ADAM.L Regulatory News (ADAM)

24 September 2013

China Private Equity Investment Holdings Limited (AIM: CPEH)

("CPE, the "Company" or the "Group")

Unaudited Interim Results for the six months ended 30 June 2013

Key Information

· Consolidated net asset value US$26.572 million (31 December 2012: US$23.174 million)

· Net asset value per share US$0.21 (31 December 2012: US$0.30)

· Pre tax losses US$594,000 (2012: US$519,000)

· US$4 million equity fundraising for investment in new assets

· New investments:

o US$1.5 million for 5.2% interest in Patimas Computer Berhad, $1.1 million for current 11.9% interest in Asia Bioenergy Technologies Berhad, with September 2013 commitment for further US$1.5 million investment

o US$1 million into Greater China Credit Fund LP, a new private equity fund being launched by Adamas Asset Management (HK) Limited ("Adamas") in August 2013

· Continued development of strategic relationship with Adamas Asset Management (HK) Limited

· Planned IPO of Fortel progressing, with anticipated application to the Hong Kong Stock Exchange in Q4 2013

Group Chairman John Croft commented:

2013 to date has been a busy period for CPE and I am confident that prospects for the Company are improving, particularly as we strengthen ties with Adamas. Your Board will be making every effort to ensure that investors and market-watchers generally are made aware of our plans as they develop. I am hopeful that ultimately this will be reflected in our share price, and that we shall begin to see some narrowing of the current discount to our NAV. 

For further information, please visit www.cpe-invest.com or contact:

CHAIRMAN'S STATEMENT

On behalf of the Directors, I am pleased to present the interim results of the Group for the six month period ended 30 June 2013.

The Group's unaudited net asset value as at 30 June 2013 stood at US$26,572,000 (31 December 2012: US$23,174,000). The increase in net assets was attributable primarily to the equity fundraising during the period which has provided US$4m of cash for new investments. Pre tax losses of US$594,000 were incurred during the period (6 months to 30 June 2012: US$519,000).

During what turned out to be a pleasingly busy period the Group made two new investments, both in public companies listed on the main market of Bursa Malaysia. The first of these was an investment in February 2013 of MYR4.7 million in cash (equivalent to US$1.5 million) for a 5.2% shareholding in Patimas Computer Berhad ("Patimas"), a company which provides information and communication technology services and products in Malaysia and internationally. This was followed in May 2013 by a MYR3.5 million (approximately US$1.1 million) purchase of shares which gives the Group an 11.9% interest in Asia Bioenergy Technologies Berhad ("ABT"), an investment holding company engaged in technology and biotechnology incubation. CPE also announced yesterday that it now intends to take up its rights for 50 million new shares with warrants in ABT, as part of a rights issue being arranged by ABT to increase the size of its investment funds.

The Board is confident that its investments in both Patimas and ABT will create access to new opportunities for the parties involved by marrying the Company's own access to and specialist expertise in the expanding mainland China market with the established broad Asia presence of the two investee companies. The Board remains extremely active in its discussion with ABT and Patimas concerning ongoing opportunities.

As mentioned in my statement contained in the 2012 annual report, the application to the Hong Kong Stock Exchange for the Admission to the market of Fortel Technology Holdings Limited ("Fortel") has been delayed by the need to re-perform the audits for prior years. This process is now nearing completion and we are hopeful that the application to the Exchange can now be submitted before the end of 2013 with an IPO possibly taking place early in 2014. CPE continues to hold a 33.6% stake in Fortel.

Since the end of the reporting period there has been some significant activity in addition to the planned additional investment in ABT mentioned above, which I believe provides further strong indication of CPE's positioning to create synergies with potential long-term strategic benefits for shareholders.

First, the Company announced in July that it plans to embark on a seven-year US$20m co-investment programme with Adamas Asset Management (HK) Ltd ("Adamas"), a Hong Kong based investment management firm which typically invests in high yield assets in Greater China. This followed the announcement in November 2012 of an agreement to build a strategic relationship between CPE and Adamas.

Then, in August, CPE announced it had agreed to invest US$1 million in a new US$275 million private equity investment fund due to be launched by Adamas to target high-return investments in Small and Medium Enterprises (SMEs) predominantly in Greater China.

CPE's planned investment in the new Greater China Credit Fund LP follows successes achieved with an earlier fund launched by Adamas in March 2010, the Asia Private Credit Fund ("APCF"), which has already provided investors with exit returns for three out of 11 investments yielding a gross IRR of 27%. This US$1 million investment marked a further step in the Board's plan to strengthen ties with Adamas over time.

CPE also recently announced the disposal of its interest in AIP Global for a consideration equal to approximately US$1.9 million. 

As evidenced by the activities described above, 2013 to date has been a busy period for CPE and I am confident that prospects for the Company are improving, particularly as we strengthen ties with Adamas. Your Board will be making every effort to ensure that investors and market-watchers generally are made aware of our plans as they develop. I am hopeful that ultimately this will be reflected in our share price, and that we shall begin to see some narrowing of the current discount to our NAV. 

John Croft

Chairman of the Board

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The results above relate to continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE FINANCIAL INFORMATION

1. CORPORATE 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, P.O. Box 3140, Road Town, Tortola, BVI, VG 1110 and its principal place of business is 16/F, Chung Nam Building, 1 Lockhart Road, Wanchai, Hong Kong. The Company was set up with an intention to position itself to be a Chinese and Asian focused AIM listed private equity investment holding group. The Company seeks to identify suitable private equity investment opportunities in China.

The Company is listed on the AIM Market of the London Stock Exchange (code: CPEH) and with effect from 6 December 2012, the Company's ordinary shares have been included on the Quotation Board of the Open Market of the Frankfurt Stock Exchange (code:1CP).

The condensed consolidated interim financial information was approved for issue on 24 September 2013.

The condensed consolidated interim financial information has not been audited nor reviewed by the auditors.

2. BASIS OF PREPARATION

The condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting".

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated interim financial information has been prepared on the historical cost convention, as modified by revaluation of certain financial assets and financial liabilities at fair value through the income statement.

The accounting policies and methods of computation used in the condensed consolidated financial information for the six months ended 30 June 2013 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012 and are those the group expect to apply into financial statements for the year ending 31 December 2013.

The seasonality or cyclicality of operations does not impact on the interim financial information.

4. SEGMENT INFORMATION

The operating segment has been determined and reviewed by the senior management and executive Board members to be used to make strategic decisions. The senior management and executive Board members consider there to be a single business segment, being that of investing activity, which is reportable in two cash generating units.

The reportable operating segment derives its revenue primarily from debt investment in several companies and unquoted investments.

The senior management and executive 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 executive Board members for the reportable segments for the periods are as follows:

Revenue attributed by reference to each company's country of domicile:

5. TAXATION

No charge to taxation arises for the six months ended 30 June 2013 and 2012 as there were no taxable profits in either period. The Company and one of its subsidiaries, CPE TMT Holdings Limited, are both located in the BVI and are not subject to any income tax.

Tax reconciliation:

As at 30 June 2013, the Group has no unused tax losses (30 June 2012: Nil) available for offset against future profits.

6. DIVIDEND

The Board of the Company does not recommend the payment of an interim dividend in respect of the six months ended 30 June 2013 (30 June 2012: Nil).

7. LOSS PER SHARE

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

For the six months ended 30 June 2013 and 2012, the share options are anti-dilutive and therefore the average shares in issue are 93,412,000 and 76,285,000 respectively.

8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

There was no change in the unquoted financial assets at fair value through profit and loss account for the six months period ended 30 June 2013. Details of the unquoted financial assets at fair value through profit and loss account are set out in the Annual Report for the year ended 31 December 2012.

9. QUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The quoted financial assets at fair value through profit or loss amounting to US$762,000 (30 June 2012: US$Nil) were pledged under a securities margin account.

10. SHARE CAPITAL

On 19 April and 11 May 2013, the Company placed a total of 50,000,000 Ordinary shares in the Company at a price of US$0.08 per share and raised gross proceeds of US$4 million.

As at 30 June 2013, the Company was authorised to issue up to a maximum of 300,000,000

Ordinary shares of a single class without par value.

The Company was incorporated in the BVI under the BVI Business Companies Act 2004. Under the BVI laws and regulations, there is no concept of "share premium", and all proceeds from the sale of no par value equity shares is deemed to be share capital of the Company.

11. 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 Level 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.

There were no transfers between levels in the current period.

During the year ended 31 December 2012, unquoted financial assets with a carrying value of US$3 million were transferred from level 2 to level 3 due to the lack of available, observable input data. The value of level 3 investments has been determined using the yield capitalisation (Discounted cash flow) method.

12. RELATED PARTY TRANSACTIONS

During the period under review, the Group entered into the following transactions with related parties and connected parties:

i. As at 30 June 2013, the Group owed approximately US$Nil (30.6.2012: US$32,200) to Imperia Capital International Holdings Limited ("Imperia"), a shareholder of the Company. The loan is repayable on demand and does not bear interest.

ii. The amounts due thereto are unsecured, interest free and have no fixed term of repayment. There are no other contracts of significance in which any director has or had a material interest during the current period.

iii. Fortel Solutions Limited is a subsidiary of Fortel Technology Holdings Limited ("Fortel"). As at 30 June 2013, CPE TMT retains a 33.6% stake in Fortel. The amount due from Fortel is interest bearing at 5% per annum and repayable on demand.

iv. The Company has a 40% interest in China iEducation Holdings Limited.. The amount due is interest bearing at 5% per annum and repayable on demand.

v. Duncan Chui Tak Keung was a director of Capital VC Limited as at 31 December 2011. He resigned as director of the Company on 9 January 2012 and as director of Capital VC Limited on 27 July 2012.

13. EVENTS AFTER THE REPORTING PERIOD

(a) The Company and the Hong Kong based investment management firm, Adamas Asset Management (HK) Limited ("Adamas") plans to embark on a co-investment programme. The Company and Adamas plan to co-invest jointly a total of up to US$20M over a seven year period in opportunities predominately in income-generating assets in Greater China.

To compensate Adamas for creating the opportunity for the Company to participate in the co-investment programme and for assisting in the proposed fundraising programme, the Company has agreed to grant Adamas options over 1.5 million ordinary shares of CPE (the "Options").

The Options were issued on 12 July 2013 in two tranches, as follows:

· 750,000 at an exercise price of 10c; and

· 750,000 at an exercise price of 15c.

The Options will be exercisable immediately and will be exercisable for a period of three years from the date of issue.

(b) In August 2013, the Company invested US$1 million in Greater China Credit Fund LP launched by Adamas.

(c) On September 17, 2013, the Company entered into a conditional agreement to sell its entire holdings in AIP Global Holdings Ltd for a cash consideration of HK$15 million (equivalent to US$1.9 million).

(d) On 23 September 2013, the Company agreed to take up the one-for-one rights issues with warrants ("Rights Issue") proposed by Asia Bioenergy Technologies Berhad ("ABT"). The Rights Issue is on the basis that one ABT share has the right to subscribe one new ABT share at an issue price of MYR0.10 each with one warrant attached (with an exercise price of MYR0.10)). Accordingly, the Company will acquire a further 50 million shares in ABT with related warrants.