Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended June 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             to


Commission file number: 333-146211

CAPMARK FINANCIAL GROUP INC.(Exact name of registrant as specified in its charter)

Nevada(State or other jurisdiction of
incorporation or organization)

91-1902188(I.R.S. Employer
Identification No.)411 Borel Avenue, Suite 320
San Mateo, California(Address of principal executive offices)

94402(Zip Code)(650) 572-6600(Registrant's telephone number, including area code)Not applicable(Former name, former address and former fiscal year, if changed since last report)


Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of July 31, 2008, 431,704,236 shares of the Registrant's common stock, par value of $.001 per share, were outstanding.



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Table of Contents



CAPMARK FINANCIAL GROUP INC.  Table of Contents

PagePART IFINANCIAL INFORMATIONItem 1.

Financial Statements

2Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

43Item 3.

Quantitative and Qualitative Disclosures about Market Risk

79Item 4T.

Controls and Procedures

83PART IIOTHER INFORMATIONItem 1.

Legal Proceedings

84Item 1A.

Risk Factors

84Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

84Item 3.

Defaults Upon Senior Securities

85Item 4.

Submission of Matters to a Vote of Security Holders

85Item 5.

Other Information

85Item 6.

Exhibits

85Signatures

86Exhibit Index

87


1

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Table of Contents

PART IFINANCIAL INFORMATION

Item 1.    Financial Statements

CAPMARK FINANCIAL GROUP INC.    Condensed Consolidated Balance Sheet (unaudited)    (in thousands, except share amounts)

June 30,
2008

December 31,
2007AssetsCash, cash equivalents and restricted cash

$
925,949

$
1,436,752Accounts and other receivables


397,221


470,669Investment securities:Trading


157,866


185,692Available for sale


925,167


949,682Loans held for sale


5,893,365


7,783,769Loans held for investment, net of allowance for loan losses of $37.8 million and $28.8 million as of June 30, 2008 and December 31, 2007


7,531,625


6,891,714Real estate investments


1,811,930


1,748,555Equity investments


1,866,683


1,984,140Mortgage servicing rights


850,056


890,550Current taxes receivable


127,822


201,916Deferred tax assets


207,063


32,029Goodwill and other intangible assets, net


175,213


182,549Other assets


481,428


506,379Total assets

$
21,351,388

$
23,264,396Liabilities and Stockholders' EquityLiabilities:Short-term borrowings

$
3,758,686

$
3,832,637Collateralized borrowings in securitization trusts


256,205


260,524Other long-term borrowings


8,049,295


8,047,162Deposit liabilities


4,455,424


5,552,607Real estate syndication proceeds and related liabilities


1,412,693


1,563,151Accounts payable and other liabilities


736,103


1,069,068Total liabilities


18,668,406


20,325,149Commitments and Contingent Liabilities





Minority Interest


300,260


330,196Mezzanine Equity


95,815


102,418Stockholders' Equity:Preferred stock, $.001 par value; 100,000,000 shares authorized; none issued and outstanding as of June 30, 2008 and December 31, 2007





Common stock, $.001 par value; 650,000,000 shares authorized; 412,899,623 shares issued and outstanding as of June 30, 2008 and 412,898,576 shares issued and outstanding as
of December 31, 2007


413


413Capital paid in excess of par value


2,060,547


2,050,361Retained earnings


206,853


418,876Accumulated other comprehensive income, net of tax:Net unrealized (loss) gain on investment securities and derivative instruments


(1,114
)

17,536Net foreign currency translation adjustment


20,208


19,447Total accumulated other comprehensive income, net of tax


19,094


36,983Total stockholders' equity


2,286,907


2,506,633Total liabilities and stockholders' equity

$
21,351,388

$
23,264,396


The accompanying notes are an integral part of these condensed consolidated financial statements.

2

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CAPMARK FINANCIAL GROUP INC.        Condensed Consolidated Statement of Operations (unaudited)        (in thousands, except per share data)

Three
months ended
June 30, 2008

Three
months ended
June 30, 2007Net Interest IncomeInterest income

$
236,837

$
281,275Interest expense


184,260


206,281Net interest income


52,577


74,994Provision for loan losses


10,390


5,391Net interest income after provision for loan losses


42,187


69,603Noninterest IncomeNet (losses) gains:Net (losses) on loans


(42,217
)

(10,265
)Net (losses) gains on investments and real estate


(17,258
)

8,401Other gains, net


47,566


3,118Mortgage servicing fees


46,062


48,937Placement fees


17,842


18,442Investment banking fees and syndication income


15,104


15,623Asset management fees


20,452


21,749Trust fees


31,332


45,579Other fees


2,472


13,998Equity in (loss) income of joint ventures and partnerships


(28,065
)

53,105Net real estate investment and other income


22,725


24,889Total noninterest income


116,015


243,576Net revenue


158,202


313,179Noninterest ExpenseCompensation and benefits


76,424


88,483Amortization of mortgage servicing rights


34,136


30,950Occupancy and equipment


21,033


21,956Professional fees


35,872


21,359Other expenses


32,470


26,387Total noninterest expense


199,935


189,135(Loss) income before minority interest and income tax (benefit) provision


(41,733
)

124,044Minority interest income


24,177


23,340(Loss) income before income tax (benefit) provision


(17,556
)

147,384Income tax (benefit) provision


(29,045
)

57,900Net Income

$
11,489

$
89,484Basic net income per share:Net income per share

$
0.03

$
0.21Weighted average shares outstanding


432,263


432,177Diluted net income per share:Net income per share

$
0.03

$
0.21Weighted average shares outstanding


434,494


432,177


The
accompanying notes are an integral part of these condensed consolidated financial statements.

3

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CAPMARK FINANCIAL GROUP INC.        Condensed Consolidated Statement of Operations (unaudited)        (in thousands, except per share data)

Six
months ended
June 30, 2008

Six
months ended
June 30, 2007Net Interest IncomeInterest income

$
513,815

$
578,692Interest expense


400,135


420,144Net interest income


113,680


158,548Provision for loan losses


18,019


11,710Net interest income after provision for loan losses


95,661


146,838Noninterest IncomeNet (losses) gains:Net (losses) gains on loans


(399,384
)

66,942Net (losses) gains on investments and real estate


(28,996
)

51,476Other gains, net


66,817


62,178Mortgage servicing fees


100,272


104,151Placement fees


35,472


41,375Investment banking fees and syndication income


28,927


31,851Asset management fees


39,215


66,078Trust fees


66,714


87,299Other fees


5,473


31,832Equity in (loss) income of joint ventures and partnerships


(38,058
)

96,159Net real estate investment and other income


46,339


48,231Total noninterest income


(77,209
)

687,572Net revenue


18,452


834,410Noninterest ExpenseCompensation and benefits


166,061


208,512Amortization of mortgage servicing rights


69,368


62,330Occupancy and equipment


42,783


44,009Professional fees


60,164


42,666Other expenses


70,169


67,471Total noninterest expense


408,545


424,988(Loss) income before minority interest and income tax (benefit) provision


(390,093
)

409,422Minority interest income


39,675


14,806(Loss) income before income tax (benefit) provision


(350,418
)

424,228Income tax (benefit) provision


(149,048
)

159,294Net (Loss) Income

$
(201,370
)
$
264,934Basic and diluted net (loss) income per share:Net (loss) income per share

$
(0.47
)
$
0.61Weighted average shares outstanding


432,602


432,493


The
accompanying notes are an integral part of these condensed consolidated financial statements.

4

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CAPMARK FINANCIAL GROUP INC.        Condensed Consolidated Statement of Changes in Stockholders' Equity (unaudited)        (in thousands)

Six
months ended
June 30, 2008

Six
months ended
June 30, 2007Common StockBalance at beginning of period

$
413

$
413Balance at end of period


413


413Capital Paid in Excess of Par ValueBalance at beginning of period


2,050,361


2,034,875Additional shares issued


6


506Stock-based compensation expense


10,452


9,023Other


(272
)

(3
)Balance at end of period


2,060,547


2,044,401Retained EarningsBalance at beginning of period


418,876


144,144Cumulative effect of adopting FASB Interpretation No. 48





(9,535
)Cumulative effect of adopting Statement of Financial Accounting Standards No. 159


(9,805
)

Net (loss) income


(201,370
)

264,934Other


(848
)

(705
)Balance at end of period


206,853


398,838Accumulated Other Comprehensive Income, Net of TaxBalance at beginning of period


36,983


49,793Net unrealized loss on investment securities and derivative instruments


(18,650
)

(19,089
)Net foreign currency translation adjustment


761


(1,359
)Balance at end of period


19,094


29,345Total Stockholders' Equity

$
2,286,907

$
2,472,997Comprehensive (Loss) IncomeNet (loss) income

$
(201,370
)
$
264,934Other comprehensive loss


(17,889
)

(20,448
)Comprehensive (loss) income

$
(219,259
)
$
244,486


The
accompanying notes are an integral part of these condensed consolidated financial statements.

5

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CAPMARK FINANCIAL GROUP INC.        Condensed Consolidated Statement of Cash Flows (unaudited)        (in thousands)

Six
months ended
June 30, 2008

Six
months ended
June 30, 2007Operating ActivitiesNet cash provided by (used in) operating activities

$
1,373,296

$
(1,902,203
)Investing ActivitiesNet decrease in restricted cash


32,442


2,656Proceeds from sales of investment securities classified as available for sale


13,918


466,486Repayments of investment securities classified as available for sale


52,903


229,606Purchases of investment securities classified as available for sale


(65,057
)

(440,322
)Repayments of loans held for investment


836,011


1,754,707Origination/purchase of loans held for investment


(1,471,618
)

(1,131,981
)Proceeds from sales of real estate investments


67,810


155,077Purchases of real estate investments


(81,738
)

(504,605
)Net purchases of property and equipment


(2,478
)

(9,123
)Proceeds from sales of/capital distributions from equity investments


74,074


185,888Purchases of equity investments


(125,841
)

(395,076
)Purchases of mortgage servicing rights


(12,520
)

(81,428
)Sales of mortgage servicing rights





43,213Other investing activities, net


(2,071
)

3,877Net cash (used in) provided by investing activities


(684,165
)

278,975Financing ActivitiesNet (decrease) increase in short-term borrowings


(152,291
)

136,677Proceeds from issuance of collateralized borrowings in securitization trusts





47,608Repayments of collateralized borrowings in securitization trusts


(5,425
)

(1,273,018
)Proceeds from issuance of other long-term borrowings


815,053


2,902,452Repayments of other long-term borrowings.


(793,751
)

(2,465,254
)Net (decrease) increase in deposit liabilities.


(1,098,507
)

2,157,449Real estate syndication proceeds received


33,197


181,584Minority interest proceeds


24,528


77,373(Repurchases of)/proceeds from issuance of mezzanine equity and additional common shares


(7,718
)

3,909Other financing activities, net


6,230


6,610Net cash (used in) provided by financing activities


(1,178,684
)

1,775,390Effect of Foreign Exchange Rates on Cash


11,192


9,761Net (Decrease) Increase in Cash and Cash Equivalents


(478,361
)

161,923Cash and Cash Equivalents, Beginning of Period(1)


1,204,477


325,804Cash and Cash Equivalents, End of Period(1)

$
726,116

$
487,727Supplemental Disclosures of Cash Flow Information:Income taxes (refunded) paid

$
(78,113
)
$
18,236Interest paid


432,851


318,231


---

The
accompanying notes are an integral part of these condensed consolidated financial statements.

6

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CAPMARK FINANCIAL GROUP INC.        Notes to Condensed Consolidated Financial Statements (unaudited)

1. Organization and Operations

Capmark Financial Group Inc. ("Capmark") is a diversified company that provides a broad range of financial services to investors in commercial real estate-related assets. Capmark
has three core businesses: lending and mortgage banking, investments and funds management, and servicing. Capmark operates in North America, Europe and Asia. As used herein, the term "Company" refers
to Capmark and its subsidiaries as a consolidated group, except where it is clear that the term means only Capmark.

Prior
to March 23, 2006, the Company was an indirect wholly-owned subsidiary of GMAC LLC, formerly known as General Motors Acceptance Corporation ("GMAC"). On
March 23, 2006, an investor entity owned by affiliates of Kohlberg Kravis Roberts & Co. L.P., Five Mile Capital Partners LLC, Goldman Sachs Capital Partners and Dune
Capital Management LP (collectively, the "Sponsors") acquired a controlling equity stake in the Company from a subsidiary of GMAC. In connection with the acquisition, the percentage ownership
interests of both the Sponsors and GMAC were reduced proportionately by the sale of common stock to certain employees of the Company who acquired an initial aggregate equity interest of approximately
four percent. As a result of subsequent sales of common stock to those and additional employees and certain non-employee directors (collectively, the "Management Stockholders"), less
repurchases of common stock from those employees no longer with the Company, the Sponsors own a majority interest of approximately 75 percent, the Management Stockholders own an equity interest
of approximately four percent and a subsidiary of GMAC owns an equity interest of approximately 21 percent as of June 30, 2008. The aforementioned changes in ownership will be referred
to as the "Sponsor Transactions" in these notes to the condensed consolidated financial statements.

2. Risks and Uncertainties

The Company's primary business risks include: credit risk, liquidity risk, interest rate and other market risks, and operational risk as more fully described in Note 2 to the
Company's 2007 audited consolidated financial statements included in the Company's prospectus filed with the Securities Exchange Commission ("SEC") on July 15, 2008 in accordance with
Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website atwww.sec.gov. Management of these risks
affects both the level and stability of the Company's earnings.

3. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") for interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnote disclosures
required for annual financial reporting. Therefore, these interim financial statements should be read in conjunction with the Company's 2007 audited consolidated financial statements. The preparation
of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities and the reported amounts of revenue and expense. The Company's estimates and assumptions are affected by risks and uncertainties, including those associated with credit exposure and
interest rate and market spread volatility. Management uses available information in developing estimates and assumptions. Future changes in credit and market trends and conditions may

7

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CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

3. Basis of Presentation and Significant Accounting Policies (Continued)

occur
which could cause actual results to differ materially from the estimates used in preparing the accompanying condensed consolidated financial statements.

The
Company consolidates all wholly-owned and majority-owned subsidiaries that it controls. In certain cases, economic ownership interests and control do not strictly align and there are
other specific consolidation criteria that must be applied under GAAP, and in those cases the Company follows the accounting policies more fully disclosed in Note 3 to its 2007 audited
consolidated financial statements. All material intercompany accounts and transactions have been eliminated in consolidation.

In
the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial
position of the Company as of June 30, 2008, the results of its operations for the three and six months ended June 30, 2008 and 2007 and its cash flows for the six months ended
June 30, 2008 and 2007. The Company's results for any interim period are not necessarily indicative of results for a full year or any other interim period.



In February 2007, the Company sold a majority of its affordable housing debt platform to an unaffiliated buyer for approximately
$500 million in cash and the buyer also assumed approximately $700 million of related financing obligations. The Company recognized a
pre-tax gain on sale of approximately $65.3 million and reported the gain as a component of other gains, net in the condensed consolidated statement of operations. At the time of
the transaction, the Company retained approximately $300 million of investment securities associated with the affordable housing debt platform that were not included in the sale. The earnings
and cash flows of the entire affordable housing debt platform are fully consolidated in the condensed consolidated statement of operations and the condensed consolidated statement of cash flows for
the six months ended June 30, 2007. The affordable housing debt platform was not classified as a discontinued operation because its operations and cash flows could not be clearly distinguished
from the rest of the Company. The affordable housing debt platform was included in the North American Affordable Housing business segment. See Note 20 for segment information.

Significant Accounting Policies and Recently Issued Accounting Standards

The Company's significant accounting policies are disclosed in Note 3 to its 2007 audited consolidated financial statements.
There have been no significant changes to the Company's significant accounting policies as of June 30, 2008, except that on January 1, 2008, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 157, "Fair Value Measurements," or "SFAS No. 157," and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115," or "SFAS No. 159," as more fully discussed below and in Note 14 to these condensed consolidated
financial statements.



The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in GAAP, and expands disclosures about fair value measurements. The statement does not require new fair value measurements, but is applied to the extent that other accounting
pronouncements require or permit fair value measurements. The

8

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CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

3. Basis of Presentation and Significant Accounting Policies (Continued)

statement
emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Companies are
required to disclose the extent to which fair value is used to measure assets and liabilities, the inputs used to develop the measurements, and the effect of certain of the measurements on earnings
(or changes in net assets) for the period. Adoption of this statement did not have a material impact on the method in which the Company determines fair value but did require additional disclosures as
discussed in Note 14.

The
Company also adopted SFAS No. 159 on January 1, 2008. SFAS No. 159 permits an entity to irrevocably elect fair value for the initial and subsequent measurement
of certain financial assets and financial liabilities on an instrument-by-instrument basis. Subsequent changes in fair value of these instruments are recognized in earnings
when they occur. SFAS No. 159 required that the difference between the carrying value and the fair value of financial assets and financial liabilites for which the fair value option was elected
be recorded as an adjustment to beginning retained earnings in the period of adoption. Effective January 1, 2008, the Company elected fair value accounting for certain loan assets and deposit
liabilities not previously carried at fair value. The after-tax cumulative effect from electing the fair value option for the selected financial instruments decreased retained earnings by
$9.8 million on January 1, 2008. See Note 14 for additional information.



Recently issued accounting standards that may have an impact on the Company's consolidated financial statements are more fully
disclosed in Note 3 to the Company's 2007 audited consolidated financial statements. The following standards have been issued subsequent to the release of the Company's 2007 audited
consolidated financial statements.

In
February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") No. FAS 157-2, "Effective date of FASB Statement
No. 157," or "FSP FAS 157-2." This FSP delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years. FSP FAS 157-2 became effective upon issuance and was adopted by the Company.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133," or "SFAS
No. 161." SFAS No. 161 changes disclosure requirements about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial
performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption
permitted. Management is currently evaluating the potential impact of SFAS No. 161 on the disclosures included in the Company's consolidated financial statements.

In
April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets," or "FSP FAS 142-3." This FSP amends the
factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other
Intangible Assets." The FSP affects entities with recognized intangible assets and is effective for financial statements issued for fiscal years

9

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

3. Basis of Presentation and Significant Accounting Policies (Continued)

beginning
after December 15, 2008, and interim periods within those fiscal years. This new guidance applies to (1) intangible assets that are acquired individually or with a group of
other assets and (2) intangible assets acquired in business combinations and asset acquisitions. The adoption of FSP FAS 142-3 is not expected to have a material impact on
the Company's consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles," or "SFAS No. 162," which, when effective, identifies the sources of
accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS
No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles." Management is currently evaluating the potential impact of SFAS No. 162 on the Company's consolidated financial statements.

In
June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities," or "FSP EITF 03-6-1." This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and
therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128, "Earnings per Share," or "SFAS
No. 128." This FSP requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of
securities in calculating earnings per share. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per
share data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform to the provisions of this FSP. Early
application is not permitted. Management is currently evaluating the potential impact of FSP EITF 03-6-1 on the Company's consolidated financial statements.

4. Investment Securities

Investment securities include: commercial mortgage-backed securities ("CMBS"); asset-backed securities ("ABS"); collateralized debt obligations ("CDOs") which may be collateralized by
CMBS, unsecured real estate investment trust debt and other real estate related investments; tax-exempt securities; certain Japanese bonds ("TMK securities"); securities backed by Ginnie
Mae, Fannie Mae and Freddie Mac (government sponsored enterprise or "GSE securities"); U.S. Treasury securities; and other investment securities.

10

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

4. Investment Securities (Continued)

The
following table summarizes the Company's investment securities classified as available for sale as of June 30, 2008, by security type (in thousands):

Amortized
cost

Unrealized
gains

Unrealized
Losses

Fair
valueBeneficial interests in CMBS, ABS and CDOs

$
93,254

$
10,136

$
(5,014
)
$
98,376Tax-exempt securities


248,738


2,162


(6,839
)

244,061TMK securities


321,925


168


(3,323
)

318,770GSE securities


234,386


2,282


(3,851
)

232,817U.S. Treasury and other securities


31,461


44


(362
)

31,143Total

$
929,764

$
14,792

$
(19,389
)
$
925,167


The
following table summarizes the Company's investment securities classified as available for sale as of December 31, 2007, by security type (in thousands):

Amortized
cost

Unrealized
gains

Unrealized
Losses

Fair
valueBeneficial interests in CMBS, ABS and CDOs

$
104,252

$
16,265

$
(2,646
)
$
117,871Tax-exempt securities


247,395


3,162


(58
)

250,499TMK securities


311,827


821


(486
)

312,162GSE securities


235,138


1,404


(417
)

236,125U.S. Treasury and other securities


32,346


679





33,025Total

$
930,958

$
22,331

$
(3,607
)
$
949,682


The
following table summarizes the gross realized gains and losses recognized by the Company on sales of investment securities classified as available for sale and the related proceeds
received on such sales (in thousands):

Three
months ended
June 30, 2008

Three
months ended
June 30, 2007

Six
months ended
June 30, 2008

Six
months ended
June 30, 2007Gains recognized

$
624

$
1,655

$
624

$
21,121Losses recognized


(9
)




(9
)

Net gains

$
615

$
1,655

$
615

$
21,121Proceeds received

$
13,918

$
11,387

$
13,918

$
55,598


The
gains were recorded as a component of net (losses) gains on investments and real estate in the condensed consolidated statement of operations. The proceeds received for the three and
six months
ended June 30, 2007 do not include the transfer of investment securities in connection with the Company's sale of a majority of its affordable housing debt platform in February 2007.

On
a quarterly basis, the Company evaluates unrealized losses to identify those impairments that would be considered other-than-temporary. The Company's
evaluation includes a credit analysis of its

11

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

4. Investment Securities (Continued)

investment
securities based on the preparation of cash flow projections reflecting its monitoring of the underlying assets and relevant market information. In the case of subordinate CMBS, ABS and
CDOs, the Company also considers its projected loss position in the relevant securities. Impairments considered other-than-temporary typically result from a decline in the
projected cash flows due to increased loss projections and the Company's determination that the impairments will not otherwise be recovered. As a result of the Company's evaluation, and its conclusion
that the amount it expected to recover on some of its investment securities was less than the amortized cost of those securities, the Company recognized charges for declines in value in certain
investment securities classified as available for sale, primarily consisting of beneficial interests in CMBS, ABS and CDOs, that were considered other-than-temporary. These
charges totaled $4.8 million and $0.3 million for the three months ended June 30, 2008 and 2007, respectively, and $8.6 million and $4.1 million for the six months
ended June 30, 2008 and 2007, respectively, and are reported as a component of net losses on investments and real estate in the condensed consolidated statement of operations.

In
addition to the impairment charges referred to above, in light of difficult market conditions, including significant liquidity constraints in the CMBS, ABS and CDO markets, the
Company has determined that the fair value of some of its investment securities had declined and has reflected the corresponding unrealized losses on those securities in the tables below. Based on its
quarterly evaluation process, the Company concluded that the unrealized losses in the tables below were temporary declines in fair value due to unfavorable market conditions and were not reflective of
credit deterioration. In determining that the carrying values are fully recoverable over the expected holding periods, the Company performed credit analyses in relation to these investment securities
and has considered the risks and uncertainties regarding future declines in fair value as well as the potential effects that declines in fair value would have on the Company's liquidity. The Company
has the intent and believes it has the ability to hold these securities until they recover in value and that (after giving effect to the impairment charges referred to above) the Company will fully
realize the remaining amortized cost of the investment securities. Therefore, the Company concluded that the unrealized losses reflected in the tables below were not considered
other-than-temporary.

The
following table summarizes the fair value and gross unrealized losses of the Company's investment securities classified as available for sale, aggregated by length of time that
individual securities have been in a continuous unrealized loss position, as of June 30, 2008 (in thousands):

Less than 12 months

12 months or more

TotalFair
value

Unrealized
losses

Fair
value

Unrealized
losses

Fair
value

Unrealized
lossesBeneficial interests in CMBS, ABS and CDOs

$
25,396

$
(4,980
)
$
576

$
(34
)
$
25,972

$
(5,014
)Tax-exempt securities


142,026


(6,736
)

1,806


(103
)

143,832


(6,839
)TMK securities


273,055


(3,323
)







273,055


(3,323
)GSE securities


140,089


(2,559
)

62,611


(1,292
)

202,700


(3,851
)U.S. Treasury and other securities


16,815


(362
)







16,815


(362
)Total

$
597,381

$
(17,960
)
$
64,993

$
(1,429
)
$
662,374

$
(19,389
)


12

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

4. Investment Securities (Continued)

The following table summarizes the fair value and gross unrealized losses of the Company's investment
securities classified as available for sale, aggregated by length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2007 (in thousands):

Less than 12 months

12 months or more

TotalFair
value

Unrealized
losses

Fair
value

Unrealized
losses

Fair
value

Unrealized
lossesBeneficial interests in CMBS, ABS and CDOs

$
33,955

$
(1,518
)
$
20,120

$
(1,128
)
$
54,075

$
(2,646
)Tax-exempt securities








1,991


(58
)

1,991


(58
)TMK securities


87,086


(194
)

89,748


(292
)

176,834


(486
)GSE securities


49,319


(72
)

96,851


(345
)

146,170


(417
)Total

$
170,360

$
(1,784
)
$
208,710

$
(1,823
)
$
379,070

$
(3,607
)


5. Loans Held for Sale

The following table summarizes the Company's loans held for sale as of June 30, 2008 and December 31,
2007, by loan type, carried at fair value as of June 30, 2008 and at the lower of amortized cost or fair value as of December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Floating rate mortgage loans

$
4,397,073

$
6,653,675Fixed rate mortgage loans


1,477,145


1,118,042Construction loans


19,147


12,052Total

$
5,893,365

$
7,783,769


In
connection with the Company's adoption of SFAS No. 159, the Company's loans held for sale are accounted for at fair value as of June 30, 2008. Approximately
$37.5 million of loans held for sale in the Philippines continue to be accounted for at the lower of amortized cost or fair value as of June 30, 2008 due to the highly specialized nature
of the underlying loan agreements, which do not readily lend themselves to reliable fair value estimation.

The
Company reviews its loan portfolio to determine whether any changes in classification should be made between "held for sale" and "held for investment." The Company classifies a loan
as "held for investment" when it intends to hold the loan for the foreseeable future or until maturity or payoff. The Company defines "foreseeable future" based upon what it believes to be reasonable
under the circumstances, including events and conditions that the Company can reasonably anticipate. The Company considers many factors in determining what is the "foreseeable future" including: its
financial condition and liquidity positions; its anticipated capital requirements; its business strategy and operating plans; the current and expected economic environment and market conditions; and
the nature and type of loans, including expected durations. The consideration of many of these factors requires the Company to make forward-looking evaluations for a period of time not less than
twelve months. Beyond the twelve-month period, the Company is less confident in its ability to predict all future events. If the Company is aware of any specific events which are likely to occur
beyond the twelve-

13

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

5. Loans Held for Sale (Continued)

month
period but prior to a loan's maturity or payoff, the Company considers such events in its evaluation. Based upon its analysis of the factors and all other relevant information, the Company
determines whether the loan should be classified as either "held for sale" or "held for investment." No loans were transferred from "held for sale" to "held for investment" during the three and six
months ended June 30, 2008 and 2007, respectively.

6. Loans Held for Investment

The following table summarizes the Company's loans held for investment as of June 30, 2008 and December 31, 2007, by loan type (in thousands):

June 30,
2008

December 31,
2007Floating rate mortgage loans

$
5,324,143

$
5,172,955Fixed rate mortgage loans


788,525


579,909Construction loans


1,118,831


809,234Acquired non-performing loans


337,943


358,368Total


7,569,442


6,920,466Allowance for loan losses


(37,817
)

(28,752
)Net

$
7,531,625

$
6,891,714


The
"Total" amounts set forth in the table above are equal to the unpaid principal balance of the loans less the amount of any market valuation adjustments applied to any loans that were
previously classified as held for sale and other discounts to carrying value. The aggregate amount of such adjustments/discounts for all loans held for investment was $90.1 million and
$106.6 million as of June 30, 2008 and December 31, 2007, respectively.

The
Company's allowance for loan losses is established, monitored and maintained on the basis of past loan experience, the current composition of the portfolio, historical credit
migration, property type diversification, default, loss severity, industry loss experience, economic conditions and trends, and other relevant factors.

The
following table summarizes activity related to the Company's allowance for loan losses (in thousands):

Three
months ended
June 30, 2008

Three
months ended
June 30, 2007

Six
months ended
June 30, 2008

Six
months ended
June 30, 2007Balance at beginning of period

$
32,088

$
65,524

$
28,752

$
61,715Provision for loan losses


10,390


5,391


18,019


11,710Loans charged off


(2,168
)

(1,649
)

(6,168
)

(5,410
)Foreign currency translation adjustment


(35
)

407


250


762Transfers and other


(2,458
)

(152
)

(3,036
)

744Balance at end of period

$
37,817

$
69,521

$
37,817

$
69,521


14

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

6. Loans Held for Investment (Continued)

The
decline in the allowance for loan losses subsequent to June 30, 2007 was primarily due to the charge-off of a fully-reserved loan in the fourth quarter of 2007.

As
discussed in Note 3 to its 2007 audited consolidated financial statements, the Company purchased non-performing loans at significant discounts to the loans' unpaid
principal balance, principally in Asia. At the time of acquisition, these loans evidenced credit quality deterioration and the probability that not all contractual payments would be collected. The
Company does not establish an allowance for loan losses on acquired non-performing loans at acquisition or thereafter. Upon determination that a post-acquisition impairment has
occurred, the carrying values of these loans are reduced by the amount of the impairment. The charges for impairments of acquired non-performing loans totaled $2.2 million and
$1.4 million for the three months ended June 30, 2008 and 2007, respectively, and $6.2 million and $4.0 million for the six months ended June 30, 2008 and 2007,
respectively.

The
following table summarizes information about loans originated by the Company that are held for investment and have specifically been identified as being impaired as of
June 30, 2008 and December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Impaired loans with an allowance for loan losses

$
77,454

$
56,761Impaired loans without an allowance for loan losses


32,471


44,474Total impaired loans


109,925


101,235Allowance for loan losses on impaired loans


(16,022
)

(6,919
)Net impaired loans

$
93,903

$
94,316


The
allowance for loan losses on impaired loans is included in the Company's overall allowance for loan losses. The Company does not recognize interest income on impaired loans.

7. Real Estate Investments

The following table summarizes the Company's real estate investments as of June 30, 2008 and December 31, 2007, by classification (in thousands):

June 30,
2008

December 31,
2007Held for investment, net of depreciation

$
1,591,593

$
1,606,730Held for sale


122,044


67,292Acquired through foreclosure


98,293


74,533Total

$
1,811,930

$
1,748,555


15

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

8. Equity Investments

The following table summarizes the Company's equity investments as of June 30, 2008 and December 31, 2007, by investment type (in thousands):

June 30, 2008

December 31, 2007Amount

Percent of
portfolio

Amount

Percent of
portfolioInvestments in affordable housing partnerships in the United States

$
802,400


43
%
$
942,176


48
%Investments in real estate equity investment funds in the United States


483,390


26


491,941


25Investments in real estate projects, joint ventures and real estate equity investment funds in Europe


168,516


9


162,487


8Investments in other real estate ventures in the United States


127,529


7


154,062


8Investments in non-performing commercial loan and real estate joint ventures, principally in Asia


154,399


8


148,239


7Investments in CMBS and debt investment funds, with collateral principally in the United States


70,148


4


66,095


3Other(1)


60,301


3


19,140


1Total

$
1,866,683


100
%
$
1,984,140


100
%


---

Note:

9. Mortgage Servicing Rights

The following table summarizes activity related to the Company's mortgage servicing rights (in thousands):

Three months
ended June 30,
2008

Three months
ended June 30,
2007

Six months
ended June 30,
2008

Six months
ended June 30,
2007Balance at beginning of period

$
861,433

$
870,431

$
890,550

$
829,011Additions


22,801


41,988


29,023


115,625Amortization


(34,136
)

(30,950
)

(69,368
)

(62,330
)Other


(42
)

(1,384
)

(149
)

(2,221
)Balance at end of period

$
850,056

$
880,085

$
850,056

$
880,085


Based
on the Company's impairment analyses, the Company did not have a valuation allowance related to mortgage servicing rights in any period presented.

16

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

10. Goodwill and Other Intangible Assets

The Company recorded scheduled amortization expense on its other intangible assets of $3.3 million and $3.9 million for the three months ended June 30, 2008 and
2007, respectively, and $6.6 million and $10.0 million for the six months ended June 30, 2008 and 2007, respectively. Amortization expense on
other intangible assets is reported as a component of other expenses in the condensed consolidated statement of operations.

The
Company recorded goodwill impairment of $0.7 million for the three and six months ended June 30, 2008 in connection with the sale of significant interests in 39 loans
in its European Operations business segment, and $0.4 million for the six months ended June 30, 2007 in connection with exiting its tender option bond program. Goodwill impairment is
reported as a component of other expenses in the condensed consolidated statement of operations.

11. Short-term and Long-term Borrowings

The following table summarizes the Company's outstanding borrowings as of June 30, 2008 and December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Short-term borrowings

$
3,758,686

$
3,832,637Collateralized borrowings in securitization trusts


256,205


260,524Other long-term borrowings


8,049,295


8,047,162Total

$
12,064,186

$
12,140,323


Included
in other long-term borrowings are approximately $1.1 billion and $1.7 billion of indebtedness as of June 30, 2008 and December 31, 2007,
respectively, associated with the Company's bridge loan due in March 2009. On June 30, 2008, the Company entered into amendments to both its credit agreement and bridge loan agreement with
various lenders. The amendments provide the Company with additional flexibility with respect to certain types of secured financing and conform certain definitions more closely to the definitions
contained in the indentures related to the Company's outstanding senior notes. The Company used borrowings under the credit agreement to repay $600.0 million of outstanding indebtedness under
the bridge loan agreement on June 30, 2008 in accordance with the terms of the bridge loan amendment, reducing the balance of the bridge loan to $1.1 billion.

In
the second quarter of 2008, the Company repurchased and retired $100.0 million of its outstanding floating rate senior notes due 2010 as previously authorized by its board of
directors. The notes were purchased at a discount to the outstanding principal amount resulting in a gain of $14.3 million, net of unamortized issuance costs. The gain is reported as a
component of other gains, net in the condensed consolidated statement of operations. The Company's outstanding senior notes are included in other long-term borrowings in the above table.

17

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

11. Short-term and Long-term Borrowings (Continued)

The
following table summarizes the Company's assets that are pledged as collateral for the payment of related secured borrowings as of June 30, 2008 and December 31, 2007
(in thousands):

June 30,
2008

December 31,
2007Loans held for sale

$
2,375,049

$
2,648,612Loans held for investment


4,482,543


1,435,105Investment securities classified as trading


84,872


57,074Investment securities classified as available for sale


218,498


239,195Real estate investments


802,648


555,934Other


87,595


8,477Total assets pledged as collateral

$
8,051,205

$
4,944,397Related secured borrowings

$
3,760,610

$
3,081,723


The
increase in assets pledged as collateral from December 31, 2007 was primarily due to the increased secured borrowings by Capmark Bank ("Capmark Bank US"), a wholly-owned
subsidiary of Capmark, from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank of Seattle, as required under the terms of their borrowing programs. The following table bifurcates
the assets pledged as collateral (substantially consisting of loans) for Capmark Bank US and for the rest of the Company as of June 30, 2008 and December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Capmark Bank US:Total assets pledged as collateral

$
5,923,715

$
1,297,678Related secured borrowings


2,377,504


550,000Non-Capmark Bank US:Total assets pledged as collateral


2,127,490


3,646,719Related secured borrowings


1,383,106


2,531,723


The
amounts shown above for Non-Capmark Bank US include total assets pledged as collateral related to the consolidation of certain LIHTC partnerships and assets
collateralized in securitization trusts, in the aggregate, of $595.4 million and $701.0 million as of June 30, 2008 and December 31, 2007, respectively, and related secured
borrowings in the aggregate of $483.1 million and $596.4 million as of June 30, 2008 and December 31, 2007, respectively.

18

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

12. Deposit Liabilities

The following table summarizes the Company's deposit liabilities as of June 30, 2008 and December 31, 2007, by deposit type, carried at fair value as of June 30,
2008 and at amortized cost as of December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Brokered certificates of deposit

$
4,450,687

$
5,545,976Other


4,737


6,631Total

$
4,455,424

$
5,552,607


In
connection with the Company's adoption of SFAS No. 159, the Company's brokered certificates of deposit ("Brokered CDs") are accounted for at fair value as of June 30,
2008.

The
deposits of Capmark Bank US are primarily interest-bearing, issued in denominations of $100,000 or less and insured by the Federal Deposit Insurance Corporation ("FDIC") subject to
current insurance program coverage account holder limits.

13. Income Taxes

The Company recognized approximately $4.6 million and $3.9 million of gross interest and penalties for the three months ended June 30, 2008 and 2007, respectively,
and $9.3 million and $8.0 million of gross interest and penalties for the six months ended June 30, 2008 and 2007, respectively. The Company
accrued approximately $59.0 million and $49.7 million for the payment of interest and penalties as of June 30, 2008 and December 31, 2007, respectively.

The
Company operates in multiple tax jurisdictions, both within and outside the United States. Accordingly, the Company is, from time to time, under examination in certain tax
jurisdictions and remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within specific countries, the Company may be subject to audit by various
tax authorities, or subsidiaries operating within the country may be subject to different expiration dates regarding the statute of limitations. The following table summarizes the tax years that
remain subject to examination in the Company's major tax jurisdictions as of June 30, 2008:

United StatesFederal

2001 and forwardUnited StatesIndividual States

1994 and forwardJapan

2001 and forwardIreland

2003 and forwardCanada

2005 and forwardTaiwan

2006 and forward


Based
upon the expiration of statutes of limitations and/or conclusion of tax examinations in several jurisdictions, management believes it is reasonably possible that the total amount
of previously unrecognized tax benefits as of June 30, 2008 may decrease by up to $36.6 million within the next 12 months.

The
Internal Revenue Service ("IRS") has a policy to examine the income tax returns of large corporate taxpayers, including GM and its subsidiaries. Prior to the Sponsor Transactions,
the Company was included in the GM-controlled tax group, which is currently under IRS examination for tax years

19

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

13. Income Taxes (Continued)

2001
through the Sponsor Transactions date. Subsequent to the Sponsor Transactions, the Company may be audited by federal, state, foreign and local tax authorities. Management believes that an
adequate provision for contingencies related to all income taxes and interest as of June 30, 2008 has been established in accordance with FIN 48. Pursuant to the legal agreements entered
into in connection with the Sponsor Transactions, GMAC has agreed to indemnify the Company for any and all taxes with respect to the Company and its subsidiaries relating to pre-closing
tax periods to the extent the aggregate of such taxes exceed a specified amount. Under these agreements, the Company has agreed to indemnify GMAC for any and all tax liabilities of the Company and its
subsidiaries related to pre-closing tax periods in an amount not to exceed the specified amount, which specified amount has been accrued in the Company's consolidated financial statements.

14. Fair Value of Financial Instruments

SFAS No. 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value,
and enhances disclosure requirements for fair value measurements. The Company accounts for a significant portion of its financial instruments at fair value or considers fair value in their
measurement.

Fair Value Hierarchy

In accordance with SFAS No. 157, the Company categorizes its financial instruments, based on the priority of the inputs to the
valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

As
required by SFAS No. 157, financial assets and financial liabilities recorded on the consolidated balance sheet are categorized based on the inputs to the valuation techniques
as follows:

Level 1financial
assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the
Company has the ability to access, as well as certain U.S. Treasury securities that are highly liquid and are actively traded.

Level 2financial
assets and financial liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either
directly or indirectly for
substantially the full term of the asset or liability. Level 2 inputs include the following:



20

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)



Level 3financial
assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow ("DCF")
methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Determination of Fair Value

Under SFAS No. 157, the Company determines fair value based on the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company's policy to maximize the use of observable inputs and minimize the use of
unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy as described above. Fair value measurements for assets and liabilities where there exists
limited or no observable market data and, therefore are based primarily upon management's own estimates, are calculated based upon the Company's pricing policy, the economic and competitive
environment, the characteristics of the asset or liability and other such factors. Therefore, the fair value amounts may not be realized in an actual sale or immediate settlement of the asset or
liability.

Following
is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, including those accounted for at fair value prior to
the adoption of SFAS No. 159, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities

Investment securities classified as trading and available for sale are carried at fair value. Where quoted prices are available in an
active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury
securities, GSE securities, and certain commercial mortgage products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities
with similar characteristics or discounted cash flows. Examples of instruments which would generally be classified within Level 2 of the valuation hierarchy include certain CMBS, ABS and CDOs.
In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment
securities classified within Level 3 include certain residual interests in securitizations and other less liquid investment securities.

Loans Held for Sale

In connection with the adoption of SFAS No. 159, the Company elected to account for its loans held for sale at fair value. This
allows the offsetting of the changes in fair value of the loans and the derivative instruments used to economically hedge such loans without the administrative burden of complying with the stringent
requirements for hedge accounting under SFAS No. 133. The fair values of the Company's loans held for sale are generally determined using a pricing model based on current market information
obtained from external sources, including updated securitization spreads where appropriate, interest rates, whole loan spreads for each property type based on loan-to-cost
ratios of collateral and other factors, and bids or indications provided by market participants on specific loans

21

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

that
are actively marketed for sale. In addition, the impact of potential extensions, interest-rate floors and unfunded commitments on the Company's floating rate loan portfolio are taken
into consideration when determining the fair value for each loan. The Company also considers changes in borrowers' credit status and the fair value of collateral in estimating the fair value of
certain loans. Although the Company bases its loan valuations on observable inputs to the extent possible, the valuations are estimates. Changes in market conditions, borrower credit-worthiness and
collateral values between the dates of management's estimates and the dates of disposition of the loans can have a significant impact on the amounts ultimately realized upon disposition. Due to
significant use of unobservable pricing inputs, the majority of the Company's loans held for sale as of June 30, 2008 are classified within Level 3 of the valuation hierarchy.

As
of June 30, 2008, loans held for sale for which the fair value option was elected had an aggregate fair value of $5.9 billion and an aggregate unpaid principal balance
of $6.2 billion. Interest income on these loans continues to be recorded as a component of interest income in the consolidated statement of operations. Net realized and unrealized losses of
$73.7 million and $401.2 million resulting from the changes in fair value of loans held for sale were recorded during the three and six months ended June 30, 2008, respectively,
and reported as a component of net (losses) on loans in the condensed consolidated statement of operations. In connection with the adoption of SFAS No. 159, the Company no longer defers
recognition of placement fees and direct loan origination costs with respect to its loans held for sale because such loans are carried at fair value. Previously, placement fees and direct loan
origination costs were deferred as part of the carrying amount of the loans and recognized as a component of the net gain or loss on sale of such loans.

Equity Investments

Substantially all of the Company's equity investments are accounted for under the equity method. The Company did not elect the fair
value option under SFAS No. 159 for its equity investments. The Company may elect the fair value option for certain new equity investments on an instrument-by-instrument
basis going forward. When such investments are made, the Company will consider facts and circumstances available to estimate the fair value of such equity investments and employ DCF models. In
arriving at the fair value, the Company will obtain observable market data, including data on the underlying investments that highlights competitive market conditions affecting occupancy projections,
current rental rates and growth prospects, current expense rates, capital improvement needs and certain market pricing parameters of similar quality properties. In addition, the Company will consider
access to and need for capital, qualitative assessments of the viability of the investees, evaluation of available financial statements of the investees and prospects for their future. When
appropriate, the changes in the fair value of these investments will be reported as a component of equity in income (loss) of joint ventures and partnerships in the consolidated statement of
operations.

Mortgage Servicing Rights

Mortgage servicing rights ("MSRs") are carried at the lower of amortized cost or fair value. MSRs do not trade in an active, open
market with readily observable prices. While sales of MSRs do occur, precise terms and conditions vary with each transaction and are not readily available. Accordingly, the Company estimates the fair
value of MSRs using DCF models that calculate the present value of estimated future net servicing income. These models consider and incorporate portfolio characteristics, contractually specified
servicing fees, prepayment assumptions, delinquency rates, late charges, other

22

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

ancillary
revenue, costs to service and other economic factors. The Company periodically reassesses and adjusts the underlying inputs and assumptions used in the models to reflect observable market
conditions and assumptions that a market participant would consider in valuing an MSR asset. MSRs are classified within Level 3 of the valuation hierarchy because the valuation inputs are
largely unobservable.

Derivative Instruments

Derivative instruments are carried at fair value. Exchange-traded derivative instruments that are valued using quoted market prices are
classified within Level 1 of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of the Company's derivative instruments are
valued using internally developed models that use readily observable market parameters and are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate
swaps and options and credit default swaps. Derivatives that are valued based upon models with significant unobservable market parameters are classified within Level 3 of the valuation
hierarchy. Such derivatives may include unfunded fixed-rate loan commitments.

Deposit LiabilitiesBrokered CDs

In connection with the adoption of SFAS No. 159, the Company elected to account for its Brokered CDs at fair value. To estimate
the fair value of Brokered CDs, cash flows are evaluated taking into consideration any embedded derivative features and then discounted using the appropriate market rates for the applicable
maturities. Brokered CDs are classified within Level 2 of the valuation hierarchy because the valuation inputs are primarily based on readily observable pricing information.

The
fair value option for Brokered CDs allows the offsetting of the changes in fair value of the Brokered CDs and the derivative instruments used to economically hedge such deposits
without the administrative burden of complying with the stringent requirements for hedge accounting under SFAS No. 133. Interest expense on these Brokered CDs continues to be recorded as a
component of interest expense in the consolidated statement of operations. Net gains of $22.5 million and $11.3 million resulting from the changes in fair value of these deposits were
recorded during the three and six months ended June 30, 2008, respectively, and reported as a component of other gains, net in the condensed consolidated statement of operations.

23

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

The
following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis, including financial instruments for which the Company has
elected the fair value option (in thousands):

Description

Quoted Prices In
Active Markets For
Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Counterparty
and Cash
Collateral
Netting

Balance as of
June 30,
2008Assets:Investment securities:Trading

$


$
55,300

$
102,566

$


$
157,866Available for sale


38,783


235,433


650,951





925,167Loans held for sale(1)





821,560


5,034,261





5,855,821Derivative assets


2,106


149,668


1,719


(48,297
)

105,196Total assets

$
40,889

$
1,261,961

$
5,789,497

$
(48,297
)
$
7,044,050Liabilities:Deposit liabilitiesBrokered CDs

$


$
4,450,687

$


$


$
4,450,687Derivative liabilities


18,542


26,728


1,422


10,532


57,224Total liabilities

$
18,542

$
4,477,415

$
1,422

$
10,532

$
4,507,911


---

Note:

With
respect to the Company's loans held for sale for which the fair value option has been elected, the aggregate fair value of loans that were 90 days or more
past due totaled $41.5 million of which the aggregate unpaid principal balance of such loans exceeded fair value by $13.2 million; and the aggregate fair value of loans in nonaccrual
status totaled $109.0 million of which the aggregate unpaid principal balance of such loans exceeded fair value by $65.9 million.

24

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

The
following table summarizes the changes in fair value of the Company's Level 3 financial assets and financial liabilities for the three months ended June 30, 2008 (in
thousands):

Investment
Securities
Trading

Investment
Securities
Available
for Sale

Loans Held
for Sale

Net
Derivatives

TotalEnding balance as of March 31, 2008

$
110,979

$
701,562

$
7,272,175

$
5,964

$
8,090,680Purchases, issuances, sales and settlements


(3,092
)

(14,533
)

(2,148,682
)




(2,166,307
)Total net realized/unrealized losses:Included in earnings


(5,313
)

(3,167
)

(73,857
)

(5,044
)

(87,381
)Included in other comprehensive income


(8
)

(32,911
)

(15,356
)




(48,275
)Net transfers out of Level 3








(19
)

(623
)

(642
)Ending balance as of June 30, 2008

$
102,566

$
650,951

$
5,034,261

$
297

$
5,788,075The amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held as of June 30,
2008

$
(5,313
)
$
(3,164
)
$
(100,287
)
$
(5,044
)
$
(113,808
)


The
following table summarizes the changes in fair value of the Company's Level 3 financial assets and financial liabilities for the six months ended
June 30, 2008 (in thousands):

Investment
Securities
Trading

Investment
Securities
Available
for Sale

Loans Held
for Sale

Net
Derivatives

TotalEnding balance as of December 31, 2007

$
126,878

$
675,254

$
7,508,926

$
3,567

$
8,314,625Transition adjustment








1,911





1,911Beginning balance as of January 1, 2008


126,878


675,254


7,510,837


3,567


8,316,536Purchases, issuances, sales and settlements


(1,695
)

(11,557
)

(2,335,673
)




(2,348,925
)Total net realized/unrealized gains (losses):Included in earnings


(23,149
)

(8,058
)

(392,369
)

(3,089
)

(426,665
)Included in other comprehensive income


532


(4,688
)

197,098





192,942Net transfers in to/(out of) Level 3








54,368


(181
)

54,187Ending balance as of June 30, 2008

$
102,566

$
650,951

$
5,034,261

$
297

$
5,788,075The amount of total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held as of June 30,
2008

$
(23,131
)
$
(8,055
)
$
(273,237
)
$
(3,090
)
$
(307,513
)


25

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

The tables above summarize the changes in fair value for all financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during
the three and six months ended June 30, 2008. Level 3 financial assets presented in the tables include investment securities classified as
trading and available for sale, loans held for sale, and net derivatives. These instruments were valued using pricing models and DCF models that incorporate assumptions, which in management's
judgment, reflect the assumptions a marketplace participant would use.

Certain
financial assets are measured at fair value on a nonrecurring basis. The carrying value of certain impaired loans held for investment is primarily based on (i) the appraised
value of the underlying collateral less estimated selling costs or (ii) the present value of expected future cash flows, which often results in significant assumptions and input with respect to the
determination of fair value (Level 3). The following table presents the changes in carrying value of those assets measured at fair value on a nonrecurring basis, for which impairment was
recognized for the three and six months ended June 30, 2008 (in thousands):

Quoted Prices In
Active Markets
For Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance
as of
June 30,
2008

Total (losses)
for the three
months ended
June 30,
2008

Total (losses)
for the six
months ended
June 30,
2008Loans held for investment

$


$


$
15,371

$
15,371

$
(5,298
)
$
(9,139
)


During
the three months ended June 30, 2008, loans held for investment with a carrying amount of $11.3 million were written down to their fair value of $6.9 million,
less costs to sell of $0.9 million (or $6.0 million), resulting in a loss of $5.3 million. During the six months ended June 30, 2008, loans held for investment with a
carrying amount of $24.5 million were written down to their fair value of $16.8 million, less costs to sell of $1.4 million (or $15.4 million), resulting in a loss of
$9.1 million. These losses were recorded as an increase to the allowance for loan losses.

SFAS
No. 159 requires that the difference between the carrying value of the financial instrument before the election of the fair value option and the fair value of the instrument
be recorded as an adjustment to beginning retained earnings in the period of adoption. The following table summarizes the impact of adopting the fair value option on January 1, 2008. Amounts
shown represent the carrying value of the affected financial instruments before and after the change in accounting resulting from the adoption of SFAS No. 159 (in thousands):

Description

Carrying Value of
Instrument as of
December 31,
2007

Cumulative Effect
Adjustment
Gain or (Loss)

Carrying Value of
Instrument as of
January 1,
2008 After
Adoption of
SFAS No. 159Loans held for sale(1)

$
7,744,180

$
1,911

$
7,746,091Deposit liabilities(2)


5,540,850


(17,506
)

5,558,356Pre-tax cumulative effect of adopting the fair value option





(15,595
)Benefit for deferred income taxes





(5,790
)After-tax cumulative effect of adopting the fair value option




$
(9,805
)


26

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

---

Notes:

15. Derivative Instruments

The Company primarily uses derivative instruments in connection with its risk management activities. The Company's primary objective in utilizing these derivative instruments is to
minimize market risk volatility associated with interest rate and foreign currency risks related to the Company's assets and liabilities. Minimizing this volatility enables the Company to mitigate the
impact of market risk on earnings.

The
derivative instruments that the Company uses include swaps, caps, forwards, options, swaptions, spread locks, loan commitments and treasury-related derivative instruments, and may be
exchange-traded or contracted in the over-the-counter market.

In
contemplation of the adoption of SFAS No. 159, the Company discontinued fair value hedge accounting for its pools of fixed rate loans held for sale in late 2007. Also in 2007,
the Company
terminated its interest rate swaps (cash flow hedges) associated with a portion of the escrow funds maintained and managed by Escrow Bank USA ("Escrow Bank"), a wholly-owned subsidiary of the Company.

16. Stock-Based Compensation

In connection with the Sponsor Transactions, the Company implemented a stock option award program which provides Management Stockholders with the option to purchase additional shares of
common stock at a specified price, once certain time-based and performance-based vesting conditions are met. These stock options are generally granted on five-year graded
vesting schedules with certain requisite service conditions. The options expire ten years after the grant date. Certain of these stock options become vested if the Company achieves specific annual
performance targets.

The
following table summarizes stock option activity and related information for the six months ended June 30, 2008 (number of options in thousands):

Six months ended June 30, 2008Number
of Options

Weighted
average exercise
price per shareOptions outstanding as of the beginning of the period


44,731

$
5.04Options granted


409


6.10Options exercised





Options forfeited


2,872


5.07Options cancelled


661


5.00Options expired





Options outstanding as of the end of the period


41,607

$
5.05Options exercisable as of the end of the period


15,417

$
5.01


27

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

16. Stock-Based Compensation (Continued)

Time-based
options relating to 7.9 million shares of common stock vested during the six months ended June 30, 2008, of which
time-based options relating to 7.7 million shares were exercisable as of June 30, 2008.

There
were 9.4 million and 6.5 million shares available for future grants of options as of June 30, 2008 and December 31, 2007, respectively.

The
weighted average grant-date fair value of options granted during the six months ended June 30, 2008 was $1.96. The fair value of the option awards was measured as
of the grant date
and estimated through a Black-Scholes option-pricing model. Because the Company's common stock is not traded publicly, certain assumptions were determined using appropriate industry sector benchmarks.

The
Company recorded $1.8 million (net of tax benefit of $2.0 million) and $1.9 million (net of tax benefit of $1.3 million) in compensation expense
associated with the vesting of time-based options for the three months ended June 30, 2008 and 2007, respectively, and $6.0 million (net of tax benefit of
$4.5 million) and $5.6 million (net of tax benefit of $3.4 million) for the six months ended June 30, 2008 and 2007, respectively. No compensation expense has been
recognized in 2008 or 2007 for performance-based options because the performance criteria have not been met. There was $36.6 million of unrecognized compensation expense related to
non-vested option awards as of June 30, 2008, including performance-based option awards. This cost is expected to be recognized over a weighted average period of 2.6 years.

17. Guarantees

In the ordinary course of business, the Company issues various guarantees. The Company's outstanding guarantees as of June 30, 2008 and December 31, 2007 consisted of the
following (in thousands):

June 30, 2008

December 31, 2007Maximum
liability

Carrying value
of liability

Maximum
liability

Carrying value
of liabilityAgency/construction lending guarantees

$
294,360

$
992

$
407,738

$
2,089Agency loans sold with recourse


638,348


16,420


543,462


13,917Other third party guarantees


272,416





272,771


Total

$
1,205,124

$
17,412

$
1,223,971

$
16,006


18. Commitments and Contingent Liabilities

The Company holds variable interests in syndicated affordable housing partnerships where the Company provides unaffiliated investors with a guaranteed yield on their investment. These
partnerships are reflected in the Company's consolidated financial statements under the financing method in accordance with SFAS No. 66, "Accounting for Sales of Real Estate." The Company's
maximum exposure to loss as of June 30, 2008 was $1.7 billion.

The
Company is subject to potential liability under laws and government regulations, and various claims and legal actions that are pending or may be asserted against it. As of
June 30, 2008, after consultation with counsel, it is the opinion of management that potential liability arising from pending

28

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

18. Commitments and Contingent Liabilities (Continued)

litigation
is not expected to have a material adverse effect on the Company's consolidated financial statements.

19. Related Party Transactions

The Company has entered into a number of related party transactions in conjunction with its business as more fully discussed in Note 23 to its 2007 audited consolidated financial
statements. A number of these transactions arose in connection with the Sponsor Transactions, such as the annual management fees paid to the Sponsors and GMAC; transaction fees paid to certain members
of the Sponsors related to the issuance of debt including the Company's senior credit facility and bridge loan; and interest paid to GMAC in connection with the Company's junior subordinated
debentures. The Company's related party transactions also include the following transactions, made in the ordinary course of business, with entities that may be owned or sponsored by either members or
affiliates of the Sponsors or by entities affiliated with our directors: commercial mortgage loans, purchases and sales of real estate-related investments, and derivative transactions. Related party
transactions also include debt financing arrangements with equity method investees; servicing of dealership loans owned by an affiliate of GMAC; sale of businesses to and facility leasing arrangements
with former employees; and certain expense reimbursements made to the Chief Executive Officer. The financial impacts related to these transactions have been properly reflected in the Company's
condensed consolidated financial statements. The Company has not entered into any additional material related party transactions subsequent to December 31, 2007.

20. Segment Information

The operating results for the Company's six reportable business segments have been determined in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." This standard is based on a management approach, which requires presentation of business segments based upon a company's organization and internal reporting of operating results
to the company's chief operating decision maker. The Company's chief operating decision maker is its Chief Executive Officer. The accounting policies of the Company's business segments are the same as
those described in Note 3, except that disaggregated results have been prepared using a management approach, which is substantially consistent with the basis and manner in which management
internally disaggregates financial information for the purpose of assisting in the operating-decision process. Material intersegment transactions have been eliminated in consolidation.

The
Company's business segments are managed and organized based on geography and the type of business conducted. The Company has six reportable business segments: North American Lending
and Mortgage Banking, North American Investments and Funds Management, North American Servicing, Asian Operations, European Operations and North American Affordable Housing.

29

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

20. Segment Information (Continued)

The
following table summarizes the financial results for the Company's reportable business segments for the three months ended June 30, 2008 (in thousands):

SegmentsNorth
American
Lending and
Mortgage
Banking

North
American
Investments
and Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate
& Other

ConsolidatedNet interest income

$
84,829

$
686

$
(3,695
)
$
2,132

$
5,693

$
3,095

$
(40,163
)
$
52,577Noninterest income


44,863


(27,559
)

76,008


13,570


(35,973
)

(4,406
)

49,512


116,015Total revenue


129,692


(26,873
)

72,313


15,702


(30,280
)

(1,311
)

9,349


168,592Provision for loan losses


8,043








2,559


(591
)




379


10,390Net revenue


121,649


(26,873
)

72,313


13,143


(29,689
)

(1,311
)

8,970


158,202Noninterest expense


47,691


7,054


45,877


22,585


14,984


9,794


51,950


199,935Income (loss) before minority interest and income taxes


73,958


(33,927
)

26,436


(9,442
)

(44,673
)

(11,105
)

(42,980
)

(41,733
)Minority interest income (expense)


6,014


12,909





(3,621
)







8,875


24,177Income (loss) before income taxes

$
79,972

$
(21,018
)
$
26,436

$
(13,063
)
$
(44,673
)
$
(11,105
)
$
(34,105
)
$
(17,556
)Total assets at end of period

$
12,815,732

$
1,041,167

$
899,785

$
2,852,320

$
822,914

$
951,009

$
1,968,461

$
21,351,388


30

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

20. Segment Information (Continued)

The following table summarizes the financial results for the Company's reportable business segments for the three months ended June 30, 2007 (in thousands):

SegmentsNorth
American
Lending and
Mortgage
Banking

North
American
Investments
and Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
Other

ConsolidatedNet interest income

$
58,818

$
1,523

$
(4,254
)
$
13,270

$
9,872

$
1,957

$
(6,192
)
$
74,994Noninterest income


73,730


79,056


107,501


14,730


57,838


1,516


(90,795
)

243,576Total revenue


132,548


80,579


103,247


28,000


67,710


3,473


(96,987
)

318,570Provision for loan losses


(71
)

(12
)

39


(127
)

(1,242
)

59


6,745


5,391Net revenue


132,619


80,591


103,208


28,127


68,952


3,414


(103,732
)

313,179Noninterest expense


75,867


19,408


52,820


24,069


20,822


7,710


(11,561
)

189,135Income (loss) before minority interest and income taxes


56,752


61,183


50,388


4,058


48,130


(4,296
)

(92,171
)

124,044Minority interest income (expense)


4,704


(8,075
)




678








26,033


23,340Income (loss) before income taxes

$
61,456

$
53,108

$
50,388

$
4,736

$
48,130

$
(4,296
)
$
(66,138
)
$
147,384Total assets at end of period

$
11,077,086

$
1,300,971

$
898,513

$
2,207,728

$
3,038,094

$
1,168,683

$
2,625,050

$
22,316,125


The following table summarizes the financial results for the Company's business segments for the six months ended June 30, 2008 (in
thousands):

SegmentsNorth
American
Lending and
Mortgage
Banking

North
American
Investments
and Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
Other

ConsolidatedNet interest income

$
162,854

$
1,305

$
(7,782
)
$
9,496

$
10,545

$
802

$
(63,540
)
$
113,680Noninterest income


(29,874
)

(10,070
)

155,121


16,929


(279,555
)

713


69,527


(77,209
)Total revenue


132,980


(8,765
)

147,339


26,425


(269,010
)

1,515


5,987


36,471Provision for loan losses


13,011








5,384


(633
)




257


18,019Net revenue


119,969


(8,765
)

147,339


21,041


(268,377
)

1,515


5,730


18,452Noninterest expense


95,561


20,423


97,650


49,676


22,898


18,415


103,922


408,545Income (loss) before minority interest and income taxes


24,408


(29,188
)

49,689


(28,635
)

(291,275
)

(16,900
)

(98,192
)

(390,093
)Minority interest income (expense)


14,620


8,674





(3,547
)







19,928


39,675Income (loss) before income taxes

$
39,028

$
(20,514
)
$
49,689

$
(32,182
)
$
(291,275
)
$
(16,900
)
$
(78,264
)
$
(350,418
)Total assets at end of period

$
12,815,732

$
1,041,167

$
899,785

$
2,852,320

$
822,914

$
951,009

$
1,968,461

$
21,351,388


31

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

20. Segment Information (Continued)

The following table summarizes the financial results for the Company's business segments for the six months ended June 30, 2007 (in
thousands):

SegmentsNorth
American
Lending and
Mortgage
Banking

North
American
Investments
and Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
Other

ConsolidatedNet interest income

$
119,899

$
6,443

$
(7,716
)
$
26,358

$
19,001

$
(1,646
)
$
(3,791
)
$
158,548Noninterest income


184,814


173,178


207,099


81,918


86,533


50,320


(96,290
)

687,572Total revenue


304,713


179,621


199,383


108,276


105,534


48,674


(100,081
)

846,120Provision for loan losses


104


539


(87
)

4,352


(1,559
)

1,559


6,802


11,710Net revenue


304,609


179,082


199,470


103,924


107,093


47,115


(106,883
)

834,410Noninterest expense


145,707


48,844


105,059


46,808


30,675


23,185


24,710


424,988Income (loss) before minority interest and income taxes


158,902


130,238


94,411


57,116


76,418


23,930


(131,593
)

409,422Minority interest income (expense)


10,146


(13,228
)




(3,078
)







20,966


14,806Income (loss) before income taxes

$
169,048

$
117,010

$
94,411

$
54,038

$
76,418

$
23,930

$
(110,627
)
$
424,228Total assets at end of period

$
11,077,086

$
1,300,971

$
898,513

$
2,207,728

$
3,038,094

$
1,168,683

$
2,625,050

$
22,316,125


21. Regulatory Matters

Certain subsidiaries of the Company are subject to GSE and the Department of Housing and Urban Development minimum net worth requirements. Failure to meet minimum net worth requirements
can
result in the initiation of certain actions by these entities that, if undertaken, could have a material adverse effect on the Company's consolidated financial statements. The Company was in
compliance with these minimum net worth requirements as of June 30, 2008.

Capmark
Bank US and Escrow Bank must maintain minimum regulatory capital ratios to qualify as "well capitalized" under the capital rules of the FDIC. In addition, both banks have agreed
with the FDIC to maintain a Tier 1 leverage ratio of not less than 8.0%. Recently, Escrow Bank ceased its trust operations and the trust customers of Escrow Bank appointed Capmark Bank US as
their new trustee. Following the cessation of trust operations, Escrow Bank no longer has any daily operations and has requested permission from the FDIC to terminate its deposit insurance as of
September 30, 2008. If such request is granted, Escrow Bank will no longer be subject to the capital rules of the FDIC. The following table summarizes the U.S. banks' regulatory capital ratios
as of June 30, 2008 and December 31, 2007:

June 30, 2008

December 31, 2007Ratios to qualify as
"Well-Capitalized"

Capmark
Bank US

Escrow
Bank

Capmark
Bank US

Escrow
BankLeverage


5.0
%

11.8
%

46.3
%

11.6
%

61.9
%Tier 1 risk-based


6.0
%

11.1
%

446.5
%

12.4
%

387.5
%Total risk-based


10.0
%

13.4
%

446.5
%

14.8
%

387.5
%


32

---



Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

21. Regulatory Matters (Continued)

Capmark
Bank Europe, a wholly-owned subsidiary of the Company, is required to comply with various laws, rules and regulations in Ireland. These requirements, among others, require
Capmark Bank Europe to maintain certain capital adequacy and liquidity ratios calculated in accordance with applicable laws and related accounting standards in Ireland. In July 2008, Capmark Bank
Europe notified the Irish banking regulatory authority that, in connection with the Company's decision to end proprietary lending in Europe, Capmark Bank Europe is commencing cessation of its banking
operations. In connection with the wind-down of banking activities, Capmark Bank Europe will voluntarily surrender its banking license once it has repaid all of its deposits and unwound or
transferred to a third party all of the obligations under which it is required to hold a banking license. The Company expects that the process of winding down Capmark Bank Europe's banking activities
will be completed and the banking license will be relinquished prior to December 31, 2008. Following the relinquishment of the license, Capmark Bank Europe will no longer be required to comply
with the capital adequacy and liquidity ratios described above.

The
following table summarizes Capmark Bank Europe's regulatory capital adequacy and liquidity ratios as of June 30, 2008 and December 31, 2007:

Ratio
minimum

June 30,
2008

December 31,
2007Capital adequacy


15
%

46
%

64
%Liquidity


100
%

124
%

113
%


Capmark
Securities Inc., a wholly-owned subsidiary of the Company, is subject to the SEC's minimum net capital requirements. Capmark Securities Inc.'s net capital
requirement was $250,000 as of June 30, 2008 and December 31, 2007. Capmark Securities Inc.'s net capital totaled $20.9 million and $21.3 million as of
June 30, 2008 and December 31, 2007, respectively.

22. Earnings per Share

The tables below demonstrate how the Company has computed basic and diluted earnings per share. The denominator in each of the tables below includes shares of common stock issued and
sold to employees and non-employee directors, which are reported as mezzanine equity in the condensed consolidated balance sheet.

Three months
ended June 30,
2008

Three months
ended June 30,
2007

Six months
ended June 30,
2008

Six months
ended June 30,
2007(In thousands, except per share amounts)Basic earnings per shareNumerator:Net income (loss)

$
11,489

$
89,484

$
(201,370
)
$
264,934Denominator:Weighted average shares
outstanding


432,263


432,177


432,602


432,493Basic income (loss) per share

$
0.03

$
0.21

$
(0.47
)
$
0.61


33

---



Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

22. Earnings per Share (Continued)



Three months
ended June 30,
2008

Three months
ended June 30,
2007

Six months
ended June 30,
2008

Six months
ended June 30,
2007(In thousands, except per share amounts)Diluted earnings per shareNumerator:Net income (loss)

$
11,489

$
89,484

$
(201,370
)
$
264,934Denominator:Weighted average shares outstanding


432,263


432,177


432,602


432,493Effect of dilutive securities


2,231








Weighted average shares outstanding


434,494


432,177


432,602


432,493Diluted income (loss) per share

$
0.03

$
0.21

$
(0.47
)
$
0.61


The
calculation of diluted earnings per share for the three months ended June 30, 2008 and 2007 excludes 2.2 million and 36.0 million, respectively,
anti-dilutive stock options with time-based vesting conditions. Additionally, the calculation of diluted earnings per share for the three months ended June 30, 2008 and
2007 excludes 9.5 million and 11.5 million, respectively, stock options with performance-based vesting conditions because the performance conditions had not been achieved at the end of
the reporting period.

The
calculation of diluted earnings per share for the six months ended June 30, 2008 and 2007 excludes 32.1 million and 36.0 million, respectively,
anti-dilutive stock options with time-based vesting conditions. Additionally, the calculation of diluted earnings per share for the six months ended June 30, 2008 and
2007 excludes 9.5 million and 11.5 million, respectively, stock options with performance-based vesting conditions because the performance conditions had not been achieved at the end of
the reporting period.

34

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information

Certain wholly-owned subsidiaries of the Company have guaranteed the Company's borrowings under its senior unsecured credit facilities. The guarantees are full and unconditional, joint
and several. The following supplemental financial information presents the condensed consolidating balance sheet,
statement of operations and statement of cash flows for the parent company, the guarantor subsidiaries and the non-guarantor subsidiaries.

Condensed Consolidating Balance Sheet  June 30, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsCash, cash equivalents and restricted cash

$
89,005

$
10,047

$
826,897

$


$
925,949Investment securitiestrading





97,840


60,026





157,866Investment securitiesother





378,306


633,257


(86,396
)

925,167Loans held for sale





2,048,941


4,040,026


(195,602
)

5,893,365Loans held for investment





937,006


6,850,756


(256,137
)

7,531,625Real estate investments





163


1,812,290


(523
)

1,811,930Equity investments


49,383


341,323


1,483,255


(7,278
)

1,866,683Other assets


6,664,838


1,466,060


2,118,757


(8,010,852
)

2,238,803Investment in subsidiaries


2,866,726


213,398





(3,080,124
)

Total assets

$
9,669,952

$
5,493,084

$
17,825,264

$
(11,636,912
)
$
21,351,388Liabilities and Stockholders' EquityLiabilities:Short-term borrowings

$
650,000

$
555,657

$
2,682,266

$
(129,237
)
$
3,758,686Long-term borrowings


6,330,683





2,236,595


(261,778
)

8,305,500Deposit liabilities








4,455,424





4,455,424Real estate syndication proceeds and related liabilities








1,412,693





1,412,693Other liabilities


306,547


3,464,223


5,092,559


(8,127,226
)

736,103Total liabilities


7,287,230


4,019,880


15,879,537


(8,518,241
)

18,668,406Commitments and Contingent Liabilities














Minority Interest





118,788


194,650


(13,178
)

300,260Mezzanine Equity


95,815











95,815Stockholders' Equity:Preferred stock














Common stock


413


786


144,220


(145,006
)

413Other stockholders' equity


2,286,494


1,353,630


1,606,857


(2,960,487
)

2,286,494Total stockholders' equity


2,286,907


1,354,416


1,751,077


(3,105,493
)

2,286,907Total liabilities and stockholders' equity

$
9,669,952

$
5,493,084

$
17,825,264

$
(11,636,912
)
$
21,351,388


35

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsCash, cash equivalents and restricted cash

$
7,421

$
213,661

$
1,215,670

$


$
1,436,752Investment securitiestrading


21,300


98,603


65,789





185,692Investment securitiesother





373,590


635,358


(59,266
)

949,682Loans held for sale





2,453,401


5,582,228


(251,860
)

7,783,769Loans held for investment





981,655


6,123,644


(213,585
)

6,891,714Real estate investments








1,748,555





1,748,555Equity investments


47,443


369,589


1,584,782


(17,674
)

1,984,140Other assets


8,040,133


1,505,763


2,039,532


(9,301,336
)

2,284,092Investment in subsidiaries


3,007,950


210,375





(3,218,325
)

Total assets

$
11,124,247

$
6,206,637

$
18,995,558

$
(13,062,046
)
$
23,264,396Liabilities and Stockholders' Equity Liabilities:Short-term borrowings

$
408,197

$
842,032

$
2,679,563

$
(97,155
)
$
3,832,637Long-term borrowings


7,035,619





1,467,185


(195,118
)

8,307,686Deposit liabilities








5,554,607


(2,000
)

5,552,607Real estate syndication proceeds and related liabilities








1,563,151





1,563,151Other liabilities


1,071,380


3,801,712


5,653,202


(9,457,226
)

1,069,068Total liabilities


8,515,196


4,643,744


16,917,708


(9,751,499
)

20,325,149Commitments and Contingent Liabilities














Minority Interest





113,357


230,437


(13,598
)

330,196Mezzanine Equity


102,418











102,418Stockholders' Equity:Preferred stock














Common stock


413


786


124,206


(124,992
)

413Other stockholders' equity


2,506,220


1,448,750


1,723,207


(3,171,957
)

2,506,220Total stockholders' equity


2,506,633


1,449,536


1,847,413


(3,296,949
)

2,506,633Total liabilities and stockholders' equity

$
11,124,247

$
6,206,637

$
18,995,558

$
(13,062,046
)
$
23,264,396


36

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Three months ended June 30, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
60,055

$
84,005

$
176,007

$
(83,230
)
$
236,837Interest expense


70,174


60,617


136,905


(83,436
)

184,260Net interest income


(10,119
)

23,388


39,102


206


52,577Provision for loan losses





(1,712
)

14,645


(2,543
)

10,390Net interest income after provision for loan losses


(10,119
)

25,100


24,457


2,749


42,187Noninterest IncomeNet (losses) gains


(66,943
)

44,107


10,535


392


(11,909
)Fee and investment income


39


71,466


47,127


9,292


127,924Total noninterest income


(66,904
)

115,573


57,662


9,684


116,015Net revenue


(77,023
)

140,673


82,119


12,433


158,202Noninterest ExpenseCompensation and benefits


(40
)

52,048


24,416





76,424Other expenses


13,869


62,654


23,853


23,135


123,511Total noninterest expense


13,829


114,702


48,269


23,135


199,935(Loss) income before minority interest and income taxes


(90,852
)

25,971


33,850


(10,702
)

(41,733
)Minority interest income





5,991


18,673


(487
)

24,177(Loss) income before income taxes


(90,852
)

31,962


52,523


(11,189
)

(17,556
)Income taxes


(52,191
)

10,011


14,493


(1,358
)

(29,045
)(Loss) income before equity in net earnings (losses) of subsidiaries


(38,661
)

21,951


38,030


(9,831
)

11,489Equity in net earnings (losses) of subsidiaries


50,150


(24,610
)




(25,540
)

Net Income (Loss)

$
11,489

$
(2,659
)
$
38,030

$
(35,371
)
$
11,489


37

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Three months ended June 30, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
104,214

$
156,848

$
217,881

$
(197,668
)
$
281,275Interest expense


110,967


125,267


175,727


(205,680
)

206,281Net interest income


(6,753
)

31,581


42,154


8,012


74,994Provision for loan losses





(1,439
)

5,273


1,557


5,391Net interest income after provision for loan losses


(6,753
)

33,020


36,881


6,455


69,603Noninterest IncomeNet (losses) gains


(12,229
)

5,507


10,599


(2,623
)

1,254Fee and investment income


20,633


151,228


150,562


(80,101
)

242,322Total noninterest income


8,404


156,735


161,161


(82,724
)

243,576Net revenue


1,651


189,755


198,042


(76,269
)

313,179Noninterest ExpenseCompensation and benefits


(65
)

46,408


42,292


(152
)

88,483Other expenses


7,340


99,601


69,562


(75,851
)

100,652Total noninterest expense


7,275


146,009


111,854


(76,003
)

189,135(Loss) income before minority interest and income taxes


(5,624
)

43,746


86,188


(266
)

124,044Minority interest income








15,957


7,383


23,340(Loss) income before income taxes


(5,624
)

43,746


102,145


7,117


147,384Income taxes


258


16,337


34,772


6,533


57,900(Loss) income before equity in net earnings (losses) of subsidiaries


(5,882
)

27,409


67,373


584


89,484Equity in net earnings (losses) of subsidiaries


95,366


(13,967
)




(81,399
)

Net Income

$
89,484

$
13,442

$
67,373

$
(80,815
)
$
89,484


38

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Six months ended June 30, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
137,681

$
192,527

$
379,784

$
(196,177
)
$
513,815Interest expense


173,537


127,540


295,172


(196,114
)

400,135Net interest income


(35,856
)

64,987


84,612


(63
)

113,680Provision for loan losses





(6,253
)

26,857


(2,585
)

18,019Net interest income after provision for loan losses


(35,856
)

71,240


57,755


2,522


95,661Noninterest IncomeNet (losses)


(295,025
)

(19,704
)

(46,687
)

(147
)

(361,563
)Fee and investment income


1,221


139,066


137,977


6,090


284,354Total noninterest income


(293,804
)

119,362


91,290


5,943


(77,209
)Net revenue


(329,660
)

190,602


149,045


8,465


18,452Noninterest ExpenseCompensation and benefits


(40
)

116,047


50,054





166,061Other expenses


21,426


138,021


68,250


14,787


242,484Total noninterest expense


21,386


254,068


118,304


14,787


408,545(Loss) income before minority interest and income taxes


(351,046
)

(63,466
)

30,741


(6,322
)

(390,093
)Minority interest income





14,793


25,326


(444
)

39,675(Loss) income before income taxes


(351,046
)

(48,673
)

56,067


(6,766
)

(350,418
)Income taxes


(149,317
)

(19,827
)

13,698


6,398


(149,048
)(Loss) income before equity in net earnings (losses) of subsidiaries


(201,729
)

(28,846
)

42,369


(13,164
)

(201,370
)Equity in net earnings (losses) of subsidiaries


359


(46,595
)




46,236


Net (Loss) Income

$
(201,370
)
$
(75,441
)
$
42,369

$
33,072

$
(201,370
)


39

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Six months ended June 30, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
217,090

$
296,886

$
403,727

$
(339,011
)
$
578,692Interest expense


218,082


242,414


301,933


(342,285
)

420,144Net interest income


(992
)

54,472


101,794


3,274


158,548Provision for loan losses





307


10,172


1,231


11,710Net interest income after provision for loan losses


(992
)

54,165


91,622


2,043


146,838Noninterest IncomeNet (losses) gains


(16,661
)

105,920


77,113


14,224


180,596Fee and investment income


27,468


264,441


305,718


(90,651
)

506,976Total noninterest income


10,807


370,361


382,831


(76,427
)

687,572Net revenue


9,815


424,526


474,453


(74,384
)

834,410Noninterest ExpenseCompensation and benefits


(137
)

139,792


69,068


(211
)

208,512Other expenses


14,202


167,351


132,504


(97,581
)

216,476Total noninterest expense


14,065


307,143


201,572


(97,792
)

424,988(Loss) income before minority interest and income taxes


(4,250
)

117,383


272,881


23,408


409,422Minority interest income








1,722


13,084


14,806(Loss) income before income taxes


(4,250
)

117,383


274,603


36,492


424,228Income taxes


(1,596
)

43,037


99,899


17,954


159,294(Loss) income before equity in net earnings of subsidiaries


(2,654
)

74,346


174,704


18,538


264,934Equity in net earnings of subsidiaries


267,588


33,758





(301,346
)

Net Income

$
264,934

$
108,104

$
174,704

$
(282,808
)
$
264,934


40

---





Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Six months ended June 30, 2008  (in thousands)

Parent

Guarantor Subsidiaries

Non-Guarantor Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash provided by operating activities

$
577,814

$
49,361

$
706,363

$
39,758

$
1,373,296Investing ActivitiesNet (increase) decrease in restricted cash





(429
)

32,871





32,442Net (increase) decrease in investment securitiesother





(22,245
)

5,961


18,048


1,764Net decrease (increase) in mortgage loans held for investment





29,321


(705,075
)

40,147


(635,607
)Net (increase) in real estate investments





(163
)

(13,834
)

69


(13,928
)Net (increase) in equity investments


(195
)

(96
)

(15,934
)

(35,542
)

(51,767
)Other investing activities, net





(14,073
)

(2,995
)

(1
)

(17,069
)Net cash (used in) investing activities


(195
)

(7,685
)

(699,006
)

22,721


(684,165
)Financing ActivitiesNet increase (decrease) in short-term borrowings


236,915


(260,322
)

(70,710
)

(58,174
)

(152,291
)Net (decrease) increase in long-term borrowings


(700,599
)




720,957


(4,481
)

15,877Net (decrease) in deposit liabilities








(1,100,507
)

2,000


(1,098,507
)Real estate syndication proceeds received








33,197





33,197Other financing activities, net


(32,360
)

14,986


42,238


(1,824
)

23,040Net cash (used in) financing activities


(496,044
)

(245,336
)

(374,825
)

(62,479
)

(1,178,684
)Effect of Foreign Exchange Rates on Cash


9


(383
)

11,566





11,192Net Increase (Decrease) in Cash and Cash Equivalents


81,584


(204,043
)

(355,902
)




(478,361
)Cash and Cash Equivalents, Beginning of Period


7,421


205,785


991,271





1,204,477Cash and Cash Equivalents, End of Period

$
89,005

$
1,742

$
635,369

$


$
726,116


41

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Table of Contents

CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

23. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Six months ended June 30, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash (used in) provided by operating activities

$
(220,698
)
$
696,048

$
(2,393,972
)
$
16,419

$
(1,902,203
)Investing ActivitiesNet decrease (increase) in restricted cash





26,508


(23,852
)




2,656Net decrease (increase) in investment securitiesother


33,399


(345,246
)

677,895


(110,278
)

255,770Net decrease in mortgage loans held for investment





143,707


461,776


17,243


622,726Net decrease (increase) in real estate investments





3,143


(350,552
)

(2,119
)

(349,528
)Net decrease (increase) in equity investments


41,577


(150,348
)

(191,116
)

90,699


(209,188
)Other investing activities, net


(3,156
)

(51,059
)

11,199


(445
)

(43,461
)Net cash provided by (used in) investing activities


71,820


(373,295
)

585,350


(4,900
)

278,975Financing ActivitiesNet (decrease) increase in short-term borrowings


(570,104
)

215,157


463,200


28,424


136,677Net increase (decrease) in long-term borrowings


501,170


(727,850
)

(601,222
)

39,690


(788,212
)Net increase in deposit liabilities








2,032,449


125,000


2,157,449Real estate syndication proceeds received








181,584





181,584Other financing activities, net


92,836


192,221


(117,618
)

(79,547
)

87,892Net cash provided by (used in) financing activities


23,902


(320,472
)

1,958,393


113,567


1,775,390Effect of Foreign Exchange Rates on Cash


11


64


9,686





9,761Net (Decrease) Increase in Cash and Cash Equivalents


(124,965
)

2,345


159,457


125,086


161,923Cash and Cash Equivalents, Beginning of Period


125,228


6,765


318,939


(125,128
)

325,804Cash and Cash Equivalents, End of Period

$
263

$
9,110

$
478,396

$
(42
)
$
487,727


42

---





Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

As used herein, the terms "we," "us" and "our" refer to Capmark and its subsidiaries as a consolidated group, except where it is clear
that the term means only Capmark.

Our
"Management's Discussion and Analysis of Financial Condition and Results of Operations" is organized as follows:



Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify
these statements by our use of forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential," "project," "intend," "could" or
similar expressions. In particular, statements regarding our plans, strategies, prospects and expectations regarding our business are forward-looking statements. These statements are based on
management's current expectations and beliefs but are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking
statements. These risks and uncertainties include, among others, adverse changes in debt and capital markets conditions, which may adversely impact our access to capital on acceptable terms or the
value or salability of our real estate related investments; interest rate and credit spread fluctuations; adverse changes in commercial real estate markets; changes in general economic and business
conditions, which will, among other things, affect the amounts we may earn on products and services and the availability and credit worthiness of our customers; changes in applicable laws and
regulations;

43

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Table of Contents

risks
posed by our competition; currency risks and other risks associated with international markets. In addition, other risks and uncertainties that could cause our actual results to be materially
different from our expectations include the risks and uncertainties set forth under "Risk Factors" in our prospectus filed with the SEC in accordance with Rule 424(b)(3) of the Securities Act
on July 15, 2008.

Such
forward-looking statements are made only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in our expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

Overview

We are a leading commercial real estate finance company that operates in North America, Asia and Europe in three core business lines:
commercial real estate lending and mortgage banking; investments and funds management; and servicing. As commercial real estate finance specialists, we provide our borrowers, investors and other
customers with a broad range of commercial real estate financial products and services, which we strive to tailor to our customers' particular needs. As of June 30, 2008, we had more than 2,000
employees located in 55 offices worldwide.

We
originated $5.5 billion and $16.6 billion in aggregate principal amount of financing during the six months ended June 30, 2008 and 2007, respectively. Our global
primary, master and special servicing portfolio included more than 52,000 loans with an aggregate outstanding principal balance of $373.2 billion as of June 30, 2008 compared to
$371.7 billion as of December 31, 2007. Real estate related assets under management were approximately $10.1 billion as of June 30, 2008 compared to $10.3 billion as
of December 31, 2007. As of June 30, 2008, our total assets were $21.4 billion and our stockholders' equity was $2.3 billion.

For
management reporting purposes, we conduct our commercial real estate lending and mortgage banking, investments and funds management, and servicing businesses through six business
segments. These business segments, which are organized based on geography and the type of business conducted, are as follows:



To
focus on allocating capital effectively and enhancing our liquidity position, we have significantly reduced our Asian proprietary lending and investing activities. We have also
curtailed our European lending activities starting in the fourth quarter of 2007 and have sold a large portion of our European loan portfolio in April 2008. We are focusing our efforts in Asia and
Europe on managing our existing loan and investment portfolios and enhancing our fee for services businesses. To reflect the decreased level of activities, we have also reduced staffing levels in both
segments.



We present the results of operations for our six business segments in accordance with SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," or "SFAS No. 131." This standard is based on a management approach, which requires presentation of our segments based upon our organization and
internal reporting of results of operations.

44

---



Table of Contents

Our
segment results have been prepared using a reporting methodology that is different from the reporting methodology used in our consolidated financial statements and, as a result, are
not directly comparable to our consolidated results. In particular:



The
following tables present summary financial information for each of our six business segments as of the dates and for the periods indicated. The tables also present reconciling
amounts that are

45

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Table of Contents

included
in "Corporate and Other" to reconcile management's reporting of our segment financial information to amounts included in our consolidated financial statements (in thousands):

Three months ended June 30,

Six months ended June 30,2008

2007

2008

2007Net Revenue(1):North American Lending and Mortgage Banking

$
121,649

$
132,619

$
119,969

$
304,609North American Investments and Funds Management


(26,873
)

80,591


(8,765
)

179,082North American Servicing


72,313


103,208


147,339


199,470Asian Operations


13,143


28,127


21,041


103,924European Operations


(29,689
)

68,952


(268,377
)

107,093North American Affordable Housing


(1,311
)

3,414


1,515


47,115Subtotal


149,232


416,911


12,722


941,293Corporate and Other:Corporate functions and immaterial businesses


5,524


(11,765
)

7,582


3,284Consolidated affordable housing partnerships


7,413


(10,378
)

8,485


5,930Push down accounting adjustments


4,901


(20,720
)

6,937


(23,045
)Eliminations and other adjustments


(5,912
)

(8,496
)

(10,954
)

(10,901
)Deferral of placement fees


(2,956
)

(52,373
)

(6,320
)

(82,151
)Total Corporate and Other


8,970


(103,732
)

5,730


(106,883
)Consolidated amount

$
158,202

$
313,179

$
18,452

$
834,410(Loss) Income Before Income Taxes:North American Lending and Mortgage Banking

$
79,972

$
61,456

$
39,028

$
169,048North American Investments and Funds Management


(21,018
)

53,108


(20,514
)

117,010North American Servicing


26,436


50,388


49,689


94,411Asian Operations


(13,063
)

4,736


(32,182
)

54,038European Operations


(44,673
)

48,130


(291,275
)

76,418North American Affordable Housing


(11,105
)

(4,296
)

(16,900
)

23,930Subtotal


16,549


213,522


(272,154
)

534,855Corporate and Other:Corporate functions and immaterial businesses


(29,886
)

(36,260
)

(70,208
)

(68,830
)Push down accounting adjustments


(4,219
)

(29,878
)

(8,056
)

(41,797
)Total Corporate and Other


(34,105
)

(66,138
)

(78,264
)

(110,627
)Consolidated amount

$
(17,556
)
$
147,384

$
(350,418
)
$
424,228


46

---



Table of Contents

June 30,
2008

December 31,
2007Total Assets:North American Lending and Mortgage Banking

$
12,815,732

$
12,159,800North American Investments and Funds Management


1,041,167


1,050,576North American Servicing


899,785


894,259Asian Operations


2,852,320


2,789,044European Operations


822,914


3,068,097North American Affordable Housing


951,009


1,084,783Subtotal


19,382,927


21,046,559Corporate and Other:Corporate functions and immaterial businesses


526,518


489,093Consolidated affordable housing partnerships


1,241,796


1,508,608Push down accounting adjustments


200,147


220,136Total Corporate and Other


1,968,461


2,217,837Consolidated amount

$
21,351,388

$
23,264,396


---

Note:

Understanding Our Financial Results

As a commercial real estate finance company, our ability to generate income and cash flow is highly dependent on the volume of
financing that we originate, our ability to securitize, sell, participate or otherwise finance our loans and the spreads we generate on our interest-earning assets. In addition, our financial
performance is driven by, among other things, our ability to increase the size of our servicing portfolio and the amount of real estate related assets under our management. The success of our
origination activities impacts our level of placement fees and net interest income and impacts the amount of loans that we have available for future sale and servicing opportunities, which in turn
affects our levels of net gains or losses and fee-based income. Our ability to increase the size of our servicing portfolio, which is also driven by the level of our origination and
distribution activities as well as the volume of mortgage servicing rights that we acquire, affects the level of servicing fees that we earn and income that we derive from escrow balances, each of
which provide us with an important source of recurring income and which, in the case of special servicing, provides us with a source of counter-cyclical income and in the case of earnings on escrow
balances, tends to partially offset the negative impact on placement fees in a rising interest rate environment. Our financial results are also dependent on the amount of assets under our management
as well as on changes in the values of our real estate related assets, which impact the levels of fee-based income and net gains or losses that we recognize.

The
amount of financing that we arrange, the number of servicing opportunities that are presented to us, the spreads we generate on our interest-earning assets and the gains or losses we
realize on sales of our assets are subject to various factors. These factors include availability of funding sources, cost of capital, changes in the interest rate environment, CMBS spreads,
commercial real estate prices, levels of supply and demand for commercial real estate and real estate-related investments, competition in our industry and the condition of local, national and foreign
economies. These factors also affect our estimates of loan losses and other items affecting expected cash flows from our assets and our related valuation of those assets. As a consequence of these
factors, particularly changes in interest rates and credit spreads, activity of our business lines may be cyclical. We seek to mitigate the effects of market and other external factors on our business
by maintaining a revenue base that is diversified among

47

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Table of Contents

business
activities, real estate asset classes and geographical areas. We also seek to take advantage of specific market opportunities, which may cause our results to fluctuate from period to period.
For a discussion of the effects that recent market developments may have on our business activities, see "Outlook and Recent Trends."

Outlook and Recent Trends

The difficult conditions in the financial markets have continued throughout the first two quarters of 2008. During these periods, the
U.S., European and Asian economies experienced widening credit spreads (which relate to our cost of funds), de-leveraging, volatility in the markets and declining asset values. There is a
continuing lack of liquidity in the markets due to banks and other lending institutions tightening lending standards and restricting access to credit. Market difficulties have contributed to losses
suffered by Fannie Mae and Freddie Mac and the failure of certain banks. The U.S. structured credit markets, including the CMBS and CDO markets, have remained severely limited with respect to new
issuances. Although still near historic lows, delinquency rates on commercial mortgage loans have increased. These rates may continue to increase, as a result of higher energy prices, rising
unemployment and lack of available credit.

These
difficult market conditions have continued to negatively affect our three core businesses. The general lack of liquidity in the debt markets has increased our average cost of
capital. In response to this increase, we have decreased our proprietary lending activities which will negatively impact the growth of our servicing portfolio. The scarcity of liquidity in the market
has also made it difficult for commercial real estate borrowers seeking replacement financing. The reduction of replacement financing decreases our transaction-related servicing fees and increases the
average duration of our loan portfolio. The average duration of our loan portfolio may also increase as securitizations are no longer a reliable exit strategy for our loans. The growth of our special
servicing portfolio may also be slowed by the lack of new CMBS issuances, decreasing our source of counter-cyclical income.

Our
real estate related investments have also experienced the effects of the unfavorable market conditions, as we continue to recognize downward changes in fair value on our portfolio of
loans held for sale and investment securities. Our ability to raise new real estate funds may be constrained by the current real estate market conditions. Our expectation is that the commercial real
estate markets in which we operate will continue to be stressed throughout the remainder of 2008 and into 2009 due to weaker economic conditions and reduced liquidity.

In
the United States, the U.S. Federal Reserve has responded to these market conditions by lowering the federal funds rate from a high of 5.25% in September 2007 to 2.00% in April 2008
and by providing liquidity to financial institutions through various funding programs. However, the Federal Reserve has indicated that it is unlikely to lower rates further and that it may increase
rates before the end of 2008 due to concerns about inflation. Notwithstanding the Federal Reserve's measures to provide liquidity, from which Capmark Bank US has benefited, capital markets conditions
remain challenging.

In
Europe, the European Central Bank ("ECB") raised rates in July 2008 to 4.25% after leaving rates unchanged at 4.00% since June 2007. Interest rates are expected to remain unchanged in
the near term as the ECB reassesses its growth outlook. The ECB joined the Federal Reserve in providing liquidity to financial institutions through the term auction facility. The European market,
similar to the U.S., has undergone a broad-based tightening in credit conditions. In Japan, the Bank of Japan ("BOJ") has kept its benchmark rate at 0.50%. The benchmark rate is expected to remain
unchanged as the BOJ weighs upside inflation risks versus downside risks to growth. Credit conditions in Japan have not experienced the widespread tightening seen in both the U.S. and Europe.

The
challenging market conditions will continue to have an on-going impact on our business. While the Federal Reserve has taken actions to intervene and moderate the
dislocation in the credit

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Table of Contents

markets,
it remains difficult to access credit in the capital markets, which constrains our ability to originate loans, among other things. Additionally, if Fannie Mae and Freddie Mac were to reduce
or modify their lending programs, we may be unable to continue to originate and sell loans to these GSEs at current levels.

Despite
the obstacles presented in the current market environment, we believe the long-term outlook for our Company remains generally positive. Our current focus is on
allocating capital effectively, enhancing our liquidity position, prudently managing our expenses and enhancing our operating efficiencies. As the disruptions to the markets persist, we will continue
to manage our originations, changing composition among product types to emphasize products with better liquidity and lower funding costs, including GSE and third party originations, and commercial
mortgage loans funded by Capmark Bank US. We will also continue to focus on our recurring fee businesses, such as servicing and investments and funds management.

Results of Operations

Consolidated

The following table summarizes our consolidated results of operations for the three and six months ended June 30, 2008 and 2007
(in thousands):

Three months ended
June 30,

Six months ended
June 30,2008

2007

2008

2007Net interest income

$
52,577

$
74,994

$
113,680

$
158,548Noninterest income


116,015


243,576


(77,209
)

687,572Total revenue


168,592


318,570


36,471


846,120Provision for loan losses


10,390


5,391


18,019


11,710Net revenue


158,202


313,179


18,452


834,410Noninterest expense


199,935


189,135


408,545


424,988(Loss) income before minority interest and income taxes


(41,733
)

124,044


(390,093
)

409,422Minority interest income


24,177


23,340


39,675


14,806(Loss) income before income taxes


(17,556
)

147,384


(350,418
)

424,228Income taxes


(29,045
)

57,900


(149,048
)

159,294Net income (loss)

$
11,489

$
89,484

$
(201,370
)
$
264,934




Net income totaled $11.5 million for the three months ended June 30, 2008 compared to $89.5 million for the three
months ended June 30, 2007. The current quarter earnings were negatively impacted by the continued adverse market conditions that resulted in further declines in our fee and investment income.
In total, fee and investment income declined $114.4 million largely due to declines in our equity in net income of joint ventures and partnerships, trust fees, and other fees. Our equity in net
income of joint ventures and partnerships declined $81.2 million due to the adverse market conditions, trust fees declined $14.2 million due to the lower interest rate environment, and
other fees
declined $11.5 million due to lower transaction volume. These declines were partially offset by a reduction in income tax expense due to tax benefits recognized for operational losses and from
the utilization of tax credits as a result of our decision in the second quarter to hold certain un-syndicated LIHTC properties for investment.

49

---



Table of Contents



We incurred a net loss of $201.4 million for the six months ended June 30, 2008 compared to net income of
$264.9 million for the six months ended June 30, 2007. The current year loss was attributable to net losses on loans of $399.4 million primarily resulting from changes in fair
value and losses on interests in European loans that were sold in April 2008 compared to net gains on loans of $66.9 million for the six months ended June 30, 2007. In addition,
the results for the six months ended June 30, 2007 included a $65.3 million non-recurring gain on the sale of a majority of our affordable housing debt platform. In total,
net gains declined $542.2 million in the first half of 2008 compared to the same period of 2007. Our fee and investment income declined $222.6 million largely due to declines in our
equity in net income of joint ventures and partnerships due to adverse market conditions in 2008 and performance-based asset management fees earned in the first half of 2007 that were not achieved in
the comparable period of 2008. Fee and investment income also declined due to lower placement fees, trust fees, and other fees. These unfavorable variances were partly offset by a $16.4 million
decrease in noninterest expense primarily attributable to lower fixed and variable compensation expense related to the decline in operating results.



The following table summarizes our net interest income for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Net Interest Income

2008

2007

2008

2007Interest income

$
236,837

$
281,275

$
513,815

$
578,692Interest expense


184,260


206,281


400,135


420,144Net interest income

$
52,577

$
74,994

$
113,680

$
158,548




Net interest income totaled $52.6 million for the three months ended June 30, 2008 compared to $75.0 million for
the three months ended June 30, 2007. Net interest income totaled $113.7 million for the six months ended June 30, 2008 compared to $158.5 million for the six months ended
June 30, 2007. The decline was primarily due to lower average spreads on
interest-earning assets and a reduction of accretion income on acquired non-performing loans year over year. The decline in spread income was largely offset by gains on interest rate
hedges included in noninterest income for the three and six months ended June 30, 2008. The reduction in accretion income on acquired non-performing loans was driven by resolutions
or sales of such loans and fewer acquisitions.



We earn interest income primarily from the loans that we originate and hold for sale or investment, from the accretion of income on
non-performing loans that we acquire at a discount to their face value and from the investment securities that we carry on our consolidated balance sheet. The investment securities that we
carry on our consolidated balance sheet consist of: beneficial interests in CMBS, ABS and CDOs; tax-exempt securities; certain Japanese securities, or "TMK securities;" securities backed
by Ginnie Mae, Fannie Mae and Freddie Mac; U.S. Treasury and other securities; and securities that we acquire for short-term trading purposes. In connection with the sale of the majority
of our affordable housing debt platform in February 2007, we sold a significant portion of the tax-exempt housing bonds that we owned. Unrelated to the sale of the majority of the
affordable

50

---



Table of Contents

housing
debt platform, we also sold $746.1 million of tax-exempt bonds related to a tender option bond program and repaid the outstanding related financing of $731.6 million
in March and April 2007.

We
have both fixed and floating rate assets on our consolidated balance sheet. Our policy is to hedge the interest rate risk associated with most of our fixed rate assets through the use
of derivative instruments and other risk mitigation strategies. However, because the net gains and losses associated with these derivative instruments generally are not classified as interest income,
we may experience volatility in our reported amounts of net interest income.

The
following table summarizes our sources of interest income for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Interest Income

2008

2007

2008

2007Loans(1)

$
193,887

$
219,587

$
420,791

$
433,076Investment securities


20,268


18,729


41,394


45,205Acquired non-performing loans


6,066


13,498


14,402


28,553Assets collateralized in securitization trusts(2)


3,705


8,110


7,499


32,501Escrow balances


5,566


9,867


13,652


17,771Other


7,345


11,484


16,077


21,586Total

$
236,837

$
281,275

$
513,815

$
578,692


---

Note:



Our interest expense consists primarily of amounts we pay third parties under our debt financing arrangements including our senior
notes, interest that accrues on our deposit liabilities and interest that we are required to pay on a portion of the escrow balances with respect to which we earn trust fees or other types of income.
Interest expense relating to our deposit liabilities has grown significantly in recent years as a result of an increase in the amount of Brokered CDs at Capmark Bank US. During the six months ended
June 30, 2008, we increased our usage of alternative funding sources which led to a decline in the amount of Brokered CDs outstanding as of June 30, 2008 compared to December 31,
2007.

We
have both fixed and floating rate borrowings and fixed rate deposit liabilities on our consolidated balance sheet. Because our interest-earning assets are predominantly floating rate,
our policy is to generally convert our fixed rate borrowings and deposit liabilities to floating rate borrowings and deposit liabilities through the use of derivative instruments and other risk
mitigation strategies. However, because the net gains and losses associated with these derivative instruments generally are not classified as interest expense, we may experience greater variability in
our reported amounts of net interest income and associated gains and losses on derivative instruments.

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---



Table of Contents

The following table summarizes our sources of interest expense for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Interest Expense

2008

2007

2008

2007Long-term borrowings

$
92,913

$
129,678

$
200,214

$
240,642Short-term borrowings


29,889


12,957


65,369


56,199Deposit liabilities


56,840


59,105


120,498


97,715Collateralized borrowings in securitization trusts(2)


3,780


8,028


7,650


30,557Other(1)


838


(3,487
)

6,404


(4,969
)Total

$
184,260

$
206,281

$
400,135

$
420,144


---

Note:



Our noninterest income includes net realized and unrealized gains and losses on loans, trading derivatives, investment securities, real
estate investments and equity investments. Effective January 1, 2008, we elected to carry our loans held for sale at fair value in accordance with SFAS No. 159. Prior to
January 1, 2008, we carried our loans held for sale at the lower of cost or fair value in accordance with SFAS No. 65. If we are required to write down the value of a loan that we hold
for sale as a result of a decrease in the loan's fair value, we reduce our noninterest income by an amount equal to the write-down in the carrying value of the loan. This change in fair
value is reported as a component of net (losses) gains on loans in our consolidated statement of operations.

Historically
we generated net gains in connection with our sales of loans through securitization and syndication activities. In recent periods, market conditions have adversely affected
our ability to securitize and syndicate loans and other assets. As a result, we have incurred realized and unrealized losses. We generally expect our level of net gains and losses to continue to
fluctuate from period to period.

52

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Table of Contents

The
following table presents information concerning our net (losses) gains for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Net (Losses) Gains

2008

2007

2008

2007Net (losses) gains on loans

$
(42,217
)
$
(10,265
)
$
(399,384
)
$
66,942Net (losses) gains on investments and real estate(1)


(17,258
)

8,401


(28,996
)

51,476Other gains, net(2)


47,566


3,118


66,817


62,178Total

$
(11,909
)
$
1,254

$
(361,563
)
$
180,596


---

Notes:



Net losses totaled $11.9 million for the three months ended June 30, 2008 compared to net gains of $1.3 million
for the three months ended June 30, 2007. Net losses totaled $361.6 million for the six months ended June 30, 2008 compared to net gains of $180.6 million for the six
months ended June 30, 2007 due to net losses on loans of $399.4 million primarily resulting from changes in fair value and losses on interests in European loans that were sold in April
2008 compared to net gains on loans of $66.9 million for the six months ended June 30, 2007. In addition, the results for the six months ended June 30, 2007 included a
$65.3 million non-recurring gain on the sale of a majority of our affordable housing debt platform.



The majority of our noninterest income is fee-based income that we earn from our three core business lines. Additionally,
our noninterest income includes
our allocable share of the earnings generated by our interests in joint ventures and partnerships that we account for under the equity method, which primarily consists of our (1) investments in
affordable housing partnerships in the U.S., (2) investments in real estate equity investment funds in the U.S., (3) investments in real estate projects, joint ventures and real estate
equity investment funds in Europe, and (4) investments in non-performing commercial loan and real estate joint ventures principally in Asia. Our noninterest income also includes
real estate investment income (generally net rental income) that is generated by investments in real property that we are required to consolidate under GAAP and includes properties located in Asia and
certain properties owned by our lower-tier LIHTC partnerships.

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The
following table summarizes our sources of fee and investment income for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Fee and Investment Income

2008

2007

2008

2007Mortgage servicing fees

$
46,062

$
48,937

$
100,272

$
104,151Placement fees


17,842


18,442


35,472


41,375Investment banking fees(1)


4,409


7,854


10,956


19,363Structuring fees and investment syndication income(1)


10,695


7,769


17,971


12,488Asset management fees


20,452


21,749


39,215


66,078Trust fees


31,332


45,579


66,714


87,299Other fees


2,472


13,998


5,473


31,832Equity in (loss) income of joint ventures and partnerships


(28,065
)

53,105


(38,058
)

96,159Net real estate investment income(2)


17,494


21,153


36,838


41,855Other(2)


5,231


3,736


9,501


6,376Total

$
127,924

$
242,322

$
284,354

$
506,976


---

Notes:



Our fee and investment income totaled $127.9 million for the three months ended June 30, 2008 compared to
$242.3 million for the three months ended June 30, 2007. The $114.4 million decrease was due primarily to a reduction of $81.2 million in our equity in income of joint
ventures and partnerships primarily due to downward changes in fair value on investment funds and losses recognized by the underlying joint venture investments. In addition, trust fees declined
$14.2 million due to the lower interest rate environment. Trust fees, which are a component of fee and investment income, are interest rate sensitive. All other fee income declined
$16.8 million due to lower transaction volume in the commercial mortgage market.



Our fee and investment income totaled $284.4 million for the six months ended June 30, 2008 compared to
$507.0 million for the six months ended June 30, 2007. The $222.6 million decrease was due primarily to a reduction in equity in income of joint ventures and partnerships, asset
management fees, trust fees, placement fees, and other fees. Equity in income of joint ventures and partnerships declined $134.2 million primarily due to downward changes in fair value on
investment funds and losses recognized by the underlying joint venture investments. Asset management fees declined $26.9 million primarily due to fees earned in the first half of 2007 related
to achieving certain performance criteria that were not achieved in the first half of 2008. Trust fees declined $20.6 million due to the lower interest rate environment. Placement fees
decreased $5.9 million due to lower origination volumes. All other fee income declined $35.1 million due to lower transaction volume in the commercial mortgage market.

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We maintain an allowance for loan losses on our loans held for investment in order to provide for the risk of credit losses inherent in
the loan portfolio. To recognize increases in this allowance, we record a provision for loan losses in our consolidated statement of operations. These provisions are estimates and involve judgment and
consideration of a number of factors including: our past loan experience; the current composition of the portfolio; historical credit migration; property type diversification; default; loss severity;
industry loss experience; economic conditions and trends; and other relevant factors.



Our provision for loan losses totaled $10.4 million for the three months ended June 30, 2008 compared to
$5.4 million for the three months ended June 30, 2007; and $18.0 million for the six months ended June 30, 2008 compared to $11.7 million for the six months ended
June 30, 2007. The increase in our provision for loan losses reflects an overall increase in our loans held for investment and an increase in impaired loans for which a specific allowance is
recorded.



Our noninterest expense consists primarily of the compensation and benefits that we pay our employees; amortization charges that we
record with respect to our mortgage servicing rights; costs relating to our office space and equipment; professional fees that we pay our legal, accounting and other service providers; and other
various expenses.

The
following table summarizes our sources of noninterest expense for the three and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,Noninterest Expense

2008

2007

2008

2007Compensation and benefits

$
76,424

$
88,483

$
166,061

$
208,512Amortization of mortgage servicing rights


34,136


30,950


69,368


62,330Occupancy and equipment


21,033


21,956


42,783


44,009Professional fees


35,872


21,359


60,164


42,666Other expenses(1)


32,470


26,387


70,169


67,471Total

$
199,935

$
189,135

$
408,545

$
424,988


---

Note:



Our noninterest expense totaled $199.9 million for the three months ended June 30, 2008 compared to $189.1 million
for the three months ended June 30, 2007. The $10.8 million increase in noninterest expense was due primarily to a $14.5 million increase in professional fees, a
$3.2 million increase in amortization of mortgage servicing rights and a $6.1 million increase in other expenses that were partly offset by a $12.1 million reduction in our
compensation and benefits expense. The increase in professional fees was primarily due to higher legal fees incurred by our Asian Operations segment due to new regulations in Japan, higher legal fees
incurred by our European Operations segment due to the April 2008 loan sales, and higher legal fees incurred by our North American Affordable Housing

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segment
due to LIHTC fund and property disposition activity. The reduction in compensation and benefits was primarily attributable to lower incentive compensation expense related to the decline in
operating results.



Our noninterest expense totaled $408.5 million for the six months ended June 30, 2008 compared to $425.0 million
for the six months ended June 30, 2007. The $16.5 million decrease in noninterest expense was due primarily to a $42.5 million reduction in our compensation and benefits expense
partly offset by a $7.0 million increase in amortization of mortgage servicing rights and a $17.5 million increase in professional fees. The reduction in compensation and benefits was
primarily attributable to lower incentive compensation expense related to the decline in operating results. The increase in professional fees was primarily due to higher legal fees as discussed above.



Our consolidated financial statements include the results of entities in which third parties own an economic interest. These entities
consist primarily of joint ventures that our Asian Operations segment has established for purposes of making investments in non-performing loans as well as our upper-tier and
lower-tier LIHTC partnerships. The consolidation of these entities in our financial statements requires us to recognize all of the revenues and all of the expenses that these entities
record during an accounting period. When calculating our net income, the portion of the net income or loss of consolidated entities that are attributable to minority investors in those entities is
reflected as minority interest income or expense, as appropriate, in our consolidated statement of operations.



Our minority interest income totaled $24.2 million for the three months ended June 30, 2008 compared to
$23.3 million for the three months ended June 30, 2007. Our minority interest income totaled $39.7 million for the six months ended June 30, 2008 compared to
$14.8 million for the six months ended June 30, 2007. The $24.9 million increase was primarily due to downward changes in fair value recognized in certain commingled funds that we
consolidate. The downward changes in fair value resulted in an increase to minority interest income equal to the third-party investors' share of such losses.



We account for income taxes under the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes,"
or "SFAS No. 109." On January 1, 2007, we adopted FIN 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109," or
"FIN 48," which clarifies SFAS No. 109 by defining the confidence level that an income tax position must meet in order to be recognized in the financial statements. FIN 48
requires the tax effects of a position to be recognized only if it is "more-likely-than-not" to be sustained solely on its technical merits. The
"more-likely-than-not" threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax
position is not considered "more-likely-than-not" to be sustained based solely on its technical merits, no benefits of the tax position are to be recognized.



We recorded an income tax benefit of $29.0 million for the three months ended June 30, 2008 compared to an income tax
expense of $57.9 million for three months June 30, 2007. The income tax benefit recorded for the three months ended June 30, 2008 was due to tax benefits recognized for

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operational
losses and from the utilization of tax credits as a result of our decision in the second quarter to hold certain un-syndicated LIHTC properties for investment.

We
recorded an income tax benefit of $149.0 million for the six months ended June 30, 2008 compared to an income tax provision of $159.3 million for the six months
ended June 30, 2007 due to the change in pre-tax earnings between the periods.



To reconcile our management reporting of our segment financial information to amounts included in our consolidated financial
statements, we have excluded certain items from our segment reporting and categorized them as "Corporate and Other." As previously described, our six reportable business segments do not include
certain corporate overhead expenses, certain immaterial businesses, allocation of income taxes, adjustments required by push down accounting, or any other eliminations, reclassifications or other
adjustments that are made to conform our management reporting to our consolidated financial statements.

The
loss before income taxes totaled $34.1 million for the three months ended June 30, 2008 compared to $66.1 million for the three months ended June 30,
2007. These amounts include unallocated personnel-related expenses for corporate departments such as accounting, tax, treasury, risk management, legal, information technology, human resources,
facilities and internal audit. In addition, as described above, these amounts include the impact of push down accounting. The $32.0 million decrease was due to a decrease in the loss before
income taxes of $25.6 million associated with push down accounting combined with a decrease in the loss before income taxes of $6.4 million associated with corporate functions and
immaterial businesses. The impact of push down accounting has diminished over time.

The
loss before income taxes totaled $78.3 million for the six months ended June 30, 2008 compared to $110.6 million for the six months ended June 30, 2007.
The $32.3 million decrease was due to a decrease in the loss before income taxes of $33.7 million associated with push down accounting partly offset by an increase in the loss before
income taxes of $1.4 million associated with corporate functions and immaterial businesses.

Segments



The following table summarizes the results of operations of our North American Lending and Mortgage Banking segment for the three and
six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net interest income

$
84,829

$
58,818

$
162,854

$
119,899Noninterest income


44,863


73,730


(29,874
)

184,814Total revenue


129,692


132,548


132,980


304,713Provision for loan losses


8,043


(71
)

13,011


104Net revenue


121,649


132,619


119,969


304,609Noninterest expense


47,691


75,867


95,561


145,707Income before minority interest and income taxes


73,958


56,752


24,408


158,902Minority interest income


6,014


4,704


14,620


10,146Income before income taxes

$
79,972

$
61,456

$
39,028

$
169,048


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Income before income taxes totaled $80.0 million for the three months ended June 30, 2008 compared to
$61.5 million for the three months ended June 30, 2007. The $18.5 million increase was driven primarily by higher net interest income and lower noninterest expense partially
offset by lower noninterest income and higher provision for loan losses.

Net
interest income totaled $84.8 million for the three months ended June 30, 2008 compared to $58.8 million for the three months ended June 30, 2007. The
$26.0 million increase was partially the result of an increase in average interest-earning assets. Total assets as of June 30, 2008 were $12.8 billion compared to
$11.1 billion as of June 30, 2007. In addition to the increase in average interest-earning assets, net interest income rose due to an $8.4 million increase in accretion income on
loans held for investment that were previously classified as held for sale, and an increase in portfolio yields partially attributed to the impact of loans structured with interest rate floors that
are currently above contractual benchmark rates.

Noninterest
income was $44.9 million for the three months ended June 30, 2008 compared to $73.7 million for the three months ended June 30, 2007. The
$28.8 million decline was driven by a decrease in placement fees and investment banking fees partially offset by an increase in net gains. Placement fees declined $28.7 million due to a
decrease in loan origination volume from $6.1 billion in the prior period to $2.7 billion in the current period. Investment banking fees declined $5.0 million due to a decrease in
military housing placement volume from $232.0 million in the prior period to $96.8 million in the current period. Net gains increased $9.5 million for the three months ended
June 30, 2008 compared to the same period in 2007. The increase was driven by a gain of $11.4 million attributed to the sale of certain entities utilized in our capital markets
activities. A reduction of $13.0 million in unrealized valuation losses was substantially offset by a reduction of $10.3 million in realized gains from the sale of mortgage loans. All
other gains decreased $4.6 million. All other noninterest income decreased $4.6 million primarily due to lower exit fees (a component of other fees in our consolidated statement of
operations) earned on loan payoffs where Capmark does not place the new debt, and lower equity in income of joint ventures and partnerships.

The
provision for loan losses totaled $8.0 million for the three months ended June 30, 2008 compared to $(0.1) million for the three months ended June 30, 2007. The
$8.1 million increase in provision for loan losses was primarily due to an overall increase in our loans held for investment and an increase in impaired loans for which a specific allowance is
recorded.

Noninterest
expense totaled $47.7 million for the three months ended June 30, 2008 compared to $75.9 million for the three months ended June 30, 2007. The
$28.2 million decrease was primarily driven by a $22.0 million decline in compensation and benefits due to a reduction in incentive compensation related to a decline in placement fees
and operating results. All other noninterest expense decreased $6.2 million primarily due to a reduction in loan origination activities.

Minority
interest income totaled $6.0 million for the three months ended June 30, 2008 compared to $4.7 million for the three months ended June 30, 2007. The
$1.3 million increase was due to an increase in minority interest income associated with certain new markets tax credit ("NMTC") partnerships that are consolidated under applicable accounting
guidance. The majority of the increase was due to a provision for loan losses in our consolidated statement of operations that is allocated to the minority interest holders of such NMTC partnerships.
The increase in provision for loan losses resulted in an increase in minority interest income equal to the third-party investors' allocation of such provision.

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Income before income taxes totaled $39.0 million for the six months ended June 30, 2008 compared to $169.0 million
for the six months ended June 30, 2007. The $130.0 million decrease was driven primarily by downward changes in fair value and increased loan loss reserves due to continued adverse
market conditions in the first half of 2008 partially offset by lower noninterest expense and higher net interest income.

Net
interest income totaled $162.9 million for the six months ended June 30, 2008 compared to $119.9 million for the six months ended June 30, 2007. The
$43.0 million increase was primarily the result of an increase in average interest-earning assets, an increase of $17.3 million in accretion income on loans held for investment that were
previously classified as held for sale, and an increase in portfolio yields partially attributed to the impact of loans structured with interest rate floors that are currently above contractual
benchmark rates.

Noninterest
income was a negative $29.9 million for the six months ended June 30, 2008 compared to $184.8 million of income for the six months ended June 30,
2007. The $214.7 million decline was driven by net losses in 2008 compared to net gains in 2007 and a decrease in placement fees. Net losses totaled $102.3 million for the six months
ended June 30, 2008 compared to net gains of $42.0 million for the six months ended June 30, 2007. Losses attributed to the valuation of loans held for sale increased by
$102.3 million as a result of market volatility in credit spreads. Gains recognized from the sale of loans decreased $46.7 million due to the absence of securitization transactions
during the six months ended June 30, 2008. All other gains increased $4.7 million. Placement fees decreased $55.9 million due to a decrease in origination volume from
$13.6 billion in the prior period to $5.4 billion in the current period. All other noninterest income decreased $14.4 million primarily due to lower investment banking fees, exit
fees and other miscellaneous income.

The
provision for loan losses totaled $13.0 million for the six months ended June 30, 2008 compared to $0.1 million for the six months ended June 30, 2007.
The $12.9 million increase in provision was primarily due to an overall increase in our loans held for investment and an increase in impaired loans for which a specific allowance is recorded.

Noninterest
expense totaled $95.6 million for the six months ended June 30, 2008 compared to $145.7 million for the six months ended June 30, 2007. The
$50.1 million decrease was primarily driven by a $50.4 million decline in compensation and benefits due to a reduction in incentive compensation related to a decline in placement fees
and operating results. All other noninterest expense increased $0.3 million.

Minority
interest income totaled $14.6 million for the six months ended June 30, 2008 compared to $10.1 million for the six months ended June 30, 2007. The
$4.5 million increase was due to an increase in
minority interest income associated with certain NMTC partnerships that are consolidated under applicable accounting guidance. The majority of the increase was due to a provision for loan losses in
our consolidated statement of operations that is allocated to the minority interest holders of such NMTC partnerships. The increase in provision for loan losses resulted in an increase in minority
interest income equal to the third-party investors' allocation of such provision.

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The following table summarizes the results of operations of our North American Investments and Funds Management segment for the three
and six months ended June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net interest income

$
686

$
1,523

$
1,305

$
6,443Noninterest income


(27,559
)

79,056


(10,070
)

173,178Total revenue


(26,873
)

80,579


(8,765
)

179,621Provision for loan losses





(12
)




539Net revenue


(26,873
)

80,591


(8,765
)

179,082Noninterest expense


7,054


19,408


20,423


48,844(Loss) income before minority interest and income taxes


(33,927
)

61,183


(29,188
)

130,238Minority interest income (expense)


12,909


(8,075
)

8,674


(13,228
)(Loss) income before income taxes

$
(21,018
)
$
53,108

$
(20,514
)
$
117,010




Our North American Investments and Funds Management segment incurred a loss before income taxes of $21.0 million for the three
months ended June 30, 2008 compared to income before income taxes of $53.1 million for the three months ended June 30, 2007. The $74.1 million decrease was primarily driven
by a reduction in equity in income of joint ventures and partnerships due to downward changes in fair value on investment funds in which we co-invest with third-party investors, losses
recognized by the underlying joint venture investments and nonrecurring gains from asset sales in the prior year partly offset by lower noninterest expense.

Net
interest income totaled $0.7 million for the three months ended June 30, 2008 compared to $1.5 million for the three months ended June 30, 2007. The
$0.8 million decrease was primarily due to a decline in average interest-earning assets for the three months ended June 30, 2008 compared to the prior year.

Noninterest
income was a negative $27.6 million for the three months ended June 30, 2008 compared to a positive $79.1 million for the three months ended
June 30, 2007. Specifically, equity in net income of joint ventures and partnerships totaled a negative $26.2 million for the three months ended June 30, 2008 resulting from
declines in the market value of assets held through such joint ventures and partnerships compared to a positive $50.0 million in the prior period. The prior period amount of
$50.0 million included $18.3 million from asset sales executed through our joint venture holdings compared to $1.5 million in the current period. Our equity in income of joint
ventures and partnerships includes the results of certain commingled funds that we consolidate. Also included in noninterest income are net losses of $16.4 million for the three months ended
June 30, 2008 due to downward changes in fair value of investment securities and loans reflecting continued adverse market conditions compared to net losses of $0.6 million in the prior
period. Additionally, placement fees declined $8.3 million due to fewer transactions upon which we earn such fees, and asset management fees declined $3.9 million due to
non-recurring fees earned in 2007 related to the liquidation of an investment fund.

Noninterest
expense totaled $7.1 million for the three months ended June 30, 2008 compared to $19.4 million for the three months ended June 30, 2007. The
$12.3 million decrease was primarily due

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to
a reduction in incentive compensation expense of $11.0 million related to the decline in operating results.

Minority
interest income was $12.9 million for the three months ended June 30, 2008 compared to minority interest expense of $8.1 million for the three months ended
June 30, 2007. The $21.0 million variance was primarily due to downward changes in fair value recognized in certain commingled funds that we consolidate. The downward changes in fair
value resulted in minority interest income equal to the third-party investors' share of such losses compared to income earned last year that resulted in minority interest expense equal to the
third-party investors' share of such income.



Our North American Investments and Funds Management segment incurred a loss before income taxes of $20.5 million for the six
months ended June 30, 2008 compared to income before income taxes of $117.0 million for the six months ended June 30, 2007. The $137.5 million decrease was primarily driven
by a reduction in equity in income of joint ventures and partnerships due to downward changes in fair value of investment funds in which we co-invest with third-party investors, losses
recognized by the underlying joint venture investments and nonrecurring gains from asset sales in the prior year partly offset by lower noninterest expense.

Net
interest income totaled $1.3 million for the six months ended June 30, 2008 compared to $6.4 million for the six months ended June 30, 2007. The
$5.1 million decrease was primarily due to a decrease in average interest-earning assets for the six months ended June 30, 2008 compared to the prior year.

Noninterest
income was a negative $10.1 million for the six months ended June 30, 2008 compared to $173.2 million of income for the six months ended June 30,
2007. Specifically, equity in net income of joint ventures and partnerships totaled a negative $22.2 million for the six months ended June 30, 2008 resulting from declines in the market
value of assets held through such joint ventures and partnerships compared to a positive $82.4 million in the prior period. The prior period amount of $82.4 million included income of
$22.1 million from asset sales executed through our joint venture holdings compared to $6.8 million in the current period. Our equity in income of joint ventures and partnerships
includes the results of certain commingled funds that we consolidate. Also included in noninterest income are net losses of $16.1 million for the six months ended June 30, 2008 due to
downward changes in fair value of investment securities and loans reflecting continued adverse market conditions compared to net gains of $25.9 million in the prior period primarily due to
non-recurring realized gains in 2007 on the sale of CMBS. Additionally, placement fees declined $18.8 million due to fewer transactions upon which we earn such fees, and asset
management fees declined $12.9 million due to non-recurring fees earned in 2007 related to achieving certain performance criteria and the liquidation of an investment fund.

Noninterest
expense totaled $20.4 million for the six months ended June 30, 2008 compared to $48.8 million for the six months ended June 30, 2007. The
$28.4 million decrease was primarily due to a reduction in incentive compensation expense related to the decline in operating results.

Minority
interest income was $8.7 million for the six months ended June 30, 2008 compared to minority interest expense of $13.2 million for the six months ended
June 30, 2007. The $21.9 million variance was primarily due to downward changes in fair value recognized in certain commingled funds that we consolidate. The downward changes in fair
value resulted in minority interest income equal to the third-party investors' share of such losses compared to income earned last year that resulted in minority interest expense equal to the
third-party investors' share of such income.

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The following table summarizes the results of operations of our North American Servicing segment for the three and six months ended
June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net interest income

$
(3,695
)
$
(4,254
)
$
(7,782
)
$
(7,716
)Noninterest income


76,008


107,501


155,121


207,099Total revenue


72,313


103,247


147,339


199,383Provision for loan losses





39





(87
)Net revenue


72,313


103,208


147,339


199,470Noninterest expense


45,877


52,820


97,650


105,059Income before minority interest and income taxes


26,436


50,388


49,689


94,411Minority interest income











Income before income taxes

$
26,436

$
50,388

$
49,689

$
94,411




Income before income taxes totaled $26.4 million for the three months ended June 30, 2008 compared to
$50.4 million for the three months ended June 30, 2007. The $24.0 million decrease was primarily driven by lower noninterest income partly offset by lower noninterest expense.

Noninterest
income totaled $76.0 million for the three months ended June 30, 2008 compared to $107.5 million for the three months ended June 30, 2007. The
$31.5 million decrease was driven by lower trust fees, mortgage servicing fees, other fees, and net gains. Trust fees decreased $17.4 million due to the lower interest rate environment.
Trust fees, although a component of noninterest income, are interest rate sensitive. Mortgage servicing fees decreased $5.3 million primarily as a result of a lower weighted average service fee
on our North American servicing portfolio and lower assumption fees, which are a component of mortgage servicing fees in our condensed consolidated statement of operations. We earn an assumption fee
when an existing borrower's mortgage is assumed by a new borrower. Assumption transactions have declined due to adverse market conditions. Other fees declined $4.9 million primarily as a result
of lower defeasance fees (a component of other fees in our consolidated statement of operations). We earn defeasance fees when a borrower pays off their mortgage through substitution of other
collateral. Defeasance transactions have also declined due to
adverse market conditions. Net gains declined $5.3 million primarily due to the gain recognized on the sale of our former technology subsidiary, EnableUS, Inc., in April 2007.

Noninterest
expense totaled $45.9 million for the three months ended June 30, 2008 compared to $52.8 million for the three months ended June 30, 2007. The
$6.9 million decrease was primarily driven by lower incentive compensation.



Income before income taxes totaled $49.7 million for the six months ended June 30, 2008 compared to $94.4 million
for the six months ended June 30, 2007. The $44.7 million decrease was primarily driven by lower noninterest income partly offset by lower noninterest expense.

Noninterest
income totaled $155.1 million for the six months ended June 30, 2008 compared to $207.1 million for the six months ended June 30, 2007. The
$52.0 million decrease was driven by lower trust fees, mortgage servicing fees, and other fees. Trust fees decreased $29.4 million due to the lower

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interest
rate environment. Mortgage servicing fees decreased $9.3 million primarily as a result of a lower weighted average service fee on our North American servicing portfolio and lower
assumption fees, which are a component of mortgage servicing fees in our condensed consolidated statement of operations. Assumption fees have declined due to adverse market conditions. Other fees
declined $10.0 million primarily as a result of lower defeasance fees (a component of other fees in our consolidated statement of operations) and the absence of revenues from our former
technology subsidiary, EnableUS, Inc.

Noninterest
expense totaled $97.7 million for the six months ended June 30, 2008 compared to $105.1 million for the six months ended June 30, 2007. The
$7.4 million decrease was primarily driven by lower incentive compensation.



The following table summarizes the results of operations of our Asian Operations segment for the three and six months ended
June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net interest income

$
2,132

$
13,270

$
9,496

$
26,358Noninterest income


13,570


14,730


16,929


81,918Total revenue


15,702


28,000


26,425


108,276Provision for loan losses


2,559


(127
)

5,384


4,352Net revenue


13,143


28,127


21,041


103,924Noninterest expense


22,585


24,069


49,676


46,808(Loss) income before minority interest and income taxes


(9,442
)

4,058


(28,635
)

57,116Minority interest (expense) income


(3,621
)

678


(3,547
)

(3,078
)(Loss) income before income taxes

$
(13,063
)
$
4,736

$
(32,182
)
$
54,038




Our Asian Operations segment incurred a loss before income taxes of $13.1 million for the three months ended June 30,
2008 compared to income before income taxes of $4.7 million for the three months ended June 30, 2007. The $17.8 million decrease was driven by a reduction in net interest income
and a reduction in noninterest income, in addition to an increase in provision for loan losses and an increase in minority expense partially offset by a decrease in noninterest expense.

Net
interest income totaled $2.1 million for the three months ended June 30, 2008 compared to $13.3 million for the three months ended June 30, 2007. The
$11.2 million decrease was attributable to a
reduction in the balance of acquired non-performing loans and an increase in acquired real estate investments that are not interest-earning assets. This resulted in an allocation of
interest expense on debt used to purchase real estate investments with no corresponding interest income. The decrease in the portfolio of acquired non-performing loans was driven by
resolutions or sales of such loans and fewer acquisitions, with certain proceeds reinvested in noninterest-earning real estate investments.

Noninterest
income totaled $13.6 million for the three months ended June 30, 2008 compared to $14.7 million for the three months ended June 30, 2007. The
$1.1 million decrease was driven primarily by lower placement fees, lower net gains and lower equity in income of joint ventures and partnerships partially offset by miscellaneous income of
$2.7 million from real estate investments consolidated in 2008. Placement fees decreased $1.5 million due to lower loan originations. Net gains decreased $1.6 million due to real
estate impairments of $14.3 million and downward changes in fair value of

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loans
totaling $0.8 million in 2008 partially offset by higher gains from non-recurring opportunistic sales of certain real estate investments in 2008 compared to 2007. Equity in
income of joint ventures and partnerships declined $1.3 million due to certain real estate joint ventures terminating in 2007 upon asset disposition.

The
provision for loan losses totaled $2.6 million for the three months ended June 30, 2008 compared to $(0.1) million for the three months ended June 30, 2007 due
to difficult market conditions for Japanese and Taiwanese real estate assets which provide the collateral for the portfolio of acquired non-performing loans.

Noninterest
expense totaled $22.6 million for the three months ended June 30, 2008 compared to $24.1 million for the three months ended June 30, 2007. The
$1.5 million decrease was mainly attributable to a reduction in incentive compensation expense of $6.1 million and lower property inspection and loan processing fees of
$2.1 million partially offset by higher professional fees of $2.8 million and miscellaneous expenses of $3.1 million from real estate investments consolidated in 2008. The
incentive compensation expense reduction related to the decline in operating results and the decrease in property inspection and loan processing fees was mainly due to fewer real estate acquisitions.
The increase in professional fees was due to higher legal fees caused by new regulations in Japan and higher audit fees.

Minority
interest expense was $3.6 million for the three months ended June 30, 2008 compared to minority interest income of $0.7 million for the three months ended
June 30, 2007. The $4.3 million variance was due to the sale of certain Japanese real estate investments in 2008 that were held in a joint venture resulting in minority interest expense
equal to the joint venture partner's share of the gain.



Our Asian Operations segment incurred a loss before income taxes of $32.2 million for the six months ended June 30, 2008
compared to income before income taxes of $54.0 million for the six months ended June 30, 2007. The $86.2 million decrease was driven by a reduction in net interest income and a
reduction in noninterest income, in addition to an increase in provision for loan losses and an increase in noninterest expense.

Net
interest income totaled $9.5 million for the six months ended June 30, 2008 compared to $26.4 million for the six months ended June 30, 2007. The
$16.9 million decrease was attributable to a reduction in the balance of acquired non-performing loans and an increase in acquired real estate investments that are not
interest-earning assets. This resulted in an allocation of interest expense on debt used to purchase real estate investments with no corresponding interest income. The decrease in the portfolio of
acquired non-performing loans was driven by resolutions or sales of such loans and fewer acquisitions, with certain proceeds reinvested in noninterest-earning real estate investments.

Noninterest
income totaled $16.9 million for the six months ended June 30, 2008 compared to $81.9 million for the six months ended June 30, 2007. The
$65.0 million decrease was driven primarily by lower placement fees, lower asset management and disposition fees, lower net gains and lower equity in income of joint ventures and partnerships
partially offset by miscellaneous income of $13.3 million from real estate investments consolidated in 2008. Placement fees decreased $2.4 million due to lower loan originations. Asset
management and disposition fees decreased by $14.6 million due to the disposition fee on a large asset sold in 2007. Net gains decreased $56.7 million due to real estate impairments of
$35.2 million and downward changes in fair value of loans totaling $4.5 million in 2008, and higher non-recurring opportunistic sales of certain real estate investments in
2007. Equity in income of joint ventures and partnerships declined $5.5 million due to certain real estate joint ventures terminating in 2007 upon asset disposition.

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The
provision for loan losses totaled $5.4 million for the six months ended June 30, 2008 compared to $4.4 million for the six months ended June 30, 2007 due
to difficult market conditions for Japanese and Taiwanese real estate assets which provide the collateral for the portfolio of acquired non-performing loans.

Noninterest
expense totaled $49.7 million for the six months ended June 30, 2008 compared to $46.8 million for the six months ended June 30, 2007. The
$2.9 million increase was mainly attributable to a reduction in incentive compensation expense of $4.9 million and lower property inspection and loan processing fees of
$7.2 million partially offset by higher professional fees of $4.4 million and miscellaneous expenses of $11.3 million from real estate investments consolidated in 2008. The
incentive compensation expense reduction related to the decline in operating results, and the decrease in property inspection and loan processing fees was mainly due to fewer real estate acquisitions
and dispositions. The increase in professional fees was due to higher legal fees caused by new regulations in Japan, and higher audit fees.



The following table summarizes the results of operations of our European Operations segment for the three and six months ended
June 30, 2008 and 2007 (in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net interest income

$
5,693

$
9,872

$
10,545

$
19,001Noninterest income


(35,973
)

57,838


(279,555
)

86,533Total revenue


(30,280
)

67,710


(269,010
)

105,534Provision for loan losses


(591
)

(1,242
)

(633
)

(1,559
)Net revenue


(29,689
)

68,952


(268,377
)

107,093Noninterest expense


14,984


20,822


22,898


30,675(Loss) income before minority interest and income taxes


(44,673
)

48,130


(291,275
)

76,418Minority interest income











(Loss) income before income taxes

$
(44,673
)
$
48,130

$
(291,275
)
$
76,418




Our European Operations segment incurred a loss before income taxes of $44.7 million for the three months ended June 30,
2008 compared to income before income taxes of $48.1 million for the three months ended June 30, 2007. The $92.8 million decrease was primarily due to significant downward changes
in fair value recognized on our loan portfolio held for sale in Europe.

Net
interest income totaled $5.7 million for the three months ended June 30, 2008 compared to $9.9 million for the three months ended June 30, 2007. The
$4.2 million decrease was primarily driven by a decrease in average interest-earning assets in Europe due to the sale of significant interests in 39 loans to a third-party institutional buyer
in April 2008.

Noninterest
income was a negative $36.0 million for the three months ended June 30, 2008 compared to a positive $57.8 million for the three months ended
June 30, 2007. The $93.8 million decrease was primarily due to decreased net gains, equity in income of joint ventures and partnerships, and fee income. Net losses totaled
$41.1 million for the three months ended June 30, 2008 compared to net losses of $3.2 million in the prior period. The increase in net losses of $37.9 million was due to
downward changes in fair value totaling $39.7 million recognized on our portfolio of loans held for sale during the three months ended June 30, 2008. Equity in income of joint ventures
and partnerships

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decreased
$49.5 million due to losses recognized by the underlying joint venture investments in 2008 and profits recognized in 2007. Mortgage servicing fees increased $1.2 million as a
result of an increase in the balance of loans serviced. Placement fees and other fees decreased by $7.6 million primarily due to decreased market activity.

Noninterest
expense totaled $15.0 million for the three months ended June 30, 2008 compared to $20.8 million for the three months ended June 30, 2007. The
$5.8 million decrease was primarily due to an $8.7 million decline in incentive compensation related to the decline in operating results partly offset by a $3.9 million increase
in professional fees due to transaction expenses incurred in connection with the European loan sale in April 2008 and consulting costs incurred in connection with matters related to Capmark Bank
Europe.



Our European Operations segment incurred a loss before income taxes of $291.3 million for the six months ended June 30,
2008 compared to income before income taxes of $76.4 million for the six months ended June 30, 2007. The $367.7 million decrease was primarily due to significant downward changes
in fair value recognized on our portfolio of loans held for sale in Europe.

Net
interest income totaled $10.5 million for the six months ended June 30, 2008 compared to $19.0 million for the six months ended June 30, 2007. The
$8.5 million decrease was primarily driven by a decrease in average interest-earning assets in Europe after we completed the sale of significant interests in 39 loans to a third-party
institutional buyer in April 2008.

Noninterest
income was a negative $279.6 million for the six months ended June 30, 2008 compared to a positive $86.5 million for the six months ended June 30,
2007. The $366.1 million decrease was primarily due to decreased net gains, equity in income of joint ventures and partnerships, and fee income. Net losses totaled $285.5 million for the
six months ended June 30, 2008 compared to net gains of $6.4 million in the prior period. The current year losses were primarily due to losses on interests in loans that were sold. In
April 2008, we completed the sale of significant interests in 39 loans to a third-party
institutional buyer for a total aggregate sale price of approximately $1.8 billion. Equity in income of joint ventures and partnerships decreased $59.3 million due to losses recognized
by the underlying joint venture investments. Mortgage servicing fees decreased $3.1 million primarily as a result of non-recurring income earned on the resolution of a specially
serviced CMBS investment in 2007. Placement fees and other fees decreased by $12.4 million primarily due to decreased market activity.

Noninterest
expense totaled $22.9 million for the six months ended June 30, 2008 compared to $30.7 million for the six months ended June 30, 2007. The
$7.8 million decrease was primarily due to a $12.5 million decline in incentive compensation related to the decline in operating results partly offset by a $3.8 million increase
in professional fees due to transaction expenses incurred in connection with the European loan sale in April 2008 and consulting costs incurred in connection with matters related to Capmark Bank
Europe.

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The following table summarizes the results of operations of our North American Affordable Housing segment for the three and six months
ended June 30, 2008 and 2007 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,2008

2007

2008

2007Net interest income

$
3,095

$
1,957

$
802

$
(1,646
)Noninterest income


(4,406
)

1,516


713


50,320Total revenue


(1,311
)

3,473


1,515


48,674Provision for loan losses





59





1,559Net revenue


(1,311
)

3,414


1,515


47,115Noninterest expense


9,794


7,710


18,415


23,185(Loss) income before minority interest and income taxes


(11,105
)

(4,296
)

(16,900
)

23,930Minority interest income











(Loss) income before income taxes

$
(11,105
)
$
(4,296
)
$
(16,900
)
$
23,930




Our North American Affordable Housing segment incurred a loss before income taxes of $11.1 million for the three months ended
June 30, 2008 compared to a loss before income taxes of $4.3 million for the three months ended June 30, 2007. The $6.8 million increased loss was primarily attributable to
a decrease in noninterest income and an increase in noninterest expense partially offset by an increase in net interest income.

Net
interest income totaled $3.1 million for the three months ended June 30, 2008 compared to $2.0 million for the three months ended June 30, 2007. The
increase of $1.1 million was primarily attributed to decreased variable rate funding costs associated with fixed rate securities in our portfolio.

Noninterest
income was a negative $4.4 million for the three months ended June 30, 2008 compared to a positive $1.5 million for the three months ended
June 30, 2007. The decrease of $5.9 million was primarily attributable to a decrease in net gains of $10.5 million related to the sale of properties to LIHTC funds during the
three months ended June 30, 2007, partially offset by a $5.2 million reduction in losses related to LIHTC yield guarantees.

Noninterest
expense totaled $9.8 million for the three months ended June 30, 2008 compared to $7.7 million for the three months ended June 30, 2007. The
$2.1 million increase was driven primarily by an increase in legal costs associated with LIHTC fund and property disposition activity.



Our North American Affordable Housing segment incurred a loss before income taxes of $16.9 million for the six months ended
June 30, 2008 compared to income before income taxes of $23.9 million for the six months ended June 30, 2007. The $40.8 million decrease was primarily attributable to a
decrease in noninterest income partially offset by a decrease in noninterest expense and an increase in net interest income.

Net
interest income totaled $0.8 million for the six months ended June 30, 2008 compared to a negative $1.6 million for the six months ended June 30, 2007.
The increase of $2.4 million was primarily caused by a decrease in variable rate funding costs associated with fixed rate securities in our portfolio and the change in composition of our
investment securities portfolio subsequent to the sale of our affordable housing debt platform in February 2007.

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Noninterest
income totaled $0.7 million for the six months ended June 30, 2008 compared to $50.3 million for the six months ended June 30, 2007. The decrease
of $49.6 million was primarily attributable to a gain on the sale of the majority of the affordable housing debt platform of approximately $71.5 million in February 2007 (partially
offset in our consolidated financial statements by the impact of push down accounting reflected in "Corporate and Other") offset in part by an $18.5 million reduction in losses relating to
LIHTC yield guarantees.

There
is no current year provision for loan losses compared to $1.6 million for the six months ended June 30, 2007. The $1.6 million provision in 2007 related to a
property acquired through foreclosure.

Noninterest
expense totaled $18.4 million for the six months ended June 30, 2008 compared to $23.2 million for the six months ended June 30, 2007. The
$4.8 million decrease was driven primarily by staff reductions and an overall reduction in operating expenses due to the sale of the majority of the affordable housing debt platform in February
2007.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of income and expense. Our management regularly
evaluates these estimates, judgments and assumptions based on available information and experience. Because the use of estimates, judgments and assumptions is inherent in the financial reporting
process, actual results may differ from these estimates under different assumptions or conditions. Certain of our accounting policies require higher degrees of judgment and are more complex than
others in their application. Our significant accounting policies are disclosed in Note 3 to our 2007 audited consolidated financial statements. There have been no significant changes to the
Company's critical accounting estimates and significant accounting policies in 2008, except that the Company adopted SFAS No. 157 and SFAS No. 159 on January 1, 2008 as discussed
below. For a discussion of our critical accounting estimates, see the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our
prospectus filed with the SEC on July 15, 2008 in accordance with Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website at www.sec.gov.

SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The adoption of SFAS
No. 157 is discussed in Notes 3 and 14 to our condensed consolidated financial statements. The adoption of this statement did not have a material impact as to the manner in which we
determine fair value but does require additional disclosures as discussed in Note 14 to our condensed financial statements.

SFAS
No. 159 permits the Company to irrevocably elect fair value of the initial and subsequent measurement of certain financial assets and financial liabilities on an
instrument-by-instrument basis. Subsequent changes in the fair value of these instruments are recognized in earnings when they occur. SFAS No. 159 required that the
difference between the carrying value of financial assets and financial liabilities elected and the fair value of such instruments be recorded as an adjustment to beginning retained earnings in the
period of adoption. Effective January 1, 2008, the Company elected fair value accounting for certain loan assets and deposit liabilities not previously carried at fair value. The
after-tax cumulative effect from electing the fair value option for the selected financial instruments decreased retained earnings by $9.8 million on January 1, 2008.

In
accordance with SFAS No. 157, we categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy.
The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). If the inputs used to measure the financial

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instruments
fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

As
of June 30, 2008, approximately $7.0 billion of our total assets consisted of financial instruments measured at fair value on a recurring basis, including financial
instruments for which we elected the fair value option. Approximately $1.3 billion of these financial instruments, net of counterparty and cash collateral balances, were measured using
valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 inputs. Approximately $5.8 billion of these financial instruments were measured
using model-based techniques, or Level 3 inputs, and represented 27.1% of our total consolidated assets.

Note 14
to our condensed consolidated financial statements contains a description of the valuation methodologies that we use for financial instruments measured at fair value on a
recurring basis, including those accounted for at fair value prior to the adoption of SFAS No. 159, as well as the general classification of such instruments pursuant to the valuation
hierarchy.



Given the prevalence of fair value measurement in our financial statements, the control functions related to the valuation process are
a critical component of our business operations. We employ control processes to validate the fair value of our financial instruments, including those derived from pricing models. These control
processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, we review the
valuation approach utilized to assure it is appropriate and consistently applied and that the assumptions are reasonable. Our reviews of the pricing models' theoretical soundness and appropriateness
are performed by Company personnel with relevant expertise who are independent from the persons responsible for the lending and investment functions. The heads of our credit, market risk management
and accounting departments are responsible for the oversight and valuation control processes and policies and for reporting the results of these processes and policies to our Audit Committee.

Liquidity and Capital Resources

We require substantial amounts of capital to support our operations and growth plans. Members of our senior management, in consultation
with our board of directors, establish our overall liquidity and capital allocation strategies. A key objective of these strategies is to support the successful execution of our business strategy
while ensuring that we have sufficient ongoing liquidity throughout the business cycle to service our financial obligations as they become due. When making funding and capital allocation
determinations, members of our senior management consider business performance; the availability of, costs and benefits associated with, different funding sources; current and expected market and
general economic conditions; our balance sheet and capital structure; and our targeted liquidity profile and risks relating to our funding needs. In carrying out these activities, members of our
senior management monitor, evaluate and seek to control the impact that our business activities have on our balance sheet, liquidity and capital structure, thereby helping to ensure that our
operations are aligned with our liquidity and capital allocation strategies.

Our
primary uses of liquidity are for (1) the origination and purchase of loans, (2) the repayment of short-term and long-term borrowings and
related interest, (3) the purchase of real estate equity and other real estate-related investments, and (4) the funding of our operating expenses. We require short-term
liquidity to fund loans that we originate and hold on our consolidated balance sheet pending sale, including through syndication, participation or securitization. We generally require
longer-term funding to finance the loans and real estate related investments that we hold for investment.

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Our primary sources of liquidity are (1) net cash from our operations, (2) proceeds from the repayment of loans, (3) proceeds from the
issuance of short-term and long-term borrowings/deposits and (4) proceeds from the sale of loans, real estate equity investments and other real estate-related
investments. Our principal debt financing sources are (1) committed unsecured funding provided by banks, including our senior credit facility and other bank loans; (2) secured funding
facilities, including borrowings by Capmark Bank US from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank of Seattle ("FHLB Seattle"); and (3) other uncommitted funding
sources, including Brokered CDs issued by Capmark Bank US. These financing arrangements provide us with diverse sources of short-term and long-term funding and allow us to
borrow amounts on a secured and unsecured basis, in a variety of currencies and at interest rates that are fixed or floating, in the geographical locations in which we operate.

As
of June 30, 2008, we had $925.9 million in total cash, of which $199.8 million was restricted under current regulatory and other contractual arrangements. This
represented a net decrease in total cash of approximately $510.8 million from December 31, 2007. As of June 30, 2008, we had readily available cash, excluding restricted cash and
cash held by Capmark Bank, and borrowing capacity under our revolving credit facility of $1.9 billion.

During
the six months ended June 30, 2008, net cash provided by operating activities totaled $1.4 billion. The European loan sale generated approximately
$1.8 billion in cash, the proceeds of which were primarily used to repay indebtedness. The proceeds from the sale were offset by approximately $0.4 billion for the net use of cash
related to all other operating activities.

We
used net cash of $684.2 million in investing activities for the six months ended June 30, 2008, primarily for the origination of loans held for investment totaling
$1.5 billion which was offset in part by the receipt of approximately $836.0 million from the repayment of loans held for investment. For the six months ended June 30, 2008, we
used approximately $1.2 billion in net cash in our financing activities, in large part due to a net decrease of $1.1 billion in our deposit liabilities.

In
the second quarter of 2008, we continued to take actions to maintain sufficient liquidity to support our business operations including:



Our
liquidity management actions in the second quarter of 2008 enabled us to reduce consolidated indebtedness by $2.0 billion. This reflected a $2.6 billion reduction
outside of Capmark Bank US offset by an approximately $600.0 million increase in total Capmark Bank US debt. Our liquidity management actions included the
following:



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Cash
and available borrowing capacity of Capmark Bank US was approximately $2.0 billion as of June 30, 2008. In addition, escrow funds held in trust as of June 30,
2008 that were eligible for deposit in Capmark Bank US were $1.1 billion.

Management
believes that the Company's current financing sources and cash flows are adequate to meet our liquidity needs for a reasonable period including the next 12 months. We
will continue to evaluate additional sources of liquidity.



Our reliance on debt financing to fund a portion of our operations makes access to sources of short-term and
long-term unsecured financing important. The cost and availability of unsecured debt financing generally are dependent on our short-term and long-term credit
ratings. Factors that are significant to the determination of our credit ratings or that otherwise affect our ability to raise short-term and long-term financing include the
level and volatility of our earnings, our relative competitive position, our risk management policies, our access to sources of liquidity, our capital adequacy, our level of leverage, the credit
quality of our balance sheet, our ability to retain key personnel and legal, regulatory and tax developments.

The
following table presents the credit ratings and ratings outlook assigned to our unsecured indebtedness by S&P, Moody's and Fitch as of the date of this quarterly report. Credit
ratings are opinions of a rated entity's ability to meet its ongoing obligations. Credit ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at
any time by the assigning rating agency. Each agency's rating should be evaluated independently of any other agency's rating.

Short-Term

Long-TermRating Agency

Rating

Outlook

Rating

OutlookS&P


A3

Stable

BBB-

StableMoody's






Baa3

StableFitch


F3

Stable

BBB

Stable




Liquidity in the capital markets has been constrained, increasing our cost of funds and limiting our access to the secured and
unsecured debt markets, including repurchase financing for real estate related investments and issuance of CMBS. Our ability to access additional
liquidity is subject to a number of factors, including the general availability of and rates applicable to financing transactions, lenders' and investors' resources, our financial performance, our
credit rating, and our industry and market trends.

We
will continue to monitor conditions in the debt capital markets and to adjust the use of our various financing sources according to availability, term and cost, as well as to adjust
the level and mix of our loan originations, ownership and real estate investment activities in order to maintain sufficient liquidity in light of market conditions. If adverse conditions in the credit
markets continue or worsen, our primary sources of liquidity may be adversely affected.

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We
have access to short-term and long-term funding under a broad range of secured and unsecured financing arrangements. These arrangements allow us to borrow
funds in U.S. dollars, pounds sterling, euro, Japanese yen, Canadian dollars, Taiwanese dollars and other currencies, depending on our financing requirements. Interest is payable under these financing
arrangements primarily at floating rates that are determined by reference to a benchmark rate, such as LIBOR or EURIBOR, and, in some cases, at fixed rates. When making determinations as to which
sources of funds to access, we generally seek to finance our assets with borrowings that are denominated in the same currency and that bear interest based on the same benchmark rates. When we are
unable to match the currency and interest rates that are applicable to our assets and liabilities, we seek to enter into derivative transactions to achieve a similar result.

Consistent
with our liquidity and capital allocation strategy, we strive to maintain diverse funding sources to provide us with a cost effective and flexible mix of funding. Brokered CDs
continue to provide a key liquidity source for Capmark Bank US. Although market conditions adversely affected the availability and cost of other sources of funding, Capmark Bank US was able to issue
Brokered CDs to support growth in its commercial mortgage loan portfolio as the Brokered CD market remained stable and provided consistently available funding. While we do not maintain specific target
levels for Brokered CDs, we manage the level of Brokered CDs in response to changes in investor demand, prevailing funding spreads and overall economic conditions. When issuing Brokered CDs, one of
our goals is to achieve a liability maturity profile similar to that of our asset maturity profile. Based on our current asset maturity profile, we are issuing Brokered CDs with maturities between one
year and five years. We continue to monitor shorter-term maturities should the opportunity arise to issue shorter-term Brokered CDs for economic reasons.

General
economic conditions may affect our ability to access the Brokered CD market. We also face the risk that we may need to issue Brokered CDs at higher rates. This increase in rates
could have a negative impact on our net interest income. We have established alternative sources of funding that can be utilized if we are either unable to access the Brokered CD market or the overall
cost of obtaining funding in this market increases significantly. We maintain cash and cash equivalents of at least 5% of
Capmark Bank US's asset base. Capmark Bank US also has access to secured funding through FHLB Seattle and the Federal Reserve Bank of San Francisco, which subject to the terms of the programs, may
enable us to borrow up to an aggregate amount of $3.8 billion. As of June 30, 2008, we had unused capacity of $1.4 billion under these programs. Additionally, deposits related to
our servicing platform of approximately $1.1 billion are eligible for deposit at Capmark Bank US. During the six months ended June 30, 2008, we increased our usage of alternative funding
sources which led to a decline in the amount of Brokered CDs outstanding as of June 30, 2008 compared to December 31, 2007.

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The
following table presents information concerning the financing arrangements and other funding sources that we had in place as of June 30, 2008 (in thousands):

Financing Arrangements and Funding Sources

Amount
Outstanding

Funding
Limit(8)

Weighted
Average
Maturity(months)Primary long-term funding:Senior credit facilityTerm loan(1)

$
2,761,509

$
2,761,509


33Revolving credit facility(1)


1,044,367


2,738,110


33Total


3,805,876


5,499,619


33Bridge loan(2)


1,133,000


1,133,000


9Senior Notes


2,490,743


2,490,743


51Total


7,429,619


9,123,362


35Secured funding(3):Repurchase agreements(4)


148,396


581,072


1Other secured funding facilitiesCapmark Bank US(5)


2,377,504


3,806,417


14Other secured funding facilitiesOther(5)


637,835


864,525


3Bank and third-party funding


85,061


85,061


23Total


3,248,796


5,337,075


11Unsecured funding:Other unsecured fundinguncommittedCapmark Bank US


274,012


275,012


0Other unsecured fundinguncommittedOther


247,978


265,671


1Other bank and third party loans(5)


101,986


198,038


1Total unsecured funding


623,976


738,721


1Subtotal


11,302,391


15,199,158


26Brokered CDs(6)


4,450,687


4,450,687


13Other deposit liabilities


4,737


4,737


0Total funding and bank deposit liabilities


15,757,815


19,654,582


23Consolidated debt agreements(7)Secured debt attributable to the consolidation of securitizations


256,205


256,205


N/ASecured debt attributable to the consolidation of real estate owned


28,737


28,737


N/ASecured debt attributable to the consolidation of LIHTC partnerships


226,852


226,852


N/ATotal consolidated debt agreements


511,794


511,794


N/AJunior subordinated debentures


250,001


250,001


453Total borrowings and deposit liabilities

$
16,519,610

$
20,416,377


29


---

Notes:

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In
addition to the outstanding funding reflected in the above table as of June 30, 2008, we had $2.3 billion of stockholders' equity and $95.8 million of common
stock classified as mezzanine equity. As of June 30, 2008, approximately $1.0 billion was outstanding under our revolving credit facility, of which approximately $1.7 billion
remained available, and we held $925.9 million of total cash, including $525.0 million of cash held at Capmark Bank US.

Of
the total deposit liabilities reflected in the above table, $4.5 billion consisted of federally insured Brokered CDs issued by Capmark Bank US, as compared to
$5.6 billion outstanding as of December 31, 2007. Capmark Bank US may also have access to funding in the form of escrow deposits held in trust as provided by our U.S. servicing
operations. Although no escrow deposits were held at Capmark Bank US as of June 30, 2008, from time to time a portion of these outstanding balances have been deposited at Capmark Bank US. As of
June 30, 2008, the amount of servicing deposits that were eligible for deposit at Capmark Bank US was $1.1 billion.

As
of June 30, 2008, we also maintained a number of other committed and uncommitted secured and other unsecured funding programs sponsored by a variety of lenders with an
aggregate principal amount totaling $3.9 billion. Of that amount, $2.3 billion is considered to be uncommitted and/or is maturing in the near term.

Commitments and Contractual Obligations



In connection with our business activities, we enter into commitments that may give rise to future cash funding requirements. As of
June 30, 2008, these commitments consisted of commitments to originate or purchase mortgage loans or investments, commitments to fund loans and commitments to provide equity to equity method
investees. The future cash payments that were associated with these obligations as of June 30, 2008 are summarized in the table below. Because these commitments may

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expire
unused, the amounts shown do not necessarily reflect our actual future cash funding requirements.

Years to MaturityType of Commitment

Less than
1 Year

1 to 3 Years

3 to 5 Years

More than
5 Years

Total(in thousands of U.S. dollars)Commitments to originate or purchase loans or investments

$
121,612

$


$


$


$
121,612Commitments to fund construction loans


106,063


691,983


439,700


33,335


1,271,081Commitments to fund other loans


339,784


949,662


48,086


273,660


1,611,192Commitments to provide equity to equity method investees


49,790


153,037





59,264


262,091Total

$
617,249

$
1,794,682

$
487,786

$
366,259

$
3,265,976Commitments to sell loans or securities

$
839,502

$


$


$


$
839,502


As an approved multifamily seller/servicer under Fannie Mae's DUS program, we are responsible for assuming a portion of the losses
that may result from a borrower's payment default on the loans that we have sold to Fannie Mae. Our loss sharing obligations are determined based on agreed loss sharing formulas. We generally are
required to assume responsibility for the first 5% of the unpaid principal and a portion of any additional losses up to a maximum of 20% of the original principal balance. Any significant losses under
this program would have an adverse effect on our results of operations and financial condition.



In the ordinary course of our business, we enter into contractual arrangements that may require future cash payments. As of
June 30, 2008, our contractual obligations primarily consisted of long-term borrowings and deposit liabilities, derivatives instruments, FIN 48 obligations and operating
leases. The future cash payments that were associated with these obligations as of June 30, 2008 are summarized in the table below.

Payments due by PeriodType of Obligation

Less than
1 Year

1 to 3 Years

3 to 5 Years

More than
5 Years

Total(in thousands of U.S. dollars)Borrowings and deposit liabilities(1)

$
3,946,285

$
5,166,906

$
2,316,541

$
1,982,888

$
13,412,620Derivative instruments(2)


324,242


503,009


278,625


223,632


1,329,508FIN 48 obligations(3)


64,319


141,328








205,647Operating leases and other(4)


31,290


77,923


70,205


14,645


194,063Total

$
4,366,136

$
5,889,166

$
2,665,371

$
2,221,165

$
15,141,838


---

Notes:

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Guarantees and Off-Balance Sheet Transactions



We enter into guarantees in the ordinary course of our business, including, among others, guarantees in support of some of our
securitization transactions and guarantees of payment of some of the agency and construction loans that we originate.



For the six months ended June 30, 2008, we entered into one loan securitization transaction in which we sold
$34.8 million of loans to an off-balance sheet securitization trust and incurred a net loss on sale totaling $2.7 million.



The instruments governing some of our securitization transactions and other off-balance sheet transactions contain
customary provisions that require us to purchase specific assets from our securitization trusts and indemnify the issuer with respect to any material misstatement or omission with respect to
information we provide for inclusion in the applicable offering documents. In connection with certain asset sales and securitization transactions, we typically make customary representations and
warranties to the purchaser of our assets that relate to the characteristics of the assets transferred. These clauses are intended to ensure that the terms and conditions of the sales contracts are
met upon transfer of the assets. Prior to any sale or securitization transaction, we perform due diligence with respect to the assets to be included in the sale to ensure that they meet the
purchaser's requirements, as described in the representations and warranties. Due to these procedures, we believe that the potential for loss under these arrangements is remote. Accordingly, we have
not recorded a liability in our consolidated balance sheet relating to these potential obligations. The maximum potential amount of future payments that we could be required to make would be equal to
the current balances of all assets subject to these securitization or sale activities. We do not monitor the total value of assets historically transferred to securitization vehicles or through other
asset sales and, as a result, we are unable to develop an estimate of the maximum payout under these representations

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and
warranties. As of June 30, 2008, we had not been required to repurchase any assets under these provisions.



We participate as a lender in the Fannie Mae Delegated Underwriting and Servicing (DUS) program and other similar programs. As a
condition to Fannie Mae's delegation of responsibility for underwriting, originating and servicing of loans under the program, we assume a limited first-dollar loss position throughout the term of
each loan we sell to Fannie Mae. As of June 30, 2008, we maintain a liability for such potential losses in the amount of $16.4 million. The maximum amount of loss we were exposed to
under these programs was $638.3 million as of June 30, 2008.



We sponsor NMTC funds that make investments in qualifying Community Development Entities ("CDEs") that receive new markets tax credit
allocations under a federal program that is designed to increase the availability of investment capital in low-income communities. We have determined that our NMTC funds are variable
interest entities under FIN 46(R) and that we were the primary beneficiary of all but twelve of the NMTC funds that we had sponsored as of June 30, 2008. The NMTC funds of which we were
not the primary beneficiary had total assets of $266.4 million as of June 30, 2008. Our exposure to a loss relating to those NMTC funds was $179.1 million as of that date,
representing the amount of financing we have provided to the funds.



We sponsor CDOs in which we may retain a subordinated or equity interest and for which we serve as the collateral manager. When we
sponsor a CDO, we establish a bankruptcy-remote special purpose entity that purchases a portfolio of assets that may consist of commercial mortgage loans and other real estate related securities and
issues debt and equity certificates, representing interests in the special purpose entity. Certain of the CDOs that we have sponsored were initially structured, or have been restructured, as
qualifying special purpose entities or "QSPEs" under SFAS No. 140 and, accordingly, are not consolidated in our financial statements.

The
CDOs that we have sponsored that have not been structured as QSPEs are variable interest entities under FIN 46(R). We have determined that we were not the primary beneficiary
of any of these entities as of June 30, 2008 and, accordingly, have not consolidated them in our financial statements. These CDOs had total assets of $4.5 billion as of June 30,
2008. Our exposure to a loss relating to those CDOs was $4.0 million as of that date, representing the value of our retained interests in those entities.

Credit Risk Management

Credit risk represents the risk that a financial loss will result from the failure of a borrower, obligor or counterparty to perform
its obligations. We have developed and implemented formal, systematic credit risk management policies and processes for our lending activities that are designed to preserve the independence and
integrity of credit-related decisions and to ensure that credit risks are accurately assessed, properly approved, monitored and actively managed at both the transaction and portfolio levels. These
policies and processes employ specific limits on credit approval authorities, the use of a programmatic risk-rating methodology, certain
concentration limitations and independent credit risk monitoring and asset management procedures. In order to meet our credit risk management objectives, we seek to maintain a risk profile that is
diverse in terms of property type, geographical location and single asset exposure. We manage this diversification through the use of asset sales, including syndications, participations and
securitizations and other risk reduction techniques.

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The following table summarizes the composition of our loans held for sale and held for investment as of June 30, 2008 and
December 31, 2007, in aggregate by property type (in thousands):

June 30, 2008

December 31, 2007Property Type

Amount

Percentage

Amount

PercentageMultifamily

$
3,397,566


25
%
$
2,828,286


19
%Office


2,726,434


20


3,052,122


21Hospitality


1,727,996


13


1,558,172


11Healthcare


1,589,772


12


1,611,729


11Retail


1,522,485


11


2,808,654


19Mixed-use and other(1)


2,498,554


19


2,845,272


19Total

$
13,462,807


100
%
$
14,704,235


100
%


---

Note:

The
above table sets forth our exposure to these property types in the loan portfolio. We maintain additional direct and indirect exposure to these property types through our interests
in funds, securities, equity investments and other non-loan exposures.



We seek to minimize the size of our exposure to losses on a single loan by using credit approval limits and by developing loan
distribution strategies before we commit to provide financing. As of June 30, 2008, we had 43 loan commitments that exceeded $50.0 million. Our aggregate commitments with respect to
these 43 loans totaled $3.6 billion, of which $2.8 billion had been funded. Two of these loans are non-performing and maintained on non-accrual
status. The gross commitment and funded amount related to these non-performing loans totaled $117.6 million as of June 30, 2008. The remaining 41 loans are performing loans.



Our originated non-performing assets consist of all of our loans that are on non-accrual status and all real
estate acquired through foreclosure, excluding any loans there were on non-accrual status at the time we acquired such loans for investment purposes. The following table presents
information

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Table of Contents

concerning
our originated non-performing assets as of June 30, 2008 and December 31, 2007 (in thousands):

June 30,
2008

December 31,
2007Gross principal balance

$
346,821

$
259,338Basis adjustments before allowance for loan losses(1)


(104,881
)

(50,898
)Specifically assigned allowance for loan losses


(16,022
)

(6,919
)Carrying value

$
225,918

$
201,521Carrying value as a percentage of total assets


1.1
%

0.9
%


---

Note:



We have acquired non-performing loans for investment purposes at substantial discounts to par. At the time of acquisition,
these
non-performing loans evidenced credit quality deterioration and the probability that not all contractually required payments would be collected. The carrying amount of these loans totaled
$337.9 million and $358.4 million as of June 30, 2008 and December 31, 2007, respectively. We recognize an estimate of the accretable yield on these loans. The accretable
yield is limited to the excess of the estimated undiscounted principal, interest and other expected cash flows over the acquisition price of the loans.

We
seek to maximize recovery on our acquired non-performing loans. However, the time and amount of our expected cash flows from such loans are based upon a number of
assumptions that are subject to business and economic uncertainties, including the amount and timing of principal payments, collateral disposition activity and other factors. We record an impairment
loss if we determine there is a decrease in the expected cash flows for such acquired non-performing loans. The charges for impairments of acquired non-performing loans totaled
$2.2 million and $1.4 million for the three months ended June 30, 2008 and 2007, and $6.2 million and $4.0 million for the six months ended June 30, 2008 and
2007, respectively.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk that a change in the level of one or more market prices, rates, indices, implied volatilities,
correlations or other market factors will result in a financial loss. The primary market risks that we face are interest rate risk, credit spread risk and foreign currency risk. These risks include
the risks that changes in prevailing interest rates, credit spreads or foreign currency exchange rates will impact the fair value of our assets and liabilities, decrease our levels of revenue or
increase our expenses. We seek to control these risks by selling United States Treasury securities and entering into a number of derivative instruments, including total rate of return swaps, CMBS
index swaps, interest rate or foreign exchange swaps, interest rate caps and floors, and options to purchase the foregoing instruments. We seek to further control our exposure to fluctuations in
foreign currency exchange rates by securing multi-currency funding sources that we may use when funding foreign currency denominated assets.

We
have implemented centralized risk management policies and processes that are intended to ensure that our market risk exposure is accurately measured, regularly monitored and
appropriately managed on a company-wide basis and within individual market positions. Our market risk limits are established by our market risk management department. These limits are
approved by our Asset/

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Liability
Management Committee. Our market risk exposure is measured using a variety of quantitative and qualitative risk measures and analyses, performed either daily or monthly, including
value-at-risk measurements and sensitivity analyses. Price sensitivity metrics, portfolio valuations and correlation analyses are performed on a daily basis, while stress
testing is performed on a monthly basis using the value-at-risk methodology explained below. Value-at-risk measures the impact on the value of existing
portfolios of specified changes in market factors for all of our interest rate sensitive assets and liabilities. We also conduct a net interest income analysis, which estimates our net interest income
sensitivity to immediate increases or decreases in interest rates of 100 and 200 basis points.

Interest Rate and CMBS Spread Risk

The predominant type of interest rate risk that we face is the risk that the value of our assets and liabilities (including the value
of our loans, debt obligations and investment portfolios) will change due to changes in interest rates, shape of the yield curve or interest rate spreads between two different financial instruments.
We are also exposed to the risk that changes in interest rates will impact the levels of revenue that are generated by our lending, servicing and investments and funds management businesses, including
trust fees that we earn on escrow balances, or give rise to mismatches between the values of our assets and the liabilities that we incur when funding those assets. Because we have floating rate debt
outstanding, changes in interest rates may impact our debt servicing costs, which may lead to changes in the levels of net income and cash flows that we report from time to time.

As
part of our effort to manage interest rate exposure in our lending business, we also enter into forward rate lock commitments that guarantee the interest rates that will be charged on
the loans that we originate from time to time. During the guaranteed rate period, a forward rate lock commitment exposes us to the possibility that the value of the forward rate lock commitment and
related loan will decrease due to a rise in interest rates. To protect against this risk, we generally enter into a hedging transaction when we enter into a forward rate lock commitment and require
the borrower to reimburse any costs to us of unwinding the related hedge in the event that the related loan fails to close. While this risk management strategy helps protect us against risks
associated with movements in interest rates, it exposes us to the risk that a borrower will be unable to reimburse us for our costs if we are required to unwind the related hedge. To limit our
exposure to this risk, when entering into a hedging transaction for a forward rate lock commitment, we generally require a borrower to collateralize its obligations to us with cash collateral
maintained in a margin account. We monitor our exposure under forward rate commitments and related hedging transactions on a daily basis. If our collateralized coverage falls below a specified level,
we require a borrower to post additional cash collateral.

We
actively monitor our exposure to changes in CMBS spreads and, when appropriate, we may enter into CMBS total return swaps to moderate our exposure against losses associated with a
widening of CMBS spreads, although such swaps may not result in a reduction of losses in certain instances. However, by entering into the swaps, we reduce the potential to benefit from gains
associated with the narrowing of CMBS spreads. The use of CMBS total return swaps and other transactions to manage our exposure to CMBS spread risks also exposes us to the risk that our swap
counterparties will default on their obligations to us as well as the risk that our strategy may not be successful.

Foreign Currency Risk

We are exposed to market risks associated with changes in foreign currency exchange rates because we generate a portion of our revenue
and incur a portion of our expenses in currencies other than the U.S. dollar. We are also exposed to risks associated with foreign currency exchange rates because we have various assets and
liabilities that are denominated in foreign currencies, including borrowings under our senior credit facility and other borrowing facilities, and because we have subsidiaries and investments in other
entities with retained earnings that are denominated in foreign currencies. As of June 30, 2008, our foreign currency exposure consisted primarily of exposure to changes in exchange

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rates
between the U.S. dollar and the Euro in addition to the Japanese yen. We were to a lesser extent subject to risks associated with movements in exchange rates between the U.S. dollar and pounds
sterling, Taiwanese dollars, Chinese renminbi, Canadian dollars, Mexican pesos, Indian rupees and Filipino pesos.

To
manage foreign currency exposure in our business, we seek to finance assets that are denominated in foreign currencies with funding sources denominated in the same currency. When
assets denominated in foreign currencies are not funded with liabilities denominated in the same currencies, we actively use foreign exchange swaps and forward transactions that are designed to
mitigate the risks associated with adverse movements in the applicable foreign currency exchange rates. We similarly use foreign exchange forward contracts to manage our foreign currency exposure
related to income streams and expenses that are denominated in foreign currencies when the amount and timing of the income streams and expenses are known. To manage the effect that fluctuations in
exchange rates may have on the value of foreign currency denominated retained earnings in our subsidiaries and the entities in which we have made investments, we have developed an active hedging
policy that manages and adjusts our exposure using one-month foreign exchange swaps and forward contracts.

Derivative Counterparty Exposure

The use of derivative instruments to manage and mitigate our exposure to market risks exposes us to the risk that counterparties to
derivative transactions will fail to perform their obligations under the derivative instruments. Because obligations under our derivative instruments are determined by reference to interest rates,
CMBS spreads and foreign currency exchange rates, our exposure to a risk of loss from defaults by counterparties to our derivative transactions is impacted by movements in interest rates, CMBS spreads
and foreign currency exchange rates. To manage our credit exposures to counterparties to our derivative transactions, before we enter into derivative transactions, we negotiate and execute industry
standard agreements that govern the maximum credit exposure that we will assume with respect to counterparties in derivative transactions. We measure our credit exposure to counterparties under our
derivative instruments on a daily basis. If exposures with respect to counterparties exceed agreed-upon thresholds, we make margin calls under which the counterparties are required to post
collateral in order to bring our credit exposure to them within the agreed-upon ranges.

Value-at-Risk Analysis

We use a statistical methodology known as value-at-risk, which we refer to as "VaR," as one of our tools for
measuring, monitoring and reviewing our market risk exposure. VaR measures the dollar amount of potential losses in fair value from adverse movements in interest rates and credit spreads in an
ordinary market. Our VaR model uses a distribution of historical changes in key market indices or other market factors to assess the potential for future losses. Our VaR model also takes into account
correlations between risks and the potential for movements in one portfolio to offset movements in another. We measure VaR using a 95% confidence interval and an assumed one-month holding
period, meaning that we would expect to incur changes in fair value greater than those predicted by our VaR model in only one out of every 20 months. We believe that our VaR analysis captures
all of our significant market risk exposures resulting from our interest rate and credit spread sensitive positions. The following table represents the maximum, average and minimum potential VaR
losses measured for the three and six months ended June 30, 2008 and 2007. This analysis has been presented for illustrative purposes only and does not represent our current views as to future
movements in interest rates and credit spreads. The table shows a greater variation in our potential VaR losses for the three and six months ended June 30, 2008 compared to the same periods in
2007 as a result of adverse

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market
conditions experienced during the six months ended June 30, 2008. In addition, the unwinding of a mortgage escrow balance hedging strategy further increased this disparity.

Three Months Ended
June 30,

Six Months Ended
June 30,Value-at-Risk

2008

2007

2008

2007Maximum

$
55,264

$
21,935

$
60,868

$
21,935Average

$
53,061

$
20,203

$
54,373

$
17,403Minimum

$
50,661

$
18,662

$
45,844

$
11,963


Net Interest Income Sensitivity Analysis

While VaR measures the risk of loss due to unlikely events in an ordinary market, a sensitivity analysis measures exposure to an
isolated hypothetical movement in one or more
specific market prices, rates or indices. To measure our exposure to volatility in net interest income, we perform a sensitivity analysis on a monthly basis that considers isolated hypothetical
movements in specific market rates for each currency in which we transact business. The first table reflects our sensitivity to sudden shifts in short-term rates in all currencies in which
we transact business, taking into consideration our asset and liability positions on our consolidated balance sheet and the derivative instruments that we use to mitigate market risk as of
June 30, 2008. The second table reflects our sensitivity to similar movements in U.S. interest rates on the trust fee income earned on escrow balances as of June 30, 2008. Both tables
measure the impact on net interest income over the next 12 months. These analyses have been presented for illustrative purposes only and do not represent our current views as to future interest
rate movements.

Annualized Impact on Net Interest IncomeCurrency

200 Basis Point
Decrease

100 Basis Point
Decrease

100 Basis Point
Increase

200 Basis Point
Increase(in thousands of U.S. dollars)U.S. dollars

$
5,287

$
2,643

$
(2,643
)
$
(5,287
)Japanese yen(1)


5,493


2,746


(5,493
)

(10,986
)Pounds sterling


942


471


(471
)

(942
)Euro


(7,758
)

(3,879
)

3,879


7,758Canadian dollars


(122
)

(61
)

61


122Mexican pesos


1,162


581


(581
)

(1,162
)Taiwanese dollars


929


465


(465
)

(929
)Filipino pesos


161


81


(81
)

(161
)Chinese renminbi


(128
)

(64
)

64


128Indian rupees


(20
)

(10
)

10


20All currencies

$
5,946

$
2,973

$
(5,720
)
$
(11,439
)


---

Note:

Annualized Impact on Net Interest Income200 Basis Point
Decrease

100 Basis Point
Decrease

100 Basis Point
Increase

200 Basis Point
Increase(in thousands of U.S. dollars)Escrow balances

$
(61,917
)
$
(30,958
)
$
30,958

$
61,917


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Table of Contents

Although
we believe that the above sensitivity data measurements provide an estimate of interest rate sensitivity, there are limitations inherent in those measurements. For example, they
do not take into account potential changes in credit quality, size or composition of our asset portfolios, potential changes in our funding mix or other possible business developments. They are also
limited in that they are performed at a particular point in time and only contemplate certain movements in market rates or indices. Accordingly, we can give no assurance that our actual results would
not differ materially from the estimated outcomes of the above simulations. We are aware of the foregoing limitations on the use of sensitivity analyses for measuring and monitoring risks and,
accordingly, employ our sensitivity analysis as only one tool for identifying, measuring, monitoring, managing and reporting our exposure market risks.

Item 4T.    Controls and Procedures

Disclosure controls and procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our
management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls
and procedures as of June 30, 2008. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2008,
the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

Internal Controls over Financial Reporting

We are not yet required to report on our internal controls over financial reporting due to a transition period established by the rules
of the Securities and Exchange Commission for newly public companies. Both we and our independent registered public accounting firm, however, identified material weaknesses, as well as significant
deficiencies, with respect to our internal controls over financial reporting in connection with the audits of our consolidated financial statements for the years ended December 31, 2007 and
2006. Beginning in 2007, we have taken, and continue to take, specific actions to remediate these weaknesses and deficiencies.

As
part of our efforts to address the identified weaknesses and deficiencies, emphasis has been placed upon recruiting for key financial positions. Several of these key positions were
filled during 2007 and the first half of 2008. The Company expects to continue recruiting for additional roles during the remainder of 2008. We also initiated projects in the second half of 2007 which
are ongoing and are designed to improve financial processes, information flows and controls. Additional projects are being developed to improve accounting policies designed to ensure
company-wide compliance with interpretation of accounting rules.

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Table of Contents

PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

The Investigation Bureau of the Ministry of Justice of Taiwan presented one of our Taiwan-based subsidiaries with a search warrant in
June 2008, authorizing a search for documents relating to a 2005 transaction involving a purchase of non-performing loan and real estate assets from Bowa Bank, a Taiwanese bank. Bowa Bank
was taken over by the Central Deposit Insurance Corporation in August 2007 as part of an insolvency proceeding. The Investigation Bureau is reviewing a number of transactions entered into by Bowa Bank
prior to its insolvency. According to the search warrant, this case relates to an investigation of potential violation of the Banking Law and the Securities and Exchange Law. An officer of this Taiwan
subsidiary was also questioned as a witness in connection with the investigation. No criminal or civil claims have been
brought against us or any of our employees in connection with these matters. We are cooperating with the investigation.

We
may be subject to potential liability under various legal actions that are pending or that may be asserted against us in the ordinary course of business. While the outcomes of the
various pending legal actions are not certain, based on present assessments, management does not believe that they will have a material adverse effect on our business.

Item 1A.    Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading "Risk Factors" in our prospectus filed
with the SEC on July 15, 2008 in accordance with Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website at www.sec.gov.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

During the second quarter of 2008, we sold 110,532 shares of our common stock, par value $0.001 per share, or "Shares," granted
non-qualified stock options, or "Options," to purchase 110,000 additional Shares, and issued 24,276 hypothetical shares, or "Hypothetical Shares," or 244,808 equity securities in the
aggregate, in the transactions described below. The Options include a combination of time-based options and performance-based options having a weighted average exercise price of $6.09 per
Share. The time-based options generally vest and become exercisable ratably on each of the first five anniversaries of the option grant date, except as otherwise determined by our board of
directors. The performance-based options vest and become exercisable ratably at the end of each of the five fiscal years occurring after the option grant date only if we achieve certain return on
equity performance targets. If a performance target is missed in any one year, but in a subsequent year the cumulative actual performance for prior years equals or exceeds the annual performance
targets for those years, all performance-based options that did not vest will vest and become exercisable, as if all prior annual targets had been met. The Hypothetical Shares are held in separate
accounts and are valued to be equal to the fair value of a share of our common stock. Hypothetical Shares are paid out at fair market value upon termination or a change of control and may be paid in
cash or current shares at our election. The Shares were sold, the Options were granted and the Hypothetical Shares were issued in the following transactions, which were exempt from the registration
requirements of the Securities Act of 1933, as amended, and, in particular pursuant to Rule 4(2). No underwriters were employed in any of these transactions.



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Item 3.    Defaults upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

Item 5.    Other Information

On July 28, 2008, Linda A. Pickles, our Executive Vice President and Chief Administrative Officer, advised us of her intention
to resign from all of her positions with us. She is currently responsible for our human resources, communications, facilities and community initiatives activities worldwide. Ms. Pickles will
continue to serve as Chief Administrative Officer until a replacement has been hired and we have completed a successful transition.

Item 6.    Exhibits

The exhibits filed as a part of this report are as follows:

3.1

Amended and Restated Articles of Incorporation of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.1 to the registration statement on Form S-4/A filed on March 14, 2008.3.2

Amended and Restated By-laws of Capmark Financial Group Inc.10.1

Confidential Release and Waiver of Claims by and among Brian R. DiDonato, Capmark Investments LP and Capmark Financial Group Inc., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 22,
2008.10.2

Amendment No. 2 to the Credit Agreement, dated as of June 30, 2008, among Capmark Financial Group Inc., a Nevada corporation (the "Company"), the subsidiaries of the Company, certain financial institutions and other institutional
lenders party thereto (the "Lenders"), and Citibank, N.A., as administrative agent for the Lenders, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 3, 2008.10.3

Amendment No.2 to the Bridge Loan Agreement, dated as of June 30, 2008, among the Company, the financial institutions and other institutional lenders party thereto (the "Bridge Lenders"), and Citicorp North America, Inc., as administrative
agent for the Bridge Lenders, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 3, 2008.31.1

CEO Certification pursuant to Rule 13a-14(a)/15d-14(a).31.2

CFO Certification pursuant to Rule 13a-14(a)/15d-14(a).32.1

Section 1350 Certifications.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Capmark Financial Group Inc.Date: August 13, 2008

/s/WILLIAM F. ALDINGER IIIName:  William F. Aldinger III
Title:President and Chief Executive OfficerDate: August 13, 2008

/s/GREGORY J. MCMANUSName:  Gregory J. McManus
Title:Executive Vice President and
            Chief Financial Officer


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EXHIBIT INDEX

Exhibit
Numbers

Description and Method of Filing3.1

Amended and Restated Articles of Incorporation of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.1 to the registration statement on Form S-4/A filed on March 14, 2008.3.2

Amended and Restated By-laws of Capmark Financial Group Inc.10.1

Confidential Release and Waiver of Claims by and among Brian R. DiDonato, Capmark Investments LP and Capmark Financial Group Inc., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 22,
2008.10.2

Amendment No. 2 to the Credit Agreement, dated as of June 30, 2008, among Capmark Financial Group Inc., a Nevada corporation (the "Company"), the subsidiaries of the Company, certain financial institutions and other institutional
lenders party thereto (the "Lenders"), and Citibank, N.A., as administrative agent for the Lenders, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 3, 2008.10.3

Amendment No.2 to the Bridge Loan Agreement, dated as of June 30, 2008, among the Company, the financial institutions and other institutional lenders party thereto (the "Bridge Lenders"), and Citicorp North America, Inc., as administrative
agent for the Bridge Lenders, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 3, 2008.31.1

CEO Certification pursuant to Rule 13a-14(a)/15d-14(a).31.2

CFO Certification pursuant to Rule 13a-14(a)/15d-14(a).32.1

Section 1350 Certifications.


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