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Uni-Asia Finance Corporation

Chairman's Statement

Chairman Kazuhiko Yoshida

2013 proved to be a good year for us considering the global economic uncertainty at the beginning of the year. We have achieved after tax profit of US$5.6 million for financial year ended 31 December 2013 ("FY2013"), an increase of 57% compared to US$3.6 million for FY2012. It is my pleasure to inform you that the Board has proposed an ordinary dividend of 0.625 Singapore cents per share subject to your approval at the forthcoming Annual General Meeting on 29 April 2014. On this positive note, I am pleased to present to you the Group's annual report for FY2013 on behalf of the board and management.

Overview of 2013

At the beginning of 2013, the US and Europe's economic woes coupled with the possibility of economic slowdown in emerging markets clouded the outlook for 2013. As the year progressed, developed economies showed signs of recovery aided by US and Japan's quantitative easing measures. Although many had expected a slowdown in the Chinese economy, it remained relatively strong during the year. By the end of 2013, the global economic outlook is more encouraging.

In my message last year, I noted that although an uncertain economic environment may bring challenges to Uni-Asia, we believed it also provides opportunities to expand our business platforms and strengthen our profit structure. Indeed, several opportunities arose, which we analysed with great care. During 2013, we seized opportunities to acquire investments where prices were competitive, and disposed of investments where returns were favourable.

Since the Lehman crisis in 2008, we have identified handysize and supramax dry bulk carriers as our strategic focus for vessel acquisitions. As at the date of this report, we placed orders to acquire 5 handysize bulk carriers and 2 supramax bulk carriers. These new orders have been placed with reputable Japanese shipyards at competitive prices, and the vessels are being built with specifications which are economical to operate and provide environmental advantages in terms of its reduced atmospheric emissions. In view of the increasing fuel prices and growing environmental regulatory requirements, such features are attractive to both ship owners and ship charterers. These vessels will be delivered at different dates between 2014 and 2016. Even as we placed orders for new vessels, Uni- Asia took delivery of a new built handysize bulk carrier in June 2013 which was purchased in 2011. Factoring in the vessel acquisitions and ship delivery, our vessel portfolio has increased to a fleet of 23 vessels as at the date of this report, owned through Uni-Asia's subsidiaries, joint venture vehicles and shipping fund. This compares to 16 vessels as at the beginning of 2013.

In addition to vessels, we also acquired a 51% stake in Wealth Ocean Ship Management Shanghai Co., Ltd, ("WOSMS"), a ship management company based in Shanghai. With this acquisition, we are better able to control the management of our vessels thereby delivering better value to our vessel charterers. At the same time, our ship management company is able to ensure better upkeep of our vessels thus preserving the value of our vessels. The acquisition of vessels and WOSMS is part of our overall strategy to position Uni-Asia as an integrated service provider for maritime investment. We differentiate ourselves from other players by being able to offer our clients and investors a wide array of maritime services from ship investment, ship chartering and ship management, to ship finance arrangement solutions. Over the years, we have built up our track record and reputation in the industry allowing us to leverage on our existing success to seed future growth. We believe this strategy provides us with resilience as well as growth in the long term. We will continue to strengthen these businesses so that our shareholders can share the fruits of our success.

Turning to the property business, our office building redevelopment investment project in Hong Kong was successfully completed with a good investment return, and we are keeping a lookout for suitable new opportunities.

"In FY2013, we have seen how different cycles within our business have a mutually complementary effect. Good investment returns from our property business boosted our bottomline while we continued to expand our shipping fleet for future growth."

Uni-Asia has embarked on investing in small residential projects in Tokyo, Japan since 2011. Typically, these projects are 4 to 5 storey apartments with between 10 to 20 units of studio or maisonette type flats which are popular with working singles in Tokyo. We would source for suitable land, design and build the apartment, lease out the units and sell the project if the exit price is good. Our projects are marketed under the "ALERO" brand name. Two projects were completed and sold with good investment returns in 2013. As at end 2013, there were 6 ongoing ALERO projects. We hope to build up a portfolio of similar projects which we can sell to realise attractive investment returns or lease out for rental income.

Since Mr Shinzo Abe took office in late 2012, there has been more optimism in the Japanese economy. With improving property prices in Japan, our property asset management subsidiary, Uni-Asia Capital (Japan) Ltd ("UACJ") disposed of assets, including 3 hotels, from the funds it managed. This contributed to disposition fee income and investment returns to the Group.

For our hotel operating business, we continued to streamline our hotel operating business in Japan while sourcing for new hotels to operate. We started hotel operating business initially to supplement our asset management business. Over time the hotels that we operate have grown to 9, and we currently licensed our brand name "Hotel Vista" to a third party hotel operator. In previous years, we have had non-profitable onerous hotel operating contracts in our portfolio. In 2013, the last of these onerous hotel operating contacts have ended. Meanwhile, tourist numbers to Japan have increased with the depreciation of the Japanese yen. Consequently, occupancy rates and average daily rates for our hotels improved in 2013. These factors resulted in our hotel operating business faring better in 2013 compared to 2012. While we recognised that the number of hotels under our operation has yet to reach an optimal level to contribute comfortably to the Group's bottom-line, we are working hard to secure new operating contracts. We are pleased to inform that Uni-Asia has won two new hotel operating contracts in 2013, including Hotel Vista Premio Kyoto as well as a new hotel which is still under construction in Minato Mirai 21, in the Yokohama Bay Area. We will start operating this hotel upon its scheduled completion in 2017. With Tokyo hosting the 2020 summer Olympic Games, Japan tourism market is expected to remain buoyant. This in turn could have a positive impact on our hotel operating business.

In 2013, our Japan operations including asset management and hotel operations contributed around 57% of the Group's after tax profit. We will continue to strive for all business segments to contribute positively to the bottom-line of the Group.

Looking ahead

We have completed one phase of our fleet expansion with the acquisitions made in 2013. We have also acquired a ship management company and readied ourselves for the shipping market to recover. Meanwhile, proceeds from disposal of our property assets have boosted the level of Uni-Asia's resources, which can be utilised to seize good investment opportunities that may come our way. 2013 has shown that by having two different classes of alternative assets investment products, we are able to capitalise on the opportunities of these products' different cycles to maximise value for our investors. While the shipping market down cycle allows us to make acquisitions at competitive prices, a rising property market provided us opportunities to exit our investments to replenish our cash. Therefore, although ship investments will still make up the bulk of our assets, we will continue to set aside resources for our property business to ride the boom of the different asset cycles, with the objective of enhancing shareholders' value.

Acknowledgement and Appreciation

I would like to conclude by thanking my fellow directors, management and staff for their commitment and valuable contributions to the Group's business.

I would also like to thank all our customers, bankers, business partners and you, our valued shareholders, for the unwavering support and confidence in our Group.

Mr Kazuhiko Yoshida
Chairman and CEO
21 March 2014