Shanghai Asia Holdings

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Chairman's Message

Dear Fellow Shareholders,

On behalf of the Board of Directors, I have pleasure in presenting the Annual Report for the year ended 31 December 2008.

The year 2008 was an incredible year. It was the best of times, it was the worst of times. During the year, the Group achieved record revenues and net profits against a backdrop of the steepest global financial crisis since the Great Depression of 1932. When the going gets tough, the tough get going!

5^th Anniversary Milestone
I feel privileged and honoured to have served as the Chairman of the Board of Directors of Shanghai Asia Holdings (SAH) for the last five years.

2008 marked a significant milestone for the Group. We celebrated the 5th anniversary of the Company's listing on the Mainboard of the Singapore Exchange Securities Trading Ltd. The Directors and management team are grateful for the support of our shareholders, some of whom had been with us since our listing. We have and will continue to adopt prudent strategies to strengthen the Group and grow the business, with an eye on creating value for our shareholders.

During the last five years, we believe we have been successful in delivering good financial perfomance and returns that can match shareholders' expectations. The Group's annual revenue has grown at a compounded annual growth rate (CAGR) of 22.4 per cent to reach RMB843.8 million in 2008. Net profit increased 4.2 per cent CAGR to RMB94.0 million in 2008 during the same period. The Group was able to generate a return on equity of more than 20.0 per cent over the last five years, except for 2008 of 18.4 per cent.

2008 Highlights
For the year ended 31 December 2008, the Group posted a record 204.2 per cent increase in revenue to RMB843.8 million, compared to RMB277.4 million in 2007. Net profit increased by 35.4 per cent from RMB69.4 million in 2007 to RMB94.0 million in 2008. The Group's earnings before interest, tax, depreciation and amortisation (EBITDA) reached RMB161.2 million in 2008, an increase of 71.7 per cent compared to RMB93.9 million in 2007. Except for the aluminium foil lamination business, all our business segments posted profits.

Rewarding Our Shareholders
We would like to express our appreciation to our shareholders for their continued support and trust in us. While remaining prudent in our cash management and mindful of the need to conserve capital to meet the challenges ahead, we remain committed to rewarding our shareholders with a dividend payout even in these difficult financial times.The Board of Directors is pleased to announce, subject to approval of the Annual General Meeting, a final tax-exempt cash dividend of 1.0 Singapore cent per ordinary share to be paid on 29 May 2009. This represents approximately 44.5 per cent of our 2008 after tax profits.

Resilient Amidst Financial Storms
The Group was not spared from the impact of the global financial crisis that "swamped" almost all economies in the world like a "tsunami" in 2008. Our markets in China remained competitive but our major export markets, the United States and Europe experienced a sharp decline in consumer demand and downturn in business sentiments and activities.

Amidst these challenges, the Group was able to remain resilient and deliver record results during the year. Our relatively strong performance reflects the benefits of our strategic investment in Jiangsu Zhongji Lamination Materials Co., Ltd (JZLM), one of the largest and high-tech thin gauge aluminium foil manufacturers in China. Starting with an initial 46 per cent stake in JZLM in 2005, we acquired all the remaining equity interests of the company in 2008. The consolidation of revenues from our aluminium foil rolling business, with significant contribution from JZLM, gave a huge boost to the Group's top and bottom lines.

The Group's current core business of gravure printing of packaging materials for the cigarette industry continued to provide sustained contributions to the Group. This business, riding on steady cigarette consumption growth in China, posted net profit of RMB73.2 million in 2008, representing 77.9 per cent of the Group's total net profit.

Opportunities Amidst Challenges
Amidst the challenging economic climate, we see oppor tunities for the Group to fur ther enhance our brand equity and strengthen our competitiveness for sustainable growth.

We will take advantage of the current slowdown in economic activities to streamline our management and operations systems, focusing on improving labour productivity and operational efficiency as well as reducing inventories and capacity so as to achieve cost reductions and improved cash flow. We will stay focused on consolidating our resources and strengthening our capital and operational structure so that when the global economy recovers, we will be ready and prepared to ride the next wave of global economic expansion.

The current economic downturn will no doubt uncover business oppor tunities. We will be diligent in exploring suitable acquisitions and joint ventures that offer attractive valuations and synergies for our core competencies. We assure our shareholders that in reviewing any joint venture potential, the Board of Directors will exercise a rigorous due diligence process, observe a prudent set of investment guidelines and maintain a high level of financial and risk management discipline.

We expect that the downturn will also compel producers and suppliers of fast moving consumer goods (FMCG) to explore ways to rationalise their end-to-end production processes including packaging to minimise costs. We believe this trend will provide opportunities for us to develop new applications and usage of our aluminium rolling foil for more cost competitive packaging of FMCG. In this way, we hope to create new markets for our aluminium foil products within the FMCG industry.

Prudent Capital and Risk Management
In view of the current economic situation, it is imperative for us to conserve our resources by strengthening the Group's capital base and reducing our exposure to contingent liabilities and counterparty risks.

During the financial year, the Group conducted a rights issue, raising gross proceeds of S$21.1 million. The proceeds were partly utilised to reduce S$11.3 million of the Group's borrowings and strengthen our balance sheet and for working capital to increase the output and efficiency of JZLM's aluminium foil rolling production.

We will continue to maintain a flexible capital structure through a balanced use of debt and equity financing to support our acquisitions and capital expenditure to grow our business and maximise value for shareholders.

Corporate Governance
We have put in place 'code of ethics' and 'whistle blowing' policies to ensure that high standards of corporate governance, business ethics and responsibility pervade throughout the Group. We will continuously review and improve our policies, processes, controls and reporting systems to ensure that we are compliant with all regulatory requirements. In addition, we will strive to inculcate among management and staff a culture of honesty and ethical decision making which is more effective in maintaining good corporate governance.

In addition, we will strive for excellence in our governance and transparency practices under the Governance and Transparency Index, which assessed the financial transparency of companies based on their annual announcements.

The Challenge going forward in 2009
We expect the operating environment in 2009 to remain challenging. The global economic crisis will continue to impact heavily on our businesses. There is much uncertainty in the outlook for this year and the key will be to concentrate on debt reduction and cash flow.

However, we believe we will successfully navigate the economic uncertainty. The Board and the management team have the capacity to act, the will to persevere and the determination to apply our best effor ts to the task at hand. Therefore, we are cautiously confident that we can deliver reasonable returns to shareholders in 2009.

The Group will stand to benefit from the Chinese government's 4 trillion yuan (US$585 billion) stimulus plan which was announced in November 2008 to invigorate the Chinese economy. The Chinese authorities have also adopted expansionary policies to increase liquidity in the credit market. In order to mitigate the adverse impact on China's export driven economy caused by the contraction in export markets, the Chinese government has enacted policies to stimulate domestic demand and consumption. This will benefit the Group's aluminium foil rolling business as aluminium foils are widely used in food and beverage, transpor tation, pharmaceutical and other FMCG packaging industries.

Volatile Markets
The financial and aluminium markets remain volatile.

Equity markets across the world, including the Singapore Exchange, have lost more than half of their market capitalisation since October 2008. This has adversely affected SAH's share price which was trading at a level that did not reflect our true value. However, we are confident that when the global markets return to normalcy, our market capitalisation will trend upwards to a level which more closely reflects our performance.

The volatility of the aluminium market will be closely monitored by the Group. The price of aluminium at the London Metal Exchange (LME) declined 41 per cent within 3 months from US$2,525 per metric ton in September 2008 to US$1,490 per metric ton in December 2008. The decline in aluminium price will depress the margins of our aluminium foil products in the short term as the stock of our aluminium used in the production of aluminium foils were purchased at a relatively higher price at the beginning of the fourth quarter of 2008. We will reduce inventories of aluminium stock and production volumes to cope with the weakening market and prices of aluminium foil products.

Appreciation
I would like to express my deep appreciation to my fellow Directors for their expert guidance, professionalism and support. On behalf of the Board, I would also like to thank our customers, partners, shareholders and employees for their dedication and generous support.

Yours truly,

John David Cambridge
Chairman
19 March 2007