TIDMADAM
RNS Number : 7994D
Adamas Finance Asia Limited
02 May 2017
Adamas Finance Asia Limited
CHANGE OF INVESTMENT MANAGER AND Proposed change to the
Investing Policy
The Directors of ADAM are pleased to announce a change in the
investment manager and a proposed change in the Investing Policy,
as well as to provide an update on the asset portfolio.
Harmony Capital has been appointed as the Company's new
Investment Manager. Further details are set out below.
A circular is expected to be posted to Shareholders on 3 May
2017 which will incorporate a notice of general meeting to be held
on 25 May 2017 at which a resolution will be proposed to amend the
Investing Policy. Further details are set out below.
1. Asset Portfolio
Since the adoption of the revised Investing Policy in April
2015, the Company, through its previous Investment Manager, AGAIM,
has continued to manage the existing asset portfolio.
The current position of the principal existing assets is set out
below.
Changtai Jinhongbang Real Estate Development Co. Ltd
("CJRE")
On 4 January 2017 the Company announced that it had agreed terms
for the sale of its indirect interest in CJRE, which owns a resort
development in Fujian Province, China for a total consideration of
up to RMB 113.58 million (approximately US$16.4 million).
Global Pharm Holdings Group Inc. ("Global Pharm")
The Company entered a redemption agreement with Global Pharm in
December 2014. Payments totaling approximately US$6 million have
been received since that time, leaving an outstanding principal
balance of approximately US$19 million, plus accrued interest. The
Company, through its Manager, has been in regular dialogue with
Global Pharm over a revised redemption schedule.
Fortel Technology Holdings Limited ("Fortel")
On 6 October 2016 the Company announced a restructuring of its
interest in Fortel. The Company now holds a US$11.3 million
interest-bearing loan which is repayable after three years with a
coupon of 3% per annum in the first year and 8% per annum
thereafter. The borrowers are Mr. David Chen and Ms. Zhong Ying
Ying who own 100% of the I-Buying e-commerce business, which was
previously owned by Fortel. The loan is personally guaranteed by
Mr. Duncan Chui.
Hong Kong Mining Holdings Limited ("HKMH")
The Company has an effective 10.95% interest in HKMH, which owns
a large dolomite magnesium limestone mine in the province of
Shanxi, China. HKMH's application to list on the Hong Kong Stock
Exchange was unsuccessful and the Manager has been in discussions
with HKMH over its plans.
Meize Energy Industries Holdings Limited ("Meize")
The Company holds an effective 7.9% interest in Meize, which
designs and manufactures blades for wind turbines, through
redeemable convertible preference shares. The Manager is in
discussions with Meize over the potential redemption of the
Company's interest.
2. Background to and reasons for the Change of Manager
The Company has taken the decision to appoint a new Investment
Manager in order to have a dedicated team to manage both the
existing portfolio and to build and manage a new asset portfolio
pursuant to the proposed new Investing Policy as explained further
below.
With effect from 1 May 2017 Harmony Capital replaced Adamas
Global Alternative Investment Management Inc. as the Company's
Investment Manager. The existing services agreement between the
Company and AGAIM was terminated with effect from 30 April
2017.
Harmony Capital is incorporated in the Cayman Islands and is the
process of registering with the Cayman Islands Monetary Authority.
The principals and owners of Adamas Asset Management, Mr. Paul
Heffner and Mr. Barry Lau own, through wholly owned companies, the
majority of the share capital of HCIL.
As Investment Manager to ADAM, HCIL is run independently of
Adamas Asset Management with its own investment platform and team
managed by Mr. Suresh Withana. The team's focus is the growth and
management of ADAM's business including, but not limited to,
assessing investment opportunities, managing portfolio investments
and expanding the Company's capital base for investment. As a
result of its affiliation, HCIL also has discretionary access to
the resources of the Adamas Asset Management platform.
Mr. Withana was most recently Global Head of Special Situations
and Co-Head of Asia at Tikehau Capital, the listed investment
management company with approximately EUR10 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.
The key terms of the Management Agreement are:
-- an initial term of three years;
-- an annual Management Fee of 1.75% of NAV payable semi-annually in advance;
-- an annual Incentive Fee of 20% of any year on year increase
in audited NAV, subject to a High Water Mark and the Hurdle;
-- warrants to subscribe for 20,000,000 Ordinary Shares, to be
issued in five equal tranches with an exercise price equivalent to
a 20% premium to the audited NAV per Ordinary Share at 31 December
2016 and exercisable within ten years of the date of grant;
-- HCIL has the ability to nominate one director to the Board
subject to approval by the Company's nominated adviser; and
-- following initial three year term, the Company can terminate
the Management Agreement on 12 months' notice. If not terminated, a
new term will commence every three years, at the end of which the
Company can terminate on 12 months' notice.
Related Party Transaction
The principals and owners of Adamas Asset Management, Mr. Paul
Heffner and Mr. Barry Lau, own, through wholly owned companies, the
majority of the share capital of HCIL. As a result, the Management
Agreement is a related party transaction under the AIM Rules. The
Directors consider, having consulted with WH Ireland Limited, that
the terms of the Management Agreement are fair and reasonable
insofar as Shareholders are concerned.
3. Background to and reasons for the proposed Change of Investing Policy
Current Investing Policy
The current Investing Policy, as set out in the Company's
circular to Shareholders dated 20 March 2015, is as follows:
1. The Company has an indefinite life and is targeting both
capital and income returns over time for its Shareholders.
2. The Company will provide credit finance to companies,
principally SMEs in Asia with a focus on Greater China. It will
seek to do this by either:
a. providing finance directly to companies, in particular where
such companies are held through offshore structures or are
otherwise already majority owned or controlled by non-PRC investors
("Direct Financings"); and
b. providing finance indirectly to companies, whereby the
Company will become a limited partner or shareholder in an existing
affiliated or third party fund which itself has a strategy to
invest in underlying companies which need credit finance
("Financing Through Funds").
3. The key parameters of the financing transactions in which the
Company will participate, whether as Direct Financings or Financing
Through Funds, are:
a. target companies are SMEs in Asia with a focus on Greater China;
b. financing will be generally sector agnostic, but will focus
on agriculture, clean energy, consumer, food and beverage,
healthcare, new materials, real estate and natural resources;
and
c. the average maturity of transactions will range from 3 to 24 months.
4. Direct Financings will:
a. on a per investment basis, represent not more than 20% of the
Company's net asset value immediately following the relevant
transaction; and
b. be managed actively, including through appropriate investor
protections which will be negotiated on each transaction.
5. The Company will not use debt to finance transactions, but
may take on debt at the Company level with no specific limit.
New Investing Policy
The Directors believe that, in order to facilitate the building
of a new portfolio, the Company requires a more opportunistic
Investing Policy in order to allow the Manager the flexibility to
invest across Asia, across sectors and across the capital structure
of companies. Furthermore, given the long-term nature of the
Company's investment horizon, the Directors believe that a more
flexible Investing Policy should enable the Manager to navigate
changes in the relative attractiveness of various financing asset
classes in Asia through economic cycles and, potentially,
geopolitical shifts which may increase the sovereign risk
associated with specific countries relative to others within the
region.
Finally, and most importantly, the Board expects the Company's
investment portfolio to be repositioned over time such that it
generates both income and capital gains.
In order to facilitate the Company's strategic objectives, the
Company is proposing the Resolution to amend the Investing Policy
to the following:
1. The Company has an indefinite life and is targeting both
capital gains and income distributions for its Shareholders over
time.
2. The Company will provide equity and credit funding to
companies, principally in the Pan-Asia region or with a connection
to Asia. It will seek to do this by:
-- providing funding directly to companies via the provision of
loans or other credit instruments which may be secured against
assets of the borrower or its affiliates ("Direct Financings");
-- providing funding to companies to accelerate their growth,
expand the scale of their business and/or to consolidate their
organisational structure in preparation for a public listing.
Investments could be in the form of structured equity, debt and
hybrid debt securities. ("Pre-IPO Investments");
-- providing growth, development or acquisition capital in the
form of equity or quasi-equity to companies within growth
industries ("Growth Private Equity");
-- providing funding to transactions structured around significant corporate events such as recapitalisations, debt restructurings, buybacks of shares, asset spin-offs and corporate reorganisations ("Event Driven Special Situations");
-- investing in publicly traded or 'over-the-counter' traded
equity or credit securities, such as preferred stock, common stock,
high yield bonds, senior loans, warrants, where the market is
mispricing a company's securities and thereby offering an
attractive risk-adjusted return due to one-off or short term
factors ("Opportunistic Special Situations"); and
-- investing (in addition to securing co-investment rights for
the Company) as a limited partner or shareholder in third party
managed vehicles which have a strategy to provide credit and/or
equity funding to companies in a specific industry ("Indirect
Financing").
3. The Company will be sector agnostic in its investment activities.
4. New investments will be managed actively, including through
appropriate investor protections which will be negotiated on each
transaction as appropriate and relevant.
5. The Company will consider using debt to finance transactions
on a case by case basis and may assume debt on its own balance
sheet when appropriate to enhance returns to Shareholders and/or to
bridge the financing needs of its investment pipeline.
The Directors believe that the proposed Change of Investing
Policy will broaden ADAM's activities and provide more flexibility
for the Manager to build a portfolio of investments producing
income and with the potential for capital gains. The Directors
further believe that the Change of Investing Policy also enables
ADAM to:
-- increase the breadth of the transactions and opportunities it can consider;
-- lower its overall investment risk by diversifying across
financing asset classes, geography and industries; and
-- implement its long-term objective of providing Shareholders
with a stock that produces income and retains the potential for
appreciation.
4. Recommendation
The Board considers that the Resolution to be put to the General
Meeting is in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Directors unanimously
recommend that all Shareholders vote in favour of the Resolution to
be proposed at the General Meeting, as they intend to do in respect
of their own beneficial holdings, comprising 232,127 Ordinary
Shares, representing approximately 0.12% of the existing issued
share capital of the Company.
Enquiries:
Adamas Finance Asia Limited
John Croft +44 (0) 1825 830587
WH Ireland Limited - Nominated Adviser
+44 (0) 113 394
6600
Tim Feather +44 (0) 117 945
Ed Allsopp 3444
finnCap Limited - Broker
William Marle +44 (0) 20 7220
Grant Bergman 0500
First City Public Relations
(Hong Kong) +852 2854 2666
Allan Piper +44 (0) 7438 148968
DEFINITIONS
"Adamas Asset Adamas Asset Management (HK)
Management" Limited
"AGAIM" Adamas Global Alternative Investment
Management Inc. of Maples Corporate
Services Limited, PO Box 309,
Ugland House, Grand Cayman, KY1-1104,
Cayman Islands
"BST" British Summer Time
"BVI" British Virgin Islands
"Change of Investing the proposed change of Investing
Policy" Policy, further details of which
are set out in the Circular
"Circular" the circular to Shareholders
expected to be dated 3 May 2017
in relation to the Change of
Investing Policy
"Company" or "ADAM" Adamas Finance Asia Limited,
a company registered in the BVI
with registered number 1459602
"General Meeting" the general meeting of the Company
to be held at 10.00 a.m. BST/
5.00 p.m. HKT time on 25 May
2017
"Greater China" the People's Republic of China,
Taiwan and the Special Administrative
Regions of Hong Kong and Macau
"Harmony Capital" Harmony Capital Investors Limited
or "HCIL" of Elian Fiduciary Services (Cayman)
Limited, 190 Elgin Avenue, George
Town, Grand Cayman KY1-9007,
Cayman Islands
"High Water Mark" in calculating whether any Incentive
Fee is due and payable under
the Management Agreement, the
audited NAV for the relevant
year being equal to or greater
than that for any previous year
in which the Incentive Fee was
paid
"HKT" Hong Kong Time
"Hurdle" in calculating whether any Incentive
Fee is due and payable under
the Management Agreement, the
audited NAV for the relevant
year being at least 105% of the
previous year's audited NAV
"Incentive Fee" the incentive fee potentially
payable to the New Investment
Manager by the Company in respect
of the services provided by the
New Investment Manager pursuant
to the Management Agreement
"Investing Policy" the investing policy of the Company
from time to time
"Investment Manager" the investment manager of the
or "Manager" Company from time to time
"Management Agreement" the agreement entered into between
(1) the Company and (2) HCIL
dated 1 May 2017
"Management Fee" the annual management fee payable
to the New Investment Manager
by the Company in respect of
the services provided by the
New Investment Manager pursuant
to the Management Agreement
"NAV" net asset value
"New Investment Harmony Capital
Manager"
"Ordinary Shares" ordinary shares of no par value
each of the Company
"PRC" the People's Republic of China
"RMB" Renminbi, the lawful currency
of the PRC
"Shareholder(s)" holder(s) of Ordinary Shares
"SMEs" small and medium-sized enterprises
"US$" US dollars
All references to dates and times in this announcement are to
BST unless otherwise stated. References to the singular shall
include references to the plural, where applicable, and vice
versa.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCUGUUUAUPMGRG
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May 02, 2017 02:01 ET (06:01 GMT)
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