GPRT.L Regulatory News (GPRT)

Goldenport Holdings Inc.

Athens, 31 August 2012

Interim Results for the Six Months Ended 30 June 2012

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, announces today its Interim Results for the six months ended 30 June, 2012.

Financial Highlights (amounts in US$ '000 except per share data):

§ Revenue of US$ 42,909, -17.6% decrease (2011: US$ 52,091)

§ EBITDA of US$ 14,556, -43.3% decrease (2011: US$ 25,685)

§ Impairment loss of U.S.$47,600 (2011: nil)

§ Net Loss of US$ 51,331 (2011: Net Income of US$ 3,374)

§ Adjusted Net Loss of U.S.$3,731 (2011: Adjusted Net Income of US$ 3,374)

§ Loss per Share of US$ 0.56 (2011: Earnings per share US$ 0.04)

§ Total cash at 30 June 2012 of US$ 31,804 (31 December 2011: US$ 42,018)

§ Restricted cash at 30 June 2012 of US$ 4,000 (31 December 2011: US$ 4,000)

§ Net debt to book capitalisation, including the effect of the impairment, as of 30 June 2012, 51% (31 December 2011: 47%)

CEO Statement:

John Dragnis, Chief Executive Officer of the Company commented:

The first half of 2012 turned out to be one of the most challenging periods for the shipping industry.

For the period ended 30 June 2012 excluding all one-off non-cash items, the Company reported a net loss of US$3,731 or US$ 0.04 per share. Our EBITDA was US$ 14,556, while we reported a net loss of US$ 51,331, which was mainly due to a non-cash impairment loss of US$ 47,600, related to the write down of the carrying amounts of certain vessels to their estimated recoverable amount.

Despite the very challenging conditions in both the dry cargo and container sectors as a result of the continued expansion of the world fleet at a time when demand is adversely impacted by lower levels of global industrial production, the Company continues to successfully employ its vessels and to maintain high utilisation for the majority of the vessels in its fleet. We took advantage of high scrap prices to maintain our strategy of fleet renewal by disposing of older tonnage and utilized part of the cash proceeds to acquire a younger vessel and to further deleverage our balance sheet.

Shipping is a cyclical business and weak markets can present attractive opportunities for strong companies like Goldenport. A large portion of the overall return in shipping is related to the timing of the acquisition of the assets. In the current market environment, our current high utilisation levels combined with lower operating costs and the net sale proceeds from the sale of older vessels all serve to enhance the cash resources of the Company enabling us to take advantage of new investment opportunities and to maintain leverage at levels that can be increased if required in the future.

As part of our current strategy of maximising available liquidity the Board has reviewed the Company's dividend policy and has decided that it is prudent not to pay a 2012 interim dividend. We will keep our dividend policy under close review and will take a decision in respect of the final dividend for 2012 in the first quarter of 2013, having reviewed market fundamentals and the Company's overall position.

Under difficult market conditions we are pleased with the current trading performance of the Company and consider that we are well positioned to take advantage of the eventual market recovery. Management remains a large shareholder in Goldenport and has never sold a share aligning its interest with all shareholders. Overall, we remain positive on the long term outlook of our business and we believe we are taking the proper steps to maximize shareholder value for the long term.

Fleet Developments:

Acquisition:

The Company agreed to acquire the sub-panamax container vessel 'Conti Seattle', with 28,366 MT deadweight and nominal intake of 2,100 TEU. The 1997 built vessel was purchased from an unaffiliated third party, Conti Clarissa Schiffahrts- Gmbh & Co. KG MS "Conti Seattle" of Germany, for an aggregate purchase price of US$ 5.2 million. The acquisition was initially financed by cash reserves.

Disposals:

On 16 March 2012, the Company agreed the sale of the 52,315 DWT, 1989-built vessel "Alex D", to an unaffiliated third party. The sale was concluded at a net consideration of U.S.$6,486 cash and the vessel was delivered to the new owners on 26 March 2012. As of delivery date, M/V Alex D had a net carrying value of U.S.$3,089. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$3,397 and is included in the interim consolidated statement of comprehensive income.

On 9 May 2012, the Company agreed the sale of the 3,032 TEU, 1986-built vessel "MSC Finland", to an unaffiliated third party. The sale was concluded at a net consideration of U.S.$7,010 cash and the vessel was delivered to the new owners on 24 May 2012. As of delivery date, M/V MSC Finland had a net carrying value U.S$2,787. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$4,223 and is included in the interim consolidated statement of comprehensive income.

On 18 June 2012, the Company agreed the sale of the 52,266 DWT, 1990-built vessel "Lindos", to an unaffiliated third party. The sale was concluded at a net consideration of U.S.$5,259 and the vessel was delivered to the new owners on 6 July 2012. As of delivery date, M/V Lindos had a net carrying value of U.S.$3,757. A commission of 3% on the gross consideration was paid for this disposal. The gain resulting from the sale of the vessel was U.S.$1,502 and will be included in the results for the year ending 31 December 2012.

As of today the fleet consists of 24 vessels of which 12 are container vessels and 12 dry bulk carriers.

Impairment:

As a result of the impairment testing performed, the Company concluded that an adjustment of the book values was appropriate. An impairment loss of U.S. $47,600 was recognised by the Group for the period ended 30 June 2012. This is a non-cash item and has no impact on our lending arrangements. The impairment loss for 2011 was U.S.$ nil.

Operational Fleet Forward Coverage:

The percentage of available days of the fleet already fixed under contracts as of 30 August 2012, assuming the earliest charter expiration, is as follows:

(1) Percentage of available days of the fleet fixed under contract as reported on 20 July 2012, being the date of the previous trading update, is given in brackets

Conference Call and Webcast:

The Company's management will hold a conference call today Friday 31 August at 2:00 P.M. (BST), 4:00 P.M. (Athens), 9:00 A.M. (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 7 September 2012 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 Holdings Inc.:

John Dragnis, Chief Executive Officer +30 210 8910500

Konstantinos Kampanaros, Interim Chief Financial Officer +30 210 8910500

Investor Relations Coordinators:

Capital Link:

Eleni Theodoropoulou - London +44 203 206 1320

Nicolas Bornozis - New York +1 212 661 7566

E-mail: goldenport@capitallink.com

info@goldenport.biz

Further Information:

Overview of Goldenport

Goldenport is an international shipping company that owns and operates a fleet of container and dry bulk vessels that transport cargo worldwide. As of the day of this Press Release, the fleet consists of 24 vessels of which 12 are container vessels and 12 dry bulk carriers. Goldenport is listed on the London Stock Exchange under the ticker GPRT.

Website: www.goldenportholdings.com or www.goldenport.biz

Current Market Outlook:

Containers:

The container market has experienced a difficult year so far in 2012. Growth in container volumes has been slow due to low economic growth in the Western economies (overall volume of traffic on the Far East to Europe route is down by 2.1% over the first six months of this year). In addition, the container market is expecting a further supply of newbuilding vessels to be delivered in the next 18 months that will exceed the expected demolition volumes. Almost 400 ships comprising 1.6 million TEU will be delivered compared to an expected scrapping volume of 450 thousand TEU by the end of 2013. Many of the new ships will be of the larger size of container ship (10,000 TEU+) and will be fuel efficient.

Charter rates in 2012 have been lower than last year and will improve as new tonnage is absorbed and as the global economy improves.

Prevailing low freight rates combined with bank foreclosures have resulted in a decline of asset values in the sector that has created attractive investment opportunities for those companies with available capital. This has been fuelled by the decline of the German KG system where about 100 KG funds have gone bankrupt and their managed vessels have become available for sale. 

Despite the difficult and challenging market, the Company has successfully covered the majority of its containers with charters until the beginning of 2013.

Dry Cargo Market

While the BDI opened in January 2012 at 1,624 (which is close to the long-term average between 1985-2006) it declined to an all-time low of 647 in February. There was a small recovery to a peak of 1,165 in May 2012 but a further correction below the 1,000 mark in June 2012. The BDI currently stands at 720 with an average of 772 for the year-to-date.

The performance of the BDI during the first half of the year is a result of the over-supply with a large number of new-buildings being delivered into an already weak market. Whilst the level of dry cargo vessels being scrapped year-to-date (19.6 million DWT) represents 85% of the aggregate scrapped last year it is not sufficient to correct the current problem. By early August 2012 approximately 800 vessels had been delivered, representing 63.4 million DWT. The net active fleet increase of 7% represents approximately 490 ships of approximately 44 million DWT.

Key trading economies such as China and India have seen slower growth this year with Chinese industrial production through June 2012 of 9.2% compared to 13.7% in 2011 and Western economies are experiencing recessionary periods with European industrial production showing a contraction of 2.8% for the first five months of the year compared to growth of 3.1% in 2011. In addition the demand for tonnage to transport grain is lower because of drought in the producing areas.

It will inevitably take time for the market to absorb the new buildings already contracted, scrap older tonnage and for demand to increase in the key market areas mentioned above. As long as there is no repeat of the large number of newbuilding orders (which should be constrained by the limited availability of bank finance) we are confident that the market will recover and generate good returns in the future.

Summary of Selected Financial and Operating Data:

(1): Ownership days, available days, operating days, TCE and average daily vessel operating expenses in 2011 exclude all of the new-build vessels that would be delivered in a future date from each reporting date.

See Appendices, for Notes on the Summary of Selected Financial and Operating Data, for forward looking statements, for detailed Fleet Employment profile and for Financial Statements.

Financial review (amounts in US$ '000, except the per day Opex data):

Time and Voyage Charter Revenues: Revenues decreased by US$ 9,182 or 17.6% to US$ 42,909 for the six months ended 30 June 2012 (2011: US$ 52,091). The main reasons for this decrease were: (i) the difference in time charter equivalent rate between the two periods (2012: US$ 8,841; 2011: US$ 12,226), as a result of: a) the deterioration of charter market during the first half of 2012 and b) the vessels Bosporus Bridge and Tilos being laid-up as at 30 June 2012 and ii) the disposal of vessels Alex D and MSC Finland, which were positively contributing to the Group's revenue up to their disposal date.

Voyage expenses total: Voyage expenses increased by US$ 2,500 or 87.9% to US$ 5,345 for the period ended 30 June 2012 (2011: US$ 2,845) mainly due to the increase of ballast voyages, which affected to a greater extent the bulk carrier fleet which was fixed for short periods throughout the period ended 30 June 2012, as well as to the increased fuel prices affecting both the container and the bulk carrier vessels of the Company.

Vessel operating expenses: Vessel operating expenses decreased marginally by US$ 197 or 1.0% to US$ 19,112 for the six months ended 30 June 2012 (2011: US$ 19,309) since the increase of the average number of vessels, as reflected in the fleet's ownership days, has been outweighed by the decrease of average operating costs following the addition of younger tonnage to the fleet.

Depreciation: The vessels' depreciation charge increased by 4.5% to US$ 19,129 for the six months ended 30 June 2012 (2011: US$ 18,313) due to the incremental depreciation attributed to the vessels acquired and delivered in 2011, which contributed in full to the depreciation of the first half of 2012.

Depreciation of dry-docking costs: Depreciation of dry-docking costs decreased by 6.5% to US$ 2,256 for the six months ended 30 June 2012 (2011: US$ 2,414), reflecting the decreased dry-docking activity and the write off of the unamortised balance of the two vessels disposed.

Financing costs: Interest expense increased by US$ 788 or 24.8% to US$ 3,970 for the six months ended 30 June 2012 (2011: US$ 3,182), reflecting the increased aggregate loan balance following the delivery of four new-building vessels during 2011.

Cash and cash equivalents: The Company as of 30 June 2012 had US$ 27,804 of cash and cash equivalents (31 December 2011: US$ 38,018).

Restricted Cash: The Company as of 30 June 2012 had US$ 4,000 (31 December 2011 US$ 4,000) of restricted cash relating to the amount drawn at the delivery of vessel 'D Skalkeas' which remains restricted in use by the financing bank. This amount can either be released to the Company upon specific events or can be off-set against the outstanding loan balance.

APPENDIX 1:

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.

(8) Net debt to book capitalisation is defined as total debt minus cash over the carrying amount of vessels, and vessel held for sale.

(9) Adjusted Net Loss is defined as the Net loss for the period decreased by the one-off non-cash impairment loss for the same period.

APPENDIX 2:

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 3:

Fleet Employment Profile:

New charters arranged since the last update on 20 July 2012, are as follows:

APPENDIX 4:

Goldenport Holdings Inc.

Interim Condensed Consolidated Financial Statements

30 June 2012

 Report on review of interim condensed consolidated

Financial statements to the shareholders of Goldenport Holdings Inc.

Introduction

We have reviewed the accompanying interim condensed consolidated financial statements of Goldenport Holdings Inc. and its subsidiaries ("the Group") as at 30 June 2012, comprising of the interim consolidated statement of financial position as at 30 June 2012 and the related interim consolidated statements of comprehensive income, changes in equity and cash flows for the six-month period then ended and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 Interim Financial Reporting (IAS 34). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standards on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing. Consequently, it does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Ernst & Young (Hellas) Certified Auditors - Accountants S.A.

30 August 2012

Athens

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2012

The accompanying notes 1 to 15 are an integral part of these consolidated financial statements.

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2012

The accompanying notes 1 to 15 are an integral part of these consolidated financial statements

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2012

The accompanying notes 1 to 15 are an integral part of these consolidated financial statements.

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2012

The accompanying notes 1 to 15 are an integral part of these consolidated financial statements.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

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 commenced trading at the London Stock Exchange ("LSE").

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 30 June 2012 is the Holding Company for twenty-two intermediate holding companies, each in turn owning a vessel-owning company, as listed in the table below. Also, as at 30 June 2012 Goldenport is the Holding Company of a fully owned subsidiary named Goldenport Marine Services, which provides the Company and its affiliates with 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. Goldenport Marine Services has been registered in Greece under the provisions of Law 89/1967. As at 30 June 2012, Karana Ocean Shipping Co.Ltd., the vessel-owning company of the disposed vessel "Alex D" and Hinter Marine S.A, the vessel owning company of the disposed vessel "MSC Finland", have become dormant.

Goldenport and its subsidiaries will be hereinafter referred to as the 'Group'.

On 24 October 2011, the Group sold 20% of the voting shares in Tuzon Maritime Co., the vessel owning company of Paris JR.

The interim condensed consolidated financial statements comprising the financial statements of the Company and its wholly owned subsidiaries, Tuzon Maritime Co, an 80% owned subsidiary (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 28 August 2012. 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION (continued):

a) The subsidiaries of the Company are:

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION (continued):

b) Proportionally consolidated the 50% Joint Venture (Note 7)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of preparation: The Group's interim condensed consolidated financial statements for the six months ended 30 June 2012 have been prepared using the same accounting policies(refer also to section 2(e) below) and methods of computation used in the preparation of the Group's annual financial statements for the year ended 31 December 2011. The interim consolidated financial statements are presented in US dollars and all financial values are rounded to the nearest thousand ($000), except the per share information.

(b) Statement of compliance: The interim condensed consolidated financial statements for the six months ended 30 June 2012 have been prepared in accordance with International Financial Reporting Standards applicable to interim financial reporting as adopted by the European Union (IAS 34). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2011.

(c) 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:

Provisions for doubtful trade receivables: Provisions for doubtful trade receivables are recorded based on management's expected future collectability of the receivables. (Receivables as included in the statement of financial position in trade receivables, have a carrying amount of U.S.$2,259 and U.S.$3,055 as at 30 June 2012 and 31 December 2011, respectively). Provision for doubtful accounts as at 30 June 2012 amounted to U.S$913 (U.S$ nil as at 31 December 2011).

(d) 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.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

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 (see also note 5).

The projected net operating cash flows are determined by considering:

i) the time charter equivalent 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 10 year rates for six months time charter for each type of our bulk carrier vessels and one year time charter for each type of our container vessels over the remaining estimated useful life of each vessel, considering the vessel's age and technical specifications.

ii) an average increase of 4% per annum on charter revenues,

iii) cash inflows were considered net of brokerage, and

iv) 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 each vessel owning company 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.

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.

During 2012, an impairment loss of U.S.$47,600 was recognised by the Group for the period ended 30 June 2012 (nil as at 31 December 2011).

Charter rates may remain at depressed levels for some time which could further adversely affect our revenue and profitability, and future assessments of vessel impairment.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

(e) Changes in accounting policy and disclosures

A) The accounting policies adopted are consistent with those of the previous financial year except that the Group adopted the following amendment to IFRS 7 as of January 2012:

·; IFRS 7 - Disclosures - Transfers of financial assets (Amendment)

The IASB issued an amendment to IFRS 7 that enhances disclosures for financial assets. These disclosures relate to assets transferred (as defined under IAS 39). If the assets transferred are not derecognised entirely in the financial statements, an entity has to disclose information that enables users of financial statements to understand the relationship between those assets which are not derecognised and their associated liabilities. If those assets are derecognised entirely, but the entity retains a continuing involvement, disclosures have to be provided that enable users of financial statements to evaluate the nature of, and risks associated with, the entity's continuing involvement in those derecognised assets. The amendment has only disclosure effects and there was no impact from the adoption of this amendment in these financial statements.

B) Standards issued but not yet effective and not early adopted

·; IAS 1 Financial Statement Presentation (Amended) - Presentation of Items of Other Comprehensive Income

The amendment is effective for annual periods beginning on or after 1 July 2012. The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or 'recycled') to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group's financial position or performance. Management has assessed that there is no impact on the Group's statement of comprehensive income.

·; IAS 19 Employee Benefits (Amended)

The amendment is effective for annual periods beginning on or after 1 January 2013. The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. Early application is permitted. Management has assessed that there is no impact on the Group's financial position.

·; IAS 27 Separate Financial Statements (Revised)

The Standard is effective for annual periods beginning on or after 1 January 2013. As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. Earlier application is permitted. This amendment has not yet been endorsed by the EU. The Group does not present separate financial statements.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

·; IAS 28 Investments in Associates and Joint Ventures (Revised)

The Standard is effective for annual periods beginning on or after 1 January 2013. As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. Earlier application is permitted. This amendment has not yet been endorsed by the EU. Management is in the process of assessing the impact from the adoption of the standard.

·; IAS 32 Financial Instruments: Presentation (Amended) - Offsetting Financial Assets and Financial Liabilities

The amendment is effective for annual periods beginning on or after 1 January 2014.This amendment clarifies the meaning of "currently has a legally enforceable right to set-off" and also clarifies the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments to IAS 32 are to be retrospectively applied. Earlier application is permitted. However, if an entity chooses to early adopt, it must disclose that fact and also make the disclosures required by the IFRS 7 Offsetting Financial Assets and Financial Liabilities amendments. This amendment has not yet been endorsed by the EU. Management has assessed that there is no impact on the Group's financial position.

·; IFRS 7 Financial Instruments: Disclosures (Amended) - Offsetting Financial Assets and Financial Liabilities

The amendment is effective for annual periods beginning on or after 1 January 2013.The amendment introduces common disclosure requirements. These disclosures would provide users with information that is useful in evaluating the effect or potential effect of netting arrangements on an entity's financial position. The amendments to IFRS 7 are to be retrospectively applied. This amendment has not yet been endorsed by the EU. Management has assessed that there is no impact on the Group's financial position.

·; IFRS 9Financial Instruments - Classification and Measurement

The new standard is effective for annual periods beginning on or after 1 January 2015. IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. Phase 1 of IFRS 9 will have a significant impact on (i) the classification and measurement of financial assets and (ii) a change in reporting for those entities that have designated financial liabilities using the FVO. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. Early application is permitted. This standard has not yet been endorsed by the EU. Management is in the process of assessing the impact of the new standard on the financial position or performance of the Group.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

·; IFRS 10 Consolidated Financial Statements

The new standard is effective for annual periods beginning on or after 1 January 2013. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation - Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27.This standard has not yet been endorsed by the EU. Management is in the process of assessing the impact of the new standard on the financial position or performance of the Group.

·; IFRS 11 Joint Arrangements

The new standard is effective for annual periods beginning on or after 1 January 2013. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. This standard has not yet been endorsed by the EU. Management is in the process of assessing the impact of the new standard on the financial position or performance of the Group.

·; IFRS 12 Disclosures of Involvement with Other Entities

The new standard is effective for annual periods beginning on or after 1 January 2013. IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard has not yet been endorsed by the EU. Management is in the process of assessing the impact of the new standard on the financial position or performance of the Group.

·; IFRS 13 Fair Value Measurement

The new standard is effective for annual periods beginning on or after 1 January 2013. IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. This standard should be applied prospectively and early adoption is permitted. This standard has not yet been endorsed by the EU. Management is in the process of assessing the impact of the new standard on the financial position or performance of the Group.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

·; The IASB has issued the Annual Improvements to IFRSs - 2009 - 2011 Cycle, which contains amendments to its standards and the related Basis for Conclusions. The annual improvements project provides a mechanism for making necessary, but non-urgent, amendments to IFRS. The effective date for the amendments is for annual periods beginning on or after 1 January 2013. Earlier application is permitted in all cases, provided that fact is disclosed. This project has not yet been endorsed by the EU. Management is in the process of assessing the impact of the project on the financial position or performance of the Group.

Ø IAS 1 Financial Statement Presentation: Clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative period is the previous period. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements.

Ø In addition, the opening statement of financial position (known as the third balance sheet) must be presented in the following circumstances: when an entity changes its accounting policies; makes retrospective restatements or makes reclassifications, and that change has a material effect on the statement of financial position. The opening statement would be at the beginning of the preceding period. However, unlike the voluntary comparative information, the related notes are not required to accompany the third balance sheet.

Ø IAS 16 Property, Plant and Equipment: Clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory.

Ø IAS 32 Financial Instruments: Presentation: Clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. The amendment removes existing income tax requirements from IAS 32 and requires entities to apply the requirements in IAS 12 to any income tax arising from distributions to equity holders.

Ø IAS 34 Interim Financial Reporting: Clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities for each reportable segment to enhance consistency with the requirements in IFRS 8 Operating Segments. Total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change in the total amount disclosed in the entity's previous annual financial statements for that reportable segment.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2012

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

·; Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)

The guidance is effective for annual periods beginning on or after 1 January 2013. The IASB issued amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments change the transition guidance to provide further relief from full retrospective application. The date of initial application' in IFRS 10 is defined as 'the beginning of the annual reporting period in which IFRS 10 is applied for the first time'. The assessment of whether control exists is made at 'the date of initial application' rather than at the beginning of the comparative period. If the control assessment is different between IFRS 10 and IAS 27/SIC-12, retrospective adjustments should be determined. However, if the control assessment is the same, no retrospective application is required. If more than one comparative period is presented, additional relief is given to require only one period to be restated. For the same reasons IASB has also amended IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities to provide transition relief. This guidance has not yet been endorsed by the EU. Management is in the process of assessing the impact of the guidance on the financial position or performance of the Group.

3. VOYAGE AND VESSEL OPERATING EXPENSES:

The amounts in the accompanying consolidated statement of comprehensive income are analysed as follows:

Voyage expenses

Vessel operating expenses