ADAM.L Regulatory News (ADAM)

Adamas Finance Asia Ltd

(AIM: ADAM)

("Adamas Finance Asia", "ADAM" or the "Company")

Final Results for the year ended 31 December 2013

Highlights of the year

· Consolidated net asset value US$25.5 million (2012: US$23.2 million) at 31 December 2013

· Loss for the year narrows to US$1.72 million (2012: US$10.37 million)

Post year-end highlights

· Reverse takeover completed in February 2014 with injection of US$87 million asset portfolio and fundraising of US$5 million

· Change of name to Adamas Finance Asia Limited

· Appointment of Adamas Asset Management as investment manager

Adamas Finance Asia Chairman John Croft commented: "We have tangible evidence that the strategic changes planned during the course of 2013 are yielding returns auguring a brighter future for the Company. With Adamas as our investment manager, we are now positioned to continue building a quality portfolio which we plan over time to be centred entirely on income generating assets. The eventual objective of this is to deliver regular income distributions to our shareholders.

"In summary, looking back over a year that led to what I believe is the most significant development in the Company's AIM history, I feel confident in stating that while these are still early days for the reshaped operation, the Company's new structure and close relationship with Adamas has the potential to deliver a solid and improving performance for our shareholders in the years ahead, and I look forward to providing further updates on progress in due course."

Enquiries:

Chairman's Statement

I am pleased to report on your Company's progress during 2013, which turned out to be a transitional year leading to what I believe is the Company's most significant strategic development since its arrival on AIM in 2009.

I referred last June in my 2012 Chairman's Report to the importance of an alliance agreed eight months earlier with Hong Kong-based Adamas Asset Management (HK) Limited ("Adamas"). The Company, which was then called China Private Equity Investment Holdings Limited ("CPE"), was intending to anchor the alliance with a planned US$20 million co-investment programme with Adamas. Instead, on the final day of what I believe will prove to have been a key year in the Company's evolution, the CPE Board announced it would seek shareholder approval for the acquisition through reverse takeover of a portfolio of four investments from Elypsis Solutions Ltd, a wholly-owned subsidiary of a credit fund managed by an Adamas affiliate (the "RTO").

The reasons for this decision have already been outlined in the AIM Admission Document published in January 2014. As I explained at the time, the Board took the decision on the basis that bringing Adamas' management and deal sourcing capability, as well as an investment portfolio of substantial value, into the Company could provide significant benefits for shareholders.

Against that very positive background, it is disappointing that, while the financial results for the year showed a significant improvement on 2012, the Company recorded a consolidated total comprehensive loss of US$1.72 million (2012: US$10.25 million). The loss was partly due to professional fees of US$185,000 incurred as a result of the RTO which started in 2013 but did not complete until February 2014. The loss arising from the fair value adjustment of the Company's historic asset portfolio was much lower than the previous year at US$319,000 (2012: US$9.25 million), details of which are provided in the Directors' report below.

Adamas has established a strong presence in Asia, where its assets under management have grown to in excess of US$600 million and where it can point to a proven track record of identifying and managing investments into high-growth businesses. A key element of the Adamas approach is its sharp focus on high-yielding, cash generative opportunities, founded on a rigorous approach to due diligence and insistence on solid collateral support. Adamas has achieved exits from earlier financings yielding regular dividend distributions and gross internal rates of return ranging between 27% and 34%. Earlier this year Adamas was a close runner-up to the global giant KKR Asset Management for the Private Debt Investor award for "2013 Asia Lender of the Year". Crucially for the Company, the Adamas team has developed proven successful experience filling a huge funding gap for SMEs in China that do not have access to bank lending but are operationally strong and can offer property or offshore collateral to secure short-term growth capital.

During the course of the year, in September 2013, the Company made its first investment of US$1 million into a fund administered by Adamas, and has already seen an early return in the form of a first dividend payment of US$79,000 - a yield of nearly 8%. Following the year-end, during April 2014, the Company invested US$500,000 into another fund launched by Adamas, the BRJ China Credit Fund ("BRJ"). Since that investment, Adamas has announced two successful exits by BRJ from early investments yielding an IRR of just under 30%, with consequent increases in its net asset value and capital available for further investment.

We therefore already have tangible evidence that the strategic changes planned during the course of 2013 are yielding returns auguring a brighter future for the Company. With Adamas as our investment manager, we are now positioned to continue building a quality portfolio which we plan over time to be centred entirely on income generating assets. The eventual objective of this is to deliver regular income distributions to our shareholders.

At the forthcoming Annual General Meeting, we intend to propose a resolution to make an amendment to the Investing Policy of the Company, which currently provides that the average maturity of the transactions will range from 24 to 36 months. We intend to propose to amend the policy such that the average maturity of transactions will range from six to 24 months. The amendment is designed to enable the Company to benefit from shorter term opportunities being identified by the Investment Manager, whilst remaining within the provisions of the Investing Policy.

At the year end, cash and short term loans available to the Group stood at US$3.2 million, although this was supplemented during February 2014 by an equity fundraising of £3 million (then approximately US$4.6 million) as part of the RTO. Two of the four investee companies acquired during the RTO are currently being prepared for stock exchange listings in Hong Kong, and the Board is also hopeful that the setbacks which have delayed the planned Hong Kong listing of Fortel Technology Holdings Limited, in which the Company holds a 33.6% stake, have at last been largely resolved. In particular, the problems associated with the audit of historic results for Fortel have now been dealt with and I am hopeful that once Fortel completes its financial year end of December 2014, the listing application will be submitted to the Growth Enterprise Market ("GEM") of the Hong Kong Stock Exchange in the first quarter of 2015, with the listing approval expected during the second quarter of 2015.

In summary, looking back over a year that led to what I believe is the most significant development in the Company's AIM history, I feel confident in stating that while these are still early days for the reshaped operation, the Company's new structure and close relationship with Adamas has the potential to deliver a solid and improving performance for our shareholders in the years ahead, and I look forward to providing further updates on progress in due course.

John Croft

Chairman

EXTRACT FROM THE Directors' Report

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.

The Investing Policy, as required under the AIM Rules for Companies is as follows:

· The transactions will be structured as senior debt, bridge loans, mezzanine finance and other types of structured private financing.

· Target companies will be SMEs in Asia with a focus on Greater China.

· The Company is generally sector agnostic, but will focus on agriculture, clean energy, consumer, food and beverage, healthcare, new materials, real estate and resources.

· The average maturity of the transactions will range from 24 to 36 months.

· Each new asset will have a targeted internal rate of return of 20 per cent. per annum.

· The investment in each new asset will not represent more than 20 per cent. of the Company's net asset value immediately following the transaction.

· The Company has an indefinite life and is targeting both capital and income returns over time for its shareholders.

· Assets will be managed actively, including through appropriate investor protections which will be negotiated on each transaction.

· The Company is designed for investors seeking access to yield-producing investment opportunities in Asia.

· The Company will not use debt to finance individual investments, but may take on debt at the Company-level with no specific limit.

As described in the Chairman's Statement, the Directors intend to propose a resolution at the forthcoming Annual General Meeting to amend the Investing Policy such that the average maturity of transactions will range from six to 24 months, rather than 24 to 36 months.

Review of the Business

The Group's audited total consolidated loss for the year ended 31 December 2013 amounted to US$1,728,000 (2012: loss: US$10,251,000). The Group's audited net asset value as at 31 December 2013 stood at US$25,475,000 (2012: US$23,174,000) equivalent to US$0.20 per share (2012: US$0.30)

The loss for the year resulted from a net decrease in fair value of the underlying assets of US$319,000 (2012: US$9,246,000 decrease) and administrative expenses of US$1.8 million (increased from US$1.4 million in 2012), but nevertheless represents a significant improvement over the prior year loss of US$10.3 million.

The increase in administrative expenses was driven predominantly by one-off fees incurred as part of the reverse takeover process completed after the Company's year end. Other administrative expenses were reduced primarily as a result of a sharp reduction in Directors' fees.

The decrease in fair value of the assets was derived from a writedown in the value of the Company's investment in Patimas Computers Berhad ("Patimas"), referenced later in this report, of US$1.4 million, offset by rises in the fair value of the Company's investment in Asia Bioenergy Technologies Berhad ("Asia Bioenergy") of US$440,000 and a surplus of US$587,000 on the disposal of its investment in AIP Global Holdings Limited ("AIP Global").

During the year the Company made three major new investments, disposed of one portfolio asset, and raised new equity to support its investment plans.

In February the Company invested US$1.5 million in Patimas, a data centre business located in Kuala Lumpur with a quotation on the Malaysian Stock Exchange. Unfortunately later in the year Patimas was suspended from the Malaysian Stock Exchange and was subsequently delisted, in spite of our Board representative's efforts to keep the company listed via a detailed financing proposal which was submitted to the exchange. As a result the majority of the value of this investment has been written down. Efforts are being made to dispose of this business, and we are hopeful that this will result in at least a partial recovery of our investment.

In April 2013 the Company raised a total of US$4 million through the issue of new equity to provide additional working capital and to support its investment plans.

In May 2013 the Company invested a total of US$1.1 million in Asia Bioenergy, a biotechnology incubation fund located in Kuala Lumpur with a listing on the Malaysian Stock Exchange. Later in the year the Company announced its intention to invest a further US$1.6 million via a rights issue and this was completed at the end of April 2014. The company appears to be performing in line with expectations, and seems to be well supported by its shareholders.

In July 2013 the Company announced that it planned to embark on a co-investment plan with Adamas Asset Management (HK) Ltd ("Adamas"). The first investment made under this plan was a US$1 million investment in Adamas's Greater China Credit Fund completed in August. Later in the year detailed discussions were entered into regarding the development of a much closer relationship, which ultimately resulted in the reverse takeover completed early in 2014.

In September 2013 the Company announced the disposal of its holding in AIP Global resulting in a net US$587,000 credit to the Company's NAV.

At the time of preparing this Directors' Report, the management of Fortel Technology Holdings Limited ("Fortel") has confirmed that the issues which previously caused the delay in the planned IPO have been addressed and the audited accounts up to 31 December 2012 have been signed off by their auditors. Completion of the 2013 audit is now expected before the end of June.

Trading at Fortel in 2013 has been strong with markedly improved results as compared to 2012. Fortel's core business has shifted from a software development and licensing model to the more exciting and rapidly growing electronic and mobile commerce area, including the provision of IT and logistics services to merchants selling a variety of merchandises to hundreds of millions of online consumers in China.

Fortel's board has been advised that to maximise its potential IPO value it should delay its application to the Hong Kong Exchange until 2014 results have been audited, which means this is now scheduled for the first half of 2015.

The Directors are not recommending the payment of a dividend for the year.

John Croft

Chairman

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2013

The results reflected above relate to continuing operations.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Consolidated Statement of Financial Position

As at 31 December 2013

Consolidated Cash Flow Statement

For the year ended 31 December 2013

Notes

1. Board Approval and 2013 Annual Report and Financial Statements

The financial information included in this report has been extracted from the Group Financial Statements for the year ended 31 December 2013 which were approved by the Board of Directors on 5 June 2014. The Group Financial Statements have been prepared in accordance with the accounting policies set out therein and in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The auditors have reported on the 2013 Financial Statements and their report is unqualified. The information included does not constitute the Company's statutory accounts. The full financial statements will be included in the Group's annual report.

2. Loss per Share - Continuing Operations

The calculation of the basic and diluted loss per share attributable to the ordinary equity holders of the Group is based on the following:

For the year ended 31 December 2013 and 2012, the share options are anti-dilutive and therefore the weighted average shares in issue are 109,984,000 and 76,285,000 respectively.

3. Unquoted Financial Assets at Fair Value through Profit or Loss

The Group adopted the recent investment methodology prescribed in the IPEVCV guidelines to value its investments at fair value through profit and loss. Applying the methodology, the Group has used the purchase consideration paid by third parties in the acquisition of new shares in Fortel and Enfinium as the basis to estimate the fair value of the investment.

Fortel Technology Holdings Limited ("Fortel")

The Group holds a 33.6% stake in Fortel.

This has been accounted for as a financial asset at fair value through profit or loss as it is to be held as part of an investment portfolio. The Group will dispose of the shareholding upon approval by the investment committee which monitors the investment/divestment decision on an ongoing basis. In November 2012, shares of Fortel were transferred between shareholders at a consideration of HK$1,000 per share ("Fortel Share Transfer"). Based on the Fortel Share Transfer, a decrease in fair value of US$5.879 million in the valuation of Fortel was recognized in the statement of comprehensive income for the year ended 31 December 2012. An independent professional qualified valuer has performed a valuation in accordance with IPEVCV guidelines for the valuation of our interest in Fortel as of 31 August 2013. The Directors consider this therefore is a fair valuation as at 31 December 2013 there having been no reported changes in Fortel's financial position since then.

Fortel was incorporated in Hong Kong and its principal places of business are in Hong Kong and the PRC.

AIP Global Holdings Limited ("AIP Global")

The Company signed an agreement with Capital VC Limited ("Capital VC") on 17 September 2013 pursuant to which the Company agreed to sell its entire holding in AIP Global to Capital VC for a cash consideration of HK$15 million (equivalent to approximately US$1.9 million) and the above disposal was completed on 4 November 2013 with final agreed cash consideration of HK$12 million (equivalent to approximately US$1.5 million). The book value of the Company's investment as at the date of disposal was US$1 million.

China iEducation Holdings Limited ("iEducation")

During the year ended 31 December 2010, the Company entered into a subscription agreement with iEducation to subscribe for its guaranteed convertible note (the "Note") for a consideration of US$2,000,000. The major shareholder of iEducation is the guarantor of the Note. The Note was converted into 6,666 ordinary shares of iEducation in December 2011, represented a 40% interest in iEducation. An independent professional qualified valuer has performed a valuation in accordance with IPEVCV guidelines for the valuation of our interest in iEducation as of 31 August 2013 at a valuation of US$2.17 million. The Directors consider the valuation of iEducation of US$2 million is a fair valuation as of 31 December 2013.

Greater China Credit Fund LP (the "Fund")

The Company invested US$1 million in a new private equity investment fund launched by Adamas. The Fund plans to raise a total of up to US$275 million to target high-return investments in small and medium Enterprises predominantly in Greater China.

4. Posting of Annual Report

The Company will post the Annual Report and Account for the year ended 31 December 2013 to shareholders before 30 June 2014. The Annual Report and Accounts will also be made available on the Company's website at www.adamasfinance.com.