contents...craned vessels with hyundai mipo dockyard co ltd in korea, to be delivered in 2009-10...

A n n u A l R e p o R t 06

ContentsGrieg Shipping Group 6

2006 in short 9

The CEO’s perspectives 11

Annual Report 2006 Grieg Shipping Group 13

Key figures 20

Management’s review 21

Fleet list 29

Star Shipping 31

Grieg Shipping Group business development 32

Next generation of vessels – The K-class 37

Environmental policy 38

The management group 41

Board of Directors 43

Grieg Group 45

Grieg Foundation 50

Financial statement Grieg Shipping 2006 55

Financial statement Grieg International 2006 71

�G R i e G S H i p p i N G G R o u p A N N u A l R e p o R t 2 0 0 6

BusIness iDeA“World ClAss IndustrIAl shIppIng”

Our trade mark within the shipping industry shall be built on quality, safety, integrity, market knowledge, innovation and strength

We shall proactively develop Star Shipping AS’ world leading position within woodpulp and other unitized cargo markets

We shall focus on synergies and spin-offs from our shipping know-how, and actively evaluate new business opportunities

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VIsIon“CreAte lAstIng VAlue through our Common effort’’

Through the development of modern global sea transportation, contribute to a peaceful coexistence between people

Contribute to the protection of our marine environment and ensure safety at sea

Maintain our headquarters in Norway in order to preserve and develop our competence

Influence and shape the future of our maritime industry and support the maritime cluster in Norway

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grIeg SHippiNG GRoupThe GrieG ShippinG Group, owninG one of The world’S larGeST open-haTch

fleeT, iS an imporTanT parTicipanT in inTernaTional induSTrial ShippinG. our hiGhly Specialized veSSelS are Tailor made To meeT

cuSTomerS’ requiremenTS and deliver Superior carGo care.

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Grieg Shipping Group owns and manages 23 open-hatch general cargo vessels In addition, we have contracts for four newbuildings with delivery in 2009 and 2010 We are located in Bergen, Oslo, Mobile (Alabama), Shanghai (PRC) and Manila (Philippines) In 2006, the Group employs 561 persons, of whom 518 are sailing personnel

Our vessels have box shaped holds to ensure optimal and safe stowage For efficient and damage free cargo handling they have gantry cranes with rain protection and make use of state-of-the-art cargo handling equipment Dehumidification systems make sure that the quality of the air in the holds is right for the various types of cargo carried Our latest newbuildings are amongst the most modern open-hatch vessels in the world and are equipped with tween decks, enabling a mix of various types of cargo in the same hold

Woodpulp, rolled paper and other forestry products are the vessels’ main cargo They also carry a wide range of other cargoes as well as containers In addition, the box shaped holds and unobstructed deck space gives excellent stowage for various project cargoes

The vessels are chartered out to Star Shipping AS (Star) on long-term charterparties Star, which is jointly owned by Masterbulk and Grieg Shipping Group, is the world’s largest marketing and operating company within seaborne transportation of woodpulp and has 21 offices world wide The strategy of Star’s open hatch pool is customer focused, long-term and industrial, and the business is characterized by long-term freight contracts Star’s goal is to be consid-ered the preferred carrier within their business segment

Our long-term commitment, financial strength and highly competent personnel are of vital importance for the ability to deliver quality and maintaining our position as a world class shipping group The organization emphasises knowledge, skills and innovation The continuous search to improve our vessels and cargo handling equipment has given us a leading role in setting new standards within our segment

Safety of the crew, environment, cargoes and vessels is always given the highest priority The vessels are manned by highly qualified Philippine seamen, specially trained for our operation We emphasise a high return rate among the crew to ensure familiarity with our vessels and operational standards The maintenance planning and follow-up are based on ensuring safe and efficient operation as well as a long useful life of the vessels

In addition to the shipping activities, Grieg Shipping Group continuously emphasise utilising its know-how to develop new business opportunities The Group has a substantial ownership in a number of unlisted companies We are an active owner which implies that we participate on the Board of Directors and work closely with the company’s management and other shareholders By contributing with a combination of capital, industrial- and financial competency as well as professional corporate governance, we seek to strengthen the basis for profitable growth in the companies we are engaged in


2006 iN SHoRt• GriegShippingGroupASisournewnameafterallemployeesinGriegInternationalAS,GriegShippingIIAS

andGriegBillabongAShavejoinedtogetherinonecompany.OurvesselsarestillownedbytheshipowningcompaniesGriegShippingAS,GriegInternationalIIAS,GriegPoseidonASandGriegMaritimeAS.

• GriegShippingGroup’sconsolidatedresultbeforetaxin2006amountedtoNOK394million,whichisareductioncomparedtolastyear’srecord,butstillahistoricallystrongresult.

• StarShippingcarried22.8millionmetrictonsofcargo,whichis1.7milliontonslessthanlastyear.

• GriegShippingGroupestablishedarepresentativeofficeinShanghai,PRC.

• StarHerdlawasinvolvedinacollisionintheEnglishChannel.Therewasnodamagetosailingpersonnelorenvironment.

• Ournextgenerationvessels,theK-class,wascontractedatHyundaiMipoDockyardLtd.,Ulsan,Korea.

• OurlatestnewbuildingStarJavawasdeliveredfromMitsuiEngineering&ShipbuildingCo.Ltd.,Tamano,Japan.

• GriegInvestorAS,providerofindependentinstitutionalinvestmentservices,wasboughtbackfromAonGriegAS.

• Asthefirstcompanyintheworld,MARISobtainedtypeapprovalofthecombinedECDIS(electronicchartdisplay)andS-VDR(simplifieddatarecorder)during2006,andthisproducthasbeenasuccess.


tHe Ceo’s peRSpectiveSANOTHERyEAR…

New SuRpRiSeSAfter 2 1/2 years of a historic high market, we believed, and we wrote in last year’s report, that 2006 would be the year when it once again turned downwards; still good, but not record levels The market did come down, but then the market surprised again – for the better, and here we are again Good earnings for all sizes within drybulk and high newbuilding activity, with all the consequences and challenges this brings The fact that such a large number of new ships that was deliv-ered throughout 2006 were absorbed without a more serious dive of the market, underlines the fundamental strength that currently exists in the dry bulk trades China is obviously still the key element with continuous high demand of transporta-tion, but with risk factors that are difficult to predict

New ReSultSResult wise we have good numbers to present Not comparable to the previous two years, but still above our long term return requirements Once again, the value added to our companies is a result, not only of a good market, but of all our people’s hard work and further improvement of all the different functions and professions within our shipping operation

New cHAlleNGeS2006 really was a year of challenges for Grieg Shipping Group Two major accidents; one collision and one grounding resulted in months of off-hire and subsequent loss of income and high repair cost Additional work for our organization required even better planning and more flexibility from all our personnel Increased focus on our routines and resources onboard has high priority in the coming period

Another challenge in a long-lasting high market is the

pressure on all cost elements Time is of essence for all the players in our market and the demand on both newbuilding- as well as repair yards is historically high All suppliers to our industry are enjoying good times and the price pressure is enormous Especially our manning situa-tion is crucial; there is a big battle going on to attract the best people, and we do our outmost to keep ours We have a loyal group of seafarers who have enjoyed long careers in Grieg Shipping Group and we hope to keep it that way

New fleet ADDitioNIn November last year, Star Java, the third and last of the J-class vessels, was delivered from Mitsui Engineering & Shipbuilding Co Ltd (MES) She was contracted on a low market and delivered in a high market

Star Java was the sixteenth vessel built by MES to Grieg Shipping Group and is state of the art technology in her field, designed to optimalize the operation in serving customer needs

The naming ceremony of Star Java was held in Bergen in February this year in order for all our colleagues in Grieg Shipping Group and Star Shipping to participate in this unique and important event It was a special moment for all of us and, we believe, gave further inspiration for everybody involved, realizing the important operation we are all part of

New SHip coNtRActSThe core of being an industrial shipping operator is the ability and willingness to be long-term oriented and show our commitment to the market and customers Our strategy

11G R i e G S H i p p i N G G R o u p A N N u A l R e p o R t 2 0 0 6

is based on further development of a strong market position, competence and sophisticated technology As such we have focus on growth both in size and improved efficiency

Last year we contracted four new Open Hatch Gantry Craned vessels with Hyundai Mipo Dockyard Co Ltd in Korea, to be delivered in 2009-10

ReoRGANizAtioNGrieg Shipping II, Grieg International and Grieg Billabong have over the past years worked more and more as a single group with among others joint board meetings and one management team However, various parallel tasks and functions have resulted in a need for clarification and a more articulated division of tasks After thorough evaluation it was decided to bring together all employees in one single company; Grieg Shipping Group AS which conducts all former activities of the three companies in direct continuation

Grieg Shipping Group AS has thus become a full scale integrated shipping company carrying out activities within technical ship management, project development, market research and contracting, financing, financial portfolio- and investment management as well as accounting services and administration Managing these tasks, Grieg Shipping Group AS has 518 employees at sea and 43 on shore in our offices in Bergen, Oslo, Mobile, Shanghai and Manila Grieg Shipping Group AS is ISM and ISPS certified as well as in compliance with the ISO 9001 standard In addition, ISO 14001 will be implemented in the office and compliance considered

The Group’s investments in Open Hatch Gantry Craned vessels will primarily continue to be owned by the two main ship owning companies; Grieg Shipping AS and Grieg International II AS The Group’s various investments in non-shipping assets and private equity investments will predominantly be controlled by Grieg International AS

The Owners, the Board and the Management Team consider it to be a value in itself that the three different companies now join together in one operating unit Going forward, we believe that our shipping activities will be managed both more effectively and efficiently, which also will give rise to organisational gains Furthermore, we hope that operating with one identity will increase the team oriented culture within the shipping group as well as strengthen the relationship with our business partners

leADeRSHip pHiloSopHyOur leadership philosophy is based on Grieg Shipping Group’s core values;

Open We expect and are dependent on new ideas from the whole organization to develop and grow Constructive feedback on all levels, based on two-way communica-tion is the key to create a positive and innovative environment, and as such make the team better

prOudSubstantial value creation is done within our company and we all contribute, both to this as well as to our industry and society We are proud to be part of this team as well as part of the Grieg Group as a world wide operator

SOlid We have a solid market position that must be devel-oped and strengthened Our strong financial position gives us flexibility and a responsibility to perform

COmmitted The management and owners of Grieg Shipping Group have a strong commitment to our customers, employees and to the society in which we operate It is our goal to make sure that the company is the preferred partner also in the years to come


BuSiNeSS SummARy The Grieg Group’s shipping activities are located in Bergen, Oslo, Mobile, Shanghai and Manila The Grieg Shipping Group primarily consists of the ship owning companies Grieg Shipping AS, Grieg International II AS, Grieg Poseidon AS and Grieg Maritime AS, as well as the management company Grieg Shipping Group AS

Grieg Shipping Group controls 23 open hatch gantry craned general cargo vessels and has contracts for four newbuildings with delivery in 2009 and 2010

The vessels are chartered out on long-term charter parties to Star Shipping AS which is jointly owned by Masterbulk Pte Ltd and Grieg Shipping II AS

tHe woRkiNG eNviRoNmeNtBy year end, Grieg Shipping Group AS employed 43 people in its offices ashore and had 518 employees at sea The Board of Directors regards the working environ-ment as good Through surveys carried out amongst the on-shore employees, it has been established that more than 90% of the employees fully or mostly agree to state-ments such as: ”I am very satisfied at work”, ”my work tasks are varied”, and “I am proud to work for the Group” There are however also areas that can be improved, where “learning and development” has been targeted as a focus area going forward Given the reorganisation into one entity this should also increase the team oriented culture

The Group keeps record of absence due to sickness according to prevailing rules and regulations Total sickness

absence in 2006 for Grieg Shipping Group AS’ on-shore personnel was 2 12% of which 0 96% was due to long term illness There are no records of injuries or accidents

equAl oppoRtuNityGrieg Shipping Group does not accept discrimination of sexes, religion, cultural heritage, race, handicap, or any other form of discrimination The Group performs its activities based on respect for all employees

Per year end, the Group has an equal mixture of both sexes among its employees with 21 women and 22 men An equal gender split is also prevailing in the management team

The Board of Directors has five members, two women and three men

coRpoRAte GoveRNANceThe Group makes an effort to work according to the Norwegian standard for good corporate governance to the extent such practice is applicable for a non-listed family owned group of companies like Grieg Shipping Group

exteRNAl eNviRoNmeNtThe operation of the vessels is exposed to the risk of pollution Thus, the Group is committed to comply with both national and international environmental legislation, regulations and other requirements

The guiding principle is that accidents and environmental harm can be prevented Continuous improvement and prevention of pollution is an inherent part of the activities,

AnnuAl report 2006 GRieG SHippiNG GRoup

1�G R i e G S H i p p i N G G R o u p A N N u A l R e p o R t 2 0 0 6

to which the Group dedicates major efforts and resources Through quality systems, the Group monitors and actively works to decrease the environmental impact of its opera-tions All systems are in accordance with the requirements which are requisite to comply with ISO 14001

There are implemented procedures and developed goals that are measurable in order to track performance and identify areas for further improvement Target areas are: machinery, ballast water management, purchasing, waste handling, segregation of garbage, and sewage management Grieg Shipping Group will continue the work to seek to limit the risk of environmental hazards in the years ahead

pRofit AND loSS AND BAlANce SHeetThrough strong shipping- and financial markets as well as hard work from everybody on board and ashore, and by sound business behaviour, the Group was able to produce healthy results and outperform its long term return targets in 2006 The ship owning companies’ consolidated accounts for 2006 show a net result before tax of NOK 394 million which constitutes a 34% reduc-tion over the NOK 601 million profit in 2005 (1)

The revenues for 2006 of NOK 809 million, came out NOK 211 million lower than the previous year, which is due to reduced time charter hire earned on the vessels

Operating costs continued to climb upwards in 2006, increasing with 9% on the foregoing year to NOK 504 million In result, the operating profit was reduced from NOK 557 million in 2005 down to NOK 305 million in 2006 As the world economy has continued on its strong path, this has had severe negative impact on prices and availability of supplies and services for the shipping activities in general, resulting in increased costs of lubricating oil and spare parts as

� TheshipowningcompaniesconsistofGriegShippingAS,GriegInternationalIIAS,GriegMaritimeASandGriegPoseidonAS.

well as higher personnel costs on-board and ashore in partic-ular Secondly, the ship operation was hurt by various tech-nical and non-technical incidents that lead to a hike in repair and insurance costs Finally, the fleet enjoyed more trading days than in 2005, with M/V Star Java starting to trade from mid November 2006 This increased the absolute cost level both in terms of operating expenses and depreciation costs

Net financial items for 2006 showed a positive contribu-tion of NOK 89 million in profit, which represented a NOK 45 million improvement over 2005 One contributing element was net positive exchange rate effects of NOK 27 million being due to a decrease in the USD vs NOK But the good financial result can also be explained by strong returns on the financial investment portfolio and reversal of interest rate swaps In consequence, the Group was able to outclass both its relative and absolute investment performance targets Although US interest rates continued to climb throughout the year, with the US Fed Fund interest rate reaching 5 25%, this had minor impact on the Group’s borrowing costs as a significant share of the interest rate exposure is hedged at favourable rate levels

In spite of reduced earnings and profits as well as higher investment activities, the Group’s cash flow for 2006 increased by NOK 124 million to NOK 1 290 million after payments of NOK 64 8 million in dividends and NOK 915 million in shipyard instalments The contracting of the four newbuild-ings and the delivery of M/V Star Java also influenced long term debt which increased from NOK 1 039 million to NOK 1 553 million In result, the Group’s total assets increased by NOK 844 million to NOK 4 723 million of which current assets constitutes NOK 1 365 million The Board of Directors considers the Group to be in a strong financial position entering 2007, with total equity of NOK 2 871 million, implying a book equity ratio of 61% This should make the Group well equipped for further growth


mARket outlook foR 20072006 was another favourable year for dry bulk ship owners After a certain nervous start of the year the freight rates gradu-ally increased and in total, the entire year came out nicely, however somewhat below 2005 in terms of average earnings

Iron ore and in particular coal, contributed strongly with sustained growth, and in total the major bulk commodi-ties showed a growth in seaborne trade of 5% in 2006 In addition, congestions in ports continued to hold up vessel capacity Furthermore, the Chinese coastal trade turned out to be a new important element In result a fleet increase of 6 6% was absorbed by the market

In the forest product market, wood pulp trade recovered during 2006 World trade increased with nearly 4% China was a frontrunner with an increase in imports of 6 6%, Japan with 2 2% and Western Europe 1 5% On the export side Brazil was dominating with a 15% increase This underlines the development that Brazil is gradually taking over the leading role in this market from N American exporters Seaborne transport of lumber is estimated to have had a moderate increase, probably less than 2% in 2006 Within the paper and board trade China’s position is becoming more and more interesting with 60% increase in exports during 2006

The market segment surrounded by most scepticism and negative forecasts is the container market Consensus points in the direction of a couple of tough years, given expectations of increased vessel capacity This could also impact negatively on the market for transportation of forestry products However, there are mixed opinions on how dramatic the downfall will be The container segment has developed into a more fragmented market over the last ten years and is more complex to read than previously

There is generally an optimistic tone in the forecasts for seaborne trade in the dry bulk sector, both in the short and

the long term perspective, when keeping aside unforeseen political events of magnitude and/or financial turmoil The industrialisation of the emerging parts of the world seems in particular to be fuelling the shipping markets with renewed strength, with China being key The big question mark continues to be the large order books, and an increase around 7% in the total dry bulk fleet is expected in 2007 Given prevailing growth forecasts in dry bulk seaborne commodity trade of 4%, coupled with continued conges-tion in ports and Chinese coastal trade tying up capacity, it might be that the market can absorb the new vessels, and that the rate level has a chance of being maintained

RiSkThe Group is exposed to various types of risks

The market risk is mainly constituted by risks related to the development in freight rates, exchange rates, and interest rates Although freight rates for 2007 may decline compared to the previous year one should bear in mind that the Group’s business is industrial, as the income from Star Shipping AS is characterised by a high degree of long term freight contracts Thus, the earnings are less volatile than in the general dry bulk market

The Group’s earnings, as well as main assets and liabili-ties are in USD The currency risk is primarily related to the Group’s administrative activity in Norway and purchases of goods for the technical operation of the vessels As the accounts are presented in NOK it will be influenced by fluctuations in the exchange rate between NOK and USD The Group’s long term debt is exposed to changes in the interest rate There are established policies and routines to control and reduce both the currency exposure and the interest rate risks

The earnings from Star Shipping AS is the Group’s dominant income source, but does not imply any signifi-


cant credit risk, as this risk is mainly market related given the structure of the charter agreements Star Shipping AS has a diversified international customer portfolio

Being in a financially strong position, the liquidity risk is close to none existing Parts of the financial investment portfolio are also regarded as a support for the core business, and these funds are governed by a financial strategy with moderate risk taking

GoiNG coNceRN The Group’s financial position is good, and the annual accounts provide a fair view of assets and liabilities, financial position, and results The annual accounts are prepared under the assumption of a going concern The basis for this assumption is the Group’s solidity

The Board of Directors would like to thank the employees of Grieg Shipping Group AS ashore and on board the vessels and likewise the worldwide organisation of Star Shipping AS for their great efforts throughout the year

Oslo, 14th of March, 2007 The Board of Directors of Grieg Shipping Group

Elisabeth Grieg Cato A Holmsen sr Camilla Grieg Jarle Roth Bjørn Gabriel ReedChairperson Deputy Chairperson Board member Board member Board member


Key fiGuReS Grieg Shipping Group (9)

Figures in 2006 2005 2004 2003From profit and loss StatementGross Revenue Mill USD 126 6 158 3 147 8 92 6EBITDA (1) Mill USD 70 0 108 7 104 8 53 9Operating Result Mill USD 50 9 90 0 86 9 38 9Net Financial Items Mill USD 11 5 7 7 3 5 -3 2Result before Tax Mill USD 62 4 97 7 90 4 35 7

From Balance SheetShips and other fixed assets Mill USD 469 0 340 7 347 2 285 6Currenct assets Mill USD 218 0 191 4 174 5 117 3Shareholder’s equity at book value Mill USD 391 0 339 3 285 0 232 6Long term liabilties Mill USD 248 0 153 5 174 1 129 7Current liabilities Mill USD 48 0 39 2 64 5 42 3Total assets Mill USD 687 0 532 1 523 6 404 5

profitability and Financial ratiosReturn on total assets (2) % 9 3 19 8 21 0 10 6Return on equity (3) % 14 7 31 3 34 9 15 3Cash flow (4) Mill USD 81 5 116 4 108 3 50 6Interest bearing debt Mill USD 242 0 146 1 164 0 124 7Liquid assets (5) Mill USD 206 2 184 1 169 0 113 9Debt repayment capability (6) Years 0 4 0 0 0 0 0 2 Current ratio (7) 4 5 4 9 2 7 2 8 Equity ratio (8) % 56 9 63 8 54 4 57 5

Fleet / CargoTotal Star cargo volume carried Mill MT 22 7 24 5 24 9 23 5Total Star forestry volume carried Mill MT 6 8 7 1 6 6 6 4Total Star Fleet No of vessels 69 71 74 74Star Open Hatch fleet No of vessels 46 45 47 43Grieg Open Hatch Fleet No of vessels 23 22 22 19

technical / manningDrydockings No 8 6 9Return rate crew % 90 93 90Grieg Shipping Group employees at sea No 518 518 500Grieg Shipping Group employees on shore No 43 37 36

USD/NOK per 31 12 6 26 6 77 6 04 6 68Average USD/NOK 6 42 6 45 6 74 7 08

1 Operating result before depreciation and gain (loss) on sale of fixed assets

2 Net result before tax plus financial expenses divided by average total assets

3 Net result before tax divided by average book shareholder’s equity

4 Net result before tax plus depreciation5 Bank deposit and securities 6 Interest bearing debt less liquid assets,

divided by net cashflow (4) before gain (loss) on sale of fixed assets

7 Currenct assets divided by current liabilities

8 Book shareholders’ equity as percentage of total assets

9 Consisting of Grieg Shipping AS, Grieg International II AS, Grieg Maritime AS and Grieg Poseidon AS

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mAnAgement’s Review

commeNtS to tHe key fiGuReSLooking back on past performance, 2006 will most likely be remembered in Grieg Shipping Group as a year with healthy earnings and good results, but nevertheless far apart from the two proceeding and prosperous years The group’s bottom line for 2006 shows a net result before tax of USD 62 4 million, which is 36% down compared to the record profits of 2005 Still, through hard work, and through sound business behaviour, we achieved 15% return on total equity

Gross revenue originated from time charter income on our open-hatch general cargo vessels amounted to USD 126 6 million Contributors to a 20% reduction in freight revenues, compared to the previous year, was mainly lower freight rates on cargo transported by the vessels in Star’s open hatch pool, and partly lower volumes of transported goods The same factors influenced the trading result of Star’s conventional drybulk handymax pool, CBCD

Operating costs continued to climb upwards in 2006, increasing with about 10% on the foregoing year to USD 75 8 million There are several reasons for the increase in costs First of all, as the world economy continued on its strong path, this had severe negative impact on prices and availability of supplies and services in general, resulting in increased costs of lubricating oil and spare parts as well as higher personnel costs on board and ashore in particular Secondly, the operation was hurt by various technical and non-technical incidents, which are commented on further below, that lead to a hike in repair and insur-ance costs Finally, our fleet enjoyed more trading days

than in 2005, with Star Java starting to trade from mid November 2006 This increased the absolute cost level both in terms of operating expenses and depreciation costs

With lower earnings and higher costs, the group’s oper-ating result decreased from USD 89 9 million in 2005 to USD 50 9 million in 2006 On the other hand, net financial items for 2006 turned out positive, resulting in a net profit of USD 11 5 million, which represents an improvement of 51% compared to last year In consequence, we were able to outclass both our relative and absolute investment performance targets The enhanced financial result can primarily be explained by good returns on our financial investment portfolio, of which a considerable share is invested in international stocks and bonds, and the reversal of interest rate swaps Although US interest rates continued to climb throughout the year with the US Fed Fund interest rate reaching 5 25%, this had minor impact on the Group’s borrowing costs as a significant share of our interest rate exposure is hedged at favourable rate levels

Grieg Shipping Group is in a very strong financial position as we finish off 2006 with total equity of USD 391 million implying a book equity ratio of 57% The proof of this soundness became also apparent through the competi-tive terms achieved when refinancing the existing fleet and securing predelivery- and long term financing for the four newbuilding contracts at HMD Based on this process and the financing of the new vessel delivered in 2006, long term debt increased throughout the year to USD 248 million Holding about USD 206 million in


unencumbered and liquid assets plus having undrawn credit facilities, we find ourselves solidly equipped to size new investment opportunities as we enter 2007

StAR SHippiNGOn average, Star Shipping AS operated 69 vessels in 2006 46 vessels were employed in the open hatch pool and 23 vessels were employed in the conventional drybulk handymax pool

Star Shipping AS carried 22 7 million metric tons of cargo in 2006, which is down from the 24 5 million metric tons last year Approximately 6 8 million metric tons were forestry products, which is down from 7 1 million metric tons in 2005 The main forestry product carried was woodpulp,

representing about 49% of the cargoes carried by the open hatch pool and about 25% of Star’s total cargo volume Besides carrying other forestry products such as paper and lumber, the balance of Star’s cargoes was steel, fertilizer, pet coke, sugar, salt, coal, grain, alumina, cement, concentrates, scrap, steel cargoes, containers and project cargoes

mARket DevelopmeNt 2006 – AND pRoSpectS AHeAD2006 was another favourable year for dry bulk ship-owners After a certain nervous start of the year the freight rates gradually increased and in total, the entire year came out nicely, however somewhat below 2005 when talking average earnings:

Pulp (49%)Container (7%)Other bulk (16%)

Fertilizer (4%)

Steel (15%)

Other wood products (2%)

Paper (3%)

Lumber (4%)Bulk ForestryTotal carried

0

5

10

15

20

25USD mill.

0

5

10

15

20

25USD mill.

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


AverAge eArnings UsD/DAy timechArter bAsis in 2006 (compAreD to 2005)

2006 2005Supramax 22 755 21 000panamax 23 745 25 200Capesize 42 960 47 200

The development in 2006 came actually as a surprise for a lot of players in the dry bulk market as an increase on the supply side of 6 6% historically has meant trouble for the owners However, the strong underlying demand in most bulk sectors made it possible for the market to absorb the newbuildings coming into the market Iron ore and in particular coal contributed strongly with

sustained growth, and in total the major bulk commodi-ties showed a growth in seaborne trade of 5% in 2006

In addition, congestions in ports continued as the most current issue holding up vessel cap acity Furthermore, the Chinese coastal trade, now involving substantial numbers of handymax and panamax ships for shorter and longer periods, turned out to be a new important element

On the asset side a lively sale and purchase market reflect a very positive atmosphere in the market A five year old handymax bulk carrier went from USD 25 million in market value to USD 40 million from 2005 to 2006 and seems to be increasing even further in 2007

Capesize Panamax Handymax

Source: Clarkson Research Studies 2006

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

USD 1000 USD 1000

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

Interest bearing debtResult before tax

Liquid assets

EBITDA

2003 2004 2005 2006

0

50

100

150

200

250

0%

20%

40%

60%

80%

100%

USD mill.

79%61%

67%

79%

21%

39%33%

21%

Book equity ratioReturn on equity


A newbuilding contract for a handymax is USD 36 5 million for delivery in 2006 in comparison The bulk carriers on order now constitute 22% of the sailing fleet

The shipyards could easily increase their prices during the year based on a steady inflow of new orders, and in practical terms most of the 2010 capacity among the quality yards are either sold out or committed to buyers There is apparently no hurry for starting to push 2011 positions, even though we already have seen some 2012 contracts

The total number of ships contracted in all segments in 2006 increased with almost 10% compared to 2005 Prices increased in all segments varying between 5-20%

In the forest product market it is fair to say that wood pulp trade recovered during 2006 World trade within this commodity increased with nearly 4% China was a frontrunner with an increase in imports of 6 6%, Japan 2 2% and Western Europe 1 5%

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On the export side Brazil is dominating with 15% increase and underline the development we have seen for some years; Brazil is gradually taking over the leading role in this market from North American exporters Chile is as well on the move and expanded their export with 7 5% in 2006 Seaborne transport of lumber is estimated to have had a moderate increase, probably less than 2% in 2006 Within the paper and board trade China’s position is becoming more and more interesting with 60% increase in exports during 2006, and we might see the nation turning into a net exporter within foreseeable future

The market segment surrounded by most scepticism and negative forecasts is the container market Huge order books throw indeed some shadows over this market From 2005 to 2006 the demand for containerships rose with 12% while the supply increased with 14 7% resulting in weaker performance, in particular during the last part of the year Timecharter rates fell with 30-35%, and this meant for instance that timecharter earnings for a 4 500 container vessel fell from USD 47 000/day to about USD 31 000/day Consensus in the market points in direction of a couple of tough years for the container owners

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and operators due to the strong increase in capacity However, there are mixed opinions how dramatic the downfall will be The container segment has developed to a more fragmented market over the last ten years and is more complex to read than we earlier experienced 2007 is met with a great deal of uncertainty – however, can the market dynamics after all fight back some of the forecasted negative development?

There is generally an optimistic tone in the forecasts for seaborne trade in the dry bulk sector, both in the short and the long term perspective, when keeping aside unforeseen political events of magnitude and/or financial melt downs The macro economic figures looks acceptable Global growth in GDP is forecasted to 4 9% in 2007, slightly down from the figure in 2006 (5 1%) The industrial production development within OECD is climbing, and we saw during the autumn of 2006 a total growth figure in excess of 4% The Japanese recovery is also starting to play an important part China is of course still a key element No essential weak signs can be spotted, at least not within the short or mid term horizon, as one forecast growth in industrial production a shade less than 15%

The industrialisation of the emerging parts of the world seems to be fuelling the shipping markets with even renewed strength The prognosis for total seaborne trade of bulk commodities in 2007 is a growth of 4%, one percent down from the estimated 2006 figure This is the same level as we saw in 2004 which at that time was considered as a historical good dry bulk year From this we read that the turning point is again the supply side, and the much discussed huge order books can be rather frightening at the first glance The increase in the dry bulk fleet was 6 7% from 2005 to 2006, which was a remarkably easy absorbed by the market We will predictably see an increase around 7% in the total dry bulk fleet in 2007, but with the prevailing growth fore-casts in the seaborne commodity trade it seems that the market can take it, and that the current rate level has a good chance of being maintained The no scrapping activity is worth mentioned,

which is quite natural with the present market in mind This means that the old part of the fleet is increasing steadily; about 22% of the fleet is more than 20 years old, which again gives interesting perspectives if the market should start to decline

tHe fleet AND itS opeRAtioNA continuous focus on safe and efficient operation has been high on the agenda also for 2006 The officers and crew onboard have been working hard and dedicated to achieve this, and so has the office staff Still, we experienced two serious incidents in 2006, and some minor, making this a challenging operational year Fortunately none of these resulted in fatal injuries or harm to the environment For Grieg as owner the consequences were however disruptive effects on the operations including off-hire days and thus lowering of the result Correc-tive actions are implemented and will be monitored closely

On 14 November 2006, we took delivery of our last addition to the fleet, the J-class vessel Star Java The vessel sailed on her maiden voyage for China where tweendecks were installed, before she headed for Canada and then to Bergen where the naming ceremony took place on 17 February 2007 After this last addition to the fleet, Grieg Shipping Group’s fleet now counts 23 open-hatch general cargo vessels, all with gantry cranes In May 2006, a contract for additional 4 vessels was signed between Hyundai Mipo Dockyard Co , Ltd in Ulsan, Korea and Grieg Shipping Group These vessels, categorised as the K-class, will have a new and improved open hatch design, and the vessels are scheduled for delivery in 2009 and 2010

In 2006, approximately 50% of all purchases related to technical operation, including owner’s supplies for Star Java, were carried out through Norwegian based vendors and suppliers Norwegian banks and insurance compa-nies, as well the Norwegian ship broking community, have also proven to be internationally competitive The majority of our vessels are financed through a Norwegian


lead bank syndicate and insured by Norwegian under-writers, while the newbuilding contract was entered into by the assistance of a Norwegian ship broker

Our focus on optimizing speed and bunker consump-tion is continuing, and the latest installed ICT equip-ment allows us to continuously monitor this

Our sailing personnel are our most important resource At any time we have about 520 sailors onboard, all of Philip-pine nationality Also in 2006 we have achieved our goal for return rate for officers and crew, and a large portion of our staff has now more than 10 years experience onboard our vessels We have again started our cadet programme, to ensure sufficiently trained staff for our vessels in the future In addition to deck and engine cadets, in 2006 we also started an Electrical Technician cadet programme to ensure safe operation of our gantry cranes We are continuously improving our focus on the human resources, training all with regards not only to operational and technical matters, but also including ethical guidelines and company values

The operation of our vessels involves the risk of pollution We dedicate major efforts into working with safety and environmental issues Through focusing on safe operational procedures, proper maintenance and continuous training of off-shore and on-shore personnel we seek to limit this risk The environmental standard ISO 14001 is an impor-tant tool in this work and an integrated part of our ISM certified quality system Our Key Performance Indicators are measured through the Quality Assurance-system

GRieG SHippiNG GRoup iN SHANGHAiThe enormous growth we have seen in seaborne Chinese trade, shipbuilding and related business over the last ten years, have been closely followed and have gradually given rise to the idea of a permanent presence in China

During the summer of 2006 we were pleased to announce that Grieg Shipping Group Shanghai office had become a reality

The essential thought behind this move is to develop the office into an active centre for business development Priority will be given to shipbuilding, docking/repair/conversion, crewing and related operational matters Furthermore we aim to explore possible joint ventures with Chinese ship owners and charterers The office will also have a close eye on different aspects of the energy sector, waste management and projects within environmental protection Projects within the forest product sector or other segments that naturally can be categorised as ‘’Star business” will of course continue to be taken care of by Star’s own representatives in Shanghai

Mr Pål Utvik has been employed as our Country Manager Pål is a naval architect by education with an MBA from Fudan University, Shanghai He previously worked for another Norwegian ship owner as a Site Manager in Korea in connec-tion with Leif Høegh’s new building programme Later on a Chinese assistant with legal education and working experi-ence from Pen-Wallem Shipping Services, was employed

During its first months of operations the office has actively been supporting our superintendents with docking and repairs at Chinese yards Furthermore, much time has been spent to estab-lish relations to vital organisations and individuals for future reference and work Specified studies, mapping and reports have also been made regarding various relevant subjects

During 2007 focus will be directed towards shaping the office more into a business development modus in accordance with our initial strategy We are indeed looking forward to develop our venture in China and to the years ahead of us in the land of opportunities!


fleet liSt

Vessel Owner Built dead

weight length

o.a. BeamCargo

volume SpeedGross

reg. ton

Container capacity

(teu)SWl gantry

cranes

Star dover GI 1977 43 082 182 91 31 10 47 232 15 0 27 911 1 392 2 x 32 mtStar dieppe GS 1977 43 082 182 91 31 10 47 232 15 0 27 911 1 392 2 x 32 mtStar derby GS 1979 43 700 183 00 31 10 47 171 15 0 27 104 1 382 2 x 32 mt

Star eagle GS 1981 39 749 179 61 29 40 41 991 15 0 24 479 1 200 2 x 40 mtStar evviva GS * 1982 39 718 179 61 29 40 41 991 15 0 24 479 1 200 2 x 40 mt

Star Florida GI 1985 40 790 187 30 29 40 42 198 15 0 25 345 1 112 2 x 37 mtStar Fraser GI 1985 40 840 187 30 29 40 42 198 15 0 25 345 1 112 2 x 37 mtStar Fuji GI 1985 40 790 187 30 29 40 42 198 15 0 25 345 1 112 2 x 37 mt

Star Alabama GS 1985 30 175 169 33 26 60 37 748 15 0 20 916 1 198 2 x 40 mtStar America GS 1985 30 168 169 33 26 60 37 748 15 0 20 929 1 198 2 x 40 mtStar Atlantic GM 1986 30 402 168 50 26 60 37 991 15 0 20 125 1 204 2 x 40 mt

Star Grip GS 1986 43 712 197 80 29 40 47 335 15 0 27 192 1 532 2 x 40 mtStar Gran GI 1986 43 759 197 80 29 40 47 335 15 0 27 192 1 532 2 x 40 mt

Star Herdla GS 1994 45 000 198 00 31 00 61 491 16 0 32 744 1 950 2 x 40 mtStar Hidra GS 1995 45 000 198 00 31 00 61 491 16 0 32 744 1 950 2 x 40 mtStar Hansa GS 1995 45 000 198 00 31 00 61 491 16 0 32 744 1 950 2 x 40 mtStar Harmonia GP 1998 45 000 198 00 31 00 61 491 16 0 32 744 1 950 2 x 40 mt

Star istind GS 1999 44 755 198 00 31 00 61 491 16 0 32 744 2 074 2 x 40 mtStar ismene GI 2000 41 777 184 50 31 00 55 284 16 2 29 898 1 834 2 x 40 mtStar isfjord GS 2000 41 457 184 50 31 00 55 284 16 0 29 898 1 834 2 x 40 mt

Star Juventas GI 2004 44 837 198 00 31 00 61 491 16 0 32 844 2 074 2 x 68 mtStar Japan GS 2004 44 814 198 00 31 00 61 491 16 0 32 844 2 074 2 x 68 mtStar Java GS 2006 44 837 198 00 31 00 61 491 16 0 32 844 2 074 2 x 68 mt

Star tBn GI 2009 48 800 207 00 32 20 65 000 16 0 – 1 420 2 x 70 mtStar tBn GS 2009 48 800 207 00 32 20 65 000 16 0 – 1 420 2 x 70 mtStar tBn GI 2009 48 800 207 00 32 20 65 000 16 0 – 1 420 2 x 70 mtStar tBn GS 2010 48 800 207 00 32 20 65 000 16 0 – 1 420 2 x 70 mt

Abbreviations:GS: Grieg Shipping ASGI: Grieg International II ASGP: Grieg Poseidon ASGM: Grieg Maritime AS

* 50% owned by Grieg Shipping AS


Star Shipping AS, founded in 1961, is jointly owned by Masterbulk and Grieg Shipping Group and is the world’s largest marketing and operating company within seaborne transportation of woodpulp Star’s business also includes carrying other type of forestry products, bulk commodi-ties for several different industries together with a large number of containers In addition to a network of agents and terminals, Star has 21 offices world wide including the headquarter in Bergen Star’s goal is to be considered the preferred carrier within its business segment

StAR opeN HAtcH poolStar has a unique position in the transportation of forestry products worldwide with more than 40 highly specialized open-hatch general cargo vessels that are tailor made for the carriage of wood pulp, rolled paper and other forestry products In addition, the vessels carry a wide range of other unitized cargoes, project cargoes and containers The strategy of the Open Hatch Division is customer focused, strong relationships, long-term and industrial, and the business is characterized by long-term contracts of affreightments This means that the pool earnings are less volatile than in the general dry-bulk and container market The open hatch pool operates a considerable network of trades with regular sailings and frequencies adapted to its customers’ requirements Punctuality, efficiency, quality and flexibility are Star’s primary competitive advantages to ensure customers satisfaction in the long run Still, continuous work is an ongoing matter to improve every aspect of the cargo handling and transportation process

StAR coNveNtioNAl poolStar’s Conventional Bulk Carrier Division operates a modern fleet of about 25 geared handysize/handymax bulk carriers, equipped with cranes and grabs Vessels are provided to the pool by London based Rethymnis & Kulukundis and

Star as well as chartered from the market Depending on Star’s future market view, the vessels in the pool are traded on freight contracts and in the spot market The CBCD pool operates world wide carrying a large variety of cargoes such as coal, coke, alumina, fertilizers, cement, concen-trates, steel products, grain, sugar, salt, scrap and logs

StAR coNtAiNeR SeRviceSStar Shipping operates regular container services in the Atlantic The company’s Swedish subsidiary, Atlanticargo AB, offers reliable and frequent services between Europe and the US East Coast/Gulf and between Europe and the US West Coast Star also frequently transports containers in other trades, either as empty positioning moves or full containers on behalf of other operators The combination of containers, break bulk and project cargoes makes this service unique and competitive Star staff in North America and agency network in Europe are dedicated to provide the container shippers with fully integrated door-to-door transportation solutions Container depots are kept in all major locations in Europe and the United States and there is a well established network for inland transportation

teRmiNAlSStar offers integrated transport solutions from shipper to end receiver As an important part of the logistic chain Star Shipping has long-term agreements with terminals in all major ports around the world, serving as consolidation and distribution hubs In Squamish, British Columbia in Canada, Star owns a purpose built forestry terminal, Squamish Terminals Ltd The terminal is equipped with specialized cargo handling equipment ensuring efficient and high quality cargo handling This is a public terminal capable of handling a wide variety of cargoes such as baled pulp, rolled pulp, newsprint, packaged lumber, plywood as well as other cargoes

stAr SHippiNG MARKETINGANDOPERATIONOfOURVESSELS

�1G R i e G S H i p p i N G G R o u p A N N u A l R e p o R t 2 0 0 6

grIeg shIppIng group BuSiNeSS DevelopmeNt

mARitime iNfoRmAtioN SyStemS AS (mARiS)The company was founded in 1997 by a group of engineers who saw a business opportunity in commercializing electronic chart systems as a replacement for the traditional paper charts in the merchant fleet and the navy In addition, the founders

had a high degree of radar competence Grieg Shipping Group became a shareholder in 1999 and has since 2001 been active in developing the company to what it is today

2006 has been another busy year with various important achievements, but as well with challenges MARIS experi-

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ence every day the tough competition and dynamics within the maritime equipment sector and are constantly making necessary adjustments of strategy and organisation to meet same By being a front-runner in developing new ‘’cutting edge’’ technology, often to be integrated in existing IT infrastructures, involves a fair deal of technical risk and cost

implications Quality assurance in every stage of development, production and installation has been given highest priority and this has already resulted in substantial improvements

As the first company in the world, MARIS obtained type approval of the combined ECDIS (electronic chart display)

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and S-VDR (simplified data recorder) during 2006, and this product has been a success MARIS has secured substantial orders in the course of 2006, with Stolt-Nielsen, WW Bergesen, Teekay, Novoship UK, Grieg Shipping Group and Danish Pilots as some of the major customers

The turnover was budgeted to NOK 65 million in 2006, and this figure was slightly exceeded The total sales amounted to approximately NOK 100 million and MARIS had a contract reserve of about NOK 50 million by year end These figures represent an increase of remarkable magnitude (turnover in 2004 and 2005 was NOK 20 million and 39 million respectively)

MARIS became a certified ISO 9001 Quality Manage-ment System (Det norske Veritas) company during 2006 This event is regarded as a major achievement and acknowledgement of the company This will be an important contributor to customer satisfaction, quality, productivity, and improved working conditions

The opening of MARIS’ new production facilities (only 200 meters from existing office facilities) was also an important event and the production team can now fulfil their tasks in far more efficient manner than before

MARIS appointed 11 new employees in 2006, and the total team now consist of 37 people

MARIS anticipate the market prospects for 2007 to be interesting and expect a growth in sales within all product segments There is generally a positive sentiment in the market for marine equipment due to a continued favourable shipping market and high newbuilding activity The further regulation of the market for electronic charts by IMO give high expectations for sales volumes in general for the years to come, and MARIS are giving high priority to be in an optimal position, both in regard to the product and to the costs

The use of paper charts will gradually be replaced by digital official charts MARIS has actively positioned the company for this significant shift, not only by being a leading developer of hardware (ECDIS), but also by developing an online system for distribution and updating of digital official charts under the name Marine Digital Services (MDS), which is a product of strategic importance for the further development of MARIS

the mAnAgement teAm in mAris consist of:

Steinar Gundersen, Managing Director

Philippe Kah, Technical Director

Ian Vendrell, Director Business Development

Vigdis Bommen, Finance Director

Egil Gundersen, Director Operations

Terje Akerholt, Director Sales

Sveinung Winter, Customer Support Manager

Stein Johnsen, Quality

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��G R i e G S H i p p i N G G R o u p A N N u A l R e p o R t 2 0 0 6

GRieG iNveStoR – iNDepeNDeNt iNStitutioNAl iNveStmeNt SeRviceS Grieg Investor provides independent investment services to institutional investors, focusing on individual, customised solutions Grieg Investor works with a broad range of customers, like family companies, foundations, municipalities, pension funds, life insurance- and non-life insurance companies as well as shipping companies

In brief, Grieg Investor provide a full scale profes-sional investment service within the asset management area, including outsourcing of consulting services from our offices in Oslo, Bergen and Trondheim

grieg investor’s investment services cAn be DiviDeD into foUr Different cAtegories:

investment strategy: Assist clients to uncover their long term objectives and risk tolerance in order for them to set up an overall investment strategy for their assets

investment manager selection: Help clients to imple-ment their investment strategy by identifying the fund managers to invest with Further on, to prepare and carry out the paperwork and necessary documentation in order to execute the purchase of shares in the various funds

performance measurement and attribution analysis: Review the investments on a monthly basis on behalf of clients Through monthly performance reports and attribution analysis the total results are evaluated as well as the performance of the fund managers

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Alm-modelling: Asset-liability-model-ling for pension funds, by the use of Grieg Investor’s own model for this purpose

AboUt 2006

One of the most important strategic events for the company in 2006 was a change on the owner side The Grieg Group bought back the company from Aon Grieg, thus re-estab-lishing Grieg Investor as a part of the Grieg Group Grieg Investor wants to keep a strong focus on investment services, which from the Grieg Group’s point of view is considered as a very interesting business area with good growth opportunities

Year 2006 has been prosperous for Grieg Investor and their customers More clients were added to the port-folio, and the company now has an interesting range of highly professional clients with different backgrounds and needs This represents very interesting and chal-lenging business opportunities going forward

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next generAtIon of Vessels – tHe k-clASS

On 15 May 2006 a contract for 4 new vessels was signed between Hyundai Mipo Dockyard Co , Ltd in Ulsan, Korea and Grieg Shipping Group The vessels are scheduled for delivery in July 2009, September 2009, November 2009 and January 2010

mAin pArticUlArs AnD cApAcities of the vessels will be As follows:

Length o a : abt 207 metresLength p p : 197 40 metresBreadth: 32 20 metresDepth: 19 50 metresDraft (design): 12 00 metresDraft (scantling): 12 34 metresDeadweight (scantling): 48 800 tonnesCargo hold volume: 65 000 m3

Speed: 16 0 knots

The new vessels are built according to DNV class and NIS flag

The vessels are equipped with two 70 ton SWL travel-ling gantry cranes with full rain protection and have completely unobstructed cargo holds for optimal cargo handling The design is based on our well proved open hatch concept and tailormade for transportation of woodpulp and other forestry products, steel coils, containers and different other unitized cargoes

The K-class vessels have tween decks in two levels in cargo hold Nos 4 and 8 The tank top in the cargo

holds is strengthened for heavy steel coils The cargo operation “window” for the gantry cranes has been increased compared with existing vessels in order to allow for higher/wider cargo units to be handled

High environmental standards have been included during the design stage

Manoeuvrability has been further improved compared with our existing vessels including a o side thrusters fore and aft and high efficiency flap rudder with an angle up to 65 degrees during manoeuvring

Durability has been a main topic when preparing specifica-tions for the new vessels The vessels are to comply with the requirements for 30 years fatigue lifetime based on the wave data on world-wide trading route according to the requirement of the classification society Strength calculations for gantry cranes, and calculations for other relevant equipment, are also based on 30 years life time


enVIronmentAl policy

ouR eNviRoNmeNtAl viSioNEnvironment care is a corporate value for Grieg Shipping Group AS Our vision is to have no harmful emissions to air and sea

The management is committed to continuous improve-ments in environmental performance and the prevention of pollution We are committed to complying with both national and international legislations, regulations and other requirements However, our ambition is always

to be a vital step ahead of any requirements by quickly implementing environmental procedures and proven tech-nology we believe will lead the way within our industry

ouR oveRAll GoAlSGrieg Shipping Group is based on years of tradition, high technological standards and professional seaman-ship We shall make use of this expertise and knowledge to pave the way in a continuous development towards a modern, competitive and sustainable business

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Our fleet of high quality and environmental friendly vessels shall be our trade mark, and we shall consolidate our position as the leading company within quality- and environmental issues We firmly believe that setting our environmental standard at a high level can further cement our market position and can be used actively towards our customers

pRiNcipleS foR ouR eNGAGemeNtIn order to reach our environmental goals, we have committed ourselves to live up to the following environmental principles:

We shall support a proactive approach in the environmental challenge

We shall work actively to continuously maintain and further develop our high environmental standards

We shall be a leading part in supporting development and use of new environmental friendly technology

We shall share technology and environmental solutions in order to improve the overall performance both domestic and global

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meASuRiNG ouR eNviRoNmeNtAl peRfoRmANceGrieg Shipping Group shall have clearly defined measurable goals to allow tracking of our environ-mental performance to verify conformity with our policy and identify areas for future improvements

This policy is forming part of our Quality Assur-ance System, and as such, communicated throughout our entire organisation The Policy shall be subject to changes and revisions when the situation calls for this

pRioRitieS DuRiNG 2006:mAchinery

We have initiated investments to improve combustion proc-esses in the main- and auxiliary engines onboard Various means of new equipment, such as new fuel injection tech-nology for main engines combined with new lubrication tech-nology, has reduced Nitrogen Oxide emission and lowered the consumption of lubricating oil respectively We are measuring the CO2 emissions from our vessels, and establishing a CO2 index enabling us to carefully monitor the improvements

Most of our vessels have been upgraded for also using low sulphur fuel oil in areas where this is required We expect all our vessels to be upgraded within required date This gives us the necessary flexibility when it comes to meet different requirements for clean combustion

bAllAst wAter mAnAgement

Ballast water exchange has been carried out for many years

although this has not been a mandatory requirement We are closely monitoring the development of new technology for future implementation of safe ballast water treatment

pUrchAsing the right proDUct from the right sUpplier

It is a fact that we are dependent on our cooperating compa-nies in order to deliver an environmental friendly product, and we are focusing on the environmental policy and standard of the supplier when entering into a new frame agreement

wAste hAnDling

Waste is defined as all non re-usable products arising from various activities onboard such as, preparation of food, unpacking stores and provi-sion, cleaning of cargo holds after various “dirty” cargoes, oil remnants from various machinery, etc

We have established a waste management system to which we shall comply at all times Waste is incinerated, delivered ashore or pumped over board as provided for in MARPOL

environmentAl consiDerAtions

We have established suitable procedures for the purpose of being in compliance with the existing regulations at all times The prime objective is to disclose polluting sources, and to obtain this we monitor and log breaches of procedures concerning environmental pollution to air, sea and land This is directly connected to our Key Performance Indicators which again gives us an indication of the company’s health


the mAnAgement GRoup

cAmillA GRieG (43)chief execUtive officer

Mrs Grieg is co-owner of the Grieg Group and member of the founding family She is also member of the Board of Directors of the companies within the Grieg Shipping Group Mrs Grieg has an MBA with major in finance from the University of San Francisco and is Certified Financial Analyst (AFA) She is deputy chairperson in Bergen Rederiforening and GC Rieber AS, and member of the board of directors in Star Shipping AS and Storebrand Livsforsikring AS

ANNickeN G. kilDAHl (39)chief finAnciAl officer AnD compAny secretAry

Mrs Kildahl has been working in the maritime industry since 1992, both in relation to commercial ship management and derivatives trading in The Torvald Klaveness Group as well as in finance and banking in Union Bank of Norway Mrs Kildahl holds a Master of Business and Economics from the Norwegian School of Management and is a Certified Financial Analyst (AFA) As part of her responsibilities for the Group she is board member of Maris AS, Grieg Group Resources AS, Grieg Investor AS and Norwegian Shipowners’ Social Security Fund, and deputy board member in Silver Pensjonsforsikring AS and Norwegian Shipowners Association’s Pension Fund Mrs Kildahl started in Grieg Shipping Group in 2000

eli vASSeNDeN (45)chief operAtion officer

Mrs Vassenden joined Grieg Shipping Group in 1982 and have since then been working in various

departments; shipmanagement, crewing, technical and purchasing She became Purchasing Manager in 1991 and was in 2004 appointed COO Mrs Vassenden is board member of GS Hydro OY and Incentra

HeNRy SveNDSeN (53) Director, technicAl & project Development

Mr Svendsen is a Naval Architect and has a broad experi-ence within project development, technical/ship manage-ment and operations in various leading companies in the shipping industry in Norway He came to Grieg Shipping Group in 1998 from Jo Tankers AS where he spent 8 years as Director Ship Management Mr Svendsen is representing Grieg Shipping Group in the board of Star Shipping AS/Pool Committee He is a board member of Norwegian Shipowners’ Tank and Bulk Carrier Group and member of the DnV Nordic Safety Committee

HAlvoR SveeN (46)Director, bUsiness Development & mArket

Mr Sveen holds a Master of Law from University of Oslo and has business economy from Norwegian School of Manage-ment He started in the shipping industry in 1986 within banking and went on to various management positions within shipowning and shipbroking Before starting in his present position in Grieg Shipping Group in 1999 he was partner in P F Bassoe Shipbrokers Mr Sveen is chairperson of the Board of Directors in Maris AS, representative for Grieg Shipping Group in Norwegian Shipowners’ Associa-tion and member of Nor-Shipping Advisory Board


Elisabeth GriegJarle Roth Bjørn Gabriel ReedCamilla Grieg Cato A. Holmsen sr.

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eliSABetH GRieG (47)chAirperson

Mrs Grieg is co-owner of the Grieg Group and a member of the founding family In addition to being Deputy Chairperson of Norwegian Shipowners Association and Norsk Hydro AS, Mrs Grieg is also board member of Star Shipping AS, NHO’s Committee on Family Business, SOS- Children’s Villages Norway and Grieg Foundation She is a member of Orkla ASA’s Supervisory Board and Election Committee and the Council and Election Committee of Det norske Veritas

cAto A. HolmSeN SR. (66)DepUty chAirperson

Mr Holmsen has previously held top executive positions in shipping and industrial companies, last being Executive Director of Aker AS and Dep CEO of Scancem AB Pres-ently he is Chairman and Partner of FSN Capital Partners AS He is also Chairman of the Board of Eiendomsspar AS and Fesil ASA, as well as board member of Kongsberg Automotive AS, VIA Travel Group ASA, Eksportfinans ASA, NorgesGruppen ASA, Schibsted ASA a o

cAmillA GRieG (43)boArD member

Mrs Grieg is co-owner of the Grieg Group and CEO of Grieg Shipping Group AS She is a member of the founding family Mrs Grieg has an MBA with major in finance from the

University of San Francisco and is Certified Financial Analyst (AFA) She is Deputy Chairperson in Bergen Rederiforening and GC Rieber AS, and member of the Board of Directors in Star Shipping AS and Storebrand Livforsikring AS

JARle RotH (46)boArD member

Mr Roth was President and CEO of Unitor ASA during the period 2001-2005 He is presently COO of the Umoe Group and chairman in many of the Groups’ subsidiaries In addition, he is a Board Member in Awilco Offshore ASA He is educated as a naval architect and holds a Master of Science in Business (siviløkonom) from Norwegian School of Economics and Business Administration (NHH) in addition to a doctorate program within organization and strategy from NHH

BJøRN GABRiel ReeD (48)boArD member

Mr Reed is partner in BA-HR and head of the company’s M&A and Finance practice group His experience from legal work is broad, with specialization on mergers and acquisi-tions, restructuring of businesses, corporate law, as well as securities- and exchange law Mr Reed is Chairperson of Star Shipping AS, and has previously had board posi-tions in among others Aker, Aker Maritime and Pareto

BoArd of DiRectoRS


1884Joachim Grieg

establishes ship broking business

in Bergen

1900sone of europe’s

leading ship brokers. office in oslo

1930sJG & co builds up a significant tanker

department

1��2per Grieg Sr.

reorganizes the firm, and starts widening

the scope of activities.

Star Shipping is founded

1��Grieg logistics

(Grieg Transport) is established as a separate unit

�0/�0sGrieg increases its stake in Star Shipping to 50%

1��100 years!

restructured as The Grieg Group

1��1The Grieg Group’s

headquarters in Bergen gathered under one

roof in Grieg Gaarden

1��2Grieg Seafood (Grieg norwegian Salmon)

is established

1��The Shipowning Group

is reorganized:• Grieg Shipping• Grieg international• Grieg Billabong

1��Grieg insurance

merges with aon norway under the name aon Grieg

1��4th generation Grieg

takes over. per Grieg Jr., elisabeth Grieg, camilla Grieg and elna-Kathrine

Grieg take leading roles for each of their

part of the Group

2001Grieg logistics expands

to cover global logistic services

2002Grieg foundation

is established in os outside Bergen

200�record results for all companies in the Grieg Group!

200� Grieg Seafood merges

with volden Group

Grieg international, Grieg Billabong and

Grieg Shipping ii merge into Grieg Shipping Group

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the grieg groUp is A privAtely owneD line of compAnies which operAtes globAlly within A vAriety of bUsiness AreAs:

Shipping and ship management (Grieg Shipping Group)

Ship broking (Joachim Grieg)

Global logistics services (Grieg Logistics)

Fish farming (Grieg Seafood and Grieg Cod Farming)

Maritime information systems (MARIS)

Investment consulting services (Grieg Investor)

Business development (Grieg Development)

In addition, the Grieg Group comprise of several business and investment companies The Grieg Group owns 20% of AON Grieg (insurance broking) and 50% of Star Shipping, which is Grieg Shipping Group’s operation and marketing company

The Grieg Group emphasises on creating economic and social values in a long term perspective The activities

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the group engages in shall be international competitive business controlled from Norway In order to strengthen the foundation for business, maintain and secure jobs in a long term perspective, all Grieg Group activities must have a sound financial basis for their existence

The companies in the Grieg Group are knowledge intensive, and the employees’ qualifications constitute a substantial part of the business capital All members of the group are independent, but close cooperation across the company borders is encouraged This contributes to a higher knowl-edge level, increased solidity and business opportunities

Our companies have offices in several cities and locations in Norway, and also Canada, USA, China, the Philippines and the Netherlands The strategic management is executed from the headquarters in Bergen and Oslo By the end of 2006 the Grieg Group employed 1024 people, of whom 518 were sailing personnel onboard vessels owned by the Group

grIeg GRoup

Management Services: Grieg Group Resources

Grieg Shipping Group Star Shipping (50%) Maritime information systemsMARIS (64%)

Investment ServicesGrieg Investor

Fish farming• Grieg Seafood• Grieg Seafood B.C Ltd• Grieg Cod Farming (50%)

Global logisticsGrieg Logistics

ShipbrokingJoachim Grieg & Co

AON Grieg (20%)

In order to maintain an ethical foundation for business and a strong and solid company culture, we have worked thoroughly for several years developing our common culture and increasing our awareness of our four core values; solid, proud, open and committed All employees in the Grieg Group shall be aware of the significance of a common value base in daily work Read more about the Grieg Group values the social responsibility section

The Grieg Group emphasises on social responsibility and contributes actively to programs for humanitarian, cultural and public benefit Grieg Foundation, which owns 25% of the Grieg Group, is a major sponsor for SOS Children’s Villages

coRe vAlueSThe Grieg Group companies operate in diversified busi-nesses, which make great opportunities for synergies and knowledge sharing, but also challenges related to informa-tion flow and how the Grieg “brand” is perceived by the public Over time we have been focusing on our common values, in order to develop and strengthen a sound business culture and the sense of community within the Group In addition to being a common basis for how we think and act, the values generate important discussions and serve as a foundation for business ethics and related issues

During an inclusive process and cultural studies, we identified four values which represent core aspects of present company culture, as well as desirable goals

Our employees have presented the following interpretations of our values:

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We have a long term approach to our businesses

We contribute to a stable economic founda-tion and thus ensure business continuity

We strive for quality and competence

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We continuously work to keep our good standing, and respect long traditions and business relations

We strive for a good company culture and act on sound ethical principles

We show concern, and take care of each other and our environment

proUD

We strive for, and celebrate good results

We contribute to the welfare of our society, nationally and internationally

We appreciate our colleagues and the competence that is present within the various business concepts

We appreciate the methods, results and products that are created in the Group

We assume responsibility for maintaining and developing a good working environment and a solid brand name

open

We strive for trust, respect and dialogue between the separate units and levels in the organization We inform, invite and include

We aim at transparency in our organization what comes to ethical issues

We are honest, exchange ideas and seek to understand and learn from our colleagues

We have an open minded business approach and strive to create room for action and possibilities

committeD

We care about the job we do, the place we work and the people around us

We show enthusiasm in our work and in cooperation with others

We are committed to common goals and values

We accept responsibility for the society and the environment

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BuSiNeSS etHicSBeing part of an active, international business environ-ment, the Grieg Group accepts a particular responsi-bility for ethical awareness Our activities are closely connected to the community we are a part of, and we wish to bring attention to what the Grieg Group does to raise ethical awareness among our employees

etHicAl GuiDeliNeSThe Group emphasise a high ethical standard, but we acknowledge that practise of an unambiguous and national adjusted “Code of Conduct” is challenging in a diverse business with international operation Thus, our ethical guide-lines are developed with the intention to be a tool to maintain a high ethical standard relative to Norwegian circumstances, and at the same time give clear guidance when our employees meets dilemmas in other management- and business cultures

The guidelines are based on simple principles of transpar-ency and reporting As an alternative of writing a complex set of detailed rules, we instruct our employees to document and report to superiors when facing corruption, facility payments and other situations that challenge ethical prin-ciples This contributes to an internal discussion of difficult subjects and thus maintaining an ethical awareness

The Grieg Shipping Group has in addition devel-oped detailed rules for employees who face particu-larly challenging corruption dilemmas

tRANSpAReNcy iNteRNAtioNAl AND tHe woRlD BuSiNeSS couNcil foR SuStAiNABle DevelopmeNt.In 2006 the Grieg Shipowning Group joined the World Business Council for Sustainable Development (WBCSD) The council is a coali-tion of 180 international companies in a shared commitment to sustainable development

wbcsD objectives inclUDe:

Business Leadership - to be a leading business advocate on sustainable development

Policy Development - to help develop policies that create framework conditions for business contribution on sustainable development

The Business Case - to help develop and promote the business case for sustainable development

Best practice - to demonstrate the business contribution to sustainable development and share practices among members

Global outreach - contribute to a sustainable future for developing nations and nations in transition

AboUt wbcsD

Membership is by invitation only and member companies pledge their support and contribution to the WBCSD by making available their knowledge and experience, and appropriate human resources. Member companies are asked to publicly report on their environmental performance and to aspire to widen their reporting to cover all three pillars of sustainable development – economic, social and environmental. The key element is personal commitment of CEO acting as Council Member and senior manager acting as Liaison Delegate

“Business is good for sustainable development and sustainable develop-ment is good for business ”

AboUt trAnspArency internAtionAl

A global network including more than 90 locally established national chapters and chapters-in-formation. These bodies fight corruption in the national arena in a number of ways. They bring together relevant players from government, civil society, business and the media to promote transparency in elections, in public

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administration, in procurement and in business. TI’s global network of chapters and contacts also use advocacy campaigns to lobby governments to implement anti-corruption reforms.

Politically non-partisan, TI does not undertake investiga-tions of alleged corruption or expose individual cases, but at times will work in coalition with organisations that do.

TI has the skills, tools, experience, expertise and broad participation to fight corruption on the ground, as well as through global and regional initiatives.

Now in its second decade, Transparency Inter-national is maturing, intensifying and diver-sifying its fight against corruption.

GRieG wAlkS foR lifeOn 22 April 2006 all land-based Grieg employees were gathered in Bergen for a company event, focusing on core values, Corporate Social Responsibility (CSR) and to celebrate the very good 2005 annual results The event was also the kick-off for the “Grieg walks for life” campaign

The primary goal of the campaign was to contribute to the United Nations getting closer to one of their Millennium Development Goals: Reduce child mortality by two thirds for the mortality rate among children under five The six children diseases; measles, polio, tuberculosis, tetanus, whooping cough and diphtheria, annually kills 1 7 million children in developing countries The Grieg Group promised to give one UNICEF vaccine-package worth NOK 140 (approx USD 22) for each 10 kilometres a Grieg-employee walked or exercised

As the Grieg Group is represented on most of the continents, we decided that the ambition was to walk around the earth, which is approx 40 000 kilometres, from the kick-off on 22 April until mid-summer However, due to an overwhelming

response from all Grieg employees, who also were joined by our colleagues at sea, we already reached our target by 24 May, only one month after the campaign kicked off

tHe eNviRoNmeNt The companies in the Grieg Group are involved in a variety of activities related to the maritime industry Some of the activities may hold environmental risks of accidents resulting in discharges and other pollution of nature Others have a more indirect role through paper- and energy consumption It is natural that some of the companies in the Grieg Group have a more distinct environmental profile than others, based on environmental threats

The Grieg Shipping Group’s business is truly global, and the ambition is to have a global perspective for all environ-mental activities Their guiding principle is that accidents and environmental harm can be prevented Continuous improvement and prevention of pollution is an inherent part of the Grieg Shipping Group activities, and through quality systems the company will monitor and actively work to decrease the environmental impact of the operations

The company is committed to complying with both national and international environmental legislation, regulations and other requirements The ISO 14001 compliance is the tool to ensure this, in addition to making the risk assessments that enables the company to focus on the critical areas Being coherent to environmental issues is also part of the daily life on shore, e g being a purchaser today means that you at all times have to know which regulations applies to the variety of products that are purchased The Grieg Shipping Group has developed goals which are measurable in order to track the performance and identify areas for further improvements

Shipping is today regarded as the most environmentally friendly mean of transport due to its potential for transporting


large volumes But shipping also represents an environmental threat, and contributes considerably to our biggest threats: climate changes and the pollution of the ocean environment (1)

Elisabeth Grieg, co-owner and chairperson in Grieg Shipping Group, and vice president in the Norwegian Shipowner’s Asso-ciation, initiated an important debate in Norwegian media at the end of 2006 The article “A Global Policy for Environ-mentally Friendly Shipping” was published in the national newspaper “Aftenposten” and generated committing response from politicians The tragic accident of the vessel “Server” on the coast outside Bergen only weeks after Elisabeth Grieg’s initiative underlines the importance of this debate

Grieg Seafood, Grieg Cod Farming and Grieg Cod Juveniles operate several fish farming plants in Norway and Canada This interaction with nature means that the welfare and development of the farmed fish is totally dependent on the water environment For this interaction to be sustainable and mutual, there are several conditions which the fish farming industry has to be responsible for

Grieg Seafood has focused on ensuring that the fish farms are in sound condition and certified in accordance to NYTEK and NS 9415 Further, the company has implemented routines to secure that the fish cannot escape from the farms and have the fish systematically checked by veterinaries to ensure fish health and welfare An important instrument in this work is the implemented IK-Akvakultur Through this work, the company’s goal is to have an operation that does not cause the external environment any permanent damage

The Eurofeeder project, which Grieg Logistics is responsible for within the MARUT programme of the Norwegian Research Council, has long worked on the basis of the philosophy that environmental aspects will influence the transport solutions being developed in this project The main

� WWFNorway,Aftenposten2.jan2007.

aim of the Eurofeeder project is to develop more competitive transport solutions for cargo owners, where ships are parts of larger transport systems, and have to be designed to match a logistics purpose set by the requirements of the cargo owners

In the past these requirements have focused on various issues where the predominant issue has been cost In some shipping segments safety has become an integral part of the solution domain, whereas environmental aspects only lately through some Norwegian efforts have been taken into account The recent public discussion on the environment seems to have moved this issue on the top of the agenda in many businesses, and now the environment is part of the decision-making when new transport solutions are being developed

The Eurofeeder project has developed a method and tool to take into account any requirement and measure the impact of e g environmental issues upon other requirements such as cost Experience show that integrating any requirement in the early project stages enables us to develop cost-effective solutions that fulfil most requirements set by the stakeholders (cargo owner, ship owner, society, politicians, etc )

Grieg Logisitcs is offering this knowledge to our customers when we are looking into developing new/improved transport systems solutions and as a company we are continuously striving towards developing solutions that are cost-effective, safe and environmental friendly


grIeg fouNDAtioNTHEGRIEGfOUNDATIONwASESTABLISHEDINTHEAUTUMNOf2002ANDOwNS25%OfTHEGRIEGGROUP’SOPERATIVECOMPANIES.ITHASNOVOTINGPOwER,BUTISGUARANTEEDADIVIDENDSECURINGTHATAPROPORTIONOfTHEVALUESCREATEDByTHEGRIEGGROUPwILLBETOTHEBENEfITOfTHESOCIETy.

The foundation contributes with substantial amounts to a wide range of activities Internationally, there is an increasing need for support and follow-up of children and youth A main objective of the foundation is to contribute to projects under the auspices of SOS Children Villages Grieg Foundation’s largest single-contribution has been the building of a SOS College in Costa Rica Later this college has entered into a co-operation with United World College (UWC), an organization which runs 12 colleges around the world The admission requirements for these schools are

very high, and the teaching is focused around the subjects of international understanding, peace work and tolerance Thus, Grieg Foundation achieves what has been the fundamental idea for its support to SOS Children Villages, namely to give talented SOS youth an education which further will have impact on the development in their home country

In Norway, Grieg Foundation has focused on contributions to support and develop children and youth Many of the projects are in the intersection between youth work and culture work

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Other contributions are canalized mainly towards cultural and other benevolent projects in western Norway Considerable contributions are made to regional opera projects, orchestral music, and the annual Bergen Inter-national Festival (Festspillene i Bergen) Medical projects, cultural and humanitarian work also receive support from Grieg Foundation

A recent large project is the development of an art museum in Os outside Bergen NOK 30 million is

earmarked for this purpose Grieg Foundation is also committed to environmental issues, and NOK 5 million have been granted for a new vessel for Green Warriors of Norway (Norges Miljøvernforbund)

Grieg Foundation contributed to national and international projects with about NOK 38 million during 2006 The Grieg Group is very proud to have a shareholder like Grieg Foundation and the work the foundation represents

photos: Gottfried Schmelzer �1

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��G R i e G S H i p p i N G A S f i N A N c i A l S t A t e m e N t 2 0 0 6

BuSiNeSS SummARy Grieg Shipping AS, located in Bergen, Norway controls 14 open hatch gantry craned general cargo vessels This includes a 50% ownership in the vessels M/V Star Evviva and M/V Star Atlantic In May 2006, Grieg Shipping AS entered into a contract with Hyundai Mipo Dockyard Co Ltd , South Korea for two newbuildings with delivery in 2009 and 2010

The vessels are chartered out on long-term charter parties to Star Shipping AS, which operates the vessels under short and long term contracts of affreightments Star Shipping AS, which is jointly owned by Masterbulk Pte Ltd and Grieg Shippping II AS, is the world’s largest marketing and operating company within seaborne transportation of wood pulp and has 21 offices world wide Star Shipping AS employed 69 vessels on average in 2006, of which 46 vessels were open hatch vessels

Grieg Shipping II AS, has up until now been responsible for the administration and delivering accounting and financial services to the company During 2006, Grieg Billabong AS, who has been responsible for the technical manage-ment of the vessels, was acquired by Grieg International AS, and thereafter renamed Grieg Shipping Group AS With effect from year end 2006, the employees in Grieg Shipping II AS and Grieg International AS and their activities have been assigned to Grieg Shipping Group AS Going forward Grieg Shipping Group AS will deliver all management services within strategy, administration, asset management, accounting and finance, market- and project development, as well as technical ship management

tHe woRkiNG eNviRoNmeNtGrieg Shipping AS has no employees The daily manage-ment of the company has through 2006 been handled by Grieg Shipping II AS, but is transferred to Grieg Shipping Group AS from the end of 2006, as mentioned above

equAl oppoRtuNityGrieg Shipping AS does not accept discrimination of sexes, religion, cultural heritage, race, handicap, or any other form of discrimination The company performs its activities based on respect for all human beings

The Board of Directors in Grieg Shipping AS has five members, two women and three men

coRpoRAte GoveRNANceThe company makes an effort to work according to the Norwegian standard for good corporate governance to the extent such practice is applicable for a non-listed family owned company like Grieg Shipping AS

exteRNAl eNviRoNmeNtThe operation of the Grieg Shipping AS’ vessels is exposed to the risk of pollution Thus, the company is committed to comply with both national and international environ-mental legislation, regulations and other requirements

The guiding principle is that accidents and environmental harm can be prevented Continuous improvement and prevention of pollution is an inherent part of the activities, to which the company dedicates major efforts and resources Through quality systems, the company monitors and

fiNANciAl StAtemeNt

grIeg shIppIng 2006


actively works to decrease the environmental impact of its operations All systems are in accordance with the require-ments which are requisite to comply with ISO 14001

There are implemented procedures and developed goals that are measurable in order to track performance and identify areas for further improvement Target areas are: machinery, ballast water management, purchasing, waste handling, segregation of garbage, and sewage manage-ment The company will continue the work to seek to limit the risk of environmental hazards in the years ahead

pRofit AND loSS AND BAlANce SHeetThrough strong shipping- and financial markets as well as hard work from everybody on board and ashore, and by sound business behaviour, the company was able to produce healthy results and outperform its long term return targets in 2006, although at lower levels compared to the previous two years Grieg Shipping AS’ accounts for 2006 show a net result before tax of NOK 244 million, which constitutes a 39% reduction over the NOK 400 million profit in 2005 Measured in USD, the currency in which the vessels earn their income, profit before tax decreased by USD 20 million to USD 41million

The revenues for 2006 of NOK 772 million, ended up NOK 198 million lower than the previous year, which is due to reduced time charter hire earned on the vessels

Operating costs continued to climb upwards in 2006, increasing with 10% on the foregoing year to NOK 303 million after payments of time charter hire In result, the operating profit was reduced from NOK 354 million in 2005 down to NOK 196 million in 2006 As the world economy has continued on its strong path, this has had severe negative impact on prices and availability of supplies and services for the company’s shipping activities in general, resulting in increased costs of

lubricating oil and spare parts as well as higher personnel costs on board and ashore in particular Secondly, the ship operation was hurt by various technical and non- tech-nical incidents that lead to a hike in repair and insurance costs Finally, the fleet enjoyed more trading days than in 2005, with M/V Star Java starting to trade from mid November 2006 This increased the absolute cost level both in terms of operating expenses and depreciation costs

Net financial items for 2006 showed a positive contribu-tion of NOK 48 million in profit, which represented a NOK 2 million improvement over 2005 The good financial result can mainly be explained by strong returns on the finan-cial investment portfolio and reversal of interest rate swaps In consequence, the company was able to meet both its relative and absolute investment performance targets Although US interest rates continued to climb throughout the year, with the US Fed Fund interest rate reaching 5 25%, this had minor impact on the company’s borrowing costs as a significant share of the interest rate exposure is hedged at favourable rate levels

In spite of reduced earnings and profits as well as higher investment activities, the company’s cash flow for 2006 increased by NOK 102 million to NOK 930 million after payments of dividends of NOK 64 8 million and NOK 585 million in shipyard instalments The contracting of the two newbuildings and the delivery of M/V Star Java also influenced long term debt which increased from NOK 533 million to NOK 900 million In result, the company’s total assets increased by NOK 551 million to NOK 3 032 million of which current assets constitutes NOK 984 million The Board of Directors considers Grieg Shipping AS to be in a very strong financial position entering 2007 with a net debt free position and total equity of NOK 2 027 million, implying a book equity ratio of 67% This should make the company well equipped for further growth




In the forest product market, wood pulp trade recovered during 2006 World trade within this commodity increased with nearly 4% China was a frontrunner with an increase in imports of 6 6%, Japan with 2 2% and Western Europe 1 5% On the export side Brazil was dominating with a 15% increase This underlines the development that Brazil is gradually taking over the leading role in this market from N American exporters Seaborne transport of lumber is estimated to have had a moderate increase, probably less than 2% in 2006 Within the paper and board trade China’s position is becoming more and more interesting with 60% increase in exports during 2006

The market segment surrounded by most scepticism and negative forecasts is the container market Consensus points in the direction of a couple of tough years, given expectations of increased vessel capacity This could also impact negatively on the market for transportation of forestry products However, there are mixed opinions on how dramatic the downfall will be The container segment has developed into a more fragmented market over the last ten years and is more complex to read than previously

There is generally an optimistic tone in the forecasts for seaborne trade in the dry bulk sector, both in the short and the long term perspective, when keeping aside unforeseen political events of magnitude and/or financial turmoil The industrialisation of the emerging parts of the world seems in particular to be fuelling the shipping markets with renewed strength, with China being key The big question mark continues to be the large order books, and an increase around 7% in the total dry bulk fleet is expected in 2007 Given prevailing growth forecasts in seaborne dry bulk commodity trade of 4%, coupled with continued conges-tion in ports and Chinese coastal trade tying up capacity, it might be that the market can absorb the new vessels, and that the rate level has a chance of being maintained

RiSkGrieg Shipping AS is exposed to various types of risks

The company’s market risk is mainly constituted by risks related to the development in freight rates, exchange rates, and interest rates Although freight rates for 2007 may decline compared to the previous year, one should bear in mind that Grieg Shipping AS’ business is industrial, as the income from Star Shipping AS is characterised by a high degree of long term freight contracts Thus, the earnings are less volatile than in the general dry bulk market

The company’s earnings, as well as main assets and liabilities are in USD The currency risk is primarily related to purchases of administrative services in Norway as well as purchases of goods for the technical operation of the vessels As the accounts are presented in NOK it will be influenced by fluctuations in the exchange rate between NOK and USD The company’s long term debt is exposed to changes in the interest rate There are established policies and routines to control and reduce both the currency exposure and the interest rate risks


The earnings from Star Shipping AS is the company’s dominant income source, but does not imply any signifi-cant credit risk, as this risk is mainly market related given the structure of the charter agreements Star Shipping AS has a diversified international customer portfolio

Being in a financially strong position the company’s liquidity risk is close to none existing Parts of the compa-ny’s financial investment portfolio are also regarded as a support of the core business, and these funds are governed by a financial strategy with moderate risk taking A negative development in the stock market will have negative effects on the investment portfolio

GoiNG coNceRNThe Board of Directors confirm that the annual accounts are prepared under the assumption of a going concern The basis for this assumption is the company’s solidity

AllocAtioN of Net iNcomeThe company’s financial position is good The annual accounts provide a fair view of the enterprise’s assets and liabilities, financial position, and results The Board of Directors recom-mends that this year’s result after tax in Grieg Shipping AS of NOK 235 505 529 is distributed in the following manner:

nOKDividend (12 5% of the results) 29 425 000Changes in reserve for valuation variances -1 779 814Other Equity 207 860 343

The company’s unrestricted equity is NOK 1 710 million

The Board of Directors would like to thank the employees of Grieg Shipping Group AS ashore and onboard the vessels and likewise the worldwide organisation of Star Shipping AS for their great efforts throughout the year

Bergen, 14th of March, 2007 The Board of Directors of Grieg Shipping AS



profIt And loss StAtemeNt

GrieG SHippinG ASFigures in NOK 1 000

note 2006 2005

opeRAtiNG iNcome AND expeNSeS Freight revenue and other income 742 679 934 538Operating income in JV 5 29 751 36 220

Operating income 772 430 970 758

T/C-hire -273 955 -341 319Operating cost 3 -177 881 -147 689Operating cost in JV 5 -14 565 -14 051Administration and general expenses -23 261 -28 806Depreciation incl JV 3,5 -86 965 -84 860

Operating cost -576 627 -616 726

net operating result 195 803 354 032

fiNANciAl iNcome AND expeNSeSInterest income 3 756 5 256 Reversal of interest swaps 22 847 0 Realized return 61 225 8 765 Financial income JV 5 742 104 Financial expenses -32 897 -24 192Interest paid to group companies -260 0Financial expenses JV 5 -609 -560Changes in market value of fin current assets incl JV 5 1 071 43 404Net currency gain/loss -7 510 12 825

net financial items 48 365 45 602

profit before tax 244 168 399 634

tAxeS Tax payable 2 -7 485 -25 200Deferred tax 2 -891 20 983Tax in JV 2,5 -287 -1 418

taxes -8 663 -5 635

prOFit OF tHe YeAr 235 506 394 000

AllocAtioNSDividend -29 425 -64 800Changes in reserve for valuation variances 1 780 -1 367Transfer to other equity -207 860 -327 832

total allocations -235 506 -394 000


BAlAnCe sheet AS of 31.12.06


note 2006 2005

ASSetS

FiXed ASSetS

intangible fixed assetsDeferred tax assets 0 650

total intangible fixed assets 0 650

tangible fixed assetsNewbuilding contracts 3 329 156 19 667 Vessels 3 1 665 126 1 482 502 Vessels in JV 3,5 53 439 60 976

total tangible fixed assets 2 047 721 1 563 145

Current ASSetSAccounts receivables 6 36 061 18 993 Receivables from group companies 6 7 010 1 270 Current assets in JV 5 18 856 15 390 Quoted investment shares 7 255 087 251 345 Other quoted financial instruments 8 490 463 607 357 Bank deposits 176 561 22 791

total current assets 984 039 917 146

tOtAl ASSetS 3 031 760 2 480 940

�0G R i e G S H i p p i N G A S f i N A N c i A l S t A t e m e N t 2 0 0 6



note 2006 2005

equity AND liABilitieS

eQuitY paid-in capital Share capital (40 367 600 shares à NOK 1) 10,12 40 367 40 367Share premium reserve 10 271 382 271 382

paid-in capital 311 749 311 749

retained earningsReserve for valuation variances 5,10 5 044 6 824 Other equity 10 1 710 252 1 502 391

total retained earnings 1 715 296 1 509 215

total equity 2 027 045 1 820 964

liABilitieS provisionsDeferred tax 2 241 0 Deferred tax in JV 2,5 361 150

total provisions 602 150

Other long-term liabilitiesMortgage debt 4 890 145 519 563 Mortgage debt in JV 4,5 10 053 13 296

total other long-term liabilities 900 198 532 859

Current liabilities Accounts payable 6 51 836 29 225 Liabilities to group companies 6 4 950 3 549 Tax payable 2 8 378 26 084 Dividend 10 29 425 64 800 Short term liabilities JV 5 9 326 3 309

total current liabilities 103 915 126 967

total liabilities 1 004 715 659 976

tOtAl eQuitY And liABilitieS 3 031 760 2 480 940

Bergen, 14th of March, 2007



CAsh floW ANAlySiS


2006 2005

Net cASH flow fRom opeRAtiNG ActivitieSOperating income before tax 244 168 399 634Taxes paid -25 200 -45 000Ordinary depreciation 86 965 84 860Depreciation drydock 3 304 9 967Cost of dock -8 622 -6 879Unrealized currency loss/(gain) 34 008 69 862Unrealized change in market value of fin current assets -1 071 -43 403Change in accounts receivables -22 808 -10Change in accounts payables/ short term debt 30 037 8 167Change in accruals -3 496 -13 604

net cash provided by operating activities 337 286 463 594

Net cASH flow fRom iNveStiNG ActivitieSPurchase of vessels and newbuilding contracts -566 225 -98 291Proceeds from sale of shares and bonds etc 114 223 -208 947

net cash provided by investing activities -452 002 -307 238

Net cASH flow fRom fiNANciNG ActivitieSProceeds from long-term borrowings 913 335 14 018Repayment of long-term borrowings -580 049 -65 672Dividend paid -64 800 -117 000

net changes in liquidity from financing 268 486 -168 654Net change in cash and cash equivalents 153 770 -12 298

Cash and cash equivalents at 01 1 06 22 791 36 998

Cash and cash equivalents at 31.12.06 176 561 24 700


The financial statements are prepared in accordance with The Norwegian Accounting Act of 1998

pRiNcipAl Rule foR vAluAtioN AND clASSificAtioN of ASSetS AND liABilitieSAssets meant for permanent ownership or use are classified as fixed assets Other assets are classified as current assets Accounts receiva-bles due within one year are classified as current assets The classifica-tion of current and long term liabilities is based on the same criteria Current assets are valued at the lower of historical cost and fair value

Current and long term liabilities are carried at nominal value

fixeD ASSetSFixed assets are valued at historical cost less accumulated depre-ciation Depreciation is charged on a straight-line basis over the estimated remaining economic life of each asset adjusted for the residual value Estimated economic life for the vessels are 27 years Periodic maintenance is capitalised and depreciated over the period to the next scheduled dry-docking Similarly, a propor-tion of the price paid for new vessels is capitalised as periodic maintenance Depreciation of periodic maintenance is presented as operating expenses The recoverable amount of an asset is measured whenever there is an indication that the asset may be impaired An impairment loss, being the carrying amount of an asset less its recoverable amount, is recognised immediately in profit or loss An impairment loss recognised in prior periods is reversed if there is a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised

New BuilDiNG coNtRActSInstalments are included in fixed assets at their cumulative costs

foReiGN cuRReNcyAll foreign currency balance sheet items are translated into NOK using the year-end exchange rates

SHAReS iN JoiNt veNtuReSJoint venture investments are accounted for using the proportionate consolidation method The share of income, expense, assets, liabilities and cash flows are included in the respective line items of the company The figures are specified by group in the notes

iNveStmeNtS Listed shares included in the trading portfolio are valued at fair value at the balance sheet date Other shares are valued at the lower of average cost and market price on the balance sheet date

foReiGN cuRReNcy HeDGeDerivatives purchased to reduce currency risk are treated as hedges for accounting purpose Gains and losses related to the derivative will be recognised in the same period as the hedged transaction

iNteReSt RAte HeDGeInterest rate hedge contracts are recognized and clas-sified according to the hedged liabilities

ReceivABleSTrade debtors and other debtors are carried at face value less provision for expected loss An estimate is made for doubtful receivables based on a review of all outstanding amounts at the year end

BANk DepoSitS, cASH iN HAND, etc.Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months

ReveNue RecoGNitioNFreight revenues are recognized in the period in which the services are executed The revenues related to voyages in progress are estimated and recorded prorate on a per day basis

tAxeSDeferred tax related to untaxed equity is set to zero The main reason is that paid out dividend according to the articles of incorporation is expected to be within each years result The valuation is based on the company’s policy related to dividend including the liquidity situation for the Group, which is not included in the taxation regime for ship owning companies In addition, it is presumed that the company will be within the taxation scheme for ship owning companies in the fore-seeable future Deferred tax on financial profit brought forward, may be taxable in the future, thus a tax percentage of 28% has been used

note 1 AccouNtiNG pRiNcipleS


note 2. tAxeS(Figures in NOK 1 000)

The company is taxed according to the taxation regime for ship owning companies

tax expence in the profit and loss Statement: 2006Write-backs 650Change in deferred tax 2006 241Tax payable on net financial items 7 485Tax on dividend paid 0Share of tax expence in joint ventures 287taxes 8 663

tax base for taxes payableNet financial result 26 732Tax payable on financial result 7 485

Tonnage tax 2006 amounts to NOK 893, and is booked as operating cost

Calculation of deferred tax on net financial items as per. 31.12.06:Temporary differences on securities -22 374Temporary differences on long-term debt 23 234total 86028% deferred tax 241Deferred tax previous year 0Booked deferred tax 241tax base for deferred tax according to the taxation regime for shipowning companies (tax percentage 0%): 1 686 966

note 3 tHe fleet (Figures in NOK 1 000)

Vessels (1) drydock (2) totalTDW 587 291 587 291Cost 01 01 06 2 660 993 41 904 2 702 897Additions 566 224 17 863 584 087Reductions 0 9 241 9 241Cost 31.12.06 3 227 217 50 526 3 277 743Acc depreciations 01 01 06 1 120 737 19 015 1 139 752Depreciations 86 965 12 407 99 372Reductions 9 102 9 102Acc. depreciations 31.12.06 1 207 702 22 320 1 230 022Book value 31.12.06 2 019 515 28 206 2 047 721Depreciation period (year) 27 years

A straight-line depreciation plan is used 1 Incl newbuilding contracts 2 Depreciation for drydock booked as operating cost

Remaining contract amount to be paid regarding newbuildings is NOK 491 651


note 4 loNG teRm liABilitieS(Figures in NOK 1 000)

Currency Amount Currency rate2006 total

2005 total

DNBNOR USD 140 200 6 2551 883 221 519 563Grieg Maritime AS USD 1 107 6 2551 6 924 0total 890 145 519 563Grieg Maritime AS, 50% USD 1 607 6 2551 10 053 13 296

900 197 532 859

Book value of assets placed as security amounts to: 1 593 283 1 245 438

The lender has first priority ship mortgage on the vessels

The loan facilities were refinanced medio November 2006 The refinancing resulted in a realization of a foreign exchange gain of NOK 79 million NOK 21 million is booked as income in the profit and loss state-ment 2006, the residual is posted as an unrealised gain included in previous years’ profits

Next year’s instalment on the mortgage debt amounts to USD 7 357, equivalent to NOK 46 020

mortgage debt due in more than 5 years: 2006 2005Grieg Shipping AS 616 127 218 629Grieg Maritime AS, 50% 0 3 626total 616 127 222 255

Covenants Grieg Shipping AS is bounded to at any time hold minimum USD 10 mill of free liquidity

note 5 JoiNt veNtuRe iNveStmeNtS(Figures in NOK 1 000)

Joint ventures are included using the proportionate consolidation method, see table below:

Companydate of acquisition registered office Share and voting right Joint liability

Ans Billabong II 15 10 92 Bergen 50% 1 382 Grieg Maritime AS 01 01 05 Oslo 50% 0

Ans Billabong ii Grieg maritime AS total joint ventureAcquisition cost 50 000 50 000Book value of equity at date of aquisition 12 813 12 813Allocated excess value 7 891 37 187 45 078

Net share 01 01 06 7 671 51 942 59 613 - net excess value -1 391 -32 538 -33 929

Additions/reductions in the period 0 0Share of current year net income 7 516 4 430 11 946Depreciation excess value -428 -4 648 -5 076Transfer to/from the company -6 927 -7 000 -13 927Other changes through the year 0net share 31.12.06 7 833 44 724 52 557


Share of net income, assets and liabilities, see table below Ans Billabong ii Grieg maritime AS total joint ventureShare of operating revenues 14 840 14 911 29 751Share of operating expenses -6 839 -7 726 -14 565Share of depreciation -338 -2 466 -2 804Depreciation excess value -428 -4 648 -5 076Share of net financial items -148 -1 744 -1 892Share of tax expenses 0 -287 -287Share of net income 7 087 -1 960 5 127

Share of vessels 4 819 19 768 24 587Excess value 963 27 890 28 853Share of current assets 2 932 15 925 18 857Share of assets 8 714 63 583 72 297

Share of long term debt 0 10 414 10 414Share of short term debt 881 8 445 9 326Share of debt 881 18 859 19 740

Share of equity 7 833 44 724 52 557

note 6 iNteRcompANy AccouNtS(Figures in NOK 1 000)

Accounts receivables to intrercompany accounts:Star Shipping AS 5 992Grieg Maritime AS (group company) 7 000Grieg Shipping II AS (group company) 10total 13 002

Current liabilities to intercompany accounts:ANS Billabong II (joint venture) 1 789Grieg International AS (group company) 108Grieg International II AS (group company) 632Star Shipping AS 9 147Grieg Shipping Group AS (group company) 4 210total 15 886

The company has no intercompany receivables maturing later than one year

note 7 liSteD fiNANciAl cuRReNt ASSetS (Figures in NOK 1 000)

Quoted investment shares purchase cost market valueNorwegian investment shares and investment share funds 144 407 186 804Foreign investment shares and investment share funds 63 262 68 283total quoted investment shares 207 669 255 087


note 8 otHeR quoteD fiNANciAl iNStRumeNtS(Figures in NOK 1 000)

purchase cost market valueQuoted bonds 22 757 22 376Call option 12 261 12 575Hedgefunds 70 173 73 713Moneymarket funds 407 647 381 799Other quoted financial instruments 512 837 490 463

note 9 iNteReSt AND cuRReNcy coNtRActS(Figures in NOK 1 000)

As at 31 12 06, 55 95% of total mortgage debt is hedged through interest swap agreements

The company has commited the following agreements as per 31.12.06:

Face value Currency instrument due dateunrecognized

profit/(loss) 31.12.0679 000 USD Interest swap agreem 2006-2016 10 978

4 291 USD Interest-currency swap 2006-2007 297total 11 275

Unrecognized profit/loss is not booked due to hedge accounting

note 10 equity(Figures in NOK 1 000)

Share capitalShare premium

reservereserve for

valuation variances Other equity total equityEquity 31 12 05 40 368 271 382 6 824 1 502 392 1 820 965Allocated dividends -29 425 -29 425Profit of the year -1 780 237 285 235 505total equity 31.12.06 40 368 271 382 5 044 1 710 252 2 027 045


note 11 feeS AND SHAReHolDeR StRuctuRe(Figures in NOK 1000)

No remuneration has been paid to the Board of Directors in 2006 The company has no employees No loans have been given to the company’s shareholders The administrative management has been performed by Grieg Shipping II AS, and is transferred to Grieg Shipping Group AS as per 31 12 06 Technical management of the vessels is handled by Grieg Shipping Group AS (renamed from Grieg Billabong AS)

Auditor’s remuneration:Auditor 266Letters of confirmation 22Technical accounting assistance 20Tax consultancy 22 5Other services 10Total auditor’s remuneration 340 5

The company has 4 shareholders as follows:Grieg Ltd AS 18 039 138 44 69% A-SharesGrieg Maturitas AS 11 155 560 27 63% A-SharesPer Grieg sr 1 081 002 2 68% A-SharesGrieg Foundation 10 091 900 25 00% B-Shares

The company has no holding of own shares

note 12 SHARe cApitAlThe company has a share capital of NOK 40 367 600 The capital is divided into two share classes with 30 275 700 shares in class A and 10 091 900 shares in class B, i e a total of 40 367 600 shares each with a par value of NOK 1,-

Only shares in class A have voting rights

•••••


Translation from the original Norwegian version

to the Annual Shareholders’ meeting of Grieg Shipping AS

AudItor’s report foR 2006We have audited the annual financial statements of Grieg Shipping AS as of 31 December 2006, showing a profit of NOK 235 505 529 We have also audited the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit The financial statements comprise the balance sheet, the statements of income and cash flows, and the accompanying notes The rules of the Norwegian Accounting Act and generally accepted accounting practice in Norway have been applied to prepare the financial statements These financial statements are the responsibility of the Company’s Board of Directors Our responsibility is to express an opinion on these financial statements and on the other information according to the requirements of the Norwegian Act on Auditing and Auditors

We have conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and generally accepted auditing practice in Norway, including standards on auditing adopted by Den norske Revisorforening These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation To the extent required by law and generally accepted auditing practice, an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems We believe that our audit provides a reasonable basis for our opinion

In our opinion,

the financial statements are prepared in accordance with the law and regulations and give a true and fair view of the financial position of the Company as of 31 December 2006, and the results of its operations and its cash flows for the year then ended, in accordance with generally accepted accounting practice in Norway

the Company’s management has fulfilled its duty to see to proper and well arranged recording and documentation of accounting information in accordance with the law and generally accepted bookkeeping practice in Norway

the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations

Bergen, 14 March 2007 deloitte AS Bjørn Lyse Opdal State Authorised Public Accountant (Norway)

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•

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DeloitteStatsautoriserte Revisorer ASAgnes Mowinckelsgate 6Postboks 6013 Postterminalen5892 Bergen

Telefon: 55 21 81 00Telefax: 55 21 81 33www.deloitte.no


�0G R i e G i N t e R N A t i o N A l A S f i N A N c i A l S t A t e m e N t 2 0 0 6

BuSiNeSS SummARy Grieg International AS, located in Oslo, Norway is the parent company in the Grieg International Group In addition, the Group primarily consists of the ship owning subsidiaries Grieg International II AS, Grieg Poseidon AS and Grieg Maritime AS During 2006, Grieg International AS acquired the technical ship management company Grieg Billabong AS and thereafter renamed the company Grieg Shipping Group AS With effect from year end 2006, the employees in Grieg International AS and Grieg Shipping II AS and their activities have been assigned to Grieg Shipping Group AS Going forward Grieg Shipping Group AS will deliver all management services within strategy, administra-tion, asset management, accounting, finance, market- and project development, as well as technical ship management The Grieg International Group is also engaged in private investment activities, such as Maris AS in Tønsberg which operates within maritime information technology Maris AS is consolidated into the accounts from June 2005

The Grieg International Group controls 9 open hatch gantry craned general cargo vessels In May 2006 the Group entered into a contract with Hyundai Mipo Dockyard Co Ltd , South Korea for two newbuildings with delivery in 2009

The vessels are chartered out on long-term charter parties to Star Shipping AS, which operates the vessels under short and long term contracts of affreightments Star Shipping AS, which is jointly owned by Masterbulk Pte Ltd and Grieg Shipping II AS, is the world’s largest marketing and operating company within seaborne

transportation of wood pulp and has 21 offices world wide Star Shipping AS employed 69 vessels on average in 2006, of which 46 vessels were open hatch vessels

tHe woRkiNG eNviRoNmeNtBy year end, the Group employed 43 people through Grieg Shipping Group’s offices in Bergen, Oslo, Mobile, Shanghai and Manila and had 518 employees at sea In additional 1 person was employed in Grieg International AS The Board of Directors regards the working environment as good Through surveys carried out amongst the on-shore employees, it has been established that more than 90% of the employees fully or mostly agree to statements such as: ”I am very satisfied at work”, ”my work tasks are varied”, and “I am proud to work for the Group” There are however also areas that can be improved, where “learning and develop-ment” has been targeted as a focus area going forward Given the recent reorganisation of Grieg Shipping Group AS into one entity, this should also increase the team oriented culture as well as give organisational efficiency gains

The Group keeps record of absence due to sickness according to prevailing rules and regulations Total sickness absence in 2006 for Grieg Shipping Group AS’ on shore personnel was 2 12% of which 0 96% was due to long term illness There are no records of injuries or accidents

equAl oppoRtuNityThe Grieg International Group does not accept discrimina-tion of sexes, religion, cultural heritage, race, handicap, or any other form of discrimination The Group performs its activities based on respect for all employees

fiNANciAl StAtemeNt

grIeg InternAtIonAl 2006


Per year end, the Group has an equal mixture of both sexes among its employees with 22 women and 22 men An equal gender split is also prevailing in the management team

The Board of Directors in Grieg International AS has three members, one woman and two men

coRpoRAte GoveRNANceThe Group makes an effort to work according to the Norwegian standard for good corporate governance to the extent such practice is applicable for non-listed family owned companies like the Grieg International Group

exteRNAl eNviRoNmeNtThe operation of the vessels is exposed to the risk of pollution Thus, the Group is committed to comply with both national and international environmental legislation, regulations and other requirements

The guiding principle is that accidents and environmental harm can be prevented Continuous improvement and prevention of pollution is an inherent part of the activities, to which the Group dedicates major efforts and resources Through quality systems, the Group monitors and actively works to decrease the environmental impact of its opera-tions All systems are in accordance with the requirements which are requisite to comply with ISO 14001

There are implemented procedures and developed goals that are measurable in order to track performance and identify areas for further improvement Target areas are: machinery, ballast water management, purchasing, waste handling, segregation of garbage, and sewage manage-ment The Group will continue the work to seek to limit the risk of environmental hazards in the years ahead

pRofit AND loSS AND BAlANce SHeetThrough strong shipping- and financial markets as well as hard work from everybody on board and ashore, and by sound business behaviour, the Group was able to produce healthy results and outperform its long term return targets in 2006, although at lower levels compared to the two previous years Grieg International AS’ consolidated accounts for 2006 show a net result before tax of NOK 128 million which constitutes a 30%

reduction over the NOK 183 million profit in 2005 Measured in USD, the consolidated net profit before tax decreased by USD 16 million to USD 19 million

The revenues for 2006 of NOK 390 million, came out NOK 24 million lower than the previous year, which is due to reduced time charter hire earned on the vessels, although 75% of the reduction in freight earnings was offset through the inclusion of Grieg Shipping Group AS into the accounts and by increased sales revenues in Maris AS

Operating costs continued to climb upwards in 2006, increasing with 29% on the foregoing year to NOK 311 million In result, the operating profit was reduced from NOK 174 million in 2005 down to NOK 79 million in 2006 As the world economy has continued on its strong path, this has had severe negative impact on prices and availability of supplies and services for the shipping activities in general, resulting in increased costs of lubricating oil and spare parts as well as higher personnel costs on board and ashore in particular Secondly, the ship operation was hurt by various technical and non-technical incidents that lead to a hike in repair and insurance costs Last, but not least the consolidation of Grieg Shipping Group AS into the accounts as well as higher activities in Maris AS increased the total cost level

Net financial items for 2006 showed a positive contribu-tion of NOK 56 million in profit, which represented a NOK 37 million improvement over 2005 The main contributor is net positive exchange rate effects of NOK 24 million being due to a decrease in the USD vs NOK But the good financial result can also be explained by strong returns on the financial investment portfolio and reversal of interest rate swaps In consequence, the Group was able to outclass both its relative and absolute invest-ment performance targets Although US interest rates continued to climb throughout the year, with the US Fed Fund interest rate reaching 5 25%, this had minor impact on the Group’s borrowing costs as a significant share of the interest rate exposure is hedged at favourable rate levels

In spite of reduced earnings and profits as well as higher investment activities, the Group’s cash flow for 2006 increased by NOK 18 million to NOK 450 million


after payments of NOK 330 million in shipyard instal-ments plus new investments in private ventures The contracting of the two newbuildings also influenced long term debt which increased from NOK 457 million to NOK 621 million In result, the Group’s total assets increased by NOK 325 million to NOK 2 195 million of which current assets constitutes NOK 522 million The Board of Directors considers the Grieg Inter-national Group to be in a strong financial position entering 2007, with total equity of NOK 1 390 million, implying a book equity ratio of 63% This should make the Group well equipped for further growth



In the forest product market, wood pulp trade recovered during 2006 World trade increased with nearly 4% China was a frontrunner with an increase in imports of 6 6%, Japan with 2 2% and Western Europe 1 5% On the export side Brazil is dominating with a 15% increase This underlines the development that Brazil was gradually taking over the leading role in this market from N American exporters Seaborne transport of lumber is estimated to have had a moderate increase, probably less than 2% in 2006 Within the paper and board trade China’s position is becoming more and more interesting with 60% increase in exports during 2006

The market segment surrounded by most scepticism and negative forecasts is the container market Consensus points in the direction of a couple of tough years, given expectations of increased vessel capacity This could also impact negatively on the market for transportation of forestry products However, there are mixed opinions on

how dramatic the downfall will be The container segment has developed into a more fragmented market over the last ten years and is more complex to read than previously

There is generally an optimistic tone in the forecasts for seaborne trade in the dry bulk sector, both in the short and the long term perspective, when keeping aside unforeseen political events of magnitude and/or financial turmoil The industrialisation of the emerging parts of the world seems in particular to be fuelling the shipping markets with renewed strength, with China being key The big question mark continues to be the large order books, and an increase around 7% in the total dry bulk fleet is expected in 2007 Given prevailing growth forecasts in dry bulk seaborne commodity trade of 4%, coupled with continued conges-tion in ports and Chinese coastal trade tying up capacity, it might be that the market can absorb the new vessels, and that the rate level has a chance of being maintained

RiSkthe grieg internAtionAl groUp is exposeD to vArioUs types of risks.

The Group’s market risk is mainly constituted by risks related to the development in freight rates, exchange rates, and interest rates Although freight rates for 2007 may decline compared to the previous year one should bear in mind that the Group’s business is industrial, as the income from Star Shipping AS is characterised by a high degree of long term freight contracts Thus, the earnings are less volatile than in the general dry bulk market

The Group’s earnings, as well as main assets and liabilities are in USD The currency risk is primarily related to the Group’s administrative activity in Norway and purchases of goods for the technical operation of the vessels As the accounts are presented in NOK it will be influenced by fluctuations in the exchange rate between NOK and USD The Group’s long term debt is exposed to changes in the interest rate There are established policies and routines to control and reduce both the currency exposure and the interest rate risks

The earnings from Star Shipping AS is the Group’s dominant income source, but does not imply any signifi-

��G R i e G i N t e R N A t i o N A l A S f i N A N c i A l S t A t e m e N t 2 0 0 6

cant credit risk, as this risk is mainly market related given the structure of the charter agreements Star Shipping AS has a diversified international customer portfolio

Being in a financially strong position the liquidity risk is close to none existing Parts of the Group’s financial investment portfolio are also regarded as support for the core business, and these funds are governed by a financial strategy with moderate risk taking

GoiNG coNceRNThe Board of Directors confirm that the annual accounts are prepared under the assumption of a going concern The basis for this assumption is the Group’s solidity

AllocAtioN of Net iNcomeThe Group’s financial position is good The annual accounts provide a fair view of the enterprise’s assets

and liabilities, financial position, and results The Board of Directors recommends that this year’s result after tax in Grieg International AS (the mother company) of NOK 24 979 941 is distributed in the following manner:

nOKDividend 6 245 000Other equity 18 734 941

The recommended dividend constitutes 25% of the after tax result and is in accordance with the company’s bye laws

The company’s unrestricted equity is NOK 34 million

The Board of Directors would like to thank the employees of Grieg Shipping Group AS ashore and on board the vessels and likewise the worldwide organisation of Star Shipping AS for their great efforts throughout the year

Oslo, 14th of March, 2007 The Board of Directors of Grieg International AS

Cato A Holmsen sr Elisabeth Grieg Arne BirkelandChairperson CEO / Board member Board member


profIt And loss StAtemeNt

GrieG internAtiOnAl AS Figures in NOK 1 000

GrieG internAtiOnAl GrOup Figures in NOK 1 000

2006 2005 note note 2006 2005

17 813 15 000 revenues 389 600 414 057

opeRAtiNG expeNSeS– – Vessels operating expenses 115 201 106 116 – – Cost of sales 39 983 11 702

10 712 8 587 20 Payroll expenses 31 588 11 666 – – Tonnage Tax 488 488

216 179 3 Depreciation 2,3 94 037 89 845 5 753 5 580 Other operating expenses 29 580 20 600

16 681 14 346 total operating expenses 310 878 240 417

1 133 654 Operating profit 78 722 173 639

fiNANciAl itemS2 779 2 029 Other interest income 3 760 2 296

– – Other financial income 216 78 – – Income from other group companies 262 –

23 054 – Dividends – – 501 320 Increase in value of market-based investments 43 359 59 294

– – Write-down of fixed asset investments – -480 -717 -363 Interest paid to group companies -717 -363 -124 -114 Other interest expenses -10 569 -21 327 -43 -48 Other financial expenses -4 375 -801

– – Gain / loss on exchange 23 710 -19 894

25 450 1 824 net financial items 55 646 18 803

26 583 2 478 profit before tax 134 369 192 442

-1 603 -932 14 Tax 14 -6 705 -9 871

24 980 1 546 profit for the year 127 664 182 571

AllocAtioNS– – Minority interests 33 161 116 183 – – Majority interests 94 503 66 389

6 245 – Proposed dividend 39 436 –18 735 1 546 To/From Other Equity





2006 2005 note note 2006 2005

ASSetS

FiXed ASSetS

intangible fixed assets– – Contracts 123 738 131 901 – – Goodwill 65 233 56 429 – – Research and development Maris 12 762 14 222

– – total intangible assets 2 201 733 202 552

tangible assets 816 1 043 3 Fixtures and fittings, other equipment 3 3 691 1 237

– – Vessels 3 1 052 894 1 111 827 – – New building contracts 329 062 –

816 1 043 total tangible assets 1 385 647 1 113 064

Fixed financial assets 517 396 513 232 4 Investment in subsidiaries – – 45 463 2 250 5 Investment in other group companies 5 45 726 2 250 28 231 21 372 6 Long term receivables 6 28 579 21 372

1 761 32 394 7 Investments in stocks and shares 7 12 040 41 070 179 305 18 Pension fund – 305

593 031 569 553 total fixed financial assets 86 344 64 997

593 847 570 596 total fixed assets 1 673 724 1 380 613

Current ASSetS

Accounts receivables 52 077 54 529 9 Receivables from group companies – – 1 000 2 125 9 Receivables from other group companies 6 462 2 125

– – Inventories 11 369 5 941 17 495 14 234 8 Market-based investments 8 329 623 429 431 3 580 3 496 10 Other receivables 10 41 026 27 733

74 152 74 385 total receivables 388 480 465 230

1 730 968 Bank deposits, cash in hand, etc. 133 057 24 442

75 882 75 353 total current assets 521 537 489 672

669 729 645 949 tOtAl ASSetS 2 195 260 1 870 285





2006 2005 note note 2006 2005

equity AND liABilitieS

eQuitY

paid-in capital 1 963 245 17 Share capital (196 292 shares a NOK 10) 17 1 963 245

26 225 26 225 Other called-up reserves 26 225 26 225 596 787 498 505 Share premium reserve 596 787 498 505

624 975 524 975 total paid-in capital 624 975 524 975

retained earnings– – Revaluation reserve 262 –

27 876 9 141 Other equity 453 592 370 447– – Minority interest 310 976 283 101

27 876 9 141 total retained earnings 764 830 653 548

652 851 534 116 16 total equity 16 1 389 805 1 178 523

liABilitieS

provisions– – Group pension liabilities 18 4 342 –

205 45 14 Deferred tax 14 34 827 50 528

205 45 total provisions 39 168 50 528

Other long-term liabilities– – Mortage loan 19 621 395 456 812

– – total long-term liabilities 621 395 456 812

Current liabilities 341 226 Trade creditors 34 350 29 323

1 443 891 14 Tax payable 14 21 103 4 173 1 198 764 Public duties payable 9 126 1 476 6 824 96 890 Liabilities to other associated companies 11 109 96 890 6 245 – Dividend 16 382 –

622 13 017 12 Other short-term liabilities 12 52 822 52 560

16 673 111 788 total current liabilities 144 892 184 422

16 878 111 833 total liabilities 805 455 691 762

669 729 645 949 tOtAl eQuitY And liABilitieS 2 195 260 1 870 285

Oslo, 14th of March, 2007 The Board of Directors of Grieg International AS

Cato A Holmsen sr Elisabeth Grieg Arne BirkelandChairperson CEO / Board member Board member


CAsh floW ANAlySiS



2006 2005 2006 2005

cASH flowS fRom opeRAtiNG ActivitieS 26 583 2 478 Operating Income before tax 134 369 192 443

-891 – Taxes paid -4 173 -2 057 -29 -113 Gain/ loss on sales of shares -43 600 -14 044 216 179 Ordinary depreciation (incl dry docking) 110 465 102 970

– – Write-down of shares – -480

126 -110 Diff between pension cost and amount paid into/out from pension scheme 4 647 -110

– – Income from other group companies -262 – – – Change in inventory -5 428 -5 941

115 – Change in accounts receivables -13 293 – – -207 Post classified as investments or other financial activity 14 829 -45 995 – 162 Change in accounts payable to suppliers 5 027 15 026

-11 944 999 Change in accruals 13 642 11 176

14 176 3 388 net cash flow from operating activities 216 223 252 988

cASH flow fRom iNveStmeNt ActivitieS 156 – Payments on sales of fixed assets 170 429

-246 -68 Payments upon purchase of tangible assets -367 175 -3 026 – – Payments upon purchase of intangible assets -7 551 –

3 577 169 485 Proceeds from other claims from the group of companies – 298 – – Payments on other claims from the group of companies -4 337 -1 445 – -1 761 Payments from other claims (short/long-term) – 641

-6 859 61 788 Paymenst on other claims (short/long-term) -7 207 73 543 -19 976 -108 350 Payments on purchase of shares and securities 99 690 -165 408

-23 348 121 094 net cash flow from investment activities -286 410 -94 968

cASH flow fRom fiNANciAl ActivitieS Net change in other liabilities (short/long-term) 164 583 -47 487

– Repayments of loan (short/long term) – 18 478 -90 066 – Repayments of debts to the group -85 781 98 154 100 000 – Payments to equity 100 000 –

9 934 -130 329 net cash flow from financial activities 178 802 -193 855

762 -5 847 net cash flow for the period 108 615 -35 835

968 6 815 Opening balance of cash and cash equivalents 24 442 60 277

1 730 968 Cash and cash equivalents 31.12 133 057 24 442

tHiS COnSiSt OF:1 730 968 Cash in banks etc. 133 057 24 442


The financial statements for Grieg International AS have been prepared in compliance with the Norwegian Accounting Act and generally accepted accounting principles

opeRAtiNG ReveNueSOperating revenues are entered as income at the time of delivery Time of delivery means the time of transfer of risk and control related to the delivery

clASSificAtioN AND vAluAtioN of BAlANce SHeet itemS Assets intended for long-term ownership or use have been classified as fixed assets Other assets have been classified as current assets Receiv-ables are classified as current assets if they are to be repaid within one year after the transaction date Similar criteria apply to liabilities

Current assets are valued at the lower of purchase cost and net realisable value Short-term liabilities are reflected in the balance sheet at nominal value on the date of delivery

Fixed assets are valued at purchase cost and are written down to net realisable value if a value reduction occurs which is not believed to be temporary Fixed assets whose value will deteriorate are systemati-cally depreciated Long-term liabilities in NOK are reflected in the balance sheet at nominal value on the establishment date If the basis for the deterioration in value disappers the write-off will be reversed

Long-term liabilities in foreign currencies are recorded based on the exchange rate on the balance sheet date

iNtANGiBle ASSetSIntangible assets expense are recorded in the balance sheet to the extent that it is distinguished as likely that future economic benefits attached to the asset will accrue to the company and one has reached a reliable measurement of purchase cost for the asset

fixeD ASSetSDepreciable assets are recorded in the balance sheet at purchase cost and depreciated over the asset’s expected economic life on a straight-line basis if expected economic life is over 3 years and cost is more than NOK 15 000 Maintenance of fixed assets are charged as a current operating expense Expenses or improvements are assigned to purchase cost and depreciated over the assets expected economic life The distinction between maintenance and improvements are related to the condition of the asset at the time of purchase

The vessels undergoes periodic drydocking From 2004, drydocking costs are activated when a drydocking has been completed and depreciated under the straight line method until the next planed

drydocking Activated drydocking will appear in the balance sheet together with the vessel’s value Depreciation related to drydocking is included as part of the vessel’s operating expenses

SuBSiDiARieS AND ASSociAteD compANieSSubsidiaries and associated companies are assessed according to the cost method in the parent company Investments are esti-mated to purchase cost, unless a write off has been necessary

Dividends are entered as income in the same year as it is provisioned in the subsidiary/associated company

ReceivABleSReceivables are recorded at nominal value less deduction for anticipated bad debts Provisions for losses due to bad debts are made on the basis of an individual appraisal of each debtor

SHoRt-teRm iNveStmeNtSShort-term investments in stocks and shares are valued as current assets and assess based on the market value on the balance sheet date Received dividend and other distribu-tions are entered as income as other financial income

foReiGN cuRReNcyAssets and liabilities in foreign currencies are recorded based on the exchange rate on the balance sheet date USD/NOK exchange rate pr 31/12-06 was 6 2551

peNSioNSPension expenses and pension commitments are calculated on a straight-line earning profile basis, based on assump-tions relating to projected salaries Employers’ National Insurance contributions are included in the figures The calculations have been made by an actuary

tAxeSThe tax charge in the income statement includes both payable taxes for the period and changes in net deferred tax Taxes are expensed as they accrue Deferred tax on the balance sheet is calculated on the basis of the temporary differences that exist between accounting and tax values Tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been eliminated The disclosure of deferred tax benefits on net tax reducing differences that have not been eliminated are presented net

cASH flow StAtemeNtCash flow statement is prepared according to the indirect method Upon use of the indirect method, cash flow is being reported gross from the investments and financing activities, while reconciling the

note 1 AccouNtiNG pRiNcipleS


book revenue against the net cash flow from the operation activities Cash and cash equivalent including cash, cash in banks and other liquid investments that immediately and by unessential risk on exchange rate can be converted into notorious down payment and with due date is shorter than three months from the acquisition date

coNSoliDAteD fiNANciAl StAtemeNtSThe consolidated financial statements presents Grieg Interna-tional AS and its subsidiaries as a single enterprise Shares in subsidiaries are eliminated using the purchase method Shares in subsidiaries are set off, equivalent to the shares book value of equity on the establishment date Differences that may occur when eliminating, are assigned to specific assets Excess value that can not be identified to a specific asset, is constituted as goodwill This is depreciated over expected economic life Intra-groups transactions and intra-group accounts are eliminated

Company Owner’s shareGrieg Neptunus AS 100 00%Grieg Shipping Group AS 100 00%Grieg Poseidon AS 75 00%Grieg Athena AS 75 00%Maris AS 52 46%

In addition, the 50% share of Grieg Maritime AS which Grieg International II owns is being considered in the consoli-dated financial statement after the gross method

GRieG NeptuNuS iS A GRoup wHicH coNSiStS of tHe followiNG compANieS: Grieg International II AS 75%Grieg Maritime AS 50%


note 2 iNtANGiBle ASSetS GRoup(Figures in NOK 1 000)

excess valueintAnGiBle ASSetS Goodwill Contracts maris r & d maris totalPurchase cost 01 01 06 68 745 163 265 4 293 20 132 256 435Addition 9 996 7 551 17 547Reduction 0Purchase cost 31 12 06 78 741 163 265 4 293 27 683 273 982Accumulated depreciation 31 12 06 16 543 39 527 1 259 14 921 72 250Book value 31.12.06 62 199 123 738 3 034 12 762 201 733depreciation 4 226 8 163 859 5 117 18 365

In relation to the establishment of consolidated financial statement, excess values tied to the purchase of shares in Grieg International II AS was allocated to excess values of the vessels, excess values related to the vessel’s contracts of affreightment and the comany’s right to renominate tonnage in Star Shipping AS (goodwill) The values have been classified as intangible assets and are depreciated for a period of 20 years

note 3 fixeD ASSetS(Figures in NOK 1 000)

FiXed ASSetSequipment/

machinery Art totalPurchase cost 01 01 06 1 818 644 2 462Addition 184 62 246Reduction 156 156Purchase cost 31 12 06 1 847 705 2 553Accumulated depreciation 31 12 06 1 737 0 1 737Book value 31.12.06 111 705 816depreciation 216 0 216Expected economic life 3 - 5 years Depreciation plan Linear No depreciation

GRoupequipment/

machinery Vessels excess valueCapitalized drydocking total

Purchase cost 01 01 06 5 686 1 403 933 193 903 52 467 1 655 989Additions 2 710 10 889 0 24 514 38 113Reduction 170 0 0 0 170Purchase cost 31 12 06 8 226 1 414 822 193 903 76 981 1 693 932Accumulated depreciation 31 12 06 4 536 488 509 92 172 52 131 637 348Book value 31.12.06 3 690 926 313 101 731 24 850 1 056 584depreciation 600 55 638 19 435 75 673 Depreciation plan Linear Linear Linear

Depreciation of the vessels is based on an expected economic life of 27 years, and a residual value equal to estimated scrap value Depreciation of excess value has the same depreciation plan as the economic life of each vessel Capitalized drydocking expenses are depreciated over the period between two drydockings (see note 1 for the change in principle)

Remaining contract amount to be paid regarding newbuildings is NOK 491 651


note 4 SuBSiDiARieS(Figures in NOK 1 000)

Business Office

Ownership/ voting rights

equity 2006 (100%)

result 2006 (100%)

Balance Sheet value (100%)

Grieg Neptunus AS *) Oslo 100% 1 096 213 111 951 502 291Grieg Shipping Group AS Bergen 100% -5 677 -913 4 164Grieg Athena AS Oslo 75% 109 055 8 800 1 514Grieg Poseidon AS Oslo 75% 32 466 6 593 1 009Maris AS**) Horten 40 86%/52 46% 11 908 328 8 417Book value 31.12.06 517 396

*) Equity and results last year shows Grieg Neptunus AS Group **) In addition, Grieg Arhena As owns 11 6% with a book value of 1 4 mill

note 5 iNveStmeNt iN otHeR GRoup compANieS(Figures in NOK 1 000)

Business Office

Ownership/ voting rights Company Group

Silver Oslo 23 16% 28 790 28 790Holmen Industri Invest I AS Oslo 26 90% 14 998 14 998Grieg Investor Holding AS Oslo 22 33% 1 675 1 937Book value 31.12.06 45 463 45 726

As the ownership is reduced to below 20% after year end, the shares in Silver AS are valued at cost

Holmen Industri Invest 1 is an investment company which value their investments at cost in their accounts Accordingly, the company’s financial statement does not reflect to the actual value added The shares in Holmen Industri Invest 1 AS are therefore valued at cost

The shares in Grieg Investor Holding are valued at cost in the company accounts In the consolidated accounts, the shares are accounted for using the equity method

Grieg investor Holding AS

Purchase cost 1 675Income share 262Book value 31.12.06 1 937Consolidated accounts posted excess value 0

Grieg International II AS owns 50% of the shares in Grieg Maritime AS The remaining shares are owned by the associated company Grieg Shipping AS The shares are accounted for using the consolidation accounting As the figures are not material, they are not shown on separate lines in the financial statement

Booked equity relating to Grieg Maritime AS is 16 8 mill after the former elimination of internal profit


note 6 loNG teRm ReceivABleS (Figures in NOK 1 000)

2006 2005Grieg Shipping II AS 22 231 21 372Grieg Investor Holding AS 6 000 0total 28 231 21 372

GRoupEmployees loan 348total Group 28 579

note 7 otHeR iNveStmeNtS (Figures in NOK 1 000)

Company’s name description Business office OwnershipBalance

sheet valueGrieg Development AS Parking house beside the Grieghallen Bergen 11 00% 878Spice AS Food delivery restaurant Oslo 8 95% 500Credit Safe Holding AS Credit evaluation company, internet-based Oslo 0 25% 384Book value 31.12.06 1 761

GRoupThe group also includes:Heimstaden (RCP V Co Invest) Real estate investments in Sweden, property rights Oslo 4 19% 666FSN Capital Ltd Partnership II Nordic private equity fond Oslo 0 66% 3 365Arrow Seismic ASA Shipping company within seismic Oslo 0 71% 6 177Borea Opportunity AS Private equity companies Bergen 0 44% 50Incentra Andelskapital Purchasing organization for shipping companies Oslo 2 70% 20Book value 31.12.06 10 278total Group 12 040

note 8 mARket-BASeD iNveStmeNtS (Figures in NOK 1 000)

purchase cost market valueMoney market funds 17 905 17 495Book value 31.12.06 17 905 17 495

GRoupEquity fund/ shares 151 189 200 578Money market fund 110 097 111 550Book value 31.12.06 261 286 312 128total Group 279 191 329 623


note 9 outStANDiNG AccouNtS BetweeN compANieS iN tHe SAme GRoup(Figures in NOK 1 000)

Accounts receivables Other receivables2006 2005 2006 2005

Grieg Ltd – 1125Grieg Maturitas AS 1 000 1 000Grieg Neptunus AS 24 073 30 145Grieg Poseidon AS 25 759 24 300Grieg Athena AS 1 650 –Grieg Shipping Group AS 452 –Grieg International II AS 144 84total 0 0 53 077 56 654

Other long term liability Other short term liability2006 2005 2006 2005

Grieg Maturitas AS 6 138 96 890Avanti II AS 685 –Sum 6 824 96 890

GRoupGrieg International II (50%) 3 462 –Grieg Shipping Group towards other company 823 –Sum 4 285 –total group 0 0 11 109 96 890

note 10 otHeR SHoRt teRm ReceivABleS(Figures in NOK 1 000)

2006 2005Spice loan 1 500 1 625Grieg Development loan 1 125 –Grieg Investor employees loan 600 1Accrued interest 170 1 509Miscellaneous 108 206Misc prepaid expense 48 45Misc short term receivables 29 111Other short term receivables 31.12. 3 580 3 496

GRoupMisc Receivables – 11 025Receivables Maris 14 431 –Deferred freight income 11 470 5 446Various short term receivables 6 141 967Credit balance VAT 1 787 2 690Receivables Grieg Shipping Group AS 1 448 2 959Loans 1 150 1 150Profit Split Grieg Shipping AS 989 –Accrued Interest 31 –Other short term receivables 31.12. 37 446 24 237total Group 41 026 27 733


note 11 ReceivABleS mAtuRiNG lAteR tHAN oNe yeAR(Figures in NOK 1 000)

receivables maturing later than one year 2006 2005Other short term receivables 0 0Other long term receivables 0 0total 0 0

note 12 otHeR SHoRt teRm liABilitieS (Figures in NOK 1 000)

2006 2005Various accrued expenses 100 1 601Deferred holiday allowance 203 524Various short term liabilities 189 407Grieg Group Resources AS 130 301Avanti II AS 0 9 781 Accrued Interest 0 402Other short term liabilities 31.12. 622 13 016

GRoupGrieg Foundation 25 845 24 750 Various short term liabilities 9 660 5 693 Deferred income 6 258 0 Accounts payable Maris AS 5 097 0 Accrued interest 4 744 6 038 Misc accrued expenses 596 0 Grieg Shipping Group AS 0 1 403 Grieg Shipping AS, profit split Star Dover 0 1 142 Tonnage tax *) 0 518 Other short term liabilities 31.12. 52 200 39 544total Group 52 822 52 560

*) Tonnage tax in 2006 is TNOK 518, and is classified under “Tax Payable” in 2006

note 13 mAtuReD DeBt There were no entries that were matured as per 31 12 06, of the company’s total liabilities


note 14 tAxeS (Figures in NOK 1 000)

tAX pAYABle 2006 2005Results before tax charges 26 583 2 478 Received dividends (not subject to tax) -23 054 –+ Permanent differences 2 196 814 +/- Changes in temporary differences -572 -108 Tax base for the year 5 154 3 184 28% tax 1 443 891 Remuneration on dividends – payable taxes in the balance sheet 1 443 891

tAX On prOFit FOr tHe YeAr 2006 2005tax charges on profit and loss statement consists of the following:Payable tax for the years profit 1 443 891 +adjustment for tax charge in 2004 – 6 +/-(increase)/ decrease in deferred tax 160 35 tax charges on ordinary result 1 603 932

deFerred tAXDeferred tax/(Deferred tax benefit) is calculated based on the difference between accounting and tax value by the end of the accounting period Deferred tax is calculated on the following items

tempOrArY diFFerenCeS relAted tO: 2006 2005 ChangeFixed assets 553 -144 -697 Pension commitments 179 305 126 Total temporary differences 733 161 -572 Financial deficit brought forward – – –Basis for deferred tax 733 161 –Deferred tax 28% 205 45 -160 deferred tax in the balance sheet 205 45 -160 In compliance with the Norwegian accounting standard on income tax, tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been eliminated


GRouptAX pAYABle 2006 2005Profit before tax 134 369 192 844 Tax basis 75 368 14 903 Tax payable (28%) 21 103 4 173 payable taxes on the balance sheet 21 103 4 173

tAXTax payable 21 103 4 173 Change in tax assesment 1 303 -2 089 Change in deferred tax -15 701 7 787 tax shown in the profit and loss account 6 705 9 871

deFerred tAXDeferred tax outside Special Norwegian Shipping tax regulations 30 089 29 544 Deferred tax within Special Norwegian Shipping tax regulations 4 738 20 984 total 34 827 50 528

Outside Special norwegian Shipping tax regulationsIncreasing tax in temporary difference 155 644 148 410 Decreasing tax in temporary difference -48 183 -42 895 Basis for deferred tax 107 461 105 515 Deferred tax (28%) 30 089 29 544 Expected remuneration 0 0 deferred tax in the balance sheet 30 089 29 544

In compliance with the Norwegian accounting standard on income tax, tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been eliminated

Within Special norwegian Shipping tax regulations 2006 2005Deferred tax related to untaxed equity 0 0 Taxed capital 0 0 Revaluation account 15 253 46 504 Write-down of market based investments 1 666 59 587 Financial deficit brought forward 0 -31 149 Total temporary difference finance 16 920 74 942 Deferred tax on financial profit (28%) 4 738 20 984 total deferred tax 4 738 20 984

Deferred tax related to untaxed equity is estimated to zero The main reason is that paid out dividend is expected to be within each years result In addition, it is presumed that the company will be within the Special Norwegian Shipping Tax Regulations in the foreseeable future

Deferred tax on financial profit brought forward may be taxable in the future, thus a tax percentage of 28% has been used


note 15 ReStRicteD BANk DepoSitS (Figures in NOK 1 000)

2006 2005Restricted liquid assets pr 31 12 amount to 807 417

GRoupRestricted liquid assets pr 31 12 amount to 546 399total Group 1353 816

note 16 equity (Figures in NOK 1 000)

pAReNt compANy

CHAnGe in eQuitY Share capitalOther called

up reserves

Share premium

reserves Other reserves totalEquity 01 01 06 245 26 225 498 505 9 141 534 116 Increase in share capital 1 718 98 282 100 000 Provisions for dividends -6 245 -6 245 Income for the year 24 980 24 980 equity 31.12.06 1 963 26 225 596 787 27 876 652 851

GRoup

CHAnGe in eQuitY Share capitalOther called

up reserve

Share premium

reserves Other reserves totalEquity 01 01 06 245 26 225 498 505 653 548 1 178 523 Increase in share capital 1 718 98 282 100 000 Provisions for dividends -16 382 -16 382 Income for the year 127 664 127 664 equity 31.12.06 1 963 26 225 596 787 764 830 1 389 805

minOritY’S SHAre: Share Balance resultGrieg Poseidon AS 25 0% 8 116 1 648Grieg Athena AS 25 0% 27 264 2 200Grieg International II AS 25 0% 269 935 29 157Maris AS 47 5% 5 661 156total Group 310 976 33 161

The NOK 100 mill loan from Grieg Maturitas AS and Avanti II AS was converted to equity in spring of 2006


note 17 SHARe cApitAl AND SHAReHolDeR’S iNfoRmAtioNThe share capital of NOK 1 962 920 consist of 196 292 shares at NOK 10 to each shares All shares have the same rights

SHAreHOlderS 31.12.06 no.of share Owner’s shareGrieg Maturitas AS 176 602 89 97%Avanti II AS 19 690 10 03%total 196 292 100%

note 18 peNSioN (Figures in NOK 1 000)

Grieg International AS has pension schemes which provide the employees the right to defined future pension payments The schemes comprise a total of 7 employees as of 31 December 2006 The schemes give rigth to defined future benefits, which are mainly dependent on the number of years worked, salary level at time of retirement, and the amount of benefits from the National Insurance Scheme The funded pension schemes are administered by a pension company

As of December 31 2006 part of the company’s business has been tranferred to the subsidiary Grieg Shipping Group AS (former Grieg Billabong AS) Pension commitments and plan assets related to 6 of the 7 emplyees are recorden in Grieg Shipping Group AS

Costs 2006 2005 Current service cost 471 325 Interest cost 206 139 Expected return of plan assets -169 -114 Change in scheme 512 0 Net actuarial losses recognised during the year 67 51 Employers National Insurance contribution -91 -7 Charges / Employees Share 6 -85 net pension cost 31.12. 1 001 309

Funds 2006 2005 Accrued pension obligations 31 12 -1 776 -3 245 Pension plan assets (market value ) 31 12 1 276 2 265 Unrecognised effect of actuarial gains/losses 658 1 247 Employer’s National Insurance contribution 22 38 net pension funds 31.12. 179 305

FinAnCiAl ASSumptiOnS 2006 2005 Discount rate 5% 5%Expected wage adjustments / increase in Pension / G-adjustments 3% 3%Expected return on plan assets 6% 6%Expected pension adjustment 3% 3%

The actuarial assumptions relating to demographic factors and turnover are based on assumptions generally applied within the insurance industry


GRoup

The group have two pension scheme, joint and amendment scheme The schemes give rigth to defined future benefits, which are mainly dependent on the number of years worked, salary level at time of retirement, and the amount of benefits from the National Insurance Scheme The funded pension schemes are administered by a pension company

Costs 2006 2005 Current service cost 2 280 325 Interest cost 1 064 139 Expected return of plan assets -976 -114 Change in Scheme 512 0 Net actuarial losses recognised during the year 66 51 Employers National Insurance contribution 177 -7 Charges / Employees Share 6 -85 net pension cost 3 129 309

Funds 2006 2005 Accrued pension obligations 31 12 -32 898 -3 245 Pension plan assets (market value ) 31 12 26 389 2 265 Unrecognised effect of actuarial gains/losses 2 703 1 247 Employer’s National Insurance contribution -536 38 net pension funds 31.12. -4 342 305

FinAnCiAl ASSumptiOnS 2006 2005 Discount rate 5% 5%Expected wage adjustments / increase in Pension / G-adjustments 3% 3%Expected return on plan assets 6% 6%Expected pension adjustment 3% 3%

The actuarial assumptions relating to demographic factors and turnover are based on assumptions generally applied within the insurance industry


note 19 iNteReSt-BeARiNG liABilitieS (Figures in NOK 1 000)

GrOupexchange rate

31.12.06 uSd nOKmortgage loanDnBNOR 6 255 88 422 553 089Royal Bank of Scotland 6 255 10 920 68 306total mortgage loan 99 342 621 395

inStAllmentSNext year installments 2 037 12 743Outstanding mortgage due for payment 5 years or more from this years accounts 35 220 220 305

installmentInstallments paid in 2006 12 837 55 478

CApitAliSed VAlue mOrtGAGe ASSetVessels 1 052 894

COVenAntS

The Group (Grieg International II, Grieg Neptunus AS and Grieg Poseidon) has covenants related to the Balance Sheet The Group has at all time during the year been in accordance with their covenants


note 20 pAyRoll exp., No.of employeeS, RemuNeRAtioN, peRSoNell loAN etc. (Figures in NOK 1 000)

pAYrOll eXpenSeS 2006 2005Salaries/wages 7 755 6 661Social security tax 1 302 1 474Pension cost 1 045 309Other 611 143total 10 712 8 587Average number of employees have been: 7 0 7 5

pAYmentS tO tHe leAdermanaging

directorBoard of

directorsWages 1 709 0Pension expense 111 0Other remuneration 49 0

Loan / Security is not given to the managers, chairman of the board of directors or any related parties There is no non-negotiable loan / security that amounts to more than 5% of the company equity

GRouppAYrOll eXpenSeS 2006 2005Salaries/wages 15 054 4 950National insurance contributions 1 704 0Social security tax 1 620 582Pension cost 1 305 0Activated cost for Research & development 0 -2 537Other 1 194 84total 20 877 3 079total Group 31 588 11 666 Average number of employees have been: 77 22

Per 31 12 06, 84 persons was employed in the Group of companies


note 21 AuDitoR’S RemuNeRAtioN AuditOr’S remunerAtiOn 2006 2005Auditor 84 80 Technical acounting assistance 0 69 Other services 3 119 total auditor’s remuneration 87 268

GRoupAuditOr’S remunerAtiOn 2006 2005Auditor 250 253 Tax counselling 13 Technical accounting assistance 47 135 Other services 144 116 total auditor’s remuneration 454 504 total Group 541 772

note 22 iNteReSt AND cuRReNcy coNtRActS GRoup The Group has entered into interest swap agreements in order to hedge parts of the interest rate exposure on its mortgage debt The agreements are accrued and classified in the same way as mortage loan, which means that received/paid interest attached to swap contracts, accrued over the actual interest period, are charged as interest cost The Group has also entered into currency forwards to secure the NOK exposure related to its administration costs

note 23 GuARANteeS GRoup The company has guaranteed for the mortgage related to M/V Star Harmonia which is owned by Grieg Poseidon AS Outstanding loan as per 31st December 2006 was USD 10 9 mill

The company has given a guarantee of NOK 40 mill in favour of Grieg Seafood AS related to a short term loan


To the Annual Shareholders’ Meeting of Grieg International AS

AudItor’s report foR 2006We have audited the annual financial statements of Grieg International AS as of December 31, 2006, showing a profit of NOK 24 980 000 for the parent company and a profit of NOK 127 664 000 for the group We have also audited the information in the directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit The annual financial statements comprise the balance sheet, the statements of income and cash flows, the accompanying notes and the group accounts The regulations of the Norwegian accounting act and accounting standards, principles and practices generally accepted in Norway have been applied in the preparation of the financial statements These financial statements are the responsibility of the Company’s Board of Directors and Managing Director Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors

We conducted our audit in accordance with the laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation To the extent required by law and auditing standards an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems We believe that our audit provides a reasonable basis for our opinion

In our opinion,

the financial statements have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the company and of the group and as of December 31, 2006, and the results of its operations and its cash flows for the year then ended, in accordance with accounting standards, principles and practices generally accepted in Norway

the company’s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway

the information given in the directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit are consistent with the financial statements and comply with the law and regulations

Bergen, March 14 2007 pricewaterhouseCoopers AS Jon Haugervåg State Authorised Public Accountant (Norway)

Note: This translation from Norwegian has been prepared for information purposes only.

•

•

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BerGen, nOrWAY

Grieg Shipping Group Grieg-Gaarden

P O Box 781 C Sundtsgate 17/19

5807 BERGEN, NORWAY

Tel : +47 55 57 66 00 Fax : +47 55 57 69 10

OSlO, nOrWAY

Grieg Shipping Group

P O Box 513 Skøyen

Karenslyst Allé 2 0214 OSLO, NORWAY

Tel : +47 23 27 41 00 Fax : +47 23 27 41 01

SHAnGHAi, prC


Flat 9D2, 9th Floor

Alison International Tower No 8 Fu You Road

Shanghai 200010 PRC

Tel : +86 21 6333 7008 Fax : +86 21 6333 7007

mAnilA, pHilippineS


c/o Seabound Maritime

Services Inc Room 307, 1526 P Santos St

Bangkal, Makati, Philippines

Tel : +63 2 845 2219

mOBile, AlABAmA


c/o Star Shipping Inc 1100B Dauphin St

Mobile, Alabama 36604 USA

Tel: +1 251 4346247 Fax: +1 251 4346259

www grieg no

AR

TG

AR

DE

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6 a

Photo:SkjalgEkeland

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