Income Statement

Balanced Sheet

Click here for the complete Second Quarter 2008 Financials

Review of Performance

A review of the performance of the group, to the extent necessary for a reasonable understanding of the group's business. It must include a discussion of any significant factors that affected the turnover, costs, and earnings of the group for the current financial period report on, including (where applicable) seasonal or cyclical factors; and any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on:

Overview

On 4 January 2008, the Group increased its interest in Capital Advisers, engaged in property investment and management in Japan, from 44.8% to 92.7%. As a result, from 4 January onwards, Capital Advisers is consolidated in the Group financial statement. Due to the sluggish property market in Japan and in the absence of hotel disposals during the period, Capital Advisers registered net losses during the first half of the year. Furthermore, as Capital Adviser's business model is one of higher volume and lower margin compared to Uni-Asia, the impact would be reflected on the Group consolidated financial statements.

The major highlights during the interim period include:

• Disposal of last vessel held under Searex fund, capturing net gain on investment of $2.7 million and incentive fee of $1.8 million.
• Completion of the acquisition of the last vessel by Akebono Fund.
• Firm bulk carrier and container markets resulted in strong fair value adjustment on shipping investments.
• Consolidation of Capital Advisers. Capital Adviser's income, operating loss and net loss totalled $1 5.6 million, ($1.4 million) and ($2.3 million) respectively during the period.
• Vista Hotel Kumamoto, wholly owned by Capital Advisers, was open for business on 28 January 2008.

Income Statement

The Group's 1 H08 interim profit dropped by 40% from $9.0 million in 1 H07 to $5.4 million in 1 H08 due primarily to net losses from Capital Advisers and higher operating expenses recorded during the period. Total income more than doubled from $13.8 million in 1 H07 to $29.3 million in 1H08 as a result of the consolidation of Capital Advisers' income from property investment and management and hotel operation in Japan amounting to $15.6 million and strong investment contribution from the Group's shipping activities.

The Group's income is classified under fee income, hotel income, investment return, interest income and other income.

(a) Fee Income

The Group's fee income rose by 11% from $6.5 million in 1H07 to $7.2 million in 1H08 due primarily to the consolidation of Capital Advisers' fee income from its asset management of hotel and residential projects and an increase in incentive fee arising from the disposal of a vessel under Searex, offset by a drop in arrangement fee income during the period.

(b) Hotel Income

Capital Advisers currently owns andlor manages 14 limited service hotels in Japan with over 1,750 rooms. During the period, through the consolidation of Capital Advisers, the Group recognized maiden contribution from its hotel operation with income totalling over $12.0 million. lncome from hotel operation would include hotel operator fee (fee as operator of the hotel) and hotel income received from hotels owned and leased by the Group.

(c) Investment Return

Note:

# Includes interest from Akebono Fund and Searex Fund. Net gain on disposal of vessel under Searex Fund totalled $2.7 million.

* The fair value loss on foreign exchange contract of $0.6 million with respect to a yen-US exchange rate contract entered into by a wholly owned shipping SPC was reversed during the second quarter as the Group adopted the use of hedge accounting under IAS39.

@ Fair value adjustment on performance notes - shipping to include fair value gain from Akebono fund and fair value loss from Searex arising from the sale of the vessel.

The Group's investment return during the period increased 45% from $6.3 million in AH07 to $9.2 million in 1 H08 due primarily to fair value adjustment on performance notes from shipping business arising from the launch of Akebono Fund and the disposal of the last vessel under Searex I fund. Akebono Fund has acquired six vessels to date. Searex I fund disposed of the last remaining vessel in the fund in 2Q08 and recognized net gain on investment of $2.7 million. Other major investment returns recognized during the period include fair value gain of $1.5 million on residential properties in Japan and China and fair value gain on shipping investments of $0.8 million. Lastly, the Group also recognized fair value loss on performance notes - distressed debt of $0.02 million, fair value loss on investment in hotel of $0.3 million and fair value loss on listed shares of $0.1 million during the period.

(d) Employee Benefits Expense

Employee benefits expenses grew by 21 0% as a result of the consolidation of Capital Advisers. Uni-Asia's headcount increased from 32 in 1H07 to 34 in 1H08, as compared to Capital Advisers, with full time employee headcount of 195. Capital Advisers' staff cost represented close to 69% of the Group's employee benefits expense during the period.

(e) Other Expenses

Other expenses grew by five times due primarily to the consolidation of Capital Advisers. Capital Advisers' operating expenses represented over 80% of the Group's total operating expenses during the period. Capital Advisers is currently expanding its limited service hotel business and building its 'Vista' brand. Hotel leases, hotel sub-operator fee and hotel operating expenses represented 62% of the Group's other operating expenses.

(f) Profitability

The Group's operating profit dropped by 18% from $8.6 million in 1H07 to $7.1 million in 1H08. Finance cost rose during the period as a result of the consolidation of Capital Advisers. In addition, contribution from our associated company dropped from $0.6 million in 1H07 to a net loss of $0.04 million in AH08 given Capital Advisers is no longer equity accounted for and the Group recognized share of losses from Capital Advisers' associates.

(g) Profit for the Year

Our net profit decreased by 40% from $9.0 million in 1 H07 to $5.4 million in 1 H08.

Balance Sheet

(a) Total Assets

The increase in total assets in particular, properties for sale of $17.8 million, accounts receivable of $4.4 million, property, plant and equipment of $14.4 million, deposits pledged of $1 1.7 million and investments of $22.9 million is due to the consolidation of Capital Advisers. During the period, the first installment was made on Prosperity Containership S.A. ("Prosperity"), a wholly owned shipping subsidiary on the Group and deposit for purchase of vessel increased by $7.1 million as a result. Also, the Group subscribed for the performance notes issued by Akebono Fund of $3.7 million and invested in an IPO share in Singapore, as reflected in the increase in investment held for trading (financial assets at fair value through profit and loss -equity shares), offset by a drop in cash and bank balances. In addition, the Group extended a US$15.2 million (JPYI ,600 million) loan to Capital Advisers which was partially financed by yen borrowings. The corresponding amount was placed from our cash deposit to deposits pledged as collateral.

(b) Current and Non-current Liabilities

Through the consolidation of Capital Advisers, the Group recognized additional current and noncurrent bank borrowings of $17.8 million and $22.6 million, respectively, along with deposits received of $1.7 million, accounts payable of $1.7 million, accrued expenses of $0.4 million and rental and deposits received of $1.7 million. During the period, derivative financial instruments arising from fair value adjustment on interest rate and exchange rate swaps charged to the Group equity during the period and to the profit and loss statement in FY2007 had been partially reclassified from current liabilities to non-current liabilities. Prosperity entered into a twelve year (callable at year 10) interest rate swap to hedge against interest rate fluctuation by fixing its cost of borrowing. In 2007, the fair value adjustment on interest rate swap was charged to the profit and loss statement given the documentation for such hedge had not been finalized. However, the hedge is now deemed effective and the Group will recognize any subsequent fair value adjustments on interest and exchange rate swaps directly on its reserves. In addition, the Group increased its bank borrowing by an additional $10.4 million in order to finance a yen loan to Capital Advisers during the period.

(c) Shareholders' Equity

The increase in shareholders' equity is mainly due to the increase in share capital and share premium arising from the issuance of new shares to finance the acquisition of Capital Advisers. The fair value reserves decreased given negative fair value adjustment on an investment made by Capital Advisers which is classified under the Group's balance sheet as long term investments. Hedging reserves increased due to fair value adjustment on exchange rate swap. Exchange reserves increased due to translation of foreign assets from foreign currency to the Group's functional currency, USD, upon consolidation. This would include our investments in China and Japan namely, China Shine and Capital Advisers.

Cash Flow

(a) Cash flow from operating activities

Cashflow from operating activities decreased due mainly to a drop in fee income from the Group's structured finance arrangement and a decrease in working capital stemming mainly from the consolidation of Capital Advisers during the period. Through Capital Advisers, the Group recognized an increase in properties for sale of $4.1 million, decrease in accounts payable of $1.6 million and decrease in other payables and accruals of $1.7 million in 1 H08.

(b) Cash flow from investing activities

Cash flow from investing activities totalled $1 . I million due primarily to an increase in investment activities during the period including purchase of investments of $4.6 million (mainly subscription of performance notes in Akebono Fund), deposit for purchase of a new vessel for $7.1 million, an increase in deposits pledged as collateral of $1 1.7 million arising from the Group's yen loan and from Capital Advisers redemption of TK' investment of $0.4 million. This was offset by an increase of $1 1.4 million from the acquisition of a subsidiary, namely Capital Advisers, proceeds from sale of investments of $1.8 million, loans repaid of $6.5 million comprising primarily loan repayment from shipping investments and proceeds from interest on performance notes of $5.4 million, including interest distribution from the disposal of the last remaining vessel under Searex Fund.

(c) Cash flow from financing activities

Cash flow from financing activities increased due to new bank borrowing of $23.9 million related to Capital Advisers and ship investment, offset by repayment of bank borrowings of $14.9 million from Capital Advisers during the period. The Group made dividends of $5.3 million.

Commentary

The global economy continues to remain subdued in the first half of the year in the face of soaring commodity prices and lingering pressure from the US sub-prime. On the shipping side, the container ship market has shown signs of weakening in the first half of 2008. The prices of newbuildings/second hand container vessels, charterhire rates along with growth projections on the demand for containers have managed to remain relatively flat. On the supply side, the container fleet is still expected to stage strong growth over the next two years. Prices of secondhand bulk carriers (28,000-50,000 dwt) have stabilized while prices of new buildings continue to be firm. The overall charter market has been stable with no significant changes shown. The second hand market and newbuilding price for product tanker continues to remain firm.

After banks reported losses in the second quarter, credit tightened on the back of increased cost of funding. In view of the current funding environment and the supply of new tonnages to come on stream, new enquiries on finance arrangement opportunities have remained firm and the demand for sale and charter back transactions are expected to remain steady. All in all, despite the more competitive market environment, the Group continues to maintain close working relationships with banks to work on our syndicated transactions.

The property market in major cities including Guangzhou where the Group invested, remained robust in spite of anti-speculation measures implemented to cool the heated economy. The property market is expected to remain stable in terms of capital value and rentals due to sustainable economic growth. The Renminbi is expected to continue to remain strong against US dollar in 2008. Due to subprime and the subsequent withdrawal of foreign lenders (CMBS lenders) in Japan, the Japan property market continues to remain sluggish this quarter and adversely affected Capital Advisers' business in the absence of sales and purchase opportunities.