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SHIPPING LIMITED

Progressing Steadily in Clear Direction

ANNUAL REPORT 2016

Uni-Asia Shipping Limited (“UAS” or the “Company”) is an owner of small & medium size bulk carriers. We also commercially manage bulk carriers leveraging our expertise and wide network in the industry.

Our StrategyTo achieve sustainable growth by expanding our fleet focusing on small & medium size bulk carriers such as Handysize bulk carrier and Supramax bulk carrier.

Our MissionTo serve our clients who transport sea cargoes in environment-friendly manners and with safety demonstration.

Our GoalTo be a group of highly experienced professionals to achieve our mission.

Corporate Information

Financial Highlights

Business Review

Operation Review

Vessel Delivery History

Regulations and Our Actions

Market Review

Financial Review

About our Shareholder – Uni-Asia Group

Risk Management

Management & Team

Report of the Directors

Independent Auditor’s Report

Audited Consolidated Financial Statement

2

4

6

13

23

24

28

31

33

34

35

37

39

42

Contents

2 / UNI-ASIA SHIPPING LIMITED / Annual Report 2016 /

Corporate Information

Date of Incorporation12 Apr 2010

Place of IncorporationHong Kong SAR

Principal Place of BusinessHong Kong HQ

30th Floor,

Prosperity Millennia Plaza,

No.663 King’s Road,

North Point, Hong Kong

Tel: 852 2528 5016

Regional contactsTokyo

MD Kanda Building 7F,

9-1 Kanda Mitoshirocho,

Chiyoda-ku, Tokyo Japan 101-0053

Tel: 81 3 3518 9255

Shanghai

Room 2106, Yongda International Tower,

2277 Longyang Road,

Pudong District, Shanghai, 201204 China

Tel: 86 21 5888 8007

DirectorsMichio Tanamoto (Chairman)

Masaki Fukumori (Chief Executive Officer)

Zac K. Hoshino (Chief Operating Officer)

Makoto Tokozume (Chief Financial Officer)

Kenji Fukuyado

ShareholdersUni-Asia Group Limited, 100% owned via

Uni-Asia Holdings Limited (from 2 June 2017)

Principal BusinessVessel Owning & Chartering (Bulk Carrier)

Vessel Commercial Management

Paid-Up CapitalUS$51,998,342.00

(as at 31 May 2017)

Principal BankersBank SinoPac Hong Kong Branch

CTBC Bank Co., Ltd. Head Office

Mega International Commercial Bank

Offshore Banking Branch

Mizuho Corporate Bank Hong Kong Branch

AuditorErnst and Young

Company Websitewww.uniasiashipping.com

3/ UNI-ASIA SHIPPING LIMITED / Annual Report 2016 /

会社概要

設立2010年4月12日

設立地香港特別行政区

所在地香港本社

30th Floor,Prosperity Millennia Plaza,No. 663 King’s Road,North Point, Hong KongTel: 852 2528 5016

グループ他拠点東京

〒101-0053東京都千代田区神田美土代町9 – 1MD 神田ビル７FTel: 81 3 3518 9255

上海裕洋船舶管理（上海）有限公司中国上海市浦東新区龍陽路2277号永達国際大厦2106室郵編　201204Tel: 86 21 5888 8007

役員棚元　道夫（会長）福森　雅紀（チーフ・エグゼクティブ・オフィサー）星野　清己（チーフ・オペレーティング・オフィサー）床爪　誠（チーフ・フィナンシャル・オフィサー）福宿　謙二

株主ユニ・アジアグループリミテッド100%

－ 2017年6月2日より（中間持株会社ユニ・アジアホールディングス

リミテッド経由）

主要業務船主・貸渡業務（ばら積み船）船舶コマーシャルマネジメント

資本金51,998,342米ドル（2017年5月31日現在）

主要取引銀行永豊銀行（バンク・サイノパック）　香港支店中国信託商業銀行　本店兆豊国際銀行オフショアバンキング支店みずほ銀行　香港支店

会計監査人アーンスト・アンド・ヤング

ウェブサイトwww.uniasiashipping.com


Financial Highlights

EBITDA = Profit before Tax + Depreciation – Interest Income + Finance Cost + Unrealised Loss / (Gain) + Impairment Loss+ Provision of Onerous Contract – Gain on Disposal of Vessel – Fair Value Gain on Equity Investments

Y-O-Y comparison(US$’000)

Revenue Number of operating days

+7.4%

FY2012 FY2013 FY2014 FY2015 FY2016

12,72316,190

19,396

26,68028,645 +14.6%

FY2012 FY2013 FY2014 FY2015 FY2016

1,2481,647

1,953

2,7563,157

Operating Profit Net assets

-92.4%

FY2012 FY2013 FY2014 FY2015 FY2016

3,778 3,8714,479

5,838

441

-20.1%

FY2012 FY2013 FY2014 FY2015 FY2016

31,019

44,08251,890

63,674

50,871

(Loss)/Profit for the year Net borrowings

-2,267.4%

FY2012 FY2013 FY2014 FY2015 FY2016

5,4262,565 2,223

613 -13,289

-3.4%

FY2012 FY2013 FY2014 FY2015 FY2016

52,55766,213

83,779

105,784 102,210

EBITDA Net cash flow from operating activities

-24.1%

FY2012 FY2013 FY2014 FY2015 FY2016

7,228

10,415 11,061

14,385

10,917

-14.3%

FY2012 FY2013 FY2014 FY2015 FY2016

7,2238,612

9,979

13,35611,449

(days)


業績ハイライト

EBITDA = 税引前当期利益 + 減価償却費 – 利息収入 + 財務費用 + 未実現評価損 / (益) + 減損損失 + 不利な契約に係る引当 – 船舶売却益 – 投資有価証券評価益

前年度対比（千米ドル）

売上高船舶稼働日数

+7.4%

FY2012 FY2013 FY2014 FY2015 FY2016

12,72316,190

19,396

26,68028,645 +14.6%

FY2012 FY2013 FY2014 FY2015 FY2016

1,2481,647

1,953

2,7563,157

営業利益純資産

-92.4%

FY2012 FY2013 FY2014 FY2015 FY2016

3,778 3,8714,479

5,838

441

-20.1%

FY2012 FY2013 FY2014 FY2015 FY2016

31,019

44,08251,890

63,674

50,871

当期利益╱（損失）純借入

-2,267.4%

FY2012 FY2013 FY2014 FY2015 FY2016

5,4262,565 2,223

613 -13,289

-3.4%

FY2012 FY2013 FY2014 FY2015 FY2016

52,55766,213

83,779

105,784 102,210

EBITDA 営業活動によるキャッシュ・フロー

-24.1%

FY2012 FY2013 FY2014 FY2015 FY2016

7,228

10,415 11,061

14,385

10,917

-14.3%

FY2012 FY2013 FY2014 FY2015 FY2016

7,2238,612

9,979

13,35611,449

( 日 )


Business Review

1. OUR BUSIneSS

1) Vessel owning & CharteringWe own vessels and charter them out to third party Owners and/or Operators, with

which we earn recurrent charter hire income. We are also bareboat chartering in

one vessel, in addition to owning vessels, which is time chartered out to a third-party

operator.

2) Commercial managementIn addition to vessel owning, we commercially manage vessels owned by joint

investments between our parent company and other parties. This service will be

extended to a pure third-party ship owner.

Ship Owning/Chartering Commercial Management

Bulk CarrierHandysize/ Supermax


Business Review

Vessel TypeA bulk carrier is a large, single deck ship which carries unpacked cargo. The cargo is simply poured, tipped or

pumped in the holds or tanks of the vessel. Bulk carriers are classified several categories by the size of the capacity.

Segment DWT Major cargo Particulars

Handysize(includingSmall Handy)

10,000-40,000 Steel products,Forest Products,Grain,Minor Bulk*

• Themostversatilesegmentduetoitscompactmobility.

• Abletotradeintomostportsintheworldincludingsmall ports with length and draft restrictions and without some infrastructures.

• Mostvesselsareequippedwithitsowngear/cranesto handle various types of cargo.

Handymax(includingSupramaxandUltramax)

40,000-65,000 Steel Products,Coal, Grain, MinorBulk*

• Startedtobebuiltfromlate1990’sand56,000-58,000DWT is its common size nowadays.

• Thisisalsoversatilesegmentcomparedtootherbigger size category.

Panamax(IncludingPost-Panamax)

65,000 to 100,000 Grain, Salt, Coals,Iron Ore

• Withthemaximumwidthof32.2meters,thevesselcan currently navigate the Panama Canal.

• Suitableforcarryingbulkcargoofindustrialcommodities such as salt, grain, coal and iron ore.

• MuchoforeistradedthroughthePanamaCanalthus the vessel with this size is usable for ore trading.

• AfteropeningoftheexpandedpanamacanalinJune 2016, new Post-Panamax vessel with wider holds than those of Panamaxes trasits the new locks.

Capesize 100,000-200,000 Iron Ore, Coals, • Becauseofitssize,therearerelativelysmallnumberof ports around the world with the infrastructures to accommodate this type of vessel.

VLOC 200,000- Iron Ore • Specialcategoryofbulkcarriersandthetermisusedto indicate ships designed to transport iron ore with a deadweight of over 300,000 tonnes.

* Minor Bulk: Fertilizer, Wood Pallet, Mineral Sands, Cement, Cement Clinker, Limestone, Gypsum, Feldspar Chips, etc.

We focus on Handysize/Supramax bulk carriers with the size ranging from 28,000 dwt to 65,000 dwt for the following

reasons:

• Wepayattentiontotheirversatility.Asthesesizesofbulkcarrierscancarryawidevarietyofcargoessuchas

grain, steel products, cement, logs including so called minor bulk, the vessel needs are in wide range.

• TheirsmallsizeallowsHandysize/Supramaxvesselstoentersmallerportstopickupcargoes.Becauseinmost

cases they are crane fitted, they can usually load and discharge cargoes at ports where port facilities are still

under development.

Our Focus

Our Focus


Business Review

• Becauseofaboveversatility,thenumberofvesselsunderthesecategoriesaremorethanthethoseoflarger

sizecategories.HighliquidityinS&Pandchartermarketisseen,whichenablesustohaveflexiblestrategyto

changethefleetsizebyeasierdisposal/acquisitionofthevessels.

The number of vessels by size

30.3%10k to <40k DWT

15.2%≥100k DWT

22.7%65k to<100k DWT

31.8%40k to <65k DWT

Source: Clarkson

As our strategy, we take following measures to maximise our profit.

i. Acquiringgoodqualityvesselsatreasonableprices

→Mostofourvesselsareacquiredafter2010atrelativelylowpriceafterindustry’sboomingtime.Ourfleetare

competitive in terms vessel age.

ii. Chartering out our vessels at reasonable hire rates

→Wearetryingtodeterminetheadequatecharterperiod foreseeingthemarketsituation.Weapplied

voyage charter for some vessels in 2016, in order to maximise the earning capacity of the vessel. Joining

the pool arrangement is also one of our options we can try.

iii. Making efforts to minimise vessels’ operation incidents

→ We closely work with our ship management companies to better control the vessel operation.

iv. Selectively working with reputable Charterers with stringent credit control

→ Regular monitoring on the Charterer’s performance and regular/ad hoc credit reviewing on our clients is

carried out.

v. Strictly controlling vessels’ operational expenses

→ Stringent operating expenses budgeting is discussed with ship manager followed by the monthly

monitoring of the actual expenses.


Business Review

2. DeVelOPMenT fOR THe YeAR

Business environment in 2016Dry bulk market slumped to the historically low level• BalticIndices,aswellasperiodcharterrate,continuedtoplungedtothehistoricallowinearly2016

→ Daily average BDI fell from 718 in 2015 to 673 in 2016.→ Daily average BHSI fell from 366 in 2015 to 360 in 2016.→ Average one year TC rate for 30KDWT dropped from $6,700/day in 2015 to $5,100/day in 2016.

• Secondhandvesselvaluealsohitthe30-yearlowsinearly2016.

Our business development under surrounding business environment in 2016Fleet was expanded in accordance with new vessels delivery• One(1)newlybuilthandysizebulkerwasdeliveredinJanuary2016,forwhich5-yearemploymenthadbeenfixed

several years back.→ Started contributing to the Company’s profit.

• Anotherone(1)vessel,forwhichUASactsascommercialmanagerwithoutshareinterest,wasalsodeliveredduringthe year 2016. Commercial management fee increased due to this new vessel.→ All 12 vessels, including three (3) commercial management vessels, are in operation now.

We increased voyage charter operation to maximise our profitability• Among the UAS fleet, employments of four (4) vessels were short term contracts and affected by historically low hires

in 2016. To be better off in our hire income under depressed market, we applied voyage charter to maximise our profit.

Stringently managed liquidity to enhance our cash flow.• We had three vessels for which refinancing were required in 2016 and all were prepared and completed well in

advance leveraging good relationships with our Lenders.

• Allrefinancingrequiredin2017wasalsopreparedin2016.

Outlook/Strategy in 2017Foreseeing slow recovery, conservative management shall be focused.• Arrangeefficientemploymenttomaximiseourcharterincome.

→ Focus more on subcontinental rout trading foreseeing the growth of cargo demand in this area.→ Focus more no employment in Atlantic sea, which provides higher charter hire rate.→ Arrange 1) Joining pool operation 2) voyage charter and 3) spot/short-term charter for four (4) vessels which do

not have long-term charter, depending on vessel / market situation.

• Improveexpenseratio→ Scale economy, due to expansion of fleet, helps us to reduce operating cost ratio and increase profitability from

operation.→ Stringent annual opex budget is agreed with ship managers and close monitoring will be carried out.

• Continuetomonitorbusinessrisks,includingcreditrisk,operationrisk,interestrateriskandliquidlyrisk.

• Expandthefleetundercommercialmanagement→ We will add four (4) commercial management vessels, three (3) of which are scheduled to be delivered in 2018.

This will increase commercial management fee income.

With above strategy and efforts, we will improve eBITDA.


Business Review

3. OUR fleeTAs at 31 May 2017, our fleet comprises 12 bulk carriers including three vessels we commercially manage. They are

all in operation now. We have ordered four handysize bulk carriers since 2013, in which we own 100% or majority

ownership. All of these four new buildings have been delivered to date.

UAS fleet

Own vessel 9

Commercial management vessel 3

Total 12

Uni-Asia Shipping fleet list

Type Capacity (DWT) Year of Built Shipyard Flag

1 Dry Bulker 28,300 2001 Kanda Hong Kong

2* Dry Bulker 28,709 2007 Shin-Kurushima Hong Kong

3 Dry Bulker 29,000 2011 Y-Nakanishi Hong Kong

4 Dry Bulker 29,100 2012 Y-Nakanishi Hong Kong

5 Dry Bulker 37,000 2013 Onomichi Hong Kong

6 Dry Bulker 37,000 2014 Imabari Hong Kong



9** Dry Bulker 58,000 2015 Tsuneishi Hong Kong

10** Dry Bulker 58,000 2015 Tsuneishi Hong Kong


12** Dry Bulker 37,000 2016 Imabari Hong Kong

As at 31 May 2017* Bareboat chartered vessel** Vessel under commercial management of UAS

Our fleet comprises mostly young vessels with the age of 5 years or less. Among our fleet of 12, 10 vessels were built

after 2010, the building prices of which are relatively low, as we contracted after the market boom had ended by

Global Financial Crisis in 2008. In this respect, we believe that our fleet is highly competitive in the market.

In addition to above fleet, the Company is going to enter into commercial management agreement to act as

a commercial manager for additional four new vessels, in which Uni-Asia Holdings Limited (“UAH”) invested with

another investor in 2015. Those vessels are scheduled to be delivered from Q1 2018 to H2 2019.


Business Review

4. CHARTeRIngAll of our existing vessels are fixing with voyage charter (VC), short-term time charter and long-term time charter

upto 7 years (TC) to reputable Charterers. Because the market deteriorated continuously and daily earnings were

lower than the break-even level at the beginning of 2016, we had entered short-term Time Charter and/or Voyage

Charter for four of our vessels and renewed them from time to time to get higher earnings in each renewal.

In January 2017, one vessel among above four vessels joined vessel pool operation which is consisting of about 30

vesselstoincreaseefficiencyandreduceoff-hire(ballastingtime) causedbyfrequentcontractrenewalstomake

use of pool manager’s charter arrangement capacity and diversify trading areas by pool vessels. This is the first

time for UAS to join this sort of pool operation and it will help UAS to catch higher spot earnings in both Pacific and

Atlantic market. As the market hire rate has been gradually recovering from the end of 2016, though it is still below

break-even, we continue to apply short-term employment strategy either in TC or VC for these vessels for the time

being. Once market recovers to a certain extent, we will also consider to fix for more than one year time charter on a

timely manner so that we can realise the gain from market recovery.

fleet employment PeriodVessel no. 2017 2018 2019 2020 2021 2022

1 Spot23456789*10*1112*

As at 31 May 2017

* Vessel under commercial management of UAS

5. COMMeRCIAl MAnAgeMenTLeveraging our expertise and wide network in shipping industry, we started providing commercial management

services to external clients. As the first step, we committed to provide commercial management services for three

new vessels of which our joint investment partner holds 82% interest while Uni-Asia Holdings Limited, our parent

company, holds 18% of investment interest. Four more new buildings, in which UAH invested with minority interest, will

be added as our commercial management vessels in due course.

Under this commercial management arrangement, we will provide following services to our clients

– Marketing research of Charter & Fixing of Charter Parties

– Arranging for the provision of bunker fuels

– Arranging insurance

– Administrative works in relation to commercial operation

– Arranging surveys associated with commercial operation


Business Review

The first Commercial Management Vessel -M.V. Kellett Island

The second commercial management vessel -M.V. Trident Star

The third commercial management vessel -M.V. Uni Harmony


Operation Review

1. HOW We PROVIDe OUR TOnnAge TO OUR ClIenTSLeveraging our internal resources and network, we are providing our tonnage and take cares of our vessel

performance

• Wehaveourcommercialteam,whichiscloselycommunicatingwithCharterersandrespondingto

their needs timely and properly.

• WehaveUni-AsiaGroup’sin-housetechnicalteam,WealthOceanShipManagement(Shanghai)Co.,

Ltd. (“WOSMS”), which is a subsidiary of Uni-Asia Holdings Limited. WOSMS can take care of our vessels

operation as a technical manager.

• Athird-partyshipmanagementcompanycanbealsoappointedasashipmanagerofourvesselto

meetCharterers’specialrequirements.

• UniShipsandManagementLimited,avesselrelatedserviceproviderofUni-Asiagroup,alsohelpsus

as a middleman in relation to ship operation between WOSMS and the Company.

Provide our vessels to our clients

Ship OwnerUni-Asia Shipping

with its Commercial Team

Ship Service ProviderUni Ships and Management• Helps procurement• Helps crew management

Ship Technical ManagerWOSMS

Third party ship manager

As a ship owner/bareboat charterer/commercial manager, we are keeping our vessels always in good condition

and complying with international regulations and rules in order for them to carry our clients’ cargoes safely and

efficiently among ports worldwide. Working with WOSMS, which has affluent experiences, and leveraging wide

connection with other ship management companies which provided professional services, we are able to provide

our clients with good performance of ships and establish good relationship with them.


Operation Review

2. OUR fleeT TRADIng ROUTeSWe always maintain our fleet in high standard to trade worldwide, which can always meet our clients’ specific

trading patterns in the planet. Examples of our vessels' trading routes are set out as follows:

1

5

6

7

7

8

9

10

11

342

13

12

14

Log Grain Steel Fertiliser

Route no. Main Cargo loading Discharging Voyage Period

1 Log Gisborne/Tauranga, New Zealand Lanqiao,China 30 days

2 Log Tanjung Manis, Malaysia Kandla, India 36 days

3 Log Solomon Islands Jingjiang, China 52 days

4 Log Papua New Guinea Jingjiang, China 45 days

5 Log Nanaimo/Port Alberni, Canada Xiuyu, China 38 days

6 Steel Gwangyang/Pohang, Korea Vung Tau, Vietnam/Map Tha Phut/Laem Chabang/Koh Sichang,

Thailand

28 days

7 Steel Antwerp, Belgium Veracruz, Altamira, Mexico/Houston, USA

46 days

8 Steel Changshu/Tianjin/Bayuquan,China

LaLibertad,Ecuador/Lirquen/Valparaiso, Chile

60 days

9 Barley Geelong, Australia Jiangyin, China 25 days

10 Barley Necochea, Argentina Cartagena, Colombia 40 days

11 Grain New Orleans, USA SantaMarta/Barranquilla,Colombia

21 days

12 Urea Jubail, Saudi Arabia Chittagong, Bangladesh 32 days

13 Potash Vancouver BC, Canada Salaverry, Peru/San Antonio/Lirquen/PuertoMontt,Chile

57 days

14 NPK Fertiliser Yosu, Korea Koh Sichang, Thailand 26 days

* Voyage period includes loading/discharging/anchoring/shifting/bunkering time.


Operation Review

3. CARgO PORTfOlIOOur Handysize bulk carriers, majority of which are logger with shallow draft, geared, logged fitted, bring high flexibility

for trading areas and loadable cargoes. The commodities we transported primarily include log, coal, cement,

cement clinker, steel products, fertilizer, grain, sugar, pet coke and mineral concentrates.

Uni-Asia Shipping limited Cargo Profile in 2016

34.5%Agricultural products

5.2%Minerals

6.9%Energy

13.8%Metals

39.7%Constructionmaterials

2016Cargo

All of our vessels are crane-fitted and ensure maximum flexibility for self-handling of commodities in those regions

where port facilities are still under development.

loading the Coal loading fertilizer

Discharging log Discharging log


Operation Review

Discharging log Discharging log

loading Wheat loading Soybean

Discharging Maize Discharging Maize

Discharging Steel Bar loading Steel Coil


Operation Review

loading Bagged Cement loading Steel Bar

4. OPeRATIOn DATA1) Charter hire incomeIn accordance with delivery of new vessels, the number of operating days has been increasing significantly

every year. Our charter hire income also increased in total in 2016 but some vessels suffered from historically low

market rates during the year. At the beginning of the year 2016, we have three vessels for which short-term/spot

employment were applied. In April 2016, one another vessel completed its five-year employment and it started to

be employed on short-term basis, the rates of which were far below its previous long-term charter rate. As a result,

though one new vessel was delivered at the beginning of 2016, which contributed to boosting the income for

FY2016withhigherrateoflong-termemployment,theincrementoftotalcharterhireincomewassqueezedbydrop

of the rates of short-term employments.

Charter Hire income and no. of operating days

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

3,500

Charter Hire Income

2011 2012 2013 2014 2015 2016

No.of operating days

3,000

2,500

2,000

1,500

1,000

500

0

No.of operating daysCH income(US$’000)

3,157

2,756

1,953

1,647

1,248

57219,390

28,645

26,680

16,19012,723

6,540

Notes:1. Commercial management vessels are excluded.2. Voyage charter income and working days of voyage charter period are included.


Operation Review

The average charter hire rate of all the vessels, excluding voyage charter period, went down further from US$9,676/

day in FY2015 to US$9,071/day in FY2016 by US$605, reflecting the worst market since 1980’s. Among nine (9) vessels

operated in 2016 (excluding three (3) commercial management vessels), three (3) vessels were exposed to the

depressed charter market throughout the year and one vessel also suffered from a drop of hire rate after expiry of

the previous employment from April as afore mentioned.

Average Charter Hire Rate (all vessels)

11,000

12,000

10,000

9,000

8,000

7,000

6,000

5,000

2011 2012 2013 2014 2015 2016

US$/day

11,436

10,1929,832 9,932 9,676

9,071

Notes:1) Average charter hire rate above does not include voyage charter2) Commercial management vessels are excluded

We continuously tried to maximise our profit from the vessels by applying voyage charter for several vessels, the

averageTCEquivalentrateofwhichwasaboutUS$5,500,betterthantheaverageshort-termhireratefor2016.


Operation Review

2) Operating expensesA) Operating cost ratio against charter hire incomeThe Operating Cost Ratio (the ratio of total operating cost to charter hire income) went up to 88.0% in FY2016 from

81.5%inFY2015,squeezingourprofitmargin.Here,thetotaloperatingcostcomprisesi)vesseloperatingexpensesii)

operating lease expense, iii) depreciation, iv) administration expenses and v) brokerage commission paid. Factors

of the increase of operating cost ratio, in addition to drop of average hire rate aforementioned, are as below.

a) One vessel was restructured from direct ownership to bareboat chartering-in, which incurred operating lease

expense and increased the total operating cost, offsetting reduction of depreciation amount.

b) Bunker oil expense for off-hire period increased due to increase in the number of off-hire days and expansion

of voyage charter operation, for which the ship owner needs to bear the bunker oil cost.

As a result of above a) and b), the ratio of vessel operating expenses against charter hire income went up from

45.9% in FY2015 to 49.8% in FY2016 and Operating Cost Ratio went up from 81.5% in FY2015 to 88.0% in FY2016.

Operating Cost Ratio(Proportion to Charter Income)

Vessel operating expenses /Charte Income (Left Axis)

Depreciation /Charter Income (Left Axis)

Vessel lease expenses (Left Axis)

Administration cost / Charte Income (Left Axis)

Total cost/ Charter Income (Right Axis)

FY2013 FY2014 FY2015 FY2016

Brokerage Commission / Charte Income (Left Axis)

0

10%

20%

30%

40%

50%

60%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

44.3%

28.0%

43.0%

77.0% 77.5%81.5%

88.0%

29.5%

45.9%

31.7%28.9%

49.8%

3.8%

0.0% 0.0% 0.0%

5.5%

0.9% 0.9% 1.2% 1.4%4.1%

2.8% 2.5%


Operation Review

B) Breakdown of vessel operating expensesBreakdown of vessel operating expenses is set out below. The portion of crew expenses, lubricating oil and

insurance expenses, which are the major components of the operating expenses, decreased compared to FY2015.

In the meantime, shares of operating miscellaneous and other expenses went up from FY2015. This is because the

aforementioned bunker oil cost and voyage charter related expenses were included in those items.

Breakdown of Vessel Operating expenses(Y-Y comparison)

Crew expenses

FY2016

Insurance

Lubricating oil

Ship management fee

Ship’s stores charges

Vessels repairs/maintenance

Vessels survey

Operating miscellaneous expenses

Other expenses

56.5%

8.1%

4.6%

5.3%

4.3%

5.9%

1.6%

7.1%

6.6%

Crew expenses

Insurance

Lubricating oil

Ship management fee

Ship’s stores charges

Vessels repairs/maintenance

Vessels survey

Operating miscellaneous expenses

Other expenses

Total

56.5%

FY2016

8.1%

4.6%

5.3%

4.3%

5.9%

1.6%

7.1%

6.6%

100.00%

- 0.5

Change(Percentage Point)

- 0.5

- 1.6

- 0.2

- 0.1

- 0.2

- 0.1

2.4

0.8

0.0

57.0%

FY2015

8.6%

6.2%

5.5%

4.4%

6.1%

1.7%

4.7%

5.8%

100.00%


Operation Review

C) Vessel operating expenses per dayThe movement of major operating expense items per day is set out in the below line chart. Crew manning fee and

insurance expenses showed stable movement. Lubricating oil dropped a bit in FY2016, due mainly to sluggish oil

price and our effort of efficient bulk purchase arrangement.

Major Vessel Operating costs per day

US$

FY2012 FY2013 FY2014 FY2015 FY2016

Crew Manning Fee/day

Lubricating oil/day

Insurance expenses/day

2,500

2,000

1,500

1,000

500

0

Note: Above numbers are calculated as annual cost/number of operating days including off hire days.

With WOSMS, our ship management company and sister company under Uni-Asia group, we are paying close

attention to these vessel operating expense items so as to better control and minimise these expenses. Due to our

effort of stringent cost control, we managed to maintain the expenses.

3) Off-hire daysOff-hireusually takesplace in thecaseof technicalproblemsofvesselwhichrequire repairorsurveydueto

technical failures and accidents, or when a regulator orders the vessel to stop operation for regulatory reasons. Also,

our vessel dry-docks at least every five years and usually conduct interim dry-docking every 2.5 years, which also

ingenerates off-hire.


Operation Review

The chart set out below shows the number of off-hire days per vessel excluding commercial management vessel,

which comprises off-hire for dry-docking and off-hire for non-drydocking. It increased from 8.3 days in FY2015 to 12.3

days in FY2016. While dry-docking off-hire days per vessel increased slightly from 4.1days in FY2015 to 5.3 days in

FY2016, the number of non-dry-docking off-hire days per vessel went up from 4.2 days to 6.9 days. The number of

non-drydocking off hire days is greater compared to the ones in the past, partly because of the greater number of

redelivery off-hire days for the vessels employed on short-term basis. Unexpected ship repair in relation to accident

also contributed to the increase of the number of off-hire days.

no. of Off-Hire Days/vessel

No. of Off-Hire Days/Vessel (excluding DD)

No. of Off-Hire Days/Vessel for DD

Total No. of Off-Hire Days/Vessel

2013 2013 2014 2015 2016

0

2

4

6

8

10

12

14

2.0

4.8

8.3

4.2

0.1

4.74.1

5.3

12.3

6.9

2.0

1.2

6.3

5.1

days


Vessel Delivery History

2011

M.V. Victoria Harbour Built in 2011

M.V. Clearwater BayBuilt in 2012

M.V. ANSAC PrideBuilt in 2013

M.V. Island BayBuilt in 2014

M.V. Inspiration LakeBuilt in 2015

M.V. Uni BulkerBuilt in 2016

M.V. Uni HarmonyBuilt in 2016

M.V. GlengyleBuilt in 2015

M.V. Kellett IslandBuilt in 2015

M.V. Trident StarBuilt in 2015

M.V. Orient SunriseBuilt in 2001

M.V. Uni Auc OneBuilt in 2007

Commercial Management VesselOwn/BBC Vessel

2012

2013

2014

2015

year-to-date2016

Vessel UAS holds majority ownership/ bareboat chartered vessel

Commercial management vesselCM

Own/BBC



1. BAllAST WATeR MAnAgeMenT

BackgroundInternational Marine Organization

(“IMO”) ConventionThe Company’s action

• Tostabilisevesselsatsea,seawater

has been used as ballast for many

years. Thus, ballast water is essential

for safe and efficient operation.

• On theotherhand, it hasbeen

criticised that it causes ecological

problems due to the multitude of

marine species carried in the ballast

water being transferred to different

environmental area. The transferred

species may survive to establish a

reproductive population in the host

environment and expel the native

species. In this way, ecological

system would be damaged.

• In February 2004, International

Convention for the Control and

Management of Ships’ Ballast Water

and Sediments (BWM Convention)

was adopted by IMO.

• TheBWMConvention requiresall

ships to implement a Ballast Water

and Sediments Management

Plan and carry out ballast water

management procedures to a given

standards.

• TheBWMConventionwillenter into

force on 2017.9.8, one year after

Finland joined and triggered 35%

world tonnage point on 2016.9.8.

• Evenbeforethisconventionbecame

effective, we have been studying the

actions to be taken and preparing

for them. The new vessels we ordered

since 2013 had factored in this

issue and vessel specifications were

made to satisfy the requirements.

For the vessels ordered/delivered

before 2013, we need to install the

system. M/V ANSAC PRIDE built in

2013 will be the first existing vessel

for which ballast water treatment

systemwillbeadditionallyequipped

in 2018, in order to comply with BWM

Convention.

2. eCO SHIP/gReen SHIP

Background IMO convention The Company’s action

• Although there is no common

definition of “ECO ship” in the world

as it is a new category, it is usually

referred to as a ship with special

consideration for the environmental

impacts. Energy efficiency is most

notable factors of ECO ship.

• The features of the ship design

include advanced hull form, large

propeller, longer stroke engines and

other additive design features relate

to the bow, rudder and paint.

• Itattractsmarketplayers’attention

since it can reduce vessel’s bunker

consumption and noxious gas

emissions.

• IMO issued new regulat ion in

January 2013, aiming at improving

the energy efficiency of international

shipping,whichrequirestheEnergy

Efficiency Design Index (“EEDI”) for

new ships with maximum four years

grace period.

• Allofour fourvesselsweordered

since 2013 and three new vessels

under commercial management

are designed with high standards

andtheymeettherequirementsof

IMO.



3. eleCTROnIC CHART AnD DISPlAY InfORMATIOn SYSTeM (“eCDIS”)


• ConventionalSeaChartshavebeen

used for marine navigation over the

past century. Recently, many nations

criticise that it costs excessive wood

and is not good for the planet.

• Mo reove r, Cap ta in needs to

manually correct paper charts,

which is burdensome work.

• Carriage requirement of ECDIS

was adopted by IMO in 2009 for

both new and existing ships. The

mandatory date when it will come

into force varies depending on

ship types and sizes. (Table 1 below

shows enforcement schedule).

• Un l ike paper char ts , ECDIS i s

able to upload data of Electronic

Navigational Chart (“ENC”) and

display it in the screen, without using

paper.

• Al l navigational information is

displayed in ENCs, and Captain is

nolongerrequiredtomakemanual

correction of Sea Charts, which can

reduce shipside’s workload.

• TheCompany isactingquickly for

ECDIS installations, although there is

still time for such rules to be imposed

on our fleet.

• Fivevesselswhichweredelivered

from June 2013 have been fitted

with ECDIS and training was carried

out for all top four Officers of those

vessels. They are sailing “paperless”

from her maiden voyage.

• Forotherexistingvesselsbuiltbefore

June 2013, the Company has

prepared the installation schedule

and plan is ready to be activated in

due course.

• Nineoutof12vesselshavealready

installed ECDIS as of the date of this

report, including installation during

drydocking carried out in 2017. For

the remaining three vessels, ECDIS

will be installed by due date.

Table 1: IMO – Mandatory Requirement of eCDIS carriage on board

Ship types Constructed Dategross Registered Tonnage (gRT)

entry into force

Cargo ships(Other thanTanker)

Before 01/07/2013 10,000<= GRT< 20,000 Not later than the 1st survey on or after 01/07/2016

Before 01/07/2013** 20,000<= GRT< 50,000 Not later than the first survey on or after 01/07/2017

Before 01/07/2013** 50,000<= GRT Not later than the first survey on or after 01/07/2018

On or After 01/07/2014 3,000<= GRT< 10,000 Notlaterthantheinitialsafetyequipmentsurvey

On or After 01/07/2013** 10,000<= GRT Notlaterthantheinitialsafetyequipmentsurvey

** Remarks: Applied to Uni-Asia Shipping`s fleetSource: IMO



4. SHIP ReCYClIng MATTeRS


• Theend-of lifevesselsaregathered

in the sh ip break ing yards in

development countries from all

over the world and demolishing

works are carried out by manual

labours. Workers may be exposed

to asbestos, fuel oils and other

substances, some of which are

hazardous for human and not

friendly to environment.

• The Hong Kong In te rnat iona l

Convent ion fo r the Sa fe and

Environmentally Sound Recycling

of Ships, 2009 (the “Convention”)

was adopted in Hong Kong in May

2009, aiming to ensure that ships,

when being recycled after reaching

the end of their operational lives,

do not pose any unnecessary risks

to human health, safety and to the

environment.

• Regulations in the Convention

includes certification and reporting

requirements so as to facilitate

safe and environmentally sound

recycling without compromising the

safety and operational efficiency of

ships.

• ShipOwnersarerequiredtoensure

that a vessel maintains i) an initial

survey to verify the inventory of

hazardous materials (“IHM”), ii)

additional surveys during the life of

the ship, and (iii) a final survey prior

to recycling.

• It is yet tobemandatoryas the

number of countries which signed

the convention has not reached the

requirednumberasof thedateof

this report. It is expected be effective

in the near future.

• Although theConvention isyet to

be in force, necessary actions are

planned or have been carried out

by the Company.

• For the vesselswe tookdelivery

before 2014, we are continuously

updating and maintaining IHM by

following manners:

– Request experts tomakean

IHM as per IMO guideline to

classification society; and

– Cooperate with classification

society and get issuance of

Statement of Fact/Certificates of

IHM.

• Forthevesselswetookdeliveryfrom

2014, we prepare and develop IHM

by following manners:

– Make sure the IHM for new

b u i l d i n g s i s c o m p i l e d by

the shipyard and verified by

classification society during

the normal construction survey

process;

– Cooperate with classification

society and get issuance of

Statement of Fact/Certificates of

IHM; and

– D eve l o p a n d d i s t r i b u te a

software which is designed

by classification society, for

the purpose of bet ter IHM

development.

Conventional wayPaper Sea Charts

New technologyElectronic Navigational Charts

Display of Electronic Navigational Chart



5. nOISe leVel On BOARD


• Inthe lastover30years, therewas

only non-mandatory guidance

to flag authorities on maximum

noise levels and exposure limits to

seafarers.

• On1 July2014, the International

Convention for the Safety of Life at

Sea (SOLA) was amended to make

the code on Noise Levels On Board

Ships (the “Code”) mandatory for

new vessels by IMO resolution. This

rule mainly focuses on crew’s health

on board especially in engine room

under an appropriate noise level.

• TheCodeisappliedtoallnewships

with a gross tonnage of 1,600 or

above. “A new ship” is a ship which

falls under one of the follows: (i) It

is delivered on or after 1 July 2018;

or (ii) Construction is contracted

on or after 1 July 2014: or, (iii) In

the absence of building contract,

keel laying is on or after 1 January

2015. The Code sets out a series

of requirementssuchas limitation

of noise levels and verification

of acoustic insulation between

accommodation spaces.

• Ifavessel isnotcategorisedasa

new ship but falls under certain

categories, measures should be

taken to reduce machinery noise in

machinery spaces to acceptable

levels depending on the case, and

adequatenoisesurveyreportshould

be made.

• TheCompanyunderstands that

appropriate noise level control could

benefit to seafarers, Ship Owners

and Charterers with respect to:

– Ensuringqualityofcrewsleepon

board.

– Protection of crew from hearing

loss due to excessive noise.

– Better communication among

crews in control station of engine

room and machinery space for

avoidance of injury or machinery

accident due to human error

and avoid impairing the safety

of our marine asset.

• With suchphilosophy,applicable

ve s s e l s o f t h e C o m p a ny a re

constructed strictly in compliance

with the Code. The noise level

measurement has been carried out

by surveyors of Classification Society

during sea trial and record is safely

kept.


Market Review

Vessel demand and supply

• Vessel supply surplus over the vessel

demand increased to 120 million DWT in

2016 from 115 million DWT in 2015. Though

vessel demand increased by 1.8% in 2016,

improved from negative demand growth

of -0.3% in 2015, supply also increased

by 2.2% in 2016, down from 2.8% in 2015.

Though it was the slowest supply growth

rate over the past 10 years, it still exceeded

the growth of demand in terms of volume

and rate.

• Vesseldemandgrowthwas supported

by dry cargo demand increase, which

reached around 4,900 million tonnes in

2016 with an annual growth rate of 1.1%

(+52.5 million tonne), up from negative

growth rate of -0.8% in 2015. It was the third

slowest growth rate since 2007. Most of the

increase in dry cargo demand in 2016 was

due to the rise of Chinese import of iron ore

and steam coal due to higher demand

and less domestic production.

Utilisation

• BeforetheGlobalFinancialCrisis in2008,

the utilisation rate had been over 90%

and it dropped to below 90% thereafter. It

was hovering around the level between

84% and 89% for the period from 2011 to

2015. However, it further dropped below

84% in Q1 2016, reflecting the increased

oversupply of the vessel. The situation

improved gradually after Q1 2016.

Source: Marsoft

Source: Marsoft

Source: Marsoft

Demand and Supply of bulker(Million DWT)

Annual change of bulker demand and supply

fleet Utilisation (%)

0

100

200

300

400

500

600

700

800

900

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vessel Demand Vessel Supply Supply-Demand (Surplus)

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Demand Supply

80

82

84

86

88

90

92

94

96

98

100

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

2012Q1

2012Q3

2013Q1

2013Q3

2014Q1

2014Q3

2015Q1

2015Q3

2016Q1

2016Q3


Market Review

Charter Rate

• The BalticDry Index (“BDI”) is adaily

index reflecting the price movement of

transporting the dry cargo. The average

of BDI for 2015 was 718, and it further

dropped to 673 in 2016 (drop by 6.3%).

In 2016, it started with slightly below 500

and it further dropped and hit the bottom

of 300 in January, which is an all-time low

since 1985. The index has been improving

since March 2016 and recovered to 1,200

level in November.

• 1-YearTC ratesof 30KDWTbulkerand

38K DWT experienced the worst over the

last 30 years. TC rate for 30K DWT hit the

bottom of US$4,288/day, while it was

US$4,521 for 38K DWT in Q1 2016. They

were the worst since 1983, when the rates

dropped to below/around US$4,000. Those

rates showed improvement from Q2 2016

and they recovered to US$6,000 level in Q4

2016.

Source: Bloomberg

BDI Movement(From 1986)

0

2,000

4,000

6,000

8,000

10,000

12,000

Dec-86

Dec-87

Dec-88

Dec-89

Dec-90

Dec-91

Dec-92

Dec-93

Dec-94

Dec-95

Dec-96

Dec-97

Dec-98

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Source: Bloomberg

BDI movement(2015 and 2016)

0

200

400

600

800

1,000

1,200

1,400

Jan-15

Feb-15

Mar-1

5

Apr-15

May-1

5

Jun-15

Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-1

6

Apr-16

May-1

6

Jun-16

Jul-1

6

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Source: Marsoft

US$/day

1 Year Time Charter Rate(From 1983)

0

1,000

2,000

3,000

4,000

5,000

6,000

1983Q4

1986Q4

1989Q4

1992Q4

1995Q4

1998Q4

2001Q4

2004Q4

2007Q4

2010Q4

2013Q4

2016Q4

30K DWT 38K DWT

Source: Marsoft

US$/day

1 Year Time Charter Rate(From 2014)

-

2,000

4,000

6,000

8,000

10,000

12,000

2014Q1

2014Q2

2014Q3

2014Q4

2015Q1

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

30K DWT 38K DWT


Market Review

Vessel price

• Newbuildingpricefor30K/38KDWTbulker

continued to drop in 2016. In Q4 2016, it

was just USD17.3 million for 30K DWT and it

was 19.0 million for 38K DWT, both are the

lowest since Q3 2003.

• Second-handvesselpricealsoexperienced

the historic low in the last 30 years. For

30K DWT 5-year old secondhand bulker,

the price dropped to USD8.0 million in

Q1 2016, while that of 38K DWT 5-year old

vessel dropped to US$8.8 million. The both

are the lowest levels since Q4 1987. Those

prices showed recovery trend from Q2

2016, and the price improved to US$9.6

million for 30K DWT while that of 38K DWT

went up to US$11.2 million in Q4 2016.

Source: Marsoft

Bulker Price Movement(US$ million)

0

10

20

30

40

50

60

1984Q4

1986Q4

1988Q4

1990Q4

1992Q4

1994Q4

1996Q4

1998Q4

2000Q4

2002Q4

2004Q4

2006Q4

2008Q4

2010Q4

2012Q4

2014Q4

2016Q4

30K Newbuilding 30K Second-hand 5-Years 38K Newbuilding 38K Second-hand 5-Years


Financial Review

Total Revenue

28.6 US$ million

Operating Profit

0.4 US$ million

Loss after Tax

-13.3 US$ million

Total Assets

170.0 US$ million

Shareholders’ Equity/ Total Assets (Equity Ratio)

28.7%

Net Cash Flows from Operating Activities

11.4 US$ million

EBITDA

10.9 US$ million

No. of operating days

3,157 days

+7.4%

Y-O-Y

1. KeY DATA (fY2016)

-92.4%

-2,267.4%

-5.1%

( from 34.5%)

-14.3%

-24.1%

+14.6%

US$000

Total Revenue 28,645

Cost of Service 27,966

Gross Profit 679

Other Income 486

Administrative Expenses 724

Finance Cost 3,987

Impairment Loss 8,590

Profit after Tax (13,289)

Fixed/Non-Current Assets 156,202

Current Assets 13,754

Current Liabilities 29,122

Non-current Liabilities 89,962

TotalEquity 50,871

Shareholders'Equity 48,758

Net Cash Flow from Operation 11,449

Depreciation 8,272

Financing cost 3,987

Unrealised loss and others 11,952

9 vessels in operation at the year end

EBITDA = Profit before Tax + Depreciation - Interest Income + Finance Cost + Unrealised Loss/(Gain) + Impairment Loss + Onerous Contract Provision - Gain on Disposal of Vessel - Fair Value Gain on Equity Investment


Financial Review

2. fInAnCIAl PeRfORMAnCe (COnSOlIDATeD fInAnCIAl STATeMenTS)

1) Income Statement (Statement of Profit or loss and Other Comprehensive Income)• TheCompanyrecordedanet lossofUS$13.3millioninFY2016,downfromanetprofitofUS$0.6millionin

FY2015. The net loss is mainly attributed to vessel impairment losses of US$8.6 million and provision of vessel related onerous contract of US$3.5 million, which reflect historically low shipping market in 2016. These losses and provision are non-cash losses without cash out flow.

• Thenumberofoperatingdaysforvessels increasedfrom2,756daysinFY2015to3,157daysinFY2016by14.6%, due to delivery of one new vessel in January 2016 and full-year contribution of two vessels which were delivered in Q1 FY2015.

• Total revenueincreasedfromUS$26.7million inFY2015toUS$28.6million inFY2016by7.4%.Dampenedcharter market continued to drop in early 2016 and it hit the bottom in Q1 though it started recovering in the middle of the year. This affected our charter hire income, as four vessels were employed for less than one year period and suffered from the lower hire rates. The average charter hire rate per day of our vessels went down from 9,676/day in 2015 to 9,071/day(note) in 2016. Though, newly delivered vessels, including two vessels delivered in 2015 and one vessels delivered in early 2016, contributed to boosting the charter revenue as the numberofoperatingdaysincreased,dropoftheaveragehireratesqueezedtheincrementofthecharterhire income to 7.4%.

Note: Average hire rate is calculated for our owning/bbc vessels only, excluding commercial management vessels.

Voyage charter period is also excluded.

• OperatingprofitdecreasedfromUS$5.8millioninFY2015toUS$0.4millioninFY2016by92.4%duetoloweredaverage hire rate and provision of onerous contract of US$3.5 mil, which was recorded as part of accounting item of “cost of services rendered”.

• AforementionedUS$8.6millionimpairmentlosseswererecognisedforthreevesselsduetothesignificantdropof the value in use of each vessel, which was assessed by estimated future cash flow of the vessel, reflecting the deteriorated market.

2) Balance Sheet (Statement of financial Position)• TotalassetsdecreasedtoUS$170.0millionattheendofDecember2016fromUS$179.2millionattheendof

December 2015 by 5.1%, though a new vessel delivery added balance sheet amount, which was offset by impairment loss of US$8.6 million.

• Duetoanet lossrecognised,equityratio(shareholders'equity/totalasset)droppedto28.7%attheendof FY2016 from 34.5% at the end of FY2015. Retained profit at the end of FY2015 was US$9.9 million, which dropped to -US$3.6 million at the end of FY2016, due to a net loss we recognised. Though retained profit turned negative, paid-up capital of US$52.0 million is sufficient to maintain the sound financial position of the Companywithshareholders’equityofUS$48.8millionandtotalequityofUS$50.9million.

3) Cash flow & eBITDA• NetcashflowfromoperatingactivitiesdecreasedtoUS$11.4millioninFY2016fromUS$13.4millioninFY2015,

mainly due to drop of average charter hire rate and reduced hire income per vessel. EBITDA decreased from US$14.4 million in FY2015 to US$10.9 million in FY2016. Accordingly, EBITDA margin (EBITDA/total revenue) also dropped from 53.9% to 38.1% by 15.8 Percentage Point. In addition to drop of average hire rate due to sluggish market, the number of days of off-hire per vessel increased to 12.3 days in FY2016 from 8.3 days in FY2015, which was caused by the longer dry-docking period including sailing period to the yard, repair and morefrequentre-deliveryofthevessels.Accordingly,thevesselprofitabilitywassqueezedandEBITDAmargindropped.


About our shareholder – Uni-Asia Group

Uni-Asia Holdings Limited (“UAH”) was established in March 1997 and was listed on Singapore Exchange ("SGX") Main Board in August 2007. UAH is an alternative investment company, which acts as a principal investor as well as an integrated service provider in relation to investment in vessels and properties. From 2 June 2017, Uni-Asia Group Limited, a newly established Singapore Company (“UAG”), takes over the listed status as an ultimate shareholding company of the group.

Starting with a background of transportation asset finance arranger, UAG and its group companies (“UAG Group” or the “Group”) branched out into asset management business of ship investment and property investment, in which we are acting as a principal investor.

UAG Group comprises four business segments, including ship owning business of the Company. These segments are re-categorised by Shipping/Financial Service and Property/ Hotel Operation from FY2017.

As illustrated, UAG Group provides integrated services in relation to ship investment under Non-consolidated Uni-Asia business segment (shipping/financial service segment from 2017). The Company is also supported by UAG group in the following business area.

– Ship finance arrangement– Ship management service– Ship brokerage services and ship sale & purchase brokerage– Administration and management of ship owning SPCs– Providing idea of restructuring vessel ownership, i.e. reforming the ship ownership to joint investment or investment

funds

ThroughUniShipsandManagementLimited,awhollyownedsubsidiary,UAHofficiallyacquired51%sharesofWealth Ocean Ship Management Shanghai (“WOSMS”) in 2013, which is a ship management company of UAG Group. WOSMS has been supporting us by providing ship management/technical management service for our vessels.Withthisacquisition,weareabletoworkwithWOSMSmuchclosersoastoimproveourshipmanagementintermsofqualityaswellascostefficiency.

Uni-Asia Shipping Limited

Business Entities Business Outline Buiness Segment

Uni-Asia Group Limited

Uni-Asia Holdings Limited

Parents & headquartersof the group

Ultimate holdingand listed entity

Hong Kong

Uni Ships & Management Limited

Hong Kong

Uni-Asia Capital(Singapore) Limited

Singapore

Uni-Asia CapitalCompany Limited

Hong Kong

Japan

Japan

Uni-Asia Hotels Limited

Japan

Vista HotelManagement Co., Ltd

Japan

Wealth Ocean Ship Management(Shanghai) Co., Ltd.

Shanghai

Uni Ships & ManagementLimited (Taiwan)

Taiwan

Uni Ships & ManagementLimited (Korea)

South Korea

• Ship finance arrangement• Ship investment asset management• Ship brokerage services for chartering and sale & purchase• Ship technical management

• Property investment & asset management in Japan

• Property investment in Hong Kong & China

• Hotel operation in Japan

• Vessel owning & chartering• Commercial management

Uni-Asia Capital(Japan) Limited

Uni-Asia InvestmentLimited

onward

2016 2017

Shipping/FinancialService

Uni-AsiaShipping

Non-consolidated

UAH

UACJ &UAI

Property/Hotel

Operation

Uni-AsiaHotels


Risk Management

Risk management framework

UAH, which was a Singapore listed company, engaged external consultant from KPMG Services Pte Ltd to set up

an Enterprise Risk Management ("ERM") framework ("ERM Framework") in 2012. This governs the risk management

process in the Group. Through this framework, risk capabilities and competencies would be continuously enhanced.

The ERM Framework also enables the identification, prioritisation, assessment, management and monitoring of

key risk to the Group’s business. The risk management process in place covers, inter alia, financial, operational

and compliance risks faced by the Group. Complementing the ERM Framework is a Group-wide system of internal

controls, which includes the Code of Conduct, documented policies and procedures, proper segregation of duties,

approval procedures and authorities, as well as checks-and-balances built into the business process. As part the

Group, the Company is involved in this ERM exercise and ERM Framework is built in the Company’s ship owning

and chartering business. Under this framework, relevant risks are identified & evaluated on regular basis. Remedial

actions or appropriate measures to control and mitigate these risks are taken, when necessary.

Risk Management framework

Internal/external audit

Risk Management

Operational Governance Financial Governance PolicyManagement

Compliance

PEOPLE

PROCESS SYSTEMS

4TH LINEOF DEFENCEUAG BOARDOVERSIGHT

3RD LINE OF DEFENCEINDEPENDNENT ASSURANCE

2ND LINE OF DEFENCEMANAGEMENT AND ASSURANCE

1ST LINE OF DEFENCEBUSINESS GOVERNANCE/POLICY MANAGEMENT

UAG Group also engages external audit professionals to outsource its internal audit function. The outsourced

professional conducts internal audit based on the internal audit plan approved by the Audit Committee of UAG. As

part of UAG Group, business operation of the company is subject to the Group’s internal audit work and it is audited

by the outsourced auditor on regular basis.


Management & Team

Board of Directors

3

1 2

4 5

Mr. Yukihiro Rob Hata(General Manager)

Ms. Ally Chiu(General Manager-chartering)

Mr. Shinichiro Ishizaki(Senior Manager)

Mr. Billy Zhang(Manager)

Ms. Fiona Wu(Manager)

Ms. Vita Wang(Manager)

Ms. Zoe Tsang

(Associate)

Commercial (S&P Chartering/Operation) Team

1 Mr. Michio Tanamoto (Chairman)

2 Mr. Masaki Fukumori (CEO)

3 Mr. Zac K. Hoshino (COO)

4 Mr. Kenji Fukuyado

5 Mr. Makoto Tokozume (CFO)


Management & Team

Ms. Yan Kwan(Senior Vice President)

Ms. Candy Wong(Group Supervisor)

Mr. Ivan Ho(Senior Accountant)

Mr. Jeffrey Choi(Vice President)

Ms. Grace Hui(Accountant)

Ms. Karman Fung(Accountant)

Ms. Valarie Shum(Assistant Accountant)

Accounting Team

Mr. Kiyoshi Takami(General Manager)

Mr. Joe Qiao(Director/Technical Dept.)

Capt. Xin Chengyu(Director/Marine Dept.)

Wealth Ocean Ship Management (Shanghai) Co., ltd



The directors present their report and the audited financial statements of Uni-Asia Shipping Limited (the “Company”)

and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2016.

PRInCIPAl ACTIVITIeS

The principle activity of the Company is investment holding. Details of the principal activities of the principal

subsidiaries are set out in note 1 to the financial statements. There were no significant changes in the nature of the

Group’s principal activities during the year.

ReCOMMenDeD DIVIDenD

The directors do not recommend the payment of any dividend in respect of the year.

DIReCTORS

The directors of the Company during the year were:

Mr. Michio Tanamoto

Mr. Masaki Fukumori

Mr. Kiyomi Hoshino

Mr. Kenji Fukuyado

Mr. Makoto Tokozume

In accordance with article 13 of the Company’s articles of association, directors are not subject to rotation or

retirement at annual general meetings. Accordingly, all directors continue in office.

DIReCTORS’ InTeReSTS

At no time during the year was the Company, its holding company, or any of its subsidiaries and fellow subsidiaries

apartytoanyarrangementtoenabletheCompany’sdirectorstoacquirebenefitsbymeansoftheacquisitionof

shares in or debentures of the Company or any other body corporate.

DIReCTORS’ InTeReSTS In TRAnSACTIOnS, ARRAngeMenTS OR COnTRACTS

No director had a material interest, either directly or indirectly, in any transactions, arrangements or contracts of

significance to the business of the Group to which the holding company of the Company, or any of the Company’s

subsidiaries and fellow subsidiaries was a party during the year.



BUSIneSS ReVIeW

No business review is presented as the Company, being a wholly-owned subsidiary of another body corporate, is

exempted from presenting a business review under section 388(3) of the Hong Kong Companies Ordinance (Cap.

622).

PeRMITTeD InDeMnITY PROVISIOnS

At no time during the financial year and up to the date of this report, there was or is, any permitted indemnity

provision being in force for the benefit of any of the directors of the Company (whether made by the Company or

otherwise) or associated company (if made by the Company).

AUDITORS

Ernst & Young retire and a resolution for their reappointment as auditor of the Company will be proposed at the

forthcoming annual general meeting.

ON BEHALF OF THE BOARD

Mr. Michio Tanamoto

Chairman

Hong Kong

22 May 2017



To the sole member of Uni-Asia Shipping Limited

(Incorporated in Hong Kong with limited liability)

OPInIOn

We have audited the consolidated financial statements of Uni-Asia Shipping Limited (the “Company”) and its

subsidiaries (the “Group”) set out on pages 42 to 100, which comprise the consolidated statement of financial

position as at 31 December 2016, and the consolidated statement of profit or loss and other comprehensive

income,theconsolidatedstatementofchangesinequityandtheconsolidatedstatementofcashflowsfortheyear

then ended, and notes to the consolidated financial statements, including a summary of significant accounting

policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position

of the Group as at 31 December 2016, and of its consolidated financial performance and its consolidated cash

flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued

by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have been properly prepared in

compliance with the Hong Kong Companies Ordinance.

BASIS fOR OPInIOn

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of

the consolidated financial statements section of our report. We are independent of the Group in accordance

with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical

responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

InfORMATIOn OTHeR THAn THe fInAnCIAl STATeMenTS AnD AUDITOR’S RePORT THeReOn

The directors are responsible for the other information. The other information comprises the information included in

the report of the directors.



ReSPOnSIBIlITIeS Of THe DIReCTORS fOR THe COnSOlIDATeD fInAnCIAl STATeMenTS

The directors are responsible for the preparation of consolidated financial statements that give a true and fair view

in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal

control as the directors determine is necessary to enable the preparation of consolidated financial statements that

are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors of the company are responsible for assessing the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and

usingthegoingconcernbasisofaccountingunlessthedirectorseither intendto liquidatethecompanyorto

cease operations or have no realistic alternative but to do so.

AUDITOR’S ReSPOnSIBIlITIeS fOR THe AUDIT Of THe COnSOlIDATeD fInAnCIAl STATeMenTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that

includes our opinion. Our report is made solely to you, as a body, in accordance with section 405 of the Hong Kong

Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any

other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional

scepticism throughout the audit. We also:

• Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherdue

to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence

that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatare

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of

the Group’s internal control.



• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimates

and related disclosures made by the directors.

• Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingand,based

on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that

may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a

materialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosures

inthefinancialstatementsor, ifsuchdisclosuresare inadequate,tomodifyouropinion.Ourconclusions

are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or

conditions may cause the Group to cease to continue as a going concern.

• Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedfinancialstatements, including

the disclosures, and whether the consolidated financial statements represent the underlying transactions

and events in a manner that achieves fair presentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancial informationoftheentitiesorbusiness

activities within the Group to express an opinion on the consolidated financial statements. We are responsible

for the direction, supervision and performance of the group audit. We remain solely responsible for our audit

opinion.

We communicate with the board of directors regarding, among other matters, the planned scope and timing of the

audit and significant audit findings, including any significant deficiencies in internal control that we identify during

our audit.

Ernst & Young

Certified Public Accountants

Hong Kong

22 May 2017


Consolidated Statement of Financial Position31 December 2016

Notes 2016 2015US$ US$

NON-CURRENT ASSETSVessels 4 155,251,153 146,609,897Deposits for purchase of vessels 5 – 6,881,429Accounts receivables 6 620,930 –Derivative financial instruments 7 329,589 116,949

Total non-current assets 156,201,672 153,608,275

CURRENT ASSETSDerivative financial instruments 7 17,217 –Equityinvestmentsatfairvaluethroughprofitorloss 8 2,398,331 –Prepayments and other receivables 6 2,209,730 3,589,511Income tax recoverable 59,582 52,415Restricted bank balances 9 1,303,801 992,271Cashandcashequivalents 9 7,765,314 5,101,048

13,753,975 9,735,245Non-current asset held for sale 10 – 15,839,847

Total current assets 13,753,975 25,575,092

TOTAL ASSETS 169,955,647 179,183,367


連結財政状態計算書2016 年 12 月 31 日終了年度

注記 2016 2015US$ US$

非流動資産船舶 4 155,251,153 146,609,897船舶購入預け金 5 – 6,881,429売掛金 6 620,930 –金融派生商品 7 329,589 116,949

非流動資産合計 156,201,672 153,608,275

流動資産金融派生商品 7 17,217 –損益を通じて公正価値で測定する株式投資 8 2,398,331 –前払金及びその他の未収金 6 2,209,730 3,589,511払戻法人所得税 59,582 52,415拘束性銀行口座預金 9 1,303,801 992,271現金及び現金同等物 9 7,765,314 5,101,048

13,753,975 9,735,245売却目的で保有する非流動資産 10 – 15,839,847

流動資産合計 13,753,975 25,575,092

資産合計 169,955,647 179,183,367


31 December 2016

Consolidated Statement of Financial Position (continued)


EQUITYEquityattributabletothesoleshareholderoftheCompany

Share capital 11 51,998,342 51,998,342Hedging reserve 24 352,287 (13,102)Retained profits/(accumulated losses) (3,592,880) 9,911,913

48,757,749 61,897,153Non-controlling interests 2,113,294 1,776,564

TOTAL EQUITY 50,871,043 63,673,717

NON-CURRENT LIABILITIESSubordinated loans, secured 12 1,250,000 1,500,000Loans from the non-controlling shareholder of a subsidiary 14 2,818,336 2,735,975Borrowings, secured 15 82,523,078 79,280,999Deferred income 972,800 –Derivative financial instruments 7 258,183 414,493Other payables and accruals 17 2,139,731 –

Total non-current liabilities 89,962,128 83,931,467

CURRENT LIABILITIESSubordinated loans, secured 12 1,500,000 2,500,000Bridge loans from the ultimate holding company 13 2,300,000 –Borrowings, secured 15 16,888,160 22,009,997Borrowings, unsecured 16 4,000,000 3,850,000Deferred income 1,460,428 333,422Other payables and accruals 17 2,633,854 2,388,494Derivative financial instruments 7 340,034 482,770Income tax payable – 13,500

Total current liabilities 29,122,476 31,578,183

TOTAL LIABILITIES 119,084,604 115,509,650

TOTAL EQUITY AND LIABILITIES 169,955,647 179,183,367

Mr. Michio Tanamoto Mr. Masaki Fukumori

Director Director


2016 年 12 月 31 日終了年度連結財政状態計算書（続き）

注記 2016 2015US$ US$

資本当社の一人株主に帰属する資本

株式資本 11 51,998,342 51,998,342ヘッジ留保金 24 352,287 (13,102)利益剰余金╱（累積損失） (3,592,880) 9,911,913

48,757,749 61,897,153非支配持分 2,113,294 1,776,564

資本合計 50,871,043 63,673,717

非流動負債担保付劣後ローン 12 1,250,000 1,500,000子会社の非支配株主からの借入金 14 2,818,336 2,735,975担保付借入金 15 82,523,078 79,280,999前受収益 972,800 –金融派生商品 7 258,183 414,493その他の未払金及び未払費用 17 2,139,731 –

非流動負債合計 89,962,128 83,931,467

流動負債担保付劣後ローン 12 1,500,000 2,500,000究極の親会社からのブリッジローン 13 2,300,000 –担保付借入金 15 16,888,160 22,009,997無担保借入金　 16 4,000,000 3,850,000前受収益 1,460,428 333,422その他の未払金及び未払費用 17 2,633,854 2,388,494金融派生商品 7 340,034 482,770未払法人所得税 – 13,500

流動負債合計 29,122,476 31,578,183

負債合計 119,084,604 115,509,650

資本負債合計 169,955,647 179,183,367

Mr. Michio Tanamoto Mr. Masaki Fukumori取締役取締役


Consolidated Statement of Profit or Loss and Other Comprehensive IncomeYear ended 31 December 2016


REVENUE 18 28,645,369 26,680,037

Cost of services rendered 19 (27,966,486) (21,001,117)

Gross profit 678,883 5,678,920

Other income 18 485,592 913,476

Administrative expensesAdministration fee (568,000) (561,000)Auditor’s remuneration (52,372) (51,802)Entertainment (9,057) (6,217)Legal and professional fees (45,072) (93,530)Other expenses (49,192) (42,040)

(723,693) (754,589)

OPERATING PROFIT 440,782 5,837,807

Finance costs 21 (3,986,799) (3,417,676)Net losses on derivative financial instruments (1,157,587) (396,485)Gain on disposal of a vessel 509 –Impairment of vessels 4 (8,590,000) (1,400,000)Realised foreign exchange loss, net (1,186) (1,064)Unrealised foreign exchange loss, net (18) (99)

PROFIT/(LOSS) BEFORE TAX (13,294,299) 622,483

Income tax 22 5,219 (9,343)

PROFIT/(LOSS) FOR THE YEAR (13,289,080) 613,140


連結損益及びその他の包括利益計算書2016 年 12 月 31 日終了年度

注記 2016 2015US$ US$

売上高 18 28,645,369 26,680,037

売上原価 19 (27,966,486) (21,001,117)

売上総利益 678,883 5,678,920

その他の収益 18 485,592 913,476

一般管理費管理手数料 (568,000) (561,000)監査報酬 (52,372) (51,802)交際費 (9,057) (6,217)法務報酬及び専門家報酬 (45,072) (93,530)その他の費用 (49,192) (42,040)

(723,693) (754,589)

営業利益 440,782 5,837,807

財務費用 21 (3,986,799) (3,417,676)正味金融派生商品損失 (1,157,587) (396,485)船舶売却益 509 –船舶の減損損失 4 (8,590,000) (1,400,000)正味実現為替差損失 (1,186) (1,064)正味未実現為替差損 (18) (99)

税引前利益╱（損失） (13,294,299) 622,483

税金費用 22 5,219 (9,343)

当期利益╱（損失） (13,289,080) 613,140


Year ended 31 December 2016

Consolidated Statement of Profit or Loss and Other Comprehensive Income (continued)


PROFIT/(LOSS) FOR THE YEAR (13,289,080) 613,140

OTHER COMPREHENSIVE INCOME/(LOSS)

Cash flow hedges:Effective portion of changes in fair value of hedging

instruments arising during the year 7(i) 486,406 (37,050)

OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF INCOME TAX 486,406 (37,050)

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR (12,802,674) 576,090

Profit/(loss) for the year attributable to:The sole shareholder of the Company (13,504,793) 81,489Non-controlling interests 215,713 531,651

(13,289,080) 613,140

Total comprehensive income/(loss) attributable to:The sole shareholder of the Company (13,139,404) 44,439Non-controlling interests 336,730 531,651

(12,802,674) 576,090


2016 年 12 月 31 日終了年度連結損益及びその他の包括利益計算書（続き）

注記 2016 2015US$ US$

当期利益╱（損失） (13,289,080) 613,140

その他の包括利益╱（損失）

キャッシュ・フロー・ヘッジ:ヘッジ手段の公正価値の変動のうちヘッジ有効部分 7(i) 486,406 (37,050)

当期その他の包括利益╱損失（税引後） 486,406 (37,050)

当期包括利益╱（損失）合計 (12,802,674) 576,090

当期利益╱（損失）の帰属する割合:当社の一人株主 (13,504,793) 81,489非支配持分 215,713 531,651

(13,289,080) 613,140

当期包括利益╱（損失）の帰属する割合:当社の一人株主 (13,139,404) 44,439非支配持分 336,730 531,651

(12,802,674) 576,090


Consolidated Statement of Changes in EquityYear ended 31 December 2016

Attributable to the sole shareholder of the Company

Retainedprofits/ Non-

Share Hedging (accumulated controlling Totalcapital reserve losses) Total interests equity

US$ US$ US$ US$ US$ US$

At 1 January 2015 41,070,142 23,948 9,830,424 50,924,514 965,801 51,890,315

Profit for the year – – 81,489 81,489 531,651 613,140

Other comprehensive loss for the year–fair value loss of effective cash flow hedges – (37,050) – (37,050) – (37,050)

Total comprehensive income/(loss) for the year – (37,050) 81,489 44,439 531,651 576,090

Deemed capital contributions from from the non-controlling shareholder of a subsidiary – – – – 309,848 309,848

Issuance of shares 10,928,200 – – 10,928,200 – 10,928,200

Interim dividend paid to the non-controlling shareholder of a subsidiary – – – – (30,736) (30,736)

At 31 December 2015 and 1 January 2016 51,998,342 (13,102) 9,911,913 61,897,153 1,776,564 63,673,717

Profit/(loss) for the year – – (13,504,793) (13,504,793) 215,713 (13,289,080)

Other comprehensive income for the year-fair value gain of effective cash flow hedges – 365,389 – 365,389 121,017 486,406

Total comprehensive income/(loss) for the year – 365,389 (13,504,793) (13,139,404) 336,730 (12,802,674)

At 31 December 2016 51,998,342 352,287 (3,592,880) 48,757,749 2,113,294 50,871,043


連結持分変動計算書2016 年 12 月 31 日終了年度

当社の一人株主持分

ヘッジ利益余剰金╱ 非支配株式資本保留金 ╱（累積損失）小計持分合計


2015年1月1日現在 41,070,142 23,948 9,830,424 50,924,514 965,801 51,890,315

当期利益 – – 81,489 81,489 531,651 613,140

有効キャッシュ・フロー・ヘッジから生じた公正価値の変動損失 – (37,050) – (37,050) – (37,050)

当期包括利益╱（損失）合計 – (37,050) 81,489 44,439 531,651 576,090

子会社の非支配株主からのみなし資本拠出 – – – – 309,848 309,848

新株の発行 10,928,200 – – 10,928,200 – 10,928,200

非支配持分の子会社への期中配当 – – – – (30,736) (30,736)

2015年12月31日及び2016年1月1日現在 51,998,342 (13,102) 9,911,913 61,897,153 1,776,564 63,673,717

当期利益╱（損失） – – (13,504,793) (13,504,793) 215,713 (13,289,080)

有効キャッシュ・フロー・ヘッジから生じた公正価値の変動損失 – 365,389 – 365,389 121,017 486,406

当期包括利益╱（損失）合計 – 365,389 (13,504,793) (13,139,404) 336,730 (12,802,674)

2016年12月31日現在 51,998,342 352,287 (3,592,880) 48,757,749 2,113,294 50,871,043


Consolidated Statement of Cash FlowsYear ended 31 December 2016


CASH FLOWS FROM OPERATING ACTIVITIESProfit/(loss) before tax (13,294,299) 622,483Adjustments for:

Interest income (18,614) (3,705)Fairvaluegainonequityinvestmentsatfairvaluethroughprofitorloss 18 (62,331) –Net losses on derivative financial instruments 1,157,587 396,485Depreciation 19 8,272,489 8,453,635Finance costs 21 3,986,799 3,417,676Gain on disposal of a vessel (509) –Impairment of vessels 4 8,590,000 1,400,000Unrealised foreign exchange losses, net 18 99

8,631,140 14,286,673Increaseinequityinvestmentsatfairvaluethroughprofitorloss (2,336,000) –Increase in accounts receivables, prepayments and other receivables (395,848) (828,588)Increase/(decrease) in deferred income 2,099,727 (261,303)Increase in other payables and accruals 3,446,669 277,861

Cash generated from operations 11,445,688 13,474,643Bank interest income 18,545 4,650Hong Kong profits tax refunded (15,448) (123,259)

Net cash flows from operating activities 11,448,785 13,356,034

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of a vessel 15,840,356 –Deposits paid for purchase of vessels – (4,602,929)Purchases of vessels and payments of dry-docking costs (18,622,961) (37,710,398)Settlement of derivative financial instruments (1,200,084) 98,479

Net cash flows used in investing activities (3,982,689) (42,214,848)


連結キャッシュ・フロー計算書2016 年 12 月 31 日終了年度

注記 2016 2015US$ US$

営業活動によるキャッシュ・フロー税引前利益╱（損失） (13,294,299) 622,483調整項目：

利息収入 (18,614) (3,705)損益を通じて公正価値で測定する株式投資評価益 18 (62,331) –正味金融派生商品損失 1,157,587 396,485減価償却費用 19 8,272,489 8,453,635財務費用 21 3,986,799 3,417,676船舶売却益 (509) –船舶の減損損失 4 8,590,000 1,400,000正味未実現為替差損 18 99

8,631,140 14,286,673損益を通じて公正価値で測定する株式投資の増加 (2,336,000) –売掛金、前払金及びその他の未収金の増加 (395,848) (828,588)前受収益増加/（減少） 2,099,727 (261,303)その他の未払金及び未払費用の増加 3,446,669 277,861

営業活動によるキャッシュ・フロー 11,445,688 13,474,643受取利息 18,545 4,650香港事業所得税の払戻額 (15,448) (123,259)

営業活動により獲得したキャッシュ・フロー純額 11,448,785 13,356,034

投資活動によるキャッシュ・フロー船舶売却益 15,840,356 –船舶購入預け金の支払い – (4,602,929)船舶購入及びドライドック費用 (18,622,961) (37,710,398)金融派生商品の決済 (1,200,084) 98,479

投資活動に使用したキャッシュ・フロー純額 (3,982,689) (42,214,848)


Year ended 31 December 2016

Consolidated Statement of Cash Flows (continued)


CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of new shares – 10,928,200New borrowings 27,367,000 41,980,000Loan from the ultimate holding company 6,550,000 7,375,000Loan repayment to the ultimate holding company (5,375,000) (11,814,902)Repayment of borrowings (29,316,665) (14,386,678)Decrease in restricted bank balances (311,530) (320,044)Decrease/(increase) in prepayment to lenders 153,979 (130,951)Interest paid on borrowings (2,981,403) (2,440,807)Interest paid on derivative financial instruments (574,974) (507,577)Upfront fee paid for borrowings (153,023) (98,711)Other incidental borrowing costs paid (94,540) (104,387)Other finance costs (65,735) (43,200)Dividend paid to the non-controlling shareholder of a subsidiary – (30,736)

Net cash flows from/(used in) financing activities (4,801,891) 30,405,207

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,664,205 1,546,393Cashandcashequivalentsatbeginningofyear 5,101,048 3,554,672Effects of foreign exchange rate changes, net 61 (17)

CASH AND CASH EQUIVALENTS AT END OF YEAR 9 7,765,314 5,101,048


2016 年 12 月 31 日終了年度連結キャッシュ・フロー計算書（続き）

注記 2016 2015US$ US$

財務活動によるキャッシュ・フロー新株発行による受取額 – 10,928,200新規借入金 27,367,000 41,980,000究極の親会社からの借入金 6,550,000 7,375,000究極の親会社への借入金の返済 (5,375,000) (11,814,902)借入金の返済 (29,316,665) (14,386,678)拘束性銀行口座預金の減少 (311,530) (320,044)貸主に対する前払金の減少╱（増加） 153,979 (130,951)借入金支払利息 (2,981,403) (2,440,807)金融派生商品の支払利息 (574,974) (507,577)借入金に伴うアップフロントフィー (153,023) (98,711)その他の借入に係る付随費用 (94,540) (104,387)その他の財務費用 (65,735) (43,200)子会社の非支配持分への配当支払 – (30,736)

財務活動により獲得した╱（使用した）キャッシュ・フロー純額 (4,801,891) 30,405,207

現金及び現金同等物の純増加 2,664,205 1,546,393現金及び現金同等物期首残高 5,101,048 3,554,672為替レートの変動による純増減額 61 (17)

現金及び現金同等物期末残高 9 7,765,314 5,101,048


Notes to Financial Statements31 December 2016

1. CORPORATe AnD gROUP InfORMATIOn

Uni-Asia Shipping Limited (the “Company”) is a limited liability company incorporated in Hong Kong. The

registered office of the company is located at 30th Floor, Prosperity Millennia Plaza, No. 663 King’s Road, North

Point, Hong Kong.

During the year, the Company and its subsidiaries (collectively, the “Group”) were principally involved in vessel

owning and chartering.

In the opinion of the directors, the immediate holding company and the ultimate holding company of the

Company is Uni-Asia Holdings Limited (“Uni-Asia Holdings”), which is an exempted company incorporated in

the Cayman Islands with limited liability and shares of which are listed on the Singapore Exchange.

Information about subsidiaries

Particulars of the Company’s subsidiaries are as follows:

Percentage ofPlace of Issued equity attributableincorporation/ ordinary to the Company Principal

Company name operations share capital 2016 2015 activities

Hope Bulkship S.A. Republic of Panama/ Hong Kong

US$4,000 83 83 Vessel owning and chartering

Imperial Bulkship S.A. Republic of Panama/ Hong Kong


Jade Bulkship S.A. Republic of Panama/ Hong Kong


Karat Bulkship S.A. Republic of Panama/ Hong Kong

US$10,000 100 100 Vessel chartering

Luna Bulkship S.A. Republic of Panama/ Hong Kong


Jubilee Bulkship S.A. Republic of Panama/ Hong Kong


Mable Bulkship S.A. Republic of Panama/ Hong Kong


Nora Bulkship S.A. Republic of Panama/ Hong Kong


Regina Bulkship S.A. Republic of Panama/ Hong Kong




2.1 BASIS Of PReSenTATIOn

These financial statements have been prepared under the going concern concept, notwithstanding that

the Group’s current liabilities exceeded its current assets by US$15,368,501 as at 31 December 2016 because

Uni-AsiaHoldingshasagreedtoprovideadequatefundstotheGrouptomeetitsliabilitiesasandwhenthey

fall due.

2.2 BASIS Of PRePARATIOn

These financial statements have been prepared in accordance with Hong Kong Financial Reporting

Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting

Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants

(the “HKICPA”), accounting principles generally accepted in Hong Kong and the Hong Kong Companies

Ordinance. They have been prepared under the historical cost convention, except for derivative financial

instruments which have been measured at fair value, and non-current asset held for sale which is stated at

the lower of its carrying amount and fair value less costs to sell as further explained in note 2.5. These financial

statements are presented in the United States dollar (“US$”).

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries

for the year ended 31 December 2016. A subsidiary is an entity (including a structured entity), directly or

indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to

variable returns from its involvement with the investee and has the ability to affect those returns through

its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant

activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee,

the Group considers all relevant facts and circumstances in assessing whether it has power over an investee,

including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company,

using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the

Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the sole shareholder

of the Group and to the non-controlling interests, even if this results in the non-controlling interests having

adeficitbalance.All intra-groupassetsandliabilities,equity, income,expensesandcashflowsrelatingto

transactions between members of the Group are eliminated in full on consolidation.



2.2 BASIS Of PRePARATIOn (COnTInUeD)

Basis of consolidation (continued)

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there

are changes to one or more of the three elements of control described above. A change in the ownership

interestofasubsidiary,withoutalossofcontrol,isaccountedforasanequitytransaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities

of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation

differencesrecordedinequity;andrecognises(i)thefairvalueoftheconsiderationreceived,(ii) thefair

value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of

components previously recognised in other comprehensive income is reclassified to profit or loss or retained

profits,asappropriate,onthesamebasisaswouldberequiredif theGrouphaddirectlydisposedofthe

related assets or liabilities.

2.3 CHAngeS In ACCOUnTIng POlICIeS AnD DISClOSUReS

The Group has adopted the following new and revised HKFRSs for the first time for the current year’s financial

statements:

Amendments to HKFRS 10, HKFRS 12

and HKAS 28 (2011)

Investment Entities: Applying the Consolidation Exception1

HKFRS 14 Regulatory Deferral Accounts

Amendments to HKAS 1 Disclosure Initiative

Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and

Amortisation

Annual Improvements 2012-2014 Cycle Amendments to a number of HKFRSs



2.3 CHAngeS In ACCOUnTIng POlICIeS AnD DISClOSUReS (continued)

Except for the amendments to HKFRS 10, HKFRS 12 and HKAS 28 (2011), HKFRS 14, and certain amendments

included in the Annual Improvements 2012-2014 Cycle, which are not relevant to the preparation of the

Group’s financial statements, the nature and the impact of each amendment is described below:

(a) Amendments to HKAS 1 include narrow-focus improvements in respect of the presentation and

disclosure in financial statements. The amendments clarify:

(i) thematerialityrequirementsinHKAS1;

(ii) that specific line items in the statement of profit or loss and the statement of financial position

may be disaggregated;

(iii) that entities have flexibility as to the order in which they present the notes to financial statements;

and

(iv) that the share of other comprehensive income of associates and joint ventures accounted for

usingtheequitymethodmustbepresentedinaggregateasasinglelineitem,andclassified

betweenthoseitemsthatwillorwillnotbesubsequentlyreclassifiedtoprofitorloss.

Furthermore, theamendmentsclarify therequirements thatapplywhenadditionalsubtotalsare

presented in the statement of financial position and the statement of profit or loss. The amendments

have had no significant impact on the Group’s financial statements.

(b) Amendments to HKAS 16 and HKAS 38 clarify the principle in HKAS 16 and HKAS 38 that revenue

reflects a pattern of economic benefits that are generated from operating a business (of which the

asset is part) rather than the economic benefits that are consumed through the use of the asset. As

aresult,arevenue-basedmethodcannotbeusedtodepreciateproperty,plantandequipmentand

may only be used in very limited circumstances to amortise intangible assets. The amendments are

applied prospectively. The amendments have had no impact on the financial position or performance

of the Group as the Group has not used a revenue-based method for the calculation of depreciation

of its non-current assets.

(c) Annual Improvements to HKFRSs 2012-2014 Cycle issued in October 2014 sets out amendments to a

number of HKFRSs. Details of the amendments are as follows:

HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Clarifies that changes to a

plan of sale or a plan of distribution to owners should not be considered to be a new plan of disposal,

rather it is a continuation of the original plan. Accordingly, there is no change in the application of

therequirementsinHKFRS5.Theamendmentsalsoclarifythatchangingthedisposalmethoddoes

not change the date of classification of the non-current assets or disposal group held for sale. The

amendments are applied prospectively. The amendments have had no impact on the Group as the

Group did not have the plan of sale or disposal method in respect of the non-current asset held for

sale during the year.



2.4 ISSUeD BUT nOT YeT effeCTIVe HOng KOng fInAnCIAl RePORTIng STAnDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet

effective, in these financial statements:

HKFRS 9 Financial Instruments2

HKFRS 15 Revenue from Contracts with Customers2

Amendments to HKFRS 15 Clarifications to HKFRS 15 Revenue from Contracts with Customers2

HKFRS 16 Leases3

Amendments to HKAS 7 Disclosure Initiative 1

Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses1

1 Effective for annual periods beginning on or after 1 January 20172 Effective for annual periods beginning on or after 1 January 20183 Effective for annual periods beginning on or after 1 January 2019

Further information about those HKFRSs that are expected to be applicable to the Group is as follows:

(a) In September 2014, the HKICPA issued the final version of HKFRS 9, bringing together all phases of the

financial instruments project to replace HKAS 39 and all previous versions of HKFRS 9. The standard

introducesnewrequirementsforclassificationandmeasurement,impairmentandhedgeaccounting.

The Group expects to adopt HKFRS 9 from 1 January 2018. During 2015, the Group performed a

high-level assessment of the impact of the adoption of HKFRS 9. This preliminary assessment is based

on currently available information and may be subject to changes arising from further detailed

analyses or additional reasonable and supportable information being made available to the Group in

the future. The expected impacts arising from the adoption of HKFRS 9 are summarised as follows:

(i) Classification and measurement

The Group does not expect that the adoption of HKFRS 9 will have a significant impact on the

classification and measurement of its financial assets. It expects to continue measuring at fair

value all financial assets currently held at fair value.

(ii) Impairment

HKFRS9requiresanimpairmentondebtinstrumentsrecordedatamortisedcostoratfairvalue

through other comprehensive income, lease receivables, loan commitments and financial

guarantee contracts that are not accounted for at fair value through profit or loss under HKFRS

9, to be recorded based on an expected credit loss model either on a twelve-month basis or a

lifetime basis. The Group expects to apply the simplified approach and record lifetime expected

losses that are estimated based on the present value of all cash shortfalls over the remaining life

of all of its trade and other receivables. The Group will perform a more detailed analysis which

considers all reasonable and supportable information, including forward-looking elements, for

estimation of expected credit losses on its trade and other receivables upon the adoption of

HKFRS 9.



2.4 ISSUeD BUT nOT YeT effeCTIVe HOng KOng fInAnCIAl RePORTIng STAnDARDS (continued)

(b) HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with

customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to

which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in HKFRS 15 provide a more structured approach for measuring and recognising

revenue.Thestandardalsointroducesextensivequalitativeandquantitativedisclosurerequirements,

including disaggregation of total revenue, information about performance obligations, changes in

contract asset and liability account balances between periods and key judgements and estimates.

ThestandardwillsupersedeallcurrentrevenuerecognitionrequirementsunderHKFRSs.InSeptember

2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory

effective date of HKFRS 15 to 1 January 2018. The Group expects to adopt HKFRS 15 on 1 January 2018.

During the year ended 31 December 2016, the Group performed a preliminary assessment on the

impact of the adoption of HKFRS 15.

The Group’s principal activities were vessel owning and chartering. The adoption of the HKFRS 15 does

not result in any substantial change to the Group’s accounting policies.

(c) HKFRS 16 replaces HKAS 17 Leases, HK(IFRIC)-Int 4 Determining whether an Arrangement contains

a Lease, HK(SIC)-Int 15 Operating Leases - Incentives and HK(SIC)-Int 27 Evaluating the Substance

of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the

recognition,measurement,presentationanddisclosureof leasesandrequires lesseestorecognise

assets and liabilities for most leases. The standard includes two recognition exemptions for lessees –

leases of low-value assets and short-term leases. At the commencement date of a lease, a lessee will

recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the

right to use the underlying asset during the lease term (i.e., the right-of-use asset). The right-of-use asset

issubsequentlymeasuredatcostlessaccumulateddepreciationandanyimpairmentlossesunless

the right-of-use asset meets the definition of investment property in HKAS 40.

Theleaseliability issubsequently increasedtoreflecttheinterestontheleaseliabilityandreduced

fortheleasepayments.Lesseeswillberequiredtoseparatelyrecognisetheinterestexpenseonthe

leaseliabilityandthedepreciationexpenseontheright-of-useasset.Lesseeswillalsoberequiredto

remeasure the lease liability upon the occurrence of certain events, such as change in the lease term

and change in future lease payments resulting from a change in an index or rate used to determine

those payments. Lessees will generally recognise the amount of the remeasurement of the lease

liability as an adjustment to the right-of-use asset. Lessor accounting under HKFRS 16 is substantially

unchanged from the accounting under HKAS 17. Lessors will continue to classify all leases using the

same classification principle as in HKAS 17 and distinguish between operating leases and finance

leases. The Group expects to adopt HKFRS 16 on 1 January 2019 and is currently assessing the impact

of HKFRS 16 upon adoption.



2.4 ISSUeD BUT nOT YeT effeCTIVe HOng KOng fInAnCIAl RePORTIng STAnDARDS (continued)

(d) Amendments toHKAS7 requireanentity toprovidedisclosures thatenableusersof financial

statements to evaluate changes in liabilities arising from financing activities, including both changes

arising from cash flows and non-cash changes. The amendments will result in additional disclosure to

be provided in the financial statements. The Group expects to adopt the amendments from 1 January

2017.

(e) Amendments to HKAS 12 were issued with the purpose of addressing the recognition of deferred

tax assets for unrealised losses related to debt instruments measured at fair value, although they

also have a broader application for other situations. The amendments clarify that an entity, when

assessing whether taxable profits will be available against which it can utilise a deductible temporary

difference, needs to consider whether tax law restricts the sources of taxable profits against which

it may make deductions on the reversal of that deductible temporary difference. Furthermore, the

amendments provide guidance on how an entity should determine future taxable profits and explain

the circumstances in which taxable profit may include the recovery of some assets for more than their

carrying amount. The Group expects to adopt the amendments from 1 January 2017.

2.5 SUMMARY Of SIgnIfICAnT ACCOUnTIng POlICIeS

Subsidiaries

Subsidiaries are all entities that are controlled by the Group. The Group controls an investee when it is

exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect

those returns through its power to direct the relevant activities of the investee. The existence and effect of

potential voting rights that are currently exercisable or convertible are considered when assessing whether

the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is

transferred to the Group. They are de-consolidated from the date that control ceases. The accounting policies

of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the

Group.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less

impairment losses.



2.5 SUMMARY Of SIgnIfICAnT ACCOUnTIng POlICIeS (continued)

Business combinations and goodwill

Businesscombinationsareaccountedforusingtheacquisitionmethod.Theconsiderationtransferred is

measuredattheacquisitiondatefairvaluewhichisthesumoftheacquisitiondatefairvaluesofassets

transferredbytheGroup, liabilitiesassumedbytheGrouptotheformerownersoftheacquireeandthe

equityinterestsissuedbytheGroupinexchangeforcontroloftheacquiree.Foreachbusinesscombination,

theGroupelectswhethertomeasurethenon-controllinginterestsintheacquireethatarepresentownership

interestsandentitletheirholderstoaproportionateshareofnetassetsintheeventofliquidationatfairvalue

orattheproportionateshareoftheacquiree’sidentifiablenetassets.Allothercomponentsofnon-controlling

interestsaremeasuredatfairvalue.Acquisition-relatedcostsareexpensedasincurred.

WhentheGroupacquiresabusiness,itassessesthefinancialassetsandliabilitiesassumedforappropriate

classification and designation in accordance with the contractual terms, economic circumstances and

pertinentconditionsasattheacquisitiondate.Thisincludestheseparationofembeddedderivativesinhost

contractsoftheacquiree.

If thebusinesscombination isachievedinstages,thepreviouslyheldequity interest is remeasuredat its

acquisitiondatefairvalueandanyresultinggainorlossisrecognisedinprofitorloss.

Anycontingentconsiderationtobetransferredbytheacquirerisrecognisedatfairvalueattheacquisition

date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair

valuerecognisedinprofitorloss.Contingentconsiderationthatisclassifiedasequityisnotremeasuredand

subsequentsettlementisaccountedforwithinequity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred,

theamountrecognisedfornon-controllinginterestsandanyfairvalueoftheGroup’spreviouslyheldequity

interests intheacquireeovertheidentifiablenetassetsacquiredandliabilitiesassumed.Ifthesumofthis

considerationandotheritemsis lowerthanthefairvalueofthenetassetsacquired,thedifferenceis,after

reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill

is testedfor impairmentannuallyormorefrequently ifeventsorchanges incircumstances indicatethat

the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31

December.Forthepurposeofimpairmenttesting,goodwillacquiredinabusinesscombinationis,fromthe

acquisitiondate,allocatedtoeachoftheGroup’scash-generatingunits,orgroupsofcash-generatingunits,

that are expected to benefit from the synergies of the combination, irrespective of whether other assets or

liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of

cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating

unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An

impairmentlossrecognisedforgoodwillisnotreversedinasubsequentperiod.




Business combinations and goodwill (continued)

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and

part of the operation within that unit is disposed of, the goodwill associated with the operation disposed

of is included in the carrying amount of the operation when determining the gain or loss on the disposal.

Goodwill disposed of in these circumstances is measured based on the relative value of the operation

disposed of and the portion of the cash-generating unit retained.

Fair value measurement

The Group measures its derivative financial instruments at fair value at the end of each reporting period.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The fair value measurement is based on

the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal

market for the asset or liability, or in the absence of a principal market, in the most advantageous market for

the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair

value of an asset or a liability is measured using the assumptions that market participants would use when

pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to

generate economic benefits by using the asset in its highest and best use or by selling it to another market

participant that would use the asset in its highest and best use.

TheGroupusesvaluationtechniquesthatareappropriateinthecircumstancesandforwhichsufficientdata

are available to measure fair value, maximising the use of relevant observable inputs and minimising the use

of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are

categorised within the fair value hierarchy, described as follows, based on the lowest level input that is

significant to the fair value measurement as a whole:

Level 1 – basedonquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities

Level 2 – basedonvaluationtechniquesforwhichthelowestlevel inputthatissignificanttothefair

value measurement is observable, either directly or indirectly

Level 3 – basedonvaluationtechniquesforwhichthelowestlevel inputthatissignificanttothefair

value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group

determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation

(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of

each reporting period.




Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a holding company of the

Group;

or

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Group are members of the same group;

(ii) one entity is an associate or joint venture of the other entity (or of a holding company, subsidiary

or fellow subsidiary of the other entity);

(iii) the entity and the Group are joint ventures of the same third party;

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or

an entity related to the Group;

(vi) the entity is controlled or jointly controlled by a person identified in (a);

(vii) a person identified in (a)(i) has significant influence over the entity or its member of the key

management personnel of the entity (or of a holding company of the entity); and

(viii) the entity, or an any member of a group of which it is part provides key management personnel

services to the Group or to a holding company of the Group.




Vessels

Vessel are stated at cost less accumulated depreciation and any impairment losses. Historical cost includes

expenditurethatisdirectlyattributabletotheacquisitionoftheitems.Whenanitemofvesselsisclassifiedas

held for sale, it is not depreciated and is accounted for in accordance with HKFRS 5, as further explained in

the accounting policy for “Non-current assets held for sale”. Vessel repairs and surveys costs are charged as

expenses as they are incurred.

Vessel is depreciated on the straight-line basis over an estimated useful life of 25 years, after taking into

account the residual value and dry-docking costs. The vessel’s residual value and useful life are reviewed,

and adjusted if appropriate, at each reporting date. Dry-docking costs of a vessel are attributed at

acquisitiontoitsservicepotentialreflectingitsmaintainedcondition,whiledry-dockingcostsofthevessel

incurredsubsequenttotheacquisitionarecapitalised.Dry-dockingcostsofavesselaredepreciatedonthe

straight-line basis over the estimated period until the next dry-docking.

The gain or loss on disposal of a vessel is the difference between the net sales proceeds and the carrying

amount of the vessel, and is recognised in profit or loss.

Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amounts will be recovered principally

through a sales transaction rather than though continuing use. For this to be the case, the asset must be

available for immediate sole in its present condition subject only to terms that are usual and customary for

the sale of such assets or disposal groups and its sale must be highly probable.

Non-current assets classified as held for sale are measured at the lower of their carrying amounts and fair

values less costs to sell. Vessel classified as held for sale is not depreciated or amortised.

Impairment of non-financial assets

Whereanindicationofimpairmentexists,orwhenannualimpairmenttestingforanassetisrequired(other

than financial assets and non-current assets classified as held for sale), the asset’s recoverable amount is

estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use

and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not

generate cash inflows that are largely independent of those from other assets or groups of assets, in which

case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to

the asset. An impairment loss is charged to the profit or loss in the period in which it arises in these expense

categories consistent with the function of the impaired asset.




Impairment of non-financial assets (continued)

An assessment is made at the end of each reporting period as to whether there is an indication that

previously recognised impairment losses may no longer exist or may have decreased. If such an indication

exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than

goodwill is reversed only if there has been a change in the estimates used to determine the recoverable

amount of that asset, but not to an amount higher than the carrying amount that would have been

determined (net of any depreciation) had no impairment loss been recognised for the asset in prior years. A

reversal of such an impairment loss is credited to profit or loss in the period in which it arises.

Leases

Lease where substantially all the rewards and risks of ownership of assets remain with the lessor are

accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under

operating leases are included in non-current assets, and rentals receivable under the operating leases are

credited to profit or loss on the straight-line basis over the lease terms.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans

and receivables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

When financial assets are recognised initially, they are measured at fair value plus in the case of financial

assets not at fair value through profit or loss, directly attributable transaction costs that are attributable to the

acquisitionofthefinancialassets,exceptinthecaseoffinancialassetsrecordedatfairvaluethroughprofit

or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date

that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales

of financialassetsthatrequiredeliveryofassetswithintheperiodgenerallyestablishedbyregulationor

convention in the marketplace.




Investments and other financial assets (continued)

Subsequent measurement

Thesubsequentmeasurementoffinancialassetsdependsontheirclassificationasfollows:

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial

assets designated upon initial recognition as at fair value through profit or loss. Financial assets are

classifiedasheldfortradingiftheyareacquiredforthepurposeofsaleinthenearterm.Derivatives,

including separated embedded derivatives, are also classified as held for trading unless they are

designated as effective hedging instruments as defined by HKAS 39. Financial assets at fair value

through profit or loss are carried in the statement of financial position at fair value with net changes in

fair value recognised in profit or loss.

Financial assets designated upon initial recognition as at fair value through profit or loss are

designated at the date of initial recognition and only if the criteria in HKAS 39 are satisfied.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded

at fair value if their economic characteristics and risks are not closely related to those of the host

contracts and the host contracts are not held for trading or designated as at fair value through profit

or loss. These embedded derivatives are measured at fair value with changes in fair value recognised

in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that

significantlymodifiesthecashflowsthatwouldotherwiseberequiredorareclassificationofafinancial

asset out of the fair value through profit or loss category.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

notquotedinanactivemarket.Afterinitialmeasurement,suchassetsaresubsequentlymeasuredat

amortised cost using the effective interest rate method less any allowance for impairment. Amortised

costiscalculatedbytakingintoaccountanydiscountorpremiumonacquisitionandincludesfees

or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is

included as interest income in profit or loss. The loss arising from impairment is recognised in profit or

loss.




Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)

is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

• therightstoreceivecashflowsfromtheassethaveexpired;or

• theGrouphastransferreditsrightstoreceivecashflowsfromtheasset,orhasassumedanobligation

to pay the received cash flows in full without material delay to a third party under a “pass-through”

arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the

asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the

asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a

pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership

of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor

transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the

Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred

asset and the associated liability are measured on a basis that reflects the rights and obligations that the

Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower

of the original carrying amount of the asset and the maximum amount of consideration that the Company

couldberequiredtorepay.

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that an item

of financial assets or a group of financial assets is impaired. An impairment exists if one or more events that

occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the

financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may

include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or

delinquencyininterestorprincipalpayments,theprobabilitythattheywillenterbankruptcyorotherfinancial

reorganisation and observable data indicating that there is a measurable decrease in the estimated future

cash flows, such as changes in arrears or economic conditions that correlate with defaults.




Impairment of financial assets (continued)

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually

for financial assets that are individually significant, or collectively for financial assets that are not individually

significant. If the Group determines that no objective evidence of impairment exists for an individually

assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with

similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually

assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included

in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying

amount and the present value of estimated future cash flows (excluding future credit losses that have not

yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s

original effective interest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is

recognised in profit or loss. Interest income continues to be accrued on the reduced carrying amount using

the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Loans and receivables together with any associated allowance are written off when there is no realistic

prospect of future recovery and all collateral has been realised or has been transferred to the Group.

If, inasubsequentperiod,theamountoftheestimatedimpairmentloss increasesordecreasesbecause

of an event occurring after the impairment was recognised, the previously recognised impairment loss is

increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is

credited to other operating expenses in profit or loss.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or

loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as

appropriate.

All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, net of

directly attributable transaction costs.

The Group’s financial liabilities include other payables, an amount due to the ultimate holding company,

derivative financial instruments and interest-bearing bank and other borrowings.




Financial liabilities (continued)

Subsequent measurement

Thesubsequentmeasurementoffinancialliabilitiesdependsontheirclassificationasfollows:

(a) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and

financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financialliabilitiesareclassifiedasheldfortradingiftheyareacquiredforthepurposeofrepurchasing

in the near term. This category includes derivative financial instruments entered into by the Group that

are not designated as hedging instruments in hedge relationships as defined by HKAS 39. Separated

embedded derivatives are also classified as held for trading unless they are designated as effective

hedging instruments. Gains or losses on liabilities held for trading are recognised in profit or loss. The

net fair value gain or loss recognised in profit or loss does not include any interest charged on these

financial liabilities.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated

at the date of initial recognition and only if the criteria of HKAS 39 are satisfied.

(b) Loans and borrowings

Afterinitialrecognition,interest-bearingloansandborrowingsaresubsequentlymeasuredatamortised

cost, using the effective interest rate method unless the effect of discounting would be immaterial, in

which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities

are derecognised as well as through the effective interest rate amortisation process.

Amortisedcostiscalculatedbytakingintoaccountanydiscountorpremiumonacquisitionandfees

or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is

included as finance costs in profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or

expires.

When an existing financial liability is replaced by another from the same lender on substantially different

terms, or the terms of an existing liability are substantially modified, such an exchange or modification is

treated as a derecognition of the original liability and a recognition of a new liability, and the difference

between the respective carrying amounts is recognised in profit or loss.




Derivative financial instruments and hedge accounting

Initial recognition and subsequent measurement

The Group uses derivative financial instruments, such as forward currency contracts and interest rates swaps,

to hedge its foreign currency risk and interest rate risk, respectively. Such derivative financial instruments

are initially recognised at fair value on the date on which a derivative contract is entered into and are

subsequentlyremeasuredatfairvalue.Derivativesarecarriedasassetswhenthefairvalueispositiveandas

liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value of derivatives are taken directly to profit or loss, except

for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later

reclassified to profit or loss when the hedged item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging the

exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised

asset or liability or a highly probable forecast transaction, or a foreign currency risk in an unrecognised firm

commitment.

At the inception of a hedge relationship, the Group formally designates and documents the hedge

relationship to which the Group wishes to apply hedge accounting, the risk management objective and its

strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the

hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging

instrument’s effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to

changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are

expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed

on an ongoing basis to determine that they actually have been highly effective throughout the financial

reporting periods for which they were designated.




Derivative financial instruments and hedge accounting (continued)

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other

comprehensive income in the hedging reserve, while any ineffective portion is recognised immediately in

profit or loss as unrealised gain/loss on derivative financial instruments.

Amounts recognised in other comprehensive income are transferred to profit or loss when the hedged

transaction affects profit or loss, such as when hedged financial income or financial expense is recognised

or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial

liability, the amounts recognised in other comprehensive income are transferred to the initial carrying amount

of the non-financial asset or non-financial liability.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part

of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the

criteria for hedge accounting, the amounts previously recognised in other comprehensive income remain in

other comprehensive income until the forecast transaction occurs or the foreign currency firm commitment is

met.




Derivative financial instruments and hedge accounting (continued)

Current versus non-current classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or

non-current or separated into a current and non-current portions based on an assessment of the facts and

circumstances (i.e., the underlying contracted cash flows).

• WheretheGroupexpectstoholdaderivativeasaneconomichedge(anddoesnotapplyhedge

accounting) for a period beyond 12 months after the end of the reporting period, the derivative is

classified as non-current (or separated into current and non-current portions) consistently with the

classification of the underlying item.

• Embeddedderivativesthatarenotcloselyrelatedtothehostcontractareclassifiedconsistentlywith

the cash flows of the host contract.

• Derivativeinstrumentsthataredesignatedas,andareeffectivehedginginstruments,areclassified

consistent with the classification of the underlying hedged item. The derivative instruments are

separated into current portions and non-current portions only if a reliable allocation can be made.

Cash and cash equivalents

Forthepurposeoftheconsolidatedstatementofcashflows,cashandcashequivalentscomprisecash

onhandanddemanddeposits,andshorttermhighly liquid investmentsthatarereadilyconvertible into

known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity

ofgenerallywithinthreemonthswhenacquired,lessbankoverdraftswhicharerepayableondemandand

form an integral part of the Group’s cash management.

Forthepurposeoftheconsolidatedstatementoffinancialposition,cashandcashequivalentscomprise

cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not

restricted as to use.




Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss

isrecognisedoutsideprofitorloss,eitherinothercomprehensiveincomeordirectlyinequity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected

to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been

enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations

and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting

period between the tax bases of assets and liabilities and their carrying amounts for the financial reporting

purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• whenthedeferredtaxliabilityarisesfromtheinitialrecognitionofgoodwilloranassetorliabilityina

transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss; and

• inrespectoftaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,associatesand

joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is

probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused

tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable

that taxable profit will be available against which the deductible temporary differences, the carryforward of

unused tax credits and unused tax losses can be utilised, except:

• whenthedeferredtaxassetrelatingtothedeductibletemporarydifferencesarisesfromthe initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time

of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• inrespectofdeductibletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,associates

and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the

temporary differences will reverse in the foreseeable future and taxable profit will be available against

which the temporary differences can be utilised.




Income tax (continued)

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced

to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of

the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each

reporting period and are recognised to the extent that it has become probable that sufficient taxable profit

will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period

when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted

or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current

tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same

taxation authority.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past

eventandit isprobablethatafutureoutflowofresourceswillberequiredtosettletheobligation,provided

that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the

endofthereportingperiodofthefutureexpendituresexpectedtoberequiredtosettletheobligation.The

increase in the discounted present value amount arising from the passage of time is included in profit or loss.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the

revenue can be measured reliably, on the following bases:

(i) charter income, commercial management fee and other income, when pre-agreed terms and

services have been rendered; and

(ii) interest income, on an accrual basis using the effective interest rate method.




Borrowing costs

Borrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets, i.e.

assets that necessarily take a substantial period of time to get ready for their intended use or sale, are

capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the

assets are substantially ready for their intended use or sale. Investment income earned on the temporary

investmentofspecificborrowingspendingtheirexpenditureonqualifyingassets isdeductedfromthe

borrowing costs capitalised. All borrowing costs are expensed in the period in which they are incurred.

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of

funds.

Foreign currencies

These financial statements are presented in the United States dollar, which is the Company’s functional

currency. Each entity in the Group determines its own functional currency and items included in the financial

statements of each entity are measured using that functional currency. Foreign currency transactions

recorded by the entities in the Group are initially recorded using their respective functional currency rates

prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies

are translated at the functional currency rates of exchange ruling at the end of the reporting period.

Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using

the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a

foreign currency are translated using the exchange rates at the date when the fair value was measured.



3. SIgnIfICAnT ACCOUnTIng JUDgeMenTS AnD eSTIMATeS

ThepreparationoftheGroup’sfinancialstatementsrequiresmanagementtomakejudgements,estimates

and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their

accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions

andestimatescouldresultinoutcomesthatcouldrequireamaterialadjustmenttothecarryingamountsof

the assets or liabilities affected in the future.

Judgements

In the process of applying the Group’s accounting policies, management has made the following

judgements, apart from those involving estimations, which have the most significant effect on the amounts

recognised in the financial statements:

Operating lease commitments – Group as lessor

The Group has entered into commercial leases on its vessels. The Group has determined, based on an

evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards

of ownership of vessels which are leased out on operating leases.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of

the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year, are discussed below:



3. SIgnIfICAnT ACCOUnTIng JUDgeMenTS AnD eSTIMATeS (continued)

Estimation uncertainty (continued)

Impairment of vessels

The Group determines whether there are any indicators of impairment for vessels at the end of each reporting

period. Vessels are tested for impairment when there are indicators that the carrying amounts may not be

recoverable. An impairment exists when the carrying value of vessel exceeds its recoverable amount, which

is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less

costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of

similar vessels or observable market prices less increment costs for disposing of the vessel. When value in use

calculations are undertaken, management will estimate the expected future cash flows from the vessel and

choose a suitable discount rate in order to calculate the present value of those cash flows.

Useful life of vessels

The Group’s management determines the estimated useful life and related depreciation expense for the

vessel. The Group’s management estimates useful life of the vessel by reference to expected usage of the

vessel, expected repair and maintenance, and the technical or commercial obsolescence arising from

changes or improvements in the vessel market. It could change significantly as a result of the changes in

these factors.

Residual value of vessels

The Group’s management determines the residual value for its vessel. This estimate is based on the current

scrap values of steels in an active market at each measurement date since the management decides to

dispose of the fully depreciated vessel as scrap steels. The depreciation expense will increase where the

residual value is less than previously estimated value.

Fair value of derivative financial instruments

The fair value of derivative financial instruments that are not traded in an active market (for example,

over-the-counterderivatives) isdeterminedbyusingvaluation techniques.TheGroupusesavarietyof

methods and makes assumptions that are based on market conditions existing at each end of the reporting

period. The fair value of interest rate swaps is calculated as the present value of the estimated future cash

flows.Thefairvalueofforwardforeignexchangecontracts isdeterminedusingquotedforwardexchange

rates at the end of the reporting period.



4. VeSSelS

2016 2015US$ US$

At beginning of year:Cost 168,590,761 139,515,292Accumulated depreciation and impairment (21,980,864) (16,558,748)

Net carrying amount 146,609,897 122,956,544

Net carrying amount:At beginning of year 146,609,897 122,956,544Additions during the year 18,622,316 37,644,976Transfer from deposits for purchase of vessels 6,881,429 11,701,859Transfer to non-current asset held for sale (note 10) – (15,839,847)Depreciation provided during the year (8,272,489) (8,453,635)Impairment provided during the year (8,590,000) (1,400,000)

At end of year 155,251,153 146,609,897

At end of year:Cost 191,889,369 168,590,761Accumulated depreciation and impairment (36,638,216) (21,980,864)

Net carrying amount 155,251,153 146,609,897

Notes:

(a) At 31 December 2016, all of the Group’s vessels were pledged to secure the Group’s subordinated loans and secured borrowings (notes 12 and 15(d)).

(b) Included in the above balance of vessels as at 31 December 2016 are dry-docking costs with an aggregate net carrying amount of US$3,492,647 (2015: US$2,966,040).

(c) During the year, an impairment loss of US$8,590,000 (2015: US$1,400,000), representing the write-down of vessels to their recoverable amounts, was recognised as “Impairment of vessels” line item in profit or loss. The recoverable amounts of the vessels were determined based on its value in use and the pre-tax discount rate used was 5.60% (2015: 5.40%).

If the discount rate used in the valuation had been 1% higher than management’s estimate, the carrying amount of the vessels would have been US$4,663,000 lower (2015: US$756,000 lower).

5. DePOSITS fOR PURCHASe Of VeSSelS

The balance represented (i) deposits paid to sellers with respect to the purchase of the Group’s vessels; and (ii)

directly attributable capitalised interest and other costs.



6. ACCOUnTS ReCeIVABleS, PRePAYMenTS AnD OTHeR ReCeIVABleS

None of the accounts receivables, prepayment and other receivables is either past due or impaired. The

financial assets included in the balances related to receivables for which there was no recent history of

default.

7. DeRIVATIVe fInAnCIAl InSTRUMenTS

Current Non-currentNotes 2016 2015 2016 2015

US$ US$ US$ US$

Financial assets

Financial assets at fair value through other comprehensive income – interest rate swaps designated as hedge (a) 17,217 – 329,589 57,073

Financial assets at fair value through profit or loss – interest rate swaps not designated as hedge (b) – – – 59,876

17,217 – 329,589 116,949

Financial liabilities

Financial liabilities at fair value through other comprehensive income – interest rate swaps designated as hedge (a) (340,034) (70,175) (258,183) –

Financial liabilities at fair value through profit or loss – interest rate swaps not designated as hedge (b) – (400,973) – (414,493)

Financial liabilities at fair value through profit or loss – forward currency contract not designated as hedge (c) – (11,622) – –

(340,034) (482,770) (258,183) (414,493)

Notes:

(a) At 31 December 2016, the Group had four interest rate swaps agreements in place with notional amounts of US$13,960,000, US$16,248,000, US$16,230,900 and US$15,170,000, respectively. The Group paid interests at fixed rates rangingfrom1.00%to2.60%,andreceivedvariableratesequaltoone-monthtothree-monthLIBORonthenotionalamounts.

At 31 December 2015, the Group had two interest rate swaps agreements in place with notional amounts of US$10,324,927 and US$15,400,000, respectively, whereby the Group paid interests at fixed rate of 0.69% and 1.25%, respectively,andreceivedvariableratesequaltothree-monthLIBORonthenotionalamounts.

The interest rate swaps met the criteria for hedge purposes and are measured at fair value through other comprehensive income.



7. DeRIVATIVe fInAnCIAl InSTRUMenTS (continued)

Notes: (continued)

(b) At 31 December 2015, the Group had four interest rate swaps agreements in place with notional amounts of US$10,000,000, US$10,867,500, US$17,232,000 and US$17,456,100. The Group paid interest at fixed rates ranging from 0.80%to2.60%,andreceivedvariableratesequaltoone-monthorthree-monthLIBORonthenotionalamounts.Theinterest rate swaps did not meet the criteria for hedge purposes and are measured at fair value through profit or loss.

During the year, one swap expired while the other three swaps were assessed to be effective (note (a)).

(c) At 31 December 2015, the Group had one foreign exchange forward contract, which will be matured on 28 June 2016 with the obligation to buy JPY600 million for US$5 million at the exchange rate of 120.04. The foreign exchange forward contract is not designated for hedge purposes and is measured at fair value through profit or loss. The foreign exchange forward contract expired in 2016.

8. eQUITY InVeSTMenTS AT fAIR VAlUe THROUgH PROfIT OR lOSS

2016 2015US$ US$

Listed shares 2,398,331 –

Fairvaluesoflistedsharesarebasedonquotedmarketpriceattheendofthereportingperiod.

9. ReSTRICTeD BAnK BAlAnCeS AnD CASH AnD CASH eQUIVAlenTS

2016 2015US$ US$

Cash at bank other than short term time deposits 5,669,115 4,227,585Short term time deposits 3,400,000 1,865,734

Total bank balances 9,069,115 6,093,319Less: Restricted bank balances (note (b)) (1,303,801) (992,271)

Cashandcashequivalents 7,765,314 5,101,048

Notes:

(a) Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made forvaryingperiodsofbetweenonedayandonetothreemonthsdependingontheimmediatecashrequirementsof the Group, and earn interest at the respective short term time deposit rates.

(b) Restricted bank balances are restricted as to their use for repayment of the secured borrowings (note 15).



10. nOn-CURRenT ASSeT HelD fOR SAle

On 9 December 2015, a subsidiary of the Group entered into a sale and leaseback agreement with an

independent third party pursuant to which the Group sold its vessel to the independent third party at fair

market value on arm’s length basis and leased back the vessel for a maximum term of seven years at the

Group’s option under an operating lease arrangement. Accordingly, the vessel was reclassified from vessel

tonon-currentassetheldforsaleasat31December2015.Theaforesaidtransactionwassubsequently

completed on 19 January 2016.

11. SHARe CAPITAl

2016 2015US$ US$

Issued and fully paid:4,695 ordinary shares 51,998,342 51,998,342

12. SUBORDInATeD lOAnS, SeCUReD

Current Non-current

2016 2015 2016 2015US$ US$ US$ US$

US$ loan 1,500,000 – – 1,500,0005.00% p.a. fixed rate US$ loan – 2,500,000 1,250,000 –

1,500,000 2,500,000 1,250,000 1,500,000

The effective interest rates of the US$ loan ranged from approximately 2.28% to 2.65% (2015: 1.91% to 2.24%)

per annum.

Subordinated loans were borrowed from independent third parties for the purpose of financing the purchase

costs of the Group’s vessels. They are secured, inter alia, by the second priority ship mortgages over two of the

Group’s pledged vessels.

13. BRIDge lOAnS fROM THe UlTIMATe HOlDIng COMPAnY

2016 2015US$ US$

US$ loans 2,300,000 –

The effective interest rates of the US$ loans ranged from approximately 2.00% to 2.48% per annum. The bridge

loans were unsecured and had no fixed terms of repayable till 15 November 2018.



14. lOAnS fROM THe nOn-COnTROllIng SHAReHOlDeR Of A SUBSIDIARY

2016 2015US$ US$

Loans from the non-controlling shareholder of a subsidiary (the “Non-controlling Interest loans”) 2,622,612 2,622,612

Imputed interest on Non-controlling Interest Loans 195,724 113,363

2,818,336 2,735,975

The principal of the Non-controlling Interest Loans amounted to US$3,524,570 (2015: US$3,524,570), and are

non-interest-bearing and repayable upon sale or total loss of the vessel of a subsidiary. The initial fair value

of the loans at inception is determined by the discounted cash flows method using a rate based on the

borrowing rate of approximately 3.00% per annum.

15. BORROWIngS, SeCUReD

Current Non-current

Notes 2016 2015 2016 2015US$ US$ US$ US$

US$ bank loans (a) 10,562,500 3,090,000 13,690,000 24,252,500Other US$ loans (b) 6,437,920 19,014,555 69,075,840 55,258,870

17,000,420 22,104,555 82,765,840 79,511,370Less: Unamortised cost of borrowings (112,260) (94,558) (242,762) (230,371)

16,888,160 22,009,997 82,523,078 79,280,999

Notes:

(a) The balance represented loans borrowed from banks for the purpose of financing the purchase costs of the Group’s vessels.

(b) The balance represented loans borrowed from affiliates of banks and leasing and financing financial institutions, which were specialised in ship finance, for the purpose of financing the purchase costs of the Group’s vessels.

(c) The effective interest rates of the borrowings ranged from approximately 1.99% to 4.53% (2015: 1.81% to 2.47%) per annum.

(d) The borrowings are secured by mortgages over Group’s vessels and guaranteed by the ultimate holding company or the Company.



16. BORROWIngS, UnSeCUReD

2016 2015US$ US$

US$ bank loans 4,000,000 3,850,000

The Group’s unsecured uncommitted banking facilities consists of short term revolving loan facilities

amounting to US$ US$5,000,000 (2015: US$5,000,000), short term revolving loan facilities for purchase of

vessels amounting to Nil (2015: US$18,000,000) and treasury products facilities amounting to US$3,000,000

(2015: US$5,000,000) on a revolving basis, of which US$4,000,000 (2015: US$3,850,000) short term revolving

loan facilities have been utilised as at the end of the reporting period. The effective interest rates of the

borrowings ranged from approximately 2.06% to 2.80% (2015: 1.92% to 2.11%) per annum. The bank facilities

are guaranteed by the ultimate holding company.

17. OTHeR PAYABleS AnD ACCRUAlS

Included in other payables and accruals were amount due to the ultimate holding company of the

Company of US$407,288 (2015: US$1,525,000) which are interest-free, unsecured and repayable on demand.

18. ReVenUe AnD OTHeR InCOMe

Revenue of the Group is charter hire income from vessel leasing.

An analysis of the Group’s other income is as follows:

2016 2015US$ US$

Other incomeInterest income 18,614 3,705Commercial management fee income 221,575 117,855Arrangement fee income – 600,000Fairvaluegainonequityinvestmentsatfairvaluethroughprofitorloss 62,331 –Others 183,072 191,916

485,592 913,476



19. COST Of SeRVICeS RenDeReD

Note 2016 2015US$ US$

Brokerage commission 389,259 314,077Depreciation 4 8,272,489 8,453,635Crewing expenses 8,062,250 6,979,607Vessels repairs and maintenance 836,665 748,306Vessels surveys 224,984 204,657Lubricants 661,811 754,317Insurance 1,157,783 1,058,575Ships’ stores charges 618,936 537,653Ship management fee 749,903 672,978Vessel lease expense 1,566,000 –Operational miscellaneous expenses 1,011,435 571,701Other expenses 940,430 705,611Provision for onerous contracts 3,474,541 –

27,966,486 21,001,117

20. DIReCTORS’ ReMUneRATIOn

No director received any fees or emoluments in respect of their services rendered to the Group during the

year (2015: Nil).

21. fInAnCe COSTS

2016 2015US$ US$

Interest on subordinated loans 127,525 156,228Interest on bridge loans from the ultimate holding company 10,776 143,996Imputed interest on the Non-controlling Interest Loans 82,361 76,498Interest on borrowings 2,894,254 2,294,461Interest on derivative financial instruments 590,430 515,996Amortisation of upfront fee 122,930 95,951Other finance costs 65,735 43,200

3,894,011 3,326,330Less: Interest capitalised in deposits for purchase of vessels (2,622) (14,026)

3,891,389 3,312,304Loan guarantee fee 95,410 105,372

3,986,799 3,417,676



22. InCOMe TAX

No provision for Hong Kong profits tax for the prior year had been provided at the rate of 16.50% (2015:

16.50%) on the estimated assessable profits arising in Hong Kong during the prior year.

2016 2015US$ US$

Current – Hong KongCharge for the year – 13,500Over-provision in prior years (5,219) (4,157)

(5,219) 9,343

A reconciliation between tax expense of the Group applicable to profit/(loss) before tax using applicable

rates and the tax expense for the year is as follows:

2016 2015US$ US$

Profit/(loss) before tax (13,294,299) 622,483

Tax at the statutory tax rate 16.50% (2,193,560) 102,710Adjustments in respect of current tax of previous periods (5,219) (4,157)Expenses not deductible for tax 6,696,218 4,294,507Income not subject to tax (4,729,899) (4,319,707)Tax losses utilised from previous periods – (64,010)Tax losses not recognised 227,241 –

Tax expense/(credit) at the Group’s effective rate 0% (2015: 1.50%) (5,219) 9,343

The Group has tax losses of US$1,503,261 (2015: US$143,390) that are available indefinitely for offsetting

against its future taxable profits. Deferred tax assets have not been recognised in respect of these losses and

it is not considered probable that taxable profits will be available against which the tax losses can be utilised.



23. PARTlY-OWneD SUBSIDIARIeS WITH MATeRIAl nOn-COnTROllIng InTeReSTS

Details of the Group’s subsidiaries that have material non-controlling interests are set out below:

Percentageofequityinterestsheldbynon-controllinginterests:

2016 2015

Hope Bulkship S.A. 17% 17%Regina Bulkship S.A. 49% 49%

Profit/(loss) for the year allocated to non-controlling interests:

2016 2015US$ US$

Hope Bulkship S.A. (158,864) 151,795Regina Bulkship S.A. 374,577 379,856

Dividends paid to non-controlling interest of Hope Bulkship S.A. – 30,736

Accumulated balances of non-controlling interests at the reporting dates:

2016 2015US$ US$

Hope Bulkship S.A. 377,765 536,630Regina Bulkship S.A. 1,735,529 1,239,934



23. PARTlY-OWneD SUBSIDIARIeS WITH MATeRIAl nOn-COnTROllIng InTeReSTS (continued)

The following tables illustrate the summarised financial information of the above subsidiaries. The amounts

disclosed are before any inter-company eliminations:

Hope ReginaBulkship Bulkship

S. A. S.A.US$ US$

2016

Revenue 2,122,739 4,026,000Other income 65,479 19,696Total expenses (3,122,708) (3,281,253)Profit/(loss) for the year (934,490) 764,443Total comprehensive income/(loss) for the year (934,490) 1,011,416

Current assets 929,838 2,606,946Non-current assets 16,349,168 22,760,789Current liabilities (6,875,306) (2,057,100)Non-current liabilities (8,181,548) (19,768,739)

Net cash flows from operating activities 357,489 2,494,278Net cash flows used in investing activities (522,923) –Net cash flows used in financing activities (1,594,302) (1,990,381)

Netincrease/(decrease)incashandcashequivalents (1,759,736) 503,897

2015

Revenue 4,089,609 3,558,704Other income 49,759 39,438Total expenses (3,246,459) (2,822,926)Profit and total comprehensive income for the year 892,909 775,216

Current assets 2,451,482 1,309,859Non-current assets 16,728,090 23,545,050Current liabilities (1,044,510) (1,626,574)Non-current liabilities (14,978,420) (20,697,855)

Net cash flows from operating activities 2,489,614 2,200,536Net cash flows used in investing activities – (17,351,411)Net cash flows from/(used in) financing activities (1,773,739) 15,943,139

Netincreaseincashandcashequivalents 715,875 792,264

24. ReSeRVeS

The amounts of the Group’s reserves and the movements therein for the current year and the prior year are

presentedintheconsolidatedstatementofchangesofequity.



25. OPeRATIng leASe ARRAngeMenTS

(a) As lessor

The Group leases its vessels to independent third parties (the “Charterers”) under operating lease

arrangements, with the leases negotiated for terms ranging from three weeks to seven years.

At 31 December 2016, the Group had total future minimum lease receivables under non-cancellable

operating leases of vessels with the Charterers falling due as follows:

2016 2015US$ US$

Within one year 18,132,327 20,178,556Later than one year and not later than five years 42,266,549 59,253,888Later than five years – 2,251,719

60,398,876 81,684,163

(b) As lessee

The Group leases back a vessel under an operating lease arrangement from an independent third

party with the lease negotiated for a maximum term of seven years at the Group’s option.

At 31 December 2016, the Group had total future minimum lease payments under non-cancellable

operating lease falling due as follows:

2016 2015US$ US$

Within one year 1,642,500 1,642,500In the second to fifth years, inclusive 9,496,500 8,030,000After five years 3,102,500 6,205,000

14,241,500 15,877,500

26. CAPITAl COMMITMenTS

At 31 December 2016, the Group had no capital commitments (2015: US$17,411,000 in respect of the

purchase of vessels, which were contracted but not provided for).



27. COnTIngenT lIABIlITIeS

The Company is the controlling shareholder of Hope Bulkship S.A. (“Hope”). Under a shipbuilding contract

dated 6 December 2006 (the “Shipbuilding Contract”) entered into between two independent shipbuilding

companies (collectively, the “Sellers”) and an independent third party (the “Original Buyer”), the Sellers

agreed to build for and to deliver to the Original Buyer a shipping vessel (the “Vessel”). Pursuant to a novation

agreement dated 13 March 2010 (the “Novation Agreement”) entered into between the Original Buyer, the

Sellers and Hope, as the new buyer, the rights and obligations of the Original Buyer under the Shipbuilding

Contract were transferred to Hope. An independent third party (the “Agent”) acted as an agent of the

Original Buyer to introduce the vessel to Hope and coordinated the negotiation and documentation of the

Novation Agreement between the Original Buyer and Hope.

In consideration of the Agent’s contribution to the successful completion of the Novation Agreement of the

Vessel, the Company entered into an agreement with the Agent on 18 June 2010 whereas an option was

granted be sold to the Agent to participate in a 33% sharing out of capital gain of the Vessel should the

Vessel be disposed of on or after 5 years, in such case the capital gain would be calculated on net sale

proceed less US$15 million, by the Company for a consideration of US$300,000. The maximum share of capital

gain by the Agent is US$2.5 million.

Currently, management has no intention to dispose of the Vessel within 5 years.



28. RelATeD PARTY DISClOSUReS

(a) In addition to the transactions detailed elsewhere in these financial statements, the Group had the

following material transactions with related parties during the year:


Ultimate holding companyBridge loan interest (i) 10,776 143,996Loan guarantee fee (ii) 95,410 105,372Administration fee (iii) 568,000 561,000

Fellow subsidiariesBrokerage commission (v) 211,769 216,095Crew pooling fund (vi) 47,500 40,341Ship management fee (vii) 665,903 588,978Ship operating expenses (vii) 2,054,772 1,945,030Outsourcing fee (viii) 12,456 49,776Library expenses (vii) – 3,000Loan advisory fee (iv) – 10,000

Notes:

(i) The interests were charged on certain loans provided by the ultimate holding company on arm’s length basis.

(ii) The loan guarantee fee was charged on the loan advanced at a mutually agreed rate. Further details of the loan were disclosed in note 15 to the financial statements.

(iii) The administration fee was charged to the Company and two subsidiaries at US$400,000 (2015: US$400,000) per annum and US$7,000 (2015: US$7,000) per month, respectively.

(iv) The loan advisory fee was charged to subsidiaries for renewal of loans during the year in the normal course of business and on arm’s length basis.

(v) The brokerage commission was charged on 1.25% of the charter hire income of the Group’s vessels as referred in note 18 to the financial statements in the normal course of business and on arm’s length basis.

(vi) The crew pooling fund was charged at US$500 (2015: US$500) per month per vessel for the crew seniority scheme.

(vii) The ship management fee, ship operating expenses and library expenses took place in the normal course of business and on arm’s length basis.

(viii) The outsourcing fee was charged to the Company at JPY500,000 per month up to June 2016 for the marketing services provided in the normal course of business and on arm’s length basis.



28. RelATeD PARTY DISClOSUReS (continued)

(b) Outstanding balances and other transaction with related parties

(i) Details of balances with the ultimate holding company and non-controlling shareholder of a subsidiary are disclosed in notes 13, 14 and 17 to the financial statements.

(ii) Details of the guarantee given by the ultimate holding company in respect of the borrowings are disclosed in notes 15(d) and 16 to the financial statements.

(c) In the opinion of the directors, the directors represented the key management personnel of the Group. During the year, no compensation was paid to the key management personnel (2015: Nil).

29. fInAnCIAl RISK MAnAgeMenT

The Group’s principal financial instruments, other than derivatives, comprise amount due to the ultimate holding company, borrowings and subordinated loans. The main purpose of these financial instruments is to raise finance for the Group’s operations and purchases of the Group’s shipping vessels. The Group’s other financial instrumentsincludecashandcashequivalents,otherpayablesandaccrualswhicharisedirectlyfrom its operations.

The Group also enters into derivative transactions, principally interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from Group’s operations and its sources of finance.

It is the management’s intention to wherever possible or desired hedge investments that are not denominated in US$. All hedging transactions are subject to an approval process as stated in the Group’s standard operating procedure (SOP) for investments.

The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, credit riskandliquidityrisk.Theboardofdirectorsreviewsandagreespoliciesformanagingeachoftheserisksandthey are summarised below. The Group accounting policies in relation to derivatives are set out in note 2.5 to the financial statements.

(a) Foreign exchange risk

The Group has transactional currency exposures. Such exposure arises from the derivative financial instruments denominated in Japanese Yen (“JPY”). At 31 December 2016, the Group has no outstanding the derivative financial instruments denominated in JPY, hence, the effect on the profit for the year is considered to be minimal. At 31 December 2015, assuming a 5% change in US$ against JPY with all other variables including tax rate being held constant, the effect on the profit for the year would have been US$238,000 lower or US$263,000 higher.

In addition, the Group’s income is denominated in US$ while its operating expenses are mainly denominated in US$ and Hong Kong dollar (“HK$”). Since the HK$ is pegged to the US$, the Group’s exposure to foreign currency risk in respect of the bank balances denominated in HK$ is considered to be minimal.



29. fInAnCIAl RISK MAnAgeMenT (continued)

(b) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate as a result of changes in

market interest rates and the cash flow risks associated with the variability of cash flows from floating

rate financial instruments. The Group is exposed to interest rate risk primarily from its cash and cash

equivalents,borrowings,subordinatedloansandinterestrateswaps.

The Group’s cash balances are kept in interest bearing accounts and on term deposits to maximise

thelevelofreturnwhilemaintaininganadequatelevelofliquidity.

The Group’s borrowings and subordinated loans at variable rates are denominated in US$ and are

stated at amortised cost and not revalued on a periodic basis. Floating rate interest expenses are

capitalised in deposits for purchase of vessels or vessel costs as incurred.

The Group has entered interest rate swaps contracts to manage its interest rate risk. These are

commitments to exchange one set of cash flow for another. Swaps result in an economic exchange of

currencies or interest rates (i.e. fixed rate for floating rate).

At 31 December 2016, if the US$ market interest rates had been 50 basis points higher/lower, which

was considered reasonably possible by management, with all other variables held constant, the

profit for the year would have been US$181,000 lower/higher (2015: US$157,000), mainly as a result of

higher/lower net interest expenses incurred on floating rate financial instruments.

(c) Credit risk

Credit risk is the risk of loss resulting from the failure of counterparties to meet the terms of their

obligations under a financial instrument or customer contract. The Group is exposed to credit risk from

account receivables, deposits with bank and financial institution and other financial instruments.

The Group deals only with customers of good credit standing. The bank balances are deposited with

creditworthy banks with no recent history of default. In the opinion of the directors, the Company’s

exposure to credit risk is minimal.




(d) Liquidity risk

TheGroupmanagesliquidityriskbymaintainingsufficientcashandtheavailabilityoffundingthrough

anadequateamountofcommittedcredit facilitiesandtheabilitytocloseoutmarketpositions in

ordertomeetournormaloperatingcommitmentandcapitalinvestmentrequirement.

The tables below analyse the maturity profile of the financial liabilities of the Group and the Company

based on contractual undiscounted cash flows:

At 31 December 2016

More than More than1 year but 2 years but

Within 1 less than 2 less than 5 More than 5On demand year years years years Total


Non-derivative financial instrumentsSubordinated loans, secured – (103,634) (103,634) (2,801,675) – (3,008,943)Loans from the non-controlling

shareholders of a subsidiary – – – – (3,524,570) (3,524,570)Bridge loans from the ultimate holding company – (65,279) (2,350,702) – – (2,415,981)Borrowings, secured – (19,700,764) (21,236,649) (67,289,810) – (108,227,223)Borrowings, unsecured – (4,010,471) – – – (4,010,471)Other payables and accruals – (827,152) – – – (827,152)

– (24,707,300) (23,690,985) (70,091,485) (3,524,570) (122,014,340)

Derivative financial instrumentsCash inflows – 630,813 771,587 1,379,492 – 2,781,892Cash outflows – (972,565) (810,824) (1,261,492) – (3,044,881)

(341,752) (39,237) (118,000) – (262,989)




(d) Liquidity risk (continued)

At 31 December 2015

More than More than1 year but 2 years but

Within 1 less than 2 less than 5 More than 5On demand year years years years Total


Non-derivative financial instrumentsSubordinated loans, secured – (2,629,712) (34,133) (1,551,152) – (4,214,997)Loans from the non-controlling

shareholders of a subsidiary – – – – (3,524,570) (3,524,570)Borrowings, secured – (24,808,837) (17,558,315) (54,981,366) (11,171,724) (108,520,242)Borrowings, unsecured – (3,856,980) – – – (3,856,980)Other payables and accruals – (1,979,568) – – – (1,979,568)

– (33,275,097) (17,592,448) (56,532,518) (14,696,294) (122,096,357)

Derivative financial instrumentsCash inflows – 588,631 651,578 1,387,226 193,701 2,821,136Cash outflows – (774,200) (785,010) (1,678,725) (210,416) (3,448,351)

(185,569) (133,432) (291,499) (16,715) (627,215)

(e) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a

going concern in order to provide returns for the sole shareholder and benefits for other stakeholders.

In order to maintain or adjust the capital structure, the Group will consider the macro economic

conditions,prevailingborrowingrate in themarketandadequacyofcashflowsgeneratingfrom

operations.

TheGroup’stotalcapital iscalculatedasequityasshownintheconsolidatedbalancesheet.The

Group’s strategy is to maintain sufficient capital with the funds generated from operations, borrowings

and subordinated loans.

30. fInAnCIAl InSTRUMenTS BY CATegORY

Otherthanthederivativefinancial instrumentsandequity investmentsbeingclassifiedasfinancialassets/

liabilities at fair value through profit or loss as disclosed in notes 7 and 8 to the financial statements, all

financial assets and liabilities of the Company as at 31 December 2016 and 2015 were loans and receivables,

and financial liabilities stated at amortised cost, respectively.



31. fAIR VAlUe HIeRARCHY Of fInAnCIAl ASSeTS AnD lIABIlITIeS

(a) Fair value of financial instruments by classes that are not carried at fair value and those carrying amounts are reasonable approximation of fair value

The carrying amounts of accounts receivables, prepayments and other receivables (note 6), cash

andcashequivalents(note9),bridgeloansfromultimateholdingcompany(note13),floatingrate

subordinated loans (note 12), borrowings (notes 15 and 16), other payables and accruals (note

17) are reasonable approximation of fair values, either due to their short-term nature or that they are

floating rate instruments that are re-priced to market interest rates on or near the end of the reporting

period.

(b) Fair value of financial instruments by classes that are not carried at fair value and those carrying amounts are not reasonable approximation of fair value

Carrying Fairamount value

US$ US$

At 31 December 2016

Financial liabilitiesSubordinated loans, secured (1,250,000) (1,341,104)

At 31 December 2015

Financial liabilitiesSubordinated loans, secured (2,500,000) (2,586,019)Loans from the non-controlling shareholders of a subsidiary (2,735,975) (2,852,904)

(5,235,975) (5,438,923)

The fair value of the loans to subsidiaries and shareholder’s loan from the non-controlling shareholder

of a subsidiary is determined by the discounted cash flow method based on the borrowing rate of

approximately 3.00% (2015: 2.50%) per annum, which the directors expect would be available to the

Company for loans on similar terms, credit risk and remaining maturities. The effective interest rate of

the loans to subsidiaries was 3.00% (2015: 3.00%) per annum.

The fair values of the subordinated loans are determined by the discounted cash flow method based

on the borrowing rate of approximately 3.00% (2015: 2.50%) per annum, which the directors expect

would be available to the Company for loans on similar terms, credit risk and remaining maturities. The

effective interest rate of the subordinated loans was 5.00% (2015: 5.00%) per annum.



31. fAIR VAlUe HIeRARCHY Of fInAnCIAl ASSeTS AnD lIABIlITIeS (continued)

(c) Analysis of financial instruments carried at fair value by level of fair value hierarchy as at the end of the reporting period is as follows:

Fair value hierarchy

Fair value measurement

Quoted prices Significant Significantin active observable unobservablemarkets inputs inputs

(Level 1) (Level 2) (Level 3) TotalUS$ US$ US$ US$

At 31 December 2016

Financial assets at fair value through other comprehensive income – interest rate swaps designated as hedge – 382,983 – 382,983

Financial liabilities at fair value through other comprehensive income – interest rate swaps designated as hedge – (556,630) – (556,630)

At 31 December 2015

Financial assets at fair value through other comprehensive income – interest rate swaps designated as hedge – 57,073 – 57,073

Financial assets at fair value through profit or loss – interest rate swaps not designated as hedge – 59,876 – 59,876

– 116,949 – 116,949

Financial liabilities at fair value through other comprehensive income – interest rate swaps designated as hedge – (70,175) – (70,175)

Financial liabilities at fair value through profit or loss – interest rate swaps not designated as hedge – (815,466) – (815,466)– forward currency contracts not designated as hedge – (11,622) – (11,622)

– (897,263) – (897,263)

During the year 2016 and 2015, there were no movement in fair value measurement in Level 3, no

transfer of fair value measurements between Level 1 and Level 2 and no transfer into or out of Level 3.

Interestrateswapcontractsarevaluedusingavaluationtechniquewithmarketobservableinputs.The

mostfrequentlyappliedvaluationtechniquesincludeforwardpricingandswapmodels,usingpresent

valuecalculations.Themodelsincorporatevariousinputsincludingthecreditqualityofcounterparties,

foreign exchange spot and forward rates, interest rate curves and forward rate curves.



32. STATeMenT Of fInAnCIAl POSITIOn Of THe COMPAnY

Information about the statement of financial position of the Company at the end of the reporting period is as

follows:

2016 2015US$ US$

NON-CURRENT ASSETSInvestments in subsidiaries 45,817,667 52,724,372

CURRENT ASSETSLoan to a subsidiary 4,500,000 –Due from subsidiaries – 9,120,247EquityInvestmentsatfairvaluethroughprofitorloss 2,398,331 –Prepayments and other receivables 3,950 –Income tax recoverable 46,183 –Cashandcashequivalents 1,727,711 146,982

Total current assets 8,676,175 9,267,229

TOTAL ASSETS 54,493,842 61,991,601

EQUITYShare capital 51,998,342 51,998,342Retained profits/(accumulated losses) (Note) (6,495,205) 4,527,122

TOTAL EQUITY 45,503,137 56,525,464

CURRENT LIABILITIESBridge loans from the ultimate holding company 2,300,000 –Borrowings, unsecured 4,000,000 3,850,000Deferred income 7,585 10,638Due to subsidiaries 2,264,058 –Other payables and accruals 419,062 1,605,499

Total current liabilities 8,990,705 5,466,137

TOTAL LIABILITIES 8,990,705 5,466,137

TOTAL EQUITY AND LIABILITIES 54,493,842 61,991,601

Mr. Michio Tanamoto Mr. Masaki Fukumori

Director Director



32. STATeMenT Of fInAnCIAl POSITIOn Of THe COMPAnY (continued)

Note: The movement of the Company’s retained profits/(accumulated losses) is as follows:

Retained Profits/

(accumulated losses)

US$ At 1 January 2015 2,629,103

Profit for the year and total comprehensive income for the year 1,898,019

At 31 December 2015 and 1 January 2016 4,527,122

Loss for the year and total comprehensive loss for the year (11,022,327)

At 31 December 2016 (6,495,205)

33. APPROVAl Of THe fInAnCIAl STATeMenTS

The financial statements were approved and authorised for issue by the board of directors on 22 May 2017.

30/F, Prosperity Millennia Plaza, No. 663 King's Road, North Point, Hong KongTel: 852 2528 5016Website: www.uniasiashipping.com

SHIPPING LIMITED

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