18 Share Capital

20182017
Number of
shares
US$'000Number of
shares
US$'000
Authorised36,000,000,000360,00036,000,000,000360,000
Issued and fully paid
At 1 January4,436,939,10243,5544,014,512,27540,046
Shares issued as Vessel Consideration Shares (a)69,746,012697216,903,2742,169
Shares issued upon grant of restricted share awards (b)21,150,00021223,115,000231
Shares granted to employees in the form of
     restricted share awards (b)
6,948,0001,19011,607,0002,325
Shares transferred back to trustee upon lapse of
    restricted share awards (b)
(1,887,000)(338)(10,925,000)(1,853)
Shares purchased by trustee of the SAS (b)(377,000)(110)(5,213,000)(1,233)
Shares issued for new share placement (c)--186,939,5531,869
At 31 December4,532,519,11445,2054,436,939,10243,554

(a) Shares issued as Vessel Consideration Shares

On 14 May 2018, the Group entered into contracts for the acquisition of four vessels at a total purchase consideration of US$88.5 million funded by a combination of: (i) the issue of 170,760,137 shares at an issue price of HK$2.036 per shares (“Vessel Consideration Shares”) amounting to US$44.3 million to the sellers; and (ii) cash of US$44.2 million. In 2018, an aggregate of 69,746,012 shares were issued upon the delivery of two vessels to the Group and, in January and February 2019, an aggregate of 101,014,125 shares were issued upon the delivery of the remaining two vessels to the Group.

Report to the Directors

(a) Share Capital and Pre-emptive Rights

On 2 August 2017, the Group entered into contracts for the acquisition of five vessels at a total purchase consideration of US$104.6 million funded by a combination of: (i) the issue of 216,903,274 shares at an issue price of HK$1.660 per shares (“Vessel Consideration Shares”) amounting to US$46.1 million to the sellers; and (ii) cash of US$58.5 million. The shares were issued by end of 2017 upon the delivery of the vessels to the Group.

(b) Restricted share awards

Restricted share awards under the Company’s 2013 Share Award Scheme (“SAS”) were granted to Executive Directors and certain employees. The SAS under HKFRS is regarded as a special purpose entity of the Company.

On the grant of the restricted share awards, the relevant number of shares is legally transferred or issued to the trustee who holds the shares for the benefit of the grantees. A grantee shall not be entitled to vote, to receive dividends (except where the Board grants dividend rights to the grantee at the Board’s discretion) or to have any other rights of a shareholder in respect of the shares until vesting. If the shares lapse or are forfeited, they will be held by the trustee and can be utilised for future awards. Any dividends paid to the grantees in respect of those shares granted to them but prior to vesting are considered to be a cost of employment and charged directly to the income statement.

Movements of the number of unvested restricted share awards during the year are as follows:

000' shares20182017
At 1 January74,00667,256
Granted28,09834,722
Vested(23,287)(17,047)
Lapsed(1,887)(10,925)
At 31 December76,93074,006

Out of the 76,930,000 unvested restricted share awards as at 31 December 2018 and according to the vesting schedule, 27,071,000 shares, 27,110,000 shares and 22,749,000 shares will be vested on 14 July 2019, 14 July 2020 and 14 July 2021 respectively.

Report of the Directors

Movement of Restricted Awards Granted

The market prices of the restricted share awards on the grant date represented the fair values of those shares. The weighted average fair value of restricted share awards granted during the year was HK$1.7 (2017: HK$1.5).

The sources of the shares granted and their related movement between share capital and staff benefits reserve are as follows:

20182017
Sources of shares grantedNumber of
granted
shares awards
Related
movement
US$'000
Number of
granted
shares awards
Related
movement
US$'000
Shares issued21,150,00021223,115,000231
Shares purchased by the trustee of the SAS
on the Stock Exchange funded by the Company
377,0001105,213,0001,233
Shares transferred from the trustee6,571,0001,0806,394,0001,092
28,098,0001,40234,722,0002,556

(c) Share placement

Pursuant to a placing agreement dated 2 August 2017, the Company issued 186,939,553 shares on 10 August 2017 with nominal value of US$0.01 each, at a price of HK$1.59 per share representing a discount of approximately 7.56% to the closing price of HK$1.72 per share as quoted on the Stock Exchange on 2 August 2017, being the date of the placing agreement. The proceeds of the placing, net of issuing expenses of approximately US$0.4 million, amounted to US$37.6 million (or HK$293.8 million) or HK$1.57 net per share. The placing was fully underwritten by a placing agent to more than six independent individual, corporate, institutional or other professional investors. The funds raised were used to finance a portion of the cash consideration of the acquisition of five vessels in 2017 set out in Note (a) above.

Accounting policy

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

Where any group company purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax) is included in equity.

For equity-settled share-based payment transactions (other than services from employee and other similar services detailed on Remuneration Report), the increase in equity is measured as the fair value of the goods or services received. If the fair value of the goods or services received cannot be reliably estimated, the increase in equity would be measured, indirectly, by reference to the fair value of the equity instruments granted.

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18 Share Capital

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