MPC Container Ships ASA

Interim / Quarterly Report • Aug 30, 2019

MPC CONTAINER SHIPS ASA FINANCIAL REPORT H1 2019

SUBSEQUENT EVENTS3 BUSINESS OVERVIEW AND CORPORATE DEVELOPMENT 3 IMO 2020 – SCRUBBER PROGRAM4 SECOND QUARTER AND HALF-YEAR 2019 RESULTS4 CONTAINER MARKET UPDATE 5 FORWARD-LOOKING STATEMENTS8 RESPONSIBILITY STATEMENT9 CONSOLIDATED INCOME STATEMENT 10 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 10 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 11 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12 CONSOLIDATED STATEMENT OF CASH FLOW12 NOTES 14 ALTERNATIVE PERFORMANCE MEASURES 19	SECOND QUARTER AND HALF-YEAR 2019 HIGHLIGHTS 3

MPC CONTAINER SHIPS ASA

SECOND QUARTER AND HALF-YEAR 2019 HIGHLIGHTS

• Total operating revenues for Q2 2019 were USD 47.8 million compared to USD 46.7 million for Q1 2019. For H1 2019, operating revenues were USD 94.5 million.
• EBITDA was USD 8.1 million in Q2 2019 compared to USD 4.7 million in Q1 2019. For H1 2019, EBITDA was 12.8 million.
• Operating cash flow for Q2 2019 was USD 9.8 million (Q1 2019: USD 0.7 million). For H1 2019, the operating cash flow was USD 10.6 million.
• Net loss for the period in Q2 2019 was USD -6.4 million compared to a net loss of USD -7.7 million in Q1 2019. Total net loss for H1 2019 was USD -14.1 million.
• Total ownership days of fully owned vessels in Q2 2019 were 5,460 (Q1 2019: 5,400). Total ownership days in H1 2019 were 10,860 days.
• Total trading days of fully owned vessels in Q2 2019 were 4,963 (Q1 2019: 4,831). Second quarter utilization was 93.0% compared to 89.9% in Q1 2019. For H1 2019, utilization was 91.5%.
• Average time charter equivalent ("TCE") was USD 9,071 per day in Q2 2019 (Q1 2019: USD 9,240 per day). For H1 2019, TCE was USD 9,154 per day.
• Average operating expenses ("OPEX") in Q2 2019 were USD 5,172 per day (Q1 2019: USD 5,274 per day). For H1 2019, OPEX per day were USD 5,222.
• Equity ratio as at 30 June 2019 was 61.5% (31 March 2019: 63.3%) and the leverage ratio was 35.8% (31 March 2019: 34.3%).
• AS Fortuna was sold and delivered to its new owner in June 2019. After the sale of this vessel the fleet of MPC Container Ships ASA and its subsidiaries (the "Group") constitute of 68 container vessels, whereof 60 is fully owned and 8 are owned through a joint venture.

SUBSEQUENT EVENTS

On 15 August 2019, under the senior secured term loan agreement with Beal Bank, the Group exercised the accordion option by the amount up to USD 13.0 million. The amounts made available will be used party for the refinancing of AS Palina and AS Petra and partly for investments in docking and installation of scrubbers on the two vessels.

BUSINESS OVERVIEW AND CORPORATE DEVELOPMENT

MPC Container Ships ASA's (the "Company") principal business activity is to invest in and operate maritime assets in the container shipping segment. As a dedicated owner and operator of container ships, the Group has a focus on feeder vessels, mainly between 1,000 and 3,000 TEU, that are chartered out to liner shipping companies and regional carriers.

In order to position the Group to benefit from expected market improvements whilst ensuring manoeuvrability under current conditions, the Group focuses on maintaining a low cash break-even, prudent leverage profile and stringent capital allocation. During H1 2019, in accordance with the share buy-back programmes announced on 28 February 2019 and 5 June 2019, respectively, the Company has acquired 351,098 own shares for a total consideration of USD 1.0 million. Moreover, the Group has obtained new debt financing at favourable terms (see note 8), thereby ensuring flexibility and additional financial strength.

In the first half of 2019, the Group declared a constructive total loss for vessel AS Fortuna after her grounding in September 2018. The vessel value was fully insured and insurance proceeds exceeded the book value of the vessel. The vessel was sold and delivered to new owners in June 2019. A total gain on disposal amounting to USD 3.1 million is reflected in the H1 2019 financial accounts.

IMO 2020 – SCRUBBER PROGRAM

In 2018, the Group announced that it has entered into agreements for the purchase of a total of ten exhaust gas cleaning systems ("scrubbers") which are to be retrofitted on ten selected vessels within the Group's fleet prior to the 1 January 2020 implementation of the new sulphur emission cap regulation, as set forth by the International Maritime Organization ("IMO"). In addition the Group in 2018 announced that it had entered into charters for six scrubber-retrofitted vessels with favourable rates and a duration into 2022.

The Group has commenced the installation of scrubbers on one of the selected vessels in June 2019 and will continue with scrubber installations on the remaining nine vessels during the second half of 2019.

SECOND QUARTER AND HALF-YEAR 2019 RESULTS

Financial performance

The Group's vessels are chartered out on time charter contracts to global and regional liner shipping companies. Operating revenues were USD 47.8 million during Q2 2019 (Q1 2019: USD 46.7 million) and 94.5 million in H1 2019. The gross profit from vessel operations was USD 10.5 million in Q2 2019 (Q1 2019: USD 7.2 million) and USD 17.7 million in H1 2019.

Container shipping continues to face a high degree of uncertainty, ranging from the additional costs associated with IMO 2020 to the possibility of an economic recession, in particular due to on-going US-China tensions. The Group's earnings continue to be affected by the challenging shipping markets.

The Group reports a loss after taxes of USD -6.4 million in Q2 2019 (Q1 2019: USD -7.7 million) and a loss for H1 2019 of USD -14.1 million.

Financial position

The Group's total assets amounted to USD 709.3 million as at 30 June 2019 (USD 722.1 million as at 31 December 2018). Non-current assets in the amount of USD 627.8 million comprises of vessels operated by the Group as well as the equity investments into a joint venture.

Total equity was USD 435.9 million as at 30 June 2019 (USD 459.2 million as at 31 December 2018) with non-controlling interest of USD 1.7 million. The decrease in equity relates in addition to the net loss for the period on USD 14.1 million to the negative fair value change of USD 5.1 million for the hedging reserves. As at 30 June 2019, the Group had interest-bearing debt in the amount of USD 254.1 million (USD 247.7 million as at 31 December 2018). The increase in long-term debt is mainly due to a drawdown of the revolving credit facility in Q2 2019, partly offset by repayments of debt in Q1 2019.

Cash flow

In Q2 2019, the Group generated a positive cash flow from operating activities of USD 9.8 million (Q1 2019: USD 0.8 million). The cash flow from investing activities was USD -12.1 million (Q1 2019: USD -3.6 million) due to dry-dockings, scrubber retrofits and other upgrades and repurchase of own shares. The Group had a positive cash flow from financing activities of USD 7.4 million (Q1 2019: USD -10.7 million) mainly due to the drawdown on the revolving credit facility (see note 8).

Cash and cash equivalents as at 30 June 2019 were USD 51.8 million, up from USD 46.6 million as at 31 March 2019. For H1 2019, the cash and cash equivalents has decreased from USD 60.3 million as at 31 December 2019 to USD 51.8 million as at 30 June 2019.

CONTAINER MARKET UPDATE

Charter rates for container ships in the Post-Panamax segment began to rise in March this year. In the following months, this development filtered through into the smaller segments, recently affecting also the feeder market. One determining factor for this development is the installation of exhaust gas cleaning systems (scrubbers) to meet the requirements set forth in the IMO 2020 regulation and the adhering need for replacement tonnage during retrofits. As a result, the idle container fleet grew from a low of 1.3% (April 2019) to 2.5% (August 2019) of the total fleet.

Container ship deliveries in H1 2019 reached a historically low level, while the newbuilding market was equally subdued. Scrapping activity in the feeder segment remained at a comparable high level in Q2 2019 as in the previous quarter.

Various economic and political circumstances had a dampening effect on global container trade, compelling analysts to lower their full-year growth forecasts. However, estimates for global container trade growth for FY 2019 ranges between 3% and 3.5% while growth in active container fleet capacity (fleet development less scrubber retrofits) is estimated to grow only 1.9%.

Demand

Global seaborne box trade was estimated to grow by 2% in H1 2019, but headwinds from the global economy put pressure on certain trade routes. Trade conflicts and other forms of geopolitical tensions, regionalisation and environmental concerns, as well as the combination of these factors have prompted analysts to lower their FY 2019 demand forecasts.

For FY 2019, Clarksons Research expects global container trade to grow by 3.1% (2018: 4.2%). Intra-regional trades are, however, expected to grow by 4.6% (2018: 5.7%). Even in the event of a "domino effect" from other trade lanes due to US-Sino tensions, Clarksons still predict 4.1% growth for FY 2019 (2018: 5.7%). Feeder ships below 3,000 TEU provide the majority of capacity on intra-regional container services. 34% of all container ships and 53% of all feeder container ships are currently deployed on intra-regional trades. What is more, the share of intra-regional trade as a portion of global trade has increased from 33% in 2001 to 42% in 2018.

Other trade lanes carry growth estimates below the aggregate 3.1% estimate for FY 2019. Next to the decreasing effect that the US-China trade conflict has on trade volumes for Transpacific routes, a trade diversion leads to increasing trade flows within Asia, already visible e.g. in the increased export and import volumes to and from Vietnam.

Fleet development

"Active" container ship fleet capacity growth, accounting for vessels being temporarily decommissioned to undergo scrubber retrofits, is estimated at 1.9% for FY 2019, while the overall full-year fleet capacity growth is forecasted at 3.1% (2018: 5.6%). This represents a 30% decline year-on-year and hence the second-lowest fleet growth in history.

Total deliveries during H1 2019 stood at 76 units (0.51m TEU), with vessels larger than 12,000 TEU accounting for 0.39m TEU (76% of the total growth) while ships below 3,000 TEU accounting for remaining 0.07m TEU (14% of total growth).

H1 2019 container ship scrapping stood at 59 units totalling 120,000 TEU, on par with total boxship capacity recycled during all of FY 2018. Feeder container ships of less than 3,000 TEU accounted for more than half of the recycled capacity.

The introduction of low-sulphur fuel regulations in January 2020 may be perceived as creating a competitive advantage for larger vessels and modern eco tonnage. However, due to physical and logistical restrictions, regional trades continue to be dominated by feeder vessels which represent an appealing sub-segment of the overall fleet. Estimates of a slow-down in feeder fleet growth to around 0.3% for 1,000 - 2,000 TEU vessels additionally supports the market perspective of the smaller segment.

The container ship newbuilding market was generally quiet during Q2 2019. Overall, newbuild contracting activity in the first six months of 2019 amounted to 54 vessels totalling 0.26m TEU capacity, a decrease of 60% compared to H1 2018 in TEU terms. At present, the newbuilding orderbook amounts to approximately 11% of the fleet and hence is at its lowest level for years.

Asset prices

Newbuilding prices at the larger-sized container ships (except for special designs) remained stable, while quotes for feeder designs have in general remained unchanged. An impending reduction of the global orderbook across all vessel types will place downward pressure on shipyards' forward cover, the main driver of newbuild prices. Analysts thus expect a slight decline in newbuild prices during H2 2019.

Newbuilding prices in June 2019:

• 1,000 TEU: USD 19.5 million (up 3% year-to-date)
• 1,700 TEU: USD 26.25 million (up 1% year-to-date)
• 2,750 TEU: USD 34.5 million (down 1% year-to-date)
• 4,800 TEU*: USD 53.0 million (up 7% year-to-date) * wide-beam design

Secondhand container ship values have been trending downwards since mid-2018, albeit based on a limited number of transactions. The recent improvement in charter rates for larger vessels has yet to have a significant impact on these values. At the end of June 2019, prices for most feeder vessels – with the exception of the smallest sizes – were noticeably lower compared to January.

In H1 2019, a total of 66 sales of secondhand tonnage were reported, totalling 0.26 million TEU. This represents a decrease of 46% compared to H1 2018, and secondhand activity remains at its lowest level since late 2016.

Once again, factors outside the secondhand container ship market have adversely affected market sentiment, dampened demand and led to prices dipping below the conventional correlation with earnings for most ship sizes.

Secondhand prices (10-year old) in June 2019:

• 1,000 TEU: USD 6.0 million (up 9% year-to-date)
• 1,700 TEU: USD 8.0 million (down 24% year-to-date)
• 2,750 TEU: USD 11.5 million (down 15% year-to-date)
• 4,300 TEU: USD 9.25 million (down 16% year-to-date)

Charter rates

As of March 2019, rates for the larger vessels have increased due to liner companies needing to cover trade routes while vessels are taken out of service for scrubber installations. Since scrubber systems are less frequently installed on smaller vessels, the dynamic has excluded feeder vessels from rate increases for most of Q2 2019.

At the end of June 2019, demand filtered through into the Panamax segment, and experts pointed towards a top-down support which should increase revenues in the feeder segments. This occurred only recently when the market successfully averted a traditional summer downturn with solid activity and improving rates for the smaller segments as well.

The idle container ship fleet has decreased sharply from 4.0% of total fleet (6.5% of the feeder fleet) in March 2019 to 1.3% (2.6%) in April, a development supported by a brisk Intra-Asian trade where new service offerings were particularly helpful for smaller segments. As per August, total idle fleet jumped to 2.5% on the back of vessels entering shipyards for scrubber retrofits. This trend is expected to continue over the coming months for vessels above 7,500 TEU, placing further pressure on the charter market.

Time charter rates (6 - 12 months) in June 2019:

• 1,000 TEU: USD 6,150 (down 3% year-to-date)
• 1,700 TEU: USD 8,300 (up 11% year-to-date)
• 2,750 TEU: USD 9,150 (down 4% year-to-date)
• 4,300 TEU: USD 9,400 (up 4% year-to-date)

Market outlook

On an overall macroeconomic level, the outlook for H2 2019 and the first months of 2020 will remain influenced by issues relating to IMO 2020, a complex economic situation as well as the associated possibility of escalating US-Sino trade disputes. Financial turmoil in emerging markets and a looming weakening of industrialized economies could all intensify.

The changes that will come along with the introduction of the IMO 2020 regulations in January are already beginning to show effect. Scrubber retrofit works presently being carried out have removed 31 vessels carrying 350,000 TEU from the market, six months before regulation enforcement, increasingly reducing the availability of chartered tonnage. It is expected that a meaningful number of scrubber retrofits will be postponed to Q4 2019 and continue well into H1 2020. As of late, it has become increasingly apparent that in many cases the originally envisaged installation time has been or will be exceeded, further improving the positive effects on the charter market. Adding to this is vessels without scrubbers sailing on lower operating speeds to reduce low-sulphur fuel consumption, and increased recycling of non-competitive vessels.

What is more, the upward trend of the various charter market indices point towards good activity and improving charter rates even during and after the usually quiet summer period. The Howe Robinson Container Index rose in late August to its highest value for the current week in 7 years. Thus far in Q3 2019, the index has risen 13%, the second strongest increase in 10 years.

As the supply side does not appear overly worrisome, with current estimates indicating moderate growth of 3% for 2019 and 2020 (2018: 5.6%), non-feeder vessels dominating the orderbook and feeder orders mainly being replacement tonnage or tailored for the fast-growing Intra-Asian market, a demand-supply rebalancing appears to hold up as a realistic scenario.

FORWARD-LOOKING STATEMENTS

Forward-looking statements presented in this report are based on various assumptions. The assumptions are subject to uncertainties and contingencies that are difficult or impossible to predict. MPC Container Ships ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished.

RESPONSIBILITY STATEMENT

Today, the Board of Directors and the CEO have resolved the report and the interim condensed consolidated financial statements for MPC Container Ships ASA per 30 June 2019 and for the first half year of 2019, including interim condensed consolidated figures for comparison per 30 June 2018 and for the first half year 2018.

The half year report is submitted in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU, and in accordance with further requirements in the Norwegian Securities Trading Act.

The Board of Directors and the CEO confirm, to the best of our knowledge, that the interim financial statements for the first half year of 2019 have been prepared in accordance with prevailing accounting standards, and that the information given in the financial statements gives a true and fair view of the Company's consolidated assets, liabilities, financial position and results for the period. To the best of our knowledge, the Board of Directors' discussion and analysis for the first half year of 2019 gives a true and fair overview of the main activities in the period.

Oslo, 29 August 2019

The Board of Directors and CEO of MPC Container Ships ASA

MPC CONTAINER SHIPS ASA FINANCIAL REPORT H1 ^{2019 9}

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

in USD thousands	Notes	Q2 2019 (unaudited)	Q1 2019 (unaudited)	Q2 2018 (unaudited)	H1 2019 (unaudited)	H1 2018 (unaudited)
Operating revenue	5	47,815	46,657	46,935	94,471	75,196
Commissions		-1,728	-1,618	-1,789	-3,345	-2,833
Vessel voyage expenditures		-4,218	-5,091	-2,759	-9,309	-3,988
Vessel operation expenditures		-28,798	-29,951	-26,062	-58,749	-41,692
Ship management fees		-2,293	-2,235	-1,785	-4,528	-3,012
Share of profit or loss from joint venture	6	-283	-524	394	-807	744
Gross profit		10,495	7,238	14,934	17,733	24,415
Administrative expenses		-2,090	-2,028	-1,863	-4,118	-3,274
Other expenses		-582	-2,253	-385	-2,835	-791
Other income		253	1,791	574	2,045	863
EBITDA		8,077	4,748	13,260	12,825	21,213
Depreciation	7	-9,943	-9,805	-7,277	-19,748	-12,194
Gain from disposal of vessels	7	460	2,669		3,129	0
Operating result (EBIT)		-1,406	-2,388	5,983	-3,794	9,019
Other finance income		109	142	118	251	437
Finance costs		-5,049	-5,458	-4,204	-10,507	-7,049
Profit/Loss before income tax (EBT)		-6,346	-7,704	1,897	-14,050	2,408
Income tax expenses		-93	-6	-123	-99	-132
Profit/Loss for the period		-6,439	-7,711	1,773	-14,149	2,276
Attributable to:
Equity holders of the Company		-6,432	-7,696	1,971	-14,128	2,547
Minority interest		-7	-14	-198	-22	-272
Basic earnings per share – in USD		-0.08	-0.09	0.02	-0.17	0.03
Diluted earnings per share – in USD		-0.07	-0.09	0.02	-0.16	0.03

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

in USD thousands	Notes	Q2 2019 (unaudited)	Q1 2019 (unaudited)	Q2 2018 (unaudited)	H1 2019 (unaudited)	H1 2018 (unaudited)
Profit/loss for the period		-6,439	-7,711	1,773	-14,149	2,276
Items that may be subsequently transferred to profit or loss		-3,558	-1,585	390	-5,143	1,781
Foreign currency effects, net of taxes		16	-68	-189	-52	-177
Change in hedging reserves, net of taxes		-3573	-1,517	578	-5,091	1,957
Items that will not be subsequently transferred to profit or loss		0	0	0	0	0
Other comprehensive profit/loss, net of taxes		0	0	0	0	0
Other comprehensive profit/loss from joint ventures and affiliates		0	0	0	0	0
Total comprehensive profit/loss		-9,997	-9,296	2,163	-19,292	4,057
Attributable to:
Equity holders of the Company		-9,989	-9,282	2,361	-19,271	4,329
Non-controlling interest		-7	-14	-198	-22	-272

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

in USD thousands	Notes	At 30 June 2019 (unaudited)	At 31 March 2019 (unaudited)	At 31 December 2018 (audited)
Assets		709,262	704,691	722,062
Non-current Assets		627,781	625,914	633,658
Vessels	7	600,728	598,578	605,749
Prepayment on vessels	7	0	0	1,549
Investment in joint venture	6	27,053	27,336	26,360
Current Assets		81,480	78,777	88,404
Inventories		5,058	4,437	4,853
Trade and other receivables		24,617	27,712	23,322
Cash and cash equivalents		51,806	46,628	60,228
Unrestricted cash		38,831	33,607	44,087
Restricted cash		12,975	13,021	16,141
Equity and Liabilities		709,262	704,691	722,062
Equity		435,883	446,334	459,150
Ordinary shares	10	456,721	457,176	457,726
Share capital		101,121	101,121	101,121
Share premium		356,566	356,566	356,605
Treasury shares		-966	-511	0
Retained losses		-18,375	-11,944	-4,247
Other reserves		-4,158	-600	984
Non-controlling interest		1,695	1,702	4,688
Non-current Liabilities		251,737	239,277	244,766
Interest bearing loans	8	251,737	239,277	244,766
Current Liabilities		21,642	19,080	18,145
Interest bearing loans and borrowings	8	2,369	2,511	2,942
Trade and other payables		6,205	7,071	6,369
Payables to affiliated companies		47	34	53
Other liabilities		13,021	9,464	8,781

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In USD thousands	Share capital (unaudited)	Share premium (unaudited)	Treasury shares (unaudited)	Retained losses (unaudited)	Other reserves (unaudited)	Non controlling interest (unaudited)	Total equity (unaudited)
Equity as at 1 Jan. 2019	101,121	356,605	0	-4,247	984	4,688	459,150
Purchase of own shares			-966				-966
Capital increase to non-controlling interest Changes in						391	391
ownership in subsidiaries that do not result in loss of control		-39				-3,361	-3,400
Result of the period				-14,128		-22	-14,150
Foreign currency effects					-52		-52
Hedging reserves					-5,091		-5,091
Equity as at 30 June 2019	101,121	356,566	-966	-18,375	-4,158	1,695	435,883
Equity as at 1 Jan. 2018	77,155	261,322	0	-2,639	140	4,542	340,520
Share issuance	23,966	95,283					119,249
Capital increase to non-controlling interest						136	136
Result of the period				-1,608		9	-1,599
Foreign currency effects					-30		-30
Hedging reserves					875		875
Equity as at 31 Dec. 2018	101,121	356,605	0	-4,247	984	4,688	459,150

CONSOLIDATED STATEMENT OF CASH FLOW

in USD thousands	Notes	Q2 2019 (unaudited)	Q1 2019 (unaudited)	Q2 2018 (unaudited)	H1 2019 (unaudited)	H1 2018 (unaudited)
Profit/Loss before income tax		-6,346	-7,704	1,897	-14,050	2,408
Income tax expenses paid		0	0	0	0	0
Net change in current assets		2,475	-3,974	-3,093	-1,499	-9,216
Net change in current liabilities		2,562	935	1,075	3,497	4,962
Fair value change in derivatives		-3,558	-1,517	578	-5,075	1,957
Depreciation		9,943	9,805	7,277	19,748	12,194
Finance costs (net)		4,940	5,316	4,086	10,256	6,611
Share of profit or loss from joint venture		283	524	-394	807	-744
Gain from disposal of vessels		-460	-2,669	0	-3,129	0
Cash flow from operating activities		9,838	717	11,425	10,554	18,172
Proceeds from disposal of vessels		1,709	9,030	0	10,739	0
Dry docks and other upgrades on vessels		-13,440	-7,391	-68,371	-20,831	-319,562
Investment in subsidiaries and affiliated companies		0	-4,900	2,794	-4,900	-9,580
Interest received		109	142	60	251	378
Purchase of own shares		-457	-511	0	-968	0
Cash flow from investing activities		-12,079	-3,630	-65,517	-15,709	-328,764
Proceeds from share issuance		0	391	41,505	391	116,002
Share issuance costs		0	0	-750	0	-2,303
Proceeds from debt financing		13,000	0	51,150	13,000	151,150
Repayment of debt		0	-6,383	-160	-6,383	-320
Interest paid		-4,827	-4,525	-3,953	-9,352	-6,399
Debt issuance costs		-753	-170	-2,376	-923	-5,077
Cash flow from financing activities		7,420	-10,688	85,415	-3,267	253,052
Net change in cash and cash equivalents		5,178	-13,600	31,323	-8,422	-57,540
Net foreign exchange differences		0	0	-60	0	-62
Cash and cash equivalents at beginning of period		46,628	60,228	75,458	60,228	164,323
Cash and cash equivalents at the end of period1		51,806	46,628	106,721	51,806	106,721

¹ Whereof USD 13.0 million is restricted as at 30 June 2019, USD 13.0 million as at 31 March 2019 and USD 16.1 million at 31 December 2018

NOTES

Note 1 - General information

MPC Container Ships ASA (the "Company") is a public limited liability company (Norwegian: allmennaksjeselskap) incorporated and domiciled in Norway, with registered address at Dronning Mauds gate 3, 0250 Oslo, Norway and Norwegian enterprise number 918 494 316. The Company was incorporated on 9 January 2017 and commenced operations in April 2017, when the first vessels were acquired. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group"). The principal activity of the Group is to invest in and to operate maritime assets in the container shipping segment.

The shares of the Company are listed at the Oslo Stock Exchange as at 3 May 2018 under the ticker "MPCC".

Note 2 - Basis of preparation

The unaudited interim financial statements for the period ended 30 June 2019 are prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU"). The statements have not been subject to audit. The statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2018. The consolidated financial statements are presented in USD thousands unless otherwise indicated.

Only standards and interpretations that are applicable to the Group have been included and the Group reviews the impact of these changes in its financial statements. The Group will adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued.

Note 3 - Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial reporting are consistent with those applied in the preparation of the Group's consolidated financial statements for the period ended 31 December 2018 except for the new standards effective as of 1 January 2019.

The Company implemented IFRS 16 starting 1 January 2019. The new standard is replacing IAS 17 Leases. The Company has implemented the new standard using the modified retrospective approach for the implementation of IFRS 16 where comparative figures are not restated. The Company has used the practical expedients when applying the new standard to leases previously classified as operating leases under IAS 17. As the Group do not charter in any vessels and do not have any other lease agreements exceeding 12 months, there has been no material impacts from the implementation of the new standard.

Note 4 - Segment information

All of the Group's vessels earn revenue from seaborne container transportation globally. The vessels exhibit similar economic, trading and financial characteristics. The Group is organized in one operating segment, i.e. the container shipping segment.

Note 5 - Revenue

in USD thousands	Q2 2019	Q1 2019
Time charter revenue	34,319	35,237
Pool charter revenue	10,701	9,404
Other revenue	2,795	2,016
Total operating revenue	47,815	46,657

The Group's time charter contracts are separated into a lease element and a service element. The lease element of the vessel represents the use of the vessel without any associated performance obligations and are accounted for in accordance with the lease standard. Revenues from time charter services (service element) and other revenue (e.g. bunkers and other services) are accounted for in accordance IFRS 15. The Group's performance obligation is to provide time charter services to its charterers.

in USD thousands	Q2 2019	Q1 2019
Service element	19,933	19,736
Other revenue	2,795	2,016
Total revenue from customer contracts	22,727	21,752
Lease element	25,087	24,904
Total operating revenue	47,815	46,657

Note 6 - Interest in joint ventures

The Group has a 50% interest in 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG, Hamburg (Germany), a company owning eight container vessels through respective wholly-owned subsidiaries.

in USD thousands	Q2 2019	Q1 2019
Operating revenue	6,852	5,693
Operating costs and depreciations	-7,156	-6,476
Net financial income/expense	-261	-266
Income tax	0	0
Profit after tax for the period	-565	-1,049
Total comprehensive income for the period	-565	-1,049
Group's share of profit for the period	-283	-524

In view of the shared control structure in the joint venture, the Group's interest in 2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG is accounted for using the equity method.

Note 7 - Vessels and prepayments

in USD thousands	At 30 June 2019 (unaudited)	At 31 December 2018 (audited)
Acquisition cost at 1 January	639,871	268,158
Acquisition of vessels	0	273,536
Prepayments reclassified to vessels	1,549	57,787
Prepayments	-1,549	1,549
Capitalized dry-docking and other expenses	20,539	38,841
Disposals of vessel	-7,361	0
Acquisition cost	653,049	639,871

Accumulated depreciations 1 January	-32,573	-3,302
Depreciation for the year-to-date	-19,748	-29,271
Accumulated depreciations at end of period	-52,321	-32,573
Closing balance at end of period	600,728	607,298
Depreciation method	Straight-line	Straight-line
Useful life (vessels)	25 years	25 years

The disposal of vessel relates to the declaration of AS Fortuna as a total loss after her grounding in September 2018 and the subsequent sale of the vessel in June 2019. These events lead to a gain on disposals in H1 2019 of USD 3.1 million.

Note 8 Interest-bearing debt

in USD thousands	Ticker	Currency	Facility amount	Interest	Maturity	30 June 2019 (unaudited)	31 Dec 2018 (audited)
Nominal value of issued bonds	MPCBV	USD	200,000	Floating + 4.75%	September 2022	200,000	200,000
Non-recourse senior secured term loan	N/A	USD	51,150	Floating + 4.75%	May 2023	49,104	50,127
Revolving Credit Facility*	N/A	USD	40,000	Floating + 3.5%	April 2022	13,000	0
Other long-term debt incl. accrued interest						326	5,484
Total outstanding						262,430	255,611
Debt issuance costs						-8,323	-7,903
Total interest bearing debt outstanding						254,107	247,708

* The amount of USD 40 million presented under facility amount represents the maximum commitments that are available for the Group under the agreement.

On 25 April 2019, MPCC Second Financing GmbH & Co. KG, a wholly-owned subsidiary of the Group, entered into an agreement for a three-year revolving credit facility of USD 40 million ("the RCF").

For the non-recourse senior secured term loan, the Group has an accordion option at the lender's discretion for additional approximately USD 250 million. The Group has entered into fixed interest-rate swap agreements for USD 50 million of the USD 200 million bond loan in MPC Container Ships Invest B.V. For the remaining bond loan of USD 150 million the Group has entered into interest cap and collar agreements. For the non-recourse senior secured term loan, the Group has entered into collar agreements.

The following main financial covenants are defined in the terms for the bond loan:

• Vessel loan-to-value ratio of MPC Container Ships Invest B.V. and its subsidiaries shall not exceed 75%;
• MPC Container Ships Invest B.V., together with its subsidiaries, shall maintain a minimum liquidity of 5% of the financial indebtedness of MPC Container Ships Invest B.V. and its subsidiaries; and
• the book-equity ratio of the Group shall at all times be higher than 40%.

The following main financial covenants are defined in the terms of the non-recourse senior secured term loan:

• Vessel loan-to-value ratio of MPCC First Financing GmbH & Co. KG and its subsidiaries shall not exceed 75%; and
• MPCC First Financing GmbH & Co. KG shall maintain a minimum liquidity of 5% of the financial indebtedness of MPCC First Financing GmbH & Co. KG and its subsidiaries.

The following main financial covenants are defined in the terms of the RCF:

• Vessel loan-to-value ratio of MPCC Second Financing GmbH & Co. KG and its subsidiaries shall not exceed 55%;
• the book-equity ratio of the Group shall at all times be higher than 40%;
• the Group shall maintain a minimum liquidity of the higher of 5% of the financial indebtedness of the Group and USD 200 thousand multiplied with the number of consolidated vessels within the Group; and
• the Group shall maintain an EBITDA to total interest expenses for at least 2.5 if the Vessel loan-to-value ratio of the MPCC Second Financing GmbH & Co. KG and its subsidiaries exceeds 40%.

The Group is in compliance with all bond and loan covenants as at 30 June 2019.

Note 9 - Related party disclosure

The following table provides the total amount of service transactions that have been entered into with related parties for the second quarter of 2019:

in USD thousands – Q2 2019	Type of services	Group	2. Bluewater Holding Schifffahrtsgesellschaft GmbH & Co. KG
Ahrenkiel Steamship GmbH & Co. KG / B.V.	Technical	2,013	252
Contchart Hamburg Leer GmbH & Co. KG / B.V.	Commercial	590	68
MPC Maritime Investments GmbH	Corporate	173	0
MPC Münchmeyer Petersen Capital AG	Corporate	86	0
Total		2,861	320

All related party transactions are carried out at market terms. Please see Note 19 in the Company's 2018 Annual Report for additional description.

See Note 10 – Share capital regarding warrants allocated to the founding shareholders.

Note 10 - Share capital

	Number of shares	Share capital
		(USD thousands)
1 January 2018	65,253,000	101,121
16 February 2018	77,003,000	92,254
20 June 2018	83,289,000	99,939
2 July 2018	84,253,000	101,121
31 December 2018	84,253,000	101,121
Changes in shares and share capital in the period	0	0
30 June 2019	84,253,000	101,121

The share capital of the Company consists of 84,253,000 shares as at 30 June 2019, with nominal value per share of NOK 10. All issued shares are of equal rights and are fully paid up.

Total share issuance costs from incorporation until 30 June 2019 amounts to USD 13.3 million.

During 2017, the Company issued a total of 2,121,046 warrants to MPC Capital Beteiligungsgesellschaft mbH & Co. KG as the founding shareholder. Each warrant gives the holders the right, but no obligation, to subscribe for one share in the Company at the exercise price of the NOK equivalent of USD 5.00 per share, given that the vesting conditions are met. The warrants issued to the founding shareholder are recognized as equity instruments in accordance with IAS 32. See Note 22 in the Company's Annual Report 2018 for further information.

Note 11 - Subsequent events

On 15 August 2019, under the senior secured term loan agreement with Beal Bank, the Group exercised the accordion option by the amount up to USD 13.0 million. The amounts made available will be used party for the refinancing of AS Palina and AS Petra and partly for investments in docking and installation of scrubbers on these two vessels.

ALTERNATIVE PERFORMANCE MEASURES

The Group's financial information is prepared in accordance with international financial reporting standards ("IFRS"). In addition, it is the management's intent to provide alternative performance measures that are regularly reviewed by management to enhance the understanding of the Group's performance, but not instead of, the financial statements prepared in accordance with IFRS. The alternative performance measures presented may be determined or calculated differently by other companies. The Group is in the initial phase of operation and performance measures are therefore subject to change. The alternative performance measures are intended to enhance comparability of the results and to give supplemental information to the users of the Group's external reporting.

GROSS PROFIT

Gross profit a key financial parameter for the Group and is derived directly from the income statement by deducting cost of sales (vessel voyage expenditures, ship management fees, vessel operating expenditures and commissions) from the operating revenues.

EBITDA

Earnings before interest, tax, depreciations and amortizations ("EBITDA") is a key financial parameter for the Group and is derived directly from the income statement by adding back depreciation and gain/loss from disposals of vessels to the operating result ("EBIT").

in USD thousands	Q2 2019 (unaudited)	Q1 2019 (unaudited)	Q2 2018 (unaudited)	H1 2019 (unaudited)	H1 2018 (unaudited)
Operating result (EBIT)	-1,406	-2,388	5,983	-3,794	9,019
Depreciation	9,943	9,805	7,277	19,748	12,194
Gain from disposal of vessels	-460	-2,669	0	-3,129	0
EBITDA	8,077	4,748	13,260	12,825	21,213

AVERAGE TIME CHARTER EQUIVALENT ("TCE")

TCE is a commonly used Key Performance Indicator ("KPI") in the shipping industry. TCE represents time charter revenue and pool revenue divided by the number of trading days for the consolidated vessels during the reporting period. Trading days are ownership days minus days without revenue, including commercial, uninsured technical and dry dock related off-hire days.

AVERAGE OPERATING EXPENSES ("OPEX") PER DAY

OPEX per day is a commonly used KPI in the shipping industry. OPEX per day represents operating expenses excluding tonnage taxes divided by the number of ownership days of consolidated vessels during the reporting period.

UTILIZATION

Utilization in percentage is a commonly used KPI in the shipping industry. Utilization in percentage represents total trading days including off-hire days relates to dry docks divided by the total number of ownership days during the period.

LEVERAGE RATIO

Interest bearing long-term debt and interest bearing short-term debt divided by total assets.

EQUITY RATIO

Total book equity divided by total assets.

MPC Container Ships ASA

Postbox 1251 Vika 0111 Oslo, Norway

Org no. 918 494 316

www.mpc-container.com