9 Mar 2009 07:00
Goldenport Holdings Inc.
Athens, 9 March 2009
Final results for the year ended 31 December 2008
Goldenport Holdings Inc. ("Goldenport" or "the Company"), (LSE: GPRT) the international shipping company that owns and operates a fleet of container and dry bulk vessels, today is pleased to announce the full year results for the year ended 31 December, 2008 and the forward coverage of the fleet for 2009 with 77% of the fleet available days already fixed under period employment.
Financial Highlights (amounts in US$ '000 except per share data):
Revenue of US$ 154,968, +24.1% increase (2007: US$ 124,861)
EBITDA of US$ 88,710, +15.1% increase (2007: US$ 77,045)
Including gain from vessels' disposal
EBIT of US$ 92,804, +56.1% increase (2007: US$ 59,444)
Net Income of US$ 87,581, +50.3% increase (2007: US$ 58,281)
Earnings per Share of US$ 1.25 calculated on 69,924,071 shares (2007: US$ 0.83 calculated on 69,885,106 shares)
Excluding gain from vessels' disposal
EBIT of US$ 56,314, +1.0% increase (2007: US$ 55,752)
Net income of US$ 51,091, 6.4% decline (2007: US$ 54,589)
Earnings per Share of US$ 0.73 calculated on 69,924,071 shares (2007: US$ 0.78 calculated on 69,885,106 shares)
Final dividend of 2 pence per share with scrip alternative
Total dividend of 10 pence per share
Gain from vessels' disposal of US$ 36,490 realised within the period (2007: US$ 3,692)
Available cash of US$ 33,257 (31 December 2007: US$ 19,947)
Net debt to book capitalisation 30.5% (31 December 2007: 40.9%)
No impairment losses incurred in any vessel of the fleet
Full compliance with debt covenants
CEO Statement:
Captain Paris Dragnis, Founder and Chief Executive Officer of the Company commented:
We are particularly pleased to report strong results for 2008, a year of unprecedented volatility and challenge in the global financial and shipping markets. During the year, our management focus evolved in tandem with the shifting market conditions, taking advantage of the strong markets in the first nine months of the year and adapting to the market downturn during the last quarter of 2008. The results we achieved demonstrate the soundness of our business model by adhering to a strategy of balancing our fleet between the dry bulk and container markets, following a conservative fleet renewal and expansion program, employing our vessels under fixed period charters with reputable charterers and making prudent use of debt.
We took advantage of the healthy markets that prevailed in the first nine months of 2008 and sold several of our older and fully depreciated vessels, locking in healthy gains of $ 36.5 million that enhanced our results and enabled us to continue with our fleet renewal and expansion program. During this period, we also secured medium and long term period employment for several of our dry bulk and container vessels at higher rates.
Since the last quarter of 2008, we have swiftly adapted our strategy to the rapidly declining market conditions. Our objective has been and still remains to safeguard the value created and at the same time position our company not only to weather the storm but also to take advantage of accretive fleet expansion opportunities that may arise, ultimately for the Company to come out of the current turmoil stronger and larger.
In this context we took several defensive measures to optimize our fleet utilization and cash flow and enhance our operational flexibility. We extended the charter cover on several of our dry-bulk vessels whose original employment would terminate in 2009, at rates higher than current market conditions, thereby increasing our cash flow and fleet utilization. As of today, we have secured for our current operational fleet of 20 vessels 77% of the available days for 2009, 46% for 2010 and 29% for 2011 under fixed period employment translating to fixed revenues of $174 million.
Also, we refinanced $38.1 million of our debt, of which $33.1 million was maturing in 2009 and I am pleased to report that we are in full compliance with our debt covenants. Furthermore, we reached agreement with the shipyard without incurring additional cost to delay the deliveries of our four dry bulk new-buildings currently under construction at the COSCO Shipyard, while keeping intact the pre-agreed time charter contracts and the committed bank financing. The decision of the Board of Directors to recommend a final dividend of only 2 pence per share accompanied by a scrip dividend alternative aims to strengthen our company's liquidity in the prevailing uncertain environment. Nevertheless, the total dividend of 10 pence for 2008 translates into an annualized yield of about 9% based on the current share price which we believe to be attractive in the current market. These three initiatives will free our cash flow and coupled with our low gearing will reinforce our ability to take advantage of market opportunities for accretive acquisition opportunities, which traditionally surface in weak markets.
The first such opportunity materialized in February of 2009, when we announced the acquisition of one second-hand container vessel, expected to be delivered to us in March 2009, for a purchase price of US$ 10.5 million, which we consider very attractive. In addition in 2009, our fleet was strengthened with the addition of the fully reconstructed container vessel "MSC Fortunate" (ex "Fortune") which in February commenced its four-year time charter and with the delivery of our first new-build Supramax dry bulk vessel "Marie Paule" which also commenced its agreed three-year charter. Our fleet as of today consists of 30 vessels, of which 16 are containers and 14 are dry-bulk carriers. Out of the total, 9 vessels (2 containers and 7 bulk-carriers) are new-building orders with expected deliveries between 2009 and 2011.
In the current environment we have to remain particularly vigilant and alert. We believe that Goldenport is well equipped to navigate through the current storm and come out stronger and larger. Given their belief in the long term prospects of the business and the company, management will elect for the scrip dividend alternative in respect of at least 50% of their holdings."
Fleet Developments (amounts in US$ '000):
Vessel Disposals
In 2008 the Company sold five fully depreciated vessels for total net proceeds of US$ 47,164 realising an aggregate profit of US$ 36,490. More specifically:
On 5 May 2008, the fully depreciated dry-bulk vessel 'Ios' (built 1981) was sold realising a profit of US$ 12,895;
On 17 June 2008, the fully depreciated dry-bulk vessel 'Samos' (built 1982) was sold realising a profit of US$ 20,331;
On 20 August 2008, the fully depreciated container vessel 'Glory D' (built 1978) was sold realising a profit of US$ 2,652;
On 29 October 2008, the fully depreciated container vessel 'Achim' (built 1978) was sold realising a profit of US$ 268;
On 9 December 2008, the fully depreciated container vessel 'Tuas-Express' (built 1978) was sold realising a profit of US$ 344.
On 12 February 2009 the fully depreciated bulk carrier vessel 'Athos' (built 1977) was sold for a net consideration US$3,738. The Company is expecting to realise a profit of US$ 382 from the disposal, which will be included in the 2009 income statement.
Vessel Deliveries
On 11 February 2009 the Company took delivery of the 53,800 DWT new bulk carrier 'Marie-Paule' which commenced its agreed three-year time charter;
On 23 February 2009 the Company delivered the vessel 'MSC Fortunate' (previous name 'Fortune') to the charterer to commence a four-year time charter.
Vessel Acquisitions - Rescheduling of Deliveries (amounts in US$ '000)
On 20 August 2008, the Company entered into a contract with Qingshan Shipyard for the construction of two bulk carrier vessels of 57,000 DWT each, with estimated delivery in December 2010, for a total consideration of US$ 91,660;
On January 26, 2009, the Company announced that it had reached an agreement with COSCO (Zhoushan) Shipyard Co., Ltd, to reschedule the delivery dates of the four new-build 57,000 DWT bulk carriers on order with the yard, at no additional cost. Pursuant to the rescheduling, the delivery dates for those four vessels will now take place between four and eighteen months after their originally agreed delivery dates in late 2009. Two vessels are now expected to be delivered in the first half 2010 and the other two in the first half of 2011. The existing charter contracts remain valid and will commence upon delivery of the respective vessels. The already secured bank financing remains in place. Taking delivery at a later date, when market conditions may have improved, enables Goldenport to optimise its cash flow utilisation during the current challenging market conditions;
On 4 March 2009, the Company acquired the vessel NYK Procyon, a 1995-built container vessel with carrying capacity of 4,953 TEU, for a total consideration of US$ 10.5 million.
The fleet as of today consists of 30 vessels, of which 16 are containers and 14 are dry-bulk carriers. Out of the total, 9 vessels (2 containers and 7 bulk-carriers) are new-building orders with expected deliveries between 2009 and 2011.
Operational Fleet Forward Coverage:
The percentage of available days of the fleet already fixed under contracts as of 8 March 2009 (assuming the earliest charter expiration) is as follows:
| 2009(1) (2) | 2010(1) (2) | 2011 (2) | |
| Total Fleet | 77% (76%) | 46% (45%) | 29% (29%) |
| Containers | 81% (82%) | 52% (54%) | 39% (39%) |
| Bulk Carriers | 70% (63%) | 33% (27%) | 11% (5%) |
(1) Percentage of available days of the fleet fixed under contract as reported on 5 February 2009 is given in brackets
(2) The percentages above include only the currently operational fleet of 20 vessels after the sale of the vessel 'Athos' and exclude the nine new-build vessels for which we expect delivery in the future and the vessel "Procyon" which was delivered to us on 4 March 2009.
On the same basis, the estimated total revenue for the years 2009, 2010 and 2011 deriving from contracts already fixed for the operational part of the fleet is US$ 174 million (US$ 162 million as of 5 February 2009). This calculation excludes the vessel "NYK Procyon" that was recently delivered to us and the nine new-build vessels for which we expect delivery in the future although six of them have already been chartered.
Debt Refinancing (amounts in US$ '000):
On 29 January 2009, the Company refinanced existing debt of US$38,100, of which US$33,100 was maturing in 2009. According to the new repayment schedule the loan will be repaid in 18 quarterly installments with a final balloon payment of US$13,800 together with the last installment;
Full Compliance with Debt Covenants:
The Company, due to the selective vessel acquisitions in the past and its low gearing policy, is in full compliance with the covenants of the existing bank debt;
Final dividend:
In light of the current and likely market conditions for the foreseeable future, rather than adopting the usual dividend payment ratio in excess of 50% of earnings, the Board of Directors of Goldenport has today recommended a final dividend of 2 pence per share for the financial year ended 31 December 2008. This cash dividend will be accompanied by a scrip dividend alternative, arrangements for which will be mailed to shareholders on or about 2 April 2009 with elections required to be made by 1 May. The Board of Directors and the Management team undertake to elect for the scrip dividend alternative in respect of at least 50% of their holdings. Including the interim dividend already paid in October 2008 the total dividend for year 2008 is 10 pence per share, which the Board believes is appropriate given the market circumstances. The dividend will be payable on 20 May 2009, to shareholders of record as of 20 March 2009.
2009 Financial Calendar:
| Ex-dividend date: | 18 March 2009 |
| Record date: | 20 March 2009 |
| Last day of elections for the scrip dividend: | 1 May 2009 |
| Annual General Meeting: | 7 May 2009 |
| Dividend payment: | 20 May 2009 |
Conference Call and Webcast:
The company's management will hold a conference call today Monday 9 March at 3:30pm (GMT), 5:30 pm (Athens), 11:30am (EDT), to discuss the results.
Conference Call details
Participants should dial into the call 10 minutes prior to the scheduled time using the following numbers: 0800-953-0329 (from the UK), 1-866-819-7111 (from the US) or +44 (0)1452-542-301 (all other callers). Please quote "Goldenport Holdings" to the operator.
A telephonic replay of the conference call will be available until Monday 16 March 2009 by dialling 0800-953-1533 (from the UK), 1-866-247-4222 (from the US) or +44 (0)1452-550-000 (all other callers). Access Code: 6906584#
Slides and audio Webcast
There will also be a live and then archived webcast of the conference call, accessible through the Goldenport Holdings website (www.goldenportholdings.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
Enquiries:
| Goldenport: | ||
| Christos Varsos, Chief Financial Officer: | Today | +30 694 429 4839 |
| Thereafter | +30 210 8910 500 | |
| John Dragnis, Commercial Director | Today | +30 694 668 8180 |
| Thereafter | +30 210 8910 500 | |
| Investor Relations Co-ordinators: | ||
| Capital link: | ||
| Annie Evangeli - London | +44 203 206 1320 | |
| Nicolas Bornozis - New York | +1 212 661 7566 | |
| E-mail: | goldenport@capitallink.com | |
| info@goldenport.biz |
2008 Operational Review:
The container chartering market during 2008, as measured by Howe Robinson's Containership charter Index ("HRCI") (following the movement of the 12 Month Time Charter rates for vessels between 250 and 4,300 TEU) started at 1,342 and rose during the first quarter to reach the 2008 high of 1,382 units. Thereafter the index slipped to 1,218 units by the end of the second quarter. The Company took advantage of this strong first half of the year by securing a mixture of medium to long term charters for several of its container vessels. In particular, 'Anafi' was chartered for one year at US$ 20,500 per day, 'MSC Mekong', 'MSC Emirates' and 'MSC Himalaya' were extended for 20 months, 3 years and 15 months respectively at US$ 7,000 per day for the first two and US$ 14,500 per day for the third. These fixtures are for longer periods and at higher rates than previously contracted for these vessels.
The Index thereafter declined heavily falling below 500 units by the end of the year. The average of the index for 2008 was 1,109.
The dry bulk chartering market commenced in 2008 at 9,392 Baltic Dry Index ("BDI") units and then declined to 5,615 by the end of January before reaching its all time high on 20th May 2008 of 11,793 units. These levels were maintained until the end of August when it fell below the 7,000 units for the first time in seven months. The market continued to soften at an accelerated pace breaking the 5,000 level in less than two weeks, then the 3,000 level by early October and the 1,000 level before the end of October. By 5th December 2008 the market had fallen to 663 units (a 95% drop in less than seven months) and remained relatively flat until the end of the year. The Company took advantage of the strong fundamentals prevailing in the first nine months of the year by employing the majority of the bulk carrier vessels at rates higher than previously. Moreover, the Company secured employment for two more Supramax New-build bulk carriers. The Cosco Zhousan new-build has been fixed at US$ 25,000 per day and the Qingshan new-build obtained US$ 27,000 per day, both on a 3 year time-charter commencing on their respective delivery dates from the shipyard.
During the strong first half of the year, the Company also sold two fully depreciated bulk carriers realising an aggregate profit of US$36.5 million.
Current Market Outlook:
Containers:
With more than 1.1 million TEU (representing 9% of the world's cellular fleet and approximately 400 vessels) already laid up, another 1,000 vessels looking for employment within the next six months (until the end of July 2009) and international trade decelerating sharply (global export volumes expected to decline by 2% during 2009 for the first time since 1982), the liner companies with high exposure in such underlying market are downsizing their chartered-in fleets by redelivering chartered vessels back to owners at the earliest possible dates allowed by the contracts and are consolidating their services.
As of early February 2009, the HRCI stood at 444 units breaking all time low levels of early 2002. The charter market for the small and the largest vessels is squeezed within a range of less than $5,000 per day (from $3,500 per day to $8,500 per day for vessels between 500 and 3,500 TEU) and the average fixing period has declined to 120 days. Rates in several cases are lower than the operating expenses and therefore there is no expectation that the rates will further decline significantly in the months to come. However, due to its prudent chartering strategy of arranging long term contracts, the Company continues to weather the decline having 81% of the available days of the container fleet in 2009 already fixed under period employment. The container fleet has also been strengthened by the delivery of the vessel "MSC Fortunate" in February, which commenced its four-year time-charter contract.
Bulk-Carriers:
Throughout December 2008 and January 2009 Baltic Dry Index ('BDI') remained flat. In early February 2009 that the index corrected sharply fuelled mainly by the seasonal effect of the Chinese returning from their New Year holidays as well as improvement in market's fundamentals. Once the de-stocking process was completed there has been a bounce back in trade volumes which became more apparent in the iron ore trade. That was enough to bring the index back to levels in excess of 2,000 (i.e. an increase of over 210% compared to the low experienced on 5th December 2008). Goldenport is well placed to maintain the visibility of its cash flows with 70% of the dry-bulk fleet available days for 2009 already fixed under period employment. In addition the first new-build Supramax was delivered to its charterer at a pre-agreed rate preferable to the prevailing market conditions.
Summary of Selected Financial and Operating Data:
| 31 December | ||||
| Income Statement Data (in US$ thousand except share data): |
| 2008 | 2007 | |
| Revenue | 154,968 | 124,861 | ||
| EBITDA | 88,710 | 77,045 | ||
| Including gain from vessels disposals: | ||||
| EBIT | 92,804 | 59,444 | ||
| Net Income | 87,581 | 58,281 | ||
| Earnings per share (basic and diluted) | 1.25 | 0.83 | ||
| Excluding gain from vessels disposals: | ||||
| EBIT | 56,314 | 55,752 | ||
| Net Income | 51,091 | 54,589 | ||
| Earnings per share (basic and diluted) | 0.73 | 0.78 | ||
| Gain from vessels disposals | 36,490 | 3,692 | ||
| Weighted average number of shares | 69,924,071 | 69,885,106 | ||
| FLEET DATA: |
|
|
| |
| Number of vessels at end of period: | 30 | 33 | ||
| -Operating | 19 | 24 | ||
| -Under reconstruction | 1 | 1 | ||
| -New Buildings under construction | 10 | 8 | ||
| Ownership days | (2) | 8,110 | 7,434 | (1) |
| Available days | (2) | 7,514 | 6,945 | (1) |
| Operating days | (2) | 7,328 | 6,666 | (1) |
| Fleet utilization | 97.5% | 96.0% | ||
| AVERAGE DAILY RESULTS (in US$) |
|
|
| |
| Time Charter Equivalent (TCE) rate | (2) | 19,028 | 16,578 | |
| Average daily vessel operating expenses | (2) | 5,786 | 4,225 | (1) |
| Average daily vessel operating expenses, excluding items arising in dry-dockings and one-off insurance premiums | (3) | 5,084 |
(1): Ownership days and average daily vessel operating expenses exclude the vessel Fortune and the 8 vessels that will be delivered in a future date
(2): Ownership days and average daily vessel operating expenses exclude the vessel Fortune and the 10 new building vessels, but include the vessels sold in 2008 up to their respective sale dates
(3): Items relating to dry-dockings aggregating a total amount of US$3,793 and the additional insurance premiums totalling US$1,896 are excluded from the total operating expenses in order to arrive to the calculation above
See Appendices, for Notes on the Summary of Selected Financial and Operating Data, for detailed Fleet Employment profile, for Notes on the Summary of Selected Financial and Operating Data, for forward looking statements and for full set of financial statements.
Financial review (amounts in US$ '000, except the per day Opex data):
Time and Voyage Charter Revenues: Revenues increased by US$ 30,107 or 24.1% to US$ 154,968 for the year ended 31 December 2008 (2007: US$ 124,861). The main reasons for this increase were: (i) the difference in available days between the two periods (2008: 7,514 days; 2007: 6,945 days), due to the additions of the vessels 'Anafi', 'MSC Accra', 'Gitte', 'Brilliant' and 'Bosporus Bridge' that were acquired after 30 June 2007 and were fully operational in 2008 and the addition of the vessel 'MSC Finland' that contributed partially in the period in 2007, but in full in 2008 (ii) a strengthening in the market rates in the second half of 2007 and the first half of 2008 which allowed existing vessels to be fixed at higher rates compared to the same period last year, which is also reflected in the TCE rate.
Voyage expenses total: The voyage expenses increased by US$ 2,274 or 23.4% to US$ 11,995 for the year ended 31 December 2008 (2007: US$ 9,721) mainly due to increased revenue figure to which commission rates applied.
Vessel operating expenses: Vessel operating expenses increased by US$ 15,510 or 49.4% to US$ 46,921 for the year ended 31 December 2008 (2007: US$ 31,411). The increase in absolute numbers is attributable to the increase of the fleet in terms of numbers of vessels but also to the change of mix as the vessels acquired were of a larger size compared to the existing vessels. Excluding maintenance costs while on dry-dockings of US$ 3,793 and one-off insurance premium increases of US$ 1,896 the vessel operating expenses increased by US$ 9,821 or 31.3% to US$ 41,232.
On a per day basis operating expenses, (excluding the one-off expenses described above), increased by 20.3% to US$ 5,084 (2007: US$ 4,225 per day), the main reasons being: (i) stepped increases in crew wages of the Ukrainian crew, that became effective in mid and late 2007 and were in full effect in first half of 2008 and another increase in crew wages that became effective in March 2008 that affected partially the 2008 period; (ii) the increase in insurance premiums for the newly acquired vessels, due to higher vessel prices and the general increase of insurance premiums effected within the period; and (iii) repairs that had to be performed on specific vessels while in operation that affected the repairs and spares expenses.
Given that: (i) lubricants' prices are expected to decline as they are correlated to the oil prices; (ii) insured values will decrease to reflect current market conditions; (iii) only a small number of vessels will undergo scheduled dry-docking (compared to 2008 and 2007 that most of the operational fleet was dry-docked) so there will be fewer maintenance related expenses and (iv) crew expenses are expected to remain flat, the Company believes that the average daily cost of operating the vessels in 2009 will remain flat or decline compared to 2008.
General and administrative expenses: General and administrative expenses increased by US$ 1,049 to US$ 3,827 reflecting incremental listing related expenses and the absorption of specific departments of Goldenport Ship Management to the fully owned subsidiary Goldenport Marine Services from 1 January 2008 amounting to a total of US$ 889 and the payment of rent for the head-offices in Athens of US$263. These expenses in the past used to be included in the 'Management fees' line of our income statement, which during the year has decreased by 20% on a per vessel per month basis.
Depreciation: The vessels' depreciation charge increased by 50.9% to US$ 23,183 for the year ended 31 December 2008 (2007: US$ 15,361) due to the incremental depreciation of the operational vessels acquired since the second half of 2007.
Depreciation of dry-docking costs: Depreciation of dry-docking costs increased by 55.3% to US$ 9,213 for the year ended 31 December 2008 (2007: 5,932) mainly due to: (i) dry-docking of 8 vessels in the second half of 2007, the expense of which affected in full in 2008; (ii) the scheduled dry-docking of 11 vessels that was completed in 2008, out of which 8 vessels have commenced in 2008; and (iii) the dry-dockings of the vessels 'Vasos' and 'MSC Accra' were completed in Europe which affected significantly their overall cost and subsequently the amortisation expense.
Gain from vessel disposals: The Company realised profit of US$ 36,490 from the sale during the year of two fully depreciated bulk carriers and three fully depreciated container vessels; in the same period last year the Company realised US$ 3,692 from the sale of the fully depreciated vessel 'Vana'.
Financing costs: Interest expense increased by US$ 888 or 15.6% to US$ 6,583 for the year ended 31 December 2008 (2007: US$ 5,695), mainly due to the increased principle amount from debt that financed the vessel acquisitions that took place in 2007 and the recognition of the loss on the fair value of the interest rate swap relating to the loan of the vessel 'Bosporus Bridge'. Interest income decreased by US$ 2,709 to US$ 1,322 due to lower cash balance available during the year and time deposits fixed at lower rates.
Cash and cash equivalents: The Company had US$ 33,257 of cash and cash equivalents (2007: US$ 19,947). The Company is expected to utilise these to strengthen the balance sheet, pay existing commitments especially in relation to the new-building program and acquire vessels selectively if and when the right opportunities arise.
APPENDIX 1:
Fleet Employment Profile:
| Operational fleet | ||||||
| Vessel | Type | Capacity | Rate (US$) per day | Earliest | ||
| Expiration (1) | ||||||
| Containers | TEU | |||||
| 1 | MSC Fortunate(2) | Post Panamax | 5,551 | 28,500 | Feb-13 | |
| 2 | NYK Procyon | Post Panamax | 4,953 | Note 3 | ||
| 3 | Bosporus Bridge | Sub Panamax | 3,720 | 14,750 | Feb-12 | |
| 4 | MSC Finland | Sub Panamax | 3,032 | 16,500 | Mar-10 | |
| 5 | MSC Scotland | Sub Panamax | 3,007 | 20,770 | Sep-09 | |
| 6 | MSC Anafi | Sub Panamax | 2,420 | 20,500 | Apr-09 | |
| 7 | MSC Socotra | Sub Panamax | 2,258 | 14,350 | Mar-13 | |
| 8 | Howrah Bridge | Sub Panamax | 2,257 | 14,180 | Jul-09 | |
| 9 | MSC Himalaya | Sub Panamax | 2,108 | 14,500 | Jul-10 | |
| 10 | MSC Accra | Sub Panamax | 1,889 | 14,200 | Jun-12 | |
| 11 | Gitte (4) | Handy | 976 | Euro 5,250 | Aug-09 | |
| Euro 6,950 | Apr-10 | |||||
| 12 | Tiger Star (ex-Brilliant) | Handy | 976 | 8,000 | Apr-09 | |
| 13 | MSC Mekong | Handy | 962 | 6,150 | Mar-09 | |
| 7,000 | Jan-11 | |||||
| 14 | MSC Emirates | Handy | 934 | 7,000 | Dec-11 | |
| Dry Bulk | DWT | |||||
| 15 | Vasos | Capesize | 152,065 | 23,950 | Feb-11 | |
| 16 | Gianni D | Panamax | 69,100 | 15,500 | May-09 | |
| 17 | Marie-Paule (5) (8) | Supramax | 53,800 | 18,000 | Jan-12(5) | |
| 18 | Alex D | Supramax | 52,315 | Note 6 |
| |
| 19 | Limnos | Supramax | 52,266 | 10,300 | May-09 | |
| 20 | Lindos | Supramax | 52,266 | 14,500 | Jul-09 | |
| 21 | Tilos | Supramax | 52,266 | 20,500 | Aug-10 | |
| Vessels under construction | ||||||
| Vessel / Yard name | Type | Capacity | Scheduled Delivery | |||
| Containers | TEU | |||||
| 22 | Jiangsu Yangzijiang | Sub Panamax | 2,500 | 2010 | ||
| 23 | Jiangsu Yangzijiang | Sub Panamax | 2,500 | 2011 | ||
| Vessel or Yard name | Type | Capacity | Scheduled Delivery | Rate (US$) per day | ||
| Dry Bulk | DWT | |||||
| 24 | COSCO (7) | Supramax | 57,000 | 2010 | 17,650+50% profit share at BSI + 5% | |
| 25 | COSCO | Supramax | 57,000 | 2010 | Note 6 | |
| 26 | COSCO (7) | Supramax | 57,000 | 2011 | 25,000 | |
| 27 | COSCO (7) | Supramax | 57,000 | 2011 | 17,700+50% profit share at BSI + 5% over 18,200 | |
| 28 | QINGSHAN (7) | Supramax | 57,000 | 2010 | 27,000 | |
| 29 | QINGSHAN | Supramax | 57,000 | 2010 | - | |
| 30 | Alpine Trader (8) | Supramax | 53,800 | 2009 | Commercially managed by Glencore International AG | |
| (1) Represents earliest day on which the charter may redeliver the vessel | ||||||
| (2) The vessel ' MSC Fortunate' commenced the charter in February 2009. The rate stated is the average rate over the 4 year period | ||||||
| (3) The vessel was delivered to the Company on 4th March charter-free. | ||||||
| (4) The charters of the vessel Gitte are received in Euros | ||||||
| (5) Effectively the charter remains at US$18,000 per day. For the first six months the rate will be at US$14,000 and for the remaining period to the end of the charter the rate will be US$ 18,000. The opportunity cost from the difference between the two rates for the first six months has been obtained from the yard as a discount from the final vessels value. | ||||||
| (6) The charterer of Alex D will declare by 15 March one out of the following three options: | ||||||
| (a) US$26,000 per day until October 2009 | ||||||
| (b) US$25,000 per day until November 2009 | ||||||
| (c) US$20,000 per day until October 2009 and the COSCO New Build to be delivered in 2010 for | ||||||
| US$15,000 per day +50% profit share at BSI+5% for 2 years from delivery | ||||||
| (7) The charter term is for three years from delivery | ||||||
| (8) Both vessels owned under a 50:50 joint venture with Glencore International AG | ||||||
APPENDIX 2:
Notes on Summary of Selected Financial and Operating Data:
(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
(2) Ownership days are the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.
(3) Available days are the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or repairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(4) Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
(5) We calculate fleet utilisation by dividing the number of our operating days during a period by the number of our available days during the period. The shipping industry uses fleet utilisation to measure a company's efficiency in finding suitable employment for its vessels and minimising the amount of days that its vessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.
(6) Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
(7) TCE rates are defined as our time and voyage charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel oil and diesel oil) expenses, canal charges and commissions. TCE rate is a standard shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per day amounts while charter hire rates for vessels on time charters are generally expressed in such amounts.
APPENDIX 3:
Forward-Looking Statement
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect the current views of Goldenport Holdings Inc. ("the Company") with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in the Company's operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. The Company does not assume, and expressly disclaims, any obligation to update these forward-looking statements.
This press release is not an offer of securities for sale in the United States. The Company's securities have not been registered under the U.S.Securities Act of 1933, as amended, and may not be offered or sold in the United States or to a U.S. person absent registration pursuant to, or an applicable exemption from, the registration requirements under U.S. securities laws.
APPENDIX 4:
Financial Statements
Goldenport Holdings Inc.
Consolidated Financial Statements
31 December 2008
The consolidated financial statements are presented in US dollars and all financial values are presented and rounded to the nearest thousand ($000), except for the per share information.
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Goldenport Holdings Inc.
We have audited the accompanying financial statements of Goldenport Holdings Inc. and its subsidiaries ("the Group"), which comprise the consolidated balance sheet as at 31 December 2008 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union.
Ernst & Young (Hellas) Certified Auditors - Accountants S.A.
8 March 2009.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2008
| | Notes | | 2008 U.S.$’000 | | 2007 U.S.$’000 |
| | | | | | |
| Revenue | | | 154,968 | | 124,861 |
| | | | | | |
| Expenses | | | | | |
| Voyage expenses | 3 | | (8,896) | | (7,224) |
| Voyage expenses – related party | 3,19 | | (3,099) | | (2,497) |
| Vessel operating expenses | 3 | | (46,921) | | (31,411) |
| Management fees – related party | 19 | | (3,515) | | (3,906) |
| Depreciation | 7 | | (23,183) | | (15,361) |
| Depreciation of dry-docking costs | 7 | | (9,213) | | (5,932) |
| General and administrative expenses | 4 | | (3,827) | | (2,778) |
| Operating profit before disposal of vessels | | | 56,314 | | 55,752 |
| | | | | | |
| Gain from vessel disposal | 7 | | 36,490 | | 3,692 |
| | | | | | |
| Operating profit | | | 92,804 | | 59,444 |
| | | | | | |
| Finance expense | 5 | | (6,583) | | (5,695) |
| Finance income | | | 1,322 | | 4,031 |
| Foreign currency gain, net | | | 38 | | 501 |
| | | | | | |
| Profit for the year attributable to Goldenport Holdings Inc. shareholders | | | 87,581 | | 58,281 |
| | | | | | |
| Earnings per share (U.S.$): | | | | | |
| | | | | | |
| - Basic EPS for the year | 6 | | 1.25 | | 0.83 |
| - Diluted EPS for the year | 6 | | 1.25 | | 0.83 |
| | | | | | |
| | | | | | |
| Weighted average number of shares for basic EPS | | | 69,924,071 | | 69,885,106 |
| | | | | | |
| Weighted average number of shares adjusted for the effect of dilution | | | 69,926,085 | | 69,886,747 |
The accompanying notes 1 to 22 are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET
As at 31 December 2008
| | Notes | | 2008 U.S.$’000 | | 2007 U.S.$’000 |
| | | | | | |
| ASSETS | | | | | |
| Non-current assets | | | | | |
| Vessels | 7 | | 221,587 | | 244,694 |
| Vessel under reconstruction | 8 | | 57,215 | | 38,880 |
| Advances for vessels construction | 9 | | 101,510 | | 62,238 |
| Other non-current assets | 10 | | - | | 50 |
| | | | 380,312 | | 345,862 |
| Current assets | | | | | |
| Inventories | | | 266 | | 154 |
| Trade receivables | | | 1,098 | | 596 |
| Insurance claims | 11 | | 2,012 | | 3,268 |
| Due from related parties | 19 | | 3,342 | | 3,289 |
| Prepaid expenses and other assets | | | 1,054 | | 1,332 |
| Cash and cash equivalents | 12 | | 33,257 | | 19,947 |
| | | | 41,029 | | 28,586 |
| TOTAL ASSETS | | | 421,341 | | 374,448 |
| | | | | | |
| EQUITY AND LIABILITIES | | | | | |
| Equity attributable to shareholders of Goldenport Holdings Inc. | | | | | |
| Issued share capital | 13 | | 699 | | 699 |
| Share premium | 13 | | 107,354 | | 106,991 |
| Retained earnings | | | 130,264 | | 73,757 |
| Total equity | | | 238,317 | | 181,447 |
| | | | | | |
| Non-current liabilities | | | | | |
| Long-term debt | 14 | | 116,858 | | 130,765 |
| Deferred revenue | 15 | | 5,649 | | 8,273 |
| Other non-current liabilities | 10 | | 801 | | 152 |
| | | | 123,308 | | 139,080 |
| Current liabilities | | | | | |
| Trade payables | | | 12,993 | | 8,512 |
| Current portion of long-term debt | 14 | | 32,564 | | 30,755 |
| Accrued liabilities and other payables | 16 | | 8,990 | | 8,966 |
| Other current liabilities | 10 | | 257 | | 42 |
| Deferred revenue current portion | 15 | | 4,912 | | 5,536 |
| | | | 59,716 | | 53,811 |
| Total Liabilities | | | 183,024 | | 193,001 |
| TOTAL EQUITY AND LIABILITIES | | | 421,341 | | 374,448 |
The accompanying notes 1 to 22 are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2008
| Number of shares | Par value U.S.$ | Issued share capital U.S.$'000 | Share premium U.S.$'000 | Retained earnings U.S.$'000 | Total equity U.S.$'000 | ||
| At 1 January 2007 | 69,885,106 | 0.01 | 699 | 106,991 | 41,838 | 149,528 | |
| Profit and total income for the year | - | - | - | - | 58,281 | 58,281 | |
| Dividends declared, approved and paid to equity shareholders | - | - | - | - | (26,362) | (26,362) | |
| At 31 December 2007 | 69,885,106 | 0.01 | 699 | 106,991 | 73,757 | 181,447 | |
| Profit and total income for the year | - | - | - | - | 87,581 | 87,581 | |
| Share based payments- AIP (Annual Incentive Plan) shares | 52,239 | 0.01 | 0 | 363 | - | 363 | |
| Dividends declared, approved and paid to equity shareholders | - | - | - | - | (31,074) | (31,074) | |
| At 31 December 2008 | 69,937,345 | 0.01 | 699 | 107,354 | 130,264 | 238,317 |
The accompanying notes 1 to 22 are an integral part of these consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2008
| Notes | 2008 U.S.$'000 | 2007 U.S.$'000 | |||
| Operating activities | |||||
| Profit for the year | 87,581 | 58,281 | |||
| Adjustments to reconcile profit for the year to net cash inflow from operating activities: | |||||
| Depreciation | 7 | 23,183 | 15,361 | ||
| Depreciation of dry-docking costs | 7 | 9,213 | 5,932 | ||
| Gain from vessel disposal | 7 | (36,490) | (3,692) | ||
| Finance expense | 5 | 6,583 | 5,695 | ||
| Finance income | (1,322) | (4,031) | |||
| Annual Incentive Plan Shares | 19 | 252 | 350 | ||
| Foreign currency gain, net | (38) | (501) | |||
| 88,962 | 77,395 | ||||
| Increase in inventories | (112) | (154) | |||
| (Increase) / Decrease in trade receivables, prepaid expenses and other assets | (256) | 176 | |||
| Decrease /(Increase) in insurance claims | 11 | 1,256 | (1,963) | ||
| Increase in trade payables, accrued liabilities and other payables | 2,342 | 5,506 | |||
| (Decrease) / Increase in deferred revenue | (3,248) | 11,170 | |||
| Net cash flows from operating activities before movement in amounts due from related parties | 88,944 | 92,130 | |||
| Due from related parties | 19 | (53) | (2,477) | ||
| Net cash flows from operating activities | 88,891 | 89,653 | |||
| Investing activities | |||||
| Acquisition/improvement of vessels | 7 | (12) | (121,671) | ||
| Proceeds from disposal of vessels, net of commission | 7 | 47,158 | 5,280 | ||
| Payments for other costs relating to disposals of vessels | 7 | (410) | - | ||
| Proceeds relating to initial expenses | 7 | 248 | - | ||
| Dry-docking costs | 7 | (17,715) | (12,484) | ||
| Advances for vessel under reconstruction | 8 | (17,537) | (14,432) | ||
| Advances for vessel under construction | 9 | (38,249) | (62,238) | ||
| Interest received | 1,362 | 4,089 | |||
| Net cash flows used in investing activities | (25,155) | (201,456) | |||
| Financing activities | |||||
| Proceeds from issue of long-term debt | 32,519 | 103,499 | |||
| Repayment of long-term debt | (44,729) | (22,780) | |||
| Restricted cash | - | 1,166 | |||
| Interest paid | (7,195) | (5,822) | |||
| Dividends paid | 17 | (31,074) | (26,362) | ||
| Net cash flows (used in) /provided by financing activities | (50,479) | 49,701 | |||
| Net increase/ (decrease) in cash and cash equivalents | 13,258 | (62,102) | |||
| Net foreign exchange difference | 52 | 677 | |||
| Cash and cash equivalents at 1 January | 12 | 19,947 | 81,372 | ||
| Cash and cash equivalents at 31 December | 12 | 33,257 | 19,947 |
The accompanying notes 1 to 22 are an integral part of these consolidated financial statements.
1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION
Goldenport Holdings Inc. ('Goldenport' or the 'Company') was incorporated under the laws of Marshall Islands, as a limited liability company, on 21 March 2005. On 5 April 2006 Goldenport Holdings Inc. was admitted in the Official List and started trading at the London Stock Exchange ("LSE") at a price of GBP 2.35 per share. On 11 April 2006 the over allotment option was exercised at a price of GBP 2.35 per share. In total, the Company received from its listing in the LSE an amount of GBP 66 million (equivalent to U.S.$. 115.5 million) with the intention to partially repay debt and to fund further fleet expansion.
The address of the registered office of the Company is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960. The address of the Head Office of the Company is Status Center, 41 Athinas Avenue, 166-71 Vouliagmeni, Greece.
Goldenport as at 31 December 2008 is the holding Company for twenty intermediate holding companies, each in turn owning a vessel-owning company, as listed in the table below. Goldenport is also the holding Company of eight more intermediate holding companies, owning Abyss Maritime Ltd., Seaward Shipping Co., Jubilant Marine Company, Alacrity Maritime Inc., Chanelle Shipping Company, Clochard Maritime Limited., Dryades Maritime Limited. and Leste Shipholding Inc., which will be the vessel-owning companies of four new built bulk carriers ordered at Cosco Zhoushan Shipyard, two new built containers ordered at Jiangsu Yangzijiang Shipyard and two new built bulk carriers ordered at Qingshan Shipyard of China upon delivery of the vessels. Also, as at 31 December 2008 Goldenport is the holding Company of a fully owned subsidiary named Goldenport Marine Services, which provides the Company and its affiliates a wide range of shipping services, such as insurance consulting, legal, financial and accounting services, quality and safety, information technology (including software licences) and other administrative activities in exchange for a daily fixed fee, per vessel (see note 19a). Goldenport Marine Services has been registered in Greece under the provisions of Law 89/1967. As at 31 December 2008 Samos Maritime Ltd, Guilford Marine S.A., Superb Maritime S.A., Opal Maritime Limited and Dancing Waves Co. Ltd., the vessel-owning companies of the disposed vessels "Samos", "Ios", "Glory D", "Achim" and "Tuas Express" (see note 7), have become dormant.
Goldenport and its subsidiaries will be hereinafter referred to as the 'Group'.
The annual consolidated financial statements comprising the financial statements of the Company and its wholly owned subsidiaries (see (a) below) and the proportionally consolidated financial statements of the jointly controlled entity (see (b) below) were authorised for issue in accordance with a resolution of the Board of Directors on 8 March 2009. The shareholders of the Company have the right to amend the financial statements at the Annual General Meeting to be held on 7 May 2009.
a)The wholly owned subsidiaries of the Company are:
| Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Year of acquisition of vessel | Type of Vessel |
| Portia Navigation Co. | Borealis Shipping Co. Ltd. | Malta | MSC Himalaya | 1999 | Container |
| Aloe Navigation Inc. | Karana Ocean Shipping Co. Ltd. | Malta | Alex D | 1999 | Bulk Carrier |
| Dumont International Inc. | Black Rose Shipping Ltd. | Malta | MSC Mekong | 2001 | Container |
| Audrey Marine Corp. | Wild Orchid Shipping Ltd. | Malta | MSC Emirates | 2001 | Container |
| Sicuro Shipmanagement SA | Hampton Trading S.A. | Liberia | MSC Socotra | 2002 | Container |
| Intermediate holding company | Vessel - owning company | Country of Incorporation of vessel-owning company | Name of Vessel owned by Subsidiary | Year of acquisition of vessel | Type of Vessel |
| Platinum Shipholding SA | Coral Sky Marine Ltd. | Malta | Gianni D | 2002 | Bulk Carrier |
| Rawlins Trading Ltd | Fairland Trading S.A. | Panama | Athos | 2002 | Bulk Carrier |
| Blaze Navigation Corp. | Nilwood Comp. Inc. | Panama | Howrah Bridge | 2003 | Container |
| Carrier Maritime Co. | Black Diamond Shipping Ltd. | Malta | Lindos | 2003 | Bulk Carrier |
| Medina Trading Co. | Carina Maritime Co. Ltd. | Malta | Tilos | 2004 | Bulk Carrier |
| Savannah Marine Inc. | Serena Navigation Ltd. | Malta | Limnos | 2004 | Bulk Carrier |
| Sirene Maritime Co. | Alvey Marine Inc. | Liberia | MSC Scotland | 2006 | Container |
| Kariba Shipping SA | Kosmo Services Inc. | Marshall Islands | MSC Fortunate (ex. Fortune) | 2006 | Container |
| Muriel Maritime Co. | Ipanema Navigation Corp. | Marshall Islands | Vasos | 2006 | Bulk Carrier |
| Baydream Shipping Inc. | Cierzo Maritime Co. | Marshall Islands | MSC Finland | 2007 | Container |
| Knight Maritime S.A. | Mona Marine S.A. | Liberia | Anafi | 2007 | Container |
| Foyer Marine Inc. | Ginger Marine Company | Marshall Islands | MSC Accra | 2007 | Container |
| Genuine Marine Corp. | Breaport Maritime S.A | Panama | Bosporus Bridge | 2007 | Container |
| Jaxon Navigation Ltd. | Hampson Shipping Ltd. | Liberia | Gitte | 2007 | Container |
| Tuscan Navigation Corp. | Longfield Navigation S.A. | Liberia | Tiger Star (ex. MOL Brilliant) | 2007 | Container |
| Abyss Maritime Ltd. | Moonglade Maritime S.A. | Liberia | ZS07036 | 2011(6) | Bulk Carrier |
| Seaward Shipping Co. | Valaam Incorporated | Liberia | ZS07037 | 2010(6) | Bulk Carrier |
| Jubilant Marine Company | Cheyenne Maritime Company | Marshall Islands | ZS07038 | 2011(6) | Bulk Carrier |
| Alacrity Maritime Inc. | Giga Shipping Ltd. | Marshall Islands | ZS07039 | 2010(6) | Bulk Carrier |
| Chanelle Shipping Company | Loden Maritime Co. | Marshall Islands | YZJ-815 | 2010(7) | Container |
| Clochard Maritime Limited | Shila Maritime Corp. | Marshall Islands | YZJ-816 | 2011(7) | Container |
| Dryades Maritime Limited | Ingle Trading Co. | Liberia | QS20060384 | 2010(8) | Bulk Carrier |
| Leste Shipholding Inc. | Sundown International Inc. | Liberia | QS20060385 | 2010(8) | Bulk Carrier |
| Oates Trading Corp. | Risa Maritime Co. Ltd. | Malta | Dormant Company | ||
| Nemesis Maritime Inc. | Samos Maritime Ltd. | Malta | Dormant Company(1) | ||
| Meredith Trading Corporation | Guilford Marine S.A. | Panama | Dormant Company(2) | ||
| Marta Trading Co. | Superb Maritime S.A. | Panama | Dormant Company(3) | ||
| Royal Bay Marine Ltd | Opal Maritime Limited | Malta | Dormant Company(4) | ||
| Daphne Marine Corp. | Dancing Waves Co. Ltd. | Malta | Dormant Company(5) | ||
| Goldenport Marine Services | Marshall Islands | ||||
| (1) Samos Maritime Ltd. was the ship owning company of MV "Samos", which was disposed of on 17 June 2008 (see note 7) | |||||
| (2) Guilford Marine S.A. was the ship owning company of MV "Ios", which was disposed of on 5 May 2008 (see note 7) | |||||
| (3) Superb Maritime S.A. was the ship owning company of MV "Glory D", which was disposed of on 20 August 2008 (see note 7) | |||||
| (4) Opal Maritime Limited. was the ship owning company of MV "Achim.", which was disposed of on 30 October 2008 (see note 7) | |||||
| (5) Dancing Waves Co. Ltd. was the ship owning company of MV "Tuas Express.", which was disposed of on 9 December 2008 (see note 7) | |||||
| (6) New building bulk carriers (see note 9a) with delivery dates between the second quarter of 2010 and the second quarter of 2011. | |||||
| (7) New building container vessels (see note 9a) with delivery dates in October 2010 and March 2011. | |||||
| (8) New building bulk carriers (see note 9a) with delivery dates in late 2010. | |||||
b)Proportionally consolidated the 50% Joint Venture (see note 9b)
| Sentinel Holdings Inc. | Citrus Shipping Corp. | Marshall Islands | Marie Paule (ex.JES041) | 2009 | Bulk Carrier |
| Sentinel Holdings Inc. | Barcita Shipping S.A. | Marshall Islands | Alpine Trader (ex.JES042) | 2009 | Bulk Carrier |
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Basis of preparation: The Group's financial statements have been prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value. The consolidated financial statements are presented in US dollars and all financial values are presented and rounded to the nearest thousand ($000), except for the per share information.
(b)Statement of compliance: The consolidated financial statements as at 31 December 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
(c)Basis of Consolidation: The consolidated financial statements comprise the financial statements of the Company and its subsidiaries listed in note 1. The financial statements of the subsidiaries are prepared for the same reporting date as the Company, using consistent accounting policies. All material inter-company balances and transactions have been eliminated upon consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
(d)Accounting for joint ventures: A joint venture is an entity whose economic activities are jointly controlled by the Group and one or more other ventures in terms of a contractual arrangement. The Group's interest in jointly controlled entities is accounted for by the proportional consolidation method of accounting. Jointly controlled entities have the same reporting date as the Group and apply common accounting policies. The Group combines its share of the joint ventures' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's financial statements.
(e)Use of judgements, estimates and assumptions: The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future . The estimates and assumptions that have the most significant effect on the amounts recognised in the consolidated financial statements, are the following:
Vessels:
Management makes estimates in relation to useful lives of vessels considering industry practices. (vessels have a carrying amount of U.S.$221,587 and U.S.$244,694 as at 31 December 2008 and 2007, respectively)
Provisions for doubtful trade receivables:
Provision for doubtful trade receivables are recorded based on management's expected future collectability of the receivables. (trade receivables have a carrying amount of U.S.$1,098 and U.S.$596 as at 31 December 2008 and 2007, respectively)
Insurance Claims:
Amounts for insurance claims are provided when amounts are virtually certain to be received based on the Company's judgement and estimates of independent adjusters as to the amount of the claims. (insurance claims have a carrying amount of U.S.$2,012 and U.S.$3,268 as at 31 December 2008 and 2007, respectively).
Estimates and assumptions relating to the impairment of vessels are discussed in paragraph (n).
(f)Revenues and Related Expenses: The Group generates its revenues from charterers for the charter hire of its vessels. Vessels are chartered using either a) time charters, where a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate; or b) voyage charters, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate. If a charter agreement exists and collection of the related revenue is reasonably assured, revenue is recognised as it is earned, evenly over the duration of the period of each voyage or time charter. A voyage is deemed to commence upon the completion of discharge of the vessel's previous cargo and is deemed to end upon the completion of discharge of the current cargo. Time charter revenue is recognised on a straight line basis.
Deferred revenue represents cash received prior to the balance sheet date which relates to revenue earned after such date. On time-charters, the charterer as per industry practice pays the revenue related to the specific agreement in advance. Therefore, as at the balance sheet date, the amount of revenue relating to the next financial year that was paid by the charterer is presented in deferred revenue.
Vessel voyage expenses primarily consisting of port, canal and bunker expenses that are unique to a particular charter are paid for by the charterer under time charter arrangements or by the Group under voyage charter arrangements. Furthermore, voyage expenses include commission on income including third party commissions, paid by the Group. The Group defers bunker expenses under voyage charter agreements and charges them to the income statement over the related voyage charter period to the extent revenue has been recognised. Port and canal costs are accounted for on an actual basis. Operating expenses are accounted on an accrual basis.
(g)Foreign Currency Translation: The functional currency of the Company and of the subsidiaries is the U.S. dollar which is also the presentation currency of the Group because the Group's vessels operate in international shipping markets, where the U.S. dollar is the currency used for transactions. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in currencies other than the U.S. dollar, are translated into the functional currency using the year-end exchange rate. Gains or losses resulting from foreign currency transactions are included in foreign currency gain or loss in the consolidated income statement.
(h)Cash and Cash Equivalents: The Group considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.
(i)Restricted Cash: Certain of the Group's loan agreements may require the Group to deposit funds into a loan retention account in the name of the borrower. The amount deposited is equivalent to the monthly portion of the next capital and interest payment. The amount is not freely available to the Group, and it is used for repaying interest and principal on the loan. As at 31 December 2008, no loan agreements required deposit of funds into a retention account.
(j)Inventories: Inventories consist of bunkers and are stated at the lower of cost or net realisable value. Cost is determined by the first-in first-out method. Any bunkers remaining on vessels, which are undergoing scheduled dry-docking, are also recognised as inventory unless the vessel is to continue under the same time charter. Inventories amount to U.S.$266 as at 31 December 2008 (U.S.$154 as at 31 December 2007) and relate to bunkers of vessel Limnos, which were directly purchased by the Company and agreed with the charterers to remain on board up to the date of redelivery.
(k)Trade Receivables: The amount shown as trade receivables at each balance sheet date includes estimated recoveries from charterers for hire, freight and demurrage billings, net of an allowance for doubtful accounts. Subsequent to initial recognition, trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. The carrying amount of receivables is reduced through an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.
(l)Insurance Claims: The Group recognises insurance claim recoveries for insured losses incurred on damages to vessels. Insurance claim recoveries are recorded net of any deductible amounts, at the time the Group's vessels suffer insured damages. They include the recoveries from the insurance companies for the claims, provided the amounts are virtually certain to be received. Claims are submitted to the insurance company, which may increase or decrease the claim amount. Such adjustments are recorded in the year they become known and have not been material to the Group's financial position or results of operation in 2008 and 2007.
(m)Vessels: The vessels are stated at cost, net of accumulated depreciation and any accumulated impairment. Vessel cost consists of the contract price for the vessel and any material expenses incurred upon acquisition of the vessel (initial repairs, improvements, delivery expenses and other expenditures) to prepare the vessel for its initial voyage. Subsequent expenditures for major improvements are also capitalised when it is probable that future economic benefits associated with the improvement will flow to the entity and the cost of the improvement can be measured reliably.
For vessels acquired in the second-hand market and where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel, the Company allocates the purchase price between the vessel and any identified tangible and intangible assets or liabilities based on their relative fair values. Fair value is determined by reference to market data. The Company determines the fair value of any intangible asset or liability related to time charters assumed, by reference to the market value of the time charters at the time the vessel is acquired. The amount recorded as an asset or liability at the date of vessel delivery is the lowest of: a) the difference between the market value of the vessel on a charter free basis and the vessel's acquisition cost and b) the present value of the difference between the future cash flows of the assumed charter and the future cash flows at the current market rate. If an intangible asset is identified it is recorded as prepaid charter revenue. If an intangible liability is identified it is recorded as deferred revenue. Such assets and liabilities, respectively, are amortized as a reduction of, or an increase in, revenue over the period of the time charter assumed.
The Company records any identified assets or liabilities associated with the acquisition of a vessel at fair value, determined by reference to market data. The Company values any asset or liability arising from the market value of assumed time charters as a condition of the original purchase of a vessel at the date when such vessel is initially deployed on its charter. The value of the asset or liability is based on the difference between the current fair value of a charter with similar characteristics as the time charter assumed and the net present value of contractual cash flows of the time charter assumed, to the extent the vessel capitalized cost does not exceed its fair value without a time charter contract. When the present value of contractual cash flows of the time charter assumed is greater than its current fair value, the difference is recorded as imputed prepaid revenue. When the opposite situation occurs, the difference is recorded as imputed deferred revenue. Such assets and liabilities are amortized as a reduction of, or an increase in, revenue, respectively, during the period of the time charter assumed.
The cost of each of the Group's vessels is depreciated beginning when the vessel is ready for its intended use, on a straight-line basis over the vessels' remaining economic useful life, after considering the estimated residual value. Management estimates the useful life of new vessels at 25 years, which is consistent with industry practice. Acquired second-hand vessels are depreciated from the date of their acquisition over their remaining estimated useful life. The remaining useful life of the Group's vessels, other than those fully depreciated, is between 1 and 15 years (excluding new building vessels not yet delivered). A vessel is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the vessel (calculated as the difference between the net disposal proceeds and the carrying amount of the vessel including any unamortised portion of dry-docking) is included in the income statement in the year the vessel is derecognised.
From time to time the Group's vessels are required to be dry-docked for inspection and re-licensing at which time major repairs and maintenance that cannot be performed while the vessels are in operation are generally performed. The Group capitalises the costs associated with dry-docking as they occur by adding them to the cost of the vessel and amortises these costs on a straight-line basis over 2.5 years, which is generally the period until the next scheduled dry-docking. In the cases where the dry-docking takes place earlier than 2.5 years since the previous one, the carrying amount of the previous dry-docking is derecognised. In the event of a vessel sale, the respective carrying value of dry-docking costs is derecognised together with the vessel's carrying amount at the time of sale.
At the date of acquisition of a second-hand vessel, management estimates the component of the cost that corresponds to the economic benefit to be derived until the next scheduled dry-docking of the vessel under the ownership of the Group, and this component is depreciated on a straight-line basis over the remaining period to the estimated dry-docking date.
(n)Impairment of vessels: The Group's vessels are reviewed for impairment in accordance with IAS 36, "Impairment of Assets." Under IAS 36, the Group assesses at each reporting date whether there is an indication that a vessel may be impaired. If such an indication exists, the Group makes an estimate of the vessel's recoverable amount. Any impairment loss of the vessel is assessed by comparison of the carrying amount of the asset to its recoverable amount. Recoverable amount is the higher of the vessel's fair value as determined by independent marine appraisers less costs to sell and its value in use.
If the recoverable amount is less than the carrying amount of the vessel, the asset is considered impaired and an expense is recognised equal to the amount required to reduce the carrying amount of the vessel to its then recoverable amount.
The calculation of value in use is made at the individual vessel level since separately identifiable cash flow information is available for each vessel. In developing estimates of future cash flows, the Group makes assumptions about future charter rates, vessel operating expenses, and the estimated remaining useful lives of the vessels.
The projected net operating cash flows are determined by considering :
a)the charter revenues from existing time charters for the fixed fleet days and an estimated daily time charter equivalent for the unfixed days based on average historical rates for 6-months time charter for each type of our bulk carrier vessels and 1-year time charter for each type of our container vessels over the remaining estimated useful life of each vessel,
b) an average increase of 4% per annum on charter revenues,
c) cash inflows were considered net of brokerage commissions, and
d) expected outflows for scheduled vessels' maintenance and vessel operating expenses were determined assuming an average annual inflation rate of 3%.
The net operating cash flows are discounted using the Weighted Average Cost of Capital of the Group to their present value as at the date of the financial statements.
Historical average six-month and one-year time charter rates used in our impairment test exercise are in line with our overall chartering strategy, especially in periods/years of depressed charter rates. The historical averages reflect the full operating history of vessels of the same type and particulars with our operating fleet and they cover at least a full business cycle.
The average annual inflation rate applied for determining vessels' maintenance and operating costs approximates current projections for global inflation rate for the remaining useful life of our vessels.
Effective fleet utilization is assumed at 95%, after taking into consideration the periods each vessel is expected to undergo the scheduled maintenance (dry-docking and special surveys). These assumptions are in line with the Group's historical performance and the expectations for future fleet utilization under our current fleet deployment strategy.
No impairment loss was identified or recorded for the years ended 31 December 2008 and 2007 and the Group has not identified any other facts or circumstances that would require the write down of vessel values under the current market conditions.
The impairment test exercise is highly sensitive on variances in the time charter rates and fleet effective utilization. Consequently, a sensitivity analysis was performed by assigning possible alternative values to these two significant inputs, which indicated that there is no impairment of individual long lived assets.
However, there can be no assurance as to how long charter rates and vessel values will remain at their currently low levels or whether they will improve to any significant degree. Charter rates may remain at depressed levels for some time which could adversely affect our revenue and profitability, and future assessments of vessel impairment.
(o)Long-term debt: Long-term debt is initially recognised at the fair value of the consideration received net of issue costs directly attributable to the borrowing. After initial recognition, long-term debt is subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.
(p)Borrowing costs: Borrowing costs on loans specifically used to finance the construction, or reconstruction of vessels are capitalised to the cost of that asset during the construction period.
(q)Derivative financial instruments and hedging. The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The fair value of interest rate swap contracts is determined through valuation techniques.
None of the Group's derivatives have been designated as hedging instruments, therefore gains or losses arising from changes in the fair value of the derivatives are taken to the income statement.
(r)Segment Reporting: The Group reports financial information and evaluates its operations by charter revenues and not by other factors such as (i) the length of ship employment for its customers, i.e. spot or time charters; or (ii) type of vessel. Management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus, the Group has determined that it operates under one reportable segment. Furthermore, when the Group charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.
(s)Finance income: Finance income is earned from the Group's short term deposits and is recognised on the accrual basis.
(t)Leases: Leases of vessels where the Group does not transfer substantially all the risks and benefits of ownership of the vessel are accounted for as operating leases. Lease income on operating leases is recognized on a straight line basis over the lease term and classified under revenue.
(v)Share incentive plan: All share based compensation provided to Directors and Senior Management for their service is included in 'General and administrative expenses' of the Consolidated Income Statement. The fair value of the employees' services received in exchange for the Company's restricted shares is accrued and recognized as an expense in the year of grant. Upon issuance of the relevant shares the total number of shares and their value is separately reflected in the Consolidated Statement of Changes in Equity.
(u)Share Capital: Ordinary shares are classified as equity. Incremental costs directly attributed to the issue of new shares are recognized in equity as deductions from proceeds.
(w) Provisions: Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.
(x) Reclassification: Certain prior year amounts have been reclassified for presentation purposes. The fair value of the derivatives was classified as current and non current based on maturity date for 2008 and amounts for 2007 were reclassified respectively.
(y)IFRS and IFRIC Interpretations not yet effective: The Group has not early adopted the following IFRS and IFRIC Interpretations that have been issued but are not yet effective:
IFRIC 13, Customer Loyalty Programmes, effective for financial years beginning on or after 1 July 2008. This Interpretation requires customer loyalty award credits to be accounted for as a separate component of the sales transaction in which they are granted and therefore part of the fair value of the consideration received is allocated to the award credits and deferred over the period that the award credits are fulfilled. It is not relevant to the Group's operations.
IFRIC 15, Agreements for the Construction of Real Estate, effective for financial years beginning on or after 1 January 2009 and is to be applied retrospectively. IFRIC 15 provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 'Construction Contracts' or IAS 18 'Revenue' and, accordingly, when revenue from such construction should be recognised. This Interpretation has not yet been endorsed by the EU. It is not relevant to the Group's operations.
IFRIC 16, Hedges of a Net Investment in a foreign operation, effective for financial years beginning on or after 1 October 2008 and is to be applied prospectively. IFRIC 16 clarifies three main issues, namely:
-A presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation.
-Hedging instrument(s) may be held by any entity or entities within the group.
-While IAS 39, 'Financial Instruments: Recognition and Measurement', must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 'The Effects of Changes in Foreign Exchange Rates' must be applied in respect of the hedged item. This Interpretation has been endorsed by the EU but it is not relevant to the Group's operations.
IFRIC 17, "Distributions of Non-cash Assets to Owners", effective for annual periods beginning on or after 1 July, 2009. IFRIC 17 clarifies the following issues, namely:
- a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity;
- an entity should measure the dividend payable at the fair value of the net assets to be distributed;
- an entity should recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss; and
- an entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation.
IFRIC 17 applies to pro rata distributions of non-cash assets except for common control transactions This Interpretation has not yet been endorsed by the EU. It is to be applied prospectively and earlier application is permitted. The Group is in the process of assessing the impact of this interpretation but has not been applied to these financial statements.
IFRIC 18, "Transfers of Assets from Customers", effective for financial years beginning on or after 1 July 2009 and is to be applied prospectively. However, limited retrospective application is permitted. This Interpretation is of particular relevance for the utility sector as it clarifies the accounting for agreements where an entity receives an item of Property Plant &Equipment (or cash to construct such an item) from a customer and this equipment in turn is used to connect a customer to the network or to provide ongoing access to supply of goods/services. This Interpretation has not yet been endorsed by the EU. The Group is in the process of assessing the impact of this interpretation.
IFRS 2, "Share-based Payments" (Amended), effective for annual periods beginning on or after 1 January 2009. The amendment clarifies two issues. The definition of 'vesting condition', introducing the term 'non-vesting condition' for conditions other than service conditions and performance conditions. It also clarifies that the same accounting treatment applies to awards that are effectively cancelled by either the entity or the counterparty. The Group expects that this Interpretation will have no impact or no material impact on its financial statements
IFRS 3, "Business Combinations" (Revised) and IAS 27, "Consolidated and Separate Financial Statements" (Amended), effective for annual periods beginning on or after 1 July 2009. A revised version of IFRS 3 Business Combinations and an amended version of IAS 27 Consolidated and Separate Financial Statements were issued by IASB on January 10, 2008. The revised IFRS 3 introduces a number of changes in the accounting for business combinations which will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. Such changes include the expensing of acquisition-related costs and recognising subsequent changes in fair value of contingent consideration in the profit or loss (rather than by adjusting goodwill). The amended IAS 27 requires that a change in ownership interest of a subsidiary is accounted for as an equity transaction. Therefore such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by IFRS 3 (Revised) and IAS 27 (Amendment) must be applied prospectively and will affect future acquisitions and transactions with minority interests. The revised IFRS 3 and amendments to IAS 27 have not yet been endorsed by the EU.
IFRS 8, "Operating Segments", effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14 'Segment reporting'. IFRS 8 adopts a management approach to segment reporting. The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. This information may be different from that reported in the balance sheet and income statement and entities will need to provide explanations and reconciliations of the differences. The Group is in the process of assessing the impact of this standard on its financial statements. As the Group does not report any operating segment, this standard will have no impact on the Group.
IAS 1, "Presentation of Financial Statements" (Revised), effective for annual periods beginning on or after 1 January 2009. IAS 1 has been revised to enhance the usefulness of information presented in the financial statements. Of the main revisions are the requirement that the statement of changes in equity includes only transactions with shareholders; the introduction of a new statement of comprehensive income that combines all items of income and expense recognised in profit or loss together with "other comprehensive income"; and the requirement to present restatements of financial statements or retrospective application of a new accounting policy as at the beginning of the earliest comparative period, i.e. a third column on the balance sheet. The Group will make the necessary changes to the presentation of its financial statements in 2009.
IAS 32 and IAS 1, "Puttable Financial Instruments" (Amended), effective for annual periods beginning on or after 1 January 2009. The amendment to IAS 32 requires certain puttable financial instruments and obligations arising on liquidation to be classified as equity if certain criteria are met. The amendment to IAS 1 requires disclosure of certain information relating to puttable instruments classified as equity. The Group does not expect these amendments to impact the financial statements of the Group.
IAS 23, "Borrowing Costs" (Revised), effective for annual periods beginning on or after 1 January 2009. The benchmark treatment in the existing standard of expensing all borrowing costs to the income statement is eliminated in the case of qualifying assets. All borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset must be capitalised. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The changes to the standard will not affect the Group as it already applies the allowed alternative treatment under the existing IAS 23 and capitalises borrowing costs on qualifying assets.
IAS 39, "Financial Instruments: Recognition and Measurement" and IFRS 7 "Financial Instruments: Disclosures; Reclassification of Financial Assets", effective from 1 July 2008 and cannot be applied retrospectively to reporting periods before the effective date. The amendment to IAS 39 permits an entity to reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss ("FVTPL") category in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as available for sale), if the entity has the intention and ability to hold that financial asset for the foreseeable future. The amendments do not permit reclassification into FVTPL. The amendment to IFRS 7 relates to the disclosures required to financial assets that have been reclassified.
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items. These amendments to IAS 39 were issued in August 2008 and become effective for financial years beginning on or after 1 July 2009. The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. It clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as hedged item. The Company has concluded that the amendment will have no impact on the financial position or performance of the Company, as the Company
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements -The amendments to IFRS 1 allows an entity to determine the 'cost' of investments in subsidiaries, jointly controlled entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate to be recognised in the income statement in the separate financial statement. Both revisions will be effective for financial years beginning on or after 1 January 2009.The revision to IAS 27 will have to be applied prospectively. The new requirements affect only the parent's separate financial statement and do not have an impact on the consolidated financial statements.
In May 2008 the IASB issued its first omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. These amendments are effective for periods beginning on or after 1 January 2009 and have not yet been endorsed by the EU. The changes will have no material affect on the financial statements.
IFRS 5, "Non-current Assets Held for Sale and Discontinued Operations" (Amended), effective for annual periods beginning on or after 1 July 2009. The amendment clarifies that all of a subsidiary's assets and liabilities are classified as held for sale, under IFRS 5, even when the entity will retain a non-controlling interest in the subsidiary after the sale. To be applied prospectively from the date at which the company first applied IFRS 5. Therefore, any investments in subsidiaries classified as held for sale since IFRS 5 was applied will need to be re-evaluated. Early application is permitted. If early adopted, IAS 27 (as amended in January 2008) must also be adopted from that date.
IFRS 7, "Financial Instruments: Disclosures" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment removes the reference to 'total interest income' as a component of finance costs.
IAS 1, "Presentation of Financial Statements" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that assets and liabilities classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement are not automatically classified as current in the balance sheet. To be applied retrospectively. Early application is permitted.
IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that only implementation guidance that is an integral part of an IFRS is mandatory when selecting accounting policies.
IAS 10, "Events after the Reporting Period" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that dividends declared after the end of the reporting period are not obligations.
IAS 16, "Property, Plant and Equipment" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Replaces the term 'net selling price' with 'fair value less costs to sell', regarding the recoverable amount, to be consistent with IFRS 5 and IAS 36 Impairment of Assets.
- Items of property, plant & equipment held for rental that are routinely sold in the ordinary course of business after rental, are transferred to inventory when rental ceases and they are held for sale. Proceeds on sale are subsequently shown as revenue. IAS 7 Statement of cash flows is also revised, to require cash payments to manufacture or acquire such items to be classified as cash flows from operating activities. The cash receipts from rents and subsequent sales of such assets are also shown as cash flows from operating activities.
IAS 18, "Revenue" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment replaces the term 'direct costs' with 'transaction costs' as defined in IAS 39.
IAS 19, "Employee Benefits" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Revises the definition of 'past service costs' to include reductions in benefits related to past services ('negative past service costs') and to exclude reductions in benefits related to future services that arise from plan amendments. Amendments to plans that result in a reduction in benefits related to future services are accounted for as a curtailment. To be applied prospectively - to changes to benefits occurring on or after 1 January 2009. Early application is permitted.
- Revises the definition of 'return on plan assets' to exclude plan administration costs if they have already been included in the actuarial assumptions used to measure the defined benefit obligation. To be applied retrospectively. Early application is permitted.
- Revises the definition of 'short-term' and 'other long term' employee benefits to focus on the point in time at which the liability is due to be settled. To be applied retrospectively. Early application is permitted.
- Deletes the reference to the recognition of contingent liabilities to ensure consistency with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 does not allow for the recognition of contingent liabilities. To be applied retrospectively. Early application is permitted.
IAS 20, "Accounting for Government Grants and Disclosure of Government Assistance" (Amended), effective for annual periods beginning on or after 1 January 2009. Loans granted with no or low interest rates will not be exempt from the requirement to impute interest. Interest is to be imputed on loans granted with below-market interest rates, thereby being consistent with IAS 39. The difference between the amount received and the discounted amount is accounted for as a government grant. To be applied prospectively - to government loans received on or after 1 January 2009. Early application is permitted. However, IFRS 1 First-time Adoption of IFRS has not been revised for first-time adoptees; hence they will be required to impute interest on all such loans outstanding at the date of transition.
IAS 23, "Borrowing Costs" (Amended), effective for annual periods beginning on or after 1 January 2009. The amendment revises the definition of borrowing costs to consolidate the types of items that are considered components of 'borrowing costs' into one - the interest expense calculated using the effective interest rate method as described in IAS 39. To be applied retrospectively. Early application is permitted.
IAS 27 "Consolidated and Separate Financial Statements" (Amended), effective for annual periods beginning on or after 1 January 2009. When a parent entity accounts for a subsidiary at fair value in accordance with IAS 39 in its separate financial statements, this treatment continues when the subsidiary is subsequently classified as held for sale. To be applied prospectively from the date at which the company first applied IFRS 5. Therefore, any subsidiaries classified as held for sale since IFRS 5 was adopted will need to be re-evaluated. Early application is permitted.
IAS 28, "Investment in Associates" (Amended), effective for annual periods beginning on or after 1 January 2009.
- If an associate is accounted for at fair value in accordance with IAS 39 (as it is exempt from the requirements of IAS 28), only the requirement of IAS 28 to disclose the nature and extent of any significant restrictions on the ability of the associate to transfer funds to the entity in the form of cash or repayment of loans applies. To be applied retrospectively, although an entity is permitted to apply it prospectively. Early application is permitted. If early adopted, an entity must also adopt the amendment below, and the amendments to paragraph 3 of IFRS 7 Financial Instruments: Disclosures, paragraph 1 of IAS 31 Joint Ventures and paragraph 4 of IAS 32 Financial Instruments: Presentation at the same time.
- An investment in an associate is a single asset for the purpose of conducting the impairment test - including any reversal of impairment. Therefore, any impairment is not separately allocated to the goodwill included in the investment balance. Any impairment is reversed if the recoverable amount of the associate increases. If early adopted, an entity must also adopt the amendment above, and the amendments to paragraph 3 of IFRS 7 Financial Instruments: Disclosures, paragraph 1 of IAS 31 Joint Ventures and paragraph 4 of IAS 32 Financial Instruments: Presentation at the same time.
IAS 29, "Financial Reporting in Hyperinflationary Economies" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment revises the reference to the exception to measure assets and liabilities at historical cost, such that it notes property, plant and equipment as being an example, rather than implying that it is a definitive list. No specific transition requirements have been stated as it is a clarification of the references rather than a change.
IAS 31, "Interest in Joint ventures" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that if a joint venture is accounted for at fair value, in accordance with IAS 39 (as it is exempt from the requirements of IAS 31), only the requirements of IAS 31 to disclose the commitments of the venturer and the joint venture, as well as summary financial information about the assets, liabilities, income and expenses will apply. Early application is permitted. If early adopted, an entity must also adopt the amendments to paragraph 3 of IFRS 7 Financial Instruments: Disclosures, IAS 28 Investments in Associates and paragraph 4 of IAS 32 Financial Instruments: Presentation at the same time.
IAS 34, "Interim Financial Reporting" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that earnings per share is disclosed in interim financial reports if an entity is within the scope of IAS 33.
IAS 36, "Impairment of assets" (Amended), effective for annual periods beginning on or after 1 January 2009. This amendment clarifies that when discounted cash flows are used to estimate 'fair value less costs to sell', the same disclosure is required as when discounted cash flows are used to estimate 'value in use'. To be applied retrospectively. Early application is permitted.
IAS 38, "Intangible Assets" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Expenditure on advertising and promotional activities is recognised as an expense when the entity either has the right to access the goods or has received the services. To be applied retrospectively. Early application is permitted.
- Deletes references to there being rarely, if ever, persuasive evidence to support an amortisation method for finite life intangible assets that results in a lower amount of accumulated amortisation than under the straight-line method, thereby effectively allowing the use of the unit of production method. To be applied retrospectively. Early application is permitted.
- A prepayment may only be recognised in the event that payment has been made in advance to obtaining right of access to goods or receipt of services.
IAS 39, "Financial instruments recognition and measurement" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Clarifies that changes in circumstances relating to derivatives - specifically derivatives designated or de-designated as hedging instruments after initial recognition - are not reclassifications. Thus, a derivative may be either removed from, or included in, the 'fair value through profit or loss' classification after initial recognition. Similarly, when financial assets are reclassified as a result of an insurance company changing its accounting policy in accordance with paragraph 45 of IFRS 4 Insurance Contracts, this is a change in circumstance, not a reclassification. To be applied retrospectively. Early application is permitted.
- Removes the reference in IAS 39 to a 'segment' when determining whether an instrument qualifies as a hedge. To be applied retrospectively. Early application is permitted.
- Requires use of the revised effective interest rate (rather than the original effective interest rate) when remeasuring a debt instrument on the cessation of fair value hedge accounting. To be applied retrospectively. Early application is permitted.
IAS 40, "Investment property" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Revises the scope (and the scope of IAS 16) such that property that is being constructed or developed for future use as an investment property is classified as investment property. If an entity is unable to determine the fair value of an investment property under construction, but expects to be able to determine its fair value on completion, the investment under construction will be measured at cost until such time as fair value can be determined or construction is complete. To be applied prospectively. Early application is permitted. An entity is permitted to apply the amendments to investment properties under construction from any date before 1 January 2009 provided that the fair values of investment properties under construction were determined at those dates.
- Revises the conditions for a voluntary change in accounting policy to be consistent with IAS 8.
- Clarifies that the carrying amount of investment property held under lease is the valuation obtained increased by any recognised liability.
IAS 41, "Agriculture" (Amended), effective for annual periods beginning on or after 1 January 2009.
- Replaces the term 'point-of-sale costs' with 'costs to sell'. Revises the example of produce from trees in a plantation forest from 'logs' to 'felled trees'.
- Removes the reference to the use of a pre-tax discount rate to determine fair value, thereby allowing use of either a pre-tax or post-tax discount rate depending on the valuation methodology used.
- Removes the prohibition to take into account cash flows resulting from any additional transformations when estimating fair value. Rather, cash flows that are expected to be generated in the 'most relevant market' are taken into account. To be applied prospectively. Early application is permitted.
(z) IFRS and IFRIC Interpretations that became effective in the year ended 31 December 2008: The following Standards and Interpretations became effective within the year ended 31 December 2008. None of the Standards and Interpretations had an impact in the consolidated financial statements, which did not have any effect on the financial position of the Group but did give rise to additional disclosures.
(a)IFRIC 11, IFRS 2, Group and Treasury Share Transactions
(b)IFRIC12, Service Concession Arrangements
(c)IFRIC 14, IAS19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
3.VOYAGE & VESSEL OPERATING EXPENSES
The amounts in the accompanying consolidated income statement are analysed as follows:
Voyage expenses
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Port charges | (822) | (541) | |
| Bunkers (fuel costs) | (1,481) | (1,198) | |
| Third party commissions | (6,593) | (5,485) | |
| (8,896) | (7,224) | ||
| Voyage expenses - related party | |||
| Commissions- related party | (3,099) | (2,497) |
Vessel operating expenses
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Vessel Operating Expenses | |||
| Crew expenses | (17,625) | (13,179) | |
| Store & Consumables | (2,153) | (1,578) | |
| Spares | (5,441) | (2,565) | |
| Repairs & maintenance | (5,152) | (1,314) | |
| Lubricants | (5,111) | (5,082) | |
| Insurance | (7,297) | (4,827) | |
| Taxes (other than income tax) | (502) | (427) | |
| Other operating expenses | (3,640) | (2,439) | |
| (46,921) | (31,411) |
4.GENERAL AND ADMINISTRATIVE EXPENSES
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Directors and Management team Remuneration (see note 19(c)) | (1,263) | (1,111) | |
| Directors and Management team Annual Incentive Plan (see note 19(c)) | (252) | (380) | |
| Payroll cost (Goldenport Marine Services) | (889) | - | |
| Rents | (263) | - | |
| Audit fees | (362) | (242) | |
| Class 1 fees | - | (375) | |
| Legal fees | (47) | (122) | |
| Other | (751) | (548) | |
| (3,827) | (2,778) |
The Directors and Management team Annual Incentive Plan ("AIP") consists in full of non cash bonus, which will be settled in the form of shares under the terms of AIP (see note 19(c)).
5.FINANCE EXPENSE
The amounts in the accompanying consolidated income statement are analysed as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Interest payable on long-term borrowings | (5,677) | (5,366) | |
| Loss on fair value of derivatives | (906) | (329) | |
| (6,583) | (5,695) |
6.EARNINGS PER SHARE
Basic earnings per share ("EPS") are calculated by dividing the profit for the year attributable to Goldenport Holdings Inc. shareholders (U.S.$87,581 and U.S.$58,281 for the years ended 31 December 2008 and 2007, respectively) by the weighted average number of shares outstanding (69,924,071 for the year ended 31 December 2008 and 69,885,106 for the year ended 31 December 2007).
Diluted EPS reflects the potential dilution that could occur if share options or other contracts to issue shares were exercised or converted into shares. Accordingly, in respect of the restricted stock granted to the Company's directors under the Annual Incentive Plan (see note 19 (c)), diluted EPS for the years ended 31 December 2008 and 2007 includes such shares granted but not issued. Diluted EPS was calculated based on the weighted average number of shares that would derive if these shares were issued on the grant date. Such number is calculated by dividing the fair value of the directors' services exchanged for Company's shares with the average market value of the Company's stock during the respective year.
7.VESSELS
Vessels consisted of the following at 31 December:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Cost of vessels | |||
| At 1 January | 272,518 | 150,735 | |
| Additions | 12 | 123,371 | |
| Initial expenses deduction | (248) | - | |
| Disposals | (12,172) | (1,588) | |
| At 31 December | 260,110 | 272,518 | |
| Depreciation | |||
| At 1 January | (40,900) | (25,539) | |
| Depreciation charge for the year | (23,183) | (15,361) | |
| Disposals | 5,242 | - | |
| Accumulated depreciation | (58,841) | (40,900) | |
| Net carrying amount of vessels | 201,269 | 231,618 | |
| Cost of dry-dockings | |||
| At 1 January | 28,270 | 15,786 | |
| Additions | 19,783 | 12,484 | |
| Disposals | (5,072) | - | |
| At 31 December | 42,981 | 28,270 | |
| Depreciation | |||
| At 1 January | (15,194) | (9,262) | |
| Depreciation charge for the year | (9,213) | (5,932) | |
| Disposals | 1,744 | - | |
| Accumulated depreciation | (22,663) | (15,194) | |
| Net carrying amount of dry-docking costs | 20,318 | 13,076 | |
| Net carrying amount at 31 December | 221,587 | 244,694 |
The gross carrying amount of vessels, which have been fully depreciated to their residual value and were still in use as at 31 December 2008, was U.S.$7,277 (2007: U.S.$14,208).
All of the Company's operating vessels having a total carrying value of U.S. $221,587 as at 31 December 2008 (U.S.$244,694 as at 31 December 2007), have been provided as collateral to secure the loans discussed in note 14.
Disposals
On 11 March 2008, the company agreed the sale of the 69,737 DWT, 1981-built vessel "Ios", to an unaffiliated third party. The sale was concluded at a gross consideration of US $16,800 in cash and the vessel was delivered to the new owners on 5 May 2008. As of delivery date, MV "Ios" had a net carrying value of U.S.$3,569, which was equal to her scrap value plus the unamortized balance of the latest dry-docking. A commission of 2% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$12,895 and is included in the consolidated income statement for the year ended 31 December 2008.
On 11 March 2008, the company agreed the sale of the 136,638 DWT, 1982-built vessel "Samos", to an unaffiliated third party. The sale was concluded at a gross consideration of US $25,000 in cash and the vessel was delivered to the new owners on 17 June 2008. As of delivery date, MV Samos had a net carrying value of U.S.$4,169, which was equal to her scrap value plus the unamortized balance of the latest dry-docking. A commission of 2% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$20,331 and is included in the consolidated income statement for the year ended 31 December 2008.
On 8 August 2008 the company agreed the sale of the 946 TEU, 1978-built container vessel 'Glory D' to an unaffiliated third party. The sale was concluded at a gross consideration of U.S.$4,128 in cash and the vessel was delivered to the new owners on 20 August 2008. As of delivery date, MV Glory D had a net carrying value of U.S.$967, which was equal to her scrap value plus the unamortized balance of the latest dry-docking. A commission of 3% on the gross consideration was paid for this disposal and additional expenses mainly for bunkers of U.S.$385 were incurred. The gain resulting from the sale of the vessel was U.S.$2,652 and is included in the consolidated income statement for the year ended 31 December 2008.
On 20 October 2008 the company agreed the sale of the 930 TEU, 1978-built container vessel 'Achim' to an unaffiliated third party. The sale was concluded at a gross consideration of US $1,330 in cash and the vessel was delivered to the new owners on 30 October 2008. As of delivery date, MV Achim had a net carrying value of U.S.$1,020, which was equal to her scrap value plus the unamortized balance of the latest dry-docking. A commission of 3% on the gross consideration was paid for this disposal and additional expenses of U.S.$2 relating to the disposal were incurred.. The gain resulting from the sale of the vessel was U.S.$268 and is included in the consolidated income statement for the year ended 31 December 2008.
On 26 November 2008 the company agreed the sale of the 485 TEU, 1978-built container vessel 'Tuas Express' to an unaffiliated third party. The sale was concluded at a gross consideration of US $928 in cash and the vessel was delivered to the owners on 9 December 2008. As of delivery date, MV Tuas Express had a net carrying value of U.S.$533, which was equal to her scrap value plus the unamortized balance of the latest dry-docking. A commission of 3% on the gross consideration was paid for this disposal and additional expenses of U.S.$23 relating to the disposal were incurred. The gain resulting from the sale of the vessel was U.S.$344 and is included in the consolidated income statement for the year ended 31 December 2008.
Dry-docking costs
During 2008 eight vessels of the Group commenced and completed scheduled dry-dockings at a total cost of U.S.$19,783. (2007: U.S.$12,484 for dry docking of ten vessels)
8.VESSEL UNDER RECONSTRUCTION
The balances as at 31 December were as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Purchase Price | 13,000 | 13,000 | |
| Capital expenditure for reconstruction | 41,944 | 24,407 | |
| Capitalised interest and other borrowing costs | 2,271 | 1,473 | |
| 57,215 | 38,880 |
On 16 June 2006, the Group acquired the MV Fortunate, a container vessel of 5,551 TEU and 68,537 DWT built in 1996, for U.S.$13,000. The vessel was damaged in a fire on 21 March 2006 under other ownership. As at 31 December 2008, the estimated remaining cost for completing the reconstruction is expected to be approximately U.S.$6,000 most of which is payable to Cosco Zhousan shipyard (see note 22). The vessel became operational within February 2009.
Depreciation on the vessel will commence upon the completion of the reconstruction and the vessel becoming operational.
Vessel's carrying value of U.S. $57,215 as at 31 December 2008 (U.S.$38,880 as at 31 December 2007), has been provided as collateral to secure the loan discussed in note 14.
9.Advances for vesselS construction
The balances as at 31 December were as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | |||
| 4 Bulk Carriers (Cosco Zhousan Shipyard, China) | (a) | 30,922 | 30,286 | |
| 2 Containers (Jiangsu Yangzijiang Shipbuilding Co. Ltd, China) | (a) | 19,276 | 18,981 | |
| 2 Bulk Carriers (Qingshan Shipyard, China) | (a) | 27,630 | - | |
| JV - 2 Bulk Carriers (Jiangsu Eastern Shipyard, China) | (b) | 23,682 | 12,971 | |
| 101,510 | 62,238 |
a)New Buildings
4 Bulk Carriers (Cosco Zhousan Shipyard)
On 27 November 2007, the Group paid to the shipyard an aggregate amount of U.S.$30,200 representing the 20% deposit in respect of the four contracts for the vessels to be delivered in 2010 (ZS07037 and ZS07039) and 2011 (ZS07036 and ZS07038) (note 22). Payments will be made to the yard based on the construction progress schedule in tranches of 20% of the total value. The last 20% will be paid upon delivery of the vessels.
The Group capitalises all the material expenses incurred during the construction period. Amount capitalised during 2008 consists of: a) borrowing costs of U.S.$440, b) broker's commission of U.S.$ 76, c) plan approval fee of U.S.$56, d) FDD insurance of U.S.$50 and e) legal fees of U.S.$14.
2 Containers (Jiangsu Yangzijiang Shipbuilding Co. Ltd)
On 7 August 2007, the Group separately agreed the specification terms with Jiangsu Yangzijiang Shipbuilding Co. Ltd and Anhui Technology Imp. & Exp. Co. Ltd for the construction of two new-build geared container vessels of 2,500 TEU nominal capacity each (the "YZJ Contracts"), the first of which is to be delivered in October 2010 and the second in March 2011. The total combined cost payable by the Group for these two vessels is estimated to be approximately U.S. $94,000, which is payable is five equal instalments.
On 31 October 2007, the Group paid U.S.$18,730, representing the 20% deposit for the two vessels, as per contract. Payments will be made to the yard based on the construction progress schedule in tranches of 20% of the total value. The last 20% will be paid upon delivery of the vessels.
The Group capitalises all the material expenses incurred during the construction period. Amount capitalised during 2008 consists of: a) borrowing costs of U.S.$190, b) legal fees of U.S.$49 and c) plan approval fee of U.S.$56.
2 Bulk Carriers (Qingshan Shipyard of China)
On 27 June 2008 the Group entered into contracts for the construction of two additional bulk carrier vessels of 57,000 DWT each, with Qingshan Shipyard of China (member of Changjiang National Shipping Group), for a total consideration of U.S.$ 91,660, with estimated delivery in December 2010.
The initial deposit of U.S.$ 27,360 was paid during 2008 with U.S.$ 18,820 from cash reserves and U.S.$ 8,540 through the draw-down of a new loan facility (note 14).
The remaining payments will be made to the yard based on the construction process schedule and will be financed by a mixture of cash reserves and the new loan facility, as follows: steel cutting stage with total cost U.S.$13,680 will be financed by U.S.$9,000 from cash reserves and the remaining from the loan facility and keel laying stage with total cost U.S.$18,240, launching stage with total cost U.S.$13,680 and delivery instalment of U.S$ 18,700 will be financed in total by the loan facility.
b)New Buildings-Joint Venture
On 13 March 2007, the Group entered into a 50% joint venture with the unaffiliated third party Topley Corporation with the objective to construct two 53,800 DWT bulk carrier vessels in Jiangsu Eastern Shipyard of China, which are expected to be delivered in 2009. The contract price for each vessel is U.S.$32,000 (U.S.$64,000 in total). The construction of the vessels is financed by cash contributions of the joint venture parties and bank financing.
As part of the joint venture agreement between the Group and Topley Corporation, the Group formed the company Sentinel Holdings Inc., under the laws of the Marshall Islands and transferred 50% of the issued shares (500 shares of no par value) to Topley Corporation for one USD per share. Sentinel Holdings Inc. is the sole shareholder of the issued share capital of Citrus Shipping Corp. and Barcita Shipping S.A. (ship-owners of Marie Paule and Alpine Trader respectively).
On 22 January 2008, the Group paid U.S.$3,200, representing the 50% (the remaining 50% was paid by the joint venture partners) of the third instalment to the yard for MV Marie Paule, as per contract.
On 7 July 2008, the Group paid U.S.$3,200, representing the 50% (the remaining 50% was paid by the joint venture partners) of the fourth instalment to the yard for MV Marie Paule, as per contract.
On 11 August 2008, the Group paid U.S.$3,200, representing the 50% (the remaining 50% was paid by the joint venture partners) of the third instalment to the yard for MV Alpine Trader, as per contract. Remaining instalments (one for MV Marie Paule and two for MV Alpine Trader) will be paid to the yard based on the construction progress schedule on tranches of 20% of the total construction value.
The Group's 50% portion in the stand alone Financial Statements of Sentinel Holdings Inc., as at 31 December was as follows:
| SENTINEL HOLDINGS INC. | 31 December 2008 U.S.$'000 | 31 December 2007 U.S.$'000 | |
| ASSETS | |||
| Non-current assets | |||
| Advances for vessel construction | 23,682 | 12,971 | |
| Other assets | 87 | - |
| TOTAL ASSETS | 23,769 | 12,971 |
| LIABILITIES | |||
| Long term debt | 14,340 | - | |
| Liabilities | 9,429 | 12,971 | |
| TOTAL LIABILITIES | 23,769 | 12,971 |
Vessels are expected to become operational in 2009 and therefore, no significant transaction with effect on the results of the joint venture occurred within 2008.
10.OTHER NON-CURRENT ASSETS - LIABILITIES
The amounts in the accompanying balance sheets as at 31 December are analysed as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Fair value of derivative instrument non current(1) | - | 50 | |
| Fair value of derivative instrument current (1) | 8 | - | |
| 8 | 50 | ||
| Fair value of derivative instrument non current(2) | (801) | (152) | |
| Fair value of derivative instrument current (2) | (257) | (42) | |
| (1,058) | (194) | ||
| (1): interest rate swap for the loan of vessel Gianni D, which was fully repaid in 2005. | |||
| (2): interest rate swap for the loan of vessel Bosporus Bridge. | |||
Variability can appear in floating rate assets, floating rate liabilities or from certain types of forecasted transactions, and can arise from changes in interest rates or currency exchange rates.
During 2003, the Group entered into an interest rate swap for the loan of vessel Gianni D. The notional amount of this contract amounted to U.S.$10,400. Under the swap agreement, the Group exchanges variable to fixed interest rate at 3.60%. The swap agreement requires the Group to pay additional interest when LIBOR exceeds 6.00% in any twelve-month year until 2009. It is noted that the bank loan for which the interest rate swap agreement was entered into, was repaid in full in 2005. However, the Group chose to maintain the swap contract.
The Group did not designate the swap agreement as an accounting hedge and accordingly, losses resulting from changes in the fair value of this derivative instrument, which approximated U.S.$42 and U.S.$135 for the years ended 31 December 2008 and 2007 respectively, are recorded in finance expense or income, accordingly, in the consolidated income statement. The fair value of the derivative financial instrument as at 31 December 2008 and 2007 was an asset of U.S.$8 and U.S.$50 which is included in Prepaid expenses and other assets and other non-current assets respectively in the accompanying consolidated balance sheet.
During 2007, the Group entered into an interest rate swap for the loan of vessel Bosporus Bridge. The notional amount of this contract amounted to U.S.$12,166. Under the swap agreement, the Group exchanged variable to fixed interest rate at 4.64%.
The fair value of the specific derivative financial instrument as at 31 December 2008 and 2007 was a liability of U.S.$1,058 and U.S.$194 respectively, which is included in other non-current and current liabilities in the accompanying consolidated balance sheet. As the Group did not designate the swap agreement as an accounting hedge, losses resulting from this derivative instrument, which approximated U.S.$864 and U.S.$194 for the years ended 31 December 2008 and 2007, were recorded in finance expense in the consolidated income statement.
11.INSURANCE CLAIMS
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Balance as of 1 January | 3,268 | 1,305 | |
| Additions | 1,594 | 3,144 | |
| Collections | (2,731) | (1,127) | |
| Amounts written off | (119) | (54) | |
| Balance as of 31 December | 2,012 | 3,268 |
12.CASH AND CASH EQUIVALENTS
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Cash at bank | 1,751 | 873 | |
| Short term deposits at banks | 31,506 | 19,074 | |
| 33,257 | 19,947 |
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
The Group's loan agreements contain minimum liquidity clauses requiring available cash balances of U.S.$7,500 throughout the year.
13.SHARE CAPITAL AND SHARE PREMIUM
Share capital consisted of the following at 31 December:
| 2008 U.S.$'000 | 2007 U.S.$'000 | |||
| Authorised | ||||
| Shares of $0.01 each | 1,000 | 1,000 | ||
| Issued and paid | ||||
| Shares of $0.01 each | 699 | 699 | ||
| Total issued share capital | 699 | 699 |
Formation: The Company was formed on 21 March 2005, and prior to the reorganization analyzed below, its share capital consisted of 500 shares authorized, issued and outstanding, without par value. On 30 March 2006, conditional on admission to the Official List of the London Stock Exchange, the Company amended its Articles of Incorporation. Under the Company's Amended and Restated Articles of Incorporation, the Company has an authorized share capital of 100,000,000 shares (all in registered form) consisting of 100,000,000 shares with a par value of U.S.$0.01 per share. The Company cancelled the existing 500 shares with no par value. Prior to the reorganization, seventeen holding companies (the "Contributed Companies"), each in turn owning a vessel-owning company, were wholly-owned by Captain Paris Dragnis. The reorganization described below was a transaction between companies under common control, and has been accounted for in a manner akin to a pooling of interests for the years prior to the reorganization. Accordingly, the financial statements of the Group have been presented using historical carrying costs of the Contributed Companies. The consolidated financial statements have also been prepared on the basis that Goldenport existed for all years prior to the reorganization and was the parent company of the Contributed Companies in all such years.
The reorganization that took place on 30 March 2006, involved the following steps:
a.Captain Paris Dragnis contributed all of the shares held by him in the seventeen intermediate holding companies to Goldenport, in exchange for shares in Goldenport, fulfilling his obligation for the Company's share capital, in accordance with the share for share exchange agreement dated 30 March 2006; and
b.Captain Paris Dragnis transferred all of the shares in Goldenport to Starla Shipholding Corporation (Starla), a company wholly owned by Captain Paris Dragnis; as a result Starla was, prior to admission to the Official List of the London Stock Exchange, the sole shareholder of the Company beginning of the earliest year presented. Starla is the ultimate holding company of the Group.
c.Following completion of the reorganisation, the Contributed Companies were wholly-owned subsidiaries of Goldenport.
d.On 5 April 2006 the Company was admitted to the Official List of the London Stock Exchange, issuing 25,531,915 shares of U.S.$0.01 each. On 11 April 2006 the over allotment option was exercised for 2,553,191 shares at GBP 2.35 per share bringing the total offer to GBP 66,000 (or U.S.$115,465).
The analysis of the share premium is as follows:
| U.S. $'000 | ||
| Proceeds from Initial Public Offering, gross | 115,465 | |
| Issuance costs | (8,193) | |
| Proceeds from Initial Public Offering, net | 107,272 | |
| Nominal share capital cost | (281) | |
| Balance 31 December 2007 | 106,991 | |
| AIP shares issued in 2008 | 363 | |
| Balance 31 December 2008 | 107,354 |
14.LONG-TERM DEBT
Debt refinancing:
On 16 December 2008, the Company committed to refinance existing debt of U.S.$38,100, of which U.S.$13,100 relating to the reconstruction of vessel 'MSC Fortunate' was maturing on 28 November 2009, U.S.$20,000 from the Company's revolving credit facility was maturing on 17 August 2009 and U.S.$5,000 from the loan of vessel 'Anafi' was maturing on 19 July 2014. According to the new repayment schedule the loan will be repaid in 18 quarterly instalments with a final balloon payment of U.S$.13,800 together with the last instalment. On 20 January 2009 the loan documentation was finalised.
Prepayment of debt:
Within 2008 the Company proceeded with the following prepayments of debt, in order to release the mortgage of the disposed vessels:
On 3 September 2008 a prepayment of U.S.$2,000 was applied towards the balloon instalment of the loan of vessel 'MSC Fortunate' (see loan f below) for the disposed vessel 'Glory D'.
On 17 November 2008 a prepayment of U.S.$1,289 was applied towards the outstanding amount of loan c (see table below) for the disposed vessel 'Achim' reducing the amortisation on a prorata basis.
On 29 December 2008 a prepayment of U.S.$900 was applied towards the balloon instalment of the loan of vessel 'MSC Fortunate' (see loan f below) for the disposed vessel 'Tuas Express'.
The amounts in the accompanying balance sheets are analysed as follows:
| 31 December 2008 | 31 December 2007 | ||||
| U.S.$'000 | U.S.$'000 | ||||
| Bank Loan | Vessel(s) | Amount | Rate % | Amount | Rate % |
| a.Issued 13 February 2003, maturing 30 May 2009 | Lindos | 1,750 | 3.40% | 2,450 | 6.19% |
| b.Issued 31 March 2004, maturing 30 September 2010 | Tilos, Limnos | 4,600 | 5.05% | 6,000 | 6.28% |
| c.Issued 17 May 2005, maturing 17 August 2009 | MSC Mekong, MSC Emirates, Alex D, Gianni D, MSC Socotra, Howrah Bridge | 5,526 | 3.45% | 11,800 | 5.91% |
| d.Issued 26 June 2006, maturing 26 September 2011 | MSC Scotland | 9,500 | 2.77% | 12,700 | 6.20% |
| e.Issued 19 July 2006, maturing 16 July 2011. | Vasos | 12,200 | 3.99% | 15,100 | 6.29% |
| f.Issued 16 December 2008, maturing 29 July 2013 | MSC Fortunate, Athos, MSC Himalayia, | 38,100 | 1.77% | 23,000 | 6.05% |
| g.Issued 14 March 2007, maturing 14 March 2012. | MSC Finland | 6,800 | 5.89% | 9,200 | 5.89% |
| h.Issued 19 July 2007, maturing 19 July 2014 | Anafi | 15,125 | 5.30% | 22,825 | 6.00% |
| i.Issued 17 August 2007, maturing 17 August 2012 | MSC Accra | 6,075 | 3.30% | 7,695 | 5.76% |
| j.Issued 18 October 2007, maturing 18 October 2014 | Bosporus Bridge, YZJ-815, YZJ-816 | 11,165 | 5.60% | 12,500 | 6.03% |
| k.Issued 11 November 2007, maturing 11 November 2014 | Gitte, Tiger Star | 16,450 | 3.24% | 18,750 | 5.84% |
| l.Issued 27 November 2007, maturing 17 August 2009 | Goldenport Holdings Inc. | - | - | 20,000 | 5.91% |
| m.Issued 22 January 2008, maturing 10 years after delivery | Marie Paule | 8,800 | 3.01% | - | - |
| n.Issued 22 January 2008, maturing 10 years after delivery | Alpine Trader | 5,600 | 3.01% | - | - |
| o.Issued 18 August 2008, maturing 12 years after delivery | QS20060384 | 4,270 | 4.23% | - | - |
| p.Issued 18 August 2008, maturing 12 years after delivery | QS20060385 | 4,270 | 4.23% | - | - |
| Total | 150,231 | 162,020 | |||
| Less: initial financing costs | (809) | (500) | |||
| Less: current portion | (32,564) | (30,755) | |||
| Long-term portion | 116,858 | 130,765 | |||
The upcoming repayment terms of loans with balances outstanding at 31 December 2008 are:
Loan a: This loan is repayable in one quarterly instalment of U.S.$350, which is due on 30 May 2009, along with a balloon payment of U.S.$1,400.
Loan b: This loan is repayable in four semi-annual instalments of U.S.$700 each, the first one being due on 30 March 2009 and the final one being due on 30 September 2010, along with a balloon payment of U.S.$1,800.
Loan c: This loan is repayable in three quarterly instalments of U.S.$1,085 each, the first one being due on 17 February 2008 and the final one being due on 17 August 2009, along with a balloon payment of U.S.$2,271.
Loan d: This loan is repayable in two quarterly instalments of U.S.$800 each, the first one being due on 26 March 2009 and the second being due on 26 June 2009, eight quarterly instalment of U.S.$600 each, the first one being due on 26 September 2009 and the final one being due on 26 June 2011, plus a balloon payment of U.S.$3,100, being due on 26 September 2011.
Loan e: This loan is repayable in six semi-annual instalments of U.S.$1,450 each, the first one being due on 16 January 2008 and the final one being due on 16 July 2011, along with a balloon payment of U.S.$3,500.
Loan f: This loan is repayable in eighteen quarterly instalments of U.S.$1,350 each, the first one being due on 29 April 2009 and the last one being due on 29 July 2013 along with a balloon payment of U.S.$13,800.
Loan g: This loan is repayable in five quarterly instalments of U.S.$600 each, the first one being due on 14 March 2009 and the fifth one on 15 March 2010 and eight quarterly instalment of U.S.$475 each, the first one being due on 14 June 2010 and the final one being due on 14 March 2012.
Loan h: This loan is repayable in one instalment of U.S.$675 being due on 19 January 2009 and twenty two quarterly instalments of U.S.$500 each, the first one being due on 19 April 2009 and the final one on 19 July 2014 along with a balloon payment of U.S.$3,450.
Loan i: This loan is repayable in fifteen quarterly instalments of U.S.$405 each, the first one being due on 16 February 2009 and the final one on 16 August 2012.
Loan j: This loan is repayable in twenty four quarterly instalments of U.S.$333.75 each, the first one being due on 18 January 2008 and the final one on 18 October 2014 along with a balloon payment of U.S.$3,155.
Loan k: This loan is repayable in twenty four quarterly instalments of U.S.$575 each, the first one being due on 11 February 2009 and the final one on 11 November 2014 along with a balloon payment of U.S.$2,650.
Loan l: In addition to the loans mentioned above, a non-amortising, revolving credit line was obtained on 27 November 2007, to support the Group's operations. It was in Group's discretion to drawdown any amount up to U.S.$20,000 in various tranches, in multiples of U.S.$500 and for interest periods of multiples of one month and up to twelve months. The facility expires on 17 August 2009 but the Company selected to refinance it in full, forming part of loan (f).
Loan m: As part of the loan agreement concluded between the vessel owning company of the JV new-build bulk carrier 'Marie Paule' and a bank (see note 9b and 18b) the vessel owning company proceeded with the drawdown of U.S.$11,200 on 22 January 2008, representing: a) the amount of U.S.$4,800 being the refinancing of the second instalment for vessel that was paid in 2007 from cash reserves from the Joint Venture partners; and b) the third instalment for vessel amounting to U.S.$6,400 that was paid directly to the shipyard as per the contract. On 7 July 2008 the vessel owning company proceeded with the drawdown of U.S.$6,400 representing the fourth instalment for vessel paid directly to the shipyard as per the contract. The amount of U.S.$8,800 included in the Consolidated Balance Sheet as at 31 December 2008, represents the Group's 50% portion of the total amount drawn (U.S.$17,600) from the vessel owning companies. This amount is repayable in ten years after delivery of vessel.
Loan n: As part of the loan agreement concluded between the vessel owning company of the JV new-build bulk carrier 'Alpine Trader' and a bank (see note 9b and 18b) the vessel owning company proceeded with the drawdown of U.S.$4,800 on 22 January 2008 being the refinancing of the second instalment for vessel that was paid in 2007 from cash reserves from the Joint Venture partners. On 11 August 2008 the vessel owning company proceeded with the drawdown of U.S.$6,400 representing the third instalment for vessel paid directly to the shipyard as per the contract. The amount of U.S.$5,600 included in the Consolidated Balance Sheet as at 31 December 2008, represents the Group's 50% portion of the total amount drawn (U.S.$11,200) from the vessel owning companies. This amount is repayable in ten years after delivery of vessel.
Loans (a-p) are denominated in U.S. dollars, and bear interest at LIBOR plus a margin. For loan g the first 10 out of 18 instalments bear fixed interest of 5.89% and for the last eight instalments the loan bears interest at LIBOR plus a margin. In addition, the Company has entered into an interest rate swap agreement for loan (j), to exchange variable to fixed interest rate at 4.64%, for a notional amount equal to the loan amount concluded.
The remaining loans have margins between 0.75% and 1.175% above LIBOR.
Total interest paid was U.S.$7,195 and U.S.$5,822 for the year ended 31 December 2008 and 31 December 2007, respectively.
Total borrowing costs capitalised were U.S.$1,821 and U.S.$1,329 for the year ended 31 December 2008 and 31 December 2007, respectively.
The loans are secured with first priority mortgages over the borrowers vessels. The loan agreements contain covenants including restrictions as to changes in management and ownership of the vessels, additional indebtedness and mortgaging of vessels without the bank's prior consent as well as minimum requirements regarding hull cover ratio and corporate guarantees of Goldenport Holdings.
New Loan
Loans o & p: On 18 August 2008 and as part of the loan agreement concluded between the vessel owning companies of the under construction bulk carriers (QS20060384 and QS20060385) and a bank (see note 9), the vessel owning companies proceeded with the drawdown of U.S.$8,540 (U.S.$4,270 each) being the financing part of the first instalment paid to Qingshan Shipyard of China. This loan is repayable in twelve years after delivery of vessels.
A number of the Group's loan agreements contain minimum liquidity clauses for a total amount of $7,500.
15.DEFERRED REVENUE
Deferred revenue includes an amount of U.S.$8,257 (original amount U.S.$ 11,300), which represents the unamortized difference between the market value of the vessel charter free and the amount actually paid to acquire MV Bosporus Bridge in the secondhand market in 2007. This amount will be recognized to income for the remaining of the charter period. The amount of U.S.$2,628 was recognized to income in the current year (U.S.$415 in 2007). The remaining balance in deferred revenue represents cash received from charterers prior to 31 December 2008, which relates to revenue earned after that date.
16.ACCRUED LIABILITIES AND OTHER PAYABLES
The amounts in the accompanying balance sheets at 31 December are analysed as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Accrued interest | 702 | 1,534 | |
| Accrual for supplementary calls | 1,823 | 678 | |
| Accrued wages | 619 | 253 | |
| Accrual for annual incentive plan | 252 | 350 | |
| Accrued audit fee | 146 | 160 | |
| Accrued dry-docking costs | 868 | 2,936 | |
| Other accrued expenses | 1,900 | 1,643 | |
| Other payables | 2,680 | 1,412 | |
| 8,990 | 8,966 |
17.DIVIDENDS DECLARED
The Board of Directors of the Company will propose to the Annual General Meeting for approval, a final dividend for 2008 of 2 pence per share or total GBP 1,399 (15 pence per share or GBP 10,483 for 2007). The dividend proposed which, is expected to be approved by the AGM to be held in Athens on 7 May 2009 has a share alternative allowing the shareholders to select between cash and shares for the respective amount of 2 pence.
Dividend rights: Under the Company's by-laws, each ordinary share is entitled to dividends if and when dividends are declared by the Board of Directors. There are no restrictions on the Company's ability to transfer funds (other than funds denominated in Marshall Islands dollars) in and out of Marshall Islands. The payment of dividends is subject to the approval of the Annual General Meeting of Shareholders. The payment of dividends was U.S.$31,074 in 2008 (29.73 cents per share or 15 pence per share as final dividend for 2007 and 14.73 cents per share or 8.0 pence per share as interim dividend for 2008) and U.S.$ 26,362 in 2007 (23.5 cents per share or 11.9 pence per share as final dividend for 2006 and 14.2 cents per share or 7.0 pence per share as interim dividend for 2007).
18.COMMITMENTS AND CONTINGENCIES
a. Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance providers and from other claims with suppliers relating to the operations of the Group's vessels. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the consolidated financial statements.
b. Sentinel Holdings Inc. (the joint venture company) entered into agreement with Jiangsu Eastern Shipyard for the construction of two new build bulk carriers of 53,800 DWT each. The total construction cost is estimated to be approximately U.S.$64,000 (U.S.$32,000 each), which is payable in five equal instalments. As of 31 December four instalments of U.S.$6,400 have been paid for vessel 'Marie Paule' and three instalments of U.S.$6,400 have been paid for vessel 'Alpine Trader'. The remaining instalments, one for the vessel 'Marie Paule' and two for the vessel 'Alpine Trader', are committed and will be paid in 2009 in accordance with the milestones as described in the contract.
c. Goldenport Holdings Inc. entered into agreement with Cosco (Zhousan) Shipyard Co. for the construction of four new build bulk carriers of 57,000 DWT each. The total construction cost is estimated to be approximately U.S.$151,000, which is payable in five equal instalments (see note 9a). Four of these payments are committed and will be paid in accordance with the milestones, as described in the contract (note 22). Three of these payments are secured through letter of guarantee from the financing bank.
d. On 7 August 2007, the Company entered into agreement with Jiangsu Yangzijiang Shipbuilding Co. Ltd and Anhui Technology Imp. & Exp. Co. for the construction of two new build geared container vessels of 2,500 TEU nominal capacity each. The total combined cost is estimated to be approximately U.S.$94,000, which is payable in five equal instalments (see note 9a). Four payments are committed and will be paid in accordance with the milestones, as described in the contract. Two of these payments are secured through a letter of guarantee from the financing bank.
e. On 27 June 2008, the Company entered into agreement with Qingshan Shipyard of China for the construction of two new build bulk carriers of 57,000 DWT each. The total construction cost is estimated to be approximately U.S.$91,660, which is payable in five instalmets (see note 9a). Four of these payments are committed and will be paid in accordance with the milestones, as described in the contract. Three of these payments are secured through letter of guarantee from the financing bank.
f. As at 31 December 2008, the Group had entered into time charter arrangements on all its operating vessels . These arrangements have remaining terms between 2 and 65 months.
g. Future minimum charters receivable upon time charter arrangements as at 31 December 2008, are as follows (it is noted that the vessel off-hires and dry-docking days that could occur but are not currently known are not taken into consideration; in order to reflect current market conditions the Company assumes delivery at the earliest date allowed by the contract of the vessels by the charterers; future default of the charterers where no indication has been given is not taken into account; for the MV Gitte which has a charter in euros the rate of 1.3920 was used to convert into U.S. dollars; with regard to the Cosco new buildings (see note 9a) the calculation is based on the floor rate without taking into account any profit share scheme; for the vessel into Joint Venture ("JV") (see note 9b) 50% of revenue is included:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Within one year | 87,797 | 157,318 | |
| 1-5 years | 199,941 | 202,591 | |
| > 5 years | 3,775 | 3,808 | |
| 291,513 | 363,717 |
19.RELATED PARTY TRANSACTIONS
Transactions with related parties consisted of the following for the years ended 31 December:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Voyage expenses - related party | |||
| Goldenport Shipmanagement Ltd (a) | 3,099 | 2,497 | |
| Management fees - related party | |||
| Goldenport Shipmanagement Ltd (a) | 3,515 | 3,906 | |
| 6,614 | 6,403 |
Balances due from related parties as at 31 December comprise the following:
| 2008 U.S.$'000 | 2007 U.S.$'000 | ||
| Due from related parties | |||
| Goldenport Shipmanagement Ltd (a) | 3,342 | 3,289 | |
| Total | 3,342 | 3,289 |
(a) Goldenport Shipmanagement Ltd. ("GSL"): All vessel operating companies included in the consolidated financial statements have a management agreement with GSL, a Liberian corporation directly controlled by Captain Paris Dragnis, to provide, in the normal course of business, a wide range of shipping managerial and administrative services, such as commercial operations, chartering, technical support and maintenance, engagement and provision of crew, financial and accounting services and cash handling in exchange for a management fee. On 1 January 2008 all the activities of accounting and legal department were transferred from GSL to the new subsidiary Goldenport Marine Services which is a company 100% owned by Goldenport Holdings. On 1 July 2008 all the activities of the quality and safety, information technology (including software licences) and other administrative activities were transferred from GSL to Goldenport Marine Services. Based on Management's estimation the total cost of these services represents a monthly cost of U.S.$3.25 per vessel and therefore, the respective monthly management fee payable to GSL was reduced accordingly to U.S.$12.5 (U.S.$15.75 for 2007) per vessel per month in order to reflect this transfer of services.
In addition GSL charged the Group, U.S.$ 430, for the services rendered for the reconstruction of MV MSC Fortunate. This amount is included in the capital expenditure for reconstruction (see note 8).
For the year ended 31 December 2008 commission charged by GSL amounted to U.S.$3,099 (2007: U.S.$2,497) and is included in "Voyage expenses-related party". GSL has a branch office registered in Greece under the provisions of Law 89/1967.
The amounts receivable from GSL, shown in the table above, represent the vessel operating companies' cash surplus handled by GSL.
(b) Sentinel Holdings Inc. appointed Goldenport Shipmanagement Ltd. as a consultant for the new-buildings project at Jiangsu Eastern Shipyard of China (note 9). As part of the supervision agreement between the two companies, GSL undertakes the plan approval, the attendance and supervision of the construction and trials of vessels 'Marie Paule' and 'Alpine Trader', in exchange for a supervision fee for the first twelve months from steel cutting (unless delivery is earlier). For the year ended 31 December 2008 such fee charged by GSL amounted to U.S.$622 (2007:U.S.$276) half of which is included in 'vessels under construction' of the accompanying consolidated balance sheet.
(c) Although two incentive plans: 'The Goldenport Discretionary Share Option Plan' and the 'Goldenport Share Award Plan' were approved prior to official admittance to the London Stock Exchange, none of them has been activated.. A new plan ("Annual Incentive Plan") was approved in the AGM held on 17 May 2007.
Annual Incentive Plan and other remuneration of Directors and Management team
The Remuneration Committee believes that a significant proportion of total remuneration should be performance-related. In addition, performance-related rewards should be deliverable largely in shares to more closely align the interests of shareholders and all Executive Directors and Management. In order to achieve this, the Board decided to terminate the 2006 Annual Cash Bonus arrangements and to replace them with a new plan called the Annual Incentive Plan ('AIP'), which will be administrated by the Remuneration Committee.
It was decided that under the terms of the AIP the eligible employees (i.e Executive Directors and Management) can elect to have their annual cash bonus delivered in the form of restricted shares in the Company. The performance criteria remained same as for the Annual Cash Bonus. Again, it is intended that the maximum limit for each participant will be 40% of annual base salary. The Remuneration Committee may select in future years, to adjust the maximum but it will not in any event exceed 75% of annual base salary. The Board (after a proposal by the Remuneration Committee) reserves the right to award shares in other circumstances which could include, without being limited to, subsequent offers of shares (primary or secondary). In each year the Remuneration Committee will propose to the Board the percentage of base salary applicable to each participant for the purposes of the AIP ("Base Award").
Under the AIP, a participant may apply his Base Award in one of three ways:
Full Cash Award ('FCA'): If the participant selects the FCA, then the AIP will pay cash but only at 90% of the Base Award.
Full Shares Award ('FSA'): If the participant selects the FSA, then under the AIP 110% of Base Award will be given in the form of shares.
Half Cash-Half Shares Award ('HCHS'): If the participant selects the HCHS, then on 50% of Base Award the 90% rule will apply and will be paid cash and on the other 50% the 110% rule will apply and will be paid in shares.
The Remuneration Committee on its meeting on 17 December 2008 proposed to the Board of Directors under the terms of AIP the base award for each participant. The Board of Directors on 18 December 2008 approved the Remuneration Committee proposal, subject to finalisation of the financial statements for 2008, and announced the base award to each participant. All four participants selected voluntary the full shares award.
As per the terms of AIP the FCA is 90% of the base award, whereas FSA is 110% of the base award. The FSA amounts to U.S.$252 (In 2007 FSA amounted to U.S.$ 363 and FCA to U.S.$ 30), which are included in the accompanying financial statements.
The Board of Directors on 8 March 2009 approved the financial statements and authorised the issuance of the shares relating to the full share award under the provisions of AIP. Under these provisions the AIP shares will be calculated by reference to the closing market value of the Company's shares on the date of announcement of full year results for 2008. The AIP shares will be allotted and then registered in the participants name after the record date (record date is on 20 March 2009).
The participant shall have the right to receive dividends for 2008 and the right to vote in respect of AIP shares but during a restricted period of one calendar year from registration the participant is not allowed to sell, assign, exchange, transfer, pledge, hypothecate or otherwise dispose of or encumber any of the AIP shares.
There are no other choices for the participants. The amounts included in the financial statements under AIP and other remuneration of Directors and Management team as of 31 December are as follows:
| 2008 U.S.$'000 | 2007 U.S.$'000 | |||
| Directors and management team remuneration | 1,263 | 1,111 | ||
| AIP- Cash bonus | - | 30 | ||
| Share bonus - AIP | 252 | 350 | ||
| 1,515 | 1,491 |
(d) The Interests of the Directors, the Senior Management and their respective immediate families in the share capital of the Company (all of which are beneficial unless otherwise stated), were as at 31 December 2008 as follows:
| Name | Number of shares at admission (after overallotment) | Percentage of shares at admission | Number of shares as at 31 Dec 2007 | Shares issued under AIP | Shares purchased in 2008 | Number of shares as at 31 Dec 2008 | Percentage of shares as at 31 Dec 2008 | ||||
| Captain Paris Dragnis (1) | 41,800,000 | 59.812 % | 41,800,000 | 30,444 | - | 41,830,444 | 59.811 % | ||||
| Chris Walton(2) | 2,128 | 0.003% | 2,128 | - | - | 2,128 | 0.003 % | ||||
| John Dragnis(3) | - | - | 125,000 | 8,383 | 323,166 | 456,549 | 0.653% | ||||
| Christos Varsos(4) | - | - | - | 13,412 | - | 13,412 | 0.019 % |
(1) Through Starla (see note 13)
(2) Chris Walton is the non-executive Chairman of the Board of Directors
(3) John Dragnis is the Commercial Director of the Company
(4) Christos Varsos is the Chief Financial Officer of the Company
On 31 October 2008 the Commercial Director purchased 323,166 shares on the open market at a price of 95 pence per share.
(e) Rental of office space: On 1 January 2008 a monthly rental of EUR14.5 was agreed to be charged by the owner of the building (a related party under common control) to Goldenport Marine Services for the rental of the head offices. From 1 July 2008 the Company rents a larger space in the same building due to the expansion of its operations. A monthly rental of EUR17.2 was agreed to be charged by the owner of the building from 1 July 2008 to 2 September 2008 and subsequently the rental was agreed to be EUR17.8. Total rent expense for the year ended 31 December 2008 amounted to U.S.$263 and is included in General and administration expenses in the accompanying financial statements.
The future minimum lease (rental) payments under the above agreement as at 31 December 2008 are as follows:
| U.S.$'000 |
| Within one year | 297 |
| After one year but not more than five years | 1,177 |
| More than five years | 544 |
| 2,018 |
20.INCOME TAXES
Under the laws of the Republic of Marshall Islands and the respective jurisdictions of the Consolidated Companies the Group is not subject to tax on international shipping income. However, the Consolidated Companies are subject to registration and tonnage taxes, which have been included in vessel operating expenses in the accompanying consolidated statement of income.
Pursuant to the United States Internal Revenue Code of 1986, as amended (the ''Code''), U.S. source income derived by a foreign corporation from the international operation of ships generally is exempt from U.S. tax if the company operating the ships meets both of the following requirements, (a) the company is organised in a foreign country that grants an equivalent exception to corporations organised in the United States and (b) either (i) more than 50% of the value of the company 's shares is owned, directly or indirectly, by individuals who are ''residents'' of the company's country of organization or of another foreign country that grants an ''equivalent exemption'' to corporations organised in the United States (50% Ownership Test) or (ii) the company's shares are ''primarily and regularly traded on an established securities market'' in its country of organization, in another country that grants an ''equivalent exemption'' to United States corporations, or in the United States (Publicly-Traded Test). Under the regulations, company's shares will be considered to be ''regularly traded'' on an established securities market if (i) one or more classes of the its shares representing more than 50% of its outstanding shares, by voting power and value, is listed on the market and is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year; and (ii) the aggregate number of shares traded during the taxable year is at least 10% of the average number of shares outstanding during the taxable year. Notwithstanding the foregoing, the regulations provide, in pertinent part, that each class of the company's shares will not be considered to be ''regularly traded'' on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of such class of the company's outstanding shares, (''5 Percent Override Rule''). In the event the 5 Percent Override Rule is triggered, the regulations provide that the 5 Percent Override Rule will nevertheless not apply if the Company can establish that among the closely-held group of 5% Stockholders, there are sufficient 5% Stockholders that are considered to be "qualified stockholders" for purposes of Section 883 to preclude non-qualified 5% Stockholders in the closely-held group from owning 50% or more of each class of the Company's stock for more than half the number of days during the taxable year.
Treasury regulations under the Code were promulgated in final form in August 2003. These regulations apply to taxable years beginning after September 24, 2004. As a result, such regulations are effective for calendar year taxpayers, like the Company, beginning with the calendar year 2005. All the Company's ship-operating subsidiaries currently satisfy the 50% Ownership Test. In addition, the management of the Company believes that by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like the Company, the 50% Ownership Test can also be satisfied based on the trading volume and the widely-held ownership of the Company's shares. Regarding the 2003, 2004, 2005, 2006, 2007 and 2008 tax years, the Company believes that it satisfies the Publicly-Traded Test and all of its United States source shipping income will be exempt from U.S. federal income tax.
21.FINANCIAL INSTRUMENTS
Risk management objectives and policies
The Group's principal financial instruments are bank loans. The main purpose of these financial instruments is to finance the Group's operations. The Group has various other financial instruments such as cash and cash equivalents, trade receivables and trade payables, which arise directly from its operations.
From time to time, the Group also uses derivative financial instruments, principally interest rate swaps.
The main risks arising from the Group's financial instruments are interest rate risk and credit risk. The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk is minimal.
Cash flow interest rate risk
Cash flow interest rate risk arises primarily from the possibility that changes in interest rates will affect the future cash outflows of the Group's long-term debt. The sensitivity analysis presented in the table below demonstrates the sensitivity to a reasonably possible change in interest rates (libor), with all other variables held constant, on the Group's profit for the year (fluctuations in interest rates do not impact the Groups equity). The sensitivity analysis has been prepared using the following assumptions:
A rise or fall in interest rates will impact interest expense on floating rate borrowings.
Although the fair value of the derivatives, and therefore the income statement will be impacted by movements in interest rates, the fair value impact of the derivatives have been excluded from the sensitivity analysis as not significant.
One interest rate swap entered into in 2007 economically hedges a loan and the interest payments/receipt almost fully offset, therefore the loan has not been included in the sensitivity analysis.
| Increase/Decrease (%) | U.S.$'000 Effect on profit | |
| 2008 | +0.5% | -575 |
| -0.5% | +575 | |
| 2007 | +0.5% | -410 |
| -0.5% | +410 |
Credit risk
The Group's maximum exposure to credit risk in the event the counterparties fail to perform their obligations as of 31 December 2008 in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets as indicated in the balance sheet.
Concentration of Credit Risk
Financial instruments, which potentially subject the Group to significant concentrations of credit risk, consist principally of cash and cash equivalents, and trade accounts receivables. The Group places its cash and cash equivalents, consisting mostly of deposits, with financial institutions. The Group performs annual evaluations of the relative credit standing of those financial institutions. Credit risk with respect to trade accounts receivable is generally managed by the chartering of vessels to major trading houses (including commodities traders), established container-line operators, major producers and government-owned entities rather than to more speculative or undercapitalised entities. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of trade receivables.
Fair Values
Derivatives are recorded at fair value while all other financial assets and financial liabilities are recorded at amortised cost which approximates fair value.
Foreign currency risk
The majority of the Group's transactions are denominated in U.S. dollars therefore its exposure to foreign currency risk from operations is minimal. However, following the admission of the Company's shares to the London Stock Exchange, part of the proceeds (in GBP) were placed in short term deposit accounts. As at 31 December 2008 and 2007 an amount of GBP 578 (U.S.$844) and GBP 6,300 (U.S.$12,621) respectively, was held in short term time deposits.
The following table demonstrates the sensitivity to a reasonably possible change in the US Dollar exchange rate (the exercise was made for the time deposits in GBP since there is no other significant balance or transaction in foreign currency), with all other variables held constant, of the Group's profit for the year and shareholders' equity.
| Increase/Decrease in GBP/USD rate | U.S.$'000 Effect on profit | |
| 2008 | +5% | + 42 |
| -5% | - 42 | |
| 2007 | +5% | + 631 |
| -5% | - 631 |
Liquidity risk
The Group aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the Group. The vessels are normally chartered under time-charter agreements where as per the industry practice the charterer pays for the transportation service in advance, supporting the management of cash generation. Investment is carefully controlled, with authorisation limits operating up to Group's board level and cash payback periods applied as part of the investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund raising.
In its funding strategy, the Group objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The Group's policy in new investments for second-hand vessels is that not more than 70% of the value of each investment will be funded through borrowings, whereas for the new buildings the respective limit is 80%. In all the acquisitions within 2008 the bank financing was in line with the Group's policy.
The Group normally meets its working capital needs through cash flows from operating activities and available credit lines. Management prepares cash flow projections in order to forecast its short term working capital position. As of 31 December 2008, the revolving credit line (note 14) has been repaid in full.
Excess cash used in managing liquidity is only invested in financial instruments exposed to insignificant risk of changes in market value, being placed on interest-bearing deposit with maturities fixed at no more than 3 months. Short term flexibility is achieved if required by credit line facilities.
The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2008 and 2007, based on contractual undiscounted payments (including interest to be paid, which is calculated using the last applicable rate for each loan, as of 31 December 2008 and 2007):
| | 31 December 2008 | | 3- 12 months | 1- 2 years | 2- 5 years | >5 years | Total |
| | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | |
| | Interest bearing loans | 9,020 | 24,633 | 28,379 | 86,837 | 20,540 | 169,409 |
| | Trade payables | 12,993 | - | - | - | - | 12,993 |
| | Other payables | 2,680 | - | - | - | - | 2,680 |
| | Derivative instrument liability | 70 | 189 | 224 | 577 | - | 1,060 |
| | 24,763 | 24,822 | 28,603 | 87,414 | 20,540 | 186,142 | |
| | | | | | | | |
| | 31 December 2007 | | 3- 12 months | 1- 2 years | 2- 5 years | >5 years | Total |
| | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | U.S.$000 | |
| | Interest bearing loans | 11,028 | 27,613 | 67,835 | 55,157 | 25,087 | 186,720 |
| | Trade payables | 8,512 | - | - | - | - | 8,512 |
| | Other payables | 1,412 | - | - | - | - | 1,412 |
| | Derivative instrument liability | 11 | 31 | 69 | 51 | 32 | 194 |
| | 20,963 | 27,644 | 67,904 | 55,208 | 25,119 | 196,838 | |
Capital Management
The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group's policy is to keep the gearing ratio below 75% on average (see also Group's funding policy in Liquidity Risk section). Excess capital represented by a low gearing ratio, is used to fund further expansion plans. The Group includes within net debt, interest bearing loans, less cash and cash equivalents. Capital includes issued share capital, share premium and retained earnings.
| 2008 | 2007 | ||
| U.S.$000 | U.S.$000 | ||
| Interest bearing loans | 150,231 | 162,020 | |
| Less: cash and short term deposits | (33,257) | (19,947) | |
| Net debt | 116,974 | 142,073 | |
| Issued share capital | 699 | 699 | |
| Share premium | 107,354 | 106,991 | |
| Retained earnings | 130,264 | 73,757 | |
| Total capital | 238,317 | 181,447 | |
| Capital & Net debt | 355,291 | 323,520 | |
| Gearing ratio | 33% | 44% |
22.EVENTS AFTER THE BALANCE SHEET DATE
Waiver of increase in management fee: On 5 January 2009 Goldenport Shipmanagement agreed with the Group to waive the right to a 5% increase in the management fee. Therefore, the management fee for 2009 will be remain at U.S.$12.50, as discussed in note 19
COSCO new build bulk carriers- Reschedule of contracts: On 26 January 2009, the Company agreed with the COSCO shipyard to reschedule the four new building contracts previously due for delivery in late 2009, at no additional cost. According to the new schedule, the first pair of vessels is expected to be delivered in the first half of 2010 and the second pair in the first half of 2011.
Disposal of vessel: On 6 February 2009 the company agreed the sale of the 67,515 DWT, 1977-built bulk carrier 'Athos' to an unaffiliated third party. The sale was concluded at a gross consideration of US $3,895 in cash and the vessel was delivered to the owners on 12 February 2009. A commission of 4% on the gross consideration was charged for this disposal. The gain resulting from the sale of the vessel was U.S.$ 382 thousands.
Delivery of MV Marie Paule: On 11 February 2009 the Company took delivery of the 53,800 DWT new build bulk carrier "Marie Paule". Upon delivery the vessel commenced its agreed three-year time charter.
Reconstruction of MV MSC Fortunate: As explained in note 8, on 16 June 2006, the Group acquired the MV Fortunate, a container vessel of 5,551 TEU and 68,537 DWT built in 1996, for U.S.$13,000. The vessel was damaged in a fire on 21 March 2006. The vessel became operational on 23 February 2009. On 8 January 2009 and on 30 January 2009 the Group paid additional instalments of U.S.$1,000 and U.S.$250 respectively, to the yard as part of the remaining reconstruction cost (see note 8). The remaining amount of approximately U.S.$ 4,750, to reach the total estimated reconstruction cost, is to be paid periodically within 2009.
Vessel acquisition: On 04 March 2009 the Group acquired and took delivery of the 1995-built container vessel 'NYK Procyon' at an aggregate cost of U.S.$10,500.
Debt refinancing:
On 4 March 2009 the Group refinanced the outstanding debt of the vessel 'MSC Finland' amounting U.S.$6,800 and proceeded with the drawdown of additional U.S.$6,400 to cover the acquisition cost of the vessel 'NYK Procyon'. Both vessels have been provided as collateral to the new loan amounting to U.S.$13,200 in total.
Drawdown of loan:
On 15 January 2009 and as part of the loan agreement concluded between the vessel owning company of the JV new-build bulk carrier 'Marie Paule' and a bank (see note 9b) the vessel owning company proceeded with the drawdown of U.S.$6,300, representing the delivery instalment payable to the shipyard as per the original contract.
On 15 January 2009 and as part of the loan agreement concluded between the vessel owning company of the JV new-build bulk carrier 'Alpine Trader' and a bank (see note 9b) the vessel owning company proceeded with the drawdown of U.S.$6,400, representing the fourth instalment paid directly to the shipyard as per the contract.
On 6 March 2009 and as part of the loan agreement concluded between the vessel owning company of the new- built bulk carrier 'ZS07039' and a bank (see note 9a) the vessel owning company proceeded with the drawdown of U.S.$3,775, representing the bank's portion of the steel cutting instalment, which was paid along with the Group's equity portion of U.S.$3,775 ,as per contract.
Prepayments of loans:
On 30 January 2009 a prepayment of U.S.$1,300 was applied towards the outstanding amount of loan c (note 14) reducing the amortisation on a prorata basis.
On 17 February 2009 a prepayment of U.S.$3,739 was applied towards the outstanding balance of loan f (note 14) reducing the amortisation on a prorata basis.
Loan repayments: On 16 January 2009 the Group paid U.S.$1,450 in relation to the outstanding balance of loan (e), on 18 January 2009 U.S.$334 in relation to loan (j), on 19 January 2009 U.S.$675 in relation to loan (h), on 11 February 2009 U.S.$575 in relation to loan (k) and on 17 February 2009 U.S.$405 and U.S.$830 in relation to loan (i) and loan (c) respectively .
Dividends: The Board of Directors of the Company will propose to the Annual General Meeting for approval, a final dividend for 2008 of 2 pence per share or total GBP 1,399 (15 pence per share or GBP 10,483 for 2007). The dividend proposed which, is expected to be approved by the AGM to be held in Athens on 7 May 2009 has a share alternative allowing the shareholders to select between cash and shares for the respective amount of 2 pence.