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DIGITAL DOMAIN HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 547) ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016 The board of directors (the “Directors” and the “Board” respectively) of Digital Domain Holdings Limited (the “Company”) announces the audited consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2016 together with the comparative figures for the previous year as follows: CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016 2016 2015 Notes HK$’000 HK$’000 Revenue 4 763,501 527,341 Cost of sales and services rendered (639,154) (443,122) Gross profit 124,347 84,219 Other income and gains 5 11,184 14,084 Selling and distribution expenses (79,715) (28,658) Administrative expenses and other net operating expenses (503,129) (251,478) Finance costs 7 (56,210) (39,801) Fair value gains on investment properties 797 18,054 Share of loss of an associate – (425) Gain on re-measurement of previously held equity interest in an associate – 35,777 Share of losses of joint ventures (716) (5,790) Loss before taxation (503,442) (174,018) Taxation 8 5,062 (5,489) Loss for the year 6 (498,380) (179,507) Loss attributable to: – Owners of the Company (479,377) (156,298) – Non-controlling interest (19,003) (23,209) (498,380) (179,507) Loss per share: 9 Basic and diluted HK cents (4.099) HK cents (1.572) 1 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 2016 2015 HK$’000 HK$’000 Loss for the year (498,380) (179,507) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences 1,844 (8,594) Share of other comprehensive income of an associate – (431) Share of other comprehensive income of joint ventures (3) – Other comprehensive income for the year, net of tax 1,841 (9,025) Total comprehensive income for the year (496,539) (188,532) Total comprehensive income attributable to: – Owners of the Company (478,023) (162,983) – Non-controlling interest (18,516) (25,549) (496,539) (188,532) 2 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 2016 2015 Notes HK$’000 HK$’000 Non-current assets Property, plant and equipment 59,843 33,330 Investment properties 210,600 208,600 Intangible assets 10 1,029,722 873,972 Interests in joint ventures 6,388 12,576 1,306,553 1,128,478 Current assets Inventories 637 329 Trade receivables, other receivables and prepayments 11 146,775 66,820 Bank balances and cash 465,838 344,726 613,250 411,875 Current liabilities Trade payables, other payables and accruals 12 101,853 58,979 Deferred revenue 10,856 33,735 Borrowings 73,162 78,657 Promissory note 34,314 – Convertible notes 370,273 – Obligations under finance leases – 3,096 Tax payable 1,565 5,279 592,023 179,746 Net current assets 21,227 232,129 Total assets less current liabilities 1,327,780 1,360,607 Non-current liabilities Borrowings 216,085 281,559 Deferred tax liabilities 46,267 45,944 Convertible notes – 330,863 262,352 658,366 NET ASSETS 1,065,428 702,241 Capital and reserves Share capital 126,187 107,006 Reserves 896,467 566,422 Equity attributable to owners of the Company 1,022,654 673,428 Non-controlling interest 42,774 28,813 TOTAL EQUITY 1,065,428 702,241 3 NOTES 1. ORGANISATION AND OPERATIONS Digital Domain Holdings Limited (the “Company”) was incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and has its principal place of business at Suite 7003, 70th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. The Company is an investment holding company. The principal activities of the Company’s principal subsidiaries are media entertainment and property investment. 2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (a) Adoption of amendments to HKFRSs – first effective on 1 January 2016 During the year, the Group has adopted the following amendments to HKFRSs which are first effective for the current year and relevant to the Group. The adoption of these amendments has no material impact on the Group’s financial statements. HKFRSs (Amendments) Annual Improvements 2012-2014 Cycle Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 16 Clarification of Acceptable Methods of Depreciation and and HKAS 38 Amortisation Amendments to HKAS 27 Equity Method in Separate Financial Statements Amendments to HKFRS 10, Investment Entities: Applying the Consolidation Exception HKFRS 12 and HKAS 28 Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations HKFRS 14 Regulatory Deferral Accounts (b) New/revised HKFRSs that have been issued but are not yet effective and not early adopted The following new/revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group. The Group’s current intention is to apply these changes on the date they become effective. Effective date HKFRSs (Amendments) Annual Improvements 2014-2016 Cycle (iii) Amendments to HKAS 7 Disclosure Initiative (i) Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (i) Amendments to HKFRS 2 Classification and Measurement of Share-based Payment Transactions (ii) Amendments to HKFRS 10 Sale or Contribution of Assets between an and HKAS 28 Investor and its Associate or Joint Venture (v) Amendments to HKFRS 15 Revenue from Contracts with Customers (Clarifications to HKFRS 15) (ii) HKFRS 9 Financial Instruments (ii) HKFRS 15 Revenue from Contracts with Customers (ii) HKFRS 16 Leases (iv) 4 Effective date: (i) Annual periods beginning on or after 1 January 2017 (ii) Annual periods beginning on or after 1 January 2018 (iii) Annual periods beginning on or after 1 January 2017 or 1 January 2018, as appropriate (iv) Annual periods beginning on or after 1 January 2019 (v) The amendments were originally intended to be effective for periods beginning on or after 1 January 2016. The effective date has now been deferred/removed. Early application of the amendments continues to be permitted. Annual Improvements 2014-2016 Cycle The amendments issued under the annual improvements process make small, non-urgent changes to a number of standards where they are currently unclear. Amendments to HKAS 7: Disclosure Initiative The amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. Amendments to HKAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses The amendments relate to the recognition of deferred tax assets and clarify some of the necessary considerations, including how to account for deferred tax assets related to debt instruments measured of fair value. Amendments to HKFRS 2 – Classification and Measurement of Share-based Payment Transactions The amendments provide requirements on the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. Amendments to HKFRS 10 and HKAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments clarify the extent of gains or losses to be recognised when an entity sells or contributes assets to its associate or joint venture. When the transaction involves a business the gain or loss is recognised in full, conversely when the transaction involves assets that do not constitute a business the gain or loss is recognised only to the extent of the unrelated investors’ interests in the joint venture or associate. Amendments to HKFRS 15 – Revenue from Contracts with Customers (Clarifications to HKFRS 15) The amendments to HKFRS 15 included clarifications on identification of performance obligations; application of principal versus agent; licenses of intellectual property; and transition requirements. 5 HKFRS 9 – Financial Instruments HKFRS 9 introduces new requirements for the classification and measurement of financial assets. Debt instruments that are held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test are measured at fair value through other comprehensive income (“FVTOCI”) if the objective of the entity’s business model is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure equity instruments that are not held for trading at FVTOCI. All other debt and equity instruments are measured at fair value through profit or loss (“FVTPL”). HKFRS 9 includes a new expected loss impairment model for all financial assets not measured at FVTPL replacing the incurred loss model in HKAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk management activities in financial statements.