26 Feb 2008 07:01
Goldenport Holdings Inc26 February 2008 Goldenport Holdings Inc.Athens, 26th February 2008 Final results for the year ended 31 December 2007 Goldenport Holdings Inc. ("Goldenport" or "the Company"), (LSE: GPRT) theinternational shipping company that owns and operates a fleet of container anddry-bulk vessels, today is pleased to announce the full year results for theyear ended 31 December, 2007 and the forward coverage of the fleet for 2008 with93% of the fleet available days already fixed under period employment. Financial Highlights: • Revenue of US$ 124.9m, +37.7% increase (2006: US$ 90.7m) • EBITDA of US$ 77.0m, +40.3% increase (2006: US$ 54.9m) • EBIT of US$ 59.4m, +42.4% increase (2006: US$ 41.7m) • Net income of US$ 58.3m, +29.0% increase (2006: US$ 45.2m) • Earnings per Share basic of US$ 0.83 calculated on 69,885,106 shares (2006: US$ 0.72 calculated on 62,533,312 shares) • Final dividend of 15 pence per share (2006: 11.9 pence per share) • Total dividend of 22 pence per share (2006: 17.5 pence) • In total US$ 198.3m was invested in vessels, second hand, under reconstruction and new build (2006: US$ 81.1m), supporting the profitability of 2007 and enhancing the earning potential of the company for the longer term Operational Highlights: • During 2007 we operated an average of 20 vessels earning a daily Time Charter Equivalent (TCE) rate of $ 16,578, (2006: 18 vessels earning a daily TCE rate of $ 13,243) • The container vessels 'MSC Scotland' and 'Vasos' operated for the full 2007 and the container vessels 'MSC Finland', 'Anafi', 'MSC Accra', ' Bosporus Bridge', 'Gitte' and 'MOL Brilliant' contributed in part • On December 31, 2007 our fleet included 24 operational vessels, 1 vessel under reconstruction with delivery in 2008 and 8 new-build vessels with expected delivery between 2008 and 2011, compared to 19 operational vessels on December 31, 2006 and 1 vessel under reconstruction. • The reconstruction of the fire damaged container vessel 'Fortune' is at the final stage and is expected to contribute to the 2008 profitability Fleet Development: • Six second-hand operational container vessels have been acquired in 2007 of which two were of 976 TEU and four were between 1,889 and 3,720 TEU. All of these contributed partially in 2007 profitability but will contribute in full in 2008; • Two new-build geared container vessels of 2,500 TEU were contracted with estimated delivery dates in 2010 and 2011. • Six new-build geared bulk carrier vessels with capacity between 53,800 DWT and 57,000 DWT were contracted with estimated delivery dates in 2008 and 2009 • The 1977 bulk carrier 'Vana', was sold early in the year, with a profit of US$ 3.7 million Operational Fleet Forward Coverage The percentage of available days of the fleet already fixed under contracts(assuming latest charter expiration and exercise of all additional hire periodsunder charter) is as follows, as of 25th February: 2008(1) (2) 2009(1) (2) 2010(1) (2)Total Fleet 93% (90%) 61% (56%) 33% (27%)Containers 93% (88%) 70% (61%) 43% (33%)Bulk Carriers 94% (94%) 50% (50%) 21% (21%) (1) Percentage of available days of the fleet fixed under contract as reported on 17 January 2008 is given in brackets(2) The percentages above include only the currently operational fleet of 24 vessels and exclude the nine vessels for which we expect delivery in the future. CEO Statement: Commenting on these results, Captain Paris Dragnis, Founder and Chief ExecutiveOfficer of the Company stated: "The deployment of the majority of our container fleet under long term charterstranslated into stable and predictable cash flows enabling us to expand ourcontainer fleet with the acquisition of four sub-panamax and two handyoperational container vessels that contributed partially in 2007 profitabilitybut will contribute in full in 2008. Furthermore, the recovery in the dry-bulkmarket in 2007, combined with our long-standing and extensive relationships withtop tier charter counterparties and our well positioned and enlarged fleet,enabled us to conclude bulk-carrier charters at rates significantly higher thanthose prevailing during the same period of 2006 thereby significantly enhancingour revenue and profitability. Since April 2006, when we became a public company, we have implemented in fullthe first phase of our growth strategy. Our fleet has grown to 24 operationalvessels and 9 vessels for which we expect delivery between 2008 and 2011, yetmaintaining low leverage. The container vessel acquisitions more than tripledour TEU capacity compared to the IPO fleet, whereas the bulk carrier additionsincreased our capacity in terms of DWT by 63%, providing a modern and versatilefleet. All the vessels' acquisitions reinforce our position in our strategicsub-segments of the container and dry-bulk shipping markets, enhance the earningpotential of our company for the longer term and are in line with our prudentexpansion strategy. For each operational vessel that entered the fleet wesecured medium to long-term employment, thus minimising shareholders' risk. Our defensive chartering strategy of employing our vessels on time charters hasnot only strengthened our 2007 results compared to previous years, but alsoallows us to create a platform of growth until the majority of the new buildvessels become operational. Most of our container fleet has already been fixed for 2008 with 93% of ourtotal container fleet available days in 2008 secured under period employment.The two container vessels opening for re-chartering within 2008 and the vesselFortune which is expected to be chartered by the summer provide upsidepotential. Out of our dry-bulk fleet, only one vessel is opening forre-chartering in mid-2008, with 94% of our total dry-bulk fleet available daysin 2008 already secured under period employment. We remain confident on the demand outlook of the container and dry-bulk marketsfor 2008 and we continue to evaluate and consider a number of sensibleopportunities to enhance our growth potential." Conference Call and Webcast The company's management will hold a conference call today at 3:30 P.M. (GMT),5:30 P.M. (Athens), 10:30 A.M. (EST) to discuss the results. Conference Call details: Participants should dial into the call 10 minutes prior to the scheduled timeusing the following numbers: 0800-953-0329 (from the UK) 1-866-819-7111 (fromthe US), or +44 (0)1452-542-301 (all other callers). Please quote "GoldenportHoldings". In case of any problem with the above numbers, please dial 0800-694-1503 (fromthe UK) 1-866-223-0615 (from the US), or +44 (0)1452-586-513 (all othercallers). Quote "Goldenport Holdings". A telephonic replay of the conference call will be available until 4 March, 2008by 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 10minutes prior to the start of the webcast. Enquiries: Goldenport:Christos Varsos, Chief Financial Officer: Today +30 694 429 4839 Thereafter +30 210 8910 500John Dragnis, Commercial Director Today +30 694 668 8180 Thereafter +30 210 8910 500 Investor Relations Coordinators: Capital link: Nicolas Bornozis - New York +1 212 661 7566Natassa Markopoulou - London +44 207 614 2950 E-mail address: goldenport@capitallink.com 2007 Operational Review: The container chartering market rose from 1,011 units to 1,406 units betweenJanuary and September and closed the year at 1,342 (source: Howe RobinsonContainers Index, 'HRCI') fuelled mainly from Asia-Europe trade, despite thesoftening in the Asia-Pacific trade. Goldenport has taken advantage of thisrecovery in the second half of the year, by re-chartering part of the currentfleet at predominately longer periods with more attractive rates, for examplethe vessel 'MSC Socotra' has been re-chartered from March 2008 until 2013 at US$14,350 per day (compared to the existing rate of US$ 8,000 per day) and bychartering new additions at attractive rates such as the 'MSC Accra' charteredat US$ 14,200 for five years from delivery. With stable cash flows from a mostlyfixed container fleet the Company focused on fleet expansion. The dry-bulk chartering market during the 2007 strengthened on average by 122%compared to 2006 (2007: 7,061 2006: 3,180 BDI units, source: Baltic Dry Index, 'BDI'). The Company was well positioned to take full advantage of the risingcharter market by keeping, in late 2006, most of the vessels that were comingout of long-term contracts in short-term charter employment. During 2007, the Company utilised a mixture of short to medium term chartersbenefiting from the booming conditions and achieving higher rates thanpreviously. Examples of this strategy were the vessels 'Vasos' and 'Samos' thatachieved US$ 50,000 and US$ 72,000 per day for 100 and 65 days respectively. Inthe second half of the year when the market reached new record levels theCompany then started to employ its vessels in longer term time charters atincreasingly attractive rates. Rewarding examples of this strategy were thevessels 'Ios' and 'Athos' that were chartered until 2009 and 2010 respectivelyat higher than previously rates ('Ios' at US$ 26,000 per day compared to US$12,500 previously and 'Athos' at US$ 19,300 per day compared to US$ 16,750previously). During 2007 also the Company entered into eight new-building contracts for theconstruction of two containers with scheduled delivery dates in 2010 and 2011and six bulk carriers with attractive scheduled delivery dates in 2008 and 2009,reasonably priced compared to the market conditions. Out of the six bulkcarriers contracted, three have already been fixed under period employment forthree years from delivery at attractive rates (two with profit sharingarrangements) and one will be commercially managed by Glencore AG. Current Market Outlook: The container market continued to advance in early 2008, with HRCI reaching1,370 units in February. The Company has strengthened its position in itsstrategic segment by acquiring four sub-panamax and two handy container vesselsin 2007 and securing profitable charters for them. As of 25th February most ofthe container fleet has already been fixed for 2008 with 93% of our totalcontainer fleet available days secured under period employment and 70% alreadysecured for 2009. In January 2008, BDI experienced a sharp correction (motivated by sentimentrather than market fundamentals) losing 35% of its strength and within Februaryrebounded to 7,000 BDI units. Goldenport is well placed to weather through anyweakness in the dry-bulk segment, as there is only one dry-bulk vessel openingfor re-chartering in mid-2008, with 94% of our total dry-bulk fleet availabledays in 2008 secured under period employment and 50% secured for 2009. Final dividend: The Board of Directors has today proposed a final dividend of 15.0 pence pershare, (final payout of £ 10.5 million). In total, including the interimdividend already paid in October 2007, the total dividend for 2007 is 22.0 penceper share (or £ 15.4 million), representing approximately 52% of the Company'snet income for the year. The dividend payment will be approved by theshareholders in the AGM to be held on 30 April 2008 and subsequently will bepayable on 2 May, 2008 to shareholders of record as of 4 April 2008. Theex-dividend date is 2 April 2008. Summary of Selected Financial and Operating Data: 31 DecemberIncome Statement Data (in US$ million, except per 2007 2006share data):Revenue 124.9 90.7EBITDA 77.0 54.9EBIT 59.4 41.7Net Income 58.3 45.2Earnings per share (basic and diluted) 0.83 0.72Weighted average number of shares 69.9 62.5 FLEET DATA:Average number of vessels 20 18Number of vessels at end of period: 33 20 -Operating 24 19 -Under reconstruction 1 1 -New Buildings under construction 8 0Number of vessels in operation at end of period 24 19Ownership days (2) 7,434 6,558 (1)Available days (2) 6,945 6,355 (1)Operating days (2) 6,666 6,249 (1)Fleet utilisation 96% 98% AVERAGE DAILY RESULTS (in US$)Time Charter Equivalent (TCE) rate (2) 16,578 13,243Average daily vessel operating expenses (2) 4,225 3,791 (1) (1): Ownership days and average daily vessel operating expenses exclude thevessel 'Fortune' which was not operating within the period and the vessel 'MSCFinland' which was delivered to the Company in March 2007(2): Ownership days and average daily vessel operating expenses exclude the vessel Fortune and the 8 vessels that will be delivered in a future date See Appendices, for Notes on the Summary of Selected Financial and OperatingData, for detailed Fleet Employment profile, for estimated revenue fromcommitted contracts and full set of financial statements. Time and Voyage Charter Revenues: Revenues increased by US$ 34.2 million or37.7% to US$ 124.9 million for the year ended 31 December 2007 (2006: US$ 90.7million). The main reasons for this increase were: (i) the 2006 additions of thevessels 'MSC Scotland' and 'Vasos' that became operational after 30th June 2006and were fully operational in 2007, the addition of the vessel 'MSC Finland' inMarch, the acquisition of the vessels 'Anafi' and 'MSC Accra' in July and Augustand the vessels 'Bosporus Bridge', 'Gitte' and 'MOL Brilliant' in the lastquarter of the year that all contributed partially in 2007, but will contributein full in 2008 after taking into account the sale of the vessel 'Vana' in May;(ii) a strengthening in the market rates which allowed existing vessels to befixed at higher rates compared to the same period last year. Voyage expenses: The voyage expenses increased by US$ 3.0 million or 711% to US$7.2 million for the year ended 31 December 2007 (2006: US$ 4.2 million) mainlydue to: (i) increased revenue figure to which commission rates applied; (ii) thevessel 'Samos' in the summer was on a voyage charter and not on a time charteras previously, meaning that the Company had to cover bunkering expenses and portand canal fees; and (iii) ten vessels underwent scheduled dry-docking in theyear and the Company covered related port fees and bunkering. Voyage expenses-related party: The voyage expenses-related party increased byUS$ 0.7 million or 37.7% to US$ 2.5 million (2006: US$ 1.8 million) due to theincreased revenue figure to which these commissions were applied. Vessel operating expenses: Vessel operating expenses increased by US$ 6.5million or 26.3% to US$ 31.4 million for the year ended 31 December 2007 (2006:US$ 24.9 million). This increase is attributable to the increase in the size ofthe fleet, but also to the change of mix as the vessels acquired were of alarger size compared to the existing vessels. On a per day basis operatingexpenses increased by 11.5% to US$ 4,225 per day, the main reasons being: (i) astepped increase in crew wages of the Ukrainian crew, that became effective inmid 2006, but was in full effect in 2007; (ii) an additional increase in crewwages in mid-2007; (iii) the increase in the cost of lubricants mainly due tothe movement of oil prices; (iv) the increase in insurance premiums due toadditions in the fleet and due to higher vessel prices; and (v) the increase inrepairs and spare costs due to scheduled maintenance that took place while tenvessels were undergoing dry-docking. General and administrative expenses: General and administrative expensesincreased by US$ 1.3 million to US$ 2.8 million for the year ended 31 December2007, reflecting (i) US$ 0.4 million relating to the professional fees chargedfor the preparation and filing of the Class 1 transaction that was approved byshareholders on 24th October 2007; and (ii) incremental listing related expensesthat were paid in full for 2007 compared to only three quarters in thecomparable period. Depreciation: The vessels' depreciation charge increased by 105.1% to US$ 15.4million for the year ended 31 December 2007 (2006: US$ 7.5 million) due to: (i)the depreciation of the vessels 'MSC Scotland', 'Vasos' that were acquired inmid-2006 but had full impact in 2007; and (ii) the deliveries of the vessels 'MSC Finland', 'Anafi', 'MSC Accra', 'Bosporus Bridge', 'Gitte' and 'MOLBrilliant' in different dates throughout the year. Depreciation of dry-docking costs: Depreciation of dry-docking costs increasedby US$ 0.3 million or 5.3% to US$ 5.9 million for the year ended 31 December2007 (2006: US$ 5.6 million) mainly due to the dry-docking of ten vessels in2007 compared to five vessels in 2006. Most of the vessels in 2007 underwentdry-docking in the second half of the year (three were on dry-docking as of 31December) so their full depreciation will impact 2008 income statement. Gain from vessel disposal: The Company realised profit of US$ 3.7 million fromthe sale of vessel 'Vana'. The vessel was fully depreciated to scrap value andthe net carrying amount in the financial statements as of December 31st, 2006was US$ 1.6 million. Financing costs & Foreign currency: Interest expense increased by US$ 1.7million or 42.4% to US$ 5.7 million for the year ended 31 December 2007 (2006:US$ 4.0 million), mainly due to the increased borrowings relating to the vesselacquisitions in the year. Interest income increased by US$ 0.9 million to US$4.0 million due to time deposits at higher rates on the cash generated fromoperations. Foreign currency gains from the translation of British Sterling toUS Dollar decreased by 88.7% to US$ 0.5 million due to less cash in Sterlingafter the acquisition of the vessels and the payment of dividends. APPENDIX 1:OPERATIONAL FLEET FORWARD COVERAGE The percentage of available days of the fleet already fixed under contracts(assuming latest charter expiration and exercise of all additional hire periodsunder charter) is as follows, as of 25th February: 2008(1) (2) 2009(1) (2) 2010(1) (2)Total Fleet 93% (90%) 61% (56%) 33% (27%)Containers 93% (88%) 70% (61%) 43% (33%)Bulk Carriers 94% (94%) 50% (50%) 21% (21%) (1) Percentage of available days of the fleet fixed under contract as reported on 17 January 2008 is given in brackets(2) The percentages above include only the currently operational fleet of 24 vessels and exclude the nine vessels for which we expect delivery in the future. . ESTIMATED REVENUE COVERAGE FROM OPERATIONAL FLEET The estimated total revenue for the years 2008, 2009 and 2010 deriving fromcontracts already fixed for the operational part of the fleet is US$ 285million, assuming latest charter expiration and exercise of all additional hireperiods under charter. The calculation excludes the nine vessels for which weexpect delivery in the future. OPERATIONAL FLEET EMPLOYMENT PROFILE Operational fleet Vessel Type Capacity Rate (US$) Charter Expiration per day Earliest Latest (1) Containers TEU 1 Bosporus Bridge Sub Panamax 3,720 14,750 Feb-12 Aug-12 2 MSC Finland (2) Sub Panamax 3,032 16,500 Feb-10 Apr-10 3 MSC Scotland Sub Panamax 3,007 20,770 Sep-09 Nov-09 4 Anafi Sub Panamax 2,420 19,000 Apr-08 Apr-08 5 MSC Socotra (2) Sub Panamax 2,258 14,350 Mar-13 May-13 6 Howrah Bridge Sub Panamax 2,257 14,180 Jul-09 Sep-09 7 MSC Himalaya Sub Panamax 2,108 12,700 Dec-08 Jan-09 8 MSC Accra Sub Panamax 1,889 14,200 Jun-12 Aug-12 9 Gitte (3) Handy 976 11,385 Apr-08 Apr-08 Euro 9,300 Aug-09 Dec-10 10 MOL Brilliant Handy 976 10,280 Jun-08 Aug-08 11 MSC Mekong (2) Handy 962 6,150 Feb-09 Apr-09 12 MSC Emirates Handy 934 7,000 Jan-09 Feb-09 13 Glory D Handy 946 9,600 Feb-09 Apr-09 14 Achim Handy 930 7,600 May-08 May-08 8,000 Oct-08 Dec-08 15 Tuas Express Feeder 485 8,900 Apr-08 Dec-08 Dry-bulk DWT 16 Vasos Capesize 152,065 23,950 Feb-11 Aug-12 17 Samos Capesize 136,638 32,000 Oct-08 Dec-08 18 Ios (2) Panamax 69,737 26,000 Apr-09 Jun-09 19 Gianni D (2) Panamax 69,100 51,500 Dec-08 Apr-09 20 Athos (4) Panamax 67,515 19,300 Jun-10 Oct-10 21 Alex D Handymax 52,315 57,000 May-09 Jun-09 22 Limnos Handymax 52,266 50,000 Jan-09 Apr-09 23 Lindos Handymax 52,266 14,500 Jul-09 Nov-09 24 Tilos Handymax 52,266 45,000 May-08 Jul-08 Vessels under construction Vessel / Yard name Type Capacity Scheduled Delivery Containers TEU 25 Fortune (5) Post 5,551 2008 Panamax 26 Jiangsu Yangzijiang Sub Panamax 2,500 2010 27 Jiangsu Yangzijiang Sub Panamax 2,500 2011 Vessel or Yard name Type Capacity Scheduled Rate (US$) per day Delivery Dry-bulk DWT 28 COSCO Supramax 57,000 2009 17,650+50% profit share at BSI + 5% 29 COSCO Supramax 57,000 2009 17,700+50% profit share at BSI + 5% over 18,200 30 COSCO Supramax 57,000 2009 - 31 COSCO Supramax 57,000 2009 - 32 JES (6) Supramax 53,800 2008 18,000 33 JES (6) Supramax 53,800 2008 Commercially managed by Glencore AG (1) Represents last day on which the charter may redeliver the vessel assumingexercise of all additional hire periods under charter(2) The vessels MSC Socotra, MSC Finland, Ios and MSC Mekong will undergodry-docking within quarter 1 and the vessel Gianni D will undergo dry-docking withinquarter 2(3) The new charter of the vessel Gitte is stated and will be received in Euros(4) Athos is currently on dry-docking(5) The vessel Fortune is under reconstruction(6) Both vessels owned under a 50:50 joint venture with Glencore APPENDIX 2: Notes on Summary of Selected Financial and Operating Data: (1) Average number of vessels is the number of vessels that constituted ourfleet for the relevant period, as measured by the sum of the number of days eachvessel was a part of our fleet during the period divided by the number ofcalendar days in the period. (2) Ownership days are the aggregate number of days in a period during whicheach vessel in our fleet has been owned by us. Ownership days are an indicatorof the size of our fleet over a period and affect both the amount of revenuesand the amount of expenses that we record during a period. (3) Available days are the number of our ownership days less the aggregatenumber of days that our vessels are off-hire due to scheduled repairs or repairsunder guarantee, vessel upgrades or special surveys and the aggregate amount oftime that we spend positioning our vessels. The shipping industry uses availabledays to measure the number of days in a period during which vessels should becapable of generating revenues. (4) Operating days are the number of available days in a period less theaggregate number of days that our vessels are off-hire due to any reason,including unforeseen circumstances. The shipping industry uses operating days tomeasure the aggregate number of days in a period during which vessels actuallygenerate revenues. (5) We calculate fleet utilisation by dividing the number of our operating daysduring a period by the number of our available days during the period. Theshipping industry uses fleet utilisation to measure a company's efficiency infinding suitable employment for its vessels and minimising the amount of daysthat its vessels are off-hire for reasons other than scheduled repairs orrepairs 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 costsof spares and consumable stores, tonnage taxes and other miscellaneous expenses,are calculated by dividing vessel operating expenses by ownership days for therelevant period. (7) TCE rates are defined as our time and voyage charter revenues less voyageexpenses during a period divided by the number of our available days during theperiod, which is consistent with industry standards. Voyage expenses includeport charges, bunker (fuel oil and diesel oil) expenses, canal charges andcommissions. TCE rate is a standard shipping industry performance measure usedprimarily to compare daily earnings generated by vessels on time charters withdaily earnings generated by vessels on voyage charters, because charter hirerates for vessels on voyage charters are generally not expressed in per dayamounts while charter hire rates for vessels on time charters are generallyexpressed in such amounts. Appendix 3: Goldenport Holdings Inc. Consolidated Financial Statements 31 December 2007 All amounts in US$ thousand unless otherwise stated INDEPENDENT AUDITORS' REPORT To the Shareholders of Goldenport Holdings Inc. We have audited the accompanying financial statements of Goldenport HoldingsInc. and its subsidiaries ("the Group"), which comprise the consolidated balancesheet as at 31 December 2007 and the consolidated income statement, consolidatedstatement of changes in equity and consolidated cash flow statement for the yearthen ended, and a summary of significant accounting policies and otherexplanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial ReportingStandards. This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit in accordance with International Standardson Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditors' judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate for thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair viewof the financial position of the Group as of 31 December 2007, and of itsfinancial performance and its cash flows for the year then ended in accordancewith International Financial Reporting Standards. Ernst & Young (Hellas) Certified Auditors - Accountants S.A.25 February 2008. CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2007 2007 2006 Notes U.S.$'000 U.S.$'000 Revenue 124,861 90,651 ExpensesVoyage expenses 3 (7,224) (4,221)Voyage expenses - related party 3,21 (2,497) (1,813)Vessel operating expenses 3 (31,411) (24,860)Management fees - related party 21 (3,906) (3,393)Depreciation 7 (15,361) (7,488)Depreciation of dry-docking costs 7 (5,932) (5,653)General and administrative expenses 4 (2,778) (1,476) (69,109) (48,904) Gain from vessel disposal 7 3,692 - Operating profit 59,444 41,747 Finance expense 5 (5,695) (4,145)Finance income 4,031 3,158Foreign currency gain, net 501 4,428 Profit for the year attributable to Goldenport Holdings 58,281 45,188Inc. shareholders Earnings per share (U.S.$): - Basic EPS for the year 6 0.83 0.72- Diluted EPS for the year 0.83 - Weighted average number of shares for basic EPS 69,885,106 62,533,312 Weighted average number of shares adjusted for the 69,886,747 62,533,312effect of dilution The accompanying notes 1 to 24 are an integral part of these consolidatedfinancial statements. CONSOLIDATED BALANCE SHEETAs at 31 December 2007 2007 2006 Notes U.S.$'000 U.S.$'000 ASSETSNon-current assetsVessels 7 244,694 131,720Vessel under reconstruction 8 38,880 23,068Advances for vessel acquisition 9 - 1,700Advances for vessel construction 10 62,238 -Other non-current assets 11 50 185 345,862 156,673Current assetsInventories 154 -Trade receivables 596 1,275Insurance claims 12 3,268 1,305Due from related parties 21 3,289 811Prepaid expenses and other assets 1,332 887Restricted cash 13 - 1,166Cash and cash equivalents 14 19,947 81,372 28,586 86,816TOTAL ASSETS 374,448 243,489 EQUITY AND LIABILITIESEquity attributable to shareholders of GoldenportHoldings Inc.Issued share capital 15 699 699Share premium 15 106,991 106,991Retained earnings 73,757 41,838Total equity 181,447 149,528 Non-current liabilitiesLong-term debt 16 130,765 60,727Deferred revenue 17 8,273 -Other non-current liabilities 11 194 - 139,232 60,727Current liabilitiesTrade payables 8,512 6,941Current portion of long-term debt 16 30,755 19,900Accrued liabilities and other payables 18 8,966 3,754Deferred revenue current portion 17 5,536 2,639 53,769 33,234Total Liabilities 193,001 93,961TOTAL EQUITY AND LIABILITIES 374,448 243,489 The accompanying notes 1 to 24 are an integral part of these consolidatedfinancial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2007 Issued share capital Par value U.S.$'000 Share premium Retained Total equity U.S.$ U.S.$'000 earnings U.S.$'000 Number of shares U.S.$'000At 1 January 2006 0.01 - 41,800,000 418 4,492 4,910 Pooling of interest - - - - (418) (418)adjustment Proceeds from 28,085,106 0.01 281 115,184 - 115,465initial publicoffering, gross(see note 15) Transaction costs - - - (8,193) - (8,193)on initial publicoffering, (see note15) Profit for the year - - 45,188 45,188 - - Dividends declared, - - (7,424) (7,424)approved and paid - -to equityshareholders At 31 December 69,885,106 0.01 699 106,991 41,838 149,5282006 Profit for the year - - 58,281 58,281 - - Dividends declared, - - (26,362) (26,362)approved and paid - -to equityshareholders At 31 December 69,885,106 0.01 699 106,991 73,757 181,4472007 The accompanying notes 1 to 24 are an integral part of these consolidatedfinancial statements. CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2007 Notes 2007 U.S.$'000 2006 U.S.$'000Operating activities Profit for the year 58,281 45,188Adjustments to reconcile profit for the year to net cash inflowfrom operating activities:Depreciation 7 15,361 7,488Depreciation of dry-docking costs 7 5,932 5,653Gain from vessel disposal 7 (3,692) -Finance expense 5 5,695 4,145Finance income (4,031) (3,158)Annual Incentive Plan Shares 21 350 -Foreign currency gain, net (501) (4,428) 77,395 54,888(Increase) / Decrease in inventories (154) 324(Increase) / Decrease in trade receivables, prepaid expenses and 176 (1,274)other assetsIncrease in insurance claims 12 (1,963) (1,046)Increase in trade payables, accrued liabilities and other 5,506 3,221payablesIncrease / (Decrease) in deferred revenue 11,170 (536)Net cash flows from operating activities before movement in 92,130 55,577amounts due from related partiesDue from related parties 21 (2,477) 9,049Net cash flows from operating activities 89,653 64,626 Investing activitiesAcquisition/improvement of vessels 7 (121,671) (56,475)Proceeds from disposal of vessel, net of commission 7 5,280 -Dry-docking costs 7 (12,484) (3,965)Advances for vessel under reconstruction 8 (14,432) (22,975)Advances for vessel acquisition - (1,700)Advances for vessel under construction (62,238) -Interest received 4,089 3,036Net cash flows used in investing activities (201,456) (82,079) Financing activitiesProceeds from issue of long -term debt 103,499 54,707Repayment of long-term debt (22,780) (49,925)Proceeds from initial public offering - 115,465Issuance costs - (8,193)Restricted cash 13 1,166 230Interest paid (5,822) (3,471)Dividends paid 19 (26,362) (13,924)Net cash flows provided by/ (used in) financing activities 49,701 94,889Net increase in cash and cash equivalents (62,102) 77,436Net foreign exchange difference 677 3,936Cash and cash equivalents at 1 January 14 81,372 -Cash and cash equivalents at 31 December 14 19,947 81,372 The accompanying notes 1 to 24 are an integral part of these consolidatedfinancial statements. 1. FORMATION, BASIS OF PRESENTATION AND GENERAL INFORMATION Goldenport Holdings Inc. ('Goldenport' or the 'Company') was incorporated underthe 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 andstarted trading at the London Stock Exchange ("LSE") at a price of GBP 2.35 pershare. On 11 April 2006 the over allotment option was exercised at a price ofGBP 2.35 per share. In total, the Company, received from its listing in the LSEan amount of GBP 66 million (equivalent to U.S. 115.5 million) with theintention 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 addressof the head office of the Company is Status Center, 41 Athinas Avenue, 166-71Vouliagmeni, Greece. Goldenport as of 31 December 2007 is the holding Company for twenty fiveintermediate holding companies, each in turn owning a vessel-owning company, aslisted in the table below. Goldenport is also the holding Company of six moreintermediate holding companies, owning Abyss Maritime Ltd., Jubilant MarineCompany, Alacrity Maritime Inc., Seaward Shipping Co., Chanelle Shipping Companyand Clochard Maritime Limited., which will be the vessel-owning companies offour new built bulk carriers ordered at Cosco Zhoushan Shipyard and two newbuilt containers ordered at Jiangsu Yangzijiang Shipyard upon delivery of thevessels. Also, as of 31 December 2007 Goldenport is the holding Company of afully owned subsidiary named Goldenport Marine Services, which in the futurewill provide the Company and its affiliates a wide range of shipping services,such as technical support and maintenance, insurance consulting, chartering,legal, financial and accounting services, in exchange for a daily fixed fee, pervessel (see note 24). As of 31 December 2007, Goldenport Marine Services wasdormant but has been registered in Greece under the provisions of Law 89/1967.As of 31 December 2007 Risa Maritime Co. Ltd, the vessel-owning company of thedisposed vessel "Vana" (see note 7), has become dormant. Goldenport and its subsidiaries will be hereinafter referred to as the 'Group'. The annual consolidated financial statements comprising the financial statementsof the Company and its wholly owned subsidiaries (see (a) below) and theproportionally consolidated financial statements of the jointly controlledentity (see (b) below) were authorised for issue in accordance with a resolutionof the Board of Directors on 25 February 2008 and is expected to be approved bythe Annual General Meeting of the shareholders, to be held on 30 April 2008. a) The wholly owned subsidiaries of the Company are: Country of Incorporation of vessel-owning company Name of Vessel Year of owned by acquisition Intermediate holding Subsidiary of vessel Type of Vessel company Vessel - owning company Marta Trading Co. Superb Maritime S.A. Panama Glory D 1997 ContainerDaphne Marine Corp. Dancing Waves Co. Ltd. Malta Tuas Express 1998 ContainerPortia Navigation Co. Borealis Shipping Co. Ltd. Malta MSC Himalaya 1999 ContainerAloe Navigation Inc. Karana Ocean Shipping Co. Malta Alex D 1999 Bulk Carrier Ltd.Dumont International Inc. Black Rose Shipping Ltd. Malta Beauty 2001 ContainerRoyal Bay Marine Ltd Opal Maritime Limited Malta Achim 2001 ContainerAudrey Marine Corp. Wild Orchid Shipping Ltd. Malta MSC Emirates 2001 ContainerSicuro Shipmanagement SA Hampton Trading S.A. Liberia MSC Socotra 2002 Container Country of Incorporation of vessel-owning company Name of Vessel Year of owned by acquisition Intermediate holding Subsidiary of vessel Type of Vessel company Vessel - owning company Platinum Shipholding SA Coral Sky Marine Ltd. Malta Gianni D 2002 Bulk CarrierNemesis Maritime Inc. Samos Maritime Ltd. Malta Samos 2002 Bulk CarrierMeredith Trading Guilford Marine S.A. Panama Ios 2002 Bulk CarrierCorporationRawlins Trading Ltd Fairland Trading S.A. Panama Athos 2002 Bulk CarrierBlaze Navigation Corp. Nilwood Comp. Inc. Panama Howrah Bridge 2003 ContainerCarrier Maritime Co. Black Diamond Shipping Malta Lindos 2003 Bulk Carrier Ltd.Medina Trading Co. Carina Maritime Co. Ltd. Malta Tilos 2004 Bulk CarrierSavannah Marine Inc. Serena Navigation Ltd. Malta Limnos 2004 Bulk CarrierSirene Maritime Co. Alvey Marine Inc. Liberia MSC Scotland 2006 Container (ex.Bengal Sea)Kariba Shipping SA Kosmo Services Inc. Marshall Fortune 2006 Container Islands (ex.Hyundai Fortune)Muriel Maritime Co. Ipanema Navigation Corp. Marshall Vasos (ex.Orient 2006 Bulk Carrier Islands Alliance)Baydream Shipping Inc. Cierzo Maritime Co. Marshall MSC Finland 2007 Container Islands (ex.West Gate BridgeKnight Maritime S.A. Mona Marine S.A. Liberia Anafi (ex.Ajama) 2007(1) ContainerFoyer Marine Inc. Ginger Marine Company Marshall MSC Accra 2007(2) Container Islands (ex.Nautic)Genuine Marine Corp. Breaport Maritime S.A Panama Bosporus Bridge 2007(3) ContainerJaxon Navigation Ltd. Hampson Shipping Ltd. Liberia Gitte 2007(4) ContainerTuscan Navigation Corp. Longfield Navigation S.A. Liberia MOL Brilliant 2007(5) Container (ex.Lone)Abyss Maritime Ltd. Moonglade Maritime S.A. Liberia ZS07036 2009(6) Bulk CarrierJubilant Marine Company Cheyenne Maritime Company Marshall ZS07038 2009(6) Bulk Carrier IslandsAlacrity Maritime Inc. Giga Shipping Ltd. Marshall ZS07039 2009(6) Bulk Carrier IslandsSeaward Shipping Co. Valaam Incorporated Liberia ZS07037 2009(6) Bulk CarrierChanelle Shipping Loden Maritime Co. Marshall YZJ-815 2010(7) ContainerCompany IslandsClochard Maritime Shila Maritime Corp. Marshall YZJ-816 2011(7) ContainerLimited IslandsOates Trading Corp. Risa Maritime Co. Ltd. Malta Dormant Company (8)Goldenport Marine Marshall Dormant CompanyServices Islands (1)Vessel Anafi was delivered on 20 July 2007.(2)Vessel MSC Accra was delivered on 17 August 2007.(3) Vessel Bosporus Bridge was delivered on 23 October 2007.(4) Vessel Gitte was delivered on 12 November 2007.(5) Vessel MOL Brilliant was delivered on 21 November 2007.(6) New building bulk carriers (see note 10a) with delivery dates between September and December 2009.(7) New building container vessels (see note 10a) with delivery dates in October 2010 and March 2011.(8) Risa Maritime Ltd. was the ship owning company of M/V Vana, which was disposed of on 2 May 2007 (see note7) b) Proportionally consolidated Joint Venture (see note 10b) Sentinel Holdings Inc. Citrus Shipping Corp. Marshall JES041 2008 Bulk Carrier IslandsSentinel Holdings Inc Barcita Shipping S.A. Marshall JES042 2008 Bulk Carrier Islands 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation: The Group's financial statements have beenprepared on a historical cost basis, except for any derivative financialinstruments that are measured at fair value. The consolidated financialstatements are presented in US dollars and all financial values are rounded tothe nearest thousand ($000), except the per share information. (b) Statement of compliance: The consolidated financial statements as at 31December 2007 have been prepared in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Union. (c) Basis of Consolidation: The consolidated financial statements comprisethe financial statements of the Company and its subsidiaries listed in note 1.The financial statements of the subsidiaries are prepared for the same reportingdate as the Company, using consistent accounting policies. All materialinter-company balances and transactions have been eliminated upon consolidation.Subsidiaries are consolidated from the date on which control is transferred tothe Group and cease to be consolidated from the date on which control istransferred out of the Group. (d) Accounting for joint ventures: A joint venture is an entity whoseeconomic activities are jointly controlled by the Group and one or more otherventures in terms of a contractual arrangement. The Group's interest in jointlycontrolled entities is accounted for by the proportional consolidation method ofaccounting. The Group combines its share of the joint ventures' individualincome and expenses, assets and liabilities and cash flows on a line-by-linebasis with similar items in the Group's financial statements. (e) Transactions between companies under common control: Transactionsbetween companies under common control are excluded from the scope of IFRS 3.Therefore such transactions are accounted for by the Group in a manner akin to apooling of interests. Accordingly, as described in note 15, the financialstatements of the Group following the reorganization have been presented usinghistorical carrying costs of the Contributed Companies. The consolidatedfinancial statements have also been prepared on the basis that Goldenportexisted for all years prior to the reorganization and was the parent company ofthe Contributed Companies in all such years. (f) Use of Estimates: The preparation of consolidated financial statementsrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the consolidated financial statements and thereported amounts of revenues and expenses during the year. Actual results coulddiffer from those estimates. The estimates and assumptions that have the most significant effect on theamounts recognised in the consolidated financial statements, are estimates inrelation to useful lives of vessels (vessels have a carrying amount ofU.S.$244,694 and U.S.$131,720 as at 31 December 2007 and 2006, respectively),provision for doubtful trade receivables (trade receivables have a carryingamount of U.S.$596 and U.S.$1,275 as at 31 December 2007 and 2006, respectively)and estimates about the result of insurance claims (insurance claims have acarrying amount of U.S.$3,268 and U.S.$1,305 as at 31 December 2007 and 2006,respectively). (g) Revenues and Related Expenses: The Group generates its revenues fromcharterers for the charter hire of its vessels. Vessels are chartered usingeither time charters, where a contract is entered into for the use of a vesselfor a specific period of time and a specified daily charter hire rate; or voyagecharters, where a contract is made in the spot market for the use of a vesselfor a specific voyage for a specified charter rate; if a charter agreementexists and collection of the related revenue is reasonably assured, revenue isrecognised as it is earned, evenly over the duration of the period of eachvoyage or time charter. A voyage is deemed to commence upon the completion ofdischarge of the vessel's previous cargo and is deemed to end upon thecompletion of discharge of the current cargo. Deferred revenue represents cash received prior to the balance sheet date whichrelates to revenue earned after such date. On time-charters, the charterer asper industry practice pays the revenue related to the specific agreement inadvance. Therefore, as of the balance sheet date, the amount of revenue relatingto the next financial year that was paid by the charterer is presented indeferred revenue. Vessel voyage expenses primarily consisting of port, canal and bunker expensesthat are unique to a particular charter are paid for by the charterer under timecharter arrangements or by the Group under voyage charter arrangements.Furthermore, voyage expenses include commission on income paid by the Group. TheGroup defers bunker expenses under voyage charter agreements and charges them tothe income statement over the related voyage charter period to the extentrevenue has been recognised. Port and canal costs are accounted for on an actualbasis. Operating expenses are accounted on an accrual basis. (h) Foreign Currency Translation: The functional currency of the Company is theU.S. dollar which is also the presentation currency of the Group because theGroup's vessels operate in international shipping markets, where the U.S. dollaris the currency used for transactions. Transactions involving other currenciesduring the year are converted into U.S. dollars using the exchange rates ineffect at the time of the transactions. At the balance sheet dates, monetaryassets and liabilities, which are denominated in currencies other than the U.S.dollar, are translated into the functional currency using the year-end exchangerate. Gains or losses resulting from foreign currency transactions are includedin foreign currency gain or loss in the consolidated income statement. (i) Cash and Cash Equivalents: The Group considers highly liquid investmentssuch as time deposits and certificates of deposit with an original maturity ofthree months or less to be cash equivalents. (j) Restricted Cash: Certain of the Group's loan agreements may require theGroup to deposit funds into a loan retention account in the name of theborrower. The amount deposited is equivalent to the monthly portion of the nextcapital 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 of 31December 2007, no loan agreements required deposit of funds into the retentionaccount. (k) Inventories: Inventories consist of bunkers and are stated at the lower ofcost or net realisable value. Cost is determined by the first-in first-outmethod. Any bunkers remaining on vessels, which are undergoing scheduleddry-docking, are also recognised as inventory unless the vessel is to continueunder the same time charter. Inventories amount to U.S.$154 as of 31 December2007 and relate to bunkers of vessel Alex D., which were purchased by theCompany and agreed with charterers to remain on board up to the date ofredelivery. (l) Trade Receivables: The amount shown as trade receivables at each balancesheet date includes estimated recoveries from charterers for hire, freight anddemurrage billings, net of an allowance for doubtful accounts. Trade receivablesare recognised and carried at the lower of their original invoiced value andrecoverable amount. The carrying amount of receivables is reduced through anallowance account. Impaired debts are derecognized when they are assessed asuncollectible. (m) Insurance Claims: The Group recognises insurance claim recoveries forinsured losses incurred on damages to vessels. Insurance claim recoveries arerecorded net of any deductible amounts, at the time the Group's vessels sufferinsured damages. They include the recoveries from the insurance companies forthe claims, provided the amounts are virtually certain to be received. Claimsare submitted to the insurance company, which may increase or decrease the claimamount. Such adjustments are recorded in the year they become known and have notbeen material to the Group's financial position or results of operation in 2007and 2006. (n) Vessels: The vessels are stated at cost, net of accumulated depreciationand any accumulated impairment. Vessel cost consists of the contract price forthe vessel and any material expenses incurred upon acquisition of the vessel(initial repairs, improvements, delivery expenses and other expenditures) toprepare the vessel for its initial voyage. Subsequent expenditures for majorimprovements are also capitalised when it is probable that future economicbenefits associated with the improvement will flow to the entity and the cost ofthe improvement can be measured reliably. For vessels acquired in the second-hand market and where the Company identifiesany intangible assets or liabilities associated with the acquisition of avessel, the Company allocates the purchase price between the vessel and anyidentified tangible and intangible assets or liabilities based on their relativefair values. Fair value is determined by reference to market data. The Companydetermines the fair value of any intangible asset or liability related to timecharters assumed, by reference to the market value of the time charters at thetime the vessel is acquired. The amount recorded as an asset or liability at thedate of vessel delivery is the lowest of: a) the difference between the marketvalue of the vessel on a charter free basis and the vessel's acquisition costand b) the present value of the difference between the future cash flows of theassumed charter and the future cash flows at the current market rate. If anintangible asset is identified it is recorded as prepaid charter revenue. If anintangible liability is identified it is recorded as deferred revenue. Suchassets and liabilities, respectively, are amortized as a reduction of, or anincrease in, revenue over the period of the time charter assumed. The cost of each of the Group's vessels is depreciated beginning when the vesselis 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 isconsistent with industry practice. Acquired second-hand vessels are depreciatedfrom the date of their acquisition over their remaining estimated useful life.The remaining useful life of the Group's vessels, other than those fullydepreciated, is between 1 and 16 years (excluding new building vessels not yetdelivered). A vessel is derecognised upon disposal or when no future economicbenefits are expected from its use. Any gain or loss arising on derecognitionof the vessel (calculated as the difference between the net disposal proceedsand the carrying amount of the vessel including any unamortised portion ofdry-docking) is included in the income statement in the year the vessel isderecognised. From time to time the Group's vessels are required to be dry-docked forinspection and re-licensing at which time major repairs and maintenance thatcannot be performed while the vessels are in operation are generally performed.The Group capitalises the costs associated with dry-docking as they occur byadding them to the cost of the vessel and amortises these costs on astraight-line basis over 2.5 years, which is generally the period until the nextscheduled dry-docking. In the cases where the dry-docking takes place earlierthan 2.5 years since the previous one, the carrying amount of the previousdry-docking is derecognised. In the event of a vessel sale, the respectivecarrying values of dry-docking costs are derecognised together with the vessel'scarrying amount at the time of sale. At the date of acquisition of a second-hand vessel, management estimates thecomponent of the cost that corresponds to the economic benefit to be deriveduntil the next scheduled dry-docking of the vessel under the ownership of theGroup, and this component is depreciated on a straight-line basis over theremaining period to the estimated dry-docking date. (o) Impairment of vessels: The Group's vessels are reviewed for impairment inaccordance with IAS 36, "Impairment of Assets." Under IAS 36, the Group assessesat each reporting date whether there is an indication that a vessel may beimpaired. If such an indication exists, the Group makes an estimate of thevessel's recoverable amount. Any impairment loss of the vessel is assessed bycomparison of the carrying amount of the asset to its recoverable amount.Recoverable amount is the higher of the vessel's fair value less costs to selland its value in use. If the recoverable amount is less than the carrying amount of the vessel, theasset is considered impaired and an expense is recognised equal to the amountrequired to reduce the carrying amount of the vessel to its then recoverableamount. Fair value of vessels is determined by independent marine appraisers. Ifthe valuation from appraiser indicates possible impairment, the Group proceedsto calculate the vessel's value in use. The calculation of value in use is made at the individual vessel level sinceseparately identifiable cash flow information is available for each vessel. Indeveloping estimates of future cash flows, the Group makes assumptions aboutfuture charter rates, vessel operating expenses, and the estimated remaininguseful lives of the vessels. These assumptions are based on historical trends aswell as future expectations. No impairment loss was recognised by the Group forthe years ended 31 December 2007 and 2006. (p) Long-term debt: Long-term debt is initially recognised at the fair value ofthe consideration received net of issue costs directly attributable to theborrowing. After initial recognition, long-term debt is subsequently measured atamortised cost using the effective interest method. Amortised cost is calculatedby taking into account any issue costs, and any discount or premium onsettlement. A financial liability is derecognized when the obligation under the liability isdischarged or cancelled or expired. (q) Borrowing costs: Borrowing costs on loans specifically used to finance theconstruction, or reconstruction of vessels are capitalised to the cost of thatasset during the construction period. (r) Derivative financial instruments and hedging. The Group uses derivativefinancial instruments such as interest rate swaps to hedge its risks associatedwith interest rate fluctuations. Such derivative financial instruments areinitially recognised at fair value on the date on which a derivative contract isentered into and are subsequently remeasured at fair value. Derivatives arecarried as assets when the fair value is positive and as liabilities when thefair value is negative. The fair value of interest rate swap contracts is determined through valuationtechniques. None of the Group's derivatives have been designated as hedging instruments,therefore gains or losses arising from changes in the fair value of thederivatives are taken to the income statement. (s) Segment Reporting: The Group reports financial information and evaluatesits operations by charter revenues and not, for example, by (i) the length ofship employment for its customers, i.e. spot or time charters; or (ii) type ofvessel. Management, including the chief operating decision maker, reviewsoperating results solely by revenue per day and operating results of the fleetand thus the Group has determined that it operates under one reportable segment.Furthermore, when the Group charters a vessel to a charterer, the charterer isfree to trade the vessel worldwide and, as a result, the disclosure ofgeographic information is impracticable. (t) Finance income: Finance income is earned from the Group's short termdeposits. (u) Leases: Leases of vessels where the Group does not transfer substantiallyall the risks and benefits of ownership of the vessel are accounted for asoperating leases. Lease income on operating leases is recognized on a straightline basis over the lease term and classified under revenue. (v) Stock incentive plan: All share based compensation provided to Directorsand Senior Management for their service is included in 'General andadministrative expenses' of the Consolidated Income Statement. The fair value ofthe employees' services received in exchange for the Company's restricted sharesis accrued and recognized as an expense in the year of grant. Upon issuance ofthe relevant shares the total number of shares and their value is separatelyreflected in the Consolidated Statement of Changes in Equity. (w) IFRS and IFRIC Interpretations not yet effective: The Group has not appliedthe following IFRS and IFRIC Interpretations that have been issued but are notyet effective: (a) IAS 23 Borrowing Costs - Revised. A revised IAS 23 Borrowing costs wasissued in March 2007 and becomes effective for financial years beginning on orafter 1 January 2009. The standard has been revised to require capitalisation ofborrowing costs when such costs relate to a qualifying asset. A qualifying assetis an asset that necessarily takes a substantial period of time to get ready forits intended use or sale. The Company will be required to change its accountingpolicy from 1 January 2009 to capitalise borrowing costs on qualifying assetsprospectively from that date. In accordance with the transitional requirementsin the Standard, the Company will adopt this as a prospective change.Accordingly, borrowing costs will be capitalised on qualifying assets with acommencement date after 1 January 2009. No changes will be made for borrowingcosts incurred to this date that have been expensed. The amendment to theStandard has not yet been endorsed by the EU. (b) IFRS 3 Business Combinations and IAS 27 Consolidated and Separate FinancialStatements - Revised. The revisions to IFRS 3 and IAS 27 were issued in January2008 and become effective for financial years beginning on or after 1 July 2009.As regards IFRS 3, this will apply to business combinations occurring in thoseperiods and its scope has been revised to include combinations of mutualentities and combinations without consideration (dual listed shares). IFRS 3 andIAS 27, inter alia, require greater use of fair value through the incomestatement and cement the economic entity concept of the reporting entity.Furthermore, these standards also introduce the following requirements (i) toremeasure interests to fair value when control is obtained or lost, (ii)recognising directly in equity the impact of all transactions betweencontrolling and non-controlling shareholders where loss of control is not lostand, (iii) focuses on what is given to the vendor as consideration rather thanwhat is spent to achieve the acquisition. More specifically, items such asacquisition-related costs, changes in the value of the contingent consideration,share-based payments and the settlement of pre-existing contracts will generallybe accounted for separately from the business combination and will often affectthe income statement. The revisions to the Standards have not yet been endorsedby the EU. (c) IAS 1 Presentation of Financial Statements - Revised. A revised IAS 1Presentation of Financial Statements was issued in September 2007 and becomeseffective for financial years beginning on or after January 2009. The standardwas revised to require statement of changes in equity to include onlytransactions with shareholders. A new statement of comprehensive income isintroduced and dividends to equity holders are shown only in the statement ofchanges of equity or notes to the financial statements. The Company is in theprocess of assessing the impact this revised standard will have on its financialstatements. This revision to the Standard has not yet been endorsed by the EU. (d) IFRS 8, Operating Segments (effective for financial years beginning on orafter 1 January 2009). It is not relevant to the Group's operations. ThisStandard has been endorsed by the EU. (e) IFRIC 11, IFRS 2, Group and Treasury Share Transactions (effective forfinancial years beginning on or after 1 March 2007). It is not relevant to theGroup's operations. This Interpretation has been endorsed by the EU. (f) IFRIC 12, Service Concession Arrangements (effective for financial yearsbeginning on or after 1 January 2008). It is not relevant to the Group'soperations. This Interpretation has not yet been endorsed by the EU. (g) IFRIC 13, Customer loyalty programs (effective for financial yearsbeginning on or after 1 July 2008). It is not relevant to the Group'soperations. This Interpretation has not yet been endorsed by the EU. (h) IFRIC 14, The limit on a Defined Benefit Asset, Minimum FundingRequirements and their interaction. (effective for financial years beginning onor after 1 January 2008). It is not relevant to the Group's operations. ThisInterpretation has not yet been endorsed by the EU. (i) Amendment to IFRS 2 'Share based payment: "vesting conditions andcancellations" (effective for financial years beginning on or after 1 January2009). The amendment to the Standard has not yet been endorsed by the EU. (x) IFRS and IFRIC Interpretations that became effective in the year ended 31December 2007: The following Standards and Interpretations became effectivewithin the year ended 31 December 2007. None of the Standards andInterpretations had an impact in the consolidated financial statements, otherthan IFRS 7 and IAS 1 (amended), which did not have any effect on the financialposition of the Group but did give rise to additional disclosures. (a) IFRS 7, Financial Instruments: Disclosures (b) IFRIC 7, Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (c) IFRIC 8, Scope of IFRS 2 (d) IFRIC 9, Reassessment of Embedded Derivatives (e) IFRIC 10, Interim Financial Reporting and Impairment (f) IAS 1, Presentation of Finacial Statements - Amended 3. VOYAGE & VESSEL OPERATING EXPENSES The amounts in the accompanying consolidated income statement are analysed asfollows: Voyage expenses 2007 2006 U.S.$'000 U.S.$'000 Port charges (541) (52)Bunkers (fuel costs) (1,198) (227)Third party commissions (5,485) (3,942) (7,224) (4,221)Voyage expenses - related partyCommissions- related party (2,497) (1,813) Vessel operating expenses 2007 2006 U.S.$'000 U.S.$'000Vessel Operating ExpensesCrew expenses (13,179) (10,216)Store & Consumables (1,578) (1,319)Spares (2,565) (2,155)Repairs & maintenance (1,314) (1,129)Lubricants (5,082) (3,182)Insurance (4,827) (4,418)Taxes (other than income tax) (427) (298)Other operating expenses (2,439) (2,143) (31,411) (24,860) 4. GENERAL AND ADMINISTRATIVE EXPENSES 2007 2006 U.S.$'000 U.S.$'000 Directors and Management team Remuneration (1,111) (940)Directors and Management team Annual Incentive Plan (see note 21c) (380) -Audit fees (242) (233)Class 1 fees(1) (375) -Legal fees (122) (85)Other (548) (218) (2,778) (1,476) (1) lass 1 fees relate to the one-off expenses incurred in the preparation ofthe circular filed with UK Listing Authority and distributed to shareholders,relating to an Extraordinary General Meeting ("EGM") held on 24 October 2007,for the approval of the acquisition of four new-build bulk carrier contracts andtwo new-build container vessel contracts (see note 7). Fees to the auditors forthe review of the working capital projections in respect to the circular,amounted to U.S.$50. "Directors and Management team Remuneration" in 2006 covers the period from theofficial listing of the Company (5 April 2006) up to 31 December 2006. Beforethat period no such costs were incurred, since the Board of Directors andManagement team were established contemporaneous with the listing of theCompany. For 2007 remuneration relates to the full year period. The Directors and Management team Annual Incentive Plan ("AIP") includesU.S.$350 of non cash items relating to bonus paid in the form of shares underthe terms of AIP as well as U.S.$30 paid in cash within 2007 (see note 21c). 5. FINANCE EXPENSE The amounts in the accompanying consolidated income statement are analysed asfollows: 2007 2006 U.S.$'000 U.S.$'000 Interest payable on long-term borrowings (5,366) (4,146)Gain/(Loss) on fair value of derivatives (329) 1 (5,695) (4,145) 6. EARNINGS PER SHARE Basic earnings per share ("EPS") are calculated by dividing the profit for theyear attributable to Goldenport Holdings Inc. shareholders (U.S.$58,281 andU.S.$45,188 for the years ended 31 December 2007 and 2006, respectively) by theweighted average number of shares outstanding (69,885,106 for the year ended 31December 2007 and 62,533,312 for the year ended 31 December 2006). The weightedaverage number of shares outstanding as of 31 December 2006 reflects theissuance of shares for the Contributed Companies in the reorganisation describedin note 15 as if they had been issued at the beginning of the earliest yearpresented. Diluted EPS reflects the potential dilution that could occur if share options orother contracts to issue shares were exercised or converted into shares.Accordingly, in respect of the restricted stock granted to the Company'sdirectors under the Annual Incentive Plan (see note 21c), diluted EPS for theyear ended 31 December 2007 includes such shares granted but not issued. DilutedEPS was calculated based on the weighted average number of shares that wouldderive if these shares were issued on the grant date. Such number is calculatedby dividing the fair value of the directors' services exchanged for Company'sshares with the average market value of the Company's stock during therespective year. 7. VESSELS Vessels consisted of the following at 31 December: 2007 2006 U.S.$'000 U.S.$'000Cost of vesselsAt 1 January 150,735 94,260Additions 123,371 56,475Disposals (1,588) -At 31 December 272,518 150,735DepreciationAt 1 January (25,539) (18,051)Depreciation charge for the year (15,361) (7,488)Disposals - -Accumulated depreciation (40,900) (25,539) Net carrying amount of vessels 231,618 125,196 2007 2006 U.S.$'000 U.S.$'000Cost of dry-dockingsAt 1 January 15,786 11,821Additions 12,484 3,965At 31 December 28,270 15,786DepreciationAt 1 January (9,262) (3,609)Depreciation charge for the year (5,932) (5,653)Accumulated depreciation (15,194) (9,262) Net carrying amount of dry-docking costs 13,076 6,524 Net carrying amount at 31 December 244,694 131,720 Operational vessel acquisitions On 19 March 2007, the Company took delivery of the M/V West Gate Bridge (renamedto MSC Finland), a container vessel of 3,032 TEU and 40,928 DWT built in 1986for U.S.$17,000 (including U.S.$165 of unamortised dry-docking component). Anamount of U.S.$1,700 had been paid in advance during 2006. On 20 July 2007, the Company took delivery of the M/V Ajama (renamed to Anafi),a container vessel of 2,420 TEU and 33,745 DWT built in 1994 for U.S.$36,000(including U.S.$313 of unamortised dry-docking component). On 17 August 2007, the Company took delivery of the M/V Nautic (renamed to MSCAccra), a container vessel of 1,889 TEU and 33,202 DWT built in 1985 forU.S.$12,350 (including U.S.$402 of unamortised dry-docking component). Onacquisition of the vessel, the Company concluded a five year time charteragreement. Accordingly, the Company estimates that the useful life of thespecific vessel should be extended up to the end of charter (June 2012). On 23 October 2007, the Company took delivery of the M/V Bosporus Bridge, acontainer vessel of 3,720 TEU and 47,359 DWT built in 1993 for U.S.$19,200. Thevessel was purchased in the second-hand market and was acquired with an existingcharter with a U.S.$14.75 daily rate for a period of 52 months beginning fromthe delivery date. The value of the vessel on a charter free basis as of thedate of acquisition has been valued at U.S.$30,500 from independent marinevaluators. The Company has allocated an amount of U.S.$11,300 as deferredrevenue (see note 17), which will be recognised to the income statement over theperiod of the time charter. This amount is included in the balance sheet underlines "Deferred revenue" and "Deferred revenue current portion". On 12 November 2007 and 21 November 2007, the Company took delivery of thesister geared container vessels M/V Gitte and M/V Lone (renamed to MOLBrilliant) respectively, both of 976 TEU and 9,868 DWT built in 1992, acquiredfor a total consideration of U.S.$28,625 (including U.S.$704 of unamortiseddry-docking component). Vessel additions include the cost of acquisition of the vessels (net ofunamortised dry-docking component), capitalised initial costs associated withthe acquired vessels of U.S.$264 and capital improvements on existing vessels ofU.S.$216. The gross carrying amount of vessels, which have been fully depreciated to theirresidual value and were still in use at 31 December 2007, was U.S.$14,208 (2006:U.S.$15,844). All of the Company's operating vessels having a total carrying value of U.S.$244,694 at 31 December 2007 (U.S.$131,720 at 31 December 2006), have beenprovided as collateral to secure the loans discussed in note 16. Disposals On 8 February 2007, the Company concluded the sale of the 53,522 DWT, 1977-builtvessel "Vana", to an unaffiliated third party. The sale was concluded at agross consideration of US $5,500 in cash and the vessel was delivered to the newowners on 2 May 2007. As of 31 December 2006, M/V Vana had a net carrying amountin the financial statements of U.S.$1,588, which was equal to her scrap value. Acommission of 4% on the gross consideration was paid during the year ended 31December 2007. The gain resulting from the sale of the vessel was U.S.$3,692 andis included in the Group's income statement for the year ended 31 December 2007. Dry-docking costs During 2007 dry-dockings were carried out for ten vessels of the Group at atotal cost of U.S.$10,900. In addition, the dry-docking component for the sixnew vessels amounted to U.S.$1,584. 8. VESSEL UNDER RECONSTRUCTION The balances as at 31 December were as follows: 2007 2006 U.S.$'000 U.S.$'000 Purchase Price 13,000 13,000Capital expenditure for reconstruction 24,407 9,975Capitalised interest and other borrowing costs 1,473 93 38,880 23,068 On 16 June 2006, the Group acquired the M/V Fortune, a container vessel of 5,551TEU and 68,537 DWT built in 1996, for U.S.$13,000. The vessel was damaged in afire on 21 March 2006 under other ownership. The vessel is expected to becomeoperational within 2008 (see note 20a). Depreciation on the vessel will commence upon the completion of thereconstruction and the vessel becoming operational. Vessel's carrying value of U.S. $38,880 at 31 December 2007 (U.S.$23,068 at 31December 2006), has been provided as collateral to secure the loan discussed innote 16. 9. ADVANCES FOR VESSEL ACQUISITION No advances for vessels acquisition were outstanding as of 31 December 2007. Theamount of U.S. $1,700 in 2006 represents 10% advance payment for the acquisitionof the vessel "West Gate Bridge". Upon delivery of vessel on 19 March 2007 theamount relating to the advance was reclassified to the cost of vessel. 10. Advances for vesselS construction The balances as at 31 December were as follows: 2007 2006 U.S.$'000 U.S.$'000 4 Bulk Carriers 30,286 -2 Containers 18,981 -JV - 2 Bulk Carriers 12,971 - 62,238 - a) New Buildings Bulk Carriers Goldenport Shipmanagement Limited ("GSL"), a company wholly-owned by CaptainParis Dragnis, the Chief Executive Officer of Goldenport, has agreedspecification terms with Cosco (Zhousan) Shipyard Co. Ltd for the constructionof four new-build bulk carriers of 57,000 DWT each (the "Cosco Contracts") withan aggregate value of U.S.$151,000, with the intention to transfer them to theCompany on a no profit /no loss basis. On 5 October 2007, the Company entered into an agreement with GSL (the "GSLAgreement"), under which the Company would acquire the four GSL subsidiariesthat at the time held the Cosco Contracts. On 24 October 2007 the Company's shareholders in an EGM approved the transfer ofthe four companies from GSL to the Group for the price of one dollar percompany. 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 thevessels to be delivered in 2009. Payments will be made to the yard based on theconstruction progress schedule in tranches of 20% of the total value. The last20% will be paid upon delivery of the vessels. Containers On 7 August 2007, the Company separately agreed the specification terms withJiangsu Yangzijiang Shipbuilding Co. Ltd and Anhui Technology Imp. & Exp. Co.Ltd for the construction of two new-build geared container vessels of 2,500 TEUnominal capacity each (the "YZJ Contracts"), the first of which is to bedelivered in October 2010 and the second in March 2011. The total combined costpayable by the Company for these two vessels is estimated to be approximatelyU.S. $94,000, which is payable is five equal instalments. On 24 October 2007 the Company's shareholders, in an EGM, approved thetransaction. On 31 October 2007, the Company paid U.S.$18,730, representing the 20% depositfor the two vessels, as per contract. Payments will be made to the yard based onthe construction progress schedule in tranches of 20% of the total value. Thelast 20% will be paid upon delivery of the vessels. b) New Buildings-Joint Venture On 13 March 2007 the Group entered into a 50% joint venture with theunaffiliated third party Topley Corporation with the objective to construct two53,800 DWT bulk carrier vessels in Jiangsu Eastern Shipyard of China, which areexpected to be delivered in the second half of 2008. The contract price for eachvessel is U.S.$32,000 (U.S.$64,000 in total). The construction of the vessels isfinanced by cash contributions of the joint venture parties and bank financing.Payments will be made to the yard based on the construction progress schedule ontranches of 20% of the total value. The last 20% will be paid upon delivery ofthe vessels. Within 2007 two instalments of 20% each were paid totallingU.S.$25,600, out of which U.S.$12,800 were paid by the Group. 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 theMarshall Islands and transferred 50% of the issued shares (500 shares of no parvalue) to Topley Corporation for one USD per share. Sentinel Holdings Inc. isthe sole shareholder of the issued share capital of Citrus Shipping Corp. andBarcita Shipping S.A. (ship-owners of JES041 and JES042 hulls respectively). On 8 August 2007 Citrus Shipping Corp. and Barcita Shipping S.A. signed a loanagreement with a bank in order to partially finance up to 75% of theconstruction cost of the two vessels. The amount of loan is up to U.S$48,000(U.S$24,000 for each vessel). Part of the loan was drawn on 22 January 2008 (seenote 24). The Group's 50% portion in the stand alone Financial Statements of SentinelHoldings Inc., for the year ended 31 December 2007 is as follows: SENTINEL HOLDINGS INC. 31 December 2007 U.S.$'000 ASSETSNon-current assetsAdvances for vessel construction 12,971TOTAL ASSETS 12,971 Vessels are expected to become operational in late 2008 and therefore, nosignificant transaction with effect on the results of the joint venture occurredwithin 2007. 11. OTHER NON-CURRENT ASSETS - LIABILITIES The amounts in the accompanying balance sheets at 31 December are analysed asfollows: 2007 2006 U.S.$'000 U.S.$'000 Fair value of derivative instrument(1) 50 185Fair value of derivative instrument(2) (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 orfrom certain types of forecasted transactions, and can arise from changes ininterest rates or currency exchange rates. During 2003, the Group entered into an interest rate swap for the loan of vesselGianni D. The notional amount of this contract amounted to U.S.$10,400. Underthe swap agreement, the Group exchanges variable to fixed interest rate at3.60%. The swap agreement requires the Group to pay additional interest whenLIBOR exceeds 6.00% in any twelve-month year until 2009. It is noted that thebank loan for which the interest rate swap agreement was entered into, wasrepaid 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 andaccordingly, gains or losses resulting from changes in the fair value of thisderivative instrument, which approximated U.S.$135 loss and U.S.$1 gain for theyears ended 31 December 2007 and 2006 respectively, are recorded in financeexpense or income, accordingly, in the consolidated income statement. The fairvalue of the derivative financial instrument at 31 December 2007 and 2006 was anasset of U.S.$50 and U.S.$185 respectively, which is included in othernon-current assets in the accompanying consolidated balance sheet. During 2007, the Group entered into an interest rate swap for the loan of vesselBosporus Bridge. The notional amount of this contract amounted to U.S.$12,166.Under the swap agreement, the Group exchanges variable to fixed interest rate at4.64%. The fair value of the specific derivative financial instrument at 31 December2007 was a liability of U.S.$194, which is included in other non-currentliabilities in the accompanying consolidated balance sheet. As the Group did notdesignate the swap agreement as an accounting hedge, the loss resulting fromthis derivative instrument, of U.S.$194 for the year ended 31 December 2007,was recorded in finance expense in the consolidated income statement 12. INSURANCE CLAIMS 2007 2006 U.S.$'000 U.S.$'000Balance as of 1 January 1,305 259Additions 3,144 1,586Collections (1,127) (459)Amounts written off (54) (81)Balance as of 31 December 3,268 1,305 13. RESTRICTED CASH 2007 2006 U.S.$'000 U.S.$'000Restricted cash - 1,166 The restricted cash concerns the amounts held in bank accounts of the managementcompany that were retained for the future instalment of Group's loans (see note16). During 2007 the Company agreed with the engaged bank to cease the retentioncash transfers. 14. CASH AND CASH EQUIVALENTS 2007 2006 U.S.$'000 U.S.$'000Cash at bank 873 303Short term deposits 19,074 81,069 19,947 81,372 Cash at banks earns interest at floating rates based on daily bank depositrates. Short term deposits are made for varying periods of between one day andthree months, depending on the immediate cash requirements of the Group, andearn interest at the respective short-term deposit rates. 15. SHARE CAPITAL AND SHARE PREMIUM Share capital consisted of the following at 31 December: 2007 2006 U.S.$'000 U.S.$'000AuthorisedShares of $0.01 each 1,000 1,000Issued and paidShares of $0.01 each 699 699Total issued share capital 699 699 Formation: The Company was formed on 21 March 2005, and prior to thereorganization analyzed below, its share capital consisted of 500 sharesauthorized, issued and outstanding, without par value. On 30 March 2006,conditional on admission to the Official List of the London Stock Exchange, theCompany amended its Articles of Incorporation. Under the Company's Amended andRestated Articles of Incorporation, the Company has an authorized share capitalof 100,000,000 shares (all in registered form) consisting of 100,000,000 shareswith a par value of U.S.$0.01 per share. The Company cancelled the existing 500shares with no par value. Prior to the reorganization, seventeen holdingcompanies (the "Contributed Companies"), each in turn owning a vessel-owningcompany, were wholly- owned by Captain Paris Dragnis. The reorganizationdescribed below was a transaction between companies under common control, andhas been accounted for in a manner akin to a pooling of interests for the yearsprior to the reorganization. Accordingly, the financial statements of the Grouphave been presented using historical carrying costs of the ContributedCompanies. The consolidated financial statements have also been prepared on thebasis that Goldenport existed for all years prior to the reorganization and wasthe parent company of the Contributed Companies in all such years. The reorganization that took place on 30 March 2006, involved the followingsteps: a. Captain Paris Dragnis contributed all of the shares held by him in theseventeen intermediate holding companies to Goldenport, in exchange for sharesin Goldenport, fulfilling his obligation for the Company's share capital, inaccordance with the share for share exchange agreement dated 30 March 2006; and b. Captain Paris Dragnis transferred all of the shares in Goldenport toStarla Shipholding Corporation (Starla), a company wholly owned by Captain ParisDragnis; as a result Starla was, prior to admission to the Official List of theLondon Stock Exchange, the sole shareholder of the Company beginning of theearliest year presented. Starla is the ultimate holding company of the Group. c. Following completion of the reorganisation, the Contributed Companieswere wholly-owned subsidiaries of Goldenport. d. On 5 April 2006 the Company was admitted to the Official List of theLondon Stock Exchange, issuing 25,531,915 shares of U.S.$0.01 each. On 11 April2006 the over allotment option was exercised for 2,553,191 shares at GBP 2.35per share bringing the total offer to GBP 66,000 (or U.S.$115,465). The analysis of the share premium is as follows: U.S.$'000Proceeds from Initial Public Offering, gross 115,465Issuance costs (8,193)Proceeds from Initial Public Offering, net 107,272Nominal share capital cost (281)Share premium 106,991 16. LONG-TERM DEBT The amounts in the accompanying balance sheets are analysed as follows: 31 December 2007 31 December 2006 Audited Audited U.S.$'000 U.S.$'000Bank Loan Vessel(s) Amount Rate % Amount Rate % a. Issued 13 February 2003, Lindos 2,450 6.19% 3,150 6.13% maturing 30 May 2009b. Issued 31 March 2004, Tilos,Limnos 6,000 6.28% 7,400 6.09% maturing 30 September 2010c. Issued 17 May 2005, maturing Beauty, 11,800 5.91% 17,000 6.09% 17 August 2009 Msc Emirates, Achim, Alex D, Gianni D, Msc Socotra, Howrah Bridged. Issued 26 June 2006, maturing Msc Scotland 12,700 6.20% 15,900 6.42% 26 September 2011e. Issued 19 July 2006, maturing Vasos 15,100 6.29% 17,500 6.49% 16 July 2011.f. Issued 14 November 2006, Fortune, Tuas 23,000 6.05% 20,000 6.38% maturing 28 November 2009 Express, Athos, Ios, Msc Himalayia, Glory D, Samosg. Issued 14 March 2007, Msc Finland 9,200 5.89% - - maturing 14 March 2012.h. Issued 19 July 2007, maturing Anafi 22,825 6.00% - - 19 July 2014i. Issued 17 August 2007, Msc Accra 7,695 5.76% - - maturing 17 August 2012j. Issued 18 October 2007, Bosporus Bridge, maturing 18 October 2014 YZJ-815, YZJ-816 12,500 6.03% - -k. Issued 11 November 2007, Gitte, MOL Brilliant maturing 11 November 2014 18,750 5.84% - -l. Issued 27 November 2007, Goldenport Holdings 20,000 5.91% - - maturing 17 August 2009 Inc.Total 162,020 80,950Less: financing costs (500) (323)Less: current portion (30,755) (19,900)Long-term portion 130,765 60,727 The upcoming repayment terms of loans with balances outstanding at 31 December2007 are: Loan a: This loan is repayable in three quarterly instalments of U.S.$350 each,the first one being due on 30 May 2008 and the final one being due on 30 May2009, along with a balloon payment of U.S.$1,400. Loan b: This loan is repayable in six semi-annual instalments of U.S.$700 each,the first one being due on 30 March 2008 and the final one being due on 30September 2010, along with a balloon payment of U.S.$1,800. Loan c: This loan is repayable in seven quarterly instalments of U.S.$1,300each, the first one being due on 17 February 2008 and the final one being due on17 August 2009, along with a balloon payment of U.S.$2,700. Loan d: This loan is repayable in six quarterly instalments of U.S.$800 each,the first one being due on 26 March 2007 and the sixth being due on 26 June2009, eight quarterly instalment of U.S.$600 each, the first one being due on 26September 2009 and the final one being due on 26 June 2011, plus a balloonpayment of U.S.$3,100, being due on 26 September 2011. Loan e: This loan is repayable in eight semi-annual instalments of U.S.$1,450each, the first one being due on 16 January 2008 and the final one being due on16 July 2011, along with a balloon payment of U.S.$3,500. Loan f: On 14 November 2006 the Group signed an agreement for a secured termloan facility of U.S.$30,000. The Group will utilise the U.S.$25,000 in order toreconstruct the M/V Fortune and the rest was used for repayment of existingloans (the vessels involved in the agreement were used as collateral to theloan).The total of U.S.$30,000 has been drawn (U.S.$ 10,000 in November 2006,U.S.$10,000 in late December 2006, U.S.$ 5,000 in late June 2007 and U.S.$ 5,000in October 2007). This loan is repayable in four quarterly instalments ofU.S.$1,750 each, the first one being due on 28 February 2008 and the last onebeing due on 28 November 2008 and four quarterly instalments of U.S.$1,000 eachwith the first one being due on 28 February 2009 and the last one being due on28 November 2009 along with a balloon payment of U.S.$12,000. Loan g: This loan was obtained to finance the acquisition cost of the M/V MSCFinland (see note 7) and is repayable by nine quarterly instalments of U.S.$600each, the first one being due on 14 March 2008 and the ninth on 15 March 2010and eight quarterly instalment of U.S.$475 each, the first one being due on 14June 2010 and the final one being due on 14 March 2012. Loan h: This loan was obtained to finance the acquisition cost of the M/V Anafi(see note 7) and is repayable by twenty seven quarterly instalments of U.S.$675each, the first one being due on 19 January 2008 and the final one on 19 July2014 along with a balloon payment of U.S.$4,600. Loan i: This loan was obtained to finance the acquisition cost of the M/V MscAccra (see note 7) and is repayable by nineteen quarterly instalments ofU.S.$405 each, the first one being due on 16 February 2008 and the final one on16 August 2012. Loan j: This loan was obtained to finance the acquisition cost of the M/VBosporus Bridge (see note 7) and is repayable by twenty eight quarterlyinstalments of U.S.$333.75 each, the first one being due on 18 January 2008 andthe final one on 18 October 2014 along with a balloon payment of U.S.$3,155. Loan k: This loan was obtained to finance the acquisition cost of the sistervessels M/V Gitte and M/V MOL Brilliant (see note 7) and is repayable by twentyeight quarterly instalments of U.S.$575 each, the first one being due on 11February 2008 and the final one on 11 November 2014 along with a balloon paymentof U.S.$2,650. Loan l: In addition to the loans mentioned above, a non-amortising, revolvingcredit line was obtained on 27 November 2007, to support the Group's operations.It is in Group's discretion to drawdown any amount up to U.S.$20,000 in varioustranches, in multiples of U.S.$500 and for interest periods of multiples of onemonth and up to twelve months. The facility expires on 17 August 2009 and can beextended upon bank's discretion. As of 31 December 2007, the Group has utilisedthis facility in full. Loans (a-l) are denominated in U.S. dollars, and bear interest at LIBOR plus amargin. For loan g the first 10 out of 18 instalments bear fixed interest of5.89% and for the last eight instalments the loan bears interest at LIBOR plus amargin. In addition, the Company has entered into an interest rate swapagreement 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 0.70% and 1.125% above LIBOR. Total interest paid was U.S.$5,822 and U.S.$3,471 for the year ended 31 December2007 and 31 December 2006, respectively. The loans are secured with first priority mortgages over the borrowers vessels.The loan agreements contain covenants including restrictions as to changes inmanagement and ownership of the vessels, additional indebtedness and mortgagingof vessels without the bank's prior consent as well as minimum requirementsregarding hull cover ratio and corporate guarantees of Goldenport Holdings. Therestricted net assets of the vessel-owning subsidiary companies at 31 December2007 and 2006 consisted of restricted cash and amounted to U.S.$0 and U.S.$1,166respectively. 17. DEFERRED REVENUE Deferred revenue includes an amount of U.S.$11,300, which represents thedifference between the market value of the vessel charter free and the amountactually paid to acquire the vessel M/V Bosporus Bridge (see note 7) in thesecondhand market. This amount will be recognized to income over fifty twomonths from delivery of vessel (see note 7). The amount recognized to income inthe current year amounts to U.S.$415. The remaining balance in deferred revenuerepresents cash received from charterers prior to 31 December 2007, whichrelates to revenue earned after that date. 18. ACCRUED LIABILITIES AND OTHER PAYABLES The amounts in the accompanying balance sheets at 31 December are analysed asfollows: 2007 2006 U.S.$'000 U.S.$'000 Accrued interest 1,534 783Accrual for supplementary calls 678 663Accrued wages 253 90Accrual for annual incentive plan 350 -Accrued audit fee 160 185Accrued dry-docking costs 2,936 -Other accrued expenses 1,643 668Other payables 1,412 1,365 8,966 3,754 19. DIVIDENDS DECLARED The Board of Directors of the Company will propose to the Annual General Meetingfor approval, a final dividend for 2007 of 15 pence per share or total GBP10,483 (11.9 pence per share or GBP 8,316 for 2006). The dividend proposed bythe Board of Directors, is expected to be approved by the AGM to be held on 30April 2008. Dividend rights: Under the Company's by-laws, each ordinary share is entitled todividends if and when dividends are declared by the Board of Directors. Thereare no restrictions on the Company's ability to transfer funds (other than fundsdenominated in Marshall Islands dollars) in and out of Marshall Islands. Thepayment of dividends is subject to the approval of the Annual General Meeting ofShareholders. The payment of dividends was U.S.$26,362 in 2007 (23.5 cents pershare or 11.9 pence per share as final dividend for 2006 and 14.2 cents pershare or 7.0 pence per share as interim dividend for 2007) and U.S.$ 13,924 in2006 (15.6 cents per share before the admission of the Company's shares in theLondon Stock Exchange as final dividend for 2005 and 10.6 cents per share or 5.6pence per share as interim dividend for 2006). 20. COMMITMENTS AND CONTINGENCIES a. Various claims, suits, and complaints, including those involvinggovernment regulations and product liability, arise in the ordinary course ofthe shipping business. In addition, losses may arise from disputes withcharterers, agents, insurance providers and from other claims with suppliersrelating to the operations of the Group's vessels. Currently, management is notaware of any such claims or contingent liabilities, which should be disclosed,or for which a provision should be established in the consolidated financialstatements. As explained in note 8, on 16 June 2006, the Group acquired the M/V Fortune, acontainer vessel of 5,551 TEU and 68,537 DWT built in 1996, for U.S.$13,000. Thevessel was damaged in a fire on 21 March 2006. The vessel is expected to becomeoperational within 2008. The total estimated cost of reconstruction, excludingthe initial acquisition cost of U.S.$13,000, is expected to be approximatelyU.S.$35,000 (including capitalised interest, supervision fees and other). As of31 December 2007, the expenditure incurred for reconstruction amounted toU.S.$25,880 (31 December 2006: U.S.$10,068). The remaining amount ofapproximately U.S.$ 9,000, to reach the total estimated reconstruction cost, isto be incurred periodically until the delivery of the vessel. The main componentof the remaining reconstruction costs of U.S.$ 9,000, is the cost of the yardthat will undertake the major repairs. The Group has entered to this respect,into an agreement with COSCO Zhouzhan yard for an amount of U.S.$12,490, whichwill be payable based on the progress of the repairs. The remaining estimatedcost mainly concerns spare parts for the vessel. b. Sentinel Holdings Inc. (the joint venture company) entered intoagreement with Jiangsu Eastern Shipyard for the construction of two new buildbulk carriers of 53,800 DWT each. The total construction cost is estimated to beapproximately U.S.$64,000 (U.S.$32,000 each), which is payable in five equalinstalments. As of 31 December two instalments of U.S.$6,400 have been paid forthe both vessels JES041 and JES042. The remaining instalments, three for bothvessels JES041 and JES042, are committed and will be paid in accordance with themilestones 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 10a). 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. d. On 7 August 2007, the Company entered into agreement with Jiangsu Yangzijiang Shipbuilding Co. Ltd and Anhui Technology Imp. & Exp. Co. for theconstruction of two new build geared container vessels of 2,500 TEU nominalcapacity each. The total combined cost is estimated to be approximatelyU.S.$94,000, which is payable in five equal instalments (see note 10a). Fourpayments are committed and will be paid in accordance with the milestones, asdescribed in the contract. Two of these payments are secured through a letter ofguarantee from the financing bank. e. The Group has entered into time charter arrangements on all its operatingvessels. These arrangements have remaining terms between 3 and 65 months as of 31 December 2007. Future minimum charters receivable upon time charter arrangements as at 31December 2007, are as follows (it is noted that the vessel off-hires anddry-docking days that could occur but are not currently known are not taken intoconsideration; in addition early delivery of the vessels by the charterers arenot accounted for; in Cosco new buildings (see note 10a) the calculation isbased on the floor rate without taking into account any profit share scheme; forthe vessel into Joint Venture ("JV") (see note 10b) 50% of revenue is included: 2007 2006 U.S.$'000 U.S.$'000 Within one year 157,318 67,6021-5 years 202,591 84,968> 5 years 3,808 - 363,717 152,570 21. RELATED PARTY TRANSACTIONS Transactions with related parties consisted of the following for the years ended31 December: 2007 2006 U.S.$'000 U.S.$'000Voyage expenses - related partyGoldenport Shipmanagement Ltd (a) 2,497 1,813Management fees - related partyGoldenport Shipmanagement Ltd (a) 3,906 3,393 6,403 5,206 Balances due from related parties as at 31 December comprise the following: 2007 2006 U.S.$'000 U.S.$'000Due from related partiesGoldenport Shipmanagement Ltd (a) 3,289 811Total 3,289 811 (a) Goldenport Shipmanagement Ltd. ("GSL"): All vessel-operating companiesincluded in the consolidated financial statements have a management agreementwith GSL, a Liberian corporation directly controlled by Captain Paris Dragnis,to provide, in the normal course of business, a wide range of shippingmanagerial 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 managementfee of U.S.$15.75 per vessel per month (same for 2006). In addition GSL charged the Group, U.S.$ 430, for the services rendered for thereconstruction of M/V Fortune. This amount is included in the capitalexpenditure for reconstruction (see note 8). For the year ended 31 December 2007 commission charged by GSL amounted toU.S.$2,497 (2006: U.S.$1,813) 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 thevessel-operating companies' cash surplus handled by GSL. (b) Sentinel Holdings Inc. appointed Goldenport Shipmanagement Ltd. as aconsultant for the new-buildings project at Jiangsu Eastern Shipyard of China(note 10). As part of the supervision agreement between the two companies, GSLundertakes the plan approval, the attendance and supervision of the constructionand trials of vessels JES041 and JES042, in exchange for a supervision fee forthe first twelve months from steel cutting (unless delivery is earlier). For theyear ended 31 December 2007 such fee charged by GSL amounted to U.S.$276 half ofwhich is included in 'vessels under construction' of the accompanyingconsolidated balance sheet. (c) Although two incentive plans: 'The Goldenport Discretionary Share OptionPlan' and the 'Goldenport Share Award Plan' were approved prior to officialadmittance to the London Stock Exchange, none of them was activated up to 31December 2007. A new plan ("Annual Incentive Plan") was approved in the AGM heldon 17 May 2007. Annual Incentive Plan and other remuneration of Directors and Management team The Remuneration Committee believes that a significant proportion of totalremuneration should be performance-related. In addition, performance-relatedrewards should be deliverable largely in shares to more closely align theinterests of shareholders and all Executive Directors and Management. In orderto achieve this, the Board decided to terminate the 2006 Annual Cash Bonusarrangements and to replace them with a new plan called the Annual IncentivePlan ('AIP'), which will be administrated by the Remuneration Committee. It was decided that under the terms of the AIP the eligible employees (i.eExecutive Directors and Management) can elect to have their annual cash bonusdelivered in the form of restricted shares in the Company. The performancecriteria remained same as for the Annual Cash Bonus. Again, it is intended thatthe maximum limit for each participant will be 40% of annual base salary. TheRemuneration Committee may select in future years, to adjust the maximum but itwill not in any event exceed 75% of annual base salary. The Board (after aproposal by the Remuneration Committee) reserves the right to award shares inother circumstances which could include, without being limited to, subsequentoffers of shares (primary or secondary). In each year the Remuneration Committeewill propose to the Board the percentage of base salary applicable to eachparticipant 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 18 December 2007 proposed to theBoard of Directors under the terms of AIP the base award for each participant.The Board of Directors on 18 December 2007 approved the Remuneration Committeeproposal, subject to finalisation of the financial statements for 2007, andannounced the base award to each participant. Out of the four participants oneselected the full cash award and the other three selected the full shares award. As per the terms of AIP the FCA is 90% of the base award, whereas FSA is 110% ofthe base award. The FCA amounted to U.S.$30 and the FSA to U.S.$350, which areincluded in the accompanying financial statements. The Board of Directors on 25 February 2008 approved the financial statements andauthorised the issuance of the shares relating to the full share award under theprovisions of AIP, as approved in the AGM of 17 May 2007. Under these provisionsthe AIP shares will be calculated by reference to the closing market value ofthe Company's shares on the date of announcement of full year results for 2007.The AIP shares will be allotted and then registered in the participants name onthe ex-dividend date (2 April 2008). The participant shall have the right to receive dividends for 2008 and the rightto vote in respect of AIP shares but during a restricted period of one calendaryear from registration the participant is not allowed to sell, assign, exchange,transfer, pledge, hypothecate or otherwise dispose of or encumber any of the AIPshares. There are no other choices for the participants. The amounts included in thefinancial statements under AIP and other remuneration of Directors andManagement team as of 31 December are as follows: 2007 2006 U.S.$'000 U.S.$'000 Directors and management team remuneration 1,111 761Annual cash bonus - 179AIP- cash bonus 30 -AIP- share bonus 350 - 1,491 940 (d) The Interests of the Directors, the Senior Management and theirrespective immediate families in the share capital of the Company (all of whichare beneficial unless otherwise stated), were as at 31 December 2007 as follows: Number of shares at Number of Percentage of admission (after shares as at shares as at overallotment) Percentage of 31 Dec 2007 31 Dec 2007 shares at admission Name Captain Paris Dragnis (1) 41,800,000 59.812 % 41,800,000 59.812 %Chris Walton(2) 2,128 0.003% 2,128 0.003 %John Dragnis(3) - - 125,000 0.179 % (1) Through Starla (see note 16) (2) Chris Walton is the non-executive Chaiman of the Board of Directors (3) John Dragnis is the Commercial Director of the Company No change has occurred in the interest of the Directors, the Senior Managementand their respective immediate families in the share capital of the Companysince 31 December 2007. 22. INCOME TAXES Under the laws of the Republic of Marshall Islands and the respectivejurisdictions of the Consolidated Companies the Group is not subject to tax oninternational shipping income. However, the Consolidated Companies are subjectto registration and tonnage taxes, which have been included in vessel operatingexpenses 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 theinternational operation of ships generally is exempt from U.S. tax if thecompany operating the ships meets both of the following requirements, (a) thecompany is organised in a foreign country that grants an equivalent exceptionto 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, byindividuals who are ''residents'' of the company's country of organization or ofanother foreign country that grants an ''equivalent exemption'' to corporationsorganised in the United States (50% Ownership Test) or (ii) the company's sharesare ''primarily and regularly traded on an established securities market'' inits country of organization, in another country that grants an ''equivalentexemption'' 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 moreclasses of the its shares representing more than 50% of its outstandingshares, by voting power and value, is listed on the market and is traded on themarket, other than in minimal quantities, on at least 60 days during the taxableyear; and (ii) the aggregate number of shares traded during the taxable year isat least 10% of the average number of shares outstanding during the taxableyear. Notwithstanding the foregoing, the regulations provide, in pertinent part,that each class of the company's shares will not be considered to be ''regularlytraded'' 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 thanhalf the days during the taxable year by persons who each own 5% or more of thevalue of such class of the company's outstanding shares, (''5 Percent OverrideRule''). In the event the 5 Percent Override Rule is triggered, the regulationsprovide that the 5 Percent Override Rule will nevertheless not apply if theCompany can establish that among the closely-held group of 5% Stockholders,there are sufficient 5% Stockholders that are considered to be "qualifiedstockholders" for purposes of Section 883 to preclude non-qualified 5%Stockholders in the closely-held group from owning 50% or more of each class ofthe Company's stock for more than half the number of days during the taxableyear. Treasury regulations under the Code were promulgated in final form in August2003. 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'sship-operating subsidiaries currently satisfy the 50% Ownership Test. Inaddition, the management of the Company believes that by virtue of a specialrule applicable to situations where the ship operating companies arebeneficially owned by a publicly traded company like the Company, the 50%Ownership Test can also be satisfied based on the trading volume and thewidely-held ownership of the Company's shares. Regarding the 2003, 2004, 2005,2006 and 2007 tax years, the Company believes that it satisfies thePublicly-Traded Test and all of its United States source shipping income will beexempt from U.S. federal income tax. 23. FINANCIAL INSTRUMENTS Risk management objectives and policies The Group's principal financial instruments are bank loans. The main purpose ofthese financial instruments is to finance the Group's operations. The Group hasvarious other financial instruments such as cash and cash equivalents,restricted cash, trade receivables and trade payables, which arise directly fromits 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 raterisk and credit risk. The majority of the Group's transactions are denominatedin 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 changesin interest rates will affect the future cash outflows of the Group's long-termdebt. The sensitivity analysis presented in the table below demonstrates thesensitivity to a reasonably possible change in interest rates (libor), with allother variables held constant, on the Group's profit for the year (fluctuationsin interest rates do not impact the Groups equity). The sensitivity analysishas 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 (%) Effect on profit 2007 +0.5% 410 -0.5% (410)2006 +0.5% 325 -0.5% (325) Credit risk The Group's maximum exposure to credit risk in the event the counterparties failto perform their obligations as of 31 December 2007 in relation to each class ofrecognised financial assets, other than derivatives, is the carrying amount ofthose assets as indicated in the balance sheet. Concentration of Credit Risk Financial instruments, which potentially subject the Group to significantconcentrations 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 performsannual evaluations of the relative credit standing of those financialinstitutions. Credit risk with respect to trade accounts receivable is generallymanaged by the chartering of vessels to major trading houses (includingcommodities traders), established container-line operators, major producers andgovernment-owned entities rather than to more speculative or undercapitalisedentities. The vessels are normally chartered under time-charter agreements whereas per the industry practice the charterer pays for the transportation servicein advance, supporting the management of trade receivables. Fair Values Derivatives are recorded at fair value while all other financial assets andfinancial liabilities are recorded at amortised cost which approximates fairvalue. Foreign currency risk The majority of the Group's transactions are denominated in U.S. dollarstherefore its exposure to foreign currency risk from operations is minimal.However, following the admission of the Company's shares to the London StockExchange, part of the proceeds (in GBP) were placed in short term depositaccounts. As at 31 December 2007 and 2006 an amount of GBP 6,300 (U.S.$12,621)and GBP 17,947 (U.S.$35,137) respectively, was held in short term time deposits. The following table demonstrates the sensitivity to a reasonably possible changein the US Dollar exchange rate (the exercise was made for the time deposits inGBP since there is no other significant balance or transaction in foreigncurrency), with all other variables held constant, of the Group's profit for theyear and shareholders' equity. Increase/Decrease in GBP/USD rate Effect on profit 2007 +5% 631 -5% (631)2006 +5% 1,754 -5% (1,754) Liquidity risk The Group aims to mitigate liquidity risk by managing cash generation by itsoperations, applying cash collection targets throughout the Group. The vesselsare normally chartered under time-charter agreements where as per the industrypractice the charterer pays for the transportation service in advance,supporting the management of cash generation. Investment is carefullycontrolled, with authorisation limits operating up to Group's board level andcash payback periods applied as part of the investment appraisal process. Inthis way the Group aims to maintain a good credit rating to facilitate fundraising. In its funding strategy, the Group objective is to maintain a balance betweencontinuity of funding and flexibility through the use of bank loans. The Group'spolicy in new investments for second-hand vessels is that not more than 70% ofthe value of each investment will be funded through borrowings, whereas for thenew buildings the respective limit is 80%. In all the acquisitions within 2007the bank financing was in line with the Group's policy. The Group normally meets its working capital needs through cash flows fromoperating activities and available credit lines. Management prepares cash flowprojections in order to forecast its short term working capital position.Accordingly, on 27 November 2007 the Group concluded a non-amortising, revolvingcredit line, to support the Group's operations (see note 16). As of 31 December2007, the Group has utilised this facility in full. Excess cash used in managing liquidity is only invested in financial instrumentsexposed to insignificant risk of changes in market value, being placed oninterest-bearing deposit with maturities fixed at no more than 3 months. Shortterm flexibility is achieved if required by credit line facilities. The table below summarises the maturity profile of the Group's financialliabilities at 31 December 2007 and 2006, based on contractual undiscountedpayments (including interest to be paid, which is calculated using the lastapplicable rate for each loan, as of 31 December 2007 and 2006): 31 December 2007 5 years Total $000 $000 $000 $000 $000 $000 Interest bearing loans 11,028 27,613 67,835 55,157 25,087 186,719 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 25,119 196,837 31 December 2006 5 years Total $000 $000 $000 $000 $000 $000Interest bearing loans 6,957 17,774 25,145 49,172 - 99,048Trade payables 6,941 - - - - 6,941Other payables 1,365 - - - - 1,365 15,263 17,774 25,145 49,172 - 107,354 Capital Management The primary objective of the Group's capital management is to ensure that itmaintains a strong credit rating and healthy capital ratios in order to supportits business and maximize shareholder value. The Group monitors capital using a gearing ratio, which is net debt divided bytotal capital plus net debt. The Group's policy is to keep the gearing ratiobelow 75% on average (see also Group's funding policy in Liquidity Risksection). Excess capital represented by a low gearing ratio, is used to fundfurther expansion plans. The Group includes within net debt, interest bearingloans, trade payables, accrued liabilities and other payables less cash and cashequivalents. Capital includes issued share capital, share premium and retainedearnings. 2007 2006 U.S.$000 U.S.$000 Interest bearing loans 162,020 80,950Trade payables, accrued liabilities and other 17,478 10,695payablesLess: cash and short term deposits (19,947) (81,372)Net debt 159,551 10,273 Issued share capital 699 699Share premium 106,991 106,991Retained earnings 73,757 41,838Total capital 181,447 149,528 Capital & Net debt 340,998 159,801Gearing ratio 47% 6% 24. EVENTS AFTER THE BALANCE SHEET DATE Transfer of GSL activities: On 1 January 2008 all the activities of theaccounting and legal department were transferred from GSL to the new subsidiaryGoldenport Marine Services (see note 1). A monthly rental of Euro 14,500 is alsoagreed to be paid from Goldenport Marine Services to the owner of the building(a related party under common control) for the rental of the head offices.According to Management the total cost of these services and the rentalrepresent 12.5% of the monthly management fee and therefore, the respectivemonthly management fee payable to GSL will be reduced by U.S.$2.0 to U.S.$13.75per vessel per month in order to reflect this transfer of services. Waiver of increase in management fee: On 5 January 2008 GoldenportShipmanagement agreed with the Group to waive the right to a 5% increase in themanagement fee. Therefore, the management fee for 2008 will be adjusted for theservices transferred to Goldenport Marine Services to U.S.$13.75, as discussedabove. Drawdown of loan: On 22 January 2008 and as part of the loan agreement concludedbetween the vessel owning companies of the JV new-build bulk carriers (JES041and JES042) and a bank (see note 10b) the vessel owning companies proceeded withthe drawdown of U.S.$16,000, representing: a) the amount of U.S.$9,600 being therefinancing of the second instalment of vessels JES041 and JES042 that was paidin 2007 from cash reserves from the Joint Venture partners; and b) the thirdinstalment for JES041 amounting to U.S.$6,400 that was paid directly to theshipyard as per the contract. Loan repayments: On 14 January 2008 the Group paid U.S.$1,450 in relation to theoutstanding balance of loan (e), on 18 January 2008 U.S.$334 in relation to loan(j), on 22 January 2008 U.S.$675 in relation to loan (h), on 11 February 2008U.S.$575 in relation to loan (k) on 19 February 2008 U.S.$405 in relation toloan (i) and on 19 February 2008 U.S.$1,300 in relation to loan (c) . Dividends: On 25 February 2008 the Company proposed a dividend of 15 pence pershare, amounting to £10,483. The dividend is expected to be approved by the AGMto be held in Athens on 30 April 2008. As a result the total dividend for 2007will become 22 pence per share, amounting to total of £15,375. This information is provided by RNS The company news service from the London Stock Exchange
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