ADAMAS FINANCE ASIA LIMITED ANN UA L RE POR T 2016 Company information Chairman’s statement Biographies of directors and senior management Directors’ report Corporate governance statement Independent auditor’s report Consolidated statement of comprehensive income Company statement of comprehensive income Consolidated statement of changes in equity Company statement of changes in equity Consolidated statement of financial position Company statement of financial position Consolidated cash flow statement Company cash flow statement Notes to the financial statements Page 2 4 7 8 12 14 15 16 17 18 19 20 21 22 23 Contents 2 Company Information Directors Investment Manager Key Personnel of Investment Manager Registered Office Company Secretary Principal Place of Business Registrars Mr. John Croft – Non-executive Chairman Mr. Conor MacNamara – Non-executive Director Mr. Wong Yiu Kit, Ernest – Non-executive Director Adamas Global Alternative Investment Management Inc. (Terminated on 30 Apr 2017) Maples Corporate Services Limited PO Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands Harmony Capital Investors Limited (Appointed on 1 May 2017) Elian Fiduciary Services (Cayman) Limited 190 Elgin Avenue, George Town Grand Cayman KY1-9007 Cayman Islands Harmony Capital Investors Limited Mr. Suresh Withana – Co-founder, Managing Partner Commence House, Wickhams Cay 1 PO Box 3140 Road Town, Tortola British Virgin Islands VG1110 Conyers Trust Company (BVI) Limited Commence House, Wickhams Cay 1 PO Box 3140 Road Town, Tortola British Virgin Islands VG1110 811-817, 8/F Bank of America Tower 12 Harcourt Road, Central Hong Kong Computershare Investor Services (BVI) Limited Woodbourne Hall PO Box 3162 Road Town, Tortola British Virgin Islands Adamas Finance Asia Limited Depositary Interest Registrars Registered Agent Nominated Adviser Broker Auditors Legal Advisers Website Stock Code 3 Computer Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZY Conyers Trust Company (BVI) Limited Commence House, Wickhams Cay 1 PO Box 3140 Road Town, Tortola British Virgin Islands VG1110 WH Ireland Limited 24 Martin Lane London EC4R 0DR WH Ireland Limited (appointed on 1 April 2016 and terminated on 31 August 2016) 24 Martin Lane London EC4R 0DR finnCap Limited (appointed on 1 September 2016) 60 New Broad Street London EC2M 1JJ Crowe Clark Whitehill LLP St Bride’s House 10 Salisbury Square London EC4Y 8EH Locke Lord (UK) LLP Second Floor 201 Bishopsgate London EC2M 3AB Conyers Dill & Pearman Romasco Place, Wickhams Cay 1 PO Box 3140 Road Town, Tortola British Virgin Islands VG1110 www.adamasfinance.com AIM: ADAM Frankfurt: 1CP1 Annual Report 2016 4 Chairman’s Statement Events during the year to 31 December 2016 showed once again that investments made by the Group continued to produce cash in line with the Group’s long-term income-generation strategy. At the same time, ongoing setbacks to the planned disposal of its legacy assets meant the Group during the year remained without the large cash holdings needed to bolster its investment programme. Encouragingly, that picture has started to change significantly within the past few weeks, with the arrival of US$15.6 million in cash, comprising US$15.1 million in near-complete payment for the Company’s disposal of Changtai Jinhongbang Real Estate Development Co. Ltd (“CJRE”), announced in January 2017. The decision to dispose of CJRE was taken by the Board as an opportunity to exit this investment arose albeit at a significant book value loss. The Board decided that it was preferable to have immediate cash to reinvest in income generating assets, rather than retain a 15% holding in an asset which was illiquid and could take many years to realise a successful exit. Additionally a distribution of US$500,000 was received from the Greater China Credit Fund (“GCCF”). During the year, dividend income from existing investments rose 125% to US$911,000 (2015: US$404,000), while administrative expenses were trimmed by 16% to US$1.9 million (2015: US$2.3 million). While existing income-generating assets yielded healthy returns over the course of the year, the Group also received US$840,000 from the redemption of its original US$800,000 holding in the BRJ Fund, along with a capital redemption of US$700,000 from GCCF, plus interest of US$120,000. The Group continues to hold a stake of approximately US$2.7 million in GCCF. The loss for the year was US$37.2 million (2015: US$3.8 million) which was due primarily to write-downs in the value of the Group’s legacy assets totaling US$36.3 million. The substantial majority of the write-downs related to the Group’s interest in the Tian Tong Shan Villa Project, the proposed sale of which was announced on 4 January 2017. Further details on the write-downs are set out below. The significant loss demonstrates the difficulties arising from the Group’s ownership of its legacy assets. On the one hand the Group is able to identify solid income-generating investments with realisable exits. Yet at the same time, it continues to face difficulties in achieving value for its older legacy assets so that the resulting cash can be deployed into income- generating opportunities. In the light of the past disappointments experienced by the Group and a desire to focus on broader investment opportunities away from predominantly China, the Board sought Shareholder approval for a broadening of the Investing Policy. As a result, the Group is now positioned to take advantage of a wider range of investment opportunities not only more broadly across Asia, but also across the capital structure of investment targets. The details of the new Investing Policy were announced on 2 May 2017, and are designed to allow the Group’s Investment Manager to navigate changes in the relative attractiveness of various financing asset classes. The Group also announced the appointment of a new independent Investment Manager, Harmony Capital Investors Limited (“Harmony”). Harmony brings wide Asian experience and a strong team with proven success in identifying and managing high-return opportunities across a wide range of Asian asset classes, and I believe the Group is now more strongly positioned than ever before to move forward successfully. Adamas Finance Asia Limited The principal investment assets held by the Group at the year-end, together with their valuations, were: Portfolio at 31 December 2016 Core Assets Effective Interest Instrument type Changtai Jinhongbang Real Estate 15.00% Structured equity Development Co. Ltd Global Pharm Holdings Group Inc Fortel Technology/I-Buying Loan – – Redeemable convertible bond Interest bearing loan Hong Kong Mining Holdings Limited 10.95% Structured equity Meize Energy Industrial Holdings Ltd 7.9% Redeemable convertible preference shares Investment fund GCCF Other investments Cash Total net book value 5 Valuation as at 31 December 2016 US$ million 16.4 17.3 11.3 8.8 8.2 2.7 11.9 1.3 77.9 Changtai Jinhongbang Real Estate Development Co. Ltd (“CJRE”) is the owner of the Tian Tong Shan Villa Project, a luxury resort and residential development in Xiamen, Eastern China. Sales of villas and serviced apartments have been very slow and consequently the Board took the decision to dispose of this asset as otherwise realisation of the Group’s investment could have taken many years to materialise. The sale proceeds have required the Group to recognise an impairment equivalent to US$32 million at 31 December 2016, but has, subsequent to the year end, generated cash that may now be reinvested and thereby start to generate income. Cash from the disposal process totaling US$15.1 million has now been received, with the remaining balance of US$1.7 million being converted into a two-year, zero coupon loan to the purchaser. Global Pharm Holdings Group Inc. (“Global Pharm”) is involved in pharmaceuticals, the cultivation of herbs for Traditional Chinese Medicine (“TCM”) and TCM processing and distribution. As announced previously, Global Pharm did not meet the original redemption payment plan agreed in December 2014. Global Pharm has been investing in the planned launch of an online Ginseng Exchange in Jilin Province. This resulted in its cash flow being adversely impacted as it invested in building a stockpile of ginseng in readiness for the launch of the exchange. In view of the continuing delays in receipt of payments from Global Pharm, the Directors have decided to make an impairment, amounting to US$1.9 million in the 2016 accounts equivalent to 10% of the previous US$19.2 million carrying value. The Directors remain hopeful that a full recovery of the outstanding payments may be obtained and are working closely with the Investment Manager to ensure this is achieved. Annual Report 2016 6 Fortel Technology Holdings Limited (“Fortel”) During 2016 the Group agreed to convert its equity holding in Fortel to an interest-bearing loan in order to facilitate the IPO for its Chinese subsidiary on the NEEQ exchange in Beijing. The conversion was completed in October 2016. Hong Kong Mining Holdings Limited (“HKMH”) is a resources company whose primary asset is a large dolomite magnesium limestone mine in the province of Shanxi, China. HKMH’s application to list on the Hong Kong Exchange was rejected by the exchange as previously announced. ADAM’s Investment Manager is exploring various alternatives for restructuring this asset and/or seeking buyers for its stake. Meize Energy Industries Holdings Limited (“Meize”) is a privately-owned company that designs and manufactures blades for wind turbines. It has a strong order book and its financial performance has been in line with expectations. Negotiations regarding the partial sale and restructuring of this investment are ongoing. John Croft Chairman of the Board 28 June 2017 Adamas Finance Asia Limited 7 Biographies of Directors and Senior Management Board of Directors Mr. John Croft (aged 64), Non-executive Chairman Mr. Croft is an experienced director of AIM-quoted companies and has previously worked in executive and non-executive capacities with a number of fast growth companies in the technology and financial services sectors. He is also currently Non- Executive Chairman of Goal Group Limited, a leading class action service provider and tax reclamation services specialist. He previously held senior director level positions in Racal Electronics and NCR Corporation, following an early career in banking with HSBC and Grindlays Bank. Mr. Conor MacNamara (aged 51), Non-executive Director Mr. MacNamara is an experienced investment banker with significant experience in asset management and structuring alternative investment products throughout Asia. He has spent over 25 years in the Japanese and Asian markets, holding senior positions at a number of institutions including been Partner at Adamas Asset Management, Executive Director and Asia Co-Head of Structured Credit & Alternatives at ABN AMRO, RBS Global Banking, Gen Re Securities and RBC Dominion Securities. He has a Bachelor of Commerce degree (B. Comm, Hons) and a Masters of Business Studies degree (MBS, Hons) from University College Dublin (UCD) in Ireland. Mr. Wong Yiu Kit, Ernest (aged 49), Non-executive Director Mr. Wong has over 20 years of experience in venture capital, corporate finance, business development, legal, IT, financial and general management. He has worked for the Hong Kong Applied Science and Technology Research Institute Company Limited, Vertex Management, Guangdong Investment Ltd, Transpac Capital and Andersen Consulting. He has a BBA (University of Hong Kong) and a MSc in investment management (University of Science & Technology, Hong Kong) and a MSc in Electronic Engineering (Chinese University of Hong Kong). Mr. Wong’s professional qualifications include: FCCA, FCPA, CFA, ACA and MHKSI. Key Personnel of Investment Manager, Harmony Capital Investors Limited. (“Harmony”) Mr. Suresh Withana is the co-founder, Managing Partner of Harmony Capital Investors Limited. Prior to founding Harmony Capital Investor Limited, he was most recently Global Head of Special Situations and Co-Head of Asia at Tikehau Capital, the listed investment management company with approximately €10 billion in assets. Previously he was the co- founder and Chief Investment Officer at Harmony Capital Partners which deployed US$275 million in Asian special situations investments. Prior to that, he was a Director of the Global Special Situations Group at Mizuho International Plc in London and Vice President, Investment Banking at Merrill Lynch International. In total, he has accumulated 23 years of experience, including over 13 years of special situations investing primarily focused on Asia. Annual Report 2016 8 Directors’ Report The board (“the Board”) of directors (“the Directors”) are pleased to present their report on the affairs of the Company and its subsidiaries (collectively referred to as “the Group”), together with the audited financial statements for the year ended 31 December 2016. PRINCIPAL ACTIVITIES The Company was incorporated with limited liability under the laws of the British Virgin Islands (“BVI”). The Company’s shares were admitted to the AIM Market (“AIM”) of the London Stock Exchange on 19 October 2009 and on the Quotation Board of the Open Market of the Frankfurt Stock Exchange on 6 December 2012. Formerly known as China Private Equity Investment Holdings Limited, the Company changed its name to Adamas Finance Asia Limited on 18 February 2014 immediately following a reverse takeover (RTO). RESULTS AND DIVIDENDS The loss on ordinary activities of the Group for the year ended 31 December 2016 after taxation was US$37.16 million (2015: loss US$3.9 million). The increased losses reflect fair value movements (net unrealized losses) in the portfolio of US$34.10 million, operating expenses of US$1.95 million offset by dividend and net interest income of US$1.11 million. The Directors are not recommending the payment of a dividend for the year. REVIEW OF THE BUSINESS The Group’s audited net asset value as at 31 December 2016 stood at US$77.79 million (2015: US$115.0 million) equivalent to US$0.40 per share (2015: US$0.60). The increased loss for the year largely reflected a net decrease in fair value on financial assets of US$34.10 million. Administrative expenses fell to US$1.9 million (2015: US$2.3 million). The main reason for this decrease was the reduction in the level of professional fees and Investment Management Fee. The principal investment assets held by the Company at the year-end, together with their valuations are set out in the Chairman’s statement. The recent cash receipts totaling US$15.6 million have, as of 28 June 2017, altered the year-end asset valuation only slightly, but have also, more significantly, transformed the Company’s ability to look seriously at new income-generation investment opportunities across Asia. Adamas Finance Asia Limited 9 Portfolio at 28 June 2017 (unaudited) Core Assets Effective Interest Instrument type Valuation as at 28 June 2017 US$ million Global Pharm Holdings Group Inc Fortel Technology/I-Buying Loan – – Redeemable convertible bond Interest bearing loan Hong Kong Mining Holdings Limited 10.95% Structured equity Meize Energy Industrial Holdings Ltd GCCF Other investments Cash Total net book value 7.9 Redeemable convertible preference shares Investment Fund EVENTS AFTER THE REPORTING PERIOD The events after the reporting period are set out in Note 20 of the financial statements. DIRECTORS AND DIRECTORS’ INTERESTS The Directors who served during the year and up to the date of this report were as follows: Mr. John Croft Mr. Wong Yiu Kit, Ernest Mr. Conor MacNamara 17.3 11.6 8.8 8.2 2.7 14.8 15.1 78.5 The Director retiring by rotation is Mr. Wong Yiu Kit, Ernest, who, being eligible, offers himself for re-election at the Company’s forthcoming annual general meeting. Annual Report 2016 10 With the exception of the related party transactions stated in Note 18 to the Financial Statements, there were no other significant contracts, other than Executive Directors’ contracts of service, in which any Director had a material interest. The Directors who held office as at 31 December 2016 had no beneficial interests in any of the shares of the Company and Group companies other than as follows: Number of ordinary shares of no par value as at 31 December 2016 2015 Direct Indirect Direct Indirect Mr. John Croft 10,294 26,833 10,294 26,833 Mr. Conor MacNamara – 195,000 – – SUBSTANTIAL SHAREHOLDINGS IN THE COMPANY As far as the Company is aware, the following persons are interested in 3% or more of the issued share capital of the Company: Shareholder Elypsis Solutions Limited Number of Ordinary shares Percentage of Issued share capital 144,541,666 75.30% The percentage of shares not in public hands (as defined in the AIM Rules for Companies) is 75.30%. The Directors have not been made aware of any other beneficial shareholdings of 3% or more of the issued share capital of the Company as of the date of this report. FINANCIAL INSTRUMENTS The Group’s use of financial instruments is described in Note 9 and Note 16. FINANCIAL RISK MANAGEMENT OBJECTIVES Management has adopted certain policies on financial risk management with the objective of ensuring that appropriate funding strategies are adopted to meet the Group’s short-term and long-term funding requirements, taking into consideration the cost of funding, gearing levels and cash flow projections. The policies are also set to ensure that appropriate strategies are adopted to manage related interest and currency risk funding; and to ensure that credit risks on receivables are properly managed. In addition, Note 16 to the financial statements include the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk, interest rate risk, liquidity risk, price risk and currency risk. POLICY AND PRACTICE ON PAYMENT OF CREDITORS The Group seeks to maintain good terms with all of its trading partners. In particular, it is the Group’s policy to agree appropriate terms and conditions for its transactions with suppliers and, provided the supplier has complied with its obligations, to abide by the terms of payment agreed. Adamas Finance Asia Limited 11 SHARE CAPITAL The Company has a single class of shares which is divided into ordinary shares of no par value. At 31 December 2016, the number of ordinary shares in issue was 191,967,084. Details of movements in the issued share capital during the year are set out in Note 15 to the financial statements. DIRECTORS’ INDEMNITY The Company’s Articles of Association provide, subject to the provisions of BVI legislation, an indemnity for Directors and officers of the Company in respect of liabilities they may incur in the discharge of their duties or in the exercise of their powers, including any liabilities relating to the defence of any proceedings brought against them which relate to anything done or omitted, or alleged to have been done or omitted, by them as officers or employees of the Company. Appropriate directors’ and officers’ liability insurance cover is in place in respect of all of the Directors. EMPLOYEE INFORMATION As at 31 December 2016, the Group had nil (2015: nil) employees excluding Directors. CHARITABLE DONATIONS The Group has not made any charitable donation during the year (2014: Nil). ANNUAL GENERAL MEETING The Company’s forthcoming annual general meeting (“Annual General Meeting”) will be held on Friday, 11 August 2017 at 5:00 p.m. (Hong Kong time) at 811-817, 8/F, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong. The notice of the Annual General Meeting is enclosed with the financial statements. GOING CONCERN Since the reporting date the Company has recorded cash proceeds of approximately US$15.6 million from realization, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. DIRECTORS’ STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS The Directors have confirmed that, as far as they are aware, there is no relevant audit information of which the auditors are unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. AUDITORS A resolution to re-appoint Crowe Clark Whitehill LLP as the Company’s auditors will be proposed at the Annual General Meeting. On behalf of the Board John Croft Non-executive Chairman 28 June 2017 Annual Report 2016 12 Corporate Governance Statement THE BOARD As an AIM listed company, Adamas Finance Asia Limited is not required to comply with the provisions of the UK Corporate Governance Code published by the Financial Reporting Council in 2016. However, the Board is committed to raising the standard of corporate governance within the Group in order to enhance the transparency in disclosure of material information. The Board reviews its corporate governance practices from time to time in order to meet the rising expectations of shareholders and comply with increasingly stringent regulatory requirements, and to fulfill its commitment to excellence in corporate governance. COMPOSITION OF THE BOARD The composition of the Board as at the date of this report is as follows: Mr. John Croft (Non-Executive Chairman) Mr. Conor MacNamara (Non-Executive Director) Mr. Wong Yiu Kit, Ernest (Non-Executive Director) The Board meets regularly throughout the year. The Board reviews financial performance, regulatory compliance and will consider any matters of significance to the Group including corporate activity. INTERNAL CONTROL The Board is responsible for overseeing the Group’s system of internal controls. To facilitate the effectiveness and efficiency of operations and to ensure compliance with relevant laws and regulations, the Group has sound internal control systems which are also indispensable for mitigating the Group’s risk exposure. The Group’s system of internal control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss and to manage and eliminate risks of failure in operational systems and fulfillment of the business objectives. The Group is committed to identifying, monitoring and managing risks associated with its business activities and has implemented a practical and effective control system which includes a defined management structure with proper approval process, a sound cash management system and periodic review of the Group’s performance by the audit committee and the Board. AUDIT COMMITTEE The audit committee comprised Mr. John Croft (Chair), Mr. Wong Yiu Kit, Ernest and Mr. Conor MacNamara throughout the year under review. The audit committee, inter alia, determines and examines matters relating to the financial affairs of the Group including the terms of engagement of the Group’s auditor and, in consultation with the auditor, the scope of the audit. It receives and reviews reports from management and the Group’s auditor relating to the half year and annual accounts and the accounting and the internal control systems in use throughout the Group, in addition to ensuring that the Group complies with the AIM Rules for companies. The audit committee met twice during the year and will meet at least twice a year in the future. REMUNERATION COMMITTEE The remuneration committee comprised Mr. John Croft (Chair), Mr. Wong Yin Kit, Ernest and Mr. Conor MacNamara throughout the year under review. It reviews the performance of the Board and determines their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. The remuneration committee also determines the payment of any bonuses to Directors and any grant of options to Directors, under any share option scheme adopted by the Group. The remuneration committee reviews and makes recommendations in respect of the Directors’ remuneration and benefits packages, including staff incentivisation and the terms of their appointment. The remuneration committee also makes recommendations to the Board concerning the allocation of incentivisation payments to employees and the grant of options to Directors. Adamas Finance Asia Limited 13 INVESTMENT COMMITTEE The investment committee comprised Mr. John Croft (Chair), Mr. Wong Yiu Kit, Ernest and Mr. Conor MacNamara throughout the year under review. The investment committee decides whether or not to proceed with any investment opportunity. It is also responsible for reviewing existing investments and deciding on divestment issues. The investment committee also needs to approve any investment in a company where any Director is already interested, subject to provisions of the AIM Rules for Companies and applicable law and regulations. RELATIONS WITH SHAREHOLDERS The Group values the views of its shareholders and recognises their interest in the Group’s strategy and performance. The shareholders are encouraged to participate in annual general meetings where the Board will present a review of the results and comments on current business activities. STATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the financial statements for each financial period. These non-statutory financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and are presented in accordance with AIM requirements. The financial statements are required by IFRSs to present fairly the financial position and performance of the Company and the Group. In preparing these financial statements the Directors should: • • • • select suitable accounting policies and apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume the Company and the Group will continue in business. The Directors are responsible for keeping proper accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements prepared by the Company comply with the requirements of applicable law and regulations. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Annual Report 2016 14 Independent Auditor’s Report Independent Auditor’s Report to the Members of Adamas Finance Asia Limited We have audited the non-statutory financial statements of Adamas Finance Asia Limited for the year ended 31 December 2016, which comprise the consolidated and parent company statements of financial position, the consolidated and parent company statements of comprehensive income, the consolidated and parent company statements of changes in equity and consolidated and parent company statements of cash flows for the year then ended, and related notes. These financial statements have been prepared under the group’s accounting policies set out therein. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This report is made solely to the company’s members as a body. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by English law, we do not accept or assume responsibility to anyone other than the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information, which comprise the Directors’ Report to identify any information that is apparently incorrect based on, or materially inconsistent with the knowledge acquired by us in the course of performing our audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our audit. OPINION In our opinion: • the non-statutory financial statements give a true and fair view of the state of the consolidated and parent company’s affairs as at 31 December 2016, and of their results for the year then ended; and • the non-statutory financial statements have been properly prepared in accordance with IFRS. Crowe Clark Whitehill LLP Registered Auditor 28 June 2017 Adamas Finance Asia Limited 15 Consolidated Statement of Comprehensive Income For the year ended 31 December 2016 Realised gain on disposal of investments Fair value changes on financial assets at fair value through profit or loss Loan written off Administrative expenses Operating loss Finance income Finance expense Dividend income Other income Loss before taxation Taxation Loss for the year Other comprehensive expense: Items that will or may be reclassified to profit or loss: Exchange differences arising on translation of foreign operations Notes 2016 US$’000 2015 US$’000 3 5 6 8 5 (34,094) (2,238) (1,948) (38,275) 80 (98) 911 220 (37,162) – – (2,265) – (2,306) (4,571) 467 (216) 404 – (3,916) – (37,162) (3,916) – – Total comprehensive expense for the year (37,162) (3,916) Loss per share Basic Diluted 19 19 19.36 cents 19.36 cents 2.04 cents 2.04 cents The results reflected above relate to continuing operations. The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Annual Report 2016 16 Company Statement of Comprehensive Income For the year ended 31 December 2016 Realised gain on disposal of investments Fair value changes on financial assets at fair value through profit or loss Loan written off Administrative expenses Operating loss Finance income Finance expense Dividend income Other income Loss before taxation Taxation Loss for the year Other comprehensive expense: Items that will or may be reclassified to profit or loss: Exchange differences arising on translation of foreign operations Notes 2016 US$’000 2015 US$’000 3 5 6 8 5 (34,094) (2,238) (1,732) (38,059) 80 (98) 911 220 (36,946) – – (2,265) – (2,132) (4,397) 467 (216) 404 – (3,742) – (36,946) (3,742) – – Total comprehensive expense for the year (36,946) (3,742) The results reflected above relate to continuing operations. The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Adamas Finance Asia Limited Consolidated Statement of Changes in Equity For the year ended 31 December 2016 17 Group balance at 1 January 2015 Loss for the year Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive expense for the year Issue of shares Share-based payments Group balance at 31 December 2015 and 1 January 2016 Loss for the year Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive expense for the year Issue of shares Share-based payments Share based payment reserve US$’000 42 – – – – (41) 1 – – 1 – (1) Accumulated losses US$’000 Total US$’000 (10,717) (3,916) 118,853 (3,916) – – (3,916) (3,916) – 41 15 – (14,592) (37,162) 114,952 (37,162) – – (51,754) 77,790 – – – (1) Share capital US$’000 129,528 – – – 15 – 129,543 – – 129,543 – – Group balance at 31 December 2016 129,543 – (51,754) 77,789 The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Annual Report 2016 18 Company Statement of Changes in Equity For the year ended 31 December 2016 Company balance at 1 January 2015 Loss for the year Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive expense for the year Issue of shares Share-based payments Share capital US$’000 129,528 – – – 15 – Company balance at 31 December 2015 and 1 January 2016 129,543 Loss for the year Other comprehensive income Exchange differences arising on translation of foreign operations Total comprehensive expense for the year Issue of shares Share-based payments – – – – – Share based payment reserve US$’000 42 – – – – (41) 1 – – – – (1) Accumulated losses US$’000 Total US$’000 (10,572) (3,742) 118,998 (3,742) – – (3,742) (3,742) – 41 15 – (14,273) 115,271 (36,946) (36,946) – – (36,946) (36,946) – – – (1) Company balance at 31 December 2016 129,543 – (51,219) 78,324 The following describes the nature and purpose of each reserve within owners’ equity. Share capital Amount subscribed for share capital at no par value Share based payment reserve The share based payment reserve represents amounts in previous and the current periods, relating to share based payment transactions granted as options and under the Group’s share option scheme (Note 17). Retained earnings/(accumulated losses) Represents the cumulative net gains and losses recognised in the income statement The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Adamas Finance Asia Limited 19 Consolidated Statement of Financial Position As at 31 December 2016 Assets Unquoted financial assets at fair value through profit or loss Loans and other receivables Cash and cash equivalents Total assets Liabilities Loan payables and interest payables Other payables and accruals Total liabilities Net assets Equity and reserves Share capital Share based payment reserve Accumulated losses Notes 9 11.1 12.1 13.1 15 2016 US$’000 2015 US$’000 75,044 1,514 1,308 110,593 3,496 3,644 77,866 117,733 – 77 77 2,518 263 2,781 77,789 114,952 129,543 – (51,754) 129,543 1 (14,592) Total equity and reserves attributable to owners of the parent 77,789 114,952 The financial statements were approved by the Board of Directors and authorised for issue on 28 June 2017 and signed on its behalf by: John Croft Director The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Annual Report 2016 20 Company Statement of Financial Position As at 31 December 2016 Assets Unquoted financial assets at fair value through profit or loss Loans and other receivables Amount due from subsidiaries Cash and cash equivalents Total assets Liabilities Loan payables and interest payables Other payables and accruals Total liabilities Net assets Equity and reserves Share capital Share based payment reserve Accumulated losses Total equity and reserves Notes 9 11.2 10 12.2 13.2 15 2016 US$’000 2015 US$’000 75,044 1,514 534 1,288 110,593 3,496 172 3,624 78,380 117,885 – 56 56 2,518 96 2,614 78,324 115,271 129,543 – (51,219) 129,543 1 (14,273) 78,324 115,271 The financial statements were approved by the Board of Directors and authorised for issue on 28 June 2017 and signed on its behalf by: John Croft Director The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Adamas Finance Asia Limited 21 Consolidated Cash Flow Statement For the year ended 31 December 2016 Cash flows from operating activities Loss before taxation Adjustments for: Depreciation Dividend income Finance income Finance expense Loan written off Fair value changes on unquoted financial assets at fair value through profit or loss Fair value changes on quoted financial assets at fair value through profit or loss Realised gain on disposal of investments Share-based expenses (Increase)/Decrease in other receivables (Decrease)/Increase in other payables and accruals 2016 US$’000 2015 US$’000 (37,162) (3,916) – (911) (80) 98 2,238 34,094 – (5) (1) (12) (186) – (404) (467) 216 – 2,265 – – – 431 79 Net cash used in operating activities (1,927) (1,796) Cash flows from investing activities Dividend income received Sale proceeds of quoted financial assets at fair value through profit or loss Purchase of unquoted financial assets at fair value through profit or loss Loans granted Proceeds from repayment of loan granted 1,611 756 (2,560) – 2,400 324 – (440) (655) 5,813 Net cash used in investing activities 2,207 5,042 Cash flows from financing activities Finance expense paid Loans repaid Net proceeds from issue of shares Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalent at the beginning of the year Cash and cash equivalent at the end of the year (216) (2,400) – (2,616) (2,336) 3,644 1,308 (109) – 15 (94) 3,152 492 3,644 The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Annual Report 2016 22 Company Cash Flow Statement For the year ended 31 December 2016 Cash flows from operating activities Loss before taxation Adjustments for: Dividend income Finance income Finance expense Gain on fixed asset disposal Fair value changes on unquoted financial assets at fair value through profit or loss Share-based expenses Loans written off (Increase)/decrease in other receivables (Decrease)/increase in other payables and accruals 2016 US$’000 2015 US$’000 (36,946) (3,742) (911) (80) 98 (5) 34,094 (1) 2,238 (374) (40) (404) (467) 216 – 2,265 – – 453 3 Net cash used in operating activities (1,927) (1,676) Cash flows from investing activities Dividend income received Purchase of unquoted financial assets at fair value through profit or loss Sale of unquoted financial assets at fair value through profit or loss Loans granted Proceeds from repayment of loan granted (Increase)/decreased in amount due from subsidiaries 1,611 (2,559) 755 – 2,400 – 324 (440) – (655) 5,813 (130) Net cash used in investing activities 2,207 4,912 Cash flows from financing activities Finance expense paid Loan repayment Net proceeds from issue of shares Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalent Cash and cash equivalent at the beginning of the year Cash and cash equivalent at the end of the year (216) (2,400) – (2,616) (2,336) 3,624 1,288 (109) – 15 (94) 3,142 482 3,624 The accompanying notes on pages 23 to 44 are an integral part of these financial statements. Adamas Finance Asia Limited 23 Notes to the Financial Statements For the year ended 31 December 2016 1. GENERAL INFORMATION The Company is a limited company incorporated in the British Virgin Islands (“BVI”) under the BVI Business Companies Act 2004 on 18 January 2008. The address of the registered office is Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, British Virgin Islands VG1110 and its principal place of business is 811-817, 8/F., Bank of America Tower, 12 Harcourt Road, Central, Hong Kong. The Company is quoted on the AIM Market of the London Stock Exchange (code: ADAM) and the Quotation Board of the Open Market of the Frankfurt Stock Exchange (code: 1CP1). The principal activity of the Company is investment holding. The Group is principally engaged in investing primarily in unlisted assets in the areas of luxury resorts real estate, pharmaceutical, mining, power generation, telecommunications, media and technology (“TMT”), and financial services or listed assets driven by corporate events such as mergers and acquisitions, pre-IPO, or re-structuring of state-owned assets. 2. ACCOUNTING POLICIES a) Basis of Preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. The Company’s and the Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as issued by the IASB. The financial statements have been prepared under the historical cost convention. Financial instruments are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability. Annual Report 2016 24 There were on new or amended accounting standards relevant to the Group that were effective for the first time for the financial year beginning on 1 January 2016 that have a material effect on the Group’s consolidated financial statements. A number of new, reused and amended accounting standards and interpretations are currently endorsed but are effective for annual periods beginning after 1 January 2016 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a material impact on the consolidated financial statements of the Group. b) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (other than structured entities) controlled by the Company. Control is achieved where the Company: • • • has the power over the investee; is expected, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. The Company holds investments through a number of unlisted wholly owned special purpose vehicles (SPV’s). The directors have considered the definition of an investment entity in IFRS10 and the associated application guidance and consider that the Company meets that definition. Consequently the Group’s investments in SPV’s and the underlying investments are accounted for at fair value through profit and loss and the SPV’s are not consolidated as subsidiaries. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Associates are those entities in which the Group has significant influence, but not control, over the financial and operating activities. Investments that are held as part of the Group’s investment portfolio are carried in the balance sheet at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS 28 – Investment in Associates, which requires investment held by venture organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39, with changes in fair value recognised in the statement of comprehensive income in the period of change. The Group has no interests in associates through which it carries on its business. Adamas Finance Asia Limited 25 c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the senior management and Board members. The senior management and Board members, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the senior management and Board members that make strategic decisions. The Group is principally engaged in investment business, the Directors consider there is only one business activity significant enough for disclosure. However, this activity consists of three entities which operate in two geographical locations, ie. BVI and Hong Kong. Each location represents a single cash generating unit. d) Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Company and when the revenue and costs, if applicable, can be measured reliably and on the following basis: • • • Dividend income is recognised when the Company’s right to receive payment is established. Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Fair value changes on financial assets represents the overall changes in net assets from the investment portfolio net of deal-related costs. Other income comprised management recharges from the parent company to its subsidiary which are eliminated on consolidation. e) Impairment of non-financial assets At each balance sheet date, the Group reviews internal and external sources of information to determine whether its fixtures, fittings and equipment and investment in subsidiaries have suffered an impairment loss or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs to sell and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. cash-generating unit). If the recoverable amount of an asset or a cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. A reversal of impairment loss is limited to the carrying amount of the asset or cash-generating unit that would have been determined had no impairment loss been recognised in prior years. Reversal of impairment loss is recognised as income immediately. Annual Report 2016 26 f) Financial instruments Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Unquoted financial assets at fair value through profit or loss Unquoted: Classification The Group classifies its unquoted financial assets as financial assets at fair value through profit or loss. These financial assets are designated by the directors as at fair value through profit or loss at inception. Financial assets designated as at fair value through profit or loss at inception are those that are managed as part of an investment portfolio and their performance evaluated on a fair value basis in accordance with the Group’s Investment Strategy. Recognition/derecognition Regular-way purchases and sales of investments are recognised on the trade date – the date on which the Group commits to purchase or sell the investment. A fair value through profit or loss asset is derecognised when the Group loses control over the contractual rights that comprise that asset. This occurs when rights are realised, expire or are surrendered and the rights to receive cash flows from the investments have expired or the Group has transferred substantially all risks and rewards of ownership. Realised gains and losses on fair value through profit or loss assets sold are calculated as the difference between the sales proceeds and cost. Fair value through profit or loss assets that are derecognised and corresponding receivables from the buyer for the payment are recognised as of the date the Group has transacted an unconditional disposal of the assets. Measurement Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed through the profit or loss. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value in accordance with International Private Equity and Venture Capital Valuation (“IPEVCV”) guidelines, as the Group’s business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the period in which they arise. Quoted: The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices and are classified as current assets. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. In the opinion of the Directors, cash flows arising from transactions in equity investments represent cash flows from investing activities. Adamas Finance Asia Limited 27 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are stated at cost less impairments loss. Amortised cost is calculated by taking into account any discount premium on acquisition, over the period to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in the income statement. The Group’s loans and receivables comprised “loans and other receivables” and “cash and cash equivalents” in the statement of financial position. Other payables Other payables are not interest bearing and are stated at their nominal value. Cash and cash equivalents For the purpose of the cash flow statement, cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value, net of bank overdrafts. Impairment of financial assets At each balance sheet date, the Group assesses whether there is objective evidence that financial assets are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial asset’s original effective interest rate. Financial liabilities The Group’s financial liabilities include other payables and accruals and amount due to related parties. All financial liabilities except for derivatives are recognised initially at their fair value and subsequently measured at amortised cost, using effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost. Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. g) h) Investment in subsidiaries Investments in subsidiaries are stated at cost less provision for any impairment in value. Under IFRS 10, where the parent company is qualified as an investment entity, the subsidiaries have been deconsolidated from the Group financial statements. Taxation The charge for current income tax is based on the results for the period as adjusted for items that are non- assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss, it is not accounted for. The deferred tax liabilities and assets are measured at the tax rates that are expected to apply to the period when the asset is recovered or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, tax losses and credits can be utilised. Annual Report 2016 28 i) j) k) l) Leasing Leases are classified as finance leases whenever the terms of the leases transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Employee benefits Salaries, annual bonuses, paid annual leave, leave passage and the costs of non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Company. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. Contributions to defined contribution retirement plans are recognised as expense in the income statement as incurred. Dividends Dividends payable are recorded in the financial statements in the period in which they meet the IAS 32 definition of have been declared. Share based payments The Group has applied the requirements of IFRS 2 “Share Based Payments”. The Group issues share options as an incentive to certain key management and staff (including directors). The fair value of options granted to Directors, management personnel and employees under the Company’s share option scheme is recognized as an expense with a corresponding credit to the share based payment reserve. The fair value is measured at grant date and spread over the period during which the awards vest. The fair value is measured using the Black Scholes Option pricing model. The Group, on special occasions as determined by the Directors, may issue options to key consultants, advisers and suppliers in payment or part payment for services or supplies provided to the Group. The fair value of options granted is recognised as an expense with a corresponding credit to the share based payment reserve. The fair value is measured at grant date and spread over the period during which the options vest. The fair value is measured at the fair value of receivable services or supplies. The options issued by the Group are subject to both market-based and non-market based vesting conditions. Non-market vesting conditions are not taken into account when estimating the fair value of awards as at grant date; such conditions are taken into account through adjusting the equity instruments that are expected to vest. The proceeds received, net of any attributable transaction costs, are credited to share capital when options are converted into ordinary shares. m) Earnings per share The Group calculates both basic and diluted earnings per share in accordance with IAS 33 “Earnings per Share”. Under IAS 33, basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares during the period plus the period dilutive effect of options outstanding during the period. n) Share issue expenses Share issue expenses are written off against the share capital account arising on the issue of share capital. Adamas Finance Asia Limited 29 o) Critical accounting estimates and judgements Preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the Financial Statements are in the following areas: Assessment of accounting treatment under IAS 10, IAS 12 and IAS 27 – Investment entities The directors have concluded that the Company meets the definition of an Investment Entity because the Company: a. b. obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and c. measures and evaluates the performance of substantially all of its investments on a fair value basis As a result, the unlisted open-ended investments (Special Purpose Vehicles (“SPVs”)) in which the Company invests in are not consolidated in the Group financial statements. Assessment of accounting treatment under IAS 28 – Investment in Associates The Group has taken advantage of the exemption under IAS28 Investments in Associates whereby IAS 28’s requirements do not apply to investments in associates held by venture capital organisations. This exemption is conditional on the investments being designated as at fair value through profit and loss or being classified as held for trading upon initial recognition. Such investments are measured at fair value with changes in fair value being recognised in the income statement. Valuation of unquoted investments The Group’s investment portfolio includes a number of investments in the form of structured loans or equity instruments in private companies operating in emerging markets. Investee companies are often at early or growth stages in their development and operating in an environment of uncertainty in capital markets. Should planned development prove successful, the value of the Group’s investment is likely to increase, although there can be no guarantee that this will be the case. Should planned development prove unsuccessful, there is a material risk that the Group’s investments may incur fair value losses. The carrying amounts of investments are therefore highly sensitive to the assumption that the strategies of these investee companies will be successfully executed. In estimating the fair value for an investment, the Group applies a methodology that is appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio using reasonable market-data. Any changes in the above data will affect the fair value of an investment which may lead to recognition of a fair value loss in the statement of comprehensive income if a fair value loss exists. Carrying values are dealt with in note 9 and note 16. All financial assets at fair value through profit and loss are measured at fair value in accordance with International Private Equity and Venture Capital Valuation (“IPECV”) guidelines. If there was no investment event involving third parties during the year, or if suitable alternative evaluation evidence is not available, the Group would then appoint an independent professional qualified valuer to estimate the value of the investment using an appropriate valuation methodologies as prescribed in IPEVCV guidelines. Annual Report 2016 30 p) Foreign currency translation – Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”), which is Hong Kong Dollar. The financial statements are presented in United States Dollars and rounded to the nearest thousand dollars, except when otherwise indicated. Transactions in foreign currencies are converted into the functional currency on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non- monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss. – Group companies The results and financial position of all the group entities, including the parent company, (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. No material reserve is expected as the HK Dollar is linked to the US Dollar. 3. FAIR VALUE CHANGES ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Group Company 2016 US$’000 2015 US$’000 2016 US$’000 2015 US$’000 Change in fair value of unquoted financial assets (note 9) (34,094) (2,265) (34,094) (2,265) Total (34,094) (2,265) (34,094) (2,265) Adamas Finance Asia Limited 31 4. SEGMENT INFORMATION The operating segment has been determined and reviewed by the senior management and Board members to be used to make strategic decisions. The senior management and Board members consider there to be a single business segment, being that of investing activity, which is reportable in two cash generating units (see Note 2c). The reportable operating segment derives its revenue primarily from debt investment in several companies and unquoted investments. The senior management and Board members assess the performance of the operating segments based on a measure of adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (“EBITDA”). This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs. The measure also excludes the effects of equity-settled share-based payments and unrealised gains/losses on financial instruments. The segment information provided to the senior management and Board members for the reportable segments for the year ended 31 December 2016 is as follows: Revenue attributed by reference to each company’s country of operation (see Note 2c): Fair value changes on financial assets at fair value through profit or loss Financial income Dividend income Financial assets attributed by reference to their location Financial assets BVI US$’000 Hong Kong US$’000 Group US$’000 (34,094) 80 911 75,044 – – – – (34,094) 80 911 75,044 The segment information provided to the senior management and Board members for the reportable segments for the year ended 31 December 2015 is as follows: Fair value changes on financial assets at fair value through profit or loss Financial income Dividend income Financial assets attributed by reference to their location Financial assets BVI US$’000 Hong Kong US$’000 Group US$’000 (2,265) 467 404 110,593 – – – – (2,265) 467 404 110,593 The amounts provided to the senior management and Board members with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the strategic operations of the segment. Annual Report 2016 32 5. OPERATING LOSS Operating loss is stated after charging: Group Company 2016 US$’000 2015 US$’000 2016 US$’000 2015 US$’000 Depreciation and amortisation Fees to the Group’s auditor for audit of the Company Operating lease rentals – land and buildings – 48 51 – 59 50 – 48 51 – 59 50 6. FINANCE INCOME Group Company 2016 US$’000 2015 US$’000 2016 US$’000 2015 US$’000 Interest from bank and other loans 80 467 80 467 7. DIRECTORS’ REMUNERATION Short term employment benefits Ernest Wong Yiu Kit John Croft Conor MacNamara Group 2016 US$ 23,191 80,682 40,341 2015 US$ 32,542 91,506 45,753 Company 2016 US$ 23,191 80,682 40,341 2015 US$ 32,542 91,506 45,753 144,214 169,801 144,214 169,801 There was no pension cost incurred during 2016 (2015: US$ Nil). The Directors have received no benefits other than those stated above. Directors’ remuneration include all applicable social security payments. Adamas Finance Asia Limited 33 8. TAXATION No charge to taxation arises in the years ended 31 December 2016 and 2015 as there were no taxable profits in either year. Tax reconciliation: Loss before taxation Effective tax charge at 16.5% (2014: 16.5%) Effect of: Differences in overseas taxation rates Effective tax rate Group 2016 US$’000 2015 US$’000 (37,162) (3,916) (6,132) (646) 6,132 – 646 – The effective tax charge is calculated based on the rate of corporate tax in Hong Kong. As at 31 December 2016, the Group has no unused tax losses (2015: Nil) available for offset against future profits. 9. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Balance as at 1 January 2015 Fair value changes through profit or loss Additions Disposals Balance as at 1 January 2016 Fair value changes through profit or loss Additions Disposals Group US$’000 Company US$’000 117,576 (2,265) 1,097 (5,815) 110,593 (34,094) 2,480 (3,935) 117,576 (2,265) 1,097 (5,815) 110,593 (34,094) 2,480 (3,935) Balance as at 31 December 2016 75,044 75,044 The Group adopted the recent investment methodology prescribed in the IPEVCV guidelines to value its investments at fair value through profit and loss. Changtai Jinhongbang Real Estate Development Co. Ltd (“CJRE”) Lead Winner Limited, a 100% (2015: 100%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a 15% stake in CJRE. CJRE is the owner of a luxury resort and residential development project in Fujian Province, Eastern China. On 29 December 2016, Lead Winner Limited signed an Memorandum of Understanding (MOU) for the sale of stake in CRJE in the total consideration of RMB113.58 million (approximately US$16.4 million), representing the directors’ assessment of the fair value of the investment. Global Pharm Holdings Group Inc. (“Global Pharm”) Blazer Delight Limited, a 75% (2015: 75%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a redeemable convertible bond issued by Global Pharm. Annual Report 2016 34 Global Pharm is a pharmaceutical company involved in pharmaceuticals, the cultivation of herbs for Traditional Chinese Medicine (“TCM”) herb cultivation and TCM processing and distribution. Headquartered in Shenzhen, Southern China, Global Pharm has recently completed two major acquisitions to enhance the TCM operations, and has positioned itself in a strong position within China’s high-margin ginseng business. Under the redemption agreement announced on 18 December 2014, the Company was due to receive an initial payment of US$2.4 million on 31 December 2014, a further US$9 million on 31 March 2015 and a final payment of US$13.6 million on 30 April 2015, an aggregate of US$25.0 million. The payments due on 31 March 2015 and on 30 April 2015 were not received in accordance with the agreement and the instalments are being rescheduled and security is being provided by the purchaser. As of 31 December 2016, USD17.3 million was outstanding, representing the directors assessment of the fair value of the receivable. Hong Kong Mining Holdings Limited (“HKMH”) Dynamite Win Limited, a 100% (2015: 100%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a 10.95% stake in HKMH. HKMH is a resources company whose primary asset is a large dolomite magnesium limestone mine in the province of Shanxi, China. An independent professional qualified valuer has performed a valuation, in accordance with IPEVCV guidelines, of our interest in HKMH as of 31 December 2016 and considered the fair value as US$8.8 million. Meize Energy Industries Holdings Limited (“Meize”) Swift Wealth Investments Limited, a 100% (2015: 100%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a 7.9% stake in Meize. Meize is a privately-owned company that designs and manufactures blades for wind turbines. It has continued to ramp-up its production volume by utilising its existing facility and revenues for the current year are expected to exceed prior years, reflecting a growing order book. An independent professional qualified valuer has performed a valuation, in accordance with IPEVCV guidelines, of our interest in Meize as of 31 December 2016 and considered the fair value as US$8.2 million. Fortel Technology/I-Buying Loan CPE TMT Holdings Limited, a 100% (2015: 100%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a loans with US$11.3m million as of 31 December 2016. The US$11.3m loan was previously restructured from 33.6% stake in Fortel Technology Holdings Limited (“FTH”) as at 31 December 2015. As at 12 October 2016, the CPT TMT has entered into a restructuring of the investment in which, a HK-based Fortel Solutions Limited (“FSL”), which is a wholly owned subsidiary of FTH, has provided a loan (the “Loan”) of RMB119 million (approximately US$18.1 million) to Mr. David Chen and Ms. Zhong Ying Ying (the “Borrowers”) who own 100% of the I-Buying business. CPE TMT has transferred its equity shareholding in FTH to Imperia Capital Investment Holdings Limited (“Imperia”), a major shareholder in FTH. In return, FSL has novated to CPE US$11.3 million worth of the Loan. I-Buying is engaged in e-commerce business and was spinned off from the Fortel Group for an onshore National Equities Exchange and Quotations (“NEEQ”) IPO in 2016. It is currently listed in the onshore NEEQ Board. The terms of the novated portion of the Loan are that it is repayable after three years and has a coupon of 3% per annum in the first year and 8% per annum thereafter. The fair value of the loan as of 31 December 2016 is considered ot have a fair value of US$11.3 million. China iEducation Holdings Limited (“iEducation”) CPE EDU Holdings Limited, a 100% (2015: 100%) owned subsidiary of the Company incorporated in British Virgin Islands, holds a 40% stake in iEducation. Adamas Finance Asia Limited 35 iEducation develops and distributes digital education content to elementary and middle schools within a market that receives substantial annual funding from the Chinese government to upgrade education resources. The fair value our interest in iEducation as of 31 December 2016 was considered as US$4.0 million. Greater China Credit Fund LP (the “GCCF”) The Company has invested in GCCF, a private equity investment fund launched by Adamas Asset Management (HK) Limited (“Adamas”), the Hong Kong-based investment management firm. The Fund targets high-return investments in small and Medium Enterprises (SMEs) predominantly in Greater China. CPE Finance Limited (the “CPE Finance”) CPE finance Limited was established to hold two loans from Orbrich Group Limited (“Orbrich”), as at 31 December 2016, the carrying value of the loans and interests are US$4.0 million. The unlisted opoen-ended investments below are defined as SPVs and are reported at fair value of 31 December 2016. Name of SPVs Country of Incorporation Percentage owned Principal activities CPE Growth Capital Limited CPE TMT Holdings Limited CPE Finance Limited CPE EDU Holdings Limited Lead Winner Limited Blazer Delight Limited Dynamite Win Limited Swift Wealth Investments Limited BVI BVI BVI BVI BVI BVI BVI BVI 2016 100% 100% 100% 100% 100% 75% 100% 100% 2015 100% 100% 100% 100% 100% 75% 100% 100% Investment Holdings Investment Holdings Investment Holdings Investment Holdings Investment Holdings Investment Holdings Investment Holdings Investment Holdings Further details of financial assets and investment valuation methodologies are set out in Note 16. 10. INVESTMENT IN SUBSIDIARIES Investment in subsidiaries at cost Amount due from subsidiaries 2016 US$’000 2015 US$’000 – 534 534 – 172 172 The subsidiaries of the Company are as follows: Name of Companies Country of Incorporation Percentage owned Principal activities 2016 2015 Adamas Finance Asia Hong Kong 100% 100% Providing operating and administrative (Hong Kong) Limited support to the Group Amount due from subsidiaries are unsecured, interest free and have no fixed term of repayment. Annual Report 2016 36 11. LOANS AND OTHER RECEIVABLES 11.1 Group Loans Other receivables and prepayments 11.2 Company Loans Other receivables and prepayments 2016 US$’000 2015 US$’000 1,000 514 1,514 2,939 557 3,496 2016 US$’000 2015 US$’000 1,000 514 1,514 2,939 557 3,496 As at 31 December 2016, loans and other receivables predominantly represent loans made to and interest receivable from Fortel Technology Holdings Limited (“Fortel”). The amount due from Fortel is interest bearing at 8% per annum. Other receivables of the Group and Company have been reviewed and are considered not to be impaired nor are they past due and all amounts held are considered to be fully recoverable in value. 12. LOAN PAYABLES AND INTEREST PAYABLES 12.1 Group Loan payables Interest payables 12.2 Company Loan payables Interest payables 2016 US$’000 2015 US$’000 – – – 2,400 118 2,518 2016 US$’000 2015 US$’000 – – – 2,400 118 2,518 As at 31 December 2015, loan payables and interest payables predominantly represented principal loan amount and interest due to Elypsis Solution Limited which were interest bearing at 9% per annum. Adamas Finance Asia Limited 13. OTHER PAYABLES AND ACCRUALS 13.1 Group Other payables Amount due to Directors Accruals 13.2 Company Other payables Amount due to Directors Accruals 37 2016 US$’000 2015 US$’000 20 5 52 77 167 13 83 263 2016 US$’000 2015 US$’000 10 5 41 56 – 13 83 96 Amount due to Directors are unsecured, interest free and has no fixed terms of repayment. 14. OTHER FINANCIAL COMMITMENTS UNDER OPERATING LEASES The Group has entered into a commercial lease for land and buildings. The minimum future lease payments for the non-cancellable operating leases are as follows: Land and buildings: One year Two to five years 15. SHARE CAPITAL Authorised, called-up and fully paid ordinary shares of no par value each at 1 January 2015 Warrant over ordinary shares exercised on 18 February 2015 Authorised, called-up and fully paid ordinary shares of no par value each at 31 December 2015 Authorised, called-up and fully paid ordinary shares of no par value each at 31 December 2016 2016 US$’000 2015 US$’000 10 – 10 48 10 58 Number of Shares Amount US$’000 191,942,420 24,664 129,528 15 191,967,084 129,543 191,967,084 129,543 On 18 February 2015, the Directors issued and allotted 24,664 new ordinary shares of no par value each for consideration of US$14,798 in respect of exercise notice of warrant received at a price of US$0.60 each. Annual Report 2016 38 16. FINANCIAL INSTRUMENTS Financial risk management objectives and policies Management has adopted certain policies on financial risk management with the objective of ensuring that: (i) appropriate funding strategies are adopted to meet the Company’s and Group’s short-term and long-term funding requirements taking into consideration the cost of funding, gearing levels and cash flow projections; (ii) appropriate strategies are also adopted to manage related interest and currency risk funding; and (iii) credit risks on receivables are properly managed. Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Loans and receivables Amount due from subsidiaries Loans Other receivables Cash and cash equivalents Other financial liabilities Loan payables and interest payables Other payables and accruals Group Company 2016 US$’000 2015 US$’000 2016 US$’000 2015 US$’000 – 1,000 514 1,308 2,822 – 2,939 557 3,644 7,140 534 1,000 514 1,288 3,336 172 2,939 557 3,624 7,292 Group Company 2016 US$’000 2015 US$’000 2016 US$’000 2015 US$’000 – 77 77 2,518 263 2,781 – 56 56 2,518 96 2,614 Financial assets at fair value through profit or loss The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1, 2, or 3 based on the degree to which the fair value is observable: • • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and • Level 3 fair value measurements are those derived from inputs that are not based on observable market data. Level 3 Unquoted financial assets at fair value through profit or loss (note 9) Group 2016 US$’000 2015 US$’000 75,044 110,593 75,044 110,593 Adamas Finance Asia Limited 39 There is no transfer between levels in the current period. Carrying values of all financial assets and liabilities are approximate to fair values. Significant unobservable inputs used in measuring fair value – Level 3 Description Fair Value at 31 Dec 2016 US$’000 Fair value hierarchy Valuation technique Private equity investments 10.95% equity investment in Hong Kong Mining Holdings Limited engaged in mining project – US$8.8m; (2015: US$9.0m) Level 3 7.9% equity investment in Meize Energy Industries Holdings Limited engaged in designing and manufacturing blades for wind turbines – US$8.2m; (2015: US$8.3m) Income Approach – in this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees. Relationship of unobservable inputs to fair value The higher the weighted average cost of capital, the lower the fair value. Significant unobservable input(s) Weighted average cost of capital, determined using a Capital Asset Pricing Model, ranging from 15 to 20 per cent (2015: 15 to 20 per cent) 15.0% equity investment in Changtai Jinhongbang Real Estate Development Co. Ltd engaged in a luxury resort and residential development project – US$16.4m; (2015: US$50.9m) Level 3 Recent Transaction Not applicable Not applicable 40% equity investment in China iEducation Holdings Limited engaged in developing and distributing digital education content – US$4.0m; (2015: US$4.0m) Level 3 Fortel Technology/I-Buying Loan – US$11.3m; (2015: US$11.3m) Level 3 Not applicable Not applicable Not applicable Not applicable Fair value of future economic benefit of receivable (Note 9) Fair value of future economic benefit of receivable (Note 9) Annual Report 2016 40 Description Fair Value at 31 Dec 2016 US$’000 Fair value hierarchy Valuation technique Bond receivable from Global Pharm Holdings Group Inc. engaged in online platform service – US$17.3m; (2015: US$19.2m) Level 3 Loan receivable from Orbrich – CPE Finance Limited – US$4.0m; (2015: US$4.0m) Level 3 Fair value of future economic benefit of receivable (Note 9) Fair value of economic benefit of receivables (Note 9) Relationship of unobservable inputs to fair value Significant unobservable input(s) Not applicable Not applicable Not applicable Not applicable Private credit fund – Greater China Credit Fund LP – US$2.7m; (2015: US$2.0m) Level 3 Unadjusted NAV Not applicable Not applicable Malaysia portfolio investment – CPE Growth Capital Limited – US$2.0m; (2015: US$1.8 m) Level 3 Unadjusted NAV Not applicable Not applicable The above table sets out information about significant unobservable inputs used at 31 December 2016 in measuring material financial instruments categorised as Level 3 in the fair value hierarchy. If the above unobservable inputs to the valuation models were 2% per cent high/lower while all the other variables were held constant, the carrying amount of investments would decrease by US$3.4m (2015: US$3.4m)/increase by US$3.6m (2015: US$3.6m). Credit risk The Company’s and the Group’s credit risk is primarily attributable to other receivables. Management has a credit policy in place and the exposure to credit risks is monitored on an ongoing basis. In respect of other receivables, individual credit evaluations are performed whenever necessary. The other receivables included above were not due at the year end. None of the loans and receivables was impaired in the current or prior year. The Company’s and the Group’s maximum exposure to credit risk is represented by the total financial assets held by the Company and the Group. The Company and the Group do not hold any collateral over these balances. Interest rate risks The Company and the Group currently operates with positive cash and cash equivalents as a result of issuing share capital in anticipation of future funding requirements. As the Group has no borrowings from the bank and the amount of deposits in the bank are not significant, the exposure to interest rate risk is not significant to the Company and the Group. The effect of a 10% increase or fall in interest rates obtainable on cash and on short- term deposits would be to increase or decrease the Group’s operating results by not more than US$1,000 (2015: US$1,000). Adamas Finance Asia Limited 41 Other receivables bear interest at a fixed annual rate, therefore there is no exposure to market interest rate risk on these financial asset. Liquidity risk The Company and the Group manages its liquidity requirements by the use of both short-term and long-term cash flow forecasts. The Company’s and the Group’s policy to ensure facilities are available as required is to issue equity share capital in accordance with long-term cash flow forecasts. The Group’s financial liabilities are primarily other payables and operational costs. All amounts are due for payment in accordance with agreed settlement terms with professional firms, and all are due within one year. The shareholder’s loan is interest free and repayable on demand. A maturity analysis is not provided because it is immaterial. Price risks The Group’s securities are susceptible to price risk arising from uncertainties about future values of the investment securities. This price risk is the risk that the fair value or future cash flows will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual investment or financial instrument or its holder or factors affecting all similar financial instruments or investments traded in the market. The Group’s investment committee provides the Board of Directors with investment recommendations that are consistent with the Group’s objectives. The investment committee recommendations are carefully reviewed by the Board of Directors before the investment decisions are implemented. During the year under review, the Group did not hedge against movements in the value of its investments. A 10% increase/decrease in the fair value of investments would result in US$7,504,400 (2015: US$1,105,930) increase/ decrease in the net asset value. While investments in companies whose business operations are based in China may offer the opportunity for significant capital gains, such investments also involve a degree of business and financial risk, in particularly for unquoted investment. Generally, the Group prepares to hold the unquoted investments for middle to long time frame, in particular if admission to trading on a stock exchange is considered likely in the future. Sales of securities in unquoted investments may result in a discount to the book value at the time of future disposal. Currency risks Since the Company and the Group operate primarily within its local currency with little exposure to currency fluctuations, management considers that foreign currency exposure is not significant to the Group and as such, there is no hedging in the foreign currencies. As the HK Dollar is linked to the US Dollar, the Directors believe that there is no significant exchange risk. Capital management The Company’s and the Group’s financial strategy is to utilise its resources to further grow the Group’s portfolio. The Group keeps investors and the market informed of its progress with its portfolio through regular announcements and raises additional equity finance at appropriate times when market conditions allow. The Company and the Group regularly reviews and manages its capital structure for the portfolio companies to maintain a balance between the higher shareholder returns that might be possible with certain levels of borrowings for the portfolio and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure of the portfolio in the light of changes in economic conditions. The capital structure of the Company and the Group consists of cash and cash equivalents, loans and equity comprising issued capital and reserves. Annual Report 2016 42 17. SHARE BASED PAYMENTS The Group has an ownership-based compensation scheme for senior management of the Group. In accordance with the provisions of the plan, senior management may be granted options to purchase ordinary shares. Each share option converts into one ordinary share of Adamas Finance Asia Limited on exercise. No amounts are paid or payable by the recipient of the options. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. On 12 July 2013, the Company issued options over 750,000 (subsequently consolidated to 75,000) ordinary shares in the Company in respect of services provided to the Group at an exercise price of US$0.10 per share. The option will expire 3 years after the date of grant. On 12 July 2013, the Company also issued options over 750,000 (subsequently consolidated to 75,000) ordinary shares in the Company in respect of services provided to the Group at an exercise price of US$0.15 per share. The option will expire 3 years after the date of grant. On 5 December 2012, the Company issued options over 750,000 (subsequently consolidated to 75,000) ordinary shares in the Company in respect of services provided to the Group at an exercise price of US$0.25 per share. The option expired 3 years after the date of grant. All options are equity-settled, the only vesting conditions for all options granted is that the options holder remains in employment over the vesting period. All options issued in the year 2012 expired during the year ended 31 December 2015. Accordingly the balance of the share based payment reserve in relation to the expired options was transferred to retained earnings. 2016 2015 Number of options Weighted average exercise price Number of options Weighted average exercise price US$ Balance at beginning of the financial year 150,000 1.7 225,000 Expired during the financial year (150,000) Balance at end of financial year Exercisable at end of financial year – – – – – (75,000) 150,000 150,000 1.7 – 1.7 1.7 Adamas Finance Asia Limited 43 18. RELATED PARTY TRANSACTIONS As at 31 December 2016, Elypsis Solutions Limited holds 75.3% of the Company. Elypsis Solutions Limited is a wholly owned subsidiary of Asia Private Credit Fund Limited, a fund managed by Adamas Global Alternative Investment Management, Inc, the Investment manager of the Group. During the year, the Company and the Group entered into the following transactions with related parties and connected parties: Amount due to Directors – Ernest Wong Yiu Kit – John Croft – Conor MacNamara Notes (i) 2016 US$’000 2015 US$’000 2 – 3 2 7 4 Adamas Global Alternative Investment Management Inc. Management fee Amount due from (ii) 1,182 292 1,449 27 (i) (ii) The key management personnel of the Company are considered to be the Directors and appropriate disclosure with respect to them is made in note 7 of the financial statements. There are no other contracts of significance in which any Director has or had during the year a material interest. Adamas Global Alternative Investment Management Inc. is the Investment Manager of the Group. The management fee, which is calculated and paid bi-annually in advance calculated at an annual rate of 1% of the higher of the net asset value of the Company’s portfolio of assets and its market capitalisation. 19. LOSS PER SHARE The calculation of the basic and diluted loss per share attributable to the ordinary equity holders of the Group is based on the following: Numerator Basic/Diluted: Denominator Basic: Net loss (37,162) (3,916) 2016 US$’000 2015 US$’000 Weighted average shares Effect of diluted securities: Share options Warrant No. of shares ’000 No. of shares ’000 191,967 191,963 – – 150 – Diluted: Adjusted weighted average shares 191,967 192,113 For the year ended 31 December 2016 and 2015, the share options are anti-dilutive and therefore the weighted average shares in issue are 191,967,000 and 191,963,000 respectively. Annual Report 2016 44 20. EVENTS AFTER THE REPORTING PERIOD On 4 January 2017, the Company announced that it has agreed terms for the sale of its indirect 15% interest in the Tian Tong Shan Villa Project (the “TTS Project”), a resort development in Fujian Province, China for a total consideration of up to RMB113.58 million (approximately US$16.4 million). On 2 May 2017, the Company announced that Harmony Capital has been appointed as the Company’s new Investment manager and a proposal that a new Investing Policy be adopted by the Company. Harmony Capital’s appointment took effect on 1 May 2017 and the change in Investing Policy has been approved by the shareholders in general meeting held at 25 May 2017 Adamas Finance Asia Limited ADAMAS FINANCE ASIA LIMITED