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WorldTradeSystemsplcCompanyRegistrationNumber:01698076

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WORLD TRADE SYSTEMS PLC

Unaudited half yearly condensed consolidated financial report as at 30 June 2017


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TABLE OF CONTENTS

MANAGEMENTREPORT

INTRODUCTION AND KEY HIGHLIGHTS.......................................................................................................3

CHAIRMAN’S STATEMENT...................................................................................................................................4

CORPORATE GOVERNANCE................................................................................................................................5

REVIEW OF OUR BUSINESS..................................................................................................................................9

KEY PERFORMANCE INDICATORS (KPIs)..................................................................................................11

PRINCIPAL RISKS AND UNCERTAINTIES...................................................................................................12

RELATED PARTY TRANSACTIONS................................................................................................................14

RESPONSIBILITY STATEMENT........................................................................................................................15

FINANCIALREPORT

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTHS ENDED 30 JUNE 2017.............................................................................................16

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017.................................................................................................................................................17

CONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHESIX-MONTHSENDED30JUNE2017..................................................................................................18

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX-MONTHS ENDED 30 JUNE 2017.............................................................................................20

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2017..........................................................................21


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MANAGEMENTREPORT

INTRODUCTIONANDKEYHIGHLIGHTS

The unaudited half yearly condensed and consolidated financial statements have been prepared using IAS 34, Interim Financial Reporting, as adopted by the European Union. This half yearly financial report is consistent with the policies and presentation applied to the latest published annual financial statements of the Company as at 31 December 2016, prepared in accordance with IAS 1 Presentation of Financial Statements, and should be read in conjunction. The presentation currency of World Trade Systems plc is the same as that of its functional currency, Pound Sterling (£) as per IAS 21, The Effects of Changes in Foreign Exchange Rates.

Key Highlights The Group only recommenced trading operations in July 2016 and therefore the 12-month comparative period to 31 December 2016 is effectively a six-month comparison of trading for the six months to 30 June 2017.

Ø Turnover of £10.136 million (12 months ended 31 December 2016: £8.690 million)

Ø Operating profit of £2.166 million (12 months ended 31 December 2016: £0.941 million)

Ø 3 new sales stores have been authorised and opened by WTS China during the interim period up to June 2017

Ø 546 active distributors during period January to June 2017

Ø During the first six months of 2017 4 MOUs have been signed with international healthcare companies to begin cooperating on research and development (“R&D”) and sales through WTS China


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CHAIRMAN’SSTATEMENT

World Trade Systems plc (referred to as ‘the Company’ or ‘the Group’ hereafter) together with Shimao (Suzhou) Biotechnology Co. Ltd (‘WTS China’), has now completed its first twelve months of operation from 1 July 2016 to 30 June 2017. The net profit for the Group for the first six months of this year for the period 1 January 2017 to 30 June 2017 was £ 1.862 million. Trading Activities and Prospects During the half year to 30 June 2017, WTS China has continued its trading of high quality health food products and developed further in the Chinese market. There was an emphasis on event sales proving to be our most demonstrated channel contributing to our increased sales. The Company has also started to diversify its marketing strategy by authorising new commercial stores and finalising testing of an e-commerce platform. These broader sales channels will be developed and established once the re-listing is successful. The Group is aiming to achieve a richer product portfolio of health food and products and has invested further in R&D during the half year. Its in-depth understanding of customer demands will allow the Company to exploit a broad area of potential marketing opportunities. By organising promotional events to sales distributors and open-day exhibitions to general public, market recognition has improved which has further enhanced the reputation of the brand. While WTS China focuses on the domestic market in China, the Group’s larger target is to identify new products and services in the international market, combine these with WTS China’s distribution channels, and thereby introduce them to the Chinese market in order to further enhance and internationalise the image of the brand. WTS has put together a special team for International Business Development (outlined in more detail below) and has made significant progress during the period in moving forward with this initiative. The Company is in the process of submitting its application to re-list its shares on the Standard Segment of the London Stock Exchange with the UK Listing Authority. The Company hopes to recommence trading of its shares on the London Stock Exchange’s market for listed shares, which will be subject, inter alia, to approval by shareholders. Results For the six month period ending 30 June 2017, the UK holding company registered a profit of £296,115 (12 months to 31 December 2016: loss of £234,000) primarily due to the positive effect of Kudrow Finance Limited (“Kudrow”) waiving the accrued interest of £241,000 on its outstanding loans. Administrative expenses and charges continued to remain high at £489,647 which was funded mainly from consulting fees paid by WTS China to the Company. Long term loans as at 30 June 2017 were £1.247 million (12 month to 31 December 2016: £1.356 million), a reduction brought about by Kudrow’s waiver of the accrued interest. For the six month period ending 30 June 2017, the Company’s Wholly Foreign-Owned Enterprise (WFOE), WTS China, alone registered a net profit of £1.566 million (12 month to 31 December 2016: net profit of £906,000). Overall this amounted to a net profit for the Group for the six month period from 1 January 2017 to 30 June 2017 of £1.862 million (12 month to 31 December 2016: net profit of £527,000). I am very pleased with the progress we have already made in the first half of 2017 and would like to thank our staff for their hard work and commitment. Whilst trading conditions remain competitive and we are fully aware of the challenges ahead of us, I am confident that the second half of 2017 has already started well and I remain very positive about the outlook for the remainder of the year. Robert Lee Non-Executive Chairman 1 August 2017


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CORPORATEGOVERNANCE

The purpose of corporate governance is to facilitate effective and prudent management so that we can achieve the long-term success of the Company. Through good corporate governance we will reduce risk and add long term shareholder value to our business. Delivering growth through transparent and effective decision making is of high importance to the Board. Though during the first half of 2017 the Group did not comply with the provisions of the UK Corporate Governance Code (“the Code”), the Directors are of the opinion that the Group is now appropriately resourced and has the procedures in place to ensure full compliance with the Code. As with the impending proposed re-listing as a standard listed company, detailed procedures for the corporate governance have been implemented, including the appointment of new Senior Managers in the first half of 2017. The Directors have also established an audit committee, a remuneration committee and a nomination committee comprising a majority of Non-Executive Directors in compliance with the Code. The terms of reference of these committees are summarised below within ‘Composition of the Board’. As stated earlier, we are now in full compliance with the Code as at July 2017 with respect to all principles set out therein as follows:

a) Leadership - A clear division of responsibilities, with the Chairman providing direction to the Board and the Executive

Directors running the Company’s business, has been established.

b) Effectiveness - The Board now has the appropriate balance of skills, experience, independence and knowledge to be effective. In the search for an additional Independent Director during the first half of 2017, the Company implemented a formal, rigorous and transparent procedure in the process of selecting and appointing Mr John Anthony (“Tony”) Hoskinson, which included various discussions with our advisors. All Directors have been able to allocate sufficient time to discharge their duties. Key management staffs have been recruited so that the Board can be supplied with information of an appropriate quality in a timely manner to enable it to discharge its duties. All Directors are subject to re-election at regular intervals and to continued performance appraisal.

c) Accountability - The Board has now strong risk management and internal control systems to determine the level of risks it

is willing to take in achieving its strategic objectives. The Board is confident that procedures and systems are in place to ensure that a fair, balanced and understandable assessment of Company’s position and prospects are always produced. The Board has established a formal and transparent arrangement for considering the application of corporate reporting, risk management and internal control principles and for maintaining an appropriate relationship with the Company’s auditors.

d) Remuneration - A formal transparent policy has been established for Directors’ Remuneration. No Director is involved in

deciding his or her own remuneration.

e) Relation with shareholders - The Board decided to call a General Meeting to ratify the related party loans granted by its major shareholder over the years so as to establish a dialogue with shareholders based on the mutual understanding of objectives. In order to fulfil its responsibility of ensuring a satisfactory dialogue with shareholders, the Board initiated an electronic means of communication with all shareholders by providing them a unique email address and password which has enabled an efficient and cost-effective means of communication. Our Company website was updated and refreshed during the first half of 2017 to further improve our relationship with shareholders by making access to ‘Shareholder Information’ and ‘Regulatory Information’ increasingly user friendly and easy to access.

The newly constituted Board has adopted the ‘comply or explain’ approach for all the requirements, which have been incorporated into the monthly reporting requirements at the department levels.


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Sources for Corporate Governance Policies and Procedures Our framework for Corporate Governance applies the principles across both the Company and its wholly owned subsidiary, WTS China, and uses, as its points of reference, the following source materials and legislative enactments:

1) UK Corporate Governance Code, issued by the Financial Reporting Council 2) FCA Handbook, principles and rules issued by the Financial Conduct Authority 3) EU Market Abuse Regulation 4) Companies Act 2006, UK Company Law

Composition of the Board in Compliance with the Code The Board is comprised of a Non-Executive Chairman, two Executive Directors and two Non-Executive Directors. It formally meets at least six times per year, but whenever necessary the Directors meet on an ad hoc basis to monitor and guide the Group’s performance and deal with any important matters that may arise suddenly or from time to time. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures are observed and that applicable rules and regulations are complied with. Since January 2017 the Board has taken a number of steps to arrive at proper procedures in order to comply with the Code. This includes appointing a new Board member, Mr John Anthony (“Tony”) Hoskinson, in May 2017 as a Non-Executive Director. Remuneration Committee Comprised of only the Non-Executive Directors, this committee will be responsible, amongst other things, for reviewing and approving the remuneration policy and the total individual remuneration packages for the Executive Directors of the Company and the Group, approving the rules and basis for participation in any performance related pay-schemes, share incentive schemes when applicable and pension arrangements and obtaining reliable and up-to-date information about remuneration in other companies. The Remuneration Committee shall meet at least three times a year. Current members: Ellen Lu (Chairwoman), Robert Lee and Tony Hoskinson. Audit Committee The Audit Committee comprises the Finance Director and two Non-Executive Directors and is responsible for making recommendations to the Board on appointment of auditors (and the audit fee) and monitoring and reviewing the integrity of the Group’s financial statements as well as reports from the Group’s auditors on those financial statements. The Audit Committee meets at least three times a year. Current members are: Ellen Lu (Chairwoman), Robert Lee and AKM Ismail. The Audit Committee has approved this interim report and the unaudited financial statements. Grant Thornton have performed a desktop review which does not constitute either an audit or a review made in accordance with United Kingdom Auditing Standards or Bulletins issued by the Auditing Practices Board. Nomination Committee Comprised of the Chairman and two Non-Executive Directors this committee is responsible for reviewing the structure, size and composition of the Board and ensuring that it has persons with the right balance of skills, knowledge and experience. It identifies and nominates for approval candidates to fill any vacancies on the Board as and when they arise, giving full consideration to succession planning for the Group and making recommendations as to the composition of the other committees of the Board. The Nomination Committee shall meet at least three times a year. Current members: Robert Lee (Chairman), Tony Hoskinson and Ellen Lu. Corporate Governance Statement The Board is committed to implementing the best practices of corporate governance standards in conducting the operations and management of the Company. The Board operates in accordance with the principles of appropriate corporate governance in order to provide the basis for high quality performance, transparent financial reporting and sustainable growth.


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Through written procedures and systems of supervision, the Company’s corporate governance teams are committed to;

• Ensuring fair and timely release of material information about the Company; • Ensuring any information released about the Company is factually correct, clear and transparent;

Ensuring that any information the Company releases does not mislead investors through omission of material facts. Internal controls The Board has overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness, which are appropriate to the activities of the Group and are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material financial misstatement or loss. With the Group establishing a profitable business in China in the period under review, formal internal control systems and risk management systems in relation to the financial reporting process have been set up. The Board monitors and approves all payments made by the Group and ensures that at all times there are adequate financial resources to enable the Group to meet its obligations. The Board reviews the financial reports provided to it by the Group’s external accountants to mitigate the risk of misstatement. Throughout the period from 1 January 2017 up to the date of approval of the interim report and financial statements the Directors have maintained close control over the Group’s finances to ensure that at all times it has sufficient cash resources to meet its financial obligations. Given that the scale of the Group’s operations has increased the Board will engage the services of external accountancy firm to perform sporadic audits and report directly to the Chairman. Greenhouse Gas Emissions The Group always ensures that its policies are environmentally friendly and that the production and sale methods of the products take into account the following: • Emission to the air, land and water • Noise and vibration • Energy efficiency • Waste minimisation • Environmental incidents In order to measure the quantity of emissions in tonnes of carbon dioxide equivalent from activities for which the Group is responsible, management has appointed Nick Matthews as the Environmental Officer. The Greenhouse Gas Reporting Program (GHGRP) prescribes methodologies that must be used to determine greenhouse gas (GHG) emissions from each source category. Reporters generally have the flexibility to choose among several methods for computing GHG emissions. The decision of which method to use may be influenced by the existing environmental monitoring systems in place and other factors. Nick Matthews has incorporated the methodology of the various divisions in the Group reporting on the quantity of emissions to the Head Office on a quarterly basis. Relationship with Shareholders The Group encourages two-way communications with all its shareholders and responds quickly to all requests or queries received. All shareholders have at least twenty-one days’ notice of the Annual General Meeting and fourteen days’ notice of the General Meeting at which all of the Directors and the Chairman are available for questions in person or online. Comments and questions are encouraged from the shareholders at the meeting. Management has established electronic means of communication by providing unique email address and passwords to all shareholders. This is expected to increase the level of communication with shareholders.


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Going Concern Following the establishment of WTS China, the Group is in a healthy financial position and will be able to meet its obligations on time. Kudrow has waived all accrued interest of £241,000 on its outstanding loans and intends to convert its existing loan of £860,363 (31 December 2016: £859,000) to equity, but the Group is under no obligation to do so, upon the proposed re-listing. Taking account of these factors, the Directors believe that the Group has adequate resources to continue as a going concern for the foreseeable future. The Board has always been active in considering new business opportunities for the Company in addition to aggressively pursuing the current opportunity with WTS China. The current lenders are in agreement to have their loans converted into equity at the point of relisting and the Group is under no contractual obligation to convert the loan to shares. Having regard to the cash flow forecasts prepared as at 30 June 2017, the Directors consider that the Company has sufficient liquid resources to meet its financial requirements for the foreseeable future and until existing loans are due for repayment. Thus, the Company should no longer be reliant upon further financial support from the lenders given the healthy cash position of the Company.


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REVIEWOFOURBUSINESS

Important events during first half of 2017 and impact on financial statements The Company is in the process of submitting its application to re-list its shares on the Standard Segment of the Official List of the UK Listing Authority and to recommence trading of these shares on the London Stock Exchange’s market for listed shares, which will be subject, inter alia, to approval by shareholders. The Company is a holding company that continues to receive rental income on freehold agricultural land. In addition, Kudrow Finance Limited (“Kudrow”) agreeing to waive the accrued interest of £241,000 on its outstanding loans positively impacted the half yearly net profit for the Company for the period 1 January 2017 to 30 June 2017. Following the establishment of its new business in China in June 2016, WTS’s existing business consists mainly of the activities of the Company’s subsidiary, Shimao (Suzhou) Biotechnology Co. Ltd (“WTS China”). WTS China has since become established as an international (i.e. foreign) brand in supplying high-quality health food products to the Chinese consumer market, and has continued to contribute significantly to the Group's net profit of £1.862 million for the period 1 January 2017 to 30 June 2017. The main increase in the Group’s profit resulted from increased sales in WTS China (see below) and the contribution to the profits from the waiver of all accrued interest totalling £241,000 by Kudrow. As at 30 June 2017, the Group had net assets of £1.285 million (compared to net liability as at 31 December 2016 of £407,000). The increase is due to the healthy cash position of the Group. Review of WTS China WTS China’s activities include manufacturing and distributing of a line of health drinks which contain collagen and other natural ingredients to provide consumers with healthy supplements and nutrients that support the body’s immune system, improve digestion, lower cholesterol and blood pressure levels, promote healthier organ functions and achieve smoother, more elastic skin and better complexion. WTS China has an active and experienced Research & Development (R&D) department which is currently developing additional products. During the first half of 2017, WTS China has been researching and developing a new product which will carry the brand name Joyouskon and is aimed at the sports drink market for younger consumers. WTS China also has a number of patents and pending patent applications as well as many proprietary formulae for its products. Currently, almost all sales and marketing activities take place in the central and coastal regions of China. The financial details and results of this business during the first six months of 2017 are reported in the financial statements. In the six month period from 1 January 2017 to 30 June 2017 WTS China authorised and opened three new commercial stores in the Suzhou, Songyang and Bridgehead zones and we expect to report revenue in the subsequent monthly financial reports. June 2017 saw the testing completion of the WTS China e-commerce platform and the online shop website. Next steps are to shortlist and select the most effective payments method provider. Going forward, WTS China intends to develop its domestic market share based on three elements:

1. The multi-channel sales model - expanding from event based marketing into commercial stores and e-commerce and generating the first sales from these new channels;

2. Expanding its domestic market coverage starting from the adjacent provinces of Anhui, Jiangxi and Fujian and then to the next group of geographical provinces that would include Beijing and Tianjin; and

3. Research & development expansion to create a rich product portfolio, through internal research, utilising the European and Japanese companies we have already signed MOUs with, and further business development with aligned companies.


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International Business Development The Company is also negotiating with various international companies to diversify our product range and extend market reach. During the first half of 2017, the Group has embarked on a strategy of developing a pipeline of potential international partnerships, by which we hope to capitalise on the success of our distribution model in China and seek to increase our business within the broader healthcare sector. During April and May of 2017, the Company announced collaboration with four well-established companies operating in the health food market across Europe and Japan (see below). In signing a Memorandum of Understanding with each of these companies, the Company has begun negotiations to cooperate in research and product development and increase market distribution for both new and existing products. 1. CHelac Holding GmbH (‘CHelac’) is a German company based in Freiburg. CHelac owns all of the patents and other intellectual property of the group. Under the guidance of its research directors, CHelac is engaged in developing active ingredients for the cosmetic and pharmaceutical industries. Through extensive testing and research, CHacoll has proven to be effective in stimulating the synthesis of collagen in the skin. CHelac Holding currently sells the ingredients which it has developed to its subsidiaries, CHelac GmbH, which markets the products internationally, and to CHelac AG, which distributes them in Switzerland.

2. Fine Japan Co., LTD (‘Fine Japan’) is a long-established Japanese company focused in the healthcare field. Fine Japan develops and sells a range of products including beauty enhancing with functional cosmetics, special food menus, food for hospitals and the elderly, natural and healthy foods for everyday living, pet foods, food supplements and vitamins. Fine Japan hopes to expand its presence in China by adapting their products and marketing methods to the Chinese market conditions and regulatory environment.

3. Biestmilch GmbH (‘Biestmilch’) is another German company which sources, manufactures and sells the health food biestmilch (also known as colostrum). Founded in November 1999, Biestmilch has already developed promising high end products for immune system performance and anti-depression with excellent results. Biestmilch has established their tested and effective products currently selling in Europe through its online store. Biestmilch’s object is to create a market leading brand of biological body immunity boost food.

4. Naturemed GmbH (‘Naturemed’) is a well-established German company engaged in developing medicinal extracts from cells which are effective in enhancing general strength and wellbeing, while helping to cure specific ailments. Starting only last year Naturemed has already developed promising products in the over-the-counter drug (OTC) and pharmacy field and established a line of three tested and effective cell based products.

This is a continuously growing pipeline and further negotiations and business development research are ongoing for the remainder of 2017 and beyond to increase business by offering a gateway into the Chinese market for appropriate foreign healthcare products and services. We continue to focus our resources on developing an in-depth understanding of the markets and consumer trends to give us a competitive advantage in achieving our goal. The Company is flexible in how these new initiatives can help it to become a successful player in the global health care field.


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KEYPERFORMANCEINDICATORS(KPIs)

The Group’s source of income increased with steady growth in the existing business of supplying high-quality health food in China. The Group’s key performance indicators are factors by reference to which the development, performance or position of the business can be measured effectively. The Group measures its performance by strategic and financial measures both qualitatively and quantitatively, which not only include sales growth, but also market impact, customer feedback, and other measures. Every month, the management team together with the Finance Department compares the budget to actual performance and monitors cash balances carefully. Corresponding actions are then taken to make sure targets are met and market feedback is reflected in sales plan of the following month. We have developed a cash flow forecasting model which takes into account the following: the growth in the number of distributors, store roll out program, and the development of new products. The KPIs of the sales team are not only to increase sales but also to have greater market penetration geographically and also to expand into other provinces. Quantitative KPIs are as follows:

Key Performance Indicators 6 months to

30 June 2017 £ ‘000

12 months to 31 December 2016*

£ ‘000 Change %

Total Revenue 10,136 8,690 16.63%

Gross Profit 4,087 2,045 99.85%

Net profit (loss) 1,862 527 253.13%

Net profit margin 18.36% 6.06% 12.30%

Total Assets 4,097 3,702 10.70%

Net (liabilities)/assets 1,285 (407) 415.2%

* Effectively six months of trading after the commencement of trade by WTS China in July 2016. The Group has 18.36% net profit margin in the first six months of 2017, which is contributed largely by WTS China following its establishment of its business since June 2016. The net assets increased given the increased sales and due to the positive effect of Kudrow Finance Limited (“Kudrow”) waiving the accrued interest of £241,000 on its outstanding loans. Other KPI’s include Customer Satisfaction Index and Employee Satisfaction Index. WTS China regularly conducts Customer Satisfaction surveys primarily at events to ascertain the level of customer satisfaction in order to channel the appropriate resources to the different segments. The Human Resource Department monitors the Employee Satisfaction level and arranges for meetings with Senior Management and Cross Department meetings to enhance staff morale and skills development.


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PRINCIPALRISKSANDUNCERTAINTIES

Principal risks and uncertainties remaining during the next six months We operate in a constantly changing economic and social environment that presents risks, some of which are driven by factors we are unable to control or predict. The key risks and uncertainties facing the Company in the remaining six months of the financial year are described below and include measures we are taking to mitigate these risks. WTS China specific risks remaining during next six-months:

Risks Mitigation The ability to continue the sales growth and build on existing success whilst managing incentive payments.

WTS China will focus on expanding its market reach to achieve continued sales growth by: ⋅ Market penetration achieved by entering new geographical areas. ⋅ Diversifying to different product areas in the health food sector. Ongoing

R&D and co-operations with international companies will allow for new products to be developed

⋅ The sales team closely monitoring incentive payments through regular discussions with sales managers. Increased sales incentives paid to distributors are being based on set thresholds calculated taking into account a number of qualitative factors. WTS China hopes to maintain the checks and balances to ensure that the incentive payments can be reduced over a period of time without adversely affecting sales.

⋅ WTS China continuing to invest considerably in staff training and team building in order to mitigate these risks and to ensure that staff are fully aware of the factors to be applied in determining their incentive payment.

Execution risks in launching and operating the e-commerce platform and commercial store roll out. WTS China does not have prior experience of these sales channels and there are risks of cannibalisation and alienating the distributors by competing with them.

In order to avoid channel conflicts or cannibalisation, we plan to develop an integrated channel strategy. This will enable the Company and distributors to use multiple channels to reach end users. The e-commerce platform has been through a thorough testing period to ensure it is fit for purpose before going live. A phased launch will focus its e-commerce strategy initially as a productivity tool for the distributors so as to mitigate the risks outlined above.

WTS China’s products are manufactured by a third-party. We assume raw material and manufacturing costs will remain at the current level, but any change could have a significant effect on profitability.

We have factored for inflation of 3% for raw material costs and 7% for manufacturing costs as a mitigant in determining total costs while deciding the sales strategy.

WTS China has recognised revenue of £10,136,000 during first six months of 2017. Distributors have the right to return goods if the end customers are dissatisfied with the products.

The Group has estimated that, based on extrapolation using past experience with similar volume sales, the value of returns will not exceed £220,749. The return rate is expected to be 2.2%.


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Operating in the Chinese market, WTS China is exposed to various in-country risks including: ⋅ Counterfeiting: successful brands are more

susceptible to counterfeiting than the UK. ⋅ Taxation and trade: as a company operating

in China WTS China will avoid import taxes that affect companies operating outside China.

⋅ Economy and politics: Both Chinese politics and the economy have behaved unpredictably in the past. The environment appears stable at present but there are potential risks from rapid social change including social inequality, social costs, and geopolitical tensions.

Management has detailed experience of working in China and meet regularly to discuss these risks and ensure that the Group is able to respond appropriately. The Group will closely monitor the external environment in China to ensure it is proactively planning and strategising based on any predicted changes in the political, economic or social environment.

The Group’s specific risks remaining during next six-months:

Risks Mitigation The Group has significant operating costs in relation to professional advisors and administrative expenses. The re-listing process has required substantial costs, which are not always predictable based on additional requests from our advisers.

The Group will work flexibly to react to demands and prioritise the work load of its employees in order to ensure ad hoc demands are met and implement systems and controls to ensure it can react immediately to requests for information. The Company will look to develop its own revenue generating activities within its business development function where appropriate.

As a small but growing company it needs to continue to attract and retain experienced employees with the relevant skills and experience to satisfy its capacity and capability requirements which will increase over time with listing and the increasing business development opportunities being pursued.

The Company is committed to focusing on employee satisfaction in order to improve employee retention and make it a more attractive place to work. This includes organising more regular team building events, non-financial rewards, flexible working policies and clearer lines of reporting.

In relation to International Business Development, there is a risk that collaboration with companies with whom we have signed MOU’s, are dependent on outcomes from the China Food and Development Authority (CFDA) process outside of the company's control. MOUs were signed in advance of knowing the exact cost and timing of CFDA approvals by either party.

In order to mitigate this risk we continue to research new business development opportunities and ensure we have a healthy pipeline of initiatives. We will ensure transparent communication with our business partners to enable them to make effective and informed decisions.

Managing communication between UK and China is vital in overcoming the language and time differences.

By understanding and retaining high level control of procedures and systems in the remainder of this year we hope to mitigate this risk. Some UK managerial staff are contracted to spend a certain proportion of their time working in China in order to improve communications and ensure controls and systems are implemented consistently in both countries.


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RELATEDPARTYTRANSACTIONS

The below related party and directors’ transactions have taken place in the first six-months of the current financial year and affect the financial position or performance of the enterprise. Kudrow Finance Limited (“Kudrow”) provided unsecured loans totalling £860,363 as at 30 June 2017 (31 December 2016: £859,000). Kudrow issued a Deed of Waiver dated 17 July 2017 agreeing to waive all of the accrued interest of £241,000 on its outstanding loans. This has positively contributed to the net profits of the Company.

In order to support the re-listing process, Kudrow has also agreed to the following:

● Repayment of loans will not be due until 31 December 2019 ● The intention (but without any obligation) is for the loan to be converted to shares upon the proposed re-listing.

For greater certainty, the Group currently is under no contractual obligation to convert the loans to shares.

Directors’ transactions Robert Lee, the Non-Executive Chairman, is the principal of Robert Lee Law Offices. Robert Lee is also a Director and owner of Proclass Limited, a company incorporated in the British Virgin Islands that provides company secretarial and nominee services. Proclass has been the sole corporate director of Kudrow since September 2004. As at 30 June 2017 he had waived all outstanding directors’ fees for periods prior to 31 December 2016.

Robert Lee Law Offices is owed £35,232.63 in respect of unpaid bills for the period up to 31 December 2016, which has been reflected as expenses in the accounts. In July 2017, Robert Lee Law Office had invoiced a further HK$ 245,160 (£24,052) which has not been reflected in the interim profit and loss accounts yet.


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RESPONSIBILITYSTATEMENT

The Disclosure and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Financial Report (the ‘Report’). The Directors confirm that to the best of their knowledge: (a) The condensed set of financial statements, for the period ended 30 June 2017, have been prepared in accordance with the applicable International Accounting Standard (IAS) 34 ‘Interim Financial Reporting’ as adopted by the EU; and (b) The Report includes a fair review of the information required by:

(i) DTR 4.2.7R, being an indication of important events that have occurred during the first six-months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six-months of the year; and (ii) DTR 4.2.8R, being related party transactions that have taken place in the first six-months of the current financial year and that may have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

The Report was approved by the Board on 1 August 2017 and the above responsibility statement signed by order of the Board. Robert Lee Non-Executive Chairman 1 August 2017 The Directors at the date of this half-yearly financial report are: Robert Lee Non-Executive Chairman Shao Chen Executive Vice Chairman AKM Ismail Executive Director Ellen Lu Non-Executive Independent Director Tony Hoskinson Non-Executive Independent Director


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CONDENSEDCONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOMEFORTHESIX-MONTHSENDED30JUNE2017

Notes

Revenue Cost of sales Gross profit Administrative expenses Profit/(loss) from operations Finance costs Profit/ (loss) before tax Income tax expense 6 Profit/(loss) after tax

Other comprehensive income items that will or may be reclassified to profit or loss: Exchange differences on translation of foreign operations Profit/(loss) for the period and total comprehensive income attributable to equity owners of the partner Earnings per share Profit/(loss) per ordinary share 4 (pence)

6 months ended 30 June 2017

(Unaudited)

£’000

10,136 (6,049)

4,087

(1,921)

2,166

218

2,384

(522)

1,862

(49)

1,813

21.27


(Unaudited)

£’000

2 (19)

(17)

-

(17)

-

(17)

-

(17)

-

(17)

(1.94)

Year ended 31 December 2016

(Audited)

£’000

8,690 (6,645)

2,045

(1,104)

941

(35)

906

(379)

527

1

528

6.02


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CONDENSEDCONSOLIDATEDSTATEMENTOFFINANCIALPOSITIONASAT30JUNE2017

Notes

Assets Non-Current Assets Property, plant and equipment 11 Investment property Intangible assets 12 Long term trade and other receivables 13 Current Assets Trade and other receivables Cash and cash equivalents Inventories Total Assets Current liabilities Trade and other payables Loans and borrowings 3 Current tax liabilities 6 Non-current liabilities Loans and borrowings 3 Total liabilities Net assets/(liabilities) Equity Share capital 5 Capital contribution reserve Currency translation reserve Retained earnings Total retained/ (deficit) of equity attributable to equity holders

At 30 June 2017

(Unaudited) £’000

1,124 40

5 71 1,240

610 2,147

100 2,857

4,097

(1,020) -

(545) (1,565)

(1,247)

(2,812)

1,285

4,378

29 (49) (3,073)

1,285

At 30 June 2016


- 40

- - 40

53 6

- 59

99

(117) (1,102) - (1,219)

-

(1,219)

(1,120)

4,378 -

- (5,498)

(1,120)

At 31 December 2016

(Audited) £’000

1,168

40 -

12 1,220

211 2,265

6 2,482

3,702

(2,389) -

(364) (2,753)

(1,356)

(4,109)

(407)

4,378

168 1 (4,954)

(407)


18

CONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHESIX-MONTHSENDED30JUNE2017

Share capital £'000

Capital contribution

reserve £'000

Currency translation reserve

£'000

Retained earnings £'000

Total equity £'000

Balance at 1 January 2017 4,378 168 1 (4,954) (407)

Profit for the period - - - 1,862 1,862

Other comprehensive Income - - (50) - (50)

Total comprehensive income for the year 4,378 168 (49) (3,092) 1,405

Contributions by and distributions to owners

Capital contribution by the owners - (139) - 19 (120)

Total contributions by and distribution to owners 4,378 29 (49) (3,073) 1,285

Balance at 30 June 2017 4,378 29 (49) (3,073) 1,285

CONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHESIX-MONTHSENDED30JUNE2016


Capital contribution reserve £'000

Currency translation reserve £'000

Retained earnings

£'000

Total equity £'000

Balance at 1 January 2016 4,378 - - (5,481) (1,103)

Loss for the year - - - (17) (17)

Total comprehensive income for the year 4,378 - - (5,498) (1,120)

Balance at 30 June 2016 4,378 - - (5,498) (1,120)


19

CONDENSEDCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHETWELVE-MONTHSENDED31DECEMBER2016


Capital contribution reserve £'000

Currency translation reserve £'000

Retained earnings

£'000

Total equity £'000

Balance at 1 January 2016 4,378 - - (5,481) (1,103)

Profit for the period - - - 527 527

Other comprehensive Income - - 1 - 1

Total comprehensive income for the year - - 1 527 528

Contribution by and distributions to owners

Capital contribution by the owners - 168 - - 168

Total contributions by and distribution to owners - 168 - - 168

Balance at 31 December 2016 4,378 168 1 (4,954) (407)


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CONDENSEDCONSOLIDATEDSTATEMENTOFCASHFLOWSFORTHESIX-MONTHSENDED30JUNE2017

Operating activities Net cash received/(used) in operating activities Cash flows received/(used) in operating activities Investing activities Purchase of property, plant and equipment Disposal of fixed assets Net cash received/(used) in investing activities Financing activities Proceeds from loans Interest paid on loans Cash flows from financing activities Net change in cash and cash equivalents from continuing operations Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period



(10)

(10)

(191) 83

(108)

- -

-

(118)

2,265

2,147



(34)

(34)

- -

-

32 -

32

(2)

8

6

Year ended 31 December 2016

(Audited) £’000

3,028

3,028

- (1,156)

(1,156)

392 (7)

385

2,257

8

2,265


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NOTESTOTHECONDENSEDANDCONSOLIDATEDFINANCIALSTATEMENTSFORTHESIXMONTHPERIODENDED30JUNE2017

1. Reporting entity World Trade Systems plc is a company registered and domiciled in the United Kingdom. The Company has been the holding company of a wholly-owned subsidiary in China for the period under review. This condensed consolidated interim financial report is neither audited nor reviewed by the auditors and was approved by the Board and the Audit Committee on 1 August 2017. Copies of the interim financial report will be available upon request from the Company’s principal place of business at St Mary’s Court, The Broadway, Amersham, HP7 0UT and the Company’s website at www.worldtradesystemsplc.com. The financial information for the year ended 30 June 2017 set out in this interim report does not constitute statutory accounts, as defined in Section 434 of the Companies Act 2006. The Company’s statutory financial statements for the year ended 31 December 2016 have been filed with the Registrar of Companies. The auditor's report on the statutory financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006. 2. Basis of preparation These condensed consolidated unaudited interim financial statements are for the six-month period ended 30 June 2017. They have been prepared in accordance with IAS34 Interim Financial Reporting and do not include all of the information required for the full annual financial statements. These condensed consolidated interim financial statements have been prepared under the historical cost convention and in accordance with the accounting policies adopted in the Company’s last annual financial statements for the year ended 31 December 2016. The accounting policies have been applied consistently throughout these condensed financial statements. 3. Loans and borrowings As at 30 June 2017, Kudrow had provided unsecured loans with the principal amount totaling £860,363 (31 December 2016: £859,000). These loans were provided to support the Company’s on-going working capital requirements. Kudrow has waived all accrued interest to-date which has resulted in an overall reduction in the Company’s total debt from the previous period. Going forward, Kudrow has agreed that the existing unsecured loans shall be provided on an interest free basis. As at 30 June 2017, Sichuan & Co (Hongkong) Limited and six other lenders has provided unsecured loans of £387,000 (31 December 2016: £373,000). These loans (Sichuan Loans) have accrued interest of at rate of 1% per annum. The increased loan amount was mainly due to the accrued interest charges.


22

4. Profit /(Loss) per ordinary share as follows: 6 months to 30 June 2017

£’000

6 months to 30 June 2016 £’000

12 months to 31 December 2016 £’000

Profit/ (loss) attributable to ordinary shareholders

1,862

(17)

527

Number of shares basic and diluted 8,753,867 8,753,867 8,753,867

Earnings/(loss) per share (pence) 21.27 (1.94) 6.02

5. Called up share capital

ALLOTTED, CALLED UP AND FULLY PAID

At 30 June 2017 At 30 June 2016 At 31 December 2016

Number £000 Number £000 Number £000 Ordinary shares of 1p each 8,753,867 88 8,753,867 88 8,753,867 88

Deferred shares of 49p each 8,753,867 4,290 8,753,867 4,290 8,753,867 4,290

The deferred shares do not entitle the holder to payment of any dividend or other distribution or to receive notice of or attend or vote at any General Meeting of the company or on a return of capital to the repayment of the amount paid on such deferred shares until after repayment of the capital paid up on the ordinary shares together with payment of £1,000,000 on each ordinary share and the Deferred Shares shall not be capable of transfer at any time other than with the consent of the Directors. 6. Taxation There is no taxation charge in respect of the holding company for the six-months ended 30 June 2017 as the Company is still carrying unutilised tax losses of £1.9 million as at 31 December 2016. The income tax on WTS China is accrued using the tax rate that would applicable to expected total annual earnings in China. At this report date, the Group and Company had unused tax losses as follows: At 30 June 2017

£000 At 30 June 2016

£000 At 31 December

2016 £000

Reconciliation of carried forward tax losses: Profit/(Loss) arising during the period Losses brought forward Unutilised tax losses carried forward

296 (1,951) (1,655)

(17) (1,718) (1,735)

(233) (1,718) (1,951)

A deferred tax asset has not been recognised in respect of these losses. Should the losses be utilised in the future the estimated value of the deferred tax asset not recognised, at a standard rate of 19%, is £314,450 (as at 31 December 2016 - £390,000). In future the standard tax rate will reduce to 17%.


23

7. Directors’ transactions Robert Lee, the Non-Executive Chairman, is the principal of Robert Lee Law Offices. Robert Lee is also a Director and owner of Proclass Limited, a company incorporated in the British Virgin Islands that provides company secretarial and nominee services. Proclass has been the sole corporate director of Kudrow since September 2004. As at 30 June 2017 he has waived all outstanding Directors fees for periods prior to 31 December 2016. Robert Lee Law Offices is owed £35,233 in respect of unpaid bills for the period up to 31 December 2016 which have been reflected as expenses in the accounts. In July 2017, Robert Lee Law Office had invoiced a further HK$ 245,160 (£24,052) for fees and disbursements which has not been reflected in the interim profit and loss accounts yet. This is for the professional work done by the legal firm in relation to the Company’s re-listing and is only payable up on the point of relisting. 8. Financial Instruments Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

• Trade and other receivables Trade and other receivables are measured at fair value on initial recognition, and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. • Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. • Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method. • Borrowings Borrowings are recognised initially at fair value, net of direct issue costs. Finance costs are accounted for on an accruals basis and are charged to profit or loss using the effective interest method. • Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting its liabilities. Equity instruments issued by the parent Company are recorded as the proceeds received net of direct issue costs. • Recognition criteria of cash and cash equivalents Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents include those investments having short holding term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be measured reliably and have low risks of change. The Company has no financing facility with its bankers and is financed by the consulting fee it charges its wholly owned subsidiary in China. The Board monitors cash flows, cash balances and on-going forward requirements on a monthly basis. The Company had cash on deposit with its bankers of £195,120 as at 30 June 2017 (31 December 2016: £208,000). At the Group level, the cash position was at a healthy £2.15 million. 9. Dividend policy The Directors take a prudent approach to making dividend payments and will make payments only when it is commercially viable to do so, subject to the availability of distributable equity reserves.


24

10. Revenue product lines and operating segments As the Group sells only healthcare products in China, management deems that to be the only operating segment. 10.1 Description of the types of products and services WTS China, as the main operating entity, has three products: Collagen Liquid, Maca Drink, and Facial Mask. The Collagen Liquid is a composite of collagen of Geilo tripeptide collage, extraction from sea buckthorn and extraction from Acai palm. The Maca Drink is a compound drinks composed of Cordyceps Militaris, Maca and red date. The Collagen Facial Mask is a mask containing small molecule collagen. 10.2 Breakdown of Product Revenue and Profit

Products Total Revenue from external customers £’000 % of Product Revenue Gross Profit £’000 Gross Profit contribution by

product

Collagen Liquid 7,535 74.34% 3,038 40.32%

Maca Drink 2,512 24.78% 1,013 40.33% Facial Mask 89 0.88% 36 40.45% Totals 10,136 100% 4,087 10.3 Geographical Information Geographical Information Revenues (£’000) % of Total revenue Zhejiang 5,948 58.68% Jiangsu 3,120 30.78% Shanghai 1,053 10.39% Others 15 0.15% Total 10,136 100.00% 11. Property, plant and equipment

Cost Leasehold

improvement Fixtures and

fittings Plant and machinery

Computer equipment

Motor vehicles

Assets under

construction Total

£'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2017 200 43 65 31 376 466 1,181

Additions - 1 5 6 183 - 195

Disposal - - - - (150) - (150)

Foreign Exchange movement

(5) (2) (1) (1) (10) (12) (31)

At 30 June 2017 195 42 69 36 399 454 1,195


25

Depreciation

Leasehold

improvement

Fixtures

and fittings

Plant and machinery

Computer equipment

Motor

vehicles

Assets under

construction

Total

£'000 £'000 £'000 £'000 £'000 £'000 £'000

At 1 January 2017 6 - 1 1 5 - 13

Charge for the period 33 3 3 5 20 - 64

Disposal - - - - (6) - (6)

At 30 June 2017 39 3 4 6 19 - 71

Net book value

NBV (after Foreign Exchange movement) at 30 June 2017

156 39 65 30 380 454 1,124

At 1 January 2017 194 43 64 30 371 466 1,168

12.Intangibleassets

Cost and net book value Description of Intangible Assets

Total

National Intellectual Bureau Patents Sales & Stock System Software £'000

At 1 January 2017 - - -

Addition - 5 5

At 30 June 2017 - 5 5 13. Long term trade and other receivables

At 30 June 2017 At 31 December 2016

£’000 £'000

Yongyou Software 11 12 Employee Health Training (3 yrs. Contract) 55 -

Other receivables 5 -

Total 71 12


26

14. Financial instruments’ fair value measurement

(a) Carrying Amount versus Fair Value

The following table compares the carrying amounts and fair values of the Group’s financial assets and financial liabilities as at 30 June 2017.

The Group considers that the carrying amount of the following financial assets and financial liabilities are a reasonable approximation of their fair value:

• Trade receivables • Trade payables • Cash and cash equivalents.

As at 30 June 2017 As at 30 June 2016 As at 31 December 2016 Carrying

Value Fair Value Carrying Value Fair Value Carrying

Value Fair Value

£'000 £'000 £'000 £'000 £'000 £'000

Financial Assets

Trade and other receivables 681 681 53 53 3 3

Cash and cash equivalents 2,147 2,147 6 6 2,265 2,265

Total 2,875 2,875 59 59 2,268 2,268

Financial Liabilities

Trade payables and accruals 1,000 1,000 117 117 1,807 1,807

Loans and borrowings 1,247 1,247 1,102 1,102 1,356 1,356

Total 2,247 2,247 1,219 1,219 3,163 3,163

The level in the fair value hierarchy within which the financial asset or financial liability is categorized, is determined on the basis of the lowest level input that is significant to the fair value measurement.

Financial assets and financial liabilities are classified in their entirety into only one of the three levels. The fair value hierarchy has the following levels:

• Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices) • Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value measurements have been categorised in their entirety at Level 1.

We will review this categorisation periodically in line with our interim and annual accounting reporting. This will determine when transfers between level 1 and level 2 are deemed to have occurred.

The group does not have any interest charges for the year except the 3% interest payable on Sichuan Loans following the waiver of interest charges from loan companies.

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