower average productivity of each operating staff.

Prospects

The Directors are pleased to report that the Group has recorded profit for the year of approximately HK$7.5 million during the challenging period in 2020. This is the greatest performance since the Company has successfully listed its shares in 2016.

Given the worldwide economic recovery is expected in light of the successful vaccine rollout, we are looking forward to another profitable fiscal year in 2021, barring any unforeseen circumstances.

Employees and Remuneration Policy

The employees of the Group are remunerated according to their job scope and responsibilities. The employees are also entitled to discretionary bonus depending on their respective performance. The total employee costs, including Directors’ emoluments, amounted to approximately HK$98.8 million for the year ended 31 December 2020 (for the year ended 31 December 2019: approximately HK$94.9 million).

The Group has adopted a share option scheme for the purpose of providing incentives and rewards to eligible persons who contributed to the success of the Group’s operation. As at 31 December 2020, no share option had been granted.

In enhancing the competitiveness and improving staff quality through continuous learning, the Group provides our staff with regular technical and on-the-job trainings and encourages our staff to attend external seminars and sit for examinations to develop their knowledge continuously.

As at 31 December 2020, the Group had an aggregate of 220 (31 December 2019: 189) employees. Such increase represented the recruitment of more engineers deploying sizable projects in Korea.

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BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

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Mr. Suh Seung Hyun (徐承鉉)

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Mr. Phung Nhuong Giang (馮潤江)

EXECUTIVE DIRECTORS

Mr. Suh Seung Hyun (徐承鉉), aged 51, is the co-founder of our Group, our executive Director and the chairman of our Board. Mr. Suh is also a director of Global Telecom, a whollyowned subsidiary of the Company. Mr. Suh is mainly responsible for the overall management with focus on the operation of our business. In particular, Mr. Suh is responsible for overseeing the financial well-being of our Korean business, monitoring our business units in achieving internal sales target and market share target, as well as supervising the provision of our services to customers.

Mr. Suh obtained a bachelor’s degree in computer science from The University of Suwon in Korea in February 1996.

Mr. Suh has over 23 years of experience in the information and communications technology industry. Prior to co-founding our Group, Mr. Suh started his career in ShinLa Information Communications Co., Ltd., a company principally engaged in network infrastructure business in Korea, in December 1995 and left in March 1997.

EXECUTIVE DIRECTORS

Mr. Phung Nhuong Giang (馮潤江), aged 59, is an executive Director and the deputy chairman of our Board. Mr. Phung is also a director of Future Data Limited (“Future Data”) and SuperChips Limited and a director of Asia Media Systems Pte. Ltd. (“AMS”), controlling shareholder of the Company. Mr. Phung was appointed as a director of Maximus Group Consulting Limited (“Maximus Group”) and its subsidiary, Maximus Consulting (Hong Kong) Limited on 3 June 2019. He was also appointed as a director of MXC Security (Singapore) Pte. Ltd., a wholly-owned subsidiary of Maximus Group, on 10 July 2019. Mr. Phung first joined our Group when he was appointed as a director of Global Telecom in December 2006 after completion of the acquisition of Global Telecom by AMS. Mr. Phung resigned from the directorship in Global Telecom in May 2008 to pursue his other business engagement, but remained as one of the ultimate beneficial owners of Global Telecom.

Mr. Phung then rejoined Global Telecom in March 2014 as a director. Mr. Phung is mainly responsible for strategy planning, investor relations and public relations of our Group. On 30 March 2020, Mr. Phung resigned from the directorship in Global Telecom but maintains control over Global Telecom by holding directorship of its holding companies.

Mr. Phung obtained a bachelor’s degree with first class honour in Electrical Engineering from the University of Western Australia in Australia in April 1987 and a Master of Business Administration from the University of Louisville in the United States in December 1999.

Mr. Phung has over 32 years of experience in the information and communications technology industry. Mr. Phung worked as a network specialist in Telstra Corporation Limited, an Australian telecommunications and media company, in 1987; as product manager in QPSX Communications Ltd, an Australian company, in 1988 and as a chief technologist in Dimension Data Asia Pacific Ltd. (formerly known as Datacraft Asia Ltd.), a company principally engaged in the provision and management of specialist IT infrastructure solutions, from 1993 to 2001. Mr. Phung joined DMX Technologies Group Limited in April 2001, a company incorporated in Bermuda. He served as the executive director and chief executive officer of DMX Technologies Group Limited and later resigned from the directorship and chief executive office in DMX Technologies Group Limited in 2006.

16

Future Data Group Limited Annual Report 2020

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

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Mr. Lee Seung Han (李承翰)

EXECUTIVE DIRECTORS

Mr. Lee Seung Han (李承翰), aged 50, is the co-founder of our Group, an executive Director and the chief executive officer of our Group. Mr. Lee is also a director of Global Telecom, Future Data and SuperChips Limited. Mr. Lee is mainly responsible for the overall management with focus on business development of our Group. In particular, Mr. Lee is responsible for the formulation of corporate strategy and the supervision and management of the business development of our Group.

Mr. Lee obtained a bachelor’s degree in computer science from The University of Suwon in Korea in February 1996.

Mr. Lee has over 24 years of experience in the information and communications technology industry. Prior to co-founding our Group, Mr. Lee started his career in ShinLa Information Communications Co., Ltd., a company principally engaged in network infrastructure business in Korea, in December 1995 and left in March 1997.

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Mr. Ryoo Seong Ryul (柳晟烈)

EXECUTIVE DIRECTORS

Mr. Ryoo Seong Ryul (柳晟烈), aged 47, is an executive Director and the chief financial officer of our Group. Mr. Ryoo is also the general manager of finance department of Global Telecom. Mr. Ryoo is mainly responsible for the financial planning, budgeting and control and administration matters of the Group.

Mr. Ryoo obtained a bachelor’s degree in business administration from Korea Aerospace University in Korea in February 1996.

Mr. Ryoo has over 19 years of experience in finance and human resource. Mr. Ryoo started his career in the trading department in Yoolim Fishingnet Co., Ltd. from May 1998 to April 2000, with last position being an assistant manager. In June 2000, Mr. Ryoo was appointed as the account and finance manager in KG INICIS Co., Ltd. (Stock code: 035600), a company principally engaged in the provision of payment gateway service and the issued shares of which are listed on KOSDAQ of the Korea Exchange, and left such position in November 2004. In November 2004, Mr. Ryoo was appointed as the general management team manager in Plantynet Co., Ltd. (Stock code: 075130), a company principally engaged in the provision of internet security software and services and the issued shares of which are listed on KOSDAQ of the Korea Exchange, and left such position in June 2005. Mr. Ryoo joined our Group in July 2005 as the general manager of Finance department of Global Telecom.

==> picture [116 x 154] intentionally omitted <==

Mr. Wong Sik Kei (王錫基)

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Wong Sik Kei (王錫基), aged 73, was appointed as our independent non-executive Director on 21 June 2016 and is the chairman of our remuneration committee.

Mr. Wong obtained a bachelor’s degree in engineering from The University of Hong Kong, in October 1971. Mr. Wong also obtained a Master of Philosophy in October 1977 and a Master of Social Sciences in November 1980 from The University of Hong Kong. Mr. Wong joined the Hong Kong government as an assistant telecommunications engineer of the Post Office of Hong Kong in September 1974. Mr. Wong was subsequently promoted to telecommunications engineer in September 1978, senior telecommunications engineer in July 1980, chief telecommunications engineer in June 1984 and assistant postmaster general in July 1988. In March 1994, Mr. Wong was appointed as a senior assistant director of telecommunications in the Office of the Telecommunications Authority of Hong Kong. Mr. Wong served as the director general of the Office of Telecommunications Authority (“OFTA”) from April 1997 to August 2003. In August 2003, Mr. Wong joined the Innovation and Technology Department of the Hong Kong government in capacity of Commissioner. Mr. Wong officially retired from the Hong Kong government in November 2007. Mr. Wong has been an independent non-executive director of ETS Group Limited (Stock code: 8031), the issued shares of which are listed on GEM, since December 2011.

17

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

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Mr. Sum Chun Ho (沈振豪)

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Sum Chun Ho (沈振豪), aged 49, was appointed as our independent non-executive Director on 2 November 2016 and is the chairman of our audit committee. Mr. Sum has over 24 years of experience in the field of professional accounting services. Mr. Sum obtained a master’s degree in accounting from Monash University, and is a member of Hong Kong Institute of Certified Public Accountants and a member of CPA Australia. Mr. Sum is currently the sole proprietor of C. H. Sum & Co., a firm of certified public accountants.

==> picture [115 x 154] intentionally omitted <==

Mr. Yung Kai Tai (容啟泰)

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Yung Kai Tai (容啟泰), aged 70, was appointed as our independent non-executive Director on 15 June 2017 and is the chairman of our nomination committee.

Mr. Yung obtained a Bachelor of Science degree majoring in Physics and minoring in Electronics and a Master of Business Administration, both from the Chinese University of Hong Kong, in October 1973 and October 1986 respectively. Mr. Yung also completed a Harvard Business School Executive Education in July 1997.

Mr. Yung has extensive knowledge and 36 years’ experience in the information and communication technology industry. Mr. Yung joined the Hong Kong Productivity Council in March 1983 and has over 29 years of working experience in the organization. Before his retirement in April 2011, Mr. Yung was the general manager of the Hong Kong Productivity Council, responsible for the development of the information and communication technology industry in Hong Kong. Mr. Yung has once acted as the chairman of the Hong Kong Game Industry Association, the vice president of the Hong Kong Software Industry Association and the vice president of the Hong Kong Association for Advancement of Science and Technology. Mr. Yung was also elected as distinguished fellow of the Hong Kong Computer Society and member of the first three Election Committees of the Hong Kong Special Administrative Region. Mr. Yung is an independent

non-executive director of Gameone Holdings Limited (stock code: 8282), the issued shares of which are listed on GEM of the Stock Exchange. From 1 February 2013 to 30 June 2016, Mr. Yung was an independent nonexecutive director of ETS Group Limited (stock code: 8031), the issued shares of which are listed on GEM.

Disclosure required under Rule 17.50(2) of the GEM Listing Rules

As at the date of this annual report, each of our Directors confirms that save for the information shown on the Section ”Corporate Information” of this annual report and save as disclosed above: (i) he has not held directorships in the past three years in other public companies the securities of which are listed on any securities market in Hong Kong or overseas; (ii) save as disclosed in the paragraph headed “Directors’ and Chief Executives’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company and its Associated Corporations” in the Report of the Directors of this annual report, he does not have any interests in the shares within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”); (iii) there was no information that should be disclosed pursuant to Rule 17.50(2) of the GEM Listing Rules; and (iv) to the best of the knowledge, information and belief of our Directors having made all reasonable enquiries, there was no other matter with respect to the appointment of the Directors that needs to be brought to the attention of the shareholders of the Company.

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Future Data Group Limited Annual Report 2020

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Ko Jae Seok (高在錫)

SENIOR MANAGEMENT

Mr. Ko Jae Seok (高在錫), aged 48, is the head of public sector division of Global Telecom. Mr. Ko is responsible for leading the sales team for public sector customers of Global Telecom.

Mr. Ko has more than 21 years of experience in the information and communications technology industry. Mr. Ko started his career in New C&C Co., Ltd., a company principally engaged in the provision of integrated information and communication systems in Korea, in April 1999 and left in March 2003. Mr. Ko joined Global Telecom in April 2003 as the head of public sector division.

Mr. Ko obtained a bachelor’s degree in economics from The University of Suwon in Korea in February 1996.

Mr. Lee Jun Su (李俊洙)

SENIOR MANAGEMENT

Mr. Lee Jun Su (李俊洙), aged 48, is the head of security technical support team. Mr. Lee Jun Su is responsible for leading the security technical support team of Global Telecom.

Mr. Lee Jun Su joined our Group as a network engineer of Global Telecom in September 1997 and has accumulated more than 22 years of experience in the information and communications technology industry.

Mr. Lee Jun Su obtained a bachelor’s degree in computer science from The University of Suwon in Korea in February 1998.

Mr. Chung Pui Nam Roger (鍾沛南)

SENIOR MANAGEMENT

Mr. Chung Pui Nam Roger (鍾沛南), aged 52, is the CEO of the cyber security business. He has over 31 years of experiences in the Information Technology and Cyber Security Advisory Industry for Asia. Mr. Chung is responsible for business strategy, overall sales, research & development and operational management of Maximus Consulting (Hong Kong) Limited (“Maximus HK”) since April 2003.

Prior to the establishment of Maximus HK, Mr. Chung held various technical and senior management positions in companies listed in NASDAQ (Borland, Symantec and Valicert) and in a multi-national airline company. Mr. Chung has expertise in software design and development (DevOps), system engineering and enterprise security technologies.

Mr. Chung holds EMBA and a computer engineering degree from the Queen’s University of Brighton and Brighton Polytechnic in 1992.

19

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Fan Chi San (樊志生)

SENIOR MANAGEMENT

Mr. Fan Chi San (樊志生), aged 41, is the financial controller of the Company. He has joined the Company in May 2018 and is principally responsible for managing the finance and accounting operations of the Company.

Mr. Fan has over 11 years of experience in auditing and 6 years of experience in financial accounting. He obtained a Bachelor degree in Accountancy from University of Bolton in 2007 and is a fellow member of the Association of Chartered Certified Accountants.

20

Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE PRACTICES OF THE COMPANY

The Company is committed to achieving high standards of corporate governance to safeguard the interest of the shareholders of the Company (the “Shareholders”) and to enhance the corporate value, accountability and transparency of the Company.

The Company’s corporate governance framework has been in place and established a set of policies and procedures based on the Corporate Governance Code (the “CG Code”) contained in Appendix 15 of the GEM Listing Rules. Such policies and procedures provide the infrastructure for enhancing the Board’s ability to implement governance and exercise proper oversight on business conduct and affairs of the Company.

The Company has applied the principles as set out in the CG Code. Throughout the year ended 31 December 2020, the Company has complied with the code provisions as set out in the CG Code which is adopted as its own code to govern its corporate governance practices. The Company will continue to enhance its corporate governance practices appropriate to the operation and growth of the business of the Group.

CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS

The Company has adopted its securities dealing code (“Securities Dealing Code”) which is no less exacting than the required standard of dealings regarding securities transactions by the Directors as set out in Rules 5.48 to 5.67 of the GEM Listing Rules. Further, the Company had made specific enquiry with all Directors and each of them has confirmed his compliance with the Securities Dealing Code throughout the year ended 31 December 2020.

The Company has also adopted the Securities Dealing Code for securities transactions by relevant employees of the Group who are likely to possess inside information in relation to the Company or its securities. No incidence of non-compliance of the Securities Dealing Code by the relevant employees was noted by the Company.

The Company will periodically review and improve its corporate governance practices with reference to its latest development.

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CORPORATE GOVERNANCE REPORT

BOARD OF DIRECTORS

The Company is headed by an effective Board which oversees the Group’s businesses, strategic decisions and performance and takes decisions objectively in the best interests of the Company.

The Board should regularly review the contribution required from a Director to perform his responsibilities to the Company, and whether the Director is spending sufficient time performing them.

Board Composition

The Board currently comprises seven members, consisting of four executive Directors and three independent non-executive Directors.

Independent non-executive Directors:

• Mr. Wong Sik Kei

(Chairman of the Remuneration Committee and member of the Audit Committee and the Nomination Committee)

• Mr. Sum Chun Ho

(Chairman of the Audit Committee and member of the Remuneration Committee and the Nomination Committee)

• Mr. Yung Kai Tai

(Chairman of the Nomination Committee and member of the Audit Committee and the Remuneration Committee)

The biographical information of the Directors are set out on pages 16 to 20 of this annual report.

None of the members of the Board is related to one another.

Executive Directors:

Mr. Suh Seung Hyun (Chairman)

Chairman and Chief Executive Officer

Mr. Phung Nhuong Giang (Deputy Chairman)

• Mr. Lee Seung Han

• (Chief Executive Officer and Compliance Officer)

• Mr. Ryoo Seong Ryul (Chief Financial Officer)

Code provision A.2.1 of the CG Code stipulates that the roles of chairman and chief executive should be separate and should not be performed by the same individual. The division of responsibilities between the chairman and the chief executive should be clearly established and set out in writing.

The position of Chairman is held by Mr. Suh Seung Hyun and he provides leadership and is responsible for the overall strategic planning and development of the Group and the effective functioning and leadership of the Board. Mr. Phung Nhuong Giang is the Deputy Chairman and is mainly responsible for strategy planning, investor relations and public relations of our Group. The position of Chief Executive Officer is held by Mr. Lee Seung Han and he is responsible for the Company’s business development and daily management and operations generally.

22 Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

Independent non-executive Directors

During the year ended 31 December 2020, the Company had met the requirements of the GEM Listing Rules relating to the appointment of at least three independent non-executive Directors, representing at least one-third of the Board, with one of whom possessing appropriate professional qualifications or accounting or related financial management expertise.

The Company has received written annual confirmation from each of the independent non-executive Directors in respect of his independence in accordance with the independence guidelines set out in Rule 5.09 of the GEM Listing Rules. The Company considers all independent non-executive Directors are independent.

Appointment and Re-election of Directors

Code provision A.4.1 of the CG Code stipulates that non-executive directors shall be appointed for a specific term, subject to re-election, whereas code provision A.4.2 states that all directors appointed to fill a casual vacancy shall be subject to election by Shareholders at the first general meeting after appointment and that every Director, including those appointed for a specific term, shall be subject to retirement by rotation at least once every three years.

Each of the executive Directors has entered into a service agreement with the Company for an initial term of three years commencing from 8 July 2016 (the “Listing Date”) then renewed on 8 July 2019, and will continue thereafter until terminated by not less than three months’ notice in writing served by either party on the other.

Each of the independent non-executive Directors has entered into a letter of appointment with the Company with a term of three years commencing from the date of renewed appointment during 2019, subject to termination in certain circumstances as stipulated in the relevant letters of appointment.

Each of the Directors is subject to

re-election at the annual general meeting of the Company (“AGM”) after his appointment pursuant to the articles of association of the Company (“Articles”). The term of offices of every Director is also subject to retirement by rotation at the AGM at least once every three years pursuant to the Articles.

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CORPORATE GOVERNANCE REPORT

Responsibilities, Accountabilities and Contributions of the Board and Management

The Board is responsible for leadership and control of the Company and oversees the Group’s businesses, strategic decisions and performance and is collectively responsible for promoting the success of the Company by directing and supervising its affairs. The Board makes decisions objectively in the interests of the Company.

All Directors, including independent nonexecutive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning.

The Directors have timely access to the information of the Company as well as the services and advice from the company secretary and senior management of the Company. The Directors may, upon request, seek independent professional advice in appropriate circumstances, at the Company’s expenses for discharging their duties to the Company.

The Board reserves for its decision all major matters relating to policy matters, strategies and budgets, internal control and risk management, material transactions (in particular those that may involve conflict of interests), financial information, appointment of Directors and other significant operational matters of the Company. Responsibilities relating to implementing decisions of the Board, directing and coordinating the daily operation and management of the Company are delegated to its management team.

All Directors shall ensure that they carry out duties in good faith, in compliance with applicable laws and regulations, and in the interests of the Company and its Shareholders at all times.

Continuous Professional Development of Directors

Directors keep abreast of responsibilities as a director of the Company and of the conduct, business activities and development of the Company.

Every newly appointed Director will receive formal, comprehensive and tailored induction on the first occasion of his appointment to ensure appropriate understanding of the business and operations of the Company and full awareness of director’s responsibilities and obligations under the GEM Listing Rules and relevant statutory requirements. The induction materials, including directors’ manual and legal and regulatory update have been provided to the Directors upon appointment.

Directors should participate in appropriate continuous professional development and training courses to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant. Internally-facilitated briefings for Directors will be arranged and reading material on relevant topics will be issued to Directors where appropriate.

24

Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

The Directors have participated in the following trainings during the year ended 31 December 2020:

Types of training
Executive Directors
Mr. Suh Seung Hyun	A
Mr. Phung Nhuong Giang	A
Mr. Lee Seung Han	A
Mr. Ryoo Seong Ryul	A
Independent non-executive Directors
Mr. Wong Sik Kei	A
Mr. Sum Chun Ho	A
Mr. Yung Kai Tai	A

A Attending training sessions, including but not limited to, briefings, seminars, conferences and workshops

• B Reading relevant news alerts, newspapers, journals, magazines and relevant publications

BOARD COMMITTEES AND CORPORATE GOVERNANCE FUNCTIONS

The Board has established three committees, namely, the audit committee, remuneration committee and nomination committee, for overseeing particular aspects of the Company’s affairs. All Board committees of the Company are established with defined written terms of reference. The terms of reference of the Board committees are posted on the Company’s website and the Stock Exchange’s website and are available to the Shareholders upon request.

All of the members of each Board committee are independent non-executive Directors and the list of the chairman and members of each Board committee is set out under “Corporate Information” on page 2 of this annual report.

Audit Committee

The Company established the audit committee (the “Audit Committee”) on 21 June 2016 with written terms of reference in compliance with the CG Code.

On 31 December 2018, the Board adopted the revised terms of reference of the Audit Committee by a resolution passed on the same date. Such revised terms of reference is posted on the website of the Stock Exchange and of the Company.

The main duties of the Audit Committee are to assist the Board in reviewing the financial information and reporting process, risk management and internal control systems and the internal audit function, audit plan and relationship with external auditors, and arrangements to enable employees of the Company to raise, in confidence, concerns about possible improprieties in financial reporting, internal control or other matters of the Company.

25

CORPORATE GOVERNANCE REPORT

The Audit Committee comprises three independent non-executive Directors, namely Mr. Sum Chun Ho, Mr. Wong Sik Kei and Mr. Yung Kai Tai. Mr. Sum Chun Ho is the chairman of the Audit Committee, who has appropriate professional qualifications or accounting or related financial management expertise.

During the year ended 31 December 2020, the Audit Committee held four meetings, to review the remuneration, terms of engagement and independence of the Company’s external auditors, review the risk management and internal control systems and internal audit function, the arrangements for employees to raise concerns about possible improprieties, the Group’s annual financial results and report for the year ended 31 December 2019; quarterly financial results and report for the three months and nine months ended 31 March 2020 and 30 September 2020 respectively; and interim financial results and report for the six months ended 30 June 2020 before submission to the Board for approval.

The Audit Committee has in conjunction with management of the Company reviewed the accounting principles and practices adopted by the Group and discussed risk management and internal control systems and financial reporting matters including a review of the audited consolidated financial statements of the Group for the year ended 31 December 2020 and the independent auditor’s report thereon.

The Audit Committee has also reviewed the compliance with the Deed of Non-competition given by the controlling Shareholders as defined and stated in the prospectus of the Company dated 29 June 2016. The Company has obtained an annual written confirmation from the Company’s controlling Shareholders in respect of their compliance with the terms of the Deed of Non-competition.

The Audit Committee met the external auditors twice a year without the presence of the executive Directors.

26 Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

Remuneration Committee

The Company established the remuneration committee (the “Remuneration Committee”) on 21 June 2016 with written terms of reference in compliance with the CG Code. The primary functions of the Remuneration Committee include determining, with delegated responsibility, the specific remuneration packages of all executive Directors and senior management, reviewing and making recommendations to the Board on the Company’s policy and structure for all remuneration of Directors and senior management and on the establishment of a formal and transparent procedure for developing policy on such remuneration and to ensure that no Director or any of his associates will participate in deciding his own remuneration.

Nomination Committee

The Company established the nomination committee (the “Nomination Committee”) on 21 June 2016 with written terms of reference in compliance with the CG Code. The principal duties of the Nomination Committee include reviewing the Board structure, size, composition and diversity, making recommendations on any proposed changes to the Board to complement the Company’s corporate strategy, making recommendations to the Board on the appointment and succession planning of Directors, and assessing the independence of independent nonexecutive Directors.

The Remuneration Committee currently consists of three members, Mr. Wong Sik Kei, Mr. Sum Chun Ho and Mr. Yung Kai Tai, all of whom are independent non-executive Directors. Mr. Wong Sik Kei is the chairman of the Remuneration Committee.

The Remuneration Committee shall report to the Board after each meeting of the Remuneration Committee.

During the year ended 31 December 2020, the Remuneration Committee held one meeting, to review the remuneration packages of Directors and senior management as well as the Company’s policy and structure for the remuneration of Directors and senior management.

27

CORPORATE GOVERNANCE REPORT

The Nomination Committee currently consists of three members, Mr. Yung Kai Tai, Mr. Sum Chun Ho and Mr. Wong Sik Kei, all of whom are independent non-executive Directors. Mr. Yung Kai Tai is the chairman of the Nomination Committee.

In assessing the Board composition, the Nomination Committee would take into account various aspects as well as factors concerning Board diversity as set out in the Company’s Board Diversity Policy. The Nomination Committee would discuss and agree on measurable objectives for achieving diversity on the Board, where necessary, and recommend them to the Board for adoption.

In identifying and selecting suitable candidates for directorships, the Nomination Committee would consider the candidate’s character, qualifications, experience, independence, time commitment and other relevant criteria as set out in the Director Nomination Policy that are necessary to complement the corporate strategy and achieve Board diversity, where appropriate, before making recommendation to the Board.

The Nomination Committee shall report to the Board after each meeting of the Nomination Committee.

During the year ended 31 December 2020, the Nomination Committee held one meeting, to review the structure, size and composition of the Board, the Board Diversity Policy and the independence of the independent nonexecutive Directors, and to consider the qualifications of the retiring directors standing for election at the AGM. The Nomination Committee considered that an appropriate balance of diversity perspectives of the Board is maintained.

Board Diversity Policy

The Company has adopted a Board Diversity Policy which sets out the approach to achieve diversity of the Board and is available on the website of the Company. The Company recognises and embraces the benefits of having a diverse Board and sees increasing diversity at the Board level as an essential element in maintaining the Company’s competitive advantage.

The Nomination Committee will review annually the structure, size and composition of the Board and where appropriate, make recommendations on changes to the Board to complement the Company’s corporate strategy and to ensure that the Board maintains a balanced diverse profile.

In relation to reviewing and assessing the Board composition, the Nomination Committee is committed to diversity at all levels and will consider a number of aspects, including but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge and length of service.

The Company aims to maintain an appropriate balance of diversity perspectives that are relevant to the Company’s business growth and is also committed to ensuring that recruitment and selection practices at all levels (from the Board downwards) are appropriately structured so that a diverse range of candidates are considered.

28

Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

At present, the Nomination Committee considered that the Board is sufficiently diverse. The Board will consider setting measurable objectives to implement the Board Diversity Policy and review such objectives from time to time to ensure their appropriateness and ascertain the progress made towards achieving those objectives.

The Nomination Committee will review the Board Diversity Policy, as appropriate, to ensure its effectiveness.

Director Nomination Policy

The Board has delegated its responsibilities to the Nomination Committee for identification and selection of candidates to stand for election as Directors. The Company has adopted a Director Nomination Policy which sets out the selection criteria and process and the Board succession planning considerations in relation to nomination and appointment of Directors of the Company and aims to ensure that the Board has a balance of skills, experience and diversity of perspectives appropriate to the Company and the continuity of the Board and appropriate leadership at Board level.

The Director Nomination Policy sets out the factors for assessing the suitability and the potential contribution to the Board of a proposed candidate, including but not limited to the following:

• Character and integrity;

• Qualifications including professional qualifications, skills, knowledge and experience that are relevant to the Company’s business and corporate strategy;

• Diversity in all aspects, including but not limited to gender, age (18 years or above), cultural and educational background, professional experience, skills, knowledge and length of service;

• Requirements of independent nonexecutive Directors on the Board and independence of the proposed independent non-executive Directors in accordance with the GEM Listing Rules; and

• Commitment in respect of available time and relevant interest to discharge duties as a member of the Board and/or Board committee(s) of the Company.

The Director Nomination Policy also sets out the procedures for the selection and appointment of new Directors and re-election of Directors at general meetings.

The Nomination Committee will review the Director Nomination Policy, as appropriate, to ensure its effectiveness.

Corporate Governance Functions

The Board is responsible for performing the functions set out in the code provision D.3.1 of the CG Code.

The Board reviewed the Company’s corporate governance policies and practices, training and continuous professional development of Directors and senior management, the Company’s policies and practices on compliance with legal and regulatory requirements, the compliance of the required standard of dealings by directors of securities transactions and the Company’s Securities Dealing Code, as well as the Company’s compliance with the CG Code and disclosure in this corporate governance report.

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CORPORATE GOVERNANCE REPORT

REMUNERATION BANDS OF MEMBERS OF SENIOR MANAGEMENT

The remuneration bands of the members of senior management who are not Directors of the Company for the year ended 31 December 2020 are as follows:

Remuneration bands	Number of Individuals
HK$ Nil to HK$1,000,000	3
HK$1,000,001 to HK$1,500,000	4

ATTENDANCE RECORD OF DIRECTORS AND COMMITTEE MEMBERS

The attendance record of each Director at the Board and Board committee meetings and the general meetings of the Company held during the year ended 31 December 2020 is set out in the table below:

		Attendance/Number of Meetings	Attendance/Number of Meetings	Attendance/Number of Meetings	Attendance/Number of Meetings
	Board	Audit Committee	Remuneration Committee	Nomination Committee	AGM	EGM
Executive Directors
Mr. Suh Seung Hyun	6/6	N/A	N/A	N/A	1/1	1/1
Mr. Phung Nhuong Giang	6/6	N/A	N/A	N/A	1/1	1/1
Mr. Lee Seung Han	6/6	N/A	N/A	N/A	1/1	1/1
Mr. Ryoo Seong Ryul	6/6	N/A	N/A	N/A	1/1	1/1
Independent Non-Executive Directors
Mr. Wong Sik Kei	6/6	4/4	1/1	1/1	1/1	1/1
Mr. Sum Chun Ho	5/6	3/4	1/1	1/1	1/1	1/1
Mr. Yung Kai Tai	6/6	4/4	1/1	1/1	1/1	1/1

Six regular board meetings were held during the year ended 31 December 2020.

On 23 March 2020 and 22 March 2021, the Chairman of the Board held a meeting with the independent non-executive Directors without the presence of other Directors.

Independent non-executive Directors have attended the AGM held in 2020 to gain and develop a balanced understanding of the view of Shareholders.

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Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

RISK MANAGEMENT AND INTERNAL CONTROL

The Board acknowledges its responsibility for the risk management and internal control systems and reviewing their effectiveness. Such systems are designed to identifying, analysing, evaluating and mitigating risk exposures that may impact the continued efficiency and effectiveness of our operation or prevent it from achieving its business objectives.

The risk management process of our Group is coordinated and facilitated by our compliance officer. The objectives of risk management are to, inter alia, enhance our Company’s governance and corporate management processes as well as to safeguard our Group against unacceptable levels of risks and losses. The risk management process of our Group will involve, inter alia, (i) an annual risk identification exercise which involves assessment of the consequence and likelihood of risks (including documenting those of potentially high impact) and the development and/or review of risk management plans for mitigating such risks; (ii) testing of documented risk management procedures at approval intervals; and (iii) ensuring that our staff and other stakeholders have access to appropriate information and training in the area of risk management.

An internal audit function is set up to examine key issues in relation to the financial and operational matters/practices and to provide its findings and any recommendations for improvement to the Audit Committee. As the Group is relatively simple corporate and operation structure, the Board is assisted by its own internal audit function to manage the risks exposed to the Group. In the event that the Board considered a significant change in risk adversely affecting the Group’s business, they will engage an independent internal control consultant to reassess existing internal control policies and to give recommendations to make any enhancement.

With a view to identifying, handling and disseminating inside information, procedures have been implemented by the Group to ensure that unauthorised access and use of information are strictly prohibited.

During the year ended 31 December 2020, the Board, as supported by the Audit Committee, our compliance officer and internal audit function, reviewed the risk management and internal control systems, including the financial, operational and compliance controls, for the mentioned period, and considered that such systems are effective and adequate. The annual review also covered the financial reporting and internal audit function and staff qualifications, experiences and relevant resources.

31

CORPORATE GOVERNANCE REPORT

DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the financial statements of the Company for the year ended 31 December 2020.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern.

COMPANY SECRETARY

With effect from 29 January 2021, Ms. Cheung Yuet Fan (“Ms. Cheung”) of Tricor Services Limited, a global professional services provider specialising in integrated business, corporate and investor services, was appointed as the company secretary of the Company in place of Ms. Chan Suet Lam.

Ms. Cheung’s primary contact person at the Company is Mr. Phung Nhuong Giang, Deputy Chairman of the Company.

The report of the independent auditor of the Company about their reporting responsibilities on the financial statements is set out in the Independent Auditor’s Report on pages 49 to 55.

AUDITOR’S REMUNERATION

BDO Limited is appointed as the external auditor of the Company.

Ms. Cheung is responsible for providing advice to the Company on corporate governance matters and relevant updates on applicable laws, rules and regulations so as to uphold good corporate governance practices of the Company. All Directors have access to the advice and services of the company secretary on corporate governance and board practices and matters.

For the year ended 31 December 2020, the remuneration paid or payable to BDO Limited in respect of audit and non-audit services provided is set out below:

Service rendered	Remuneration paid/payable HK$’000
Audit services:
2020 annual audit	1,000
Non-audit services:
Acting as reporting accountant in relation to the very substantial acquisition of properties in Korea	230
	1,230

32 Future Data Group Limited Annual Report 2020

CORPORATE GOVERNANCE REPORT

SHAREHOLDERS’ RIGHTS

To safeguard Shareholders’ interests and rights, a separate resolution is proposed for each substantially separate issue at Shareholders’ meetings, including the election of individual Directors. All resolutions put forward at Shareholders’ meetings of the Company will be voted on by poll pursuant to the GEM Listing Rules and poll results will be posted on the websites of the Company and of the Stock Exchange after each Shareholders’ meeting of the Company.

Convening an Extraordinary General Meeting by Shareholders and Putting Forward Proposals at General Meetings

• Any one or more Shareholders holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company (the “Eligible Shareholder(s)”) shall at all times have the right, by written requisition to the Board or the company secretary of the Company, to require an extraordinary general meeting (“EGM”) to be called by the Board for the transaction of any business specified in such requisition, including making proposals or moving a resolution at the EGM.

• Eligible Shareholders who wish to convene an EGM for the purpose of making proposals or moving a resolution at the EGM must deposit a written requisition (the “Requisition”) signed by the Eligible Shareholder(s) concerned to the principal place of business of the Company in Hong Kong at Suite 1507–08, 15/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong, for the attention of the Chairman of the Board.

• The Requisition must state clearly the name of the Eligible Shareholder(s) concerned, his/her/their shareholding in the Company, the reason(s) to convene an EGM, the agenda proposed to be included, the details of the business(es) proposed to be transacted in the EGM, signed by the Eligible Shareholder(s) concerned.

• The Company will check the Requisition and the identity and the shareholding of the Eligible Shareholders will be verified with the Company’s branch share registrar. If the Requisition is found to be proper and in order, the Chairman of the Board will ask the Board to convene an EGM within 2 months and/or include the proposal or the resolution proposed by the Eligible Shareholder(s) at the EGM after the deposit of the Requisition. On the contrary, if the Requisition has been verified as not in order, the Eligible Shareholder(s) concerned will be advised of this outcome and accordingly, the Board will not call for an EGM and/or include the proposal or the resolution proposed by the Eligible Shareholder(s) at the EGM.

33

CORPORATE GOVERNANCE REPORT

• If within 21 days of the deposit of the Requisition the Board has not advised the Eligible Shareholder(s) of any outcome to the contrary and fails to proceed to convene such EGM, the Eligible Shareholder(s) himself/herself/themselves may do so in accordance with the Memorandum and Articles of Association of the Company, and all reasonable expenses incurred by the Eligible Shareholder(s) concerned as a result of the failure of the Board shall be reimbursed to the Eligible Shareholder(s) concerned by the Company.

Putting Forward Enquiries to the Board and Contact Details

For putting forward any enquiries to the Board, Shareholders may send written enquiries to the Company. The Company will not normally deal with verbal or anonymous enquiries.

Shareholders may send their enquiries as mentioned above to the following:

Address:	Suite 1507–08, 15/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong
Email:	enquiry@futuredatagroup.com
Fax:	(852) 2907 0003

POLICIES RELATING TO SHAREHOLDERS

The Company has in place a Shareholders’ communication policy to ensure that Shareholders’ views and concerns are appropriately addressed. The policy is regularly reviewed to ensure its effectiveness.

The Company has adopted a policy on payment of dividends, which sets out the principles and guidelines that the Company intends to apply in relation to the declaration, payment or distribution of dividends to the Shareholders.

In recommending the declaration and payment of dividend, the Board shall consider all relevant internal and external factors which include, but not limited to, financial results, liquidity position, capital requirements, general market and economic conditions, as well as our Shareholders’ interests.

The recommendation of any final dividend for a financial year will be subject to Shareholders’ approval at general meeting of the Company.

CONSTITUTIONAL DOCUMENTS

The Company has not made any changes to its Articles during the year ended 31 December 2020. An up to date version of the Articles is also available on the Company’s website and the Stock Exchange’s website.

34 Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

The Directors are pleased to present the report and the audited consolidated financial statements of the Group for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The Group is engaged in the provision of (i) integration of systems with network connectivity, cloud computing and security elements; (ii) maintenance services and (iii) cyber security services in Korea and Hong Kong.

REVENUE AND SEGMENT INFORMATION

The revenue and segment information of the Group for the year are set forth in the consolidated financial statements on pages 95 to 99 of this annual report.

RESULTS AND DIVIDENDS

The results of the Group for the year and the financial position of the Company and of the Group as at 31 December 2020 are set forth in the consolidated financial statements on pages 56 to 151 of this annual report.

BUSINESS REVIEW

A review of the business of the Group for the year ended 31 December 2020, a discussion on the Group’s business development and an analysis of the Group’s performance using key financial performance indicators are provided in the “Management Discussion and Analysis” on pages 7 to 15. In addition, discussions on the principal risks and uncertainties facing the Group, the Group’s environmental policies and performance, the Group’s compliance with the relevant laws and regulations that have a significant impact on the Group, particulars of important events affecting the Group since the financial year ended 31 December 2020 and key relationships with its stakeholders are contained in this “Report of the Directors”.

PRINCIPAL RISK AND UNCERTAINTIES

Our Group’s financial position, results of operations and business prospects may be affected by a number of risks and uncertainties directly and indirectly pertaining to our Group’s business. The following are the key risks and uncertainties identified by our Group.

The Board does not recommend the payment of a final dividend for the year ended 31 December 2020 (2019: Nil).

35

REPORT OF THE DIRECTORS

Our integrated systems are provided on a project basis. Such projects are not recurring in nature and our future business depends on our continuing success in securing contracts

For the year ended 31 December 2020, approximately HK$488.0 million (2019: HK$484.6 million) of our revenue was generated from our system integration projects, representing approximately 71.9% (2019: 75.0%) of our total revenue. Our Directors believe that the competition in the system integration industry is intense and our ability to secure contracts is one of the critical factors that is important to our success. Our success requires us to maintain good relationships with our existing customers and to develop new relationship with potential customers. Our integrated systems are provided on a project basis and our customers may subsequently engage us in enhancement works or conducting upgrades for the systems integrated by us in previous projects. Our customers may also engage us to integrate new systems after the retirement of outdated systems. However, there is no assurance that the customers will continue to provide us with the new businesses after completion of our projects. In the event that we are unable to succeed in securing existing customers and obtaining sufficient number of recurring and/or new system integration contracts, our competitive advantage may be weakened.

We may not be able to keep up with rapid technological changes and may be driven out of competition

The system integration industry is characterised by rapidly changing technology, evolving industry standards, frequent introductions and enhancements of new products and services, and changing customer demands.

The introduction of new technology and the emergence of new industry standards may render our services to be obsolete and uncompetitive. Accordingly, our future success will depend on our ability to adapt to rapidly changing technologies and continually improving the know-how of our staff in response to evolving demands of the market place. Failing to adapt to such changes would have a material adverse effect on our business.

ENVIRONMENTAL POLICY

Environmental policy is set out in the “Environmental, Social and Governance Report”, which will be published on the websites of the Company and of the Stock Exchange by the end of May 2021.

COMPLIANCE WITH LAWS AND REGULATIONS

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, our Group has complied in all material respects with the relevant laws and regulations that have a significant impact on the business and operation of our Group during the year ended 31 December 2020.

KEY RELATIONSHIPS

Employees

Our Group recognises employees as our valuable assets. We provide competitive remuneration package to attract, motivate and retain appropriate and suitable personnel to serve our Group. We have also adopted an annual review system to assess the performance of our staff, which forms the basis of our decisions with respect to salary raises and promotions.

36 Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

Customers

Owing to the fact that our system integration can be applied to various industries, we have a diverse base of customers ranging from small and medium enterprises to multinational corporations and government-owned entities. We will therefore endeavor to accommodate their demands for our services to the extent our resources allow in order to capture more opportunities for larger scale projects in the future.

Suppliers and subcontractors

Our Group encompasses working relationships with suppliers and subcontractors to meet our customers’ needs in an effective and efficient manner. Our Group has set up an approved list of suppliers and we select suppliers based on our past experience working with them, their reputation in the industry, specification of their hardware and software components, and quality of their after sales service and price.

MAJOR CUSTOMERS, SUPPLIERS AND SUBCONTRACTORS

For the year ended 31 December 2020, our largest customer accounted for approximately 5.5% (2019: 6.1%) of our total revenue, while the percentage of our total revenue attributable to our five largest customers in aggregate was approximately 21.9% (2019: 22.8%).

For the year ended 31 December 2020, our largest supplier accounted for approximately 14.3% (2019: 16.3%) of our total costs of hardware and software component incurred, while the percentage of our total costs of hardware and software component incurred attributable to our five largest suppliers in aggregate was approximately 36.4% (2019: 46.0%).

For the year ended 31 December 2020, our largest subcontractor amounted to approximately 32.2% (2019: 34.1%) of our total subcontracting charges incurred, while the percentage of our subcontracting charges incurred attributable to our five largest subcontractors in aggregate was approximately 56.5% (2019: 67.2%).

As far as the Company is aware, as at the date of this annual report, none of the Directors, their close associates nor any Shareholders (which to the knowledge of the Directors own more than 5% of the Company’s share capital) had any interest in the Group’s customers and suppliers as disclosed above.

EMOLUMENT POLICY

The Remuneration Committee will review and determine the remuneration and compensation packages of the Directors with reference to their responsibilities, workload, time devoted to our Group and the performance of our Group. The Directors may also receive options to be granted under the share option scheme.

37

REPORT OF THE DIRECTORS

EQUITY-LINKED AGREEMENTS

Save for the share option scheme as set out in this report, no equity-linked agreements were entered into by the Group, or existed during the year.

TAX RELIEF AND EXEMPTION

The Company is not aware of any tax relief and exemption available to Shareholders by reason of their holding of the Company’s securities.

RESERVES

SUMMARY OF FINANCIAL INFORMATION

A summary of the published results, assets, liabilities of the Group for the last five financial years, as extracted from the audited consolidated financial statements is set out on page 152 of this annual report. This summary does not form part of the consolidated financial statements for the year.

PROPERTY, PLANT AND EQUIPMENT

Details of the movements in property, plant and equipment of the Group during the year are set out in note 16 to the consolidated financial statements.

INTANGIBLE ASSETS

Details of movements in intangible assets of the Group during the year are set out in note 17 to the consolidated financial statements.

SHARE CAPITAL

Details of the movements in share capital of the Company during the year are set out in note 30 to the consolidated financial statements.

Details of movements in the reserves of the Company and of the Group during the year are set out in note 33 to the consolidated financial statements and in the consolidated statement of changes in equity, respectively.

PRE-EMPTIVE RIGHTS

There are no provision for pre-emptive rights under the Company’s articles of association or the laws of the Cayman Islands, being the jurisdiction in which the Company is incorporated, which would oblige the Company to offer new shares on a pro rata basis to existing Shareholders.

DISTRIBUTABLE RESERVES

As at 31 December 2020, the Company had no retained profit available for distribution to Shareholders of the Company. However, in accordance with the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and the Articles, the share premium account of the Company of HK$35,718,000 is subject to solvency test, available for distribution to Shareholders.

SHARE OPTION SCHEME

The Company has adopted a share option scheme on 21 June 2016 (the “Scheme”) as approved by a resolution of the Shareholders passed on 21 June 2016.

38

Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

Details of the Scheme are as follows:

1. Purpose of the Scheme

To provide an incentive or a reward to eligible participants for their contribution to the Group and/or to enable the Group to recruit and retain highcalibre employees and attract human resources that are valuable to the Group or any entity in which the Group holds any equity interest.

1. Eligible participants to the Scheme

2. Any employee (full-time or part-time), director, supplier and customer of the Group or any invested entity; any consultant, adviser, manager, officer or entity that provides research, development or other technological support to the Group or any invested entity; and any person (who in the sole discretion of the Board) has contributed or may contribute to the Group or any invested entity.

3. Total number of shares available for issue under the Scheme and percentage to the issued shares as at the date of this annual report

4. 40,000,000 shares (equivalent to 10% of the total number of shares of the Company (“Shares”) in issue as at 31 December 2020).

5. Maximum entitlement of each participant under the Scheme

6. Not exceeding 1% of the total number of Shares in issue for the time being in any 12-month period. Any further grant of share option in excess of such limit must be separately approved by the Shareholders in general meeting.

7. The period within which the shares must be taken up under an option

8. A period which shall not be more than ten (10) years after the offer date and subject to the provisions for early termination as contained in the Scheme.

9. The minimum period for which an option must be held before it can be exercised

10. Unless otherwise determined by the Board, there is no performance target required to be achieved and no minimum period required under the Scheme for the holding of an option before it can be exercised.

11. The amount payable on application or acceptance of the option and the period within which payments or calls must be made

12. The payment or remittance of HK$1.00 within 21 days from the offer date or within such other period of time as may be determined by the Board pursuant to the GEM Listing Rules.

13. The basis of determining the exercise price

Being determined by the Board and shall be at least the highest of:

• (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotation sheet on the offer date;

• (b) the average closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five consecutive business days immediately preceding the offer date; and

• (c) the nominal value of a Share on the offer date.

• The remaining life of the Scheme The Scheme is valid and effective for a period of ten (10) years commencing on 21 June 2016 (being the date of adoption of the Scheme).

39

REPORT OF THE DIRECTORS

No share option has been granted under the Scheme since the adoption of the Scheme.

DIRECTORS

The Board during the year and up to the date of this report are as follows:

Executive Directors

Mr. Suh Seung Hyun (Chairman)

Mr. Phung Nhuong Giang (Deputy Chairman)

• Mr. Lee Seung Han (Chief Executive Officer

and Compliance Officer)

• Mr. Ryoo Seong Ryul (Chief Financial Officer)

Independent non-executive Directors

Mr. Wong Sik Kei Mr. Sum Chun Ho Mr. Yung Kai Tai

In accordance with the Articles, at each annual general meeting one-third of the Directors for the time being shall retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. Any Director appointed by the Board to fill a casual vacancy shall hold office until the first general meeting of the Shareholders after his/ her appointment and shall be subject to re-election at such general meeting. Any Director appointed by the Board as an addition to the Board shall hold office until the next following annual general meeting and shall be eligible for re-election.

In accordance with articles 84(1) and 84(2) of the Articles, Mr. Phung Nhuong Giang, Mr. Wong Sik Kei and Mr. Sum Chun Ho shall retire at the forthcoming AGM. All of the above retiring Directors, being eligible, will offer themselves for re-election at the AGM.

DIRECTORS’ SERVICE CONTRACTS

None of the Directors has a service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation other than statutory compensation.

DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES

Biographical details of the Directors and the senior management of the Group are set out on pages 16 to 20 of this annual report.

EMOLUMENTS OF DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

Details of the emoluments of the Directors and the five highest paid individuals of the Group are set out in note 15 to the consolidated financial statements.

40

Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

DIRECTORS’ INTEREST IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS OF SIGNIFICANCE

Save for the loan to ultimate holding company disclosed in note 23 to the consolidated financial statements, no Director had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to the business of the Group to which the Company or any of its subsidiaries was a party during the year ended 31 December 2020.

MANAGEMENT CONTRACTS

During the year ended 31 December 2020, the Company did not enter into or have any management and administration contracts in respect of the whole or any substantial part of the business of the Company.

DIRECTORS’ RIGHT TO ACQUIRE SHARES

Other than as disclosed in the paragraph headed “Disclosure of Interests” below and “Share Option Scheme” in note 31 to the consolidated financial statements, at no time during the year ended 31 December 2020 was the Company or any of its subsidiaries a party to any arrangement to enable the Directors or chief executives of the Company (including their spouses or children under 18 years of age) to have any right to subscribe for securities of the Company or any of its associated corporations as defined in the SFO or to acquire benefits by means of acquisition of Shares in, or debentures of, the Company or any other body corporate.

DISCLOSURE OF INTERESTS

Directors’ and Chief Executives’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company and its Associated Corporations

As at 31 December 2020, the interests and short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”) held by the Directors and chief executives of the Company which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO) or have been entered in the register maintained by the Company pursuant to Section 352 of the SFO, or otherwise have been notified to the Company and the Stock Exchange pursuant to Rule 5.46 of the GEM Listing Rules are as follows:

41

REPORT OF THE DIRECTORS

Long Positions in the Shares

Name of Director	Capacity/Nature of interest	Number of Shares held	Approximate percentage of issued share capital (Note 4)
Mr. Phung Nhuong Giang (Notes 1, 2 and 3)(“Mr. Phung”)	Interest held jointly with other persons/ Interest in controlled corporation/ Interest of spouse	262,917,327	65.73%
Mr. Suh Seung Hyun (Notes 1 and 2)(“Mr. Suh”)	Interest held jointly with other persons/ Interest in controlled corporation	262,917,327	65.73%
Mr. Lee Seung Han (Notes 1 and 2)(“Mr. Lee”)	Interest held jointly with other persons/ Interest in controlled corporation	262,917,327	65.73%

Notes:

• (1) LiquidTech Limited (“LiquidTech”) held 262,917,327 Shares, representing 65.73% of the issued Shares. LiquidTech is wholly owned by Asia Media Systems Pte. Ltd. (“AMS”) which is owned by Mr. Phung, Mr. Suh, Mr. Lee, Mr. Park Hyeoung Jin (“Mr. Park”), Mr. Lee Sung Gue, Mr. Lee Je Eun and Ms. Marilyn Tang as to 18.14%, 25.34%, 22.71%, 14.03%, 14.03%, 3.40% and 2.35% respectively.

• (2) On 21 June 2016, four of the ultimate controlling Shareholders, namely, Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park, entered into the acting in concert confirmation and undertaking to acknowledge and confirm, among other things, that they were parties acting in concert of each of the members of the Group. As such, Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park together control approximately 65.73% interest in the share capital of the Company through AMS and LiquidTech. As a result, each of Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park is deemed to be interested in approximately 65.73% interest in the share capital of the Company.

• (3) Ms. Marilyn Tang is the owner of approximately 2.35% of the issued shares of AMS and the spouse of Mr. Phung. Mr. Phung is deemed to be interested in all the Shares in which Ms. Marilyn Tang is interested under Part XV of the SFO.

• (4) The percentage of shareholding was calculated based on the Company’s total number of issued Shares as at 31 December 2020 (i.e. 400,000,000 Shares).

Save as disclosed above, as at 31 December 2020, none of the Directors and chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations that was notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or was required to be recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Rule 5.46 of the GEM Listing Rules.

42

Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

Substantial Shareholders’ Interests in the Shares and Underlying Shares

As at 31 December 2020, the following persons (not being Directors or chief executive of the Company) had or were deemed or taken to have an interest and/or short position in the Shares or the underlying Shares which would

fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which would be recorded in the register required to be kept under Section 336 of the SFO who, are directly or indirectly interested in 5% or more of the Shares.

Long Positions in the Shares

Name of Shareholder	Capacity/Nature of interest	Number of Shares held	Approximate percentage of issued share capital(Note 8)
LiquidTech(Note 1)	Beneficial owner	262,917,327	65.73%
AMS(Notes 1, 2 and 3)	Interest in controlled corporation	262,917,327	65.73%
Mr. Park(Notes 2 and 3)	Interest held jointly with other persons/ Interest in controlled corporation	262,917,327	65.73%
Ms. Marilyn Tang(Notes 2, 3 and 4)	Interest held jointly with other persons/ Interest in controlled corporation/ Interest of spouse	262,917,327	65.73%
Ms. Lee Kim Sinae(Note 5)	Interest of spouse	262,917,327	65.73%
Ms. Suh Kim Seong Ock(Note 6)	Interest of spouse	262,917,327	65.73%
Ms. Shin Hee Kum(Note 7)	Interest of spouse	262,917,327	65.73%

Notes:

• (1) LiquidTech is wholly-owned by AMS. AMS is deemed to be interested in all the Shares in which LiquidTech is interested under Part XV of the SFO.

• (2) AMS is owned as to approximately 18.14% by Mr. Phung, 25.34% by Mr. Suh, 22.71% by Mr. Lee, 14.03% by Mr. Park, 14.03% by Mr. Lee Sung Gue, 3.40% by Mr. Lee Je Eun and 2.35% by Ms. Marilyn Tang.

• (3) On 21 June 2016, four of the ultimate controlling Shareholders, namely, Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park, entered into the acting in concert confirmation and undertaking to acknowledge and confirm, among other things, that they were parties acting in concert of each of the members of the Group. As such, Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park together control approximately 65.73% interest in the share capital of the Company through AMS and LiquidTech. As a result, each of Mr. Phung, Mr. Suh, Mr. Lee and Mr. Park is deemed to be interested in approximately 65.73% interest in the share capital of the Company.

• (4) Ms. Marilyn Tang is the owner of approximately 2.35% of the issued shares of AMS and the spouse of Mr. Phung. Ms. Marilyn Tang is deemed to be interested in all the Shares in which Mr. Phung is interested under Part XV of the SFO.

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REPORT OF THE DIRECTORS

• (5) Ms. Lee Kim Sinae is the spouse of Mr. Lee. Ms. Lee Kim Sinae is deemed to be interested in all the Shares in which Mr. Lee is interested under Part XV of the SFO.

• (6) Ms. Suh Kim Seong Ock is the spouse of Mr. Suh. Ms. Suh Kim Seong Ock is deemed to be interested in all the Shares in which Mr. Suh is interested under Part XV of the SFO.

• (7) Ms. Shin Hee Kum is the spouse of Mr. Park. Ms. Shin Hee Kum is deemed to be interested in all the Shares in which Mr. Park is interested under Part XV of the SFO.

• (8) The percentage of shareholding was calculated based on the Company’s total number of issued Shares as at 31 December 2020 (i.e. 400,000,000 Shares).

Save as disclosed above, as at 31 December 2020, the Directors were not aware of any other persons who had any interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which would be recorded in the register required to be kept under Section 336 of the SFO, who are directly or indirectly interested in 5% or more of the Shares.

DIRECTORS’ INTEREST IN COMPETING BUSINESS

During the year ended 31 December 2020, none of the Directors or the controlling Shareholders or their respective close associates (as defined in the GEM Listing Rules) of the Company had an interest in a business which competed with or might compete with the business of the Group.

CONNECTED TRANSACTION

On 15 October 2020, a wholly-owned subsidiary, Global Telecom, entered into an agreement with AMS in provision of a loan facility with principal amount of US$1,150,000 which constituted a connected transaction under Chapter 20 of the GEM Listing Rules.

During the year ended 31 December 2020, the Group also entered into a related party transaction as set out in note 37(a) to the consolidated financial statements. The related party transaction disclosed in note 37(a) to the consolidated financial statements is a connected transaction that is fully exempt from reporting, announcement and independent Shareholders’ approval pursuant to the GEM Listing Rules. The Company has complied with the applicable requirements under Chapter 20 of the GEM Listing Rules in respect of such connected transaction.

PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES OF THE COMPANY

During the year ended 31 December 2020, the Company did not redeem its listed securities, nor did the Company or any of its subsidiaries purchase or sell any of such listed securities.

NON-COMPETITION UNDERTAKING BY THE CONTROLLING SHAREHOLDERS

Each of the controlling Shareholders, namely LiquidTech, AMS, Mr. Phung Nhuong Giang, Mr. Suh Seung Hyun, Mr. Lee Seung Han, Mr. Park Hyeoung Jin and Ms. Marilyn Tang, entered into the Deed of Non-competition in favour of the Company on 28 June 2016 (the “Deed”), details of which have been set out in the prospectus dated 29 June 2016 (the “Prospectus”).

44

Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

The Company has received an annual confirmation from the controlling Shareholders in respect of their compliance with the noncompetition undertakings under the Deed throughout the year ended 31 December 2020. The independent non-executive Directors have also reviewed the compliance with the noncompetition undertakings under the Deed by the controlling Shareholders and confirmed that the controlling Shareholders have not been in breach of the Deed during the year ended 31 December 2020.

DONATIONS

Charitable or other donations made by the Group during the year ended 31 December 2020 amounted to approximately HK$49,000.

CLOSURE OF REGISTER OF MEMBERS

For attending and voting at the annual general meeting

The register of members of the Company will be closed from Tuesday, 4 May 2021 to Friday, 7 May 2021 (both days inclusive, 4 business days in total) during which period no transfer of shares will be registered. In order to be eligible to attend and vote at the AGM, unregistered holders of shares of the Company shall ensure that all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Monday, 3 May 2021.

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, at least 25% of the Company’s total issued share capital was held by the public as required under the GEM Listing Rules during the year ended 31 December 2020 and up to the date of this report.

45

REPORT OF THE DIRECTORS

USE OF PROCEEDS

Comparison of Business Objectives with Actual Business Progress

An analysis comparing the business objectives as set out in the Prospectus with the Group’s actual business progress from 8 July 2016 to 31 December 2020 (“Review Period”) is set out below:

Business strategies	Implementation activities	Sources of funding during the Review Period	Actual business progress during the Review Period
Expanding market share by setting up new service points	– Setting up an office in Busan City, Jeonju City and Gangneung City	– Listing proceeds of approximately HK$6.8 million	– Setting up an offices was further prolonged to 2020 as the Group was not able to identify a suitable location under the Review Period.
	– Acquiring maintenance equipment to support our maintenance service in Busan City, Jeonju city and Gangneung City	– Listing proceeds of approximately HK$3.7 million and our internal resources – Purchase of maintenance equipment was prolonged until the offices are being located and set up.
	– Acquiring testing equipment for performance check of the integrated systems – Listing proceeds of approximately HK$2.4 million		– Purchase of testing equipment was prolonged until the offices are located and set up.
Development of big data platform and cyber security software application capabilities	– Acquisition of software intellectual property platforms will be integrated to form part of the security operations center (Black Diamond) which is a key business differentiator form other market players – Listing proceeds of approximately in total HK$12 million		– The Group has bought the platforms totally in HK$11.9 million for Hong Kong operations and began to see positive result in the Group’s revenue.
	– Recruitment of cyber security expert team shall be responsible for the provision of intelligence- lead cyberattack simulation testing services – Listing proceeds of approximately in total HK$3.4 million		– The professional team cost was HK$3.4 million and contributed brilliant profit margins to the Group’s cyber security business in Hong Kong operations since 2017.
Expanding our professional team and enhancing our service quality	– Recruiting new salespersons, engineers and administrative staff to support the business in Jeonju city	– Our internal resources	– Prolonged due to the office in Jeonju city not yet set up as explained above.

46 Future Data Group Limited Annual Report 2020

REPORT OF THE DIRECTORS

Below table summarises the use of net proceeds from the placing:

Use of proceeds	Use of proceeds	Planned use of net proceeds from 5 September 2017 up to 31 December 2020 (HK$ million)	Actual use of net proceeds up to 31 December 2020 (HK$ million)
1) 2) 3) 4)	Setting up new service points in the cities of Busan, Jeonju and Gangneung in Korea	12.9	–
	General working capital	1.5	1.5
	Development of big data platform and cyber security software application capabilities
	– Acquiring software platforms	12.0	11.9
	– Recruiting a team of security experts in Hong Kong	3.4	3.4
	Setting up new office in Hong Kong	1.8	0.8
Total:		31.6	16.4

PERMITTED INDEMNITY PROVISIONS

Under the Articles, every Director shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, cost, charges, losses, damages and expenses incurred or sustained by him as a Director provided that this indemnity shall not extend to any matter in respect of any fraud or dishonesty attached to him. The Company has arranged appropriate insurance cover in respect of legal action against the Directors.

Discussions on the Company’s environmental, social, and governance practices, relationships with stakeholders and compliance with relevant laws and regulations which have a significant impact on the Company are contained in the sustainability review in the Environmental, Social and Governance Report, which will be published on the website of the Company and of the Stock Exchange by the end of May 2021.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES

As a data technology service provider in Korea and Hong Kong, the Group actively adheres to the enterprises’ environmental and social responsibilities. We are mindful of our social responsibility and commitment in engaging our stakeholders to build a greener future.

47

REPORT OF THE DIRECTORS

AUDITOR

BDO Limited has been appointed as auditor of the Company and has audited the Group’s financial statements for the year ended 31 December 2020.

The Company has not changed its external auditor during the year ended 31 December 2020 up to the date of this annual report. A resolution will be proposed at the forthcoming AGM for the re-appointment of BDO Limited as the auditor of the Company.

EVENT AFTER THE REPORTING DATE

The current coronavirus pandemic has not had a material adverse impact on the Group’s operations and financial position to date. Nevertheless, the Group will monitor closely and take appropriate action to mitigate the impact.

On Behalf of the Board

Suh Seung Hyun Chairman

22 March 2021

48

Future Data Group Limited Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

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==> picture [95 x 54] intentionally omitted <==

TO THE SHAREHOLDERS OF FUTURE DATA GROUP LIMITED (incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Future Data Group Limited (the “Company”) and its subsidiaries (together the “Group”) set out on pages 56 to 151, which comprise the consolidated statement of financial position as at 31 December 2020, 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 notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the Group in accordance with the HKICPA’s “Code of Ethics for Professional Accountants” (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

49

INDEPENDENT AUDITOR’S REPORT

KEY AUDIT MATTERS

Key audit matters are the matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Revenue recognition from contracts for system integration and cyber security services

(refer to notes 4(j), 5, 6 and 7 to the consolidated financial statements)

For the year ended 31 December 2020, the Group recognised revenue of approximately HK$514,968,000 related to the Group’s revenue from contracts for system integration and cyber security services.

Revenue from contracts for system integration and cyber security services involves a number of projects and is recognised under the input method which requires estimation made by management for each project based on the followings:

• Budgeted contract costs; and

• Expected cost to complete the contracts

We have identified this as a key audit matter because revenue is one of the key performance indicators of the Group and because of its significance to the consolidated financial statements and the judgement required in applying the input method for recognising revenue from contracts for system integration and cyber security services.

Our response

Our procedures in relation to the revenue from contracts for system integration and cyber security services included:

• Evaluated the design of internal controls over revenue recognition;

• Assessed the appropriateness of the Group’s revenue recognition policy under the requirements of HKFRS 15 by inspecting a sample of representative contracts with customers;

• Selected a sample of incomplete contracts as at year end and checked calculation of significant components of budgeted contract costs to supporting documents such as purchase orders of equipment and contracts with subcontractors;

50

Future Data Group Limited Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

• Selected a sample of completed contracts during the year and checked the historical reliability of the budgeted contract costs; and

• Re-performed on a sample basis the calculation of revenue recognised during the year based on the input method.

Impairment assessment on trade receivables

(refer to notes 4(h), 5, 22 and 41(a) to the consolidated financial statements)

As at 31 December 2020, gross trade receivables and its related impairment allowances amounted to HK$95,078,000 and HK$20,571,000 respectively. We have identified this as a key audit matter because the assessment of impairment for trade receivables involves significant management judgements and estimates on the amount of expected credit losses at the reporting date. In performing an impairment assessment on trade receivables, management considers the credit history including default or delay in payments, settlement records, subsequent settlements and ageing analysis of the trade receivables, and also forward-looking analysis.

Our response

Our procedures in relation to the impairment assessment on trade receivables included:

• Evaluated the design, implementation and operating effectiveness of key internal controls which govern credit control, debt collection and estimate of expected credit losses;

• Obtained an understanding of the Group’s credit risk management and practices, and assessed the Group’s impairment provision policy in accordance with the requirements of HKFRS 9;

• Assessed, on a sample basis, whether items in the trade receivables ageing report were classified within the appropriate ageing bracket by comparing individual items in the report with the relevant invoices; and

• Assessed the reasonableness of management’s loss allowance estimates by examining the information used by management to form such judgements, including testing the accuracy of the historical default data, evaluating whether the historical loss rates are appropriately adjusted based on current economic conditions and forward-looking information and examining the actual losses recorded during the current financial year and assessing whether there was an indication of management bias when recognising loss allowances.

51

INDEPENDENT AUDITOR’S REPORT

Impairment assessment on goodwill

(refer to notes 4(c), 5 and 18 to the consolidated financial statements)

As at 31 December 2020, the Group had goodwill of HK$7,534,000 which is solely attributable to the cash-generating unit (“CGU”) of cyber security services and subject to annual impairment testing.

Management has concluded that there was no impairment loss to be recognised in the current year. As set out in note 18, this conclusion was based on the impairment assessment performed by the management for the CGU in accordance with the Group’s accounting policies which are set out in detail in note 4(c). The calculation of recoverable amount, which is the higher of value in use (“VIU”) and fair value less costs to sell, involved significant judgements and assumptions with respect to the determination of the pre-tax discount rates and the estimation of the underlying future cash flows.

We have identified the impairment assessment on goodwill of the relevant CGU as a key audit matter because of its significance to the consolidated financial statements and because the impairment assessment involved significant management judgement and estimates as explained above.

Our response

Our engagement team included an internal valuation expert and our procedures in relation to the impairment assessment on goodwill included:

• Evaluated the model used by management in the VIU calculations for impairment testing;

• Assessed the reasonableness of discount rates and growth rates applied to the impairment assessment;

• Challenged the reasonableness of other key assumptions based on our knowledge of the business and industry;

• Checked input data to supporting evidence, such as approved budget and considering the reasonableness of the budget;

• Checked the VIU calculations; and

• Considered the overall adequacy of the disclosure in respect of impairment assessment included in the consolidated financial statements.

52

Future Data Group Limited Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

OTHER INFORMATION IN THE ANNUAL REPORT

The directors are responsible for the other information. The other information comprises all the information in the Company’s annual report, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

DIRECTORS’ RESPONSIBILITIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The directors are also responsible for overseeing the Group’s financial reporting process. The Audit Committee assists the directors in discharging their responsibility in this regard.

53

INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. This report is made solely to you, as a body, in accordance with the terms of our engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error; design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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Future Data Group Limited Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

BDO Limited

Certified Public Accountants

Li Pak Ki

Practising Certificate Number P01330

Hong Kong, 22 March 2021

55

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

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2020 2019
Notes HK$’000 HK$’000
Revenue 7 679,053 646,470
Cost of sales and services (602,131) (559,441)
Gross profit 76,922 87,029
Other income 8 6,558 4,974
Selling and administrative expenses (73,707) (86,297)
Finance costs 9 (746) (1,445)
Profit before income tax 10 9,027 4,261
Income tax expense 12 (1,514) (220)
Profit for the year 7,513 4,041
Other comprehensive income for the year
Item that will not be reclassified subsequently to
profit or loss:
Recognition of actuarial losses on defined benefit obligations (826) (1,631)
Item that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign
operations 6,533 (3,421)
Total other comprehensive income 5,707 (5,052)
Total comprehensive income for the year 13,220 (1,011)
Profit/(loss) attributable to:
Owners of the Company 7,876 4,373
Non-controlling interests (363) (332)
7,513 4,041
Total comprehensive income attributable to:
Owners of the Company 13,583 (679)
Non-controlling interests (363) (332)
13,220 (1,011)
Earnings per share attributable to owners of the Company
– Basic and Diluted (HK cents) 14 1.97 1.09
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56

Future Data Group Limited Annual Report 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2020

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----- Start of picture text -----

2020 2019
Notes HK$’000 HK$’000
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment 16 9,959 6,715
Intangible assets 17 8,095 13,854
Goodwill 18 7,534 7,534
Other financial assets 19 7,407 5,000
Loan to ultimate holding company 23 8,869 –
Deposits for acquisition of properties 20 10,498 –
Guarantee deposits 3,901 4,671
Deferred tax assets 27 8,500 7,160
64,763 44,934
Current assets
Inventories 21 15,812 9,729
Trade and other receivables 22 79,813 89,794
Contract assets 24 24,679 21,623
Prepayments 14,273 10,748
Pledged bank deposits 19 – 3,372
Fixed bank deposits 4,536 4,316
Cash and cash equivalents 96,189 116,075
235,302 255,657
Current liabilities
Trade and other payables 25 96,698 115,966
Contract liabilities 24 23,960 30,443
Lease liabilities 29 2,398 993
Bank borrowings 26 24,722 20,582
Tax payable 916 239
148,694 168,223
Net current assets 86,608 87,434
Total assets less current liabilities 151,371 132,368
Non-current liabilities
Lease liabilities 29 2,052 661
Bank borrowings 26 5,568 –
Defined benefit obligations 28 166 1,181
Deferred tax liabilities 27 217 378
8,003 2,220
Net assets 143,368 130,148
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57

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

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2020 2019
Notes HK$’000 HK$’000
EQUITY
Share capital 30 4,000 4,000
Reserves 138,710 125,127
Equity attributable to owners of the Company 142,710 129,127
Non-controlling interests 35 658 1,021
Total equity 143,368 130,148
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On behalf of the board of directors

Mr. Phung Nhuong Giang Mr. Lee Seung Han Director Director

58

Future Data Group Limited Annual Report 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2020

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Equity
Research attributable
and Foreign to owners Non-
Share Share Capital development exchange Legal Retained of the controlling
capital premium reserve reserve reserve reserve earnings Company interests Total
(Note 30) (Note 33(a)) (Note 33(b)) (Note 33(c)) (Note 33(d)) (Note 33(e)) (Note 35)
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 January 2019 4,000 41,598 13,855 3,674 (2,371) 1,995 72,935 135,686 – 135,686
Profit for the year – – – – – – 4,373 4,373 (332) 4,041
Recognition of actuarial losses on
defined benefit obligations – – – – – – (1,631) (1,631) – (1,631)
Exchange differences arising on
translation of foreign operations – – – – (3,421) – – (3,421) – (3,421)
Total comprehensive income – – – – (3,421) – 2,742 (679) (332) (1,011)
Dividends paid in respect of the
previous year (note 13) – (5,880) – – – – – (5,880) – (5,880)
Acquisition of non-controlling
interests (note 36) – – – – – – – – 1,353 1,353
Balance at 31 December 2019 4,000 35,718 13,855 3,674 (5,792) 1,995 75,677 129,127 1,021 130,148
Balance at 1 January 2020 4,000 35,718 13,855 3,674 (5,792) 1,995 75,677 129,127 1,021 130,148
Profit for the year – – – – – – 7,876 7,876 (363) 7,513
Recognition of actuarial losses on
defined benefit obligations – – – – – – (826) (826) – (826)
Exchange differences arising on
translation of foreign operations – – – – 6,533 – – 6,533 – 6,533
Total comprehensive income – – – – 6,533 – 7,050 13,583 (363) 13,220
Appropriation – – – – – 495 (495) – – –
Balance at 31 December 2020 4,000 35,718 13,855 3,674 741 2,490 82,232 142,710 658 143,368
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• The total of these balances represents “Reserves” in the consolidated statement of financial position.

59

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2020

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2020 2019
HK$’000 HK$’000
Cash flows from operating activities
Profit before income tax expense 9,027 4,261
Adjustments for:
Bad debt expenses on write off of trade receivables 192 –
Amortisation of intangible assets 4,848 4,180
Depreciation of property, plant and equipment 4,695 5,761
Exchange gain (2,763) (586)
Finance costs 746 1,445
Net provision for/(reversal of) impairment of inventories 1,919 (262)
Impairment of intangible assets 911 –
Interest income (453) (604)
–
Reversal of contingent consideration (32)
Net loss/(gain) on disposal of property, plant and
equipment 5 (60)
Fair value gain on other financial assets (127) (118)
Net (reversal of)/provision for impairment of
trade receivables (276) 7,637
Operating profit before working capital changes 18,724 21,622
Increase in inventories (7,664) (3,365)
Decrease in trade and other receivables 12,879 27,721
(Increase)/decrease in contract assets (1,938) 1,232
Increase in prepayments (2,894) (4,285)
Decrease in trade and other payables (21,495) (58,408)
(Decrease)/increase in contract liabilities (6,975) 19,186
Decrease in net defined benefit obligations (2,058) (1,822)
Cash (used in)/generated from operations (11,421) 1,881
Income taxes paid (1,364) (6,034)
Income taxes refunded 1,161 108
Interest received 453 612
Net cash used in operating activities (11,171) (3,433)
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60

Future Data Group Limited Annual Report 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

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----- Start of picture text -----

2020 2019
Note HK$’000 HK$’000
Cash flows from investing activities
Net cash outflows from acquisition through
business combination 36 – (2,843)
–
Research and development expenditures (2,854)
Purchases of property, plant and equipment (1,825) (1,519)
–
Deposits paid for acquisition of properties (15,562)
Proceeds from deposits transferred upon disposal of
properties 5,809 –
Purchases of other financial assets (1,873) (228)
Proceeds from disposal of property, plant and equipment 5 98
Decrease in fixed bank deposits 3,293 –
(Increase)/decrease in loan to/amount due from ultimate
holding company (8,239) 5,874
Net cash used in investing activities (18,392) (1,472)
Cash flows from financing activities
Proceeds from bank borrowings 138,475 145,304
Repayments of bank borrowings (130,431) (146,834)
Interest paid (746) (1,445)
Repayments of principal portion of the lease liabilities (2,171) (1,941)
–
Dividends paid (5,880)
Net cash generated from/(used in) financing activities 5,127 (10,796)
Net decrease in cash and cash equivalents (24,436) (15,701)
Cash and cash equivalents at beginning of year 116,075 136,134
Effect of exchange rate changes 4,550 (4,358)
Cash and cash equivalents at end of year 96,189 116,075
Analysis of balances of cash and cash equivalents
Cash and bank balances 96,189 116,075
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61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

1. GENERAL

Future Data Group Limited (the “Company”) was incorporated in the Cayman Islands on 4 January 2016 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as revised and consolidated) of the Cayman Islands and its shares are listed on GEM of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The Company’s registered office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The Company’s principal place of business is located at Suite 1507–08, 15/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.

The principal places of the businesses of the Company and its subsidiaries (together the “Group”) are located at Unit 801–809, 822, Mullae SKV1 Center, 10 Seonyu-ro, 9-gil, Yeongdeungpo-gu, Seoul, Korea and at the aforementioned address in Hong Kong.

The principal activity of the Company is investment holding. The Group is engaged in the provision of (i) integration of systems with network connectivity, cloud computing and security elements, (ii) maintenance services and (iii) cyber security services in Korea and Hong Kong.

As at 31 December 2020, the directors of the Company considered the immediate holding company to be LiquidTech Limited (“LiquidTech”), incorporated in the British Virgin Islands, and the ultimate holding company to be Asia Media Systems Pte. Ltd. (“AMS”) incorporated in Singapore.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

• (a) Adoption of amended HKFRSs

The Hong Kong Institute of Certified Public Accountants (the “HKICPA”) has issued a number of amended HKFRSs that are first effective for the current accounting period of the Group:

Amendments to HKFRS 3 Definition of a Business Amendments to HKAS 1 and HKAS 8 Definition of Material Amendments to HKAS 39, Interest Rate Benchmark Reform HKFRS 7 and HKFRS 9

The Group has not early applied any amended HKFRSs that is not yet effective for the current accounting period. None of these amended HKFRSs has a significant impact on the Group’s results and financial position for the current or prior period.

62

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED)

• (b) Revised HKFRSs that have been issued but are not yet effective

The following revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group. The Group’s current intention is to apply these changes on the date they become effective.

Amendments to HKAS 1 Classification of Liabilities as Current or Noncurrent and Hong Kong Interpretation 5 (2020), Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause[5] Amendments to HKAS 16 Proceeds before Intended Use[3] Amendments to HKAS 37 Onerous Contracts – Cost of Fulfilling a Contract[3] Amendments to HKFRS 3 Reference to the Conceptual Framework[4] Amendment to HKFRS 16 COVID-19-Related Rent Concessions[1] Amendments to HKAS 39, Interest Rate Benchmark Reform – Phase 2[2] HKFRS 4, HKFRS 7, HKFRS 9 and HKFRS 16 Annual Improvements to Amendments to HKFRS 9, Illustrative Examples HKFRSs 2018–2020 accompanying HKFRS 16[2]

• 1 Effective for annual periods beginning on or after 1 June 2020. 2 Effective for annual periods beginning on or after 1 January 2021. 3 Effective for annual periods beginning on or after 1 January 2022. 4 Effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after 1 January 2022.

• 5 Effective for annual period beginning on or after 1 January 2023.

63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED)

• (b) Revised HKFRSs that have been issued but are not yet effective (Continued)

Amendments to HKAS 1, Classification of Liabilities as Current or Non-current and Hong Kong Interpretation 5 (2020), Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause

The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and explain that rights are in existence if covenants are complied with at the end of the reporting period. The amendments also introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

Hong Kong Interpretation 5 (2020) was revised as a consequence of the amendments to HKAS 1 issued in August 2020. The revision to Hong Kong Interpretation 5 (2020) updates the wordings in the interpretation to align with the amendments to HKAS 1 with no change in conclusion and do not change the existing requirements.

The directors of the Company do not anticipate that the application of the amendments and revision in the future will have a significant impact on the consolidated financial statements.

Amendments to HKAS 16, Proceeds before Intended Use

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, the proceeds from selling such items, and the cost of producing those items, is recognised in profit or loss.

The directors of the Company do not anticipate that the application of the amendments in the future will have significant impact on the consolidated financial statements.

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Future Data Group Limited Annual Report 2020

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31 December 2020

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED)

• (b) Revised HKFRSs that have been issued but are not yet effective (Continued)

Amendments to HKAS 37, Onerous Contracts – Cost of Fulfilling a Contract

The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (e.g. direct labour and materials) or an allocation of other costs that relate directly to fulfilling contracts (e.g. the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

The directors of the Company is currently assessing the impact that the application of the amendments will have on the consolidated financial statements.

Amendment to HKFRS 16, COVID-19-Related Rent Concessions

HKFRS 16 was amended to provide a practical expedient to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic, by including an additional practical expedient in HKFRS 16 that permits entities to elect not to account for rent concessions as modifications. The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 pandemic and only if all of the following criteria are satisfied:

• (a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

• (b) the reduction in lease payments affects only payments originally due on or before 30 June 2021; and

• (c) there is no substantive change to other terms and conditions of the lease.

Rent concessions that satisfy these criteria may be accounted for in accordance with this practical expedient, which means the lessee does not need to assess whether the rent concession meets the definition of lease modification. Lessees shall apply other requirements of HKFRS 16 in accounting for the rent concession.

65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED)

• (b) Revised HKFRSs that have been issued but are not yet effective (Continued)

Amendment to HKFRS 16, COVID-19-Related Rent Concessions (Continued)

Accounting for rent concessions as lease modifications would have resulted in the Group remeasuring the lease liability to reflect the revised consideration using a revised discount rate, with the effect of the change in the lease liability recorded against the right-of-use asset. By applying the practical expedient, the Group is not required to determine a revised discount rate and the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

The directors of the Company do not anticipate that the application of the amendment in the future will have a significant impact on the consolidated financial statements.

Amendments to HKFRS 3, Reference to the Conceptual Framework

The amendments update HKFRS 3 so that it refers to the revised Conceptual Framework for Financial Reporting 2018 instead of the version issued in 2010. The amendments add to HKFRS 3 a requirement that, for obligations within the scope of HKAS 37, an acquirer applies HKAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of HK(IFRIC)Int 21 Levies, the acquirer applies HK(IFRIC)-Int 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. The amendments also add an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

The directors of the Company do not anticipate that the application of the amendment in the future will have a significant impact on the consolidated financial statements.

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Future Data Group Limited Annual Report 2020

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31 December 2020

1. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (CONTINUED)

2. (b) Revised HKFRSs that have been issued but are not yet effective (Continued)

Amendments to HKAS 39, HKFRS 4, HKFRS 7, HKFRS 9 and HKFRS 16, Interest Rate Benchmark Reform – Phase 2

The amendments address issues that might affect financial reporting when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the interest rate benchmark reform (the “Reform”). The amendments complement those issued in November 2019 and relate to (a) changes to contractual cash flows in which an entity will not have to derecognise or adjust the carrying amount of financial instruments for changes required by the Reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate; (b) hedge accounting in which an entity will not have to discontinue its hedge accounting solely because it makes changes required by the Reform, if the hedge meets other hedge accounting criteria; and (c) disclosures in which an entity will be required to disclose information about new risks arising from the Reform and how it manages the transition to alternative benchmark rates.

The directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the consolidated financial statements.

Annual Improvements to HKFRSs 2018–2020, Amendments to HKFRS 9, Illustrative Examples accompanying HKFRS 16

Details of the amendments that are expected to be applicable to the Group are as follows:

• HKFRS 9, Financial Instruments, which clarify the fees included in the ‘10 per cent’ test in paragraph B3.3.6 of HKFRS 9 in assessing whether to derecognise a financial liability, explaining that only fees paid or received between the entity and the lender, including fees paid or received by either the entity or the lender on other’s behalf are included.

• HKFRS 16, Leases, which amend Illustrative Example 13 to remove the illustration of reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.

The directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the consolidated financial statements.

67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

3. BASIS OF PREPARATION

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (hereinafter collectively referred to as the “HKFRSs”) issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. In addition, the financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”).

(b) Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for other financial assets which are measured at fair value as disclosed in the summary of significant accounting policies in note 4(h).

(c) Functional and presentation currency

The functional currencies of the Company’s principal operating subsidiaries in Korea and Hong Kong, are South Korean Won (“KRW”) and Hong Kong Dollars (“HK$”) respectively, while the consolidated financial statements are presented in HK$ which is also the functional currency of the Company. As the Company’s shares are listed on GEM of the Stock Exchange, the directors consider that it will be more appropriate to adopt HK$ as the Group’s presentation currency. The amounts stated are rounded to the nearest HK$1,000 unless otherwise stated.

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31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Business combination and basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the dates of acquisition or up to the dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive processes and whether the acquired set has the ability to produce outputs.

The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. The Group’s previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-bytransaction basis, to measure the non-controlling interests that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other non-controlling interests are measured at fair value unless another measurement basis is required by HKFRSs. Acquisition-related costs incurred are expensed unless they are incurred in issuing equity instruments in which case the costs are deducted from equity.

69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Business combination and basis of consolidation (Continued)

Any contingent consideration to be transferred by the acquirer is recognised at acquisition-date fair value. Subsequent adjustments to consideration are recognised against goodwill 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 acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

Subsequent to acquisition, the carrying amount of non-controlling interests that represent present ownership interests in the subsidiary is the amount of those interests at initial recognition plus such non-controlling interests’ share of subsequent changes in equity. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income is attributed to such non-controlling interests even if this results in those noncontrolling interests having a deficit balance.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control of the subsidiary are accounted for as equity transactions. The carrying amount 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 the owners of the Company.

When the Group loses control of a subsidiary, the gain 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. Amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for on the same basis as would be required if the relevant assets or liabilities were disposed of.

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Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Subsidiaries

A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all three of the following elements are present: (i) power over the investee, (ii) exposure, or rights, to variable returns from the investee, and (iii) the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

In the note to the consolidated financial statements that disclose the Company’s statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if any. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(c) Goodwill

Goodwill represents the excess of the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree over the fair value of the identifiable assets and liabilities measured as at the acquisition date.

Where the fair value of identifiable assets and liabilities exceed the aggregate of the fair value of consideration paid, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree, the excess is recognised in profit or loss on the acquisition date, after reassessment.

Goodwill is measured at cost less impairment losses. For the purpose of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cashgenerating units that are expected to benefit from the synergies of the acquisition. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, by comparing its carrying amount with its recoverable amount (see note 4(g)), and whenever there is an indication that the unit may be impaired.

71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Goodwill (Continued)

For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro-rata on the basis of the carrying amount to each asset in the unit. However, the loss allocated to each asset will not reduce the individual asset’s carrying amount to below its fair value less cost of disposal (if measurable) or its value in use (if determinable), whichever is the higher. Any impairment loss for goodwill is recognised in profit or loss and is not reversed in subsequent periods.

(d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance, are recognised as an expense in profit or loss during the financial period in which they are incurred.

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Future Data Group Limited Annual Report 2020

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31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Property, plant and equipment (Continued)

Property, plant and equipment are depreciated so as to write off their cost over their estimated useful lives on a straight-line basis. The useful lives and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period. The useful lives are as follows:

Leasehold improvements	Over the shorter of lease terms or 5 years
Equipment	5 years
Furniture and fixtures	5 years
Motor vehicles	5 years

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal.

• (e) Leases

The Group as a lessee

All leases are required to be capitalised in the statement of financial position as rightof-use assets and lease liabilities, but accounting policy choices exist for an entity to choose not to capitalise (i) leases which are short-term leases and/or (ii) leases for which the underlying asset is of low-value. The Group has elected not to recognise right-of-use assets and lease liabilities for low-value assets and leases for which at the commencement date have a lease term of less than 12 months. The lease payments associated with those leases have been expensed on a straight-line basis over the lease term.

73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Leases (Continued)

The Group as a lessee (Continued)

Right-of-use assets

The right-of-use asset is initially recognised at cost and would comprise:

• (i) the amount of the initial measurement of the lease liability (see below for the accounting policy to account for lease liability);

• (ii) any lease payments made at or before the commencement date, less any lease incentives received;

• (iii) any initial direct costs incurred by the lessee; and

• (iv) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories.

The Group measures the right-of-use assets applying a cost model. Under the cost model, the Group measures the right-to-use at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liability. Rightof-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying assets on a straight line basis.

Lease liability

The lease liability is recognised at the present value of the lease payments that are not paid at the date of commencement of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the Group’s incremental borrowing rate.

The following payments for the right-to-use the underlying asset during the lease term that are not paid at the commencement date of the lease are considered to be lease payments:

• (i) fixed lease payments less any lease incentives receivable;

• (ii) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at commencement date;

74

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (e) Leases (Continued)

The Group as a lessee (Continued)

Lease liability (Continued)

• (iii) amounts expected to be payable by the lessee under residual value guarantees;

• (iv) exercise price of a purchase option, if the lessee is reasonably certain to exercise that option; and

• (v) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

Subsequent to the commencement date, the Group measures the lease liability by:

• (i) increasing the carrying amount to reflect interest on the lease liability;

• (ii) reducing the carrying amount to reflect the lease payments made; and

• (iii) remeasuring the carrying amount to reflect any reassessment or lease modification, or to reflect revised in-substance fixed lease payments.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases, an equivalent adjustment is made to the carrying value of the right-ofuse asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (e) Leases (Continued)

The Group as a lessee (Continued)

Lease liability (Continued)

When the Group renegotiates the contractual terms of a lease with the lessor, if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease, in all other cases, where the renegotiation increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount. With the exception to which the practical expedient for COVID-19-Related Rent Concessions applies (see note 2(b)), if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date and the right-of-use asset is adjusted by the same amount.

(f) Intangible assets (other than goodwill)

(i) Intangible assets acquired separately and in a business combination

Intangible assets acquired separately are initially recognised at cost. The cost of intangible assets acquired in a business combination is its fair value at the date of acquisition. Subsequently, intangible assets with indefinite useful lives are carried at cost less any accumulated impairment losses. Intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses.

The amortisation expense is recognised in profit or loss and included in administrative expenses. The useful lives and amortisation method are reviewed, and adjusted if appropriate, at the end of each reporting period. Amortisation is provided on a straight-line basis over their useful lives as follows:

Software platforms	5 years
Reacquired rights	2 years

76

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (f) Intangible assets (other than goodwill) (Continued)

• (ii) Internally generated intangible assets (research and development costs)

Expenditure on internally developed products is capitalised if it can be demonstrated that:

• it is technically feasible to develop the product for it to be sold;

• adequate resources are available to complete the development;

• there is an intention to complete and sell the product;

• the Group is able to sell the product;

• sale of the product will generate future economic benefits; and expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The amortisation expense is recognised in profit or loss and included in cost of sales.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in profit or loss as incurred.

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

(iv) Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (f) Intangible assets (other than goodwill) (Continued)

• (v) Impairment of intangible assets

Intangible assets with finite lives are tested for impairment when there is an indication that an asset may be impaired. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is any indication that they may be impaired. Intangible assets are tested for impairment by comparing their carrying amounts with their recoverable amounts (see note 4(g)).

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as revaluation decrease to the extent of its revaluation surplus.

(g) Impairment of non-financial assets

At the end of each reporting period, the Group reviews the carrying amounts of the following assets to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased:

• property, plant and equipment (including right-of-use assets);

• intangible assets (other than goodwill);

• deposits paid for acquisition of properties; and

• investments in subsidiaries

78

Future Data Group Limited Annual Report 2020

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31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Impairment of non-financial assets (Continued)

If the recoverable amount (i.e. the greater of the fair value less costs of disposal and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Value in use is based on the estimated future cash flows expected to be derived from the asset, 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. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another HKFRSs, in which case the impairment loss is treated as a revaluation decrease under that HKFRSs. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another HKFRSs, in which case the reversal of the impairment loss is treated as a revaluation increase under that HKFRSs.

(h) Financial instruments

(i) Financial assets

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place.

79

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (h) Financial instruments (Continued)

• (i) Financial assets (Continued)

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There is one measurement category into which the Group classifies its debt instruments:

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets at amortised cost are subsequently measured using the effective interest rate method. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain on derecognition is recognised in profit or loss.

Equity instruments

On initial recognition of an equity investment that is not held for trading, the Group could irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-byinvestment basis. All the Group’s other equity instruments are classified as FVTPL, whereby changes in fair value, dividends and interest income are recognised in profit or loss.

Investment in insurance policy

Investment in insurance policy is classified as FVTPL, whereby changes in fair value and related income are recognised in profit or loss. Fair value is based on the surrender value of the insurance policy provided by insurance company.

80

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (h) Financial instruments (Continued)

• (ii) Impairment loss on financial assets

The Group recognises loss allowances for expected credit loss (“ECLs”) on trade receivables, contract assets and financial assets measured at amortised cost. The ECLs are measured on either of the following bases:

• 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

• Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the assets’ original effective interest rate.

The Group measured loss allowances for trade receivables and contracts assets using HKFRS 9 simplified approach and has calculated ECLs based on lifetime ECLs. The Group has established a provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For other financial assets at amortised cost, ECLs are based on lifetime ECLs except when there has not been a significant increase in credit risk since initial recognition, in which case the allowance will be based on the 12-month ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

81

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (h) Financial instruments (Continued)

(ii) Impairment loss on financial assets (Continued)

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and geographical location of the debtor.

The Group considers a financial asset to be credit-impaired upon occurrence of the following:

• the debtor is in significant financial difficulty;

• a breach of contract, such as a default or being more than 90 days past due;

• the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

• it is probable that the debtor will enter bankruptcy or other financial reorganisation; or

• the disappearance of an active market for a security because of financial difficulties.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

82

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (h) Financial instruments (Continued)

• (ii) Impairment loss on financial assets (Continued)

Interest income on credit-impaired financial assets is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset. For non credit-impaired financial assets, interest income is calculated based on the gross carrying amount.

(iii) Financial liabilities

The Group classifies its financial liabilities, depending on the purpose for which the liabilities were incurred. All the Group’s financial liabilities are at amortised cost which are initially measured at fair value, net of directly attributable costs incurred.

Financial liabilities at amortised cost

Financial liabilities at amortised cost including trade and other payables and bank borrowings are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.

Gains or losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

• (iv) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

• (v) Derecognition

The Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKFRS 9.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

83

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in-first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

(j) Revenue recognition

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Depending on the terms of the contract and the laws that apply to the contract, control of the goods or service may be transferred over time or at a point in time. Control of the goods or service is transferred over time if the Group’s performance:

• (i) provides all of the benefits received and consumed simultaneously by the customer;

• (ii) creates or enhances an asset that the customer controls as the Group performs; or

• (iii) does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If control of the goods or services transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the goods or service.

When the contract contains a financing component which provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amounts receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception.

84

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Revenue recognition (Continued)

Where the contract contains a financing component which provides a significant financing benefit to the Group, revenue recognised under that contract includes the interest expense accreted on the contract liability under the effective interest method.

For contracts where the period between the payment and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

Provision of system integration and cyber security services

The Group provides system integration and cyber security services based on contracts entered into with customers before the commencement of the system integration or cyber security projects (the “Projects”). The Projects involve the Group to source and integrate suitable hardware and software components and configure them into a compatible system in accordance with the requirements of the customers. Such projects comprise a single performance obligation because the project implementation by the Group to deliver the required system specified by the customers involve a number of processes each of which are highly interdependent and highly interrelated to each other. Since the project implementation is carried out in the customers’ sites, the customers have control over the projects. These contracts therefore satisfy the criteria for category (ii) for recognising revenue over time during the project implementation. Accordingly, the revenue generated from the Projects is recognised over time using the input method (i.e. percentage of completion is established by reference to the costs incurred up to the reporting date as compared to the total costs to be incurred under the contracts except where this would not be representative of the stage of completion). The directors of the Company consider that input method would faithfully depict the Group’s performance towards complete satisfaction of these performance obligations under HKFRS 15.

Contract costs incurred comprise cost of hardware and software sourced from outside vendors, engineer cost and other costs of personnel directly engaged in the contracts and where applicable subcontracting cost and attributable overheads.

For warranty included in the system integration contracts, the Group accounts for the warranty in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets unless the warranty provides the customer with a service in addition to the assurance that the system integration work complies with the agreed-upon specifications.

85

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Revenue recognition (Continued)

Provision of system integration and cyber security services (Continued)

If at any time the unavoidable costs of meeting contractual obligations are estimated to exceed the remaining amount of the economic benefits expected to be received under the contract, then a provision is recognised in accordance with the policy set out in “Onerous contracts” below.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.

Provision of maintenance services

The Group provides maintenance services based on contracts entered with customers. Under the terms of the contracts, the customers simultaneously receive and consume the benefits as and when the Group provides these services. Accordingly, the Group recognises revenue from maintenance services over time on a straight line basis over the terms of the maintenance contracts.

Contract assets and liabilities

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

Interest income

Interest income is recognised as it accrues using the effective interest method. For financial assets measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to the amortised cost (i.e. gross carrying amount net of loss allowance) of the asset.

86

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Income taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the end of reporting period. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects any uncertainty related to income tax.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Except for goodwill not deductible for tax purposes and initial recognition of assets and liabilities that are not part of the business combination which affect neither accounting nor taxable profits, taxable temporary differences arising on investments in subsidiaries, associates and joint ventures 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 liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised, provided that the deductible temporary differences do not arise from initial recognition of assets and liabilities in a transaction other than in a business combination that affects neither taxable profit nor the accounting profit. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of reporting period, and reflects any uncertainty related to income taxes.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income tax levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income or when they relate to items recognised directly in equity in which case the taxes are also recognised directly in equity.

87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Foreign currency

Transactions entered into by group entities in currencies other than the currency of the primary economic environment in which they operate (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income, in which case, the exchange differences are also recognised in other comprehensive income.

On consolidation, income and expense items of foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the rates approximating to those ruling when the transactions took place are used. All assets and liabilities of foreign operations are translated at the rate ruling at the end of reporting period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity as foreign exchange reserve.

(m) Employee benefits

Short term employee benefits

Short term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. Short term employee benefits are recognised in the year when the employees render the related service.

Defined contribution retirement plans

The employees of Global Telecom Company Limited (“Global Telecom”) are required to participate in a National Pension Scheme which is a defined contribution plan operated by the local municipal government. The contributions are charged to profit or loss as they become payable in accordance with the rules of the National Pension Scheme.

88

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) Employee benefits (Continued)

Defined contribution retirement plans (Continued)

Future Data Limited (“Future Data”) and Maximus (Hong Kong) Consulting Limited (“Maximus (HK)”) operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Company in an independently administered fund. Future Data’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

Defined benefit plan

In addition to the contributions under the National Pension Scheme, Global Telecom operates a defined benefit plan covering its employees in Korea. The cost of providing benefits is determined using the projected unit credit method. Remeasurements of the net defined benefit liability, which include actuarial gains and losses and the return on plan assets (excluding interest) are recognised immediately in other comprehensive income. The net interest expense on the net defined benefit liability is determined by applying the discount rate used to measure the defined benefit obligations at the beginning of the annual period to the then net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and service cost are recognised in profit or loss.

The amount recognised in the consolidated statement of financial position represents the present value of the defined benefit obligations as reduced by the fair value of plan assets.

(n) Cash and cash equivalents

Cash and cash equivalents include cash at banks and in hand and bank deposits with an original maturity of three months or less.

89

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(o) Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction.

(p) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reliably estimated.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within the control of the Group are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(q) Related parties

• (a) A person or a close member of that person’s family is related to the Group if that person:

• (i) has control or joint control over the Group;

• (ii) has significant influence over the Group; or

• (iii) is a member of key management personnel of the Group or the Company’s parent.

90

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (q) Related parties (Continued)

• (b) An entity is related to the Group if any of the following conditions applies:

  • (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

  • (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

  • (iii) Both entities are joint ventures of the same third party.

  • (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

  • (v) The entity is a post-employment benefit plan for the benefit of the employees of the Group or an entity related to the Group.

  • (vi) The entity is controlled or jointly controlled by a person identified in (a).

  • (vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity).

  • (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

• (c) Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

  • (i) that person’s children and spouse or domestic partner;

  • (ii) children of that person’s spouse or domestic partner; and

  • (iii) dependents of that person or that person’s spouse or domestic partner.

91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Contracts for system integration and cyber security services

Revenue from contracts for system integration and cyber security services are recognised under the input method which requires estimation made by management. The Group’s management estimates the contract costs, outcome and expected cost to complete the contacts based on the budgets prepared for the contracts. Because of the nature of the activities, management reviews and revises the estimates of both contract outcome and expected costs to complete in the budget prepared for each contract as the contract progresses. Any revisions to estimates of contract outcome and expected costs to completion would affect contract revenue recognition. Should expected costs to complete exceed contract revenue, a provision for contract loss would be recognised.

Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cashgenerating unit and a suitable discount rate in order to calculate the present value.

Estimation of useful lives of intangible assets (excluding goodwill)

The Group’s management determines the estimated useful lives and related amortisation charges for its intangible assets. This estimate is based on the estimated years of future economic benefits generated from those intangible assets. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the amortisation charges where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

92

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Estimation of useful lives of property, plant and equipment (including right-of-use assets)

The Group’s management determines the estimated useful lives and related depreciation charges for its property, plant and equipment and right-of-use assets. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment and right-of-use assets of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

Recognition of deferred tax assets

Deferred tax assets are recognised in respect of deductible temporary differences. As those deferred tax assets can only be recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised, management’s judgement is required to assess the probability of future taxable profits. Management’s assessment is revised as necessary and additional deferred tax assets are recognised if it becomes probable that future taxable profits will allow the deferred tax asset to be recovered.

Estimated allowance for inventories

The management of the Group reviews an ageing analysis at the end of each reporting period and makes allowance for obsolete and slow-moving items identified that are no longer suitable for sale or use. The Group makes allowance for inventories based on the assessment of the net realisable value. The management estimates the net realisable value for inventories based primarily on the latest invoice prices and current market conditions. Where the expectation is different from the original estimate, such difference will impact the carrying value of inventories and write-down of inventories in the period in which such estimate has been changed. Management reassesses the estimate at each reporting date.

Estimated impairment loss of trade and other receivables

The impairment allowances for trade and other receivables are based on assumptions about risk of default and expected credit loss rates. The Group adopts judgement in making these assumptions and selecting inputs for computing such impairment loss, broadly based on the available customers’ historical data, existing market conditions including forward-looking estimates at the end of each reporting period.

93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Estimated incremental borrowing rate in the lease

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use assets in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and condition of the lease. The Group estimates the IBR using observable inputs (such as market interest rate) when available and is required to make certain entityspecific estimates (such as the subsidiary’s stand-alone credit rating).

Fair value measurement

A number of assets included in the Group’s consolidated financial statements require measurement at, and/or disclosure of, fair value.

The fair value measurement of the Group’s financial assets utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the “fair value hierarchy”):

Level	1:	Quoted prices in active markets for identical items (unadjusted);
Level	2:	Observable direct or indirect inputs other than Level 1 inputs;
Level	3:	Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.

For more detailed information in relation to the fair value measurement of the items above, please refer to note 42.

94

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)

Defined benefit pension plan

The costs of the defined benefit pension plan and the present value of the defined benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increase, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

6. SEGMENT INFORMATION

The executive directors of the Company are the Group’s chief operating decision-makers. Management has determined the operating segments based on the information reviewed by the executive directors for the purposes of allocating resources and assessing performance.

The executive directors review the performance of the Group mainly from the service perspective. The Group is organised into three segments engaged in:

• (i) System integration

• (ii) Maintenance services

• (iii) Cyber security services

The executive directors assess the performance of the operating segments based on a measure of gross profit of each segment, which is consistent with that of the consolidated financial statements. The revenue reported to the executive directors is measured in a manner consistent with that in the consolidated statement of comprehensive income.

There was no information regarding segment assets and liabilities provided to the executive directors as they do not use such information for the purpose of allocation of resources and segment performance assessment.

95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

6. SEGMENT INFORMATION (CONTINUED)

The segment results are as follows:

(a) Business segments

For the year ended 31 December 2020

==> picture [386 x 205] intentionally omitted <==

----- Start of picture text -----

Cyber
System Maintenance security
integration services services Total
HK$’000 HK$’000 HK$’000 HK$’000
Total segment revenue 487,951 164,085 34,314 686,350
– –
Inter-segment revenue (7,297) (7,297)
Revenue from external customers 487,951 164,085 27,017 679,053
Gross profit/segment results 23,202 45,348 8,372 76,922
Other income 6,558
Selling and administrative expenses (73,707)
Finance costs (746)
Profit before income tax 9,027
Income tax expense (1,514)
Profit for the year 7,513
----- End of picture text -----

For the year ended 31 December 2019

	System integration HK$’000	Maintenance services HK$’000	Cyber security services HK$’000	Total HK$’000
Total segment revenue Inter-segment revenue	484,579	136,955	35,125	656,659
	–	–	(10,189)	(10,189)
Revenue from external customers	484,579	136,955	24,936	646,470
Gross profit/segment results Other income Selling and administrative expenses Finance costs	40,482	38,774	7,773	87,029
				4,974
				(86,297)
				(1,445)
Profit before income tax Income tax expense				4,261
				(220)
Profit for the year				4,041

96

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

6. SEGMENT INFORMATION (CONTINUED)

(b) Geographic information

The following table provides an analysis of the Group’s revenue from external customers and non-current assets excluding goodwill, other financial assets, loan to ultimate holding company, deposits for acquisition of properties, guarantee deposits and deferred tax assets (“specified non-current assets”).

	Revenue from external customers (by customers location) 2020 2019 HK$’000 HK$’000	Revenue from external customers (by customers location) 2020 2019 HK$’000 HK$’000	Specified non-current assets 2020 2019 HK$’000 HK$’000	Specified non-current assets 2020 2019 HK$’000 HK$’000
	2020		2020
	HK$’000		HK$’000
Hong Kong Korea	27,017	24,936	9,580	14,915
	652,036	621,534	8,474	5,654
	679,053	646,470	18,054	20,569

The above specified non-current assets are analysed based on the principal places of the Group’s business operations.

The principal places of the Group’s operations are Korea and Hong Kong. The Group regarded Korea as its place of domicile.

7. REVENUE

Revenue mainly represents income from provision of system integration, maintenance services and cyber security services during the reporting period. An analysis of the Group’s revenue by category for the year ended 31 December 2020 was as follows:

(a) An analysis of the Group’s revenue by business segments and timing of recognition:

==> picture [386 x 118] intentionally omitted <==

----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Revenue from customers and recognised over time
– Contract revenue from provision of system integration 487,951 484,579
– Contract revenue from provision of maintenance services 164,085 136,955
– Contract revenue from provision of cyber security
services 27,017 24,936
679,053 646,470
----- End of picture text -----

97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

7. REVENUE (CONTINUED)

(a) (Continued)

System integration, maintenance services and cyber security services represent performance obligations that the Group satisfies over time for each respective contract.

The following table provides information about trade receivables, contract assets and contract liabilities from contracts with customers:

==> picture [386 x 76] intentionally omitted <==

----- Start of picture text -----

2020 2019
HK$’000 HK$’000
– Trade receivables (net of impairment) (note 22) 74,507 85,830
– Contract assets (net of impairment) (note 24(a)) 24,679 21,623
– Contract liabilities (note 24(b)) 23,960 30,443
----- End of picture text -----

(b) Disaggregation of revenue

The following tables disaggregate the Group’s revenue from contracts with customers:

==> picture [386 x 308] intentionally omitted <==

----- Start of picture text -----

2020 2019
Cyber Cyber
System Maintenance security System Maintenance security
integration services services Total integration services services Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Type of goods or services
– Cloud infrastructure 385,139 157,145 – 542,284 386,199 125,846 – 512,045
– Security 102,812 6,940 27,017 136,769 98,380 5,418 24,936 128,734
– Software license – – – – – 5,691 – 5,691
Total revenue from contracts
with customers 487,951 164,085 27,017 679,053 484,579 136,955 24,936 646,470
Type of customers
– Public sector 232,564 98,381 – 330,945 201,286 75,765 – 277,051
– Private sector 255,387 65,704 27,017 348,108 283,293 61,190 24,936 369,419
Total revenue from contracts
with customers 487,951 164,085 27,017 679,053 484,579 136,955 24,936 646,470
Contract duration
– Within 12 months 464,926 137,041 21,103 623,070 482,773 104,886 20,892 608,551
– Over 12 months but less than
24 months 23,025 2,776 2,774 28,575 1,666 11,239 2,087 14,992
– Over 24 months – 24,268 3,140 27,408 140 20,830 1,957 22,927
Total revenue from contracts
with customers 487,951 164,085 27,017 679,053 484,579 136,955 24,936 646,470
----- End of picture text -----

98

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

7. REVENUE (CONTINUED)

(c) Transaction price allocated to the remaining performance obligations

The follow table shows the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as at end of the reporting period:

==> picture [386 x 91] intentionally omitted <==

----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Provision of system integration 58,391 86,931
Provision of maintenance services 88,877 70,697
Provision of cyber security services 18,856 17,520
166,124 175,148
----- End of picture text -----

Based on the information available to the Group at the end of the reporting period, the management of the Group expects the transaction price amounting to HK$166,124,000 (2019: HK$175,148,000) allocated to the contracts under system integration, maintenance services and cyber security services as at 31 December 2020 will be recognised as revenue on or before 31 August 2023 (2019: on or before 31 January 2023).

8. OTHER INCOME

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Interest income 453 604
Net gain on disposal of property, plant and equipment – 60
Gain on foreign exchange, net 2,763 –
Fair value gain on other financial assets 127 118
Reversal of provision for litigation claims – 3,256
Government grant (note) 737 –
Miscellaneous gains, net 2,478 936
Total 6,558 4,974
----- End of picture text -----

Note: The amount included government grant of HK$687,000 (2019: Nil) obtained from Employment Support Scheme (“ESS”) under the Anti-epidemic Fund launched by the Hong Kong SAR Government supporting the payroll of the Group’s employees. Under the ESS, the Group had to commit to spend these grants on payroll expenses, and not reduce employee head count below prescribed levels for a specified period of time. The Group does not have any unfulfilled obligations relating to this program as at 31 December 2020.

99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

9. FINANCE COSTS

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2020 2019
HK$’000 HK$’000
Interest on borrowings 663 1,374
Interest on lease liabilities 83 71
Total 746 1,445
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10. PROFIT BEFORE INCOME TAX

Profit before income tax is arrived at after charging/(crediting):

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2020 2019
HK$’000 HK$’000
Carrying amount of inventories sold 514,261 487,068
Net provision for/(reversal of) impairment of inventories (note i) 1,919 (262)
Costs of inventories recognised as expenses 516,180 486,806
Employee costs (note 11) 98,812 94,907
Depreciation charge (note 16):
– Owned property, plant and equipment 2,338 3,347
– Right-of-use assets 2,357 2,414
4,695 5,761
Amortisation of intangible assets 4,848 4,180
Auditor’s remuneration 1,028 1,100
Research and development costs (note ii) 5,146 2,824
Subcontracting costs 27,320 38,229
Bad debt expenses on write off of trade receivables 192 –
(Reversal of)/provision for impairment of trade receivables (276) 7,637
Impairment on intangible assets 911 –
Interest on lease liabilities 83 71
Net loss on disposal of other financial assets 11 12
Net (gain)/loss on foreign exchange (2,763) 590
Net loss/(gain) on disposal of property, plant and equipment 5 (60)
Fair value gain on other financial assets (127) (118)
–
Reversal of contingent consideration (32)
–
Reversal of provision for litigation claims (note iii) (3,256)
Short term leases expenses 645 407
Low-value assets leases expenses 32 23
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100

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

10. PROFIT BEFORE INCOME TAX (CONTINUED)

Notes:

• (i) Write down of HK$262,000 made in prior year against the carrying value of inventories has been reversed. This reversal arose due to an increase in the estimated net realisable value of certain inventories as a result of a change in consumer preferences.

• (ii) Research and development costs included employee costs of approximately HK$2,897,000 (2019: HK$2,824,000) as disclosed above.

• (iii) Reversal of provision for litigation claims for the year ended 31 December 2019 arose due to the litigation was settled in the year.

11. EMPLOYEE COSTS

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2020 2019
HK$’000 HK$’000
Employee costs (including directors) comprise:
Wages and Salaries
– Capitalised as intangible assets (note 17) – 504
– Charged to profit or loss 83,711 79,745
Contributions to defined contribution retirement plans 2,580 2,275
Defined benefit costs (note 28) 4,990 4,329
Other benefits 7,531 8,054
Total 98,812 94,907
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12. INCOME TAX EXPENSE

The amount of taxation in the consolidated statement of comprehensive income represents:

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2020 2019
HK$’000 HK$’000
Current tax
– Korea 2,339 1,151
Deferred tax
– Korea (note 27) (146) (757)
– Hong Kong (note 27) (679) (174)
(825) (931)
Income tax expense 1,514 220
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101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

12. INCOME TAX EXPENSE (CONTINUED)

Global Telecom is subject to Korean Corporate Income Tax which comprised national and local taxes (collectively “Korean Corporate Income Tax”). Korean Corporate Income Tax is charged at the progressive rate from 11% to 24.2% on the estimated assessable profit of Global Telecom derived worldwide during the year ended 31 December 2020. The Korean Corporate Income Tax rates applicable to Global Telecom for the year ended 31 December 2020 are as follows:

• 11% on assessable profit up to the first KRW200 million (equivalent to approximately HK$1.3 million) for the year ended 31 December 2020 (2019: KRW200 million (equivalent to approximately HK$1.3 million));

• 22% on assessable profit in excess of KRW200 million (equivalent to approximately HK$1.3 million) for the year ended 31 December 2020 (2019: KRW200 million (equivalent to approximately HK$1.3 million)) and up to KRW20 billion (equivalent to approximately HK$131.7 million) for the year ended 31 December 2020 (2019: KRW20 billion (equivalent to approximately HK$134.7 million)); and

• 24.2% on assessable profit in excess of KRW20 billion (equivalent to approximately HK$131.7 million) for the year ended 31 December 2020 (2019: KRW20 billion (equivalent to approximately HK$134.7 million)).

Subsidiaries operating in Hong Kong are subject to Hong Kong profits tax. Under two-tiered profits tax rates regime, if the entity has one or more connected entity, the two-tiered profits tax rates would only apply to the one which is nominated to be chargeable at the two-tiered rates. Hong Kong profits tax of the nominated entity is calculated at 8.25% on assessable profits up to HK$2 million and 16.5% on any part of assessable profits over HK$2 million.

For the subsidiary operating in Hong Kong which does not qualify for two-tiered profits tax rates, a profits tax rate of 16.5% on assessable profit shall remain in calculating Hong Kong profits tax.

102

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

12. INCOME TAX EXPENSE (CONTINUED)

The income tax expense for the year can be reconciled to the profit before income tax expense in the consolidated statement of comprehensive income as follows:

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2020 2019
HK$’000 HK$’000
Profit before income tax 9,027 4,261
Tax thereon at domestic rates applicable to profit or loss
in the jurisdictions concerned 2,358 975
Tax effect of expenses not deductible for tax purposes 2,076 2,506
Withholding tax on dividend declared by a subsidiary 792 –
Tax credit (3,713) (2,801)
Others 1 (460)
Income tax expense for the year 1,514 220
13. DIVIDENDS
2020 2019
HK$’000 HK$’000
2018 final dividend of HK cents 1.47 per ordinary share – 5,880
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The final dividend of HK$5,880,000 for the year ended 31 December 2018 was paid on 6 June 2019. The Directors do not recommend the payment of a final dividend for the years ended 31 December 2020 and 2019.

103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

14. BASIC AND DILUTED EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the following data.

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2020 2019
HK$’000 HK$’000
Earnings
Profit for the year attributable to owners of the Company 7,876 4,373
2020 2019
Number’000 Number’000
Number of shares
Weighted average number of ordinary shares 400,000 400,000
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Weighted average of 400,000,000 shares for the years ended 31 December 2020 and 2019 represent the number of shares in issue throughout the respective years.

Diluted earnings per share were the same as the basic earnings per share as the Group had no potential dilutive ordinary shares during the years ended 31 December 2020 and 2019.

104

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

15. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS

Directors’ emoluments

Directors’ emoluments is disclosed as follows:

For the year ended 31 December 2020

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Basic salaries,
allowances
and other Contribution
benefits in to pension Discretionary Total
Fees kind schemes bonuses emoluments
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive directors:
Mr. Suh Seung Hyun – 1,296 86 859 2,241
Mr. Phung Nhuong Giang – 1,020 – – 1,020
Mr. Lee Seung Han – 1,491 87 859 2,437
Mr. Ryoo Seong Ryul – 911 69 201 1,181
Total – 4,718 242 1,919 6,879
Independent non-executive
directors:
Mr. Wong Sik Kei 120 – – – 120
Mr. Sum Chun Ho 120 – – – 120
Mr. Yung Kai Tai 120 – – – 120
Total 360 – – – 360
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For the year ended 31 December 2019

	Fees HK$’000	Basic salaries, allowances and other benefits in kind HK$’000	Contribution to pension schemes HK$’000	Discretionary bonuses HK$’000	Total emoluments HK$’000
Executive directors:
Mr. Suh Seung Hyun	–	1,307	74	882	2,263
Mr. Phung Nhuong Giang	–	1,200	–	–	1,200
Mr. Lee Seung Han	–	1,439	75	882	2,396
Mr. Ryoo Seong Ryul	–	876	61	209	1,146
Total	–	4,822	210	1,973	7,005
Independent non-executive directors:
Mr. Wong Sik Kei	120	–	–	–	120
Mr. Sum Chun Ho	120	–	–	–	120
Mr. Yung Kai Tai	120	–	–	–	120
Total	360	–	–	–	360

105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

15. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS (CONTINUED)

Directors’ emoluments (Continued)

Note: Salaries, allowances and other benefits paid to or for the executive directors are generally emoluments in respect of those persons’ other services in connection with the management of the affairs of the Company and its subsidiaries.

Five highest paid individuals

For the year ended 31 December 2020, the five individuals whose emoluments were the highest in the Group include 3 (2019: 4) directors whose emoluments were reflected in the analysis presented above. The emoluments paid to the remaining 2 (2019: 1) individuals is as follows:

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2020 2019
HK$’000 HK$’000
Salaries and other benefits 2,332 1,255
Contribution to pension schemes 151 76
2,483 1,331
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The emoluments of the above individuals with the highest emoluments are within the following band:

			2020	2019
			No. of	No. of
			individuals	individuals
	HK$1,000,001	to HK$1,500,000	2	1

No emoluments were paid or payable by the Group to these employees as an inducement to join or upon joining the Group or as compensation for loss of office. In addition, none of the directors waived or agreed to waive any emoluments during the year (2019: Nil).

Senior management emoluments

Emoluments paid or payable to members of senior management who are not directors were within the following bands:

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----- Start of picture text -----

2020 2019
No. of No. of
individuals individuals
Nil to HK$1,000,000 3 2
HK$1,000,001 to HK$1,500,000 4 4
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106

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT

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----- Start of picture text -----

Right-of-use Leasehold Furniture Motor
assets improvements Equipment and fixtures vehicles Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost:
At 31 December 2018
as originally presented – 1,234 27,397 1,029 2,216 31,876
Initial application of HKFRS 16 2,341 – – – – 2,341
At 1 January 2019 2,341 1,234 27,397 1,029 2,216 34,217
Additions 950 57 1,425 37 – 2,469
Acquired through business
combination (note 36) 850 102 12 54 – 1,018
Transferred from inventories – – 35 – – 35
– – –
Disposals (149) (631) (780)
Exchange realignment 5 (21) (877) (25) (73) (991)
At 31 December 2019
and 1 January 2020 4,146 1,372 27,843 1,095 1,512 35,968
Additions 5,095 548 978 229 70 6,920
Transferred from inventories – – 555 – – 555
– –
Disposals (598) (14,645) (491) (15,734)
Exchange realignment 469 30 396 19 83 997
At 31 December 2020 9,710 1,352 15,127 852 1,665 28,706
Accumulated depreciation:
At 1 January 2019 – 1,055 21,062 789 2,112 25,018
Charge for the year 2,414 217 2,931 137 62 5,761
– – –
Disposals (149) (593) (742)
Exchange realignment 3 (16) (680) (22) (69) (784)
At 31 December 2019
and 1 January 2020 2,417 1,256 23,164 904 1,512 29,253
Charge for the year 2,357 173 1,954 139 72 4,695
– –
Disposals (598) (14,640) (491) (15,729)
Exchange realignment 250 (5) 198 4 81 528
At 31 December 2020 5,024 826 10,676 556 1,665 18,747
Net carrying amount:
At 31 December 2020 4,686 526 4,451 296 – 9,959
At 31 December 2019 1,729 116 4,679 191 – 6,715
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107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Right-of-use assets

	Properties leased for own use HK$’000	Motor vehicles HK$’000	Total HK$’000
Initial application of HKFRS 16 and at 1 January 2019	2,341	–	2,341
Additions	–	950	950
Acquired through business combination (note 36)	850	–	850
Depreciation	(2,303)	(111)	(2,414)
Exchange realignment	1	1	2
At 31 December 2019 and 1 January 2020	889	840	1,729
Additions	4,270	825	5,095
Depreciation	(2,125)	(232)	(2,357)
Exchange realignment	131	88	219
At 31 December 2020	3,165	1,521	4,686

108

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

17. INTANGIBLE ASSETS

	Reacquired right of software HK$’000	Software platforms (note i) HK$’000	Total HK$’000
Cost: At 1 January 2019 Additions Acquired through business combination (note 36)
	–	16,503	16,503
	–	2,854	2,854
	1,950	911	2,861
At 31 December 2019 and 2020	1,950	20,268	22,218
Accumulated amortisation: At 1 January 2019 Amortisation charge for the year
	–	4,184	4,184
	350	3,830	4,180
At 31 December 2019 Amortisation charge for the year Impairment recognised for the year (note ii)	350	8,014	8,364
	600	4,248	4,848
	–	911	911
At 31 December 2020	950	13,173	14,123
Net carrying Amount At 31 December 2020
	1,000	7,095	8,095
At 31 December 2019	1,600	12,254	13,854

Notes:

• (i) The software platforms acquired were for three distinct software platforms with cyber security, big data and internet of things (“IoT”) features. In 2019, employee costs of HK$504,000 (note 11) for enhancement of the acquired software platforms were capitalised as part of the cost of the acquired software platforms.

• (ii) For the year ended 31 December 2020, an impairment loss of HK$911,000 (note 10) was recognised, which represented a full write-down of the carrying amount of one of the acquired software platforms with IoT features as it is not expected that it will generate any future economic benefit. The impairment loss was recognised in the consolidated statement of comprehensive income and included in selling and administrative expenses.

109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

18. GOODWILL

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2020 2019
HK$’000 HK$’000
Net carrying amount
At 1 January 7,534 –
Acquired through business combination (note 36) – 7,534
At 31 December 7,534 7,534
----- End of picture text -----

Impairment testing on goodwill

For the purpose of impairment testing, goodwill is allocated to the cash generating unit (“CGU”) identified as follows:

		2020	2019
		HK$’000	HK$’000
	Cyber security – Hong Kong	7,534	7,534

The recoverable amount of the CGU has been determined from value in use calculations based on cash flow projections from formally approved budgets covering a five-year period. The discount rate, which is pre-tax and reflects specific risks relating to the CGU, applied to the cash flow projections is 13.52% (2019: 15.18%). Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate of 3% (2019: 3%), which does not exceed the long-term growth rate for the cyber security industry in Hong Kong.

As at 31 December 2020, the value in use of the CGU exceeded its carrying amount, and hence the goodwill and intangible assets (other than fully-impaired software platform with IoT features (note 17)) allocated to this CGU was not regarded as impaired.

110

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

19. OTHER FINANCIAL ASSETS – NON-CURRENT

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2020 2019
HK$’000 HK$’000
Financial assets measured at fair value through profit or loss
– Unlisted equity securities (note (a)) 4,821 2,839
– Investment in insurance policy (note (b)) 2,586 2,161
7,407 5,000
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(a) The investment represents Global Telecom’s equity interests (both of which are less than 20%) in two cooperatives in Korea:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Korea Software Financial Cooperative (“KSFC”) 4,779 2,799
Korea Broadcasting & Communication Financial
Cooperative (“KBCFC”) 42 40
4,821 2,839
----- End of picture text -----

KSFC was established pursuant to the Software Industry Promotion Act of Korea. KSFC provides to its members, (i) loans and investments necessary to develop software, upgrade technologies and stabilise the management, (ii) guarantees for liabilities of any software business operator who intends to obtain loans from financial institutions for the purpose of developing software, upgrading technologies and stabilising his/her business management, (iii) performance guarantees necessary for business.

KBCFC was established under the provisions of the Small and Medium Enterprise Cooperatives Act of Korea with aims of promoting sound development of information communication industry and welfare of its members to encourage their independent economic activities for the improvement of their economic status and the balanced development of the national economy. Small and medium enterprises engaging in manufacturing telecommunication and broadcasting apparatuses and industrial cooperatives engaging in an identical or related type of business are eligible for membership in KBCFC.

111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

19. OTHER FINANCIAL ASSETS – NON-CURRENT (CONTINUED)

(a) (Continued)

As at 31 December, KSFC provided the following guarantees on behalf of Global Telecom:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Description of guarantees which are related to projects of
Global Telecom
– Bidding guarantees 7,380 6,987
– Contract guarantees 130,638 105,989
– Defect guarantees 45,945 37,500
– Payment guarantees 78 –
– Prepayment guarantees 119,404 77,050
303,445 227,526
----- End of picture text -----

KSFC is entitled to be indemnified by Global Telecom under the terms and conditions of the above guarantees given by KSFC. The directors consider that the probability for Global Telecom to indemnify KSFC is remote based on historical experiences and the disclosure of contingent liabilities arising from such guarantees as of each reporting date is not required.

Although there is no quoted market price in active market for the investment in KSFC, the directors are of the opinion that the fair value of the investment in KSFC as at 31 December 2020 can be measured reliably given that KSFC is required under Article 35 of Software Industry Promotion Act, which became effective on 23 March 2016, to repurchase Global Telecom’s investment in KSFC at a value as set out in the statement provided by KSFC to Global Telecom as at 31 December 2020. In respect of the investment in KBCFC, the directors are of the opinion that its fair value approximates to its carrying value, which is very immaterial.

The directors consider the Group does not have significant influence over these two cooperatives.

As at 31 December 2020, no fixed bank deposit (2019: KRW500 million (equivalent to approximately HK$3.4 million)) has been pledged with KSFC in return for the guarantees provided by KSFC above.

112

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

19. OTHER FINANCIAL ASSETS – NON-CURRENT (CONTINUED)

• (b) The Group invested in a savings-type insurance policy as detailed below:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Surrender value as at 31 December 2,586 2,161
Insurance policy type Life insurance plan
Insured Mr. Suh Seung Hyun
Insured sum HK$106,710
Premium period 10 years
----- End of picture text -----

During the insured periods covered by the insurance policy, Global Telecom can earn interest income which is linked to the then prevailing market saving interest rates. The Directors consider that the surrender value of this insurance policy provided by the insurance company approximates its fair value.

Global Telecom can terminate the insurance policy at any time and can receive cash based on the surrender value of the insurance policy at the date of withdrawal which is determined by the gross premium paid at inception plus accumulated interest earned and minus insurance policy expense.

Further disclosure on the fair value hierarchy and basis of fair value measurement of the investments in insurance policy are detailed in note 42.

113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

20. DEPOSITS FOR ACQUISITION OF PROPERTIES

Pursuant to 17 agreements dated 14 May 2020 (the “Date of Agreements”) entered into amongst Global Telecom and Korea Trust Company Limited (“Korea Trust”) (as vendor and trustee of the Properties of SK D&D), SK D&D Company Limited (“SK D&D”) (as property developer) and Taeyoung Engineering and Construction Company Limited (“Taeyoung Engineering”) (as construction company) (collectively the “Agreements”), Global Telecom agreed to purchase and Korea Trust agreed to sell 17 office units, in relation to properties located at Think Factory Industrial Cluster Dangsan, Seoul, South Korea (the “Properties”) at a total consideration of KRW12,532,830,000 (equivalent to approximately HK$88,833,000) including value-added tax (the “VAT”) of KRW716,405,000 (equivalent to approximately HK$5,078,000). The Properties are still under construction as at the Date of Agreements. The expected date of occupancy will be on or around October 2022 (the “Date of Closing”). Global Telecom has paid an initial payment of KRW1,253,283,000 (equivalent to approximately HK$8,883,000) including VAT of KRW71,641,000 (equivalent to approximately HK$508,000) as at the Date of Agreements by cash and the first intermediate payment of KRW1,253,283,000 (equivalent to approximately HK$8,883,000) including VAT of KRW71,641,000 (equivalent to approximately HK$508,000) on 13 October 2020 which was financed by bank borrowings.

Based on the Korean legal opinion obtained by the Company, Global Telecom can sell the Properties before Date of Closing to third parties after obtaining written consent from the vendor. New agreements would be entered into amongst the new buyers and the vendor. Upon completion of the disposals, the new buyers shall assume and perform all the payment obligations and liabilities of Global Telecom to pay the vendor the remaining purchase price and Global Telecom therefore cease to have any payment obligations and liabilities under the original agreements. On 8 December 2020, Global Telecom entered into two disposal agreements with new buyers, pursuant to which Global Telecom agreed to transfer all of its rights and obligations under the Agreements in respect of total 6 office units (the “Disposed Properties”) to the new buyers for a total purchase price of KRW935,546,000 (equivalent to approximately HK$6,630,000) including VAT of KRW53,377,000 (equivalent to approximately HK$378,000) (the “Disposals”), and the new buyers shall assume and perform all payment obligations and liabilities of Global Telecom in relation to the Disposed Properties and pay the remaining payments of KRW3,742,184,000 (equivalent to approximately HK$26,525,000) in accordance with the terms and conditions of the disposal agreements.

The Disposed Properties were sold at cost to Global Telecom and no gain or loss has been recognised in profit or loss during the year. The Group has no plan to sell the remaining 11 office units within the next year. As at 31 December 2020, the total amount of initial payment and the first intermediate payment (net of disposed portion) (i.e. KRW1,481,115,000 (approximately HK$10,498,000) are recognised as deposits for acquisition of properties under non-current assets.

114

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

20. DEPOSITS FOR ACQUISITION OF PROPERTIES (CONTINUED)

The table below illustrates the breakdown of each of the amounts which form deposits paid and capital commitments as at 31 December 2020:

	Amount (excluding VAT) HK$’000	VAT HK$’000	Amount (including VAT) HK$’000
Total deposits (initial payment and first intermediate payment) paid before the Disposals Less: deposits (initial payment and first intermediate payment) transferred upon the Disposals	16,750	1,016	17,766
	6,252	378	6,630
Net deposits (initial payment and first intermediate payment) paid after the Disposals and as at 31 December 2020 10,498		638	11,136
Total purchase price of the Properties Less: total deposits paid (initial payment and first intermediate payment) Less: remaining unpaid purchase price of the Disposed Properties
			88,833
			17,766
			26,525
Capital commitments as at 31 December 2020 (note 39)			44,542

21. INVENTORIES

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Inventories
– Hardware and software 15,812 9,729
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115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

22. TRADE AND OTHER RECEIVABLES

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Trade receivables 95,078 106,064
Less: Provision for impairment (20,571) (20,234)
Trade receivables, net (note (a)) 74,507 85,830
Bills receivables 2,380 –
Short-term loans to employees (note (b)) 248 236
Accrued interest 140 39
Rental and other deposits 2,360 2,330
Other receivables 178 1,359
Total trade and other receivables (note (c)) 79,813 89,794
----- End of picture text -----

• (a) The credit term granted by the Group to its trade customers is normally 90 days. Based on the invoice dates, the ageing analysis of the Group’s trade receivables net of impairment provision is as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
0–90 days 72,315 81,594
91–180 days 1,558 930
181–365 days 516 2,577
1–2 years 118 643
Over 2 years – 86
74,507 85,830
----- End of picture text -----

• (b) The loans to employees of Global Telecom are fully secured by the employees’ entitlement to retirement benefit, carry market interest rate at 6.9% (2019: 6.9%) per annum as at 31 December 2020 and repayable within one year from the respective dates of drawdown of loans.

• (c) The Group recognised impairment, if any, of trade and bills receivables and other receivables for the years ended 31 December 2020 and 2019 based on the accounting policy stated in note 4(h), Further details are set out in note 41(a).

116

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

23. LOAN TO ULTIMATE HOLDING COMPANY

Details of loan to ultimate holding company, AMS, are as follows:

			Maximum
	As at	As at	outstanding
1	January	31 December	amount during
	2020	2020	the year
	HK$’000	HK$’000	HK$’000
	–	8,869	8,869

Notes:

• (a) The loan to AMS is unsecured, interest bearing at 5% per annum and is repayable on 7 October 2022. The loan is denominated in United States Dollars (“US$”).

• (b) As at 31 December 2020, Mr. Suh Seung Hyun, Mr. Phung Nhuong Giang and Mr. Lee Seung Han who are executive directors of the Company are also controlling shareholders of AMS, and the loan to AMS constituted a connected transaction under Chapter 20 of the GEM Listing Rules.

• (c) The Group did not recognise impairment loss of loan to AMS for the year ended 31 December 2020 based on the accounting policy stated in note 4(h). Further details are set out in note 41(a).

24. CONTRACT ASSETS AND CONTRACT LIABILITIES

(a) Contract assets

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Contract assets
Arising from performance under system integration 22,137 19,232
Arising from performance under cyber security services 2,542 2,391
24,679 21,623
----- End of picture text -----

Invoices on revenue from system integration and cyber security services are issued according to the payment certificates approved by customers once certain milestones are reached. If the Group recognises the related revenue before it being unconditionally entitled to the consideration (i.e. when invoices are issued), the entitlement to consideration is classified as contract asset. Similarly, a contract liability is recognised when a customer pays consideration, or is contractually required to pay consideration and the amount is already due, before the Group recognises the related revenue.

117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

24. CONTRACT ASSETS AND CONTRACT LIABILITIES (CONTINUED)

(a) Contract assets (Continued)

Contract assets are related to unbilled work in progress which have substantially the same characteristics as the trade receivables for the same types of contract. The Group has concluded that the expected loss rate for trade receivables are a reasonable approximation of the rates for the contract assets. Since the contract assets are related to contracts which are still in progress and the payment is not due, the expected loss rate of contract assets is assessed to be minimal.

The Group recognise impairment of contract assets, if any, for the year ended 31 December 2020 and 2019 based on the accounting policy stated in note 4(h). Further details are set out in note 41(a).

(b) Contract liabilities

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2020 2019
HK$’000 HK$’000
Contract liabilities
Billings in advance of performance under system integration 14,260 22,108
Billings in advance of performance under cyber
security services 9,700 8,335
23,960 30,443
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Set out below is the movement of contract liabilities during the respective years.

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Movements in contract liabilities
Balance as at 1 January 30,443 5,563
Decrease as a result of recognising revenue during the year
that was included in the contract liabilities at the
beginning of the year (29,394) (5,255)
Acquired through business combination (note 36) – 5,848
Decrease as a result of recognising revenue during the year
that was included in the contract liabilities at the
–
acquisition date (5,848)
Increase as a result of billing in advance of
revenue recognition of system integration and
cyber security services 24,123 30,443
Exchange realignment (1,212) (308)
Balance as at 31 December 23,960 30,443
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118 Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

25. TRADE AND OTHER PAYABLES

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2020 2019
HK$’000 HK$’000
Trade payables 72,478 92,123
Accruals and other payables 20,965 16,334
Advance receipts 2,683 7,455
Value-added tax payables 572 54
96,698 115,966
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Credit periods granted by suppliers normally range from 30 days to 90 days. Based on the invoice dates, the ageing analysis of the trade payables is as follows:

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2020 2019
HK$’000 HK$’000
0–30 days 62,418 78,296
31–60 days 3,528 5,643
61–90 days 3,760 3,238
91–180 days 1,371 4,167
181–365 days 494 83
Over 1 year 907 696
72,478 92,123
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Due to short maturity periods, the carrying values of the Group’s trade and other payables are considered to be a reasonable approximation of their fair values.

26. BANK BORROWINGS

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2020 2019
HK$’000 HK$’000
Current – unsecured:
– Bank loans (note (a)) 24,722 20,582
Non-current – unsecured:
– Bank loans (note (c)) 5,568 –
Total borrowings 30,290 20,582
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119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

26. BANK BORROWINGS (CONTINUED)

• (a) Bank loans are carried at amortised cost.

Details of the bank loans denominated in US$ are stated below:

	Amount	Interest rate	Repayable in
2020
Bank A	US$311,624	3-month LIBOR plus 2.07% per annum	July 2021
Bank B	US$477,413	3-month LIBOR plus 1.73% per annum	April 2021
Bank C	US$703,382	KORIBOR base rate plus 1.30% per annum	September 2021
Bank D	US$1,398,783	3-month LIBOR plus 0.5% per annum	April 2021
Bank E	US$314,622	3-month LIBOR plus 2.0% per annum	November 2021
2019
Bank A	US$301,675	3-month LIBOR plus 1.80% per annum	July 2020
Bank B	US$608,250	3-month LIBOR plus 1.58% per annum	April 2020
Bank C	US$1,016,007	KORIBOR base rate plus 1.30% per annum	September 2020
Bank D	US$709,984	3-month LIBOR plus 1.70% per annum	September 2020

• (b) As at 31 December 2020, Korea Credit Guarantee Fund, which is a public financial institution independent of the Group, provided foreign and local currency guarantees to certain banks in the amount of US$288,000 and KRW400 million (2019: US$320,000 and KRW400 million) for import financing facilities and bank loans provided to Global Telecom.

• (c) In accordance with the sales and purchase agreements of the acquisition of properties in Korea dated 14 May 2020, Global Telecom applied for loans from a financial institution designated by the vendor for the intermediate payments, and the interest on bank loans was borne by the vendor until the date of occupancy. The bank loans are denominated in KRW, interest bearing at 6-month COFIX plus 2.19% per annum, unsecured and due to be settled on or before 31 January 2023.

120

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

27. DEFERRED TAX ASSETS/(LIABILITIES)

Details of the deferred tax assets/(liabilities) recognised and movements during the current and prior year are as follows:

	Amortisation of intangible assets HK$’000	Decelerated tax depreciation HK$’000	Provision for impairment of trade receivables HK$’000	Provision for incentive bonus HK$’000	Provision for impairment of inventories HK$’000	Tax losses carried forward (note) HK$’000	Undistributed profits of foreign operation HK$’000	Others HK$’000	Total HK$’000
At 1 January 2019 Acquired from business combination (note 36) Credited/(charged) to profit or loss for the year (note 12) Changed to equity for the year Exchange realignment	(2,033)	53	2,627	920	1,184	2,070	–	1,232	6,053
	(472)	–	–	–	–	–	–	–	(472)
	219	(79)	1,738	337	(58)	7	–	(1,233)	931
	–	–	–	–	–	–	–	461	461
	–	(2)	(81)	(41)	(38)	–	–	(29)	(191)
At 31 December 2019	(2,286)	(28)	4,284	1,216	1,088	2,077	–	431	6,782
	Amortisation of intangible assets	Decelerated tax depreciation	Provision for impairment of trade receivables	Provision for incentive bonus	Provision for impairment of inventories	Tax losses carried forward (note a)	Undistributed profits of foreign operation (note b)	Others	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2020 Credited/(charged) to profit or loss for the year (note 12) Changed to equity for the year Exchange realignment	(2,286)	(28)	4,284	1,216	1,088	2,077	–	431	6,782
	950	12	(153)	909	422	(211)	(792)	(312)	825
	–	–	–	–	–	–	–	233	233
	–	1	209	148	87	–	–	(2)	443
At 31 December 2020	(1,336)	(15)	4,340	2,273	1,597	1,866	(792)	350	8,283

The following is the analysis of deferred tax balances for financial reporting purposes:

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2020 2019
HK$’000 HK$’000
Deferred tax assets 8,500 7,160
Deferred tax liabilities (217) (378)
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121

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

27. DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)

Notes:

• (a) As at 31 December 2020, the Group had tax losses arising in Hong Kong of HK$11,309,000 (2019: HK$12,589,000) that are available indefinitely for offsetting against future taxable profits of the company in which the losses arose. Deferred tax assets of approximately HK$1,866,000 (2019: HK$2,077,000) have been recognised for tax losses arising from a subsidiary in Hong Kong as management expects that availability of future profit streams is highly probable in the foreseeable future.

• (b) According to Korean Corporate Income Tax, the Group is subject to a withholding tax at 22%, unless reduced by tax treaties or arrangements, for dividends distributed by a Korean enterprise to its immediate holding company outside Korea. Since, the Group controls the dividend policy of the Group’s Korean subsidiary, deferred tax liability arising from the undistributed profits of the Group’s Korean subsidiary is only provided to the extent that such profits are expected to be distributed in the foreseeable future.

As at 31 December 2020, deferred tax liability of HK$27,600,000 (2019: HK$24,700,000) has not been recognised on temporary differences relating to the remaining undistributed earnings of the subsidiary in Korea because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

28. DEFINED BENEFIT OBLIGATIONS

The Group operates a defined benefit plan (“Plan”) under the Employee Retirement Benefit Security Act (“ERBSA”) legislation covering the employees of Global Telecom. The Plan is administered by the independent trustee and the Plan assets are held separately from those of the Group. The Plan provides lump sum benefits when a member ceases employment with Global Telecom. The amount is based on a formula linking final average salary (averaged over three months) and years of service.

Global Telecom must carry out a funding valuation using a prescribed method each year and if the fair value of the plan assets is below 95% of the present value of defined benefit obligation which is the standard required reserve under ERBSA as at 31 December 2020 and 2019, Global Telecom must develop a financial stabilisation plan to make up the deficiency within three years.

The Plan exposes Global Telecom to actuarial risks, such as interest rate risk and longevity risk.

As a result of the Plan characteristics, Global Telecom does not use any asset-liability matching strategies involving annuities or other techniques.

122

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

28. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

The Plan is funded by contributions from the Group with reference to an independent actuary’s recommendation based on annual actuarial valuation. The latest independent actuarial valuation of the Plan was as at 31 December 2020 and prepared by qualified staff of Towers Watson, who is a member of Society of Actuaries and a member of Institute of Actuaries of Korea, using the projected unit credit method. The actuarial valuations as at 31 December 2020 indicate that the Group’s obligations under the Plan are approximately 100% (2019: 96%) covered by the Plan assets held by the trustee as at the respective reporting date.

The amounts recognised in the consolidated statement of financial position are as follows:

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2020 2019
HK$’000 HK$’000
Present value of defined benefit obligations 34,946 31,044
Fair value of plan assets (34,780) (29,863)
Defined benefit obligations liability as at 31 December 166 1,181
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A portion of the above liability is expected to be settled after more than one year. However, it is not practicable to segregate this amount from the amounts payable in the next twelve months, as future contributions will also relate to future services rendered and future changes in actuarial assumptions and market conditions. The Group expects to pay approximately HK$7,244,000 in contributions to the Plan in 2021.

The Group’s contributions for the year ended 31 December 2020 amounted to approximately HK$7,048,000 (2019: HK$6,151,000).

The principal financial assumptions used in the actuarial valuation as at 31 December 2020 for the purpose of the accounting disclosures were as follows:

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----- Start of picture text -----

2020 2019
Discount rate 1.75% 2.00%
Rate of salary increase 5.00% 5.00%
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123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

28. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

For purpose of determining the defined benefit obligations, the following participant data has been applied as at 31 December 2020:

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----- Start of picture text -----

2020 2019
Number of staff 187 164
Total annual plan salary HK$56,896,000 HK$54,418,000
Average annual plan salary HK$304,000 HK$332,000
Average age (count weighted) 39.22 years 39.68 years
Average credited services (count weighted) 3.91 years 4.12 years
Expected future working lifetime 4.65 years 4.35 years
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Amounts recognised in the consolidated statement of comprehensive income in respect of the Plan are as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Current service costs 4,967 4,308
Administration costs 165 162
Interest on assets (701) (711)
Interest costs 559 570
Total amount recognised in profit or loss (note 11) 4,990 4,329
Actuarial losses (net of tax) recognised in
other comprehensive income 826 1,631
Total defined benefit costs 5,816 5,960
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The current service costs, administration costs and the net interest on net defined benefit liability are recognised in the following line items in the consolidated statement of comprehensive income:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Cost of sales 3,049 2,387
Selling and administrative expenses 1,941 1,942
4,990 4,329
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124

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

28. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

Movements in the present value of the defined benefit obligations are as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Balance as at 1 January 31,044 28,471
Pension costs charged to profit or loss:
Service costs 4,967 4,308
Net interest 559 570
Sub-total 5,526 4,878
Benefits paid (4,208) (3,315)
Actuarial changes arising from changes in demographic
assumptions (494) 473
Actuarial changes arising from changes in financial assumptions 377 394
Actuarial changes arising from experience adjustments 952 1,066
Exchange realignment 1,749 (923)
Balance as at 31 December 34,946 31,044
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The weighted average duration of the defined benefit obligations is 4.78 years (2019: 5.19 years).

Changes in the fair values of the Plan assets are as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Balance as at 1 January 29,863 27,529
Pension costs charged to profit or loss:
Administrative costs (165) (162)
Net interest 701 711
Sub-total 536 549
Benefits paid (4,208) (3,315)
Actuarial changes arising from changes in financial assumptions (224) (159)
Contribution from employer 7,048 6,151
Exchange realignment 1,765 (892)
Balance as at 31 December 34,780 29,863
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125

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

28. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

The assets of the Plan are as follows:

		2020	2019
		HK$’000	HK$’000
	Term deposit	34,780	29,863

Sensitivity analysis on actuarial assumptions used in determining defined benefit obligations for the Plan as at 31 December 2020 are set out as follows:

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----- Start of picture text -----

Percentage
change 2020 2019
HK$’000 HK$’000
Discount rate +1% (1,508) (1,560)
-1% 1,542 1,597
Rate of salary increase +1% 1,647 1,696
-1% (1,619) (1,664)
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The above sensitivity analysis is based on the assumption that changes in actuarial assumptions are not correlated and therefore it does not take into account the correlations between the actuarial assumptions.

126

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

29. LEASES

The Group as a lessee

Nature of leasing activities

The Group leases a number of properties and vehicles in Korea and Hong Kong. Lease contracts are typically made for a fixed period which ranged from 2 to 5 years.

(a) Right-of-use assets

The analysis of the net book value of right-of-use assets by class of underlying asset is as follows:

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2020 2019
HK$’000 HK$’000
Properties leased for own use, carried at depreciated cost 3,165 889
Motor vehicles, carried at depreciated cost 1,521 840
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(b) Lease liabilities

	Properties leased for own use HK$’000	Motor vehicles HK$’000	Total HK$’000
Balance as at 1 January 2019	1,792	–	1,792
Additions	–	909	909
Acquired through business combination (note 36)	893	–	893
Lease payments	(1,899)	(113)	(2,012)
Interest expense	56	15	71
Exchange realignment	–	1	1
Balance as at 31 December 2019 and 1 January 2020	842	812	1,654
Additions	3,935	825	4,760
Lease payments	(2,014)	(240)	(2,254)
Interest expense	56	27	83
Exchange realignment	119	88	207
Balance as at 31 December 2020	2,938	1,512	4,450

127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

29. LEASES (CONTINUED)

The Group as a lessee (Continued)

Nature of leasing activities (Continued)

• (b) Lease liabilities (Continued)

Future lease payments are due as follows:

2020

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Minimum
lease payments Interest Present value
31 December 31 December 31 December
2020 2020 2020
HK$’000 HK$’000 HK$’000
Not later than one year 2,511 113 2,398
Later than one year and not later than
two years 1,270 53 1,217
Later than two years and not later than
five years 860 25 835
4,641 191 4,450
2019
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	Minimum lease payments 31 December 2019 HK$’000	Interest 31 December 2019 HK$’000	Present value 31 December 2019 HK$’000
Not later than one year	1,037	44	993
Later than one year and not later than two years	220	16	204
Later than two years and not later than five years	474	17	457
	1,731	77	1,654

128

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

29. LEASES (CONTINUED)

The Group as a lessee (Continued)

Nature of leasing activities (Continued)

(b) Lease liabilities (Continued)

The present value of future lease payments are analysed as:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Current liabilities 2,398 993
Non-current liabilities 2,052 661
4,450 1,654
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(c) The amounts recognised in profit or loss in relation to leases are as follows:

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2020 2019
HK$’000 HK$’000
Interest on lease liabilities (note 9) 83 71
Depreciation charge of right-of-use assets (note 16) 2,357 2,414
Short-term lease expense and low value lease expense
(note 10) 677 430
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30. SHARE CAPITAL

	Number ’000	Amount HK$’000
Authorised: Ordinary shares of HK$0.01 each At 31 December 2019 and 2020
	5,000,000	50,000
	Number ’000	Amount HK$’000
Ordinary shares, issued and fullypaid: At 31 December 2019 and 2020
	400,000	4,000

129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

31. SHARE OPTION SCHEME

A share option scheme (the “Scheme”) was approved and adopted by the Company on 21 June 2016.

The Scheme is effective for a period of 10 years commencing on the Listing Date of the Company. Under the Scheme, the board of directors may in its absolute discretion determine at the time of grant of the relevant option but the subscription price shall not be less than whichever is the highest of: (i) the closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of the granting of the option; (ii) the average closing prices of the shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of the granting of the option; and (iii) the nominal value of a share. An offer of grant of an option may be accepted by a participant within the date as specified in the offer letter issued by the Company, being a date not later than 21 days from the date upon which it is made, by which the participant must accept the offer or be deemed to have declined it, provided that such date shall not be more than 10 years after the date of adoption of the Scheme. A consideration of HK$1.00 is payable on acceptance of the offer of grant of an option.

The period as the board of directors may in its absolute discretion determine and specify in relation to any particular option holder in his option agreement during which the option may be exercised (subject to such restriction on exercisability specified therein), which shall be not greater than the period prescribed by the GEM Listing Rules from time to time (which is, as at the date of adoption of the Scheme, a period of 10 years from the date of the granting of the option).

The limit on the number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Scheme and any other schemes must not exceed 30% of the shares in issue from time to time. No options may be granted under any schemes of the Company if this will result in the limit being exceeded. The total number of shares which may be issued upon exercise of all options to be granted under the Scheme and any other schemes of the Company must not in aggregate exceed 10% of the shares in issue. Options lapsed in accordance with the terms of the Scheme or any other schemes will not be counted for the purpose of calculating the 10% limit.

No share options were granted under the Scheme during the year. Share options do not confer rights to the holders to dividends or to vote at shareholders’ meetings.

130

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

32. HOLDING COMPANY STATEMENT OF FINANCIAL POSITION

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2020 2019
Notes HK$’000 HK$’000
Non-current assets
Interests in subsidiaries 57,639 57,639
Current assets
Deposit and prepayments 223 223
Amounts due from subsidiaries 10,997 12,242
Cash and cash equivalent 86 54
11,306 12,519
Current liabilities
Accruals 1,523 1,523
Net current assets 9,783 10,996
Net assets 67,422 68,635
Capital and reserves
Share capital 30 4,000 4,000
Reserves 33 63,422 64,635
Total equity 67,422 68,635
----- End of picture text -----

On behalf of the board of directors

Mr. Phung Nhuong Giang Director

Mr. Lee Seung Han Director

131

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

33. RESERVES

Details of the movements in the Group’s reserves are as set out in the consolidated statement of changes in equity in these consolidated financial statements. The natures and purposes of reserves within equity are as follows:

• (a) Share premium account of the Company represents the excess of the proceeds received over the nominal value of the Company’s shares issued.

• (b) Capital reserve represents (i) the difference between the nominal value of the share capital of the subsidiaries acquired and the nominal value of the shares of the Company issued in exchange thereof pursuant to the group reorganisation and (ii) the effect of capitalisation of loan from AMS of approximately HK$10,171,000.

• (c) Pursuant to the Special Tax Treatment Control Law in Korea, Global Telecom is allowed to appropriate retained earnings as a reserve for research and manpower development. This reserve is not available for the payment of dividends but to be used for specified purposes or reversed back to retained earnings.

• (d) The foreign exchange reserve comprises all foreign exchange differences arising from the translation of financial statements of foreign operations from KRW to the presentation currency, HK$.

• (e) In accordance with the Korean Commercial Code, an amount equal to at least 10% of cash dividends is required to be appropriated as a legal reserve until the reserve equals 50% of issued capital. The legal reserve may not be utilised for cash dividend but may only be used to offset a deficit, if any, or be transferred to capital.

132

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

33. RESERVES (CONTINUED)

Details of the movements on the Company’s reserves are as follows:

	Share premium HK$’000	Contributed surplus HK$’000	Accumulated losses HK$’000	Total HK$’000
At 1 January 2019 Dividends paid in respect of previous year Loss for the year	41,598	57,639	(21,860)	77,377
	(5,880)	–	–	(5,880)
	–	–	(6,862)	(6,862)
At 31 December 2019 Loss for the year	35,718	57,639	(28,722)	64,635
	–	–	(1,213)	(1,213)
At 31 December 2020	35,718	57,639	(29,935)	63,422

Note: The contributed surplus of the Company represented the difference between the net asset value of the subsidiaries acquired and the nominal value of the shares of the Company issued in exchange thereof pursuant to the group reorganisation.

34. INTERESTS IN SUBSIDIARIES

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Place of Issued and fully
incorporation and paid share
Name of subsidiary operation capital % of ownership interest Principal activities
2020 2019
SuperChips British Virgin US$1 Directly Directly Investment holding
Islands (“B.V.I.”) 100% 100%
Maximus Group Consulting B.V.I. 74,000 shares of Indirectly Indirectly Investment holding
Limited (“Maximus Group”) US$1 each 64.86% 64.86%
Global Telecom Republic of Korea 190,000 shares of Indirectly Indirectly Provision of system
KRW5,000 each 100% 100% integration and
maintenance
services
Future Data Hong Kong HK$10,441,395 Indirectly Indirectly Provision of cyber
100% 100% security services
Maximus HK Hong Kong HK$10,000 Indirectly Indirectly Provision of cyber
64.86% 64.86% security services
MXC Security (Singapore) Pte Singapore Singapore dollar 1 Indirectly Indirectly Provision of cyber
Ltd (“MXC Singapore”) 64.86% 64.86% security services
----- End of picture text -----

133

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

35. NON-CONTROLLING INTERESTS

Maximus Group, a 64.86% owned subsidiary of the Company, has non-controlling interests (“NCI”).

Summarised financial information in relation to the NCI of Maximus Group, before intragroup eliminations, is presented below:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
For the year/period ended 31 December
Revenue 27,017 16,627
Loss before tax (1,195) (1,040)
Loss for the year/period and total comprehensive income (1,034) (946)
Loss allocated to NCI (363) (332)
For the year/period ended 31 December
Cash (used in)/from operating activities (27) 3,394
–
Cash used in investing activities (89)
Cash used in financing activities (581) (339)
Net cash (outflows)/inflows (608) 2,966
As at 31 December
Current assets 12,783 11,312
Non-current assets 2,570 2,988
Current liabilities (12,616) (11,395)
Non-current liabilities (864) –
Net assets 1,873 2,905
Accumulated NCI 658 1,021
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134

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

36. BUSINESS ACQUISITION DURING PRIOR YEAR

On 2 April 2019, Future Data entered into a share purchase and subscription agreement with Mr. Chung Pui Nam Roger (“Mr. Chung”), an independent third party. Pursuant to the agreement, Mr. Chung agreed to sell, and Future Data agreed (i) to acquire 24,000 existing shares of Maximus Group (“Target Company”), representing approximately 32.43% of the entire issued share capital of the Target Company (“Sale Shares”); and (ii) to subscribe for 24,000 new shares of the Target Company, representing approximately 32.43% of the entire issued share capital of the Target Company (“New Shares”), at a total consideration of HK$10,000,000 and a Contingent Consideration (defined below) of up to HK$2,000,000. The acquisition was completed on 3 June 2019 (“Acquisition date”) and Future Data was interested in approximately 64.86% of the entire issued share capital of the Target Company. Further details regarding the consideration of HK$10,000,000 and the Contingent Consideration of up to HK$2,000,000 are disclosed below. Further details of the reasons and benefits of this acquisition are set out in the Company’s announcement dated 2 April 2019.

The identifiable assets and liabilities of Target Company and its subsidiaries (collectively referred to as “Target Group”) as at the Acquisition date were as follows:

	Amount recognised at Acquisition date HK$’000
Property, plant and equipment	1,018
Intangible assets (including reacquired rights of software of HK$1,950,000 under note 17)	2,861
Trade and other receivables	4,478
Bank balances and cash	1,157
Contract assets	1,965
Amount due from Future Data	6,000
Trade and other payables	(6,415)
Contract liabilities	(5,848)
Lease liabilities	(893)
Deferred tax liabilities	(472)
	3,851
Less: NCI	(1,353)
Net identifiable assets acquired and recognised at Acquisition date	2,498

135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

36. BUSINESS ACQUISITION DURING PRIOR YEAR (CONTINUED)

	HK$’000
Cash consideration settled (note a(i))	4,000
Cash consideration to be settled against current account with Target Group (note b(i))	2,000
Consideration to be settled by way of set off against current account with Target Group (note b(ii))	4,000
Fair value of contingent consideration (notes a(ii) and c)	32
Less: Fair values of net identifiable assets (see above)	(2,498)
Goodwill (note 18)	7,534

• (a) The Sale Shares consideration shall be the aggregate sum of up to HK$6,000,000, and is satisfied by Future Data to Mr. Chung in two instalments by payment in cash in the following manner:

• (i) as to HK$4,000,000 and settled on 28 June 2019; and

• (ii) the remaining balance of up to HK$2,000,000 on a date not later than five business days after the completion and delivery of the audited financial statements for the year ended 31 December 2019 (“FY2019 Audited Financial Statements”) by the Target Company to Future Data on or before 30 June 2020 (“Contingent Consideration”).

The Contingent Consideration shall be adjusted in the following manner:

• if the earnings before interest, taxes, depreciation, and amortisation (“EBITDA”) of the Target Group, based on the FY2019 Audited Financial Statements, is equal to or greater than HK$8,000,000, there shall not be any adjustment to the Contingent Consideration and the Contingent Consideration shall remain as HK$2,000,000;

• if the EBITDA of the Target Group, based on the FY2019 Audited Financial Statements, is less than HK$8,000,000 but more than or equal to HK$4,000,000, the Contingent Consideration shall be adjusted downward to HK$500,000; and

• if the EBITDA of the Target Group, based on the FY2019 Audited Financial Statements, is less than HK$4,000,000, the Contingent Consideration shall be adjusted downward to zero.

136

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

36. BUSINESS ACQUISITION DURING PRIOR YEAR (CONTINUED)

• (b) The New Shares consideration shall be the aggregate sum of HK$6,000,000, and is payable by Future Data to the Target Company on or before 30 September 2019, in the following manner:

• (i) as to HK$2,000,000 by payment in cash and settled against the current account with Target Group in 2020; and

• (ii) as to HK$4,000,000 by setting off current account with the Target Group.

• (c) At the Acquisition date, the fair value of the Contingent Consideration arrangement of HK$32,000 was estimated by applying the income approach at a discount rate of 13.73% and the projected EBITDA of the Target Group for the year ended 31 December 2019. As at 31 December 2019, the fair value of contingent consideration was determined to be zero based on the audited results of Target Group and the decrease of HK$32,000 was recognised in current year’s profit or loss.

• (d) The fair value of trade and other receivables amounted to HK$4,478,000. The gross amount of these receivables is HK$4,616,000 of which trade receivables of HK$138,000 are expected to be uncollectable.

The goodwill of HK$7,534,000 which is not deductible for tax purposes, comprises the acquired workforce and the value of expected synergies arising from the combination of the acquired business with the existing operations of the Group.

• (e) Since the Acquisition date, Target Group has contributed HK$16,125,000 and a loss before tax of HK$1,040,000 to the Group’s revenue and results respectively. If the acquisition had occurred on 1 January 2019, the Group’s revenue and profit before tax would have been HK$647,848,000 and HK$3,470,000 respectively. This pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2019, nor is it intended to be a projection of future performance.

137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

36. BUSINESS ACQUISITION DURING PRIOR YEAR (CONTINUED)

An analysis of the cash flows in respect of the acquisition of Target Group is	as follows:
	HK$’000
Cash consideration Bank balances and cash acquired	(4,000)
	1,157
Net outflows of cash and cash equivalents included in cash flows from investing activities	(2,843)

37. RELATED PARTY TRANSACTIONS

(a)	Save for the loan to ultimate holding company, AMS, as disclosed in note 23, during the year, the Group entered into the following transaction with a related party.
	Related party identity Type of transaction 2020 2019 HK$’000 HK$’000
	AMS Interest income 94 –

(b) Compensation of key management personnel

The remuneration of directors and other members of key management for the year are set out in note 15.

138

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

38. NOTES SUPPORTING CASH FLOWS STATEMENT

Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows from financing activities.

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Bank Lease
borrowings liabilities
HK$’000 HK$’000
At 31 December 2018 as originally presented 23,224 –
Initial application of HKFRS 16 – 1,792
Restated balance at 1 January 2019 23,224 1,792
Changes from financing cash flows:
Proceeds from bank borrowings 145,304 –
–
Repayments of bank borrowings (146,834)
Interest paid (1,374) (71)
–
Repayments of principal portion of the lease liabilities (1,941)
Total changes from financing cash flows (2,904) (2,012)
Other changes
Net cash inflows from acquisition through business combination – 893
Additions to leases liabilities – 909
Finance costs 1,374 71
Exchange realignment (1,112) 1
Total other changes 262 1,874
At 31 December 2019 and 1 January 2020 20,582 1,654
Changes from financing cash flows:
Proceeds from bank borrowings 138,475 –
–
Repayments of bank borrowings (130,431)
Interest paid (663) (83)
–
Repayments of principal portion of the lease liabilities (2,171)
Total changes from financing cash flows 7,381 (2,254)
Other changes
Additions to leases liabilities – 4,760
Finance costs 663 83
Exchange realignment 1,664 207
Total other changes 2,327 5,050
At 31 December 2020 30,290 4,450
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139

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

39. CAPITAL COMMITMENTS

			2020	2019
			HK$’000	HK$’000
	Commitment for the acquisition of properties (note	20)	44,542	–

40. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts presented in the consolidated statement of financial position relate to the following categories of financial assets and financial liabilities:

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2020 2019
HK$’000 HK$’000
Financial assets
Non-current
Financial assets at amortised cost
– Loan to ultimate holding company 8,869 –
Financial assets at FVTPL
– Unlisted equity securities 4,821 2,839
– Insurance policy 2,586 2,161
16,276 5,000
Current
Financial assets at amortised cost
– Trade and other receivables 79,813 89,794
– Contract assets 24,679 21,623
– Pledged bank deposit – 3,372
– Fixed bank deposits 4,536 4,316
– Cash and cash equivalents 96,189 116,075
205,217 235,180
Financial liabilities
Financial liabilities at amortised cost
– Trade and other payables 93,443 108,457
– Bank borrowings 30,290 20,582
Lease liabilities 4,450 1,654
128,183 130,693
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140

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

40. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY (CONTINUED)

Note: The carrying amounts of the financial assets included above approximate their fair values due to their short term nature.

The carrying values of the financial liabilities (including current portion of bank borrowings) included above approximate their fair values due to their short term nature.

The fair values of the non-current portion of bank borrowings have been calculated by discounting the expected future cash flows using rates currently available for borrowings with similar terms, credit risk and remaining maturities. The Group’s own non-performance risk for bank borrowings as at 31 December 2020 and 2019 were assessed to be insignificant. The carrying values of the noncurrent portion of bank borrowings also approximate their fair values as at 31 December 2020 and 2019.

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s activities expose it to a variety of financial risks which result from the use of financial instruments in its ordinary course of operations. The financial risks include market risks (mainly foreign currency risk and interest rate risk), credit risk and liquidity risk. Details of these financial instruments are disclosed in the notes below. The Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The directors meet regularly to identify and evaluate risks and to formulate strategies to manage financial risks on timely and effective manner. The risks associated with these financial instruments and the policies applied by the Group to mitigate these risks are set out below.

(a) Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligations under the terms of the financial instrument and cause a financial loss to the Group.

Cash and cash equivalents and deposits with banks are normally placed at financial institutions that have sound credit rating and the Group considers the credit risk to be insignificant. The directors consider the credit risk on bills receivables is low since the banks which guarantee payments of bills receivables are of high credit rating.

141

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(a) Credit risk (Continued)

Loan to ultimate holding company will be settled before 7 October 2022 and the Board will closely monitor the repayment progress to minimise the risk of default. The management considers the credit risk to be insignificant as there was no default history and no ECL is recognised.

Trade receivables and contract assets

The Group measures the loss allowance for trade receivables and contract assets at an amount equal to lifetime ECLs. To measure the ECLs, the trade receivables and contract assets have been grouped based on shared credit risk characteristics (i.e. usually by locations) and the days past due. The ECLs on trade receivables and contract assets are estimated using a provision matrix by reference to past default experience of the debtor, current market condition in relation to each debtor’s exposure. The ECLs also incorporated forward-looking information with reference to general macroeconomic conditions that may affect the ability of the debtors to settle receivables.

As at each reporting period, the provision made respectively against the gross amount of trade and bills receivables is as follows:

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Expected Gross carrying Loss
2020 credit loss rate amount allowance
% HK$’000 HK$’000
Current (not past due) 0.39% 74,545 287
0–90 days past due 2.50% 1,921 48
91–180 days past due 7.28% 618 45
181–365 days past due 23.26% 86 20
1–2 years past due 78.88% 554 437
Over 2 years past due 100% 19,734 19,734
97,458 20,571
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142

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(a) Credit risk (Continued)

Trade receivables and contract assets (Continued)

2019	Expected credit loss rate %	Gross carrying amount HK$’000	Loss allowance HK$’000
Current (not past due)	0.51%	81,041	417
0–90 days past due	2.19%	1,504	33
91–180 days past due	9.75%	2,666	260
181–365 days past due	51.35%	1,443	741
1–2 years past due	68.02%	1,695	1,154
Over 2 years past due	99.51%	17,715	17,629
		106,064	20,234

Expected loss rates are based on actual loss experience over the past 3 years. These rates are adjusted to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.

Movement in the loss allowance account in respect of trade receivables during the year is as follows:

	Trade receivables HK$’000
As at 1 January 2019	12,852
Acquisition through business combination (note 36)	138
Net impairment losses recognised during the year	7,637
Exchange realignment	(393)
As at 31 December 2019 and 1 January 2020	20,234
Net reversal of impairment losses recognised during the year	(276)
Exchange realignment	613
As at 31 December 2020	20,571

143

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(a) Credit risk (Continued)

Trade receivables and contract assets (Continued)

As at 31 December 2020, no provision was made against the gross amount of contract assets because the Group has concluded that the ECL rate for trade receivables are a reasonable approximation of the rates for the contract assets. Since the contract assets are related to contracts which are still in progress and the payment is not due, the ECL rate of contract assets is assessed to be minimal.

Other receivables

ECLs model for other receivables is summarised below:

Other receivables that are not credit-impaired on initial recognition are classified in “Stage 1” and have their credit risk continuously monitored by the Group. The ECLs is measured on a 12-month basis.

• If a significant increase in credit risk (as define below) since initial recognition is identified, the financial instrument is moved to “Stage 2” but it not yet deemed to be credit-impaired. The ECLs is measured on lifetime basis.

• If the financial instrument is credit-impaired, the financial instrument is then moved to “Stage 3”. The ECLs is measured on lifetime basis.

• At Stages 1 and 2, interest income is calculated on the gross carrying amount (without deducting the loss allowance). If a financial instrument subsequently becomes credit-impaired (Stage 3), the Group is required to calculate the interest income by applying the effective interest method in subsequent reporting periods to the amortised cost of the financial asset (the gross carrying amount net of loss allowance) rather than the gross carrying amount.

As at 31 December 2020, no provision was made against the gross amount of other receivables because the Group considered the impact of the impairment of other receivables to be insignificant based on past credit history and the nature of the other receivables.

The credit policies have been consistently applied and are considered to be effective in managing the Group’s exposure.

144

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(b) Liquidity risk

Liquidity risk relates to the risk that the Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group is exposed to liquidity risk in respect of settlement of trade and other payables, bank borrowings and lease liabilities also in respect of its cash flow management. The Group’s objective is to maintain an appropriate level of liquid assets and committed lines of funding to meet its liquidity requirements in the short and longer term.

The liquidity policy has been followed by the Group during the year and is considered by the directors to have been effective in managing liquidity risks.

The following table details the remaining contractual maturities at the end of the reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the respective reporting date) and the earliest date the Group can be required to pay.

2020

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Total More than
contractual Within 1 year but
Carrying undiscounted 1 year or less than
amount cash flows on demand 2 years
HK$’000 HK$’000 HK$’000 HK$’000
Non-derivatives:
Trade and other payables 93,443 93,443 93,443 –
Bank borrowings 30,290 35,905 30,337 5,568
Lease liabilities 4,450 4,641 2,511 2,130
128,183 133,989 126,291 7,698
----- End of picture text -----

145

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(b) Liquidity risk (Continued)

2019

	Carrying amount HK$’000	Total contractual undiscounted cash flows HK$’000	Within 1 year or on demand HK$’000	More than 1 year but less than 2 years HK$’000
Non-derivatives:
Trade and other payables	108,457	108,457	108,457	–
Bank borrowings	20,582	20,749	20,749	–
Lease liabilities	1,654	1,731	1,037	694
	130,693	130,937	130,243	694

(c) Interest rate risk

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk relates principally to its bank deposits and interestbearing bank borrowings. The Group’s policy is to minimise interest rate risk exposure. To achieve this, the Group regularly assesses and monitors its needs for cash with reference to its business plans and day-to-day operations. The interest rates and terms of repayment of interest-bearing bank borrowings and the lease of properties and motor vehicles of the Group are disclosed in notes 26 and 29. The Group currently does not have an interest rate hedging policy.

In respect of cash flow interest rate risk, the following table illustrates the sensitivity of the Group’s profit for the year, and other components of equity at the dates indicated due to a possible change in interest rates on its floating rate bank deposits and bank borrowings with all other variables held constant at the end of the reporting period:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Increase/(decrease) in profit for the year and retained profits
Increase/decrease in basis points
+0.5% (1,004) (669)
-0.5% 1,004 669
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146

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(c) Interest rate risk (Continued)

The above sensitivity analysis is prepared based on the assumption that the bank deposits and bank borrowings as at reporting dates existed throughout the whole financial year.

The assumed changes in interest rates are considered to be reasonably possible based on observation of current market conditions and represents management’s assessment of a reasonably possible change in interest rates over the next twelve months.

(d) Foreign currency risk

Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposures to currency risk principally arise from Global Telecom’s overseas purchases which are denominated in US$ whereas the functional currency of Global Telecom is KRW.

To mitigate the Group’s financial loss from exposure to unfavourable foreign exchange rate movement in KRW and US$, the Group added on a margin in the costing of the relevant part of the system integration projects which required purchases of hardware and software components to be settled in US$. The margin was supposed to be a cushion to safeguard against any unfavourable foreign exchange rate movement in KRW and US$ between the costing date and the relevant settlement date. In view of the limited size of each US$ denominated purchase, it is considered that it is not justifiable on a cost and benefit analysis to enter into foreign exchange hedging transactions for such purchases.

In respect of the business operation in Hong Kong, the transactions are primarily denominated in HK$ and US$. Since US$ is pegged to HK$, the corresponding foreign currency risk exposure is considered as minimal. Accordingly, the analysis below is prepared based on Global Telecom’s foreign currency risk exposure only.

147

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

(d) Foreign currency risk (Continued)

Summary of exposure

Global Telecom’s financial assets and liabilities denominated in US$, translated into HK$ at the closing rates, are as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Cash and cash equivalents 7,065 10,240
Trade payables (21,300) (15,768)
Bank borrowings (24,722) (20,582)
Gross exposure from recognised financial assets
and liabilities (38,957) (26,110)
----- End of picture text -----

The following table illustrates the sensitivity of the Group’s profit for the year and equity in response to a 5% depreciation in Global Telecom’s functional currency against US$. The 5% is the rate used when reporting foreign currency risk internally to key management personnel and represents management’s best assessment of the possible change in foreign exchange rates.

The sensitivity analysis of the Group’s exposure to foreign currency risk at the end of the reporting period has been determined based on the assumed percentage changes in foreign currency exchange rates taking place at the beginning of the financial year and held constant throughout the year.

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Changes in exchange rate:
KRW depreciates by 5% against US$ (1,519) (1,018)
KRW appreciates by 5% against US$ 1,519 1,018
----- End of picture text -----

The sensitivity analysis for the year ended 31 December 2020 has been prepared on the same basis.

Exposures to foreign exchange rates vary during the year depending on the volume of foreign currency transactions. Nevertheless, the analysis above is considered to be representative of the Group’s exposure to foreign currency risk.

148

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

42. FAIR VALUE MEASUREMENTS

Fair values of the Group’s financial assets and liabilities at amortised cost are not materially different from their carrying amounts as explained in note 40.

Financial instruments measured at fair value

Fair value hierarchy

The following table presents the fair value of the Group’s financial instruments measured at the reporting date on a recurring basis, categorised into the three-level fair value hierarchy as defined in HKFRS 13 Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

• Level 1: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date;

• Level 2: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available;

• Level 3: Fair value measured using significant unobservable inputs (i.e. not derived from market data).

The following table presents the Group’s assets that are measured at fair value:

2020

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----- Start of picture text -----

Level 1 Level 2 Level 3 Total
HK$’000 HK$’000 HK$’000 HK$’000
Financial assets at FVTPL (Non-current)
– Unlisted equity security – 4,821 – 4,821
– Insurance policies – 2,586 – 2,586
– 7,407 – 7,407
----- End of picture text -----

149

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

42. FAIR VALUE MEASUREMENTS (CONTINUED)

Financial instruments measured at fair value (Continued)

Fair value hierarchy (Continued)

2019

	Level 1 HK$’000	Level 2 HK$’000	Level 3 HK$’000	Total HK$’000
Financial assets at FVTPL (Non-current) – Unlisted equity security – Insurance policies
	–	2,839	–	2,839
	–	2,161	–	2,161
	–	5,000	–	5,000

The fair value of the unlisted equity security representing investment in KSFC is determined by the redemption price provided by KSFC as at the reporting date. The fair values of insurance policy are determined based on the surrender value provided by the insurance company as at the reporting date.

At 31 December 2020, the Group’s unlisted equity security and insurance policies are grouped under Level 2 (2019: Level 2) category.

There were no transfers between levels during the year.

43. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged for the year.

The Group sets the amount of capital in proportion to its overall financing structure. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debts.

The capital structure of the Group consists of debts, which includes bank borrowings and lease liabilities disclosed in notes 26 and 29 and equity of the Group, comprising share capital and reserves. The Group’s risk management reviews the capital structure on a regular basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.

150

Future Data Group Limited Annual Report 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 December 2020

43. CAPITAL MANAGEMENT (CONTINUED)

The gearing ratios which are determined as total borrowings (i.e. bank borrowings and lease liabilities) to total equity of the Group as at 31 December 2020 are as follows:

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----- Start of picture text -----

2020 2019
HK$’000 HK$’000
Lease liabilities 4,450 1,654
Bank borrowings 30,290 20,582
Total equity 143,786 130,148
Gearing ratio 24% 17%
----- End of picture text -----

44. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the current year’s presentation.

45. EVENT AFTER REPORTING DATE

The World Health Organisation declared coronavirus and COVID-19 a global health emergency on 30 January 2020. a series of precautionary and control measures have been and continued to be implemented by the Korean and the Hong Kong SAR governments including compulsory quarantine measures of all inbound travelers, and various social distancing measures. As at the date on which this set of consolidated financial statements were authorised for issue, the Group was not aware of material adverse effects on the consolidated financial statements as a result of the COVID-19 pandemic. The Group will pay close attention to the development of the COVID-19 pandemic, perform further assessment of its impact and take relevant measures.

46. APPROVAL OF FINANCIAL STATEMENTS

These financial statements for the year ended 31 December 2020 were approved and authorised for issue by the board of directors on 22 March 2021.

151

SUMMARY OF FINANCIAL INFORMATION

FINANCIAL SUMMARY

A summary of the results and of the assets and liabilities of the Group for the five years ended 31 December 2020, as extracted from the audited consolidated financial statements, is set out below:

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Year ended 31 December
2020 2019 2018 2017 2016
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Results
Revenue 679,053 646,470 605,161 506,490 524,021
Net profit for the year 7,513 4,041 5,758 5,271 3,708
Assets and liabilities
Total assets 300,065 300,591 350,029 316,004 235,402
Total liabilities 156,697 170,443 214,343 177,798 109,994
Total equity 143,368 130,148 135,686 138,206 125,408
----- End of picture text -----

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