PROSPECTUS GOLDEN OCEAN GROUP LIMITED

Transcription

1 PROSPECTUS GOLDEN OCEAN GROUP LIMITED (a limited liability company incorporated under the laws of Bermuda) Listing of 343,684,000 Shares, issued in a Private Placement Offering and listing of up to 34,368,400 Shares in a Subsequent Offering to Eligible Shareholders The information contained in this prospectus (the Prospectus ) relates to (i) the listing on Oslo Børs (the Oslo Stock Exchange ) of up to 343,684,000 common shares in Golden Ocean Group Limited (the Company ), taken together with its consolidated subsidiaries the Group ), each with a par value of USD 0.01 (the Private Placement Shares ), already issued in a private placement directed towards certain institutional investors for gross proceeds of NOK 1,718,420,000, or approximately USD 200 million (the Private Placement ) and (ii) a subsequent offering (the Subsequent Offering ) and listing of up to 34,368,400 common shares In the Company, each with a par value of USD 0.01 (the Offer Shares ) for gross proceeds of up to NOK 171,842,000, or approximately USD 20 million, pursuant to the terms and conditions set out in this Prospectus. Subsequent Offering, offer size...34,368,400 Offer Shares. Subscription Price...NOK 5.00 per Offer Share. Subscription Period...From 09:00 hours (CET) on February 29, 2016 to 16:30 hours (CET) March 11, 2016 (the Subscription Period ) The Offer Shares will only be offered and sold outside the United States in reliance on Regulation S under the U.S. Securities Act of 1933 (the U.S. Securities Act ). In the Subsequent Offering, the Company will allocate the Offer Shares to subscribers who (i) were registered as holders of shares in the Company ( Shares ) in the Company's register of shareholders with the Norwegian Central Securities Depositary (Nw. Verdipapirsentralen) (the VPS ) with a holding of less than 100,000 Shares, as of expiry of February 22, 2016 (the Record Date ), (ii) were not allocated shares in the Private Placement, and (iii) are not resident in a jurisdiction where such offering would be unlawful or, for jurisdictions other than Norway, would require any prospectus, filing, registration or similar action (each such shareholder an Eligible Shareholder, and collectively, Eligible Shareholders ). For each Share recorded as held in the Company as of expiry of the Record Date, each Eligible Shareholder will be granted subscription right(s) (the Subscription Right(s) ), rounded down to the nearest whole Subscription Right. One (1) Subscription Right will give the right to subscribe for one (1) Offer Share. The Shares of the Company began trading exclusive of Subscription Rights from and including February 19, Hence, the last day of trading inclusive of Subscription Rights was February 18, For the purposes of determining eligibility to Subscription Rights, the Company will, however, look solely to its register of shareholders as of expiry of the Record Date, which will show shareholders as of expiry of February 22, 2016 (and potentially shareholders that have purchased Shares thereafter with non-standard settlement cycle). Oversubscription by Eligible Shareholders will be permitted. Subscription without Subscription Rights will not be allowed. The Subscription Rights will not be tradable. The Eligible Shareholders who do not use their Subscription Rights will experience a significant dilution, see Section 6.2 Dilution. The Subscription Rights would normally have an economic value if the shares trade above the Subscription Price during the Subscription Period. Upon expiry of the Subscription Period, the Subscription Rights will expire and have no value. Notifications of allocation in the Subsequent Offering are expected to be issued on or about March 14, The due date for payment of allocated Offer Shares is March 16, 2016 (the Payment Due Date ). Delivery of the Offer Shares to investors' VPS accounts is expected to take place on or about March 21, The Private Placement Shares and the Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and can, for a period of six months after the full purchase price consideration for the Shares are paid, only be offered, sold or transferred (i) under a registration statement that has been declared effective under the U.S. Securities Act; (ii) through offers and sales that occur outside of the United States within the meaning of Regulation S under the U.S. Securities Act; or (iii) under any other available exemption from the registration requirements of the U.S. Securities Act. The Private Placement Shares and the Offer Shares will therefore be registered on a separate ISIN BMG and trade under a separate trading symbol GOGL R on the Oslo Stock Exchange, until the U.S. resale restriction period has expired for all Private Placement Shares and Offer Shares. During the second half of 2016, following the expiry of the U.S. resale restriction period for all Private Placement Shares and Offer Shares, the Private Placement Shares and the Offer Shares are expected to be assumed on the Company s ordinary ISIN BMG and trade under the ordinary trading symbol of the Company GOGL. Investing in the Shares involves a high degree of risk; see Section 2 Risk Factors. For the definitions of certain terms and abbreviations used throughout this Prospectus, see Section 22 Definitions. Joint Bookrunners and Managers: Danske Bank DNB Markets Arctic Securities Clarksons Platou Nordea Markets The date of this Prospectus is February 23, 2016.

2 This Prospectus has been prepared to comply with the Norwegian Securities Trading Act of 29 June 2007 no. 75 (the Norwegian Securities Trading Act ) and related secondary legislation, including the Commission Regulation (EC) no. 809/2004 ( EU Regulation 809/2004 ) implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses (the Prospectus Directive ) as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements. This Prospectus has been prepared solely in the English language. The Financial Supervisory Authority of Norway (Nw. Finanstilsynet) (the Norwegian FSA ) has reviewed and approved this Prospectus in accordance with Sections 7-7 and 7-8 of the Norwegian Securities Trading Act. The Norwegian FSA has not controlled or approved the accuracy or completeness of the information included in this Prospectus. The approval by the Norwegian FSA only relates to the information included in accordance with pre-defined disclosure requirements. The Norwegian FSA has not made any form of control or approval relating to corporate matters described in or referred to in this Prospectus. The Norwegian FSA approved the Prospectus on February 23, The information contained herein is current as of the date hereof and subject to change, completion and amendment without notice. In accordance with Section 7-15 of the Norwegian Securities Trading Act, significant new factors, material mistakes or inaccuracies relating to the information included in this Prospectus, which are capable of affecting the assessment of the Shares between the time when this Prospectus is approved and the date of listing of the Offer Shares on the Oslo Stock Exchange, will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus, nor any sale of Offer Shares made hereunder, shall under any circumstances create any implication that there has been no change in the Company's affairs or that the information herein is correct as of any date subsequent to the date of this Prospectus. In making an investment decision, each investor must rely on its own examination, analysis of, and enquiry into the Company and the terms of the Subsequent Offering, including the merits and risks involved. None of the Company or the Managers (as defined below), or any of their respective representatives or advisers, is making any representation to any offeree or purchaser of the Offer Shares regarding the legality of an investment in the Offer Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Offer Shares. Danske Bank, DNB Markets, part of DNB Bank ASA ( DNB Markets ), Arctic Securities AS ( Arctic Securities ), Clarksons Platou Securities AS ( Clarksons Platou ) and Nordea Bank Norge ASA, Markets ( Nordea Markets ) (the Managers ) make no representation or warranty, whether express or implied, as to the accuracy or completeness of such information, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Managers. No person is authorized to give information or to make any representation in connection with the Subsequent Offering other than as contained in this Prospectus. If any such information is given or made, it must not be relied upon as having been authorized by the Company or the Managers or by any of the affiliates or advisors of any of the foregoing. The distribution of this Prospectus and the offering and sale of the Offer Shares in certain jurisdictions may be restricted by law. This Prospectus does not constitute an offer of, or an invitation to purchase, any of the Offer Shares in any jurisdiction in which such offer or sale would be unlawful. No one has taken any action that would permit a public offering of Shares to occur outside of Norway. Accordingly, neither this Prospectus nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. The Company and the Managers require persons in possession of this Prospectus to inform themselves about and to observe any such restrictions. The Shares are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable securities laws and regulations. Any failure to comply with these restrictions may constitute a violation of the s ecurities laws of any such jurisdiction. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time. For further information on the manner of distribution of the Shares and the transfer restrictions to which they are subject, see Section 19 Selling and Transfer Restrictions. THE PRIVATE PLACEMENT AND THE OFFER SHARES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE PRIVATE PLACEMENT AND THE OFFER SHARES MAY NOT BE RE-OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THE PRIVATE PLACEMENT AND THE OFFER SHARES, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED THE PRIVATE PLACEMENT AND THE OFFER SHARES, TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH PRIVATE PLACEMENT AND THE OFFER SHARES, PRIOR TO THE DATE THAT IS SIX MONTHS AFTER THE INVESTOR PAYS FOR THE PRIVATE PLACEMENT SHARES OR THE OFFER SHARES (THE RESALE RESTRICTION TERMINATION DATE ) ONLY (A) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT; (B) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE OF THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT, OR (C) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. 1

3 This Prospectus and the terms and conditions of the Subsequent Offering shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Subsequent Offering or this Prospectus. 2

4 CONTENTS Clause Page 1. SUMMARY RISK FACTORS RESPONSIBILITY STATEMENT GENERAL INFORMATION THE EQUITY RAISE USE OF PROCEEDS; REASONS FOR THE EQUITY RAISE BUSINESS OVERVIEW INDUSTRY OVERVIEW CAPITALIZATION AND INDEBTEDNESS SELECTED FINANCIAL INFORMATION AND OTHER INFORMATION OPERATING AND FINANCIAL REVIEW RELATED PARTY TRANSACTIONS THE BOARD OF DIRECTORS AND MANAGEMENT DIVIDEND AND DIVIDEND POLICY CORPORATE INFORMATION; SHARES AND SHARE CAPITAL SECURITIES TRADING IN NORWAY TAXATION TERMS OF THE SUBSEQUENT OFFERING SELLING AND TRANSFER RESTRICTIONS INCORPORATION BY REFERENCE; DOCUMENTS ON DISPLAY ADDITIONAL INFORMATION DEFINITIONS APPENDIX A VALUATION REPORTS... A1 APPENDIX B MEMORANDUM OF ASSOCIATION... B1 APPENDIX C BYE-LAWS... C1 APPENDIX D ASSURANCE REPORT ON PRO FORMA FINANCIAL INFORMATION... D1 APPENDIX E ANNUAL FINANCIAL STATEMENTS FOR FORMER GOLDEN OCEAN GROUP LIMITED... E1 APPENDIX F SUBSCRIPTION FORM FOR SUBSEQUENT OFFERING... F1 3

5 1. SUMMARY Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections A E (A.1 E.7) below. This summary contains all the Elements required to be included in a summary for this type of securities and the Company. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and Company, it is possible that no relevant information can be given regarding the relevant Element. In this case a short description of the Element is included in the summary with the mention of "not applicable". Section A Introduction and Warnings A.1 Warning...This summary should be read as an introduction to the Prospectus. Any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Warning...Not applicable. No consent is granted by the Company for the use of the Prospectus for subsequent resale or final placement of the shares. Section B Company B.1 Legal and Commercial Name...Golden Ocean Group Limited. B.2 Domicile and Legal Form, Legislation and Country of Incorporation...The Company was incorporated in Bermuda as an exempted company under the Bermuda Companies Act of 1981 on September 18, 1996, and is domiciled in Hamilton, Bermuda. B.3 Current Operations, Principal Activities and Markets...The Company is an international shipping company that owns and operates a fleet of drybulk carrier vessels, focusing on the Capesize, Supramax and Panamax markets. As of the date of this Prospectus, the Company has a fleet of 71 vessels, including 13 vessels chartered-in long term on bareboat charter or time charter and one owned in a joint venture, with an aggregate capacity of 9.3 million dwt. The fleet of the Company consists of 58 operating vessels and 13 vessels currently under construction at shipyards, of which one is sold and will be delivered to new owners upon completion from the yard. The Company s vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes. The Company s executive management team comprises Herman Billung, CEO of Golden Ocean Management AS, and Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS. The Company s business strategy is to operate a diversified fleet of dry bulk carriers with flexibility to adjust its exposure to the dry bulk market depending on existing factors such as charter rates, newbuilding costs, vessel resale and scrap values and vessel operating expenses resulting from, among other things, changes in the supply of and demand for dry bulk capacity. The Company may adjust its exposure through time charters, bareboat charters, sale and leasebacks, sales and purchases of vessels, newbuilding contracts and acquisitions. The Company s long term goal is to renew and grow its fleet through selective acquisitions. B.4 Significant Recent Trends...The current oversupply of dry bulk vessels is not sustainable for owners and will have a strong impact on supply over time if the physical 4

6 market delivers in accordance with the prevailing Forward Freight Agreements market. But significant increases in scrapping and nondeliveries could lead to a negative fleet growth within the next two years. The current scrapping run rate for the dry bulk fleet is at all time high with ~60m dwt p.a. and 21 Capesize vessels have been scrapped so far in Most analysts have a bleak demand outlook for 2016 which supports the supply case as described above. But even with zero steel production growth in China it is expected that iron ore imports to the country will increase due to substitution of low quality domestic iron ore. The biggest disappointment in transportation demand over the last two years has been from the thermal coal sector. It is worth mentioning that China produced about 3.5 billion mt of coal in About 1,000 coal mines ceased operation last year and it is expected that a similar number of mines will be closed within the next two years. The Chinese Energy Bureau does not foresee a major shift in the energy mix for the coming three years. With a modest increase in the overall energy consumption, it is expected that coal consumption will remain more or less unchanged. Coal will remain the biggest uncertainty when it comes to dry bulk demand. One per cent reduction in domestic production substituted by import is equivalent to increased imports of 35 million mt. Over the last 12 months, the Company has taken several measures to preserve its liquidity position, including postponement of newbuilding deliveries, sale of vessels, sale of newbuildings and sale and leaseback agreements. In light of the continued weak freight markets, the Company has been exploring additional measures to further preserve and improve its liquidity position to better position the Company through the current market cycle. The Company has therefore announced further proactive measures to strengthen its balance sheet, including amendment of all debt facilities, positive discussions with yards about further postponements of newbuilding deliveries, and the Equity Raise. The refinancing creates a comfortable liquidity position while preserving an attractive and leveraged exposure to the dry bulk market. The agreement with the Company s lenders demonstrates the strong support the Company has from its bank relationships. This, together with the support from the main shareholder, that has also subscribed for new Shares in the Private Placement, puts the Company in a strong position to manage the current down turn in the dry bulk market. B.5 Description of the Group...The Company is a holding company and the operations of the Company are carried out through its operating subsidiaries. B.6 Interests in the Company and Voting Rights...Shareholders owning 5% or more of the Company s shares have an interest in the Company's share capital which is notifiable pursuant to the Norwegian Securities Trading Act. Each of the Company s Shares carries one vote. None of the major shareholders has different voting rights than the other shareholders in the Company. The Company is not aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. B.7 Selected Historical Key Financial Information...The table below sets out a summary of the Company s unaudited consolidated statement of operations information for the three months ended December 31, 2015 and 2014 and the year ended December 31, 2015 and the Company s audited consolidated statement of operations information for the years ended December 31, 2014, 2013 and

7 USD thousands For the Three Months Ended December 31 (unaudited) For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Operating revenues Time charter revenues... 28,028 6,226 85,960 22,656 27,677 35,046 Voyage charter revenues... 28,057 25, ,717 53,706 9,869 2,269 Other operating income , ,353 Total operating revenues... 56,524 36, ,632 96,715 37,546 37,315 Loss on sale of newbuilding and amortization of deferred gain... (8,492) (10,788) Operating expenses Voyage expenses and commission... 22,768 15,456 81,728 33,955 6,809 4,323 Ship operating expenses... 25,495 5,721 83,022 18,676 7,897 7,608 Charter hire expenses... 12,575 30,719 Administrative expenses... 3,426 2,025 12,469 5,037 4,937 4,259 Vessel impairment loss... 4, ,597 Provision for uncollectible receivables... 4,729 4,729 Depreciation... 13,769 7,595 52,728 19,561 11,079 11,117 Total operating expenses... 87,287 30, ,992 77,229 30,722 27,307 Net operating (loss)/income... (39,255) 5,884 (239,148) 19,486 6,824 10,008 Other income/(expenses) Interest income Interest expense... (6,028) (502) (28,270) (2,525) (2,827) (3,765) Impairment loss on securities... (23,323) (23,323) Other financial items... (774) (236) (9,634) (737) (508) (467) Bargain purchase gain arising on consolidation... 78,876 Net other expenses... (29,824) (722) 18,498 (3,233) (3,294) (4,126) Tax... (189) (189) Net income/(loss) from continuing operations... (69,268) 5,162 (220,839) 16,253 3,530 5,882 Net income/(loss) from discontinued operations... (258) (7,433) (59,311) Net income/(loss)... (69,268) 5,162 (220,839) 15,995 (3,903) (53,429) Per share information (in USD): Earnings/(loss) per share: basic... (0.40) 0.06 (1.46) 0.30 (0.15) (2.19) Earnings/(loss) per share: diluted... (0.40) 0.06 (1.46) 0.30 (0.15) (2.17) Cash distributions per share declared The table below sets out a summary of the Company s unaudited consolidated balance sheet information as of December 31, 2015, and the Company s audited consolidated balance sheet information as of December 31, 2014, 2013 and USD thousands As of December 31 (unaudited) As of December 31 (audited) Assets Current assets Cash and cash equivalents ,617 42,221 98,250 79,259 Restricted cash Marketable securities... 14,615 Trade accounts receivable, net... 9,631 2,770 3,298 2,102 Related party receivables... 8, Other receivables... 14,992 3, ,691 Inventories... 15,156 13,243 1,729 1,181 Voyage in progress... 1,690 1,322 Value of favorable long term charter contracts, short term 28,829 6

8 USD thousands As of December 31 (unaudited) As of December 31 (audited) positions... Derivative instruments receivable... 1,641 Prepaid expenses and accrued income... 5, Total current assets ,660 64, ,741 85,849 Restricted cash... 48,521 18,923 15,000 15,000 Vessels, net... 1,488, , , ,826 Vessels under capital lease, net... 8,354 Newbuildings , ,340 26,706 Investments in associated companies... 6,225 Value of favorable long term charter contracts... 74,547 Vessels held for sale... 21,523 Other long term assets... 4,744 Deferred charges... 5,797 3, ,222 Total assets... 2,178,667 1,262, , ,420 Equity and liabilities Current liabilities Current portion of long-term debt... 54,541 19,812 4,700 Current portion of obligations under capital lease... 15,749 Related party payables... 4,101 2,555 Trades accounts payable... 2,533 4,937 1,430 1,277 Accrued expenses... 17,878 4,190 2,364 2,501 Other current liabilities... 13,993 3,285 3,623 3,020 Derivative instruments payable... 5,400 Total current liabilities ,195 34,779 7,417 11,498 Long-term liabilities Long term debt , ,688 95, ,978 Obligations under capital lease... 17,531 Other long term liabilities... 8,540 1,250 Total liabilities... 1,020, , , ,726 Equity Share capital (December 31, 2015: 172,675,637 shares outstanding, par value USD 0.01, 2014: 80,121,550, 2013: 30,472,061, 2012: 24,437,000)... 1, Additional paid in capital , , ,766 Contributed capital surplus... 1,378, , , ,700 Retained deficit... (221,844) (1,005) (7,919) (4,016) Total equity... 1,158, , , ,694 Total liabilities and equity... 2,178,667 1,262, , ,420 The table below sets out a summary of the Company s unaudited consolidated cash flow information for the three months ended December 31, 2015 and 2014 and the year ended December 31, 2015, and the Company's audited consolidated cash flow information for the years ended December 31, 2014, 2013 and USD thousands Cash flow from operating activities For the Three Months Ended December 31 (unaudited) For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Net income/(loss) for the period... (69,268) 5,162 (220,839) 15,995 (3,903) (53,429) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization of deferred charges... 13,973 7,815 54,290 20,246 11,637 21,364 Net loss on sale of assets and amortization of 8,492 10,788 (254) 13,088 7

9 USD thousands deferred gain... For the Three Months Ended December 31 (unaudited) For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Impairment loss on vessels... 4, ,597 5,342 41,597 Impairment loss on securities... 23,323 23,323 Results from associated companies... (144) 433 Amortization of time charter contract value... 2,303 Restricted stock unit expense (366) (10) Bargain purchase gain arising on consolidation. (78,876) Other... 13,189 43, ,155 Change in operating assets and liabilities... (299) (10,238) 33 (11,619) (1,654) 815 Net cash (used in)/provided by operating activities... (6,161) 2,373 (14,827) 24,864 12,313 36,799 Cash flow from investing activities Placement of restricted cash... 1,888 (3,923) 4,052 (3,924) Additions to newbuildings... (65,339) (106,905) (519,013) (357,402) (26,706) Purchase of investments... (32,159) Cash acquired on purchase of SPCs ,645 68,560 Purchase of vessel... (24,085) Proceeds from sale of assets... 46, ,723 17,075 66,993 Refund of newbuilding installments... 40,148 Dividends received from associated companies Cash acquired on merger with the Former Golden Ocean ,084 Net cash (used in)/provided by investing activities... (17,236) (110,828) 112,568 (316,851) (9,631) 66,993 Cash flow from financing activities Proceeds from long-term debt... 60, , ,000 Repayment of long-term debt... (11,446) (1,500) (244,338) (1,500) (16,678) (42,062) Debt fees paid... (3,825) (3,555) Net proceeds from share issuance... 51,167 Repayment of capital leases... (1,725) (5,157) Distributions to shareholders... (4,006) (28,987) (18,180) (29,319) Net cash provided by/(used in) financing activities... (13,171) 54,494 (37,345) 235,958 16,309 (71,381) Net change in cash and cash equivalents... (36,568) (53,961) 60,396 (56,029) 18,991 32,411 Cash and cash equivalents at start of the period ,185 96,182 42,221 98,250 79,259 46,848 Cash and cash equivalents at end of the period ,617 42, ,617 42,221 98,250 79,259 B.8 Selected Key Pro Forma Financial Information... The unaudited pro forma condensed combined financial information of the Company is presented to illustrate the Merger between the Company and former Golden Ocean Group Limited, pursuant to which the two companies merged, with the Company as the surviving legal entity. The Merger was completed on March 31, The unaudited pro forma condensed combined financial information has been prepared by management in accordance with Annex II to EU Regulation No. 809/2004 as incorporated in Norwegian law through section 7-13 of the Norwegian Securities Trading Act and in accordance with the principles that are consistent with the accounting principles as applied by the Company. The unaudited pro forma information has been prepared for illustrative purposes only. Because of its nature, the unaudited pro forma information addresses a hypothetical situation and, therefore, does not represent the Company s actual results. The unaudited pro forma condensed combined financial information is 8

10 hence not necessarily indicative of the combined financial position or results of operations that would have been realized had the combination occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the Company will experience after the Merger. The table below sets out the Company s unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014, as if the Merger had taken place at January 1, USD thousands Knightsbridge Former Golden Ocean, IFRS IASB US GAAP Selected Adjustments Notes 4(A) Pro Forma Adjustments Notes 4(B) Pro Forma Combined Operating revenue Time charter revenue... 22, ,301 (30,417) (1) 121,540 Voyage charter revenue... 53, , ,410 Other income... 20,353 7,453 (1,034) (2) 26,772 Total operating revenue... 96, ,458 (31,451) 318,722 Gain on newbuilding contracts... 57,414 (1)(2) 57,414 Operating expenses Voyage expenses and commissions... 33,955 75,971 (1,034) (2) 108,892 Ship operating expenses... 18,676 56,404 11,367 (2) 86,447 Charter hire expenses... 43,268 (1,567) (3) 41,701 Administrative expenses... 5,037 11,864 16,901 Depreciation... 19,561 47,475 (3,930) (2) (11,093) (4) 52,013 Loss on freight forward agreements... 16,259 (1) 16,259 Impairment loss ,300 (116,600) (2) 66,700 Total operating expenses... 77, ,282 (92,904) (13,694) 388,913 Other gains, net... 62,868 (62,868) (1) Net operating income (loss)... 19,486 (101,956) 87,450 (17,757) (12,777) Interest income ,134 1,163 Interest expense... (2,525) (31,394) 6,425 (2) (2,826) (5) (30,320) Loss on interest rate swaps... (7,401) (1) (7,401) Income from associated companies... 8,215 (1) (190) (6) 8,025 Profit on sale of securities... 4,165 (1) 4,165 Other financial items... (737) (3,188) 3,236 (1) (300) (7) (989) Bargain purchase gain... 78,876 (8) 78,876 Income (loss) from continuing operations before income taxes... 16,253 (135,404) 102,090 57,803 40,742 Income taxes (197) (197) Income (loss) from continuing operations after income taxes... 16,253 (135,601) 102,090 57,803 40,545 Net loss attributable to noncontrolling interest Net earnings (loss) from continuing operations attributable to common shareholders... 16,253 (135,008) 102,090 57,803 41,138 Weighted-average number of common shares outstanding Basic... 52, , ,889 Diluted... 52, , ,669 Net earnings attributable to common shareholders (USD) Basic (0.30) 0.23 Diluted (0.30) 0.23 B.9 Profit Forecast or Estimate... Not applicable. There are no profit forecasts or estimates included in this Prospectus. 9

11 B.10 Audit Report Qualification...Not applicable. There are no qualifications in the audit reports. B.11 Working Capital...As of the date of this Prospectus, the Company is of the opinion that its working capital is sufficient for its present requirements and for at least the next twelve months from the date of this Prospectus. Section C Securities C.1 Type and Class of Securities Being The Company has one class of shares in issue, and all shares in that Offered and Admitted to Trading and class have equal rights in the Company. The Shares have been issued Identification Number... under the Bermuda Companies Act and are registered with the VPS under ISIN BMG The Private Placement Shares and the Offer Shares will be registered on a separate ISIN BMG and trade under a separate trading symbol GOGL R on the Oslo Stock Exchange, until the U.S. resale restriction period of six months has expired, expected during the second half of C.2 Currency of Issue...The Shares are issued in USD, but is quoted and traded in NOK on the Oslo Stock Exchange. C.3 Number and Shares in Issue and Par Value...The Company currently has an authorized share capital of USD 6,000,000, consisting of 600,000,000 common shares with a par value of USD 0.01 each. As of the date of this Prospectus, the Company has issued 516,359,637 common shares, fully paid and with a par value of USD 0.01 each. C.4 Rights Attaching to the Securities...All shares provide equal rights in the Company in accordance with the Bermuda Companies Act. The Bye-Laws and the Bermuda Companies Act do not provide a shareholder of the Company with any preemptive rights to subscribe for additional issues of the Company s shares. C.5 Restrictions on Transfer...The Private Placement Shares and the Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and can, for a period of six months after the full purchase price consideration for the Shares are paid, only be offered, sold or transferred (i) under a registration statement that has been declared effective under the U.S. Securities Act; (ii) through offers and sales that occur outside of the United States within the meaning of Regulation S under the U.S. Securities Act; or (iii) under any other available exemption from the registration requirements of the U.S. Securities Act. The Private Placement Shares and the Offer Shares will therefore be registered on a separate ISIN BMG and trade under a separate trading symbol GOGL R on the Oslo Stock Exchange, until the U.S. resale restriction period has expired for all Private Placement Shares and Offer Shares. During the second half of 2016, following the expiry of the U.S. resale restriction period for all Private Placement Shares and Offer Shares, the Private Placement Shares and the Offer Shares are expected to be assumed on the Company s ordinary ISIN BMG and trade under the ordinary trading symbol of the Company GOGL on the Oslo Stock Exchange and NASDAQ Global Select Market. The Bye-Laws do not provide for a right of first refusal on transfer of shares. Share transfers are not subject to approval by the Board of Directors, however, the Board of Directors may decline to register any transfer in certain circumstances described in the Bye-Laws. Such circumstances include, where the transfer might breach any law or requirement of any authority or listing exchange and if the transfer could result in 50% or more of the Company s voting share capital being held by a person resident for tax purposes in Norway. C.6 Admission to Trading...The Company s shares are currently trading on NASDAQ Global Select Market and the Oslo Stock Exchange under the trading symbol GOGL. 10

12 The Private Placement Shares and the Offer Shares will be registered on a separate ISIN BMG and trade on the Oslo Stock Exchange under a separate trading symbol GOGL R in anticipation of the expiry of the U.S. resale restriction period of six months. Trading in the Private Placement Shares is expected to commence under the separate trading symbol GOGL R on or about on February 24, 2016 and trading in the Offer Shares on the Oslo Stock Exchange is expected to commence under the separate trading symbol GOGL R on or about on March 21, During the second half of 2016, the Private Placement Shares and the Offer Shares are expected to assume on the ordinary ISIN BMG of the Company and be freely tradable under the Company's ordinary trading symbol GOGL on the Oslo Stock Exchange and NASDAQ Global Select Market. C.7 Dividend Policy...The Company s intention is to pay out excess cash as dividends at the discretion of the Board of Directors of the Company. Dividend payments will depend on, among other things, the Company s financial situation, any restrictions in borrowing arrangements or other contractual arrangements, need for working capital and investments or acquisition possibilities from time to time. Section D Risks D.1 Key Risks Specific to the Company or its Industry...Risks Related to the Industry The continued downturn in the dry bulk carrier charter market has had and is expected to continue to have an adverse effect on the Company s earnings, revenue and profitability and the Company s ability to comply with its loan covenants. The over-supply of dry bulk carrier capacity is expected to continue to prolong and depress the current low charter rates, which has and is expected to continue to limit the Company s ability to operate its dry bulk carriers profitably. Changes in the state of the global financial markets and economic conditions may adversely impact the Company s ability to obtain financing on acceptable terms and may otherwise negatively impact its business. Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce the Company s net cash flows and net income. The Company is subject to complex laws and regulations, including environmental laws and regulations, which can adversely affect its business, results of operations and financial condition. If the Company fails to comply with international safety regulations, the Company may be subject to increased liability, which may adversely affect its insurance coverage and may result in a denial of access to, or detention in, certain ports. Maritime claimants could arrest one or more of the Company s vessels, which could interrupt its cash flow. Governments could requisition the Company s vessels during a period of war or emergency resulting in a loss of earnings. 11

13 Risks Related to the Company s Business D.3 Key Risks Specific to the Securities...Risks Related to the Shares The Company may require additional capital in the future, which may not be available on favorable terms, or at all. The Company is subject to certain risks with respect to its counterparties on contracts, and failure of such counterparties to meet their obligations could cause the Company to suffer losses or otherwise adversely affect its business. The aging of the Company s fleet may result in increased operating costs in the future, which could adversely affect the Company s earnings. If the Company does not set aside funds and are unable to borrow or raise funds for vessel replacement at the end of a vessel's useful life its revenue will decline, which would adversely affect its business, results of operations, financial condition and ability to pay cash distributions. The fair market value of the Company s vessels have declined and may decline further, which could limit the amount of funds that the Company can borrow, cause the Company to breach certain financial covenants in its credit facilities, result in an impairment charge, and cause the Company to incur a loss if the Company sells vessels following a decline in their market value. The participation in the Subsequent Offering and the sale and transfer of the Private Placement Shares and the Offer Shares are subject to restrictions under the securities laws of the United States and other jurisdictions. Investors may not be able to exercise their voting rights for Shares registered in a nominee account. Future issuance of shares or other securities may dilute the holdings of shareholders and could materially affect the price of the Shares. Because the Company s offices and most of its assets are outside the United States, shareholders may not be able to bring suit against the Company, or enforce a judgment obtained against the Company in the United States. There are certain risks connected to the Shares being registered in the VPS. Section E Share Issue E.1 Proceeds and Estimated Expenses...The gross proceeds from the Private Placement were NOK 1,718,420,000, or approximately USD 200 million. Assuming the Subsequent Offering is fully subscribed, the gross proceeds for the Subsequent Offering will amount to NOK 171,842,000, or approximately USD 20 million. The Company estimates that the total expenses in connection with the Private Placement and the Subsequent Offering will amount to approximately USD 3-4 million. The net proceeds for the Private Placement and the Subsequent Offering will accordingly amount to approximately USD 216 million. E.2a Reasons for the Offering...The Company intends to apply the net proceeds of the Private Placement and the Subsequent Offering to strengthen the Company s 12

14 balance sheet and create a comfortable liquidity runway through the current market cycle, as well as facilitate amendments of all debt facilities of the Company, including amortization deferral and covenant waivers. E.3 Terms and Conditions for the Offer...The Subsequent Offering consists of up to 34,368,400 Offer Shares in the Company for gross proceeds of up to NOK 171,842,000, or approximately USD 20 million. In the Subsequent Offering, the Company will allocate the Offer Shares to subscribers who (i) were registered in the Company's register of shareholders with the VPS as of expiry of February 22, 2016 (the Record Date) with a holding of less than 100,000 Shares, (ii) were not allocated shares in the Private Placement, and (iii) are not resident in a jurisdiction where such offering would be unlawful or, for jurisdictions other than Norway, would require any prospectus, filing, registration or similar action (each such shareholder an Eligible Shareholder, and collectively, Eligible Shareholders). For each Share recorded as held in the Company as of expiry of the Record Date, each Eligible Shareholder will be granted Subscription Right(s), rounded down to the nearest whole Subscription Right. One (1) Subscription Right will give the right to subscribe for one (1) Offer Share, subject to the selling and transfer restrictions set out in Section 19 Selling and Transfer Restrictions. For the purposes of determining eligibility to Subscription Rights, the Company will look solely to its register of shareholders as of expiry of the Record Date, which will show shareholders as of expiry of February 18, 2016, and potentially shareholders that have purchased Shares thereafter with non-standard settlement cycle. The Subscription Rights will not be tradable. Oversubscription by Eligible Shareholders will be permitted. Subscription without Subscription Rights will not be allowed. The Subscription Price in the Subsequent Offering is NOK 5.00 per Offer Share. The Subscription Price is equal to the per Share subscription price that applied to the Private Placement, which was set on the basis of a book-building. The Subscription Period will commence on 09:00 a.m. CET on February, 29, 2016, and expire at 16:30 p.m. CET on March 11, Allocation of the Offer Shares will take place on or about March 14, Notifications of allocation in the Subsequent Offering are expected to be issued on or about March 14, The due date for payment of allocated Offer Shares is March 16, 2016 (the Payment Due Date). Delivery of the Offer Shares to investors' VPS accounts is expected to take place on or about March 21, The Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and can,, for a period of six months after the full purchase price consideration for the Shares are paid, only be offered, sold or transferred (i) under a registration statement that has been declared effective under the U.S. Securities Act; (ii) through offers and sales that occur outside of the United States within the meaning of Regulation S under the U.S. Securities Act; or (iii) under any other available exemption from the registration requirements of the U.S. Securities Act. The Offer Shares will therefore be registered on a separate ISIN BMG and trade under a separate trading symbol GOGL R on the Oslo Stock Exchange, until the U.S. resale restriction period has expired for all Private Placement Shares and Offer Shares. During the second half of 2016, following the expiry of the U.S. resale restriction period for all Private Placement Shares and Offer Shares, the Offer Shares are expected to be assumed on the Company s ordinary ISIN BMG and thereafter commence to trade under 13

15 the Company s ordinary trading symbol GOGL and become freely tradable on both the Oslo Stock Exchange and NASDAQ Global Select Market. E.4 Material and Conflicting Interests...The Managers or their affiliates have provided from time to time, and may provide in the future, investment and commercial banking services to the Company and its affiliates in the ordinary course of business, for which they may have received and may continue to receive customary fees and commissions. The Managers, their employees and any affiliate may currently own Shares in the Company. Further, in connection with the Subsequent Offering, each of the Managers, its employees and any affiliate acting as an investor for its own account may be entitled to be allocated Offer Shares in the Subsequent Offering (if they were registered as shareholders of the Company as of expiry of the Record Date) and may exercise their right to take up such Offer Shares, and, in that capacity, may retain, purchase or sell Offer Shares (or other investments) for its own account and may offer or sell such Offer Shares (or other investments) otherwise than in connection with the Subsequent Offering. The Managers do not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In accordance with market practice, the Managers receive a certain percentage of the proceeds from the Private Placement and the Subsequent Offering. Beyond the abovementioned, the Company is not aware of any interest of natural or legal persons involved in the Private Placement or the Subsequent Offering. E.5 Selling Shareholders and Lock-Up Agreements...Not applicable. There are no selling shareholders in the Subsequent Offering and there are no lock-up agreements entered into for the Offer Shares. E.6 Dilution...The Private Placement resulted in a dilution of the then existing shareholders of the Company of approximately 66.6%. Taken together with the dilution resulting from the Private Placement, the Subsequent Offering will, assuming that it is fully subscribed, result in a dilution of the shareholders of the Company prior to the Private Placement, to the extent such shareholders elect not to participate in the Subsequent Offering, of approximately 68.6%. E.7 Estimated Expenses Charged to Investors...Not applicable. The expenses related to the Subsequent Offering will be paid by the Company. 14

16 2. RISK FACTORS An investment in the shares of the Company should be considered as a high-risk investment, and is suitable only for investors who understand the risks associated with this type of investment and who can afford a loss of all or part of the investment. This Section discusses the risks and uncertainties which the Company believes are the principal known risks and uncertainties faced by the Company as of the date hereof. If any of the risks described below materialize, individually or together with other circumstances, they may have a material adverse effect on the Company's business, financial condition, results of operations and the value and trading price of the Shares that could result in a loss of all or part of any investment in the Shares. The order in which the risks are presented below is not intended to provide an indication of the likelihood of their occurrence nor of their severity or significance. 2.1 Risks Related to the Industry The continued downturn in the dry bulk carrier charter market has had and is expected to continue to have an adverse effect on the Company s earnings, revenue and profitability and the Company s ability to comply with its loan covenants. The dramatic downturn in the dry bulk charter market, from which the Company derives its revenues, has severely affected the dry bulk shipping industry. The Baltic Dry Index ( BDI ) an index published by The Baltic Exchange of shipping rates for 20 key dry bulk routes, has fallen 97% from a peak of 11,793 in May 2008 to a so far low of 290 in February After a steep drop during the financial crisis in 2008 to 663 the BDI has been very volatile ranging from the high of 4,661 during 2009 to the low of 473 in Highest observed value in 2015 was 1,222 in August. There can be no assurance that the dry bulk charter market will recover and the market could continue to decline further. The downturn and volatility in the dry bulk charter market has had a number of adverse consequences for dry bulk shipping, including, among other things: an absence of financing for vessels; extremely low charter rates, particularly for vessels employed in the spot market; widespread loan covenant defaults in the dry bulk shipping industry; and declarations of bankruptcy by some operators, ship owners and charterers. The occurrence of one or more of these events could adversely affect the Company s business, results of operations, cash flows, financial condition and ability to pay cash distributions. Dry bulk carrier values have also declined both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates. Charter rates and vessel values have been affected in part by the lack of availability of credit to finance both vessel purchases and purchases of commodities carried by sea, and the excess supply of iron ore in China, Brazil and Australia, which resulted in falling iron ore prices and increased stockpiles in Chinese, Brazilian and Australian ports. There can be no assurance as to how long spot charter rates and vessel values will remain at their currently low levels. Charter rates may remain at low levels for some time which will adversely affect the Company s revenue and profitability and asset values may drop further, which may affect the Company s ability to comply with its loan covenants. In addition, because the market value of the Company s vessels may fluctuate significantly, the Company may incur losses when it sells vessels, which may adversely affect its earnings. If the Company sells vessels at a time when vessel prices have fallen and before the Company have recorded an impairment adjustment to its financial statements, the sale may be at less than the vessel's carrying amount in the Company s financial statements, resulting in a loss and a reduction in earnings. Charter hire rates for dry bulk vessels may decrease further in the future, which may adversely affect the Company s earnings. The dry bulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of dry bulk vessels has varied widely, and charter hire rates for dry bulk vessels have declined significantly from historically high levels. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by water internationally. The Company cannot assure that it will be able to successfully charter its vessels in the future or renew existing charters at rates sufficient to allow the Company to meet its obligations. Because the factors affecting the supply and demand for vessels are outside of the Company s control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable. Factors that influence demand for vessel capacity include: 15

17 supply and demand for energy resources, commodities, semi-finished and finished consumer and industrial products; changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products; the location of regional and global exploration, production and manufacturing facilities; the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products; the globalization of production and manufacturing; global and regional economic and political conditions, including armed conflicts and terrorist activities, embargoes and strikes; developments in international trade; changes in seaborne and other transportation patterns, including the distance cargo is transported by sea; environmental and other regulatory developments; currency exchange rates, and weather. Factors that influence the supply of vessel capacity include: number of newbuilding deliveries; port and canal congestion; scrapping of older vessels; slow steaming; vessel casualties; and number of vessels that are out of service. Demand for the Company s dry bulk vessels is dependent upon economic growth in the world's economies, seasonal and regional changes in demand, changes in the capacity of the global dry bulk fleet and the sources and supply of dry bulk cargo transported by sea. Given the large number of new dry bulk carriers currently on order with shipyards, the capacity of the global dry bulk carrier fleet seems likely to increase and economic growth may not resume in areas that have experienced a recession or continue in other areas. Adverse economic, political, social or other developments could have a material adverse effect on the Company s business and operating results. The over-supply of dry bulk carrier capacity is expected to continue to prolong and depress the current low charter rates, which has and is expected to continue to limit the Company s ability to operate its dry bulk carriers profitably. The supply of dry bulk vessels, which has increased significantly since the beginning of 2008, has outpaced vessel demand growth over the past few years, thereby causing downward pressure on charter rates. As of December 31, 2015, newbuilding orders have been placed for approximately 15% of the existing fleet capacity. Until the new supply of vessels is fully absorbed by the market, charter rates may continue to be under pressure in the near to medium term. Risks involved with operating ocean-going vessels could affect the Company s business and reputation, which could have a material adverse effect on its results of operations and financial condition. The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of: a marine disaster, terrorism, environmental accidents, cargo and property losses and damage, and business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions. Any of these circumstances or events could increase the Company s costs or lower its revenues. The involvement of the Company s vessels in an oil spill or other environmental disaster may harm its reputation as a safe and reliable dry bulk operator. Volatile economic conditions throughout the world could have an adverse impact on the Company s operations and financial results. The world economy continues to face a number of challenges, including turmoil and hostilities in the Middle East, North Africa and other geographic areas. The presence of United States and other armed forces in Afghanistan and Syria, additional acts of terrorism and armed conflict around the world may contribute to further economic instability in the global financial markets. While global economic conditions have generally improved, continued adverse and developing economic and governmental factors, together with the concurrent volatility in charter rates and vessel values, may have 16

18 a material adverse effect on the Company s results of operations, financial condition and cash flows and could cause the price of the Company s ordinary shares to decline. An extended period of deterioration in the outlook for the world economy could reduce the overall demand for the Company s services and could also adversely affect its ability to obtain financing on acceptable terms or at all. The European Union has likewise experienced relatively slow growth and has exhibited weak economic trends. Over the past seven years, the credit markets in Europe have experienced significant contraction, de-leveraging and reduced liquidity. While credit conditions are beginning to stabilize, global financial markets have been, and continue to be, disrupted and volatile. Since 2008, lending by financial institutions worldwide remains at lower levels compared to the period preceding The continued economic slowdown in the Asia Pacific region, especially in China, has and may continue to exacerbate the effect on the Company of the recent slowdown in the rest of the world. Chinese dry bulk imports have accounted for between 50% and 80% of global dry bulk transportation growth annually over the last 12 years. Before the global economic financial crisis that began in 2008, China had one of the world's fastest growing economies in terms of gross domestic product ( GDP ) which had a significant impact on shipping demand. The growth rate of China's GDP for the year ended December 31, 2015, is estimated to be around 6.9%, down from a growth rate of 7.4% for the year ended December 31, 2014, and remaining below pre-2008 levels. The lack of visibility and transparency from Chinese policy makers (the big shortfall of coal imports to the country in 2014, for example) is also adding risk. It appears that China is willing to take important steps to curb pollution, which in turn could have a negative impact for the dry bulk sector. China and other countries in the Asia Pacific region may continue to experience slowed or even negative economic growth in the future. The Company s financial condition and results of operations, as well as its future prospects, would likely be impeded by a continuing or worsening economic downturn in any of these countries. The Company conducts a substantial amount of business in China. The legal system in China has inherent uncertainties that could have a material adverse effect on the Company s business, financial condition and results of operations. The Chinese legal system is based on written statutes and their legal interpretation by the Standing Committee of the National People s Congress. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, there is a general lack of internal guidelines or authoritative interpretive guidance and because of the limited number of published cases and their non-binding nature, interpretation and enforcement of these laws and regulations involve uncertainties. Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could affect the Company s vessels that are either chartered to Chinese customers or that call to Chinese ports and the Company s vessels being built at Chinese shipyards, and could have a material adverse effect on the Company s business, results of operations and financial condition and the Company s ability to pay dividends. The inability of countries to refinance their debts could have a material adverse effect on the Company s revenue, profitability and financial position. As a result of the credit crisis in Europe, the European Commission created the European Financial Stability Facility (the EFSF ) and the European Financial Stability Mechanism (the EFSM ), to provide funding to Eurozone countries in financial difficulties that seek such support. In September 2012, the European Council established a permanent stability mechanism, the European Stability Mechanism (the ESM ), to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations. Potential adverse developments in the outlook for European countries could reduce the overall demand for dry bulk cargoes and for the Company s services. Market perceptions concerning these and related issues, could affect its financial position, results of operations and cash flow. Changes in the state of the global financial markets and economic conditions may adversely impact the Company s ability to obtain financing on acceptable terms and may otherwise negatively impact its business. Global financial markets and economic conditions have been, and continue to be, volatile. Operating businesses in the global economy have faced tightening credit, weakening demand for goods and services, deteriorating international liquidity conditions and declining markets. There has similarly been a general decline in the willingness by banks and other financial institutions to extend credit, particularly in the shipping industry, due to the historically volatile asset values of vessels. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it has been negatively affected by this decline. 17

19 As a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt and reduced, and in some cases ceased, to provide funding to borrowers. Due to these factors, the Company cannot be certain that financing will be available if needed and to the extent required, on acceptable terms. If financing is not available when needed, or is available only on unfavorable terms, the Company may be unable to meet its obligations as they come due or the Company may be unable to enhance its existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise. In addition, lower demand for dry bulk cargoes as well as diminished trade credit available for the delivery of such dry bulk cargoes have led to decreased demand for dry bulk vessels, creating downward pressure on charter rates. If the current global economic environment persists or worsens, the Company may be negatively affected in the following ways: the Company may not be able to employ its vessels at charter rates as favorable to the Company as historical rates or at all or operate its vessels profitably; and the market value of the Company s vessels could decrease, which may cause the Company to recognize losses if any of its vessels are sold or if their values are impaired. The occurrence of any of the foregoing could have a material adverse effect on the Company s business, results of operations, cash flows, financial condition and ability to pay cash distributions. Acts of piracy on on-going vessels and acts of terrorism could adversely affect the Company s business. Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia. Sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia and in the Gulf of Guinea, with dry bulk vessels and tankers particularly vulnerable to such attacks. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. The perception that the Company s vessels are potential piracy or terrorist targets could have a material adverse impact on the Company s business, financial condition, results of operations and ability to pay dividends. Further, if piracy attacks occur in regions in which the Company s vessels are deployed that insurers characterize as "war risk" zones or by the Joint War Committee as "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain, if available or at all. In addition, crew costs, including costs which may be incurred to the extent the Company employ on-board security guards, could increase in such circumstances. The Company may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on the Company. In addition, detention hijacking as a result of an act of piracy against the Company s vessels, or an increase in cost, or unavailability of insurance for its vessels, could have a material adverse impact on the Company s business, results of operations, cash flows, financial condition and ability to pay dividends and may result in loss of revenues, increased costs and decreased cash flows to its customers, which could impair their ability to make payments to the Company under its charters. The Company s vessels may call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely affect the Company s reputation and the market for its ordinary shares. From time to time on charterers' instructions, the Company s vessels may call on ports located in countries subject to sanctions and embargoes imposed by the United States government and countries identified by the U.S. government as state sponsors of terrorism, such as Cuba, Iran, Sudan and Syria. In the past, certain of its vessels have made port calls to Iran, and in 2015 one vessel, chartered-in through a joint venture partly owned by the Company had one call to Iran transporting non-sanction cargo. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. With effect from July 1, 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act ( CISADA ), which expanded the scope of the Iran Sanctions Act. Among other things, CISADA expands the application of the prohibitions to companies, such as the Company, and introduces limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. In addition, on May 1, 2012, President Obama signed Executive Order which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive a foreign sanctions evader and will be banned from all contacts with the United States, including conducting business in U.S. dollars. Also in 18

20 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012 ( Iran Threat Reduction Act ) which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran's petroleum or petrochemical sector. On November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement with Iran entitled the Joint Plan of Action (the JPOA ). Under the JPOA it was agreed that, in exchange for Iran taking certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the U.S. and EU would voluntarily suspend certain sanctions for a period of six months. On January 20, 2014, the U.S. and E.U. indicated that they would begin implementing the temporary relief measures provided for under the JPOA. These measures included, among other things, the suspension of certain sanctions on the Iranian petrochemicals, precious metals, and automotive industries from January 20, 2014 until July 20, The JPOA has subsequently been extended twice. On July 14, 2015, the P5+1 and the European Union announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran s Nuclear Program, or the JCPOA, which is intended to significantly restrict Iran s ability to develop and produce nuclear weapons for ten years while simultaneously easing sanctions directed toward non-u.s. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and does not involve U.S. persons. On January 16, 2016, or Implementation Day, the United States joined the European Union and the United Nations in lifting a significant number of their nuclear-related sanctions on Iran following an announcement by the International Atomic Energy Agency, or IAEA that Iran had satisfied its respective obligations under the JCPOA. U.S. sanctions prohibiting certain conduct that is now permitted under the JCPOA have not actually been repealed or permanently terminated at this time. Rather, the U.S. government has implemented changes to the sanctions regime by: (1) issuing waivers of certain statutory sanctions provisions; (2) committing to refrain from exercising certain discretionary sanctions authorities; (3) removing certain individuals and entities from OFAC's sanctions lists; and (4) revoking certain Executive Orders and specified sections of Executive Orders. These sanctions will not be permanently "lifted" until the earlier of Transition Day, set to occur on October 20, 2023, or upon a report from the IAEA stating that all nuclear material in Iran is being used for peaceful activities. Although the Company believes that it has been in compliance with all applicable sanctions and embargo laws and regulations, and intends to maintain such compliance, there can be no assurance that the Company will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact its ability to access U.S. capital markets and conduct its business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in the Company. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, the Company s common shares may adversely affect the price at which its common shares trade. Moreover, the Company s charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve the Company or its vessels, and those violations could in turn negatively affect the Company s reputation. In addition, the Company s reputation and the market for its securities may be adversely affected if the Company engages in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of the Company s common shares may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries. Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce the Company s net cash flows and net income. The hull and machinery of every commercial vessel must be certified as being "in class" by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be placed on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. The Company expects its vessels to be on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel is also required to be drydocked, or inspected by divers. every two to three years for inspection of its underwater parts. 19

21 Compliance with the above requirements may result in significant expense. If any vessel does not maintain its class or fails any annual, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable, which could have a material adverse effect on the Company s business, results of operations, cash flows, financial condition and ability to pay cash distributions. The Company is subject to complex laws and regulations, including environmental laws and regulations, which can adversely affect its business, results of operations and financial condition. The Company s operations will be subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which its vessels operate or are registered, which can significantly affect the ownership and operation of its vessels. These requirements include, but are not limited to, European Union ( EU ) regulations, the U.S. Oil Pollution Act of 1990, ( OPA ), requirements of the U.S. Coast Guard ( USCG ) and the U.S. Environmental Protection Agency ( EPA ), the U.S. Comprehensive Environmental Response, Compensation and Liability Act ( CERCLA ), the U.S. Clean Air Act ( CAA ), the U.S. Clean Water Act ( CWA ) the International Maritime Organization ( IMO ), the International Convention on Civil Liability for Oil Pollution Damage of 1969, as from time to time amended and replaced by the 1992 protocol ( CLC ), the IMO International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001 (the Bunker Convention ), the IMO International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended ( MARPOL ), including the designation of Emission Control Areas ( ECAs ) thereunder, the IMO International Convention for the Safety of Life at Sea of 1974, as from time to time amended ( SOLAS ), the IMO's International Safety Management code for the safe Operation of Ships and for Pollution Prevention ( ISM Code ) the IMO International Convention on Load Lines of 1966, as from time to time amended, and the U.S. Maritime Transportation Security Act of 2002 ( MTSA ). Compliance with such laws and regulations, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of the Company s vessels. Compliance with such laws and regulations may require the Company to obtain certain permits or authorizations prior to commencing operations. Failure to obtain such permits or authorizations could materially impact the Company s business results of operations, financial conditions and ability to pay cash distributions by delaying or limiting its ability to accept charterers. The Company may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions including greenhouse gases, the management of ballast waters, maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of its ability to address pollution incidents. Additionally, the Company cannot predict the cost of compliance with any new regulations that may be promulgated as a result of the 2010 BP plc Deepwater Horizon oil spill in the Gulf of Mexico. These costs could have a material adverse effect on the Company s business, results of operations, cash flows and financial condition and its available cash. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of the Company s operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject the Company to liability, without regard to whether the Company was negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil in U.S. waters, including the 200- nautical mile exclusive economic zone around the United States. An oil spill could also result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages under other international and U.S. Federal, state and local laws, as well as third-party damages, including punitive damages, and could harm its reputation with current or potential charterers of the Company s vessels. The Company will be required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although the Company s technical manager will arrange for insurance to cover its vessels with respect to certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on its business, financial condition, results of operations and cash flows. If the Company fails to comply with international safety regulations, the Company may be subject to increased liability, which may adversely affect its insurance coverage and may result in a denial of access to, or detention in, certain ports. The operation of the Company s vessels is affected by the requirements set forth in the ISM Code. The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. If the Company fails to comply with the ISM Code, the Company may be subject to increased liability, may invalidate existing insurance or decrease available insurance coverage for its affected vessels and such failure may result in a denial of access to, or detention in, certain ports. 20

22 Maritime claimants could arrest one or more of the Company s vessels, which could interrupt its cash flow. Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by "arresting" or "attaching" a vessel through foreclosure proceedings. The arrest or attachment of one or more of the Company s vessels could result in a significant loss of earnings for the related off-hire period. In addition, in jurisdictions where the "sister ship" theory of liability applies, such as South Africa, a claimant may arrest the vessel which is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. In countries with "sister ship" liability laws, claims might be asserted against the Company or any of its vessels for liabilities of other vessels that it owns. Governments could requisition the Company s vessels during a period of war or emergency resulting in a loss of earnings. A government of a vessel's registry could requisition for title or seize one or more of the Company s vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. A government could also requisition one or more of the Company s vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more the Company s vessels could have a material adverse effect on the Company s business, results of operations, cash flows, financial condition and ability to pay cash distributions. 2.2 Risks Related to the Company s Business The Company may require additional capital in the future, which may not be available on favorable terms, or at all. Depending on many factors, including market developments, the Company s future earnings, value of its assets and expenditures for any new projects, the Company may need additional funds in the longer term. The Company cannot guarantee that the Company will be able to obtain additional financing at all or on terms acceptable to it. If adequate funds are not available, the Company may have to reduce expenditures for investments in new and existing projects, which could hinder its growth and prevent it from realizing potential revenues from prior investments which will have a negative impact on its cash flows and results of operations. As of December 31, 2015, the Company had 18 vessels under construction, of which two have been sold and will be delivered to the new owners on delivery from the yard. The Company expects to receive net sales proceeds of USD 92.4 million in 2016 upon delivery of the two vessels which have been sold. There is no debt drawn in relation to these vessels. The Company s outstanding commitments as of December 31, 2015, for its 18 newbuildings amount to USD million with expected payments of USD million in 2016 and USD 67.2 million in 2017, for expected delivery of 16 vessels in 2016 and two vessels in During the period from January 1, 2016 and up to the date of this Prospectus, the Company has taken delivery of five vessels, of which one vessel has been delivered to its new owner. The Company has paid USD million in final installments for these five vessels and received USD 46.2 million for the sale of the vessel. The Company has also paid USD 10.1 million in pre-delivery installments on vessels under construction. As of the date of this Prospectus, following these deliveries, the Company has 13 vessels under construction, of which one has been sold and will be delivered to the new owners on delivery from the yard. As of the date of this Prospectus, the Company s outstanding commitment amounts to USD million. As of December 31, 2015, the Company had available debt financing of USD 395 million for 13 Capesize newbuilding contracts. During the period from January 1, 2016 and up to the date of this Prospectus, the Company has taken delivery of four of the financed vessels and drawn down debt in total of USD million. Based on the amended terms under the loan agreement and draw down on delivered vessels, as of the date of this Prospectus, the available debt financing for the remaining 9 vessels is USD 225 million. The Company intends to finance the remaining newbuilding commitments and any shortfall in financing commitments arising from a fall in vessel values with cash on hand, operating cash flow and, if market conditions permit, proceeds from debt and equity financings. If such financing is not available when the Company s capital commitments are due, the Company may be unable to meet such obligations and finance its other and future obligations. If for any reason the Company fails to take delivery of the newbuilding vessels described above, it would be prevented from realizing potential revenues from these vessels, it may be required to forego deposits on construction and it may incur additional costs and liability to the shipyard under the construction contracts. 21

23 The Company is highly leveraged, which could significantly limit the Company s ability to execute its business strategy and has increased the risk of default under its debt obligations. As of December 31, 2015, the Company had USD million of outstanding indebtedness under its outstanding credit facilities and debt securities. The Company s credit facilities impose operating and financial restrictions on the Company that limit its ability, or the ability of its subsidiaries party thereto to: pay dividends and make capital expenditures if the Company does not repay amounts drawn under its credit facilities or if there is another default under its credit facilities; incur additional indebtedness, including the issuance of guarantees; create liens on its assets; change the flag, class or management of its vessels or terminate or materially amend the management agreement relating to each vessel; sell its vessels; merge or consolidate with, or transfer all or substantially all its assets to, another person; or enter into a new line of business. Therefore, the Company may need to seek permission from its lenders in order to engage in some corporate actions. Its lenders interests may be different from the Company s interests and the Company may not be able to obtain its lenders permission when needed. This may limit the Company s ability to pay dividends on its common shares if the Company determines to do so in the future, and interest on its notes, finance its future operations or capital requirements, make acquisitions or pursue business opportunities. In addition, the Company s loan agreements for its borrowings, which are secured by liens on its vessels, contain various financial covenants. Among those covenants are requirements that relate to the Company s financial position, operating performance and liquidity. For example, there are financial covenants that require the Company to maintain (i) a minimum value adjusted equity that is based, in part, upon the market value of the vessels securing the loans, (ii) minimum levels of free cash, (iii) a positive working capital, and (iv) a loan-to-value clause, which could require the Company to post collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings decrease below a required level. The market value of dry bulk vessels is sensitive, among other things, to changes in the dry bulk market, with vessel values deteriorating in times when dry bulk rates are falling or anticipated to fall and improving when charter rates are rising or anticipated to rise. Such conditions may result in the Company not being in compliance with these loan covenants. In such a situation, unless the Company s lenders are willing to provide waivers of covenant compliance or modifications to the Company s covenants, or would be willing to refinance the Company s indebtedness, the Company may have to sell vessels in its fleet and/or seek to raise additional capital in the equity markets in order to comply with its loan covenants. Furthermore, if the value of its vessels deteriorates significantly, the Company may have to record an impairment adjustment in its financial statements, which would adversely affect its financial results and further hinder its ability to raise capital. If the Company is not in compliance with its covenants and are not able to obtain covenant waivers or modifications, its lenders could require the Company to post additional collateral, enhance its equity and liquidity, increase its interest payments or pay down its indebtedness to a level where the Company is in compliance with its loan covenants, sell vessels in its fleet, or they could accelerate the Company s indebtedness, which would impair the Company s ability to continue to conduct its business. In such an event, the Company s auditors may give either an unqualified opinion with an explanatory paragraph relating to the disclosure in the notes to the Company s financial statements as to the substantial doubt of its ability to continue as a going concern, or a qualified, adverse or disclaimer of opinion, which could lead to additional defaults under its loan agreements. If the Company s indebtedness is accelerated, the Company might not be able to refinance its debt or obtain additional financing and could lose its vessels if its lenders foreclose their liens. In addition, if the Company finds it necessary to sell its vessels at a time when vessel prices are low, the Company will recognize losses and a reduction in its earnings, which could affect its ability to raise additional capital necessary for the Company to comply with its loan agreements. The Company cannot assure that the Company will be able to refinance its existing indebtedness on acceptable terms. The Company cannot assure that the Company will be able to refinance its indebtedness on terms that are acceptable to the Company or at all. If the Company is not able to refinance its indebtedness, the Company will have to dedicate a greater portion of its cash flow from operations to pay the principal and interest of this indebtedness. The Company cannot assure that the Company will be able to generate cash flow in amounts that are sufficient for these purposes. If the Company is not able to satisfy these obligations, the Company may have to undertake alternative financing plans or sell its assets. In addition, debt service payments under its credit facilities may limit funds otherwise available for working capital, capital expenditures, payment of cash distributions and other purposes. The Company s loan facilities contain a minimum ownership clause that Hemen must hold more than 1/3 of the shares in the Company during the 22

24 period where the Company has a waiver to its covenants. The Company cannot guarantee that Hemen will continue to hold such ownership and if Hemen reduces its shareholding, the Company may have to refinance its debt. If the Company is unable to meet its debt obligations, or if the Company otherwise defaults under its credit facilities, its lenders could declare the debt, together with accrued interest and fees, to be immediately due and payable and foreclose on its fleet, which could result in the acceleration of other indebtedness that the Company may have at such time and the commencement of similar foreclosure proceedings by other lenders. The Company s financing obligations could affect its ability to incur additional indebtedness or engage in certain transactions. The Company s financing agreements impose operational and financing restrictions on the Company and/or on its subsidiaries, which may significantly limit or prohibit, among other things, its and/or its subsidiaries' ability to, without the consent of its lenders, incur additional indebtedness, create liens, sell capital interests of subsidiaries, make certain investments, engage in mergers and acquisitions, purchase and sell vessels, enter into certain charters or, if an event of default has occurred, pay cash distributions. In addition, the Company s lenders may accelerate the maturity of indebtedness under the Company s financing agreements and foreclose on the collateral securing the indebtedness upon the occurrence of certain events of default, including the Company s failure to comply with any of the covenants contained in its financing agreements, not rectified within the permitted time. For instance, declining vessel values could lead to a breach of covenants under its financing agreements. If the Company is unable to prepay, pledge additional collateral or obtain waivers from its lenders, its lenders could accelerate its debt and foreclose on its vessels. In addition, if the lenders are entitled to accelerate the debt outstanding under one facility in default, it could result in a default on its other facilities. A drop in spot charter rates may provide an incentive for some charterers to default on their charters. When the Company enters into a time charter or bareboat charter, charter rates under that charter may be fixed for the term of the charter. Six of the Company s vessels are currently on a fixed rate time charters expiring between November 2016 and December If the spot charter rates or short-term time charter rates in the dry bulk shipping industry become significantly lower than the time charter equivalent rates that some of the Company s charterers are obligated to pay the Company under its existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If its charterers fail to pay their obligations, the Company would have to attempt to recharter its vessels at lower charter rates, which would affect its ability to comply with its loan covenants and operate its vessels profitably. If the Company is not able to comply with its loan covenants and its lenders choose to accelerate its indebtedness and foreclose their liens, the Company could be required to sell vessels in its fleet and its ability to continue to conduct its business would be impaired. The Company s ability to obtain additional debt financing may be dependent on the performance of its then existing charterers and their creditworthiness. The actual or perceived credit quality of the Company s charterers, and any defaults by them, may materially affect the Company s ability to obtain the additional capital resources required to purchase additional vessels or may significantly increase its costs of obtaining such capital. The Company s inability to obtain additional financing at anticipated costs or at all may materially affect its results of operations and its ability to implement its business strategy. The Company's financing arrangements have floating interest rates which could negatively affect the financial performance of the Company as a result of interest rate fluctuations. As a large part of the Company's current financing agreement has, and its future financing arrangements may have, floating interest rates, movements in interest rates could negatively affect the financial performance of the Company. In order to manage its exposure to interest rate fluctuations, the Company may from time to time use interest rate derivatives to effectively fix some of its floating rate debt obligations. No assurance can however be given that use of these derivative instruments, if any, may affectively protect to Company from adverse interest rate movements. The use of interest rate derivatives may affect the Company s result through mark to market valuation of these derivatives. Also, adverse movements in the interest rate derivatives may require the Company to post cash as collateral, which may impact the Company s free cash position. The Company may fail to realize the anticipated benefits of the Merger, and the integration process could adversely impact its ongoing operations. The Company completed the Merger with former Golden Ocean Group Limited ( Former Golden Ocean ), with the Company as the surviving entity, on March 31, 2015 with the expectation that it would result in various benefits, including, among other things, the creation of a larger listed company that would be more attractive to investors, improved purchasing and placing power, an expanded customer base and ongoing cost savings and operating efficiencies. The success of the Merger will depend, in part, on the Company s ability to realize such anticipated benefits from 23

25 combining the Company's business with that of Former Golden Ocean. The anticipated benefits and cost savings of the Merger may not be realized fully, or at all, or may take longer to realize than expected. Failure to achieve anticipated benefits could result in increased costs and decreases in the amounts of the Company s expected revenues or results. The Company and Former Golden Ocean operated independently until the completion of the Merger. While Former Golden Ocean was the commercial manager of all of the Company s operating vessels, it is possible that the integration process could result in disruption of each company s ongoing businesses or inconsistencies in standards, controls, procedures or policies that adversely affect the Company s ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the Merger. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on the Company during the transition period. The integration may take longer than anticipated and may have unanticipated adverse results relating to the Company s existing business. Certain of the Company s directors, executive officers and major shareholders may have interests that are different from the interests of its other shareholders. Certain of the Company s directors, executive officers and major shareholders may have interests that are different from, or are in addition to, the interests of its other shareholders. In particular, Hemen Holding Limited, a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family ( Hemen ), own approximately 45% of the Company s issued and outstanding shares. Hemen is also a principal shareholder of a number of other large publicly traded companies involved in various sectors of the shipping and oil services industries (the Hemen Related Companies ). In addition, certain of the Company s directors, including Hans Petter Aas, John Fredriksen and Kate Blankenship, also serve on the boards of one or more of the Hemen Related Companies, including but not limited to, Frontline Ltd. (NYSE:FRO), Ship Finance International Limited (NYSE:SFL) ( Ship Finance ) Seadrill Limited NYSE:SDRL) ( Seadrill ) and North Atlantic Drilling Ltd. (NYSE:NADL) ( NADL ). There may be real or apparent conflicts of interest with respect to matters affecting Hemen and other Hemen Related Companies whose interests in some circumstances may be adverse to the Company s interests. To the extent that the Company does business with or compete with other Hemen Related Companies for business opportunities, prospects or financial resources, or participate in ventures in which other Hemen Related Companies may participate, these directors and officers may face actual or apparent conflicts of interest in connection with decisions that could have different implications for the Company. These decisions may relate to corporate opportunities, corporate strategies, potential acquisitions of businesses, newbuilding acquisitions, inter-company agreements, the issuance or disposition of securities, the election of new or additional directors and other matters. Such potential conflicts may delay or limit the opportunities available to the Company, and it is possible that conflicts may be resolved in a manner adverse to the Company. The Company is subject to certain risks with respect to its counterparties on contracts, and failure of such counterparties to meet their obligations could cause the Company to suffer losses or otherwise adversely affect its business. The Company has entered into various contracts, including charter parties with its customers, loan agreements with its lenders, vessel managements and other agreements, which subject the Company to counterparty risks. The ability of each of the counterparties to perform its obligations under a contract with the Company or contracts entered into on its behalf will depend on a number of factors that are beyond the Company s control and may include, among other things, general economic conditions, the condition of the shipping sector, the overall financial condition of the counterparty, charter rates received for its vessels and the supply and demand for commodities. The Company has entered into newbuilding contracts with shipyards in Japan and China. Should a counterparty fail to honor its obligations under any such contract, the Company could sustain significant losses which could have a material adverse effect on its business, financial condition, results of operations and cash flows. Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities. In addition, in depressed market conditions, charterers may have incentive to renegotiate their charters or default on their obligations under charters. Should a charterer in future fail to honor its obligations under agreements with the Company, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements the Company secures on the spot market or on charters may be at lower rates, depending on the then existing charter rate levels, compared to the rates currently being charged for its vessels. In addition, if the charterer of a vessel in the Company s fleet that is used as collateral under one or more of the Company s loan agreements defaults on its charter obligations to the Company, such default may constitute an event of default under its loan agreements, which may allow the bank to exercise remedies under the Company s loan agreements. If the Company s charterers fail to meet their obligations to the Company or attempt to renegotiate the Company s charter agreements, the Company could sustain significant losses which could have a material adverse effect on its business, financial condition, results of operations and cash flows, as 24

26 well as its ability to pay cash distributions, if any, in the future, and compliance with covenants in its loan agreements. Further, if the Company has to find a replacement technical manager, the Company may need approval from its lenders to change the technical manager. The Company may not be able to implement its growth successfully. The Company s intention is to renew and grow its fleet through selective acquisitions of dry bulk tonnage. The Company s business plan will therefore depend upon the Company s ability to identify and acquire suitable vessels to grow its fleet in the future and successfully employ its vessels. Growing any business by acquisition presents numerous risks, including undisclosed liabilities and obligations, difficulty obtaining additional qualified personnel and managing relationships with customers and suppliers. In addition, competition from other companies, many of which may have significantly greater financial resources than the Company, may reduce its acquisition opportunities or cause the Company to pay higher prices. The Company cannot assure that the Company will be successful in executing its plans to establish and grow its business or that the Company will not incur significant expenses and losses in connection with these plans. The Company s failure to effectively identify, purchase, develop and integrate any vessels could impede its ability to establish its operations or implement its growth successfully. The Company s acquisition growth strategy exposes the Company to risks that may harm its business, financial condition and operating results, including risks that the Company may: fail to realize anticipated benefits, such as cost savings or cash flow enhancements; incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired, particularly if any vessel the Company acquires proves not to be in good condition; be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate its growing business and fleet; decrease its liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions; significantly increase its interest expense or financial leverage if the Company incurs debt to finance acquisitions; or incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. Purchasing and operating previously owned, or secondhand, vessels may result in increased drydocking costs and vessels offhire, which could adversely affect the Company s earnings. The Company s current business strategy includes growth through the acquisition of previously owned vessels. Even following a physical inspection of secondhand vessels prior to purchase, the Company does not have the same knowledge about their condition and cost of any required (or anticipated) repairs that the Company would have had if these vessels had been built for and operated exclusively by the Company. Accordingly, the Company may not discover defects or other problems with such vessels prior to purchase. Any such hidden defects or problems, when detected, may be expensive to repair, and if not detected, may result in accidents or other incidents for which the Company may become liable to third parties. Also, when purchasing previously owned vessels, the Company does not receive the benefit of any builder warranties if the vessels the Company buys are older than one year. In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel efficient than more recently constructed vessels due to improvements in engine technology. Governmental regulations, safety and other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment to some of the Company s vessels and may restrict the type of activities in which these vessels may engage. The Company cannot assure that, as its vessels age, market conditions will justify those expenditures or enable the Company to operate its vessels profitably during the remainder of their useful lives. As a result, regulations and standards could have a material adverse effect on the Company s business, financial condition, results of operations, cash flows and ability to pay cash distributions. The operation of dry bulk carriers involves certain unique operational risks. The operation of dry bulk carriers has certain unique operational risks. With a dry bulk carrier, the cargo itself and its interaction with the ship can be a risk factor. By their nature, dry bulk cargoes are often heavy, dense and easily shifted, and react badly to water exposure. In addition, dry bulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers. This treatment may cause damage to the dry bulk carrier. Dry bulk carriers damaged due to treatment during unloading procedures may be more susceptible to a breach to the sea. Hull breaches in dry bulk carriers may lead to the flooding of their holds. If a dry bulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the dry bulk carrier's bulkheads leading to the loss of the dry bulk carrier. 25

27 If the Company is unable to adequately maintain or safeguard its vessels the Company may be unable to prevent these events. Any of these circumstances or events could negatively impact the Company s business, financial condition or results of operations. In addition, the loss of any of the Company s vessels could harm its reputation as a safe and reliable vessel owner and operator. Rising fuel, or bunker, prices may adversely affect the Company s profits. Since the Company primarily employs its vessels in the spot market, the Company expects that fuel, or bunkers, will be typically the largest expense in its shipping operations for its vessels. While the Company believes that the Company will experience a competitive advantage as a result of increased bunker prices due to the greater fuel efficiency of its vessels compared to the average global fleet, changes in the price of fuel may adversely affect its profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside its control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries ( OPEC ), and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Despite lower fuel oil prices during 2015 and the beginning of 2016, fuel may become much more expensive in the future, which may reduce the Company s profitability. The Company s results of operations are subject to seasonal fluctuations, which may adversely affect its financial condition. The Company plans to operate its vessels in markets that have historically exhibited seasonal variations in demand and, as a result, charter rates. This seasonality may result in quarter-to-quarter volatility in its operating results, as most of its vessels currently trade in the spot market. The fair market values of the Company s vessels have declined and may decline further, which could limit the amount of funds that the Company can borrow, cause the Company to breach certain financial covenants in its credit facilities, result in an impairment charge, and cause the Company to incur a loss if the Company sells vessels following a decline in their market value. The fair market values of dry bulk vessels, including the Company s vessels, have generally experienced high volatility and have recently declined significantly. The fair market value of vessels may increase and decrease depending on but not limited to the following factors: general economic and market conditions affecting the shipping industry; competition from other shipping companies; types and sizes of vessels; the availability of other modes of transportations; cost of newbuildings; shipyard capacity; governmental or other regulations; age of vessels; prevailing level of charter rates; the need to upgrade secondhand and previously owned vessels as a result of charterer requirements, and technological advances in vessel design or equipment or otherwise. During the period a vessel is subject to a charter, the Company will not be permitted to sell it to take advantage of increases in vessel values without the charterer's consent. If the Company sells a vessel at a time when ship prices have fallen, the sale may be at less than the vessel's carrying amount on its financial statements, with the result that the Company could incur a loss and a reduction in earnings. In addition, if the Company determines at any time that a vessel's future useful life and earnings require the Company to impair its value on its financial statements, this would result in a charge against its earnings and a reduction of its shareholders' equity. If the fair market values of its vessels decline, the amount of funds the Company may draw down under its secured credit facilities may be limited and the Company may not be in compliance with certain covenants contained in its secured credit facilities, which may result in an event of default. In such circumstances, the Company may not be able to refinance its debt or obtain additional financing. If the Company is not able to comply with the covenants in its secured credit facilities, and are unable to remedy the relevant breach, its lenders could accelerate its debt and foreclose on its fleet. Conversely, if vessel values are elevated at a time when the Company wishes to acquire additional vessels, the cost of acquisition may increase and this could adversely affect the Company s business, results of operations, cash flow and financial condition. 26

28 The Company may be unable to successfully compete with other vessel operators for charters, which could adversely affect its results of operations and financial position. The operation of dry bulk vessels and transportation of dry bulk cargoes is extremely competitive. Through the Company s operating subsidiaries the Company competes with other vessel owners, and, to a lesser extent, owners of other size vessels. The dry bulk market is highly fragmented. It is possible that the Company could not obtain suitable employment for its vessels, which could adversely affect its results of operations and financial position. The Company s fixed rate time charters may limit its ability to benefit from any improvement in charter rates, and at the same time, its revenues may be adversely affected if the Company does not successfully employ its vessels on the expiration of its charters. Six of the Company s vessels are currently on a fixed rate time charters expiring between November 2016 and December Although the Company s fixed rate time charters generally provide reliable revenues, they also limit the portion of the Company s fleet available for spot market voyages during an upswing in the dry bulk industry cycle, when spot market voyages might be more profitable. By the same token, the Company cannot assure that it will be able to successfully employ its vessels in the future or renew its existing charters at rates sufficient to allow the Company to operate its business profitably or meet its obligations. A decline in charter or spot rates or a failure to successfully charter the Company s vessels could have a material adverse effect on its business, financial condition, results of operations and ability to pay cash distributions Declines in charter rates and other market deterioration could cause the Company to incur impairment charges. The carrying values of the Company s vessels and other assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of the vessel or other assets may no longer be recoverable. The Company assesses recoverability of the carrying value by estimating the future net cash flows expected to result from the vessel, including eventual disposal. If the future net undiscounted cash flows and the estimated fair market value of the vessel are less than the carrying value an impairment loss is recorded equal to the difference between the vessel's carrying value and fair value. Any impairment charges incurred as a result of declines in charter rates and other market deterioration could negatively affect the Company s business, financial condition or operating results or the trading price of its common shares. During the year ended December 31, 2015, the Company recorded a vessel impairment loss off USD million related to five vessels sold to Ship Finance and two newbuilding contracts sold to Frontline]. During the year ended December 31, 2013, the Company recorded an impairment loss of USD 5.3 million related to the VLCC Mayfair. Operational risks and damage to the Company s vessels could adversely impact the Company s performance. The Company s vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather and other events outside the Company s control, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy, labor strikes, boycotts and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to the Company s customer relationships and market disruptions, delay or rerouting. If the Company s vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be substantial. The Company may have to pay drydocking costs that its insurance does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect the Company s business and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. The Company may be unable to find space at a suitable drydocking facility or its vessels may be forced to travel to a drydocking facility that is not conveniently located relative to its vessels' positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely affect the Company s business and financial condition. Further, the total loss of any of the Company s vessels could harm the Company s reputation as a safe and reliable vessel owner and operator. If the Company is unable to adequately maintain or safeguard its vessels, the Company may be unable to prevent any such damage, costs or loss which could negatively impact its business, financial condition, results of operations, cash flows and ability to pay cash distributions. Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and cause disruption of the Company s business. International shipping is subject to security and customs inspection and related procedures in countries of origin, destination and trans-shipment points. Under the U.S. Maritime Transportation Security Act of 2002, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. These security procedures can result in delays in the loading, offloading or trans- 27

29 shipment and the levying of customs duties, fines or other penalties against exporters or importers and, in some cases, carriers. Future changes to the existing security procedures may be implemented that could affect the dry bulk sector. These changes have the potential to impose additional financial and legal obligations on carriers and, in certain cases, to render the shipment of certain types of goods uneconomical or impractical. These additional costs could reduce the volume of goods shipped, resulting in a decreased demand for vessels and have a negative effect on the Company s business, revenues and customer relations. Failure to comply with the U.S. Foreign Corrupt Practices Act of 1977 and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract terminations and an adverse effect on the Company s business. The Company may operate in a number of countries throughout the world, including countries known to have a reputation for corruption. The Company is committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977 (the U.S. Foreign Corrupt Practices Act ), and other anti-bribery legislation. The Company is subject, however, to the risk that the Company, its affiliated entities or its or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect the Company s business, results of operations or financial condition. In addition, actual or alleged violations could damage the Company s reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of the Company s senior management. Incurrence of expenses or liabilities may reduce or eliminate distributions. The amount and timing of cash distributions will depend on the Company s earnings, financial condition, cash position, Bermuda law affecting the payment of distributions and other factors. The Company could incur other expenses or contingent liabilities that would reduce or eliminate the cash available for distribution by the Company as cash distributions. The declaration and payment of cash distributions is subject at all times to the discretion of the Company s Board. The Company cannot assure that it will pay cash distributions. The Company may be subject to litigation that, if not resolved in its favor and not sufficiently insured against, could have a material adverse effect on the Company. The Company may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, shareholder litigation, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of the Company s business. Although the Company intends to defend these matters vigorously, the Company cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on the Company. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on the Company s financial condition. The aging of the Company s fleet may result in increased operating costs in the future, which could adversely affect the Company s earnings. In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. The age of the Company s dry bulk carrier fleet is approximately three years. As the Company s fleet ages, the Company will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, including environmental regulations, safety or other equipment standards related to the age of vessels, may require expenditures for alterations, or the addition of new equipment, to the Company s vessels and may restrict the type of activities in which its vessels may engage. As the Company s vessels age, market conditions might not justify those expenditures or enable the Company to operate its vessels profitably during the remainder of their useful lives. If the Company does not set aside funds and are unable to borrow or raise funds for vessel replacement at the end of a vessel's useful life its revenue will decline, which would adversely affect its business, results of operations, financial condition and ability to pay cash distributions. If the Company does not set aside funds and are unable to borrow or raise funds for vessel replacement, the Company will be unable to replace the vessels in its fleet upon the expiration of their remaining useful lives. The Company s cash flows and income are dependent on the revenues earned by the chartering of its vessels. If the Company is unable to replace the vessels in its fleet upon the expiration of their useful lives, its business, results of operations, financial condition and 28

30 ability to pay cash distributions would be adversely affected. Any funds set aside for vessel replacement will not be available for cash distributions. The Company may not have adequate insurance to compensate it if its vessels are damaged or lost. The Company procures insurance for its fleet against those risks that the Company believes companies in the shipping industry commonly insure. These insurances include hull and machinery insurance, protection and indemnity insurance, which include environmental damage and pollution insurance coverage, and war risk insurance. The Company can give no assurance that it will be adequately insured against all risks and the Company cannot guarantee that any particular claim will be paid, even if the Company has previously recorded a receivable or revenue in respect of such claim. The Company s insurance policies may contain deductibles for which it will be responsible and limitations and exclusions, which may increase its costs or lower its revenues. The Company cannot assure that the Company will be able to obtain adequate insurance coverage for its vessels in the future or renew its existing policies on the same or commercially reasonable terms, or at all. For example, more stringent environmental regulations have in the past led to increased costs for, and in the future may result in the lack of availability of, protection and indemnity insurance against risks of environmental damage or pollution. Any uninsured or underinsured loss could harm the Company s business, results of operations, cash flows, financial condition and ability to pay cash distributions. In addition, its insurance may be voidable by the insurers as a result of certain of its actions, such as its vessels failing to maintain certification with applicable maritime selfregulatory organizations. Further, the Company cannot assure that its insurance policies will cover all losses that the Company incurs, or that disputes over insurance claims will not arise with its insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. In addition, the Company s insurance policies may be subject to limitations and exclusions, which may increase the Company s costs or lower its revenues, thereby possibly having a material adverse effect on its business, results of operations, cash flows, financial condition and ability to pay cash distributions. The Company may be subject to calls because it obtains some of its insurance through protection and indemnity associations. The Company may be subject to increased premium payments, or calls, if the value of its claim records, the claim records of its fleet managers, and/or the claim records of other members of the protection and indemnity associations through which the Company receives insurance coverage for tort liability (including pollution-related liability) significantly exceed projected claims. In addition, the Company s protection and indemnity associations may not have enough resources to cover claims made against them. The Company s payment of these calls could result in significant expense to the Company, which could have a material adverse effect on its business, results of operations, cash flows, financial condition and ability to pay cash distributions. The Company is a holding company, and depends on the ability of its subsidiaries to distribute funds to it in order to satisfy its financial obligations and to make dividend payments. The Company is a holding company and its subsidiaries conduct all of its operations and own all of its operating assets. The Company has no significant assets other than the equity interests in its subsidiaries. As a result, its ability to satisfy its financial obligations and to make dividend payments in the future depends on its subsidiaries and their ability to distribute funds to it. There are currently no material legal or economic restrictions on the ability of subsidiaries to transfer funds to the Company in the form of cash, dividends, loans, or advance. However, if the Company is unable to obtain funds from its subsidiaries, the Board may exercise its discretion not to declare or pay dividends. The Company does not intend to obtain funds from other sources to pay dividends. The international nature of the Company s operations may make the outcome of any bankruptcy proceedings difficult to predict. The Company is incorporated under the laws of Bermuda and it conducts operations in countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding involving the Company or any of its subsidiaries, bankruptcy laws other than those of the United States could apply. If the Company becomes a debtor under U.S. bankruptcy law, bankruptcy courts in the United States may seek to assert jurisdiction over all of its assets, wherever located, including property situated in other countries. There can be no assurance, however, that the Company would become a debtor in the United States, or that a U.S. bankruptcy court would be entitled to, or accept, jurisdiction over such a bankruptcy case, or that courts in other countries that have jurisdiction over the Company and its operations would recognize a U.S. bankruptcy court s jurisdiction if any other bankruptcy court would determine it had jurisdiction. 29

31 Because the Company is a foreign corporation, shareholders may not have the same rights that a shareholder in a United States corporation may have. The Company is a Bermuda company. The Company s memorandum of association and bye-laws and the Bermuda Companies Act 1981, as amended, govern its affairs. Class actions and derivative actions are not generally available under Bermuda law. Investors may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction. Under Bermuda law a director generally owes a fiduciary duty only to the company; not to the company's shareholders. The Company s shareholders may not have a direct cause of action against the Company s directors. The Company s bye-laws provide that the shareholders waive any claim or right of action he may have against the directors and officers and their delegates, except in respect of fraud or dishonesty. Its bye-laws further provide for the indemnification of its directors or officers against any liability arising out of any act or omission except for an act or omission constituting fraud or dishonesty. United States tax authorities could treat the Company as a "passive foreign investment company", which could have adverse United States federal income tax consequences to United States shareholders. A foreign corporation will be treated as a "passive foreign investment company" ( PFIC ) for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income". For purposes of these tests, "passive income" includes cash distributions, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income". United States shareholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. Based on the Company s current and proposed method of operation, the Company does not believe that the Company is or that the Company has been since the beginning of its 2004 taxable year, or that the Company will be a PFIC with respect to any taxable year. In this regard, the Company intends to treat the gross income the Company derives or is deemed to derive from its time chartering and voyage chartering activities as services income, rather than rental income. Accordingly, the Company believes that its income from these activities does not constitute "passive income", and the assets that the Company owns and operates in connection with the production of that income do not constitute assets that produce, or are held for the production of, "passive income". Although there is no direct legal authority under the PFIC rules addressing the Company s method of operation there is substantial legal authority supporting the Company s position consisting of case law and United States Internal Revenue Service (the IRS ) pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, it should be noted that there is also authority that characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept the Company s position, and there is a risk that the IRS or a court of law could determine that the Company is a PFIC. Moreover, no assurance can be given that the Company would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of its operations. If the IRS were to find that the Company is or has been a PFIC for any taxable year, the Company s United States shareholders will face adverse United States federal income tax consequences. Under the PFIC rules, unless those shareholders make an election available under United States Internal Revenue Code of 1986, as amended (the Code ) (which election could itself have adverse consequences for such shareholders) such shareholders would be liable to pay United States federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of the Company s common shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of the Company s common shares. The Company may have to pay tax on United States source income, which would reduce its earnings. Under the Code, 50 % of the gross shipping income of a vessel owning or chartering corporation, such as the Company and its subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States, may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder. The Company believes that the Company and each of its subsidiaries are qualified for this statutory tax exemption for the taxable year ending on December 31, 2015 and the Company intends to this position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond the Company s control that could cause the 30

32 Company to lose the benefit of this tax exemption for future taxable years and thereby become subject to United States federal income tax on its United States source shipping income. For example, the Company would no longer qualify for exemption under Section 883 of the Code for a particular taxable year if certain non-qualified shareholders with a 5% or greater interest in its common shares owned, in the aggregate, 50% or more of its outstanding common shares for more than half the days during the taxable year. It is possible that the Company could be subject to this rule for its taxable year ending on December 31, Due to the factual nature of the issues involved, there can be no assurances on its tax-exempt status or that of any of its subsidiaries. If the Company or its subsidiaries are not entitled to exemption under Section 883 of the Code for any taxable year, the Company, or its subsidiaries, could be subject during those years to an effective 2% United States federal income tax on gross shipping income derived during such a year that is attributable to the transport of cargoes to or from the United States. The imposition of this tax would have a negative effect on the Company s business and would result in decreased earnings available for distribution to its shareholders. However, the amount of the Company s shipping income that would be subject to this tax has historically not been material. 2.3 Risks Relating to the Shares The participation in the Subsequent Offering and the sale and transfer of the Private Placement Shares and the Offer Shares are subject to restrictions under the securities laws of the United States and other jurisdictions. The Offer Shares will only be offered and sold outside the United States in reliance on Regulation S under the U.S. Securities Act and cannot be sold to U.S. persons as defined in Regulation S. In the Subsequent Offering, the Company will allocate the Offer Shares to subscribers who (i) were registered as holders of Shares in the Company's register of shareholders with the VPS as of expiry of February 22, 2016 (the Record Date) with a holding of less than 100,000 Shares, (ii) were not allocated shares in the Private Placement, and (iii) are not resident in a jurisdiction where such offering would be unlawful or, for jurisdictions other than Norway, would require any prospectus, filing, registration or similar action (each such shareholder an Eligible Shareholder, and collectively, Eligible Shareholders). The Private Placement Shares and the Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and may not be deposited into any unrestricted depositary receipt facility in the United States, unless at the time of deposit the shares are no longer restricted securities. The Private Placement Shares and the Offer Shares may not be reoffered, resold, pledged or otherwise transferred, for a period of six months, after the full purchase price consideration for the Private Placement Shares or the Offer Shares, respectively, is paid, except (a) under a registration statement that has been declared effective under the U.S. Securities Act; (b) outside the United States in accordance with Rule 903 or Rule 904 of Regulation S, as applicable or (c) pursuant to an applicable exemption from the registration requirements of the U.S. Securities Act. The Private Placement Shares and the Offer Shares will therefore be delivered and registered on a separate ISIN BMG and listed on the Oslo Stock Exchange only under a separate trading symbol GOGL R. During the second half of 2016, after the restriction period for all Private Placement Shares and Offer Shares has expired, the Private Placement Shares and the Offer Shares are expected to be registered with the ordinary ISIN BMG of the Company and thereafter commence to trade under the Company s ordinary trading symbol GOGL and become freely tradable on both the Oslo Stock Exchange and NASDAQ Global Select Market. See Section 19 Selling and Transfer Restrictions. The Company s share price may be highly volatile and future sales of its common shares could cause the market price of its common shares to decline. The Company s common shares commenced trading on the NASDAQ Global Select Market ( NASDAQ ) in February 1997 and currently trade under the symbol "GOGL". Beginning on April 7, 2015, its shares traded on the Oslo Stock Exchange under the ticker code GOGL. The Company cannot assure that an active and liquid public market for its common shares will continue. The market price of the Company s common shares has historically fluctuated over a wide range and may continue to fluctuate significantly in response to many factors, such as actual or anticipated fluctuations in its operating results, changes in financial estimates by securities analysts, economic and regulatory trends, general market conditions, rumors and other factors, many of which are beyond the Company s control. Since 2008, the stock market has experienced extreme price and volume fluctuations. If the volatility in the market continues or worsens, it could have an adverse effect on the market price of the Company s common shares and impact a potential sale price if holders of the Company s common shares decide to sell their shares. Investors may not be able to exercise their voting rights for Shares registered in a nominee account. Beneficial owners of Shares listed on the Oslo Stock Exchange that are registered in a nominee account (such as through brokers, dealers or other third parties) may not be able to vote for such shares unless their ownership is re-registered in their names with the VPS prior to the Company s general meetings. The Company cannot guarantee that beneficial owners of the Shares will receive the notice of a general meeting of shareholders of the Company in time to instruct their 31

33 nominees to either effect a re-registration of their Shares or otherwise vote for their shares in the manner desired by such beneficial owners. Future issuance of shares or other securities may dilute the holdings of shareholders and could materially affect the price of the Shares. It is possible that the Company may in the future decide to offer additional shares or other securities in order to secure financing of new projects, in connection with unanticipated liabilities or expenses or for any other purposes. Any such additional offering could reduce the proportionate ownership and voting interests of holders of Shares, as well as the earnings per share and the net asset value per share of the Company, and any offering by the Company could have a material adverse effect on the market price of the Shares. Because the Company s offices and most of its assets are outside the United States, shareholders may not be able to bring suit against the Company, or enforce a judgment obtained against the Company in the United States. The Company s executive offices, administrative activities and assets are located outside the United States. As a result, it may be more difficult for investors to effect service of process within the United States upon the Company, or to enforce both in the United States and outside the United States judgments against the Company in any action, including actions predicated upon the civil liability provisions of the federal securities laws of the United States. Shareholders outside Norway are subject to exchange rate risk. The Shares listed on the Oslo Stock Exchange are priced in NOK, and any future payments of dividends on the Shares listed on the Oslo Stock Exchange will be paid in NOK. Accordingly, any investor outside Norway is subject to adverse movements in NOK against their local currency as the foreign currency equivalent of any dividends paid on the Shares listed on the Oslo Stock Exchange or price received in connection with sale of such Shares could be materially adversely affected. There are certain risks connected to the shares being registered in the VPS. The Shares listed on the Oslo Stock Exchange are for the purpose of Bermuda company law, registered in the Company's register of members (directly or indirectly) in the name of Nordea Bank Norge ASA (the "VPS Registrar"), which holds the Shares as a nominee on behalf of the beneficial owners. For the purpose of enabling trading of Shares on the Oslo Stock Exchange, the Company maintains a register in the VPS, where the beneficial ownership interests in the shares and transfer of such beneficial ownership interests are recorded. The Company has entered into a registrar agreement with the VPS Registrar where the VPS Registrar is appointed as registrar and nominee, in order to provide for the registration of each investor s beneficial ownership in the Shares in the VPS on investors individual VPS accounts. In accordance with market practice in Norway and system requirements of the VPS, the beneficial ownership of investors is registered in the VPS under the name of a share and the beneficial ownership is listed and traded on the Oslo Stock Exchange as "shares" in the Company. Investors who purchase Shares (although recorded as owners of the Shares in the VPS) will have no direct rights against the Company. Each VPS-registered share represents evidence of beneficial ownership of one of the Shares for the purposes of Norwegian law, however such ownership would not necessarily be recognized by a Bermuda or other court. The VPS-registered shares are freely transferable with delivery and settlement through the VPS-system. Investors must look solely to the VPS Registrar for the payment of dividends, for the exercise of voting rights attached to the Shares and for all other rights arising in respect of the Shares. 32

34 3. RESPONSIBILITY STATEMENT The Board of Directors of Golden Ocean Group Limited accepts responsibility for the information contained in this Prospectus. The members of the Board of Directors confirm that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of their knowledge, in accordance with the facts and contains no omissions likely to affect its import. February 23, 2016 The Board of Directors of Golden Ocean Group Limited Ola Lorentzon (Chairman) John Fredriksen Hans Petter Aas Kate Blankenship Gert-Jan van der Akker 33

35 4. GENERAL INFORMATION This Section provides general information on the presentation of financial and other information, as well as the use of forward-looking statements, in this Prospectus. You should read this information carefully before continuing. 4.1 Cautionary Note Regarding Forward-Looking Statements This Prospectus includes forward-looking statements ( Forward-looking Statements ) that reflect the Company s current views with respect to future events and financial and operational performance; including, but not limited to, statements relating to the risks specific to the Group s business, future earnings from charter contracts, the ability to distribute dividends, the solution to contractual disagreements with counterparties, the implementation of strategic initiatives as well as other statements relating to the Group s future business development and economic performance. These forwardlooking statements can be identified by the use of forward-looking terminology; including the terms assumes, projects, forecasts, estimates, expects, anticipates, believes, plans, intends, may, might, will, would, can, could, should or, in each case, their negative or other variations or comparable terminology. These Forward-looking Statements are not historical facts. They appear in a number of places throughout this Prospectus;, Section 7 Business Overview, Section 8 Industry Overview, Section 10 Selected Financial Information and other information and Section 11 Operating and Financial Review and include statements regarding the Company s intentions, beliefs or current expectations concerning, among other things, goals, objectives, financial condition and results of operations, liquidity, outlook and prospects, growth, strategies, impact of regulatory initiatives, capital resources and capital expenditure and dividend targets, and the industry trends and developments in the markets in which the Group operates. Prospective investors in the Shares are cautioned that Forward-looking Statements are not guarantees of future performance and that the Group s actual financial position, operating results and liquidity, and the development of the industry in which the Group operates may differ materially from those contained in or suggested by the Forward-looking Statements contained in this Prospectus. The Company cannot guarantee that the intentions, beliefs or current expectations that these Forward-looking Statements are based will occur. By their nature, the Forward-looking Statements involve and are subject to known and unknown risks, uncertainties and assumptions as they relate to events and depend on circumstances that may or may not occur in the future. Because of these known and unknown risks, uncertainties and assumptions, the outcome may differ materially from those set out in the Forward-looking Statements. Should one or more of these risks and uncertainties materialize, or should any underlying assumption prove to be incorrect, the Group s business, actual financial condition, cash flows or results of operations could differ materially from that described herein as anticipated, believed, estimated or expected. The information contained in this Prospectus, including the information set out under Section 2 Risk Factors, identifies additional factors that could affect the Company s financial position, operating results, liquidity and performance. Prospective investors in the Shares are urged to read all sections of this Prospectus and, in particular, Section 2 Risk Factors for a more complete discussion of the factors that could affect the Group s future performance and the industry in which the Company operates when considering an investment in the Shares. Except as required according to Section 7-15 of the Norwegian Securities Trading Act, the Company undertakes no obligation to publicly update or publicly revise any Forward-looking Statement, whether as a result of new information, future events or otherwise. All subsequent written and oral Forward-looking Statements attributable to the Group or to persons acting on the Company s behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Prospectus. 4.2 Presentation of Industry Data and Other Information Sources of Industry and Market Data To the extent not otherwise indicated, the information contained in this Prospectus on the market environment, market developments, growth rates, market trends, market positions, industry trends, competition in the industry in which the Company operates and similar information are estimates based on data compiled by professional organizations, consultants and analysts; in addition to market data from other external and publicly available sources as well as the Company s knowledge of the markets. While the Company has compiled, extracted and reproduced such market and other industry data from external sources, the Company has not independently verified the correctness of such data. Thus, the Company takes no responsibility for the correctness of such data. The Company cautions prospective investors not to place undue reliance on the above mentioned data. 34

36 Although the industry and market data is inherently imprecise, the Company confirms that where information has been sourced from a third party, such information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where information sourced from third parties has been presented, the source of such information has been identified. In addition, although the Company believes its internal estimates to be reasonable, such estimates have not been verified by any independent sources and the Company cannot assure prospective investors as to their accuracy or that a third party using different methods to assemble, analyze or compute market data would obtain the same results. The Company does not intend to or assume any obligations to update industry or market data set forth in this Prospectus. Finally, behavior, preferences and trends in the marketplace tend to change. As a result, prospective investors should be aware that data in this Prospectus and estimates based on those data may not be reliable indicators of future results. Vessel Valuation Reports The information and data contained in vessel valuation reports relating to the vessels in the have been provided by Fearnleys AS and Nordic Shipping AS at the request of the Company. Fearnleys AS and Nordic Shipping AS is each an independent and specialized ship brokerage firm with no material interests in the Company. The address of Fearnleys AS is Grev Wedels plass 9, 0107 Oslo, Norway and the address of Nordic Shipping AS is Fridtjof Nansens plass 6, 0110 Oslo, Norway. Fearnleys AS and Nordic Shipping AS have given their consent to the inclusion of the vessel valuation reports in this Prospectus. The valuation reports are as of December 31, 2015 and there have not been material changes to the values since this date. See Appendix A Valuation Reports to this Prospectus for further information about the basis of preparation of the vessel valuation reports. Other Information In this Prospectus, all references to NOK are to the lawful currency of Norway, and all references to U.S. dollar, US$, USD, or $ are to the lawful currency of the United States of America. In this Prospectus all references to EU are to the European Union and its Member States as of the date of this Prospectus; all references to EEA are to the European Economic Area and its member states as of the date of this Prospectus; and all references to US, U.S. or United States are to the United States of America. Certain figures included in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly. 35

37 5. THE EQUITY RAISE This Section provides summary information about the Equity Raise of the Company. You should read this Section in conjunction with the other parts of this Prospectus, in particular, Section 6 Use of Proceeds; Reasons for the Equity Raise, Section 7 Business Overview, Section 9 Capitalization and Indebtedness, Section 11 Operating and Financial Review and Section 18 Terms of the Subsequent Offering. 5.1 Raising of New Equity; Overview In February, 2016, the Company announced an equity raise in the Company (the Equity Raise ) comprising of a Private Placement, and a Subsequent Offering to those shareholders of the Company as of the Record Date that did not participate in the Private Placement. 5.2 The Private Placement On February 18, 2016, the Company announced that it had agreed with the lenders to amend the terms for its senior, secured loan agreements, see Section 11.8 Operating and Financial Review Borrowing Activities. For the period from April 1, 2016 to September 30, 2018 there will be no repayments, the minimum value covenant is set at 100% and the market adjusted equity ratio is waived. The Company has also agreed that for the nine remaining newbuilding contracts where the Company has financing in the USD million term loan facility, there will be a fixed drawdown of USD 25.0 million per vessel subject to compliance with the minimum value covenant of 100%. A cash sweep mechanism will be put in place whereby the Company will pay down on the deferred repayment amount should the cash position of the Company improve. The principal margins on the loans are unchanged and in average 2.3%, however the Company will pay a slightly increased margin of 4.25% for the at any given time deferred amount under the loan facilities. The agreement with the lenders was subject to the Company raising USD 200 million in equity. Prior to any equity contribution from the Company s shareholders, an amendment to the minimum value covenant and a waiver of the market adjusted equity ratio was agreed from February 2016 to, but not including, June 30, On February 19, 2016, the Company announced that it had completed a Private Placement of new Shares of a total of NOK 1,718,420,000, approximately USD 200 million. The Private Placement Shares were subscribed for at a subscription price of NOK 5.00 per Share. On February 22, 2016, the Board of Directors resolved to increase the Company s share capital pursuant to the authorized share capital of the Company, from USD 1,726, to USD 5,163, by issue of the 343,684,000 Private Placement Shares. The Private Placement Shares was delivered on a delivery-versus-payment basis from February 23, Assuming that the Subsequent Offering is fully subscribed, the Private Placement Shares will constitute approximately 62.4% of the Company s share capital following the implementation of the Subsequent Offering. The Private Placement Shares were issued pursuant to the under the Bermuda Companies Act of 1981 (the Bermuda Companies Act ) and are registered with the Bermuda Registrar of Companies and with an equivalent number of depository receipts in book-entry form with the VPS. The Company s register of shareholders with the VPS is administered by Nordea Issuer Services, Essendropsgate 7, 0107 Oslo, Norway. See Section 16.3 Securities Trading in Norway Registration of the Shares with the VPS. The Private Placement Shares carry full shareholder rights and rank in parity with all Shares in the Company. Each Private Placement Share has a nominal value of USD 0.01 and carries one vote per Share. The Private Placement Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and may not be deposited into any unrestricted depositary receipt facility in the United States, unless at the time of deposit the shares are no longer restricted securities. The Private Placement Shares may not be reoffered, resold, pledged or otherwise transferred for a period of six months after the full purchase price consideration for the Private Placement Shares is paid, except (a) outside the United States in accordance with Rule 903 or Rule 904 of Regulation S, as applicable or (b) pursuant to an applicable exemption from the registration requirements of the U.S. Securities Act. The Private Placement Shares will therefore be delivered and registered on a separate ISIN BMG and listed on the Oslo Stock Exchange only under a separate trading symbol GOGL R. During the second half of 2016, after expiry of the restriction period for all Private Placement Shares and Offer Shares, the Private Placement Shares are expected to be registered with the ordinary ISIN BMG of the Company and thereafter commence to trade under the Company s ordinary trading symbol GOGL and become freely tradable on both the Oslo Stock Exchange and NASDAQ Global Select Market. Hemen, which is indirectly controlled by trusts established by John Fredriksen, director in the Company, for the benefit of his immediate family, was allocated 158,000,000 Private Placement Shares at the subscription price of NOK 5.00 in the Private Placement. 36

38 5.3 The Subsequent Offering To allow for participation in the Equity Raise by those shareholders that as of the Record Date did not participate in the Private Placement and such that these shareholders could reduce the dilution they experienced as a result of the Private Placement, the Board of Directors resolved to launch the Subsequent Offering as documented by this Prospectus, see Section 18 Terms of the Subsequent Offering. Assuming that the Subsequent Offering is fully subscribed, the Offer Shares in the Subsequent Offering will constitute approximately 6.2% of the Company's share capital following the implementation of the Subsequent Offering; see Section 6.2 Use of Proceeds; Reasons for the Equity Raise Dilution. 5.4 Expenses The Company estimates that the total expenses in connection with the Private Placement and the Subsequent Offering will amount to approximately USD 3-4 million, including fees to advisors, auditor and additional listing fees. 5.5 Interests of Natural and Legal Persons Involved in the Private Placement The Managers or its affiliates have provided from time to time, and may provide in the future, investment and commercial banking services to the Company and its affiliates in the ordinary course of business, for which they may have received and may continue to receive customary fees and commissions. The Managers, their employees and any affiliates may currently own Shares in the Company. The Managers do not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In accordance with market practice, the Managers receive a fee calculated as a certain percentage of the proce eds from the Private Placement and the Subsequent Offering. Beyond the abovementioned, the Company is not aware of any interest of natural or legal persons involved in the Private Placement or the Subsequent Offering. 37

39 6. USE OF PROCEEDS; REASONS FOR THE EQUITY RAISE The discussion about use of proceeds below only addresses the intentions of the Company as of the date of this Prospectus; and no assurance can be made that the proceeds actually will be applied to all or any of the purposes identified herein. 6.1 Use of Proceeds The gross proceeds from the Private Placement were NOK 1,718,420,000, or approximately USD 200 million. Assuming the Subsequent Offering is fully subscribed, the Company estimates that the gross proceeds from the Subsequent Offering will be approximately NOK 171,842,000, or approximately USD 20 million. The Company estimates that the total expenses in connection with the Equity Raise, will amount to approximately USD 3-4 million. Hence, the net cash proceeds from the Equity Raise, is estimated to amount to approximately USD 216 million. The Company intends to apply the net proceeds of the Equity Raise to strengthen the Company s balance sheet and create a comfortable liquidity runway through the current market cycle, as well as facilitate amendments of all debt facilities of the Company, including amortization deferral and covenant waivers. For the purposes of arriving at the abovementioned USD figures, amounts in NOK have been translated to USD on the basis of a NOK/USD exchange rate of Dilution The table below shows the percentage split of the Company's share capital following the Equity Raise; split by pre-equity Raise share capital, share capital issued in the Private Placement and share capital issued in the Subsequent Offering, on the basis that the Subsequent Offering is fully subscribed: Pre-Equity Raise share capital % Private Placement share capital % Subsequent Offering share capital % (1) (1) Assuming the Subsequent Offering is fully subscribed. The Private Placement resulted in a dilution of the then existing shareholders of the Company of approximately 66.6%. Taken together with the dilution resulting from the Private Placement, the Subsequent Offering, assuming that it is fully subscribed, will result in a dilution of the shareholders of the Company prior to the Private Placement, to the extent such shareholders elect not to participate in the Subsequent Offering, of approximately 68.6%. 38

40 7. BUSINESS OVERVIEW This Section provides an overview of the business of the Group as of the date of this Prospectus. The following discussion contains Forward-Looking Statements that reflect the Company's plans and estimates; see Section 4.1 General Information Cautionary Note Regarding Forward-Looking Statements. You should read this Section in conjunction with the other parts of this Prospectus, in particular Section 2 Risk Factors and Section 11 Operating and Financial Review. 7.1 Introduction The Company is an international shipping company that owns and operates a fleet of drybulk carrier vessels, focusing on the Capesize, Supramax and Panamax markets. As of the date of this Prospectus, the Company has a fleet of 71 vessels, including 13 vessels chartered-in long term on bareboat charter or time charter and one owned in a joint venture, with an aggregate capacity of 9.3 million dwt. The fleet of the Company consists of 58 operating vessels and 13 vessels currently under construction at shipyards, of which one is sold and will be delivered to new owners upon completion from the yard. For more details about the Company s fleet, see Section 7.3 Fleet below. The Company s vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes. The Company s executive management team comprises Herman Billung, CEO of Golden Ocean Management AS, and Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS. The Company s business strategy is to operate a diversified fleet of dry bulk carriers with flexibility to adjust its exposure to the dry bulk market depending on existing factors such as charter rates, newbuilding costs, vessel resale and scrap values and vessel operating expenses resulting from, among other things, changes in the supply of and demand for dry bulk capacity. The Company may adjust its exposure through time charters, bareboat charters, sale and leasebacks, sales and purchases of vessels, newbuilding contracts and acquisitions. The Company s long term goal is to renew and grow its fleet through selective acquisitions. 7.2 History and Development The Company was incorporated as Knightsbridge Tankers Limited in Bermuda as an exempted company under the Bermuda Companies Act of 1981 on September 18, The Company has been listed on the NASDAQ under the symbol "VLCCF" since its initial public offering in February The Company was originally established for the purpose of owning and operating five very large crude oil carriers ( VLCCs ). Upon the purchase from their previous owners on February 27, 1997 until March 2004, the Company chartered its vessels to Shell International on long-term bareboat charters. In 2007, the Company entered into agreements for the construction of two Capesize dry bulk carriers. Both of the vessels commenced five-year time charters following their delivery to the Company in August and October In July 2010, the Company acquired a 2010-built Capesize dry bulk carrier from Former Golden Ocean and in October 2010, the Company acquired a second 2010-built Capesize dry bulk carrier from Former Golden Ocean. Both vessels were acquired with existing time charters. The Company sold one VLCC in 2007, three in 2012 and one in 2013, and from that time owned dry bulk vessels only. In 2013, the Company concluded newbuilding contracts for two 182,000 dwt Capesize bulk carriers with Japan Marine United Corporation and two 180,000 dwt Capesize bulk carriers with Daehan Shipyard. The design of these vessels represented the next generation of Capesize bulk carriers using the latest technology available in order to secure fuel efficiency. In March 2014, the Company agreed to acquire five special purpose companies ( SPCs ) from Frontline 2012 Ltd. ( Frontline 2012 ), each owning a fuel efficient 180,000 dwt Capesize dry bulk newbuilding and one 2013-built Capesize dry bulk carrier from Karpasia Shipping Inc. ( Karpasia ). The consideration consisted of the issuance of 18.6 million shares, USD million was assumed in remaining newbuilding installments and USD 24.0 million was paid in cash. The 18.6 million shares were valued at USD per share. The vessels were delivered to the Company from April 2014 to September In April 2014, the Company agreed to acquire 25 SPCs from Frontline 2012, each owning a fuel efficient Capesize dry bulk newbuilding. In September 2014, the Company acquired 13 of these SPCs. The consideration for the SPCs consisted of the issuance of 31.0 million shares, valued at USD per share. The remaining 12 SPCs were acquired on March 16, 2015 and the Company issued 31.0 million shares as consideration, valued at USD 4.10 per share. On October 7, 2014, the Company entered into an agreement and plan of merger (the Merger Agreement ) with Former Golden Ocean, pursuant to which the two companies agreed to merge, with the Company as the surviving company (the Merger ). The Merger was completed on March 31, 2015 and the Company issued 61.4 million shares (net) as 39

41 consideration to the shareholders of Former Golden Ocean. At the same time the Company obtained a secondary listing at the Oslo Stock Exchange. Former Golden Ocean was established in 2004 and its shares were admitted for trading on the Oslo Stock Exchange in December Starting off with a fleet of three vessels and options to acquire two newbuilding orders, Former Golden Ocean had a substantial growth in fleet size and business activity. Expansion took place both through purchases of second hand tonnage and newbuildings, as well as through time charter and bareboat agreements. At the time of the Merger, Former Golden Ocean owned 28 vessels and had at the same time five Supramax vessels under construction and had several chartered-in vessels both on short term and longer term duration. Upon completion of the Merger the Company had a fleet of 82 vessels, including 4 vessels chartered-in long term on bareboat charter or time charter and one owned in a joint venture. Two of the vessels on long term charter were redelivered to their owners during the second quarter of The fleet of the Company consisted of 59 operating vessels and 23 vessels currently under construction at shipyards. In April 2015, the Company entered into various transactions related to its fleet. The Company agreed to a sale and leaseback transaction with Ship Finance for eight Capesize vessels. These vessels were built in Korea and China between 2009 and 2013 and were sold en-bloc for an aggregate price of USD million or USD 34.0 million per vessel on average. The vessels were time chartered-in by one of the Company's subsidiaries for a period of 10 years. The transaction was completed during the third quarter of Further, the Company agreed to sell two old Capesize vessels, which were delivered to new owners during second quarter of 2015, and four Capesize newbuilding vessels under construction. The four Capesize newbuilding contracts will be completed at yard and delivered to new owners upon completion. Two of these vessels were completed and delivered in 2015, one in February 2016 and the last will be completed and delivered during The Company also agreed with the various yards to postpone delivery date on its newbuilding contracts. In November 2015 the Company converted two Capesize newbuilding contracts to Suezmax newbuilding contracts and subsequently sold these newbuilding contracts to Frontline. The transaction closed in December The Company transferred the newbuilding contracts to Frontline at that time and have no further commitment related to these contracts. 7.3 Fleet As of the date of this Prospectus, the Company owns or controls 71 vessels, including 13 newbuildings under construction. Of this fleet, 13 vessels are chartered-in long term on bareboat charter or time charter and one vessel is owned through a joint venture which is accounted for under the equity method. Six of the vessels are chartered out on long time charter (TC), while most vessels operate in the spot market or are fixed out on index linked time charter contracts. For more information about the different types of charter contracts, see Section 8.4 Industry Overview Charter Contracts. The table below summarizes key information about the fleet of the Company as of the date of this Prospectus. Vessel Type Vessel Name Year Built DWT Flag Spot/TC Status Capesize Golden Feng ,232 Marshall Island Spot Operating Capesize Golden Shui ,333 Marshall Island Spot Operating Capesize KSL Salvador ,958 Hong Kong Cape index + premium Capesize KSL San Francisco ,066 Hong Kong Cape index + premium Capesize KSL Santiago ,020 Hong Kong Cape index + premium Operating Operating Operating Capesize KSL Santos ,055 Hong Kong Spot Operating Capesize KSL Sapporo ,960 Hong Kong Spot Operating Capesize KSL Seattle ,015 Hong Kong Cape index + premium Capesize KSL Singapore ,062 Hong Kong Cape index + premium Capesize KSL Sydney ,000 Hong Kong Cape index + premium Operating Operating Operating Capesize KSL Sakura January ,062 Hong Kong Spot Operating Capesize KSL Seoul January ,010 Hong Kong Cape index + premium Operating Capesize KSL Stockholm March ,055 Hong Kong Cape index + Operating 40

42 premium Capesize KSL Seville January ,062 Hong Kong Spot Operating Capesize Golden Kathrine January ,486 Hong Kong Spot Operating Capesize Golden Aso June ,472 Hong Kong Spot Operating Capesize KSL Finsbury September ,418 Hong Kong Spot Operating Capesize KSL Barnet January ,355 Hong Kong Spot Operating Capesize KSL Bexley January ,209 Hong Kong Spot Operating Capesize Golden Scape January ,000 Hong Kong Index linked CoA* Operating Capesize Golden Swift January ,000 Hong Kong Index linked CoA* Operating Capesize Golden Fulham ,000 Hong Kong Newbuilding Capesize Golden Surabaya ,000 Hong Kong Newbuilding Capesize Golden Savannah ,000 Hong Kong Newbuilding Capesize KSL Mediterranean ,000 Hong Kong Newbuilding** Capesize Golden Cirrus ,000 Hong Kong Newbuilding Capesize Golden Arcus ,000 Hong Kong Newbuilding Capesize Golden Nimbus ,000 Hong Kong Newbuilding Capesize Golden Cumulus ,000 Hong Kong Newbuilding Capesize Golden Calvus ,000 Hong Kong Newbuilding Capesize Golden Incus ,000 Hong Kong Newbuilding Ice class Panamax Golden Ice ,500 Hong Kong Spot Operating Ice class Panamax Golden Opportunity ,500 Hong Kong Spot Operating Ice class Panamax Golden Saguenay ,500 Hong Kong Spot Operating Ice class Panamax Golden Strength ,500 Hong Kong Spot Operating Ice class Panamax Golden Suek ,849 Hong Kong TC (expires in Operating September 2016) Ice class Panamax Golden Bull ,000 Hong Kong TC (expires in Operating September 2017) Ice class Panamax Golden Brilliant ,500 Hong Kong Spot Operating Ice class Panamax Golden Diamond ,186 Hong Kong Spot Operating Ice class Panamax Golden Pearl ,186 Hong Kong Spot Operating Ice class Panamax Golden Ruby ,052 Hong Kong Spot Operating Kamsarmax Golden Eminence ,463 Hong Kong Spot Operating Kamsarmax Golden Empress ,463 Hong Kong TC (expires in Operating December 2021) Kamsarmax Golden Endeavour ,454 Hong Kong TC (expires in Operating October 2020) Kamsarmax Golden Endurer ,474 Hong Kong TC (expires in Operating November 2020) Kamsarmax Golden Enterprise ,463 Hong Kong Spot Operating Kamsarmax Golden Daisy ,507 Marshall Island Spot Operating Kamsarmax Golden Ginger ,487 Marshall Island Spot Operating Kamsarmax Golden Rose ,585 Marshall Island Spot Operating Supramax Golden Aries February ,605 Hong Kong Spot Operating Supramax Golden Cecilie February ,263 Hong Kong Spot Operating Supramax Golden Cathrine February ,263 Hong Kong Spot Operating Supramax Golden Gemini March ,605 Hong Kong Spot Operating Supramax Golden Taurus May ,000 Hong Kong Spot Operating Supramax Golden Leo ,800 Hong Kong Newbuilding Supramax Golden Virgo ,800 Hong Kong Newbuilding Supramax Golden Libra ,800 Hong Kong Newbuilding Capesize Golden Opus ,715 Hong Kong Spot *** 41

43 * Will commence in February 2016 for one year of consecutive voyages. ** The vessel is sold and will be delivered to its new owners upon completion from the yard. *** Owned through joint venture with ST Shipping and Transportation Pte Ltd. Chartered In Tonnage Below is an overview of the contracts for the vessels chartered in either on bareboat or time charter contract for a contract duration of more than one year: Vessel Type Vessel Name Dwt Net Pay Expiry (min period) Capesize Golden Future* 176,000 17,600 August 2025 Capesize Golden Beijing* 176,000 17,600 August 2025 Capesize Battersea* 169,391 17,600 July 2025 Capesize Belgravia* 169,332 17,600 August 2025 Capesize Golden Magnum* 179,788 17,600 August 2025 Capesize Golden Zhejiang* 175,834 17,600 July 2025 Capesize Golden Zhoushan* 175,835 17,600 July 2025 Capesize KSL China* 179,109 17,600 September 2025 Capesize HL Passion 180,000 14,000 November 2016 Capeisize HL Pioneer 180,000 14,000 January 2017 Kamsarmax Golden Eclipse** 79,600 16,284 April 2020 Panamax Golden Lyderhorn** 74,242 9,300 August 2016 Supramax Golden Hawk*** 58,000 13,035 February 2025 * On time charter ( years) with purchase options ** On bareboat charter (with purchase option and for Lyderhorn purchase obligation) *** On time charter ( years) (with purchase option) Vessel Employment Below is an overview of the contracts for the vessels on time charter contracts with contract duration of more than one year: Vessel Type Vessel Name Dwt Net Rate Expiry (min period) Ice class Panamax Golden Suek 74,500 17,000 September 2016 Ice class Panamax Golden Bull 74,500 16,788 September 2017 Kamsarmax Golden Empress 79,463 22,800 December 2021 Kamsarmax Golden Endeavour 79,600 18,525 October 2020 Kamsarmax Golden Endurer 79,600 22,800 November 2020 Kamsarmax Golden Eclipse 79,600 28,025 February 2020 Several of the Company s vessels are fixed out on various index linked contracts, meaning that the charter rates under the contracts are linked to the Baltic time charter indexes for the relevant vessel type, possibly adjusted for a premium/discount for the specific vessel relative to the index vessel. This implies that the charter earnings are variable and similar to the earnings obtained in the spot market, as opposed to charter rates under time charter contracts where the earnings are fixed for a period of time. Such index linked contracts are not included in the table above. In particular, in January 2015, the Company entered into an agreement with RWE Supply & Trading GmbH, a wholly owned subsidiary of RWE AG (a major European energy company), for chartering out a total of 15 Capesize vessels on long term, index-linked contracts. In September 2015 the parties agreed to amend the terms to 10 Capesize vessels at seven and a half year term instead of 15 Capesize vessels at five year term. As of the date of this prospectus, 8 vessels are delivered and 2 are remaining. 42

44 7.4 Management The Company s fleet is managed by its fully owned subsidiary Golden Ocean Group Management (Bermuda) Ltd, which in turn has subcontracted services to Golden Ocean Management AS, based in Oslo, Norway and Golden Ocean Management Asia Pte Ltd, in Singapore. From January 2016, the Company has agreed to market its Capesize fleet through Capesize Chartering Ltd., see Section 11.4 Operating and Financial Review Recent Developments. Technical management and newbuilding supervision is outsourced to Frontline Management (Bermuda) Ltd. The Company can add and remove vessels to the agreement when needed. Technical operations and crewing of all owned vessels are outsourced to several leading ship management companies. 7.5 Disclosure on Certain Contracts Material Contracts Apart from the Merger Agreement, the Group has not entered into any material contracts outside the ordinary course of business for the two years prior to the date of this Prospectus. Further, apart from the Merger Agreement, the Group has not entered into any other contract outside the ordinary course of business which contains any provision under which any member of the Group has any obligation or entitlement which is material to the Group. Dependency on Contracts The charter rates on the Company s time charter contracts of more than one year, as set out under Section 7.3 The Fleet Vessel Employment are at levels that are currently not possible to obtain in the market. In the event any of these contracts should be cancelled, the Company would have to reemploy the vessels in the spot market, where the rat es are lower and accordingly would reduce the revenues of the Company going forward. The financing arrangements of the Company, as described under Section 11.8 Operating and Financial Review Borrowing Activities, are necessary to finance newbuildings and existing vessels. The Company is dependent on these agreements to the extent it would not be able to replace these financing arrangements with agreements at similar terms and conditions. 7.6 Legal and Arbitration Proceedings As of the date of this Prospectus, the Company is not aware of any governmental, legal or arbitration proceedings during the course of the preceding twelve months, including any such proceedings which are pending or threatened, of such importance that they have had in the recent past, or may have, a significant effect on the Company or the Group s financial position or profitability. 43

45 8. INDUSTRY OVERVIEW This Section discusses the dry bulk industry in which the Group operates. Certain of the information in this Section relating to market environment, market developments, growth rates, market trends, industry trends, competition and similar information are estimates based on data compiled by professional organisations, consultants and analysts, in addition to market data from other external and publicly available sources, see Section 4.2 "General Information Presentation of Industry Data and Other Information Sources of Industry and Market Data". Fearnley Consultants ( Fearnleys ) has provided the information and data presented in this section. Fearnleys has advised that the statistical and graphical information contained herein is drawn from its databases and other published and private industry sources. The main source for data in this Section is Fearnresearch, the market research department of Fearnleys AS. This data is normally not publicly available, but is published in various forms in market reports to the benefit of Fearnleys clients. In connection therewith, Fearnleys has advised that: (i) certain information in Fearnleys databases are derived from estimates or subjective judgments, (ii) the information in the databases of other shipping data collection agencies may differ from the information in Fearnleys database and (iii) while Fearnleys has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures. Although data is taken from the most recently available published sources, these sources do revise figures and forecasts from time to time. 8.1 Overview Dry bulk shipping comprises shipments of free flowing bulk raw materials like iron ore, grains, and coal; free flowing finished or semi-finished bulk materials like alumina, fertilizers, and sugar; and unitized commodities like steel, semifinished metals, lumber/logs, and metal scrap. The latter group is often denoted neo-bulks. Charterers in the dry bulk shipping industry include cargo owners such as mining companies, grain houses, and steel mill s as well as end-users such as steel mills, alumina refineries and power utilities. The charterers also include trading houses, ship operators and even traditional ship owners. Preliminary data indicates a total demand for dry bulk shipping of about 20,665 billion tonne-miles in 2015, which entails a decrease of approximately 0.7% compared to 2014 and is well below the compounded average growth ( CAGR ) rate in the period from 2008 to 2013 (CAGR: 3%). Except for 2009, 2015 looks to become the first year of contraction in demand in the past 15 years. Dry bulk shipping demand (billion tonne-miles) e 2015f growth (%) CAGR Iron ore 2,545 3,918 4,849 5,346 5,540 5,913 6,230 6,325 6, % 5 % Coal 2,509 3,113 3,905 2,890 3,547 3,614 4,085 4,585 4, % 0 % Grains 1,244 1,688 1,930 1,905 2,190 2,174 2,283 2,397 2, % 5 % Major bulks 6,298 8,719 10,684 10,141 11,277 11,701 12,598 13,307 13, % 3 % Minor bulks 4,894 5,642 6,738 5,508 6,084 6,591 6,986 7,222 7, % 1 % Total 11,192 14,361 17,422 15,649 17,361 18,292 19,584 20,528 20, % 3 % The 2014 estimate is based on Fearnley s tracking of all bulk carriers larger than 50,000 dwt and customs statistics for both major and minor bulk commodities for major importers. The 2015 forecast is based on 10 months tracking and 11 months customs statistics for major bulk commodities and major importers. 8.2 Major Bulk Commodities The three major bulk commodities constitute almost two thirds of the total demand for dry bulk shipping. The ratio has increased from about 55% at the beginning of the century to about 65% in Iron Ore Iron ore is the key ingredient in steelmaking. Seaborne iron ore volumes almost doubled, from 306 million tonnes to 589 million tonnes, over the 20-year period from 1984 to Seaborne volumes have doubled over the last nine years, mainly due to the rapid and unprecedented industrialisation of China during the latest decade. Iron ore is the single largest seaborne dry bulk commodity. In 2015, it is estimated that 1,300 million tonnes iron ore was shipped, generating about 6,980 billion tonne-miles. Iron ore constituted about one third of total seaborne dry bulk demand in

46 Chinese seaborne imports constitute about 72% of total seaborne volumes followed by Japan, Europe 1, South Korea, and Taiwan. Japan and Europe combined constituted about 17%. In 2002, the year before Chinese imports took off, Europe and Japan combined constituted about 53% of global seaborne imports (and China about 23%) 2. China Japan Europe South Korea Taiwan Others Volume (mt) Share 72 % 10 % 7 % 6 % 2 % 4 % Transportation work (btm) Share 72 % 12 % 5 % 6 % 2 % 4 % The source for data for China has been several issues of the Tex Report 3, for South Korea it has been Korea International Trade Association 4, for Japan it has been the Japan Customs 5, for Taiwan it has been the CPT 6 and for EU it has been Eurostat 7. The main exporters of iron ore are Australia and Brazil, which handle approximately 87% of world seaborne exports, while South Africa and Canada also are major exporters. India used to be the third largest exporter, but due to a governmental crackdown on illegal mining and breaches of environmental legislation, their exports have been reduced by close to 90% since The majority of iron ore shipments are shipped by Capesize bulk carriers or VLOCs, but due to port limitations and the nature of the trade, certain volumes are also shipped by smaller vessels. For vessels larger than 50,000 dwt, more than 85% of the shipments are carried by Capesize bulkers. Coal Coal has principally two uses; (i) being fuel for electricity and heat generation, and (ii) as reduction agent in blast furnace iron making. An estimated 1,025 million tonnes of coal, generating about 3,800 billion tonne-miles, were shipped by sea in This represented a decrease of approximately 10.0% by volume and 9.4% by transportation work compared to Except for 2014 and 2015, the average annual growth in volume and transportation work has been quite strong since The period between 2008 and 2013 shows a volume growth of coal of about 7.6% p.a. and a growth in transportation work of about 3.3% p.a. The key importing countries are principally the same as for iron ore, with the addition of India. Up to 2009, China was a net exporter of coal, but during the last few years, China developed into the single largest importer of coal, however due to the decline in imports in 2014/15 China has now become the third largest importer. China India Japan Europe S. Korea Taiwan Others Volume (mt) Share 17 % 18 % 18 % 14 % 13 % 7 % 14 % Transportation work (btm) Share 15 % 18 % 19 % 18 % 13 % 5 % 13 % The source for data for China has been various issues of the Tex Report 2, for South Korea it has been Korea International Trade Association 3, for Japan it has been the Japan Customs 4, for Taiwan it has been the CPT 5 and for EU it has been Eurostat 6. This market has traditionally been dominated by imports to Japan and Europe 8. This was the case until quite recently, but since 2003, China has emerged as the by far largest importer of coal. 1 Europe in this context includes the major importerts Germany, the UK, France, Italy, the Netherlands, Belgium and Spain 2 Source: World Bulk Trades 2003, Fearnresearch Not publicly available The thirteen major importing countries in Europe. 45

47 The main exporting countries are Indonesia and Australia. In addition, the USA, the Former Soviet Union (FSU), Colombia and South Africa are also key exporting countries. Fearnleys estimates that exports from Australia 9 in 2015 were unchanged from 2014 at about 385 million tonnes. Indonesian exports 10, however, declined to about 350 million tonnes. Still, the two countries represent about 70% of total seaborne trade. The size of bulk carriers deployed in coal trades is much more heterogeneous than the ones in iron ore trades. One of the reasons is that the average coal haul is much shorter than the average iron ore haul (3,700 nm vs. 5,330 nm). Another factor is that port infrastructure and restrictions result in many trades being served by Handysize and Supramax bulkers. Shipments by Panamax vessel remain to be the largest segment, but shipments by vessels larger than 50,000 dwt have changed considerably from 2008 till 2014: Shipments (mdwt) Share Shipments (mdwt) Share Supramax kdwt 71 9 % % Panamax/Ultramax kdwt % 67 5 % Panamax/Kamsarmax kdwt % % Capesize 100 kdwt % % Total % % Supramax and Capesize bulkers have both gained market shares over this period. Grains Seaborne trade in grains is estimated to about 470 million tonnes and 2,800 b tonne-miles in Grains comprise wheat, coarse grains (maize, rye, oats, barley, and sorghum), and soyabean/meal. The demand for transportation stemming from grains has traditionally increased slower compared to minerals. However, the growth in grain transportation has been very high at average growth rates of about 4.3% and 5.5% in terms of volume and transportation work, respectively. The longer term demand for transportation of grains is primarily a function of dietary habits, which to a large extent are dependent on economic development in individual countries and regions. When the economy improves, the food intake tends to increase, which also increases the demand for feed grain. In the shorter term, grains are a key source for market freight volatility. One key factor for this volatility is the seasonality and the fact that harvesting periods are quite different in the northern and southern hemispheres. Another key factor is the weather, which greatly impact crops and could result in significantly changed trading patterns from year to year. Soya beans/meal are the largest of the three main categories of grains, with U.S., Brazil, and Argentina being the main producers and exporters. The principal markets for sale of grains are West Europe and Asia. China has been a major force in soya bean/meal trades as imports have increased from about 12 million tonnes in 2000 to about 82 million tonnes in China is sourcing most of its imports in the Americas, and the substantial distance has contributed significantly to the demand. Grain is primarily shipped in Handysize-Panamax bulk carriers Shipments (mdwt) Share Shipments (mdwt) Share Supramax kdwt % % Panamax/Ultramax kdwt % 29 5 % Panamax/Kamsarmax kdwt % % Capesize 100 kdwt % % Total % % 9 Australian Bureau of Statistics 10 Platts International Coal Report 11 China customs statistics 46

48 Over the period between 2008 and 2014 it is quite evident that a further polarisation of shipment sizes has occurred for shipments larger than 50,000 dwt. The share of shipments by Supramax and Panamax bulkers have increased from approximately 79% to 94%. It should be noted, however, that a fair share of grain shipments occur in vessels smaller than 50,000 dwt. Total shipments in 2015 were about 470 million tonnes. Using a rule-of-thumb load factor, with load factor being the ratio between cargo intake and deadweight of 0.8 for grains, shows that about 40 million tonnes grains were shipped by vessels smaller than 50,000 dwt. Others This residual group covers all other dry bulk commodities, such as free flowing bulk commodities like bauxite, alumina, petroleum coke, fertilisers, metallic ores and concentrates, sugar and seeds, cement. In addition, there is a long array of dry commodities that are unitized rather than free flowing, but still carried by bulk carriers. These include commodities such as steel and other metals, lumber, logs, woodpulp and metal scrap. A common denominator for this residual group is that the majority is finished or semi-finished commodities and as such the demand for these goods is more linked to the general economic development than the major bulk commodities. Fearnleys estimates that global seaborne trade of dry bulk commodities in this group ended at about 1,405 million tonnes in Shipments of these dry bulk commodities are to a very high degree carried out by vessels smaller than 50,000 dwt. Using the general load factor of 0.85 results in a seaborne traded volume of about 479 million tonnes in 2014 by vessels larger than 50,000 dwt. This implies that more than two thirds, or about 926 million tonnes, were carried by vessels smaller than 50,000 dwt Shipments (mdwt) Share Shipments (mdwt) Share Supramax kdwt % % Panamax/Ultramax kdwt % 46 8 % Panamax/Kamsarmax kdwt % % Capesize 100 kdwt % 11 2 % Total % % For vessels larger than 50,000 dwt about two thirds were carried by Supramax bulkers. Demand for dry bulk shipping Dry bulk trade is a function of several factors: General economic activity Industrialization/urbanization of developing countries; Population growth (plus changes in dietary habits); and Regional shifts in cargo supply/demand balances General economic activity and growth in GDP indirectly has an impact on demand for both raw materials and finished/semi-finished products. However, in the developed world and when developing countries reach a certain level of maturity, GDP is normally a poor indicator for dry bulk demand. The reason for this is that the value of services constitutes a large share of GDP and the sectors driving dry bulk demand constitute a minor share of economic activity. In developing countries, steel and energy intensities are normally high due to the industrialisation required for construction of infrastructure, housing and industrial facilities. In the initial phase of an industrialisation, fixed asset investments tend to constitute a fairly high proportion of GDP and as such have a positive impact on dry bulk demand. Population growth alone contributes to demand as people need housing, transportation and infrastructure and these necessities increase in line with the population growth. Changes in dietary habits and increased demand of meat result in an over-proportional growth in grain demand due to increased need of feed grain. Finally, global imbalances in raw material supplies and demand impact the demand for dry bulk shipping. The distances for shipment chiefly reflect regional commodity surpluses and deficits. Changes occur as a result of depletion of local resources or that local demand exceeds local supply. On the other hand, down-stream involvement could have a negative impact on dry bulk demand. Generally, the more concentrated the sources of cargo supply, the greater the average distance shipped. Ship demand is determined by the overall volumes of cargo moved and the distances for shipment (i.e. 47

49 tonne-mile demand), as well as changes in vessel efficiency. Changes in vessel efficiency may be caused by factors such as: (a) (b) (c) Vessel speed: In the high fuel cost/low freight rate environment of recent years, there has been an incentive for shipowners to reduce speed and so lower fuel consumption; Port delays: Port delays have been a common occurrence in the last ten years as inland and port logistics in several key export areas have struggled to meet surging global demand; and Laden to ballast ratios: I.e. how much time vessels spend sailing empty on re-positioning voyages. Ballasting has also increased over the last ten years, mainly due to the widening imbalance in cargo flows between the Atlantic and Pacific Basins. World seaborne dry bulk trade has followed a steady underlying upward trend during the 1980s and 1990s. The annual CAGR in the major dry bulk cargoes over this period was an estimated 2.0%, before doubling to about 4.0% in the decade from 2000 to In the period from 2010 to 2014 a further increase to an estimated 5.0% occurred. The seaborne estimate is for all vessels larger than 10,000 dwt, but it must also be taken into consideration that the fleet structure has changed considerably over this period. The fleet below 50,000 dwt is today at about 126 million dwt whereas at the end of 1989 the fleet stood at 103 million dwt, and the total fleet has grown from about 203 million dwt to about 768 million dwt. This implies that virtually all growth in seaborne dry bulk trades has occurred in the 50,000 dwt or larger segment. Considering this segment, seaborne trade rose an average of 3.7% in the 1990s; about 6.7% p.a. from 2000 to 2009 and about 8.5% p.a. from 2010 to China has been the key driver for the growth in seaborne dry bulk volumes over the last decade. From 2003 to 2015, Chinese iron ore imports have six folded from 147 million tonnes in 2003 to an estimated 938 million tonnes in Coal imports have risen from 34 million tonnes in 2008 to an estimated 173 million tonnes in As mentioned above, soya bean/meal imports have risen from about 12 million tonnes in 2000 to about 82 million tonnes in Such, there has been a solid growth of several commodities China has needed to industrialise and urbanise the country. 8.3 Fleet In international dry bulk shipping it is common to refer to the fleet above 10,000 dwt as the fleet. Bulk carriers and other single-deckers below 10,000 dwt are typically deployed in regional and short haul trades, although vessels in this fleet segment also perform longer haul trades. This section covers vessels larger than 10,000 dwt. Dry bulk carriers are single-decked ships that transport dry bulk commodities that are either free-flowing like grain and coal, or unitized like steel. The free-flowing cargoes are carried in a loose form in the sense that the cargo is put into the cargo holds without any means of bags, nets, or even crates. The unitized cargoes might be bundled like steel beams or logs, but could also be loose. Carriage of unitised commodities often requires the cargo to be secured by means of dunnage in order to avoid the cargo to shift during voyage. The fleet is usually divided into four main segments given generic names. Below is an overview of these main segments and with a reference to sub-segments within these: Handysize Handysize vessels are between 10,000 and 39,999 dwt, and typically have four or five cargo holds and four cranes and/or derricks. The ships are highly versatile and carry almost all types of cargoes and this segment has to a certain degree more specialised designs than other segments. The vessels can be designed for various purposes; for carrying steel; for carriage of logs and lumber; vessels designs with speciality cranes and wide open hatches and boxed holds as well as vessels designed for the carriage of cement. The hull design does not differ much, but the configuration of cargo holds and their design and the equipment for loading and discharging are the key differences between the various designs. Handysize bulk carriers trade both regionally as well as long haul trades across the Atlantic or Pacific oceans, or between them. The economy of size benefits of the Handysize is limited and they are typically deployed in trades where significant port limitations exists and/or trades where there is limited storage capacity in place which limits shipment sizes. Handymax Handymax vessels are between 40,000 and 69,999 dwt and typically have five holds and hatches and four cranes. The generic name Handymax used to be a reference to vessels 40,000-50,000 dwt, but this has changed over the past 15 years. Around 2000 the first 50,000 dwt+ vessels with the same features as the traditional Handymax vessels were delivered from shipyards. The new group, 50,000-60,000 dwt, was named Supramax. In the last years there has been yet 48

50 an increase of the Handymax as the Supramax has developed into a vessel of 60,000-70,000 dwt named Ultramax. A vessel of this size would normally be called a Panamax, but the new Ultramax differs from the Panamax as it has five holds/hatches and cargo cranes whereas a Panamax has seven holds/hatches and usually is gearless. Thus, the new Ultramax tend to compete with the Supramaxes with respect to hold configuration and cargo gear whereas it could compete with Panamax with respect to deadweight and hold volume. The Handymax bulker trades world-wide with all kinds of dry bulk cargoes. The degree of specialisation in this size group is less than in the Handysize, but to a certain degree there are vessels specially designed for, among other things, carrying forest products. Panamax Panamax vessels are between 70,000 and 99,999 dwt and are in principle the largest vessels that can transit the Panama Canal, however the largest vessels in this group cannot transit the canal as of yet. The maximum beam for transiting the canal currently is m. The conventional Panamax is 225 m long with a beam of m. The vessel is fitted with seven holds and hatches and is normally gearless. This segment is sub-divided into three groups. Firstly it is the traditional Panamax. Secondly it is the Kamsarmax, which has derived its name from Port Kamsar in Guinea. This port has a length restriction of metres, and hence the Kamsarmax is a stretched Panamax providing extra cargo capacity. Apart from this, the design carries the same features as a traditional Panamax. Finally, there is a group of vessels that fall in under the generic name Panamax, but these vessels are currently too wide to transit the Panama Canal. The vessels are often denoted Post Panamax bulk carriers and the reason for categorizing them in this group is that they compete with Panamax/Kamsarmax bulkers rather than Capesize bulkers. Close to 90% of all cargoes carried by Panamax bulkers are either coal, grain, or iron ore. Coal is by far the dominant commodity constituting about 53% of the Panamax cargo base. Panamax bulkers trade world-wide, including short haul trades regionally. Capesize Capesize vessels larger than 100,000 dwt and derive the name from the fact that they are too large to transit the Panama Canal and traditionally had to go around Cape Horn. Despite seeing increased interest for small Capesizes in recent years, the typical Capesize vessel is between 150,000 dwt and 220,000 dwt. The ,000 dwt category is simply referred to as Capesize whereas the ,000 dwt vessels are called Newcastlemaxes. These vessels have a slightly wider beam and are generally a little bit longer than the Capesize bulkers. Apart from this they are quite similar with nine holds/hatches and gearless. Finally the largest category of dry bulk carriers is Very Large Ore Carriers (VLOCs). These are vessels specially designed to carry iron ore. The holds of the VLOCs have a different design than those of a bulk carrier and the bottom of the hold is raised in order to lift the center of gravity of the cargo. These vessels are unsuitable to carry other cargoes than iron orde due to their limited cubic capacity. The VLOCs are about ,000 dwt. About 99% of the commodities carried by Capesize bulkers are iron ore or coal. Iron ore constitute about 69% alone. The following table shows the current age distribution of the dry bulk fleet in million deadweight tonnage, in addition to information about the average age for each segment: 10-39, , , ,000+ Total <= Total fleet Average age

51 Supply of Dry Bulk Vessels The supply of dry bulk carriers is mainly determined by deliveries of new vessels from shipyards and the demolition, recycling, of obsolete vessels. In addition, there are permanent conversion of bulk carriers to other uses and losses at sea and constructional total losses. The latter causes are very small in comparison to demolition. The demand for newbuildings and subsequent deliveries of newbuildings is to large extent a function demand for new tonnage from ship owners and available shipyard capacity. Following the upturn in the market from 2004 to 2006, ship owners ordered a large number of new vessels from the yards. At the same time, shipbuilding capacity increased substantially, especially in China, resulting in delivery of new tonnage increasing rapidly in 2009 and the subsequent years. In 2008 about 24.3m dwt were delivered, which was in line with the preceding three years. However, in 2009 approximately 42.3m dwt were delivered before more than 79 m dwt in 2010 and 96.1 m dwt and 97.9 m dwt in 2011 and 2012, respectively. This resulted in substantial net fleet growth rates causing freight markets to tumble and contracting of new tonnage slowed down resulting in lower deliveries in In 2013 and 2014, contracting picked up again and one of the key drivers for this revival was the focus on fuel efficient vessels. Yards have marketed new designs with significantly lower fuel consumption than existing ones, and in a market environment with very high bunker prices this was considered attractive despite the prices of newbuildings. The figure below shows the end of year order books from 2005 to 2014: The typical useful trading life of a bulk carrier is about 25 years, but varies over time. In periods of good market earnings owners tend to maintain and keep their vessels longer. The following chart shows how the average demolition age has changed during 2011 to 2015 broken down by segments. Please note the segment division is slightly different from elsewhere in this Section. 50

52 The decision to scrap a vessel is usually reactive rather than proactive. This means that owners often decide to scrap vessels following a period with poor market conditions where the owners do not see or expect a market revival in the short term. In addition, the vessel might be in for a special survey which is associated with costs, and the owners could then decide to scrap the vessel when expectations for improvement are very low. In the period between 2004 and 2008, when there was a significant increase of newbuildings, very few vessels were sold for scrap and annual demolition sales varied between 0.8 and 3.0 million dwt. The demolition sales increased in 2009 and 2010 but did not reach significant levels before 2011 to 2015, where a total of about 129 million dwt of tonnage was sold for demolition. The peak years were 2012 and 2015, coinciding with a freight market low, at about 33 m dwt each year. As a result of deliveries and demolition activity, the dry bulk fleet has on average increased by approximately 7.1% p.a. since The following table shows average growth rates for the individual segments and the total fleet: 10-39,999 dwt 40-69,999 dwt 70-99,999 dwt 100,000 dwt+ Total Nos Kdwt Nos Kdwt Nos Kdwt Nos Kdwt Nos Kdwt ,865 75,602 1,517 79, , ,320 5, , ,729 72,482 1,869 97, , ,094 6, , ,864 76,315 2, ,064 1,120 85, ,815 6, , ,813 75,211 2, ,868 1,205 92, ,748 7, , ,977 80,566 2, ,117 1, ,195 1, ,374 8, , ,059 84,240 2, ,611 1, ,160 1, ,739 8, , ,110 86,893 3, ,818 1, ,520 1, ,553 9, , ,078 86,754 3, ,396 2, ,924 1, ,197 9, , ,082 87,660 3, ,207 2, ,095 1, ,428 10, , ,088 88,673 3, ,919 2, ,085 1, ,124 10, ,801 CAGR % -0.8% 4.3% 4.2% 11.1% 11.3% 5.0% 5.7% 2.5% 4.5% % 1.7% 4.9% 5.1% 10.1% 10.6% 8.4% 9.5% 4.6% 6.9% % 0.1% 4.5% 4.5% 10.7% 11.1% 6.2% 7.1% 3.3% 5.4% % 2.2% 6.6% 7.2% 11.1% 11.9% 9.9% 11.2% 5.9% 9.0% 8.4 Charter Contracts Chartering of bulk carriers can take different forms. In principle most owners are targeting a certain income on time charter basis. The main difference between the various forms of charter contracts is the allocation of risk between the owner and the charterer. The main forms of charter contracts are: Voyage charter The owner agrees with the charterer to perform a single voyage. The parties furthermore agree on the loading and discharging ports, the commodity and quantity, the rate of loading and discharging and the dates of loading. The charterer pays the owner a freight, normally in US$/million tonnes loaded cargo quantity. Under a voyage charter, the owner is responsible for all voyage related costs such as the cost of bunkers, the port costs and canal costs, if any, in addition to operating costs (insurance, manning, repair & maintenance, etc.) and capital costs. Under a voyage charter the owner bears the risk for delays at sea (bad weather) and changes in voyage related cost elements. The charterer bears the risk of increased loading and discharging time. Contracts of Affreightment (COA) Under a contract of affreightment (a COA ), the owner and charterer agree on the terms for carrying a certain volume of cargo from A to B, or any combination of ports, over a certain period. The cargoes are normally carried at fairly regular intervals. The name of the vessels deployed under a COA are usually not specified in the contract and the owner nominates vessels for each lifting according to agreed routines. Freight is normally paid in US$/million tonnes and otherwise a COA is quite similar to a spot voyage charter with similar obligations and rights as agreed under a voyage charter. COAs may cover only a few cargoes over a short period of time or up to several years covering dozens of cargoes per year. Time charters A time charter is a contract for the use of a vessel for a fixed period of time at a specified daily rate. Under a typical time charter, the ship owner provides crewing and other services related to the operation of the vessel s operation, the cost of which is included in the daily rate, and the customer is responsible for substantially all of the vessel s voyage related costs. When the vessel is off-hire, the customer is usually not required to pay the hire rate and the owner is responsible for all costs. Under a time charter the point and time of delivery and redelivery is pre-agreed. The charterer 51

53 is commercially responsible for the utilization of the vessel, and as opposed to a voyage charter, the charterer takes over all risks for voyage related costs and delays at sea. The charterer normally selects a time charter if it wants a dedicated vessel. A time charter can have a duration of less than a week or up to many years. Bareboat Charters A bareboat charter is in principle a lease. Similar to a time charter, the owner provides the customer with a vessel at a specified daily rate and for a fixed period of time. However, under a bareboat charter, the customer provides crewing and all necessary services required for the operation of the vessel, in addition to all voyage related costs. In practice, the customer becomes a shipowner without holding title to the ship. During the bareboat charter, a charterer must pay the hire rate regardless of whether or not the vessel is in service and all time and operational risk is transferred to the charterer. 8.5 Freight Rates The freight rates of charter contracts are determined by the balance, or imbalance, between supply and demand. This balance can broadly be divided into the global demand and supply balance governing the global market conditions, and the short term balance regionally that could cause rates to temporary increase or decrease. The Baltic Exchange issues daily freight and hire assessments based on the input of data from ship brokers. These daily assessments are presented both as an average of the broker assessments as well as an index the Baltic Dr Index, or BDI. In addition, the Baltic calculates time charter average earnings for each of the main sub-segments: Handysize, Supramax, Panamax, and Capesize bulkers. The freight and time charter assessments presented by the Baltic Exchange deviate from individual fixtures made in the market place, but its daily assessments have for several purposes become the norm for market levels and development. The following chart shows the time charter average development for Supramax, Panamax, and Capesize and is a representation of average spot earnings: TC avg BSI (BSI=Baltic Supramax Index) refers to the average time charter earnings as calculated/presented by the Baltic Exchange and covers Supramax bulk carriers TC avg BPI (BPI=Baltic Panamax Index) refers to the average time charter earnings as calculated/presented by the Baltic Exchange and covers Panamax bulk carriers TC avg BCI (BCI=Baltic Capesize Index) refers to the average time charter earnings as calculated/presented by the Baltic Exchange and covers Capesize bulk carriers. The Baltic Exchange introduced a new Capesize reference vessel in February The current BCI refers to these 180,000 dwt vessels whereas the BCI 172 refers to the old reference vessel of 172,000 dwt. 52

54 Another way of illustrating the dry bulk market is to show the 12 month time charter rates. The variation in the 12 months charter rates have in several period been close correlated with second hand values. Normally, this period rate is also an indicator of short term expectations. An owner will often opt for a charter for a period of 12 months if it expects a decreasing market, whereas a charter will opt for a period charter if its expects a rising market. 8.6 Asset Values The shipping markets differ from other markets in one major aspect; that the market for sale and purchase of the production assets is quite liquid and normally considered a vital part of the business plan for most ship owners. Price assessments are typically made by brokers on a regular basis for standard vessels for newbuildings, newbuilding resale values as well as assessments for 5, 10, and 15 year old vessels. Newbuilding prices are determined by the balance between supply and demand for newbuildings as well as changes in production costs, currency exchange rates and interest rates. Price differences between individual shipyards are often due to the quality of their vessels, both with respect to design and workmanship. The value of second hand vessel values is influenced by several factors. Normally an owner will consider either to order a new vessel or to purchase a modern vessel typically being less than five years. The decision is influenced by short term market development and pricing. In late 2009 and 2010 newbuilding resales (i.e., vessels due for delivery from the shipyard within a few months) were valued significantly higher than newbuilding contracts. In addition, expectations for freight development were not optimistic in the short term and owners opted for newbuilding contracts. Values of older vessels, years old, are more prone to be impacted by freight market developments. If the spot market is expected to firm prices tend to increase, whereas increase when the expectations are lower. In sum, second hand values are primarily shaped by actual and anticipated earnings, newbuilding replacement costs (relevant to modern second hand vessels) and demolition value for old vessels. For an individual transaction, the class position (when is the next special survey due) and the technical condition play an important role in setting the value. The following charts show newbuilding price and second hand value development for Supramax, Panamax, and Capesize bulk carriers: 53

55 54

56 8.7 Market Developments Over the past five years, the total fleet growth has been high at about 10% p.a. (CAGR), whereas demand in the same period has increased by about 6% p.a. (CAGR). The latter figure is quite good in a historical context. However, the growth in supply has by far outpaced the growth in demand and the increased supply has resulted in the very low current freight conditions. The average of the Baltic Dry Index (BDI) in January 2015 is the lowest figure for any January in the index history and the ninth lowest monthly average on record. Following the significant ordering activity in 2013 and 2014, it was expected that a high delivery rate of bulk carriers would continue in 2015 and In 2015 we observed total deliveries of about 47.5 million dwt. To mitigate the effects of these deliveries a continued, and preferably increased, demolition activity is necessary in order to balance supply and demand growth going forward. A challenging factor in this respect is that the current bulk carrier fleet is a very modern fleet with an average age of 7.8 years, which indicates a lower demand for new vessels. The Panamax and Capesize segments are even younger; both at 7.1 years. In order to balance the market, this implies that the demand has to increase at similar rates, or preferably higher, and that the growth in demand accordingly must continue at the average rate for the past five years in the next years to come. In the past five years the key driver in the dry bulk market has been the Chinese stimulus package early in the period, and the significant growth in Chinese coal imports throughout the period. In 2015, total iron ore trade expanded by about 1% whereas coal trades contracted by about 10.1%, resulting in a combined contraction of approximately 4.3%. There is currently an overcapacity in the Chinese steel industry and an increased recycling of steel scrap in China that may affect the level of growth going forward. Furthermore, the level of air pollution in China and the recent Paris climate agreement may also impact Chinese coal consumption and the dry bulk market accordingly. 55

57 9. CAPITALIZATION AND INDEBTEDNESS This Section provides information of the Company's capitalization and net financial indebtedness as of December 31, 2015 both on an actual basis and on an adjusted basis to show the estimated effects of the items listed below. You should read this information together with the other parts of this Prospectus, in particular Section 5 The Equity Raise, and Section 10 Selected Financial Information and Other Information and Section 11 Operating and Financial Review, as well as the Company's financial statements incorporated by reference into this Prospectus; see Section 20 Incorporation by Reference; Documents on Display. The actual columns in the tables below set out the Company's unaudited capitalization and net financial indebtedness, respectively, as of December 31, 2015 and has been based on the Company's unaudited interim financial information as of December 31, 2015, whereas the "as adjusted" columns set out the Company's unaudited capitalization and net indebtedness, respectively, on an adjusted basis to show the estimated effects of: The Private Placement, which raised gross proceeds to the Company of NOK 1, million, or approximately USD 200 million and prior to any proceeds from the Subsequent Offering; The draw down of debt related to delivery of four Capesize vessels of USD million, and split of this debt into short term debt (USD 1.8 million) and long term debt (USD million), and the increase in restricted cash (USD 5.9 million) as the Company s minimum cash covenants are 5% of interest bearing debt; The new financing agreement includes no quarterly payment of loan in the period from 1 April 2016 to 30 September The allocation between current and non-current liabilities have therefore been amended to reflect this. The effect of this adjustment is USD 34.5 million which decreases current portion of long term debt. For the purposes of arriving at the USD figures in the "as adjusted columns" a NOK/USD exchange rate of has been applied. No adjustments have been made for any proceeds from the Subsequent Offering. 9.1 Capitalization USD thousands As of December 31, 2015 (unaudited) Actual Adjustment Actual following significant changes as of date of the Prospectus Total current liabilities ,195 (32,585) 81,610 Guaranteed... Secured (1)... 54,541 (32,585) 21,956 Unguaranteed/ unsecured... 59,654 59,654 Total non-current liabilities , ,785 1,055,607 Guaranteed... Secured (1) , , ,721 Unguaranteed/unsecured (2) , ,886 Total liabilities (A)... 1,020, ,200 1,137,217 Shareholders equity Share capital... 1,727 3,437 5,164 Legal reserves... Other reserves... 1,378, ,563 1,575,329 Retained deficit... (221,844) (221,844) Total equity (B)... 1,158, ,000 1,138,649 Total capitalization (A)+(B)... 2,178, ,200 2,495,867 (1) See Section 11.8 Operating and Financial Review-Borrowing Activities for a description of the security under the Company s loan agreements. (2) This amount includes USD million, which is owed by the Company under its convertible debt. The convertible debt is recorded in the balance sheet at a value of USD million based on its estimated fair value at the time of the Merger with Former Golden Ocean and the impact of the subsequent amortization of the fair value adjustment. 56

58 9.2 Net Financial Indebtedness USD thousands As of December 31, 2015 (unaudited) Actual Adjustment Actual following significant changes as of date of the Prospectus A. Cash , , ,957 B. Cash equivalent (1)... 48,872 5,860 54,732 C. Trading securities... 14,615 14,615 D. Liquidity (A)+(B)+(C) , , ,304 E. Current financial receivables (2)... 34,715 34,715 F. Current bank debt... G. Current portion of non-current debt (3,5)... 54,541 (32,585) 21,956 H. Other current financial debt (3)... 58,980 58,980 I. Current financial debt (F)+(G)+(H) ,521 (32,585) 80,936 J. Net current financial indebtedness (I)-(E)-(D)... (87,298) (349,785) (437,083) K. Non-current bank debt (3,5) , , ,721 L. Bonds issued , ,815 M. Other non-current financial debt (4)... 26,071 26,071 N. Non-current financial debt (K)+(L)+(M) , ,785 1,055,607 O. Net financial indebtedness (J)+(N) ,525 (200,000) 618,525 (1) Cash equivalents are cash that is classified in the balance sheet as short term and long term restricted cash in accordance with US GAAP. (2) Other current financial receivables include trade accounts receivable, related party receivables, other receivables and fair value of derivative instruments receivable. (3) (4) Other current financial debt includes the Current portion of obligations under capital lease, Related party payables, Trade accounts payable, Accrued expenses, Other current liabilities and Derivative instruments payable. It excludes Deferred charter revenue and the value of Unfavorable time charter. Other non-current financial debt is the long-term portion of obligations under capital lease and other long term liabilities. (5) The new financing agreement includes no quarterly payment of loan in the period from 1 April 2016 to 30 September The allocation between current and non-current liabilities have therefore been amended to reflect this. The effect of this adjustment is USD 34.4 million. Please note that the following transactions have not been adjusted for in the net financial indebtedness table above; (i) net proceeds received from sale of a vessel subsequent to December 31, 2015 of USD 46.2 million (see Section 11.7 Operating and Financial Review Liquidity and Capital Resources ), (ii) newbuilding instalments paid subsequent to December 31, 2015 of USD 33.4 million and USD million, for the vessel that has been sold and for four other new - buildings, respectively, Indirect and Contingent Indebtedness The Company guarantees debt and other obligations of certain of its equity method investees. The debt and other obligations are primarily due to banks in connection with financing the purchase of vessels and equipment used in the joint venture operations. As of December 31, 2015, the joint venture owning Golden Opus had total bank debt outstanding of USD 18.3 million. The Company has guaranteed for 50% of the outstanding debt in the joint venture. Therefore the maximum potential amount of future principle payments (undiscounted) that the Company could be required to make relating to equity method investees secured bank debt was USD 9.15 and the carrying amount of the liability related to this guarantee was USD 0. 57

59 10. SELECTED FINANCIAL INFORMATION AND OTHER INFORMATION The following selected financial information has been extracted from the Company s unaudited financial statements as of and for the three months and year ended December 31, 2015, the Company s audited financial statements as of and for the years ended December 31, 2014, 2013 and 2012, except for the unaudited pro forma financial income statement information for the year ended December 31, The Company s financial statements have been prepared in accordance with U.S. GAAP. The selected financial information included herein should be read in connection with the financial statements which are incorporated by reference to this Prospectus, see Section 20 Incorporation by Reference; Documents on Display. This Section should be read together with Section 11 "Operating and Financial Review". This Section contains Forward-Looking Statements that reflect the Company's plans and estimates; see Section 4.1 "General Information Cautionary Note Regarding Forward-Looking Statements" Selected Income Statement Information The table below sets out a summary of the Company s unaudited consolidated statement of operations information for the three months ended December 31, 2015 and 2014 and the year ended December 31, 2015, and the Company s audited consolidated statement of operations information for the years ended December 31, 2014, 2013 and USD thousands For the Three Months Ended December 31 (unaudited) For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Operating revenues Time charter revenues... 28,028 6,226 85,960 22,656 27,677 35,046 Voyage charter revenues... 28,057 25, ,717 53,706 9,869 2,269 Other operating income , ,353 Total operating revenues... 56,524 36, ,632 96,715 37,546 37,315 Loss on sale of newbuilding and amortization of deferred gain... (8,492) (10,788) Operating expenses Voyage expenses and commission... 22,768 15,456 81,728 33,955 6,809 4,323 Ship operating expenses... 25,495 5,721 83,022 18,676 7,897 7,608 Charter hire expenses... 12,575 30,719 Administrative expenses... 3,426 2,025 12,469 5,037 4,937 4,259 Vessel impairment loss... 4, ,597 Provision for uncollectible receivables... 4,729 4,729 Depreciation... 13,769 7,595 52,728 19,561 11,079 11,117 Total operating expenses... 87,287 30, ,992 77,229 30,722 27,307 Net operating (loss)/income... (39,255) 5,884 (239,148) 19,486 6,824 10,008 Other income/(expenses) Interest income Interest expense... (6,028) (502) (28,270) (2,525) (2,827) (3,765) Impairment loss on securities... (23,323) (23,323) Other financial items... (774) (236) (9,634) (737) (508) (467) Bargain purchase gain arising on consolidation... 78,876 Net other expenses... (29,824) (722) 18,498 (3,233) (3,294) (4,126) Tax... (189) (189) Net income/(loss) from continuing operations... (69,268) 5,162 (220,839) 16,253 3,530 5,882 Net income/(loss) from discontinued operations... (258) (7,433) (59,311) Net income/(loss)... (69,268) 5,162 (220,839) 15,995 (3,903) (53,429) Per share information (in USD): Earnings/(loss) per share: basic... (0.40) 0.06 (1.46) 0.30 (0.15) (2.19) Earnings/(loss) per share: diluted... (0.40) 0.06 (1.46) 0.30 (0.15) (2.17) Cash distributions per share declared

60 Former Golden Ocean The table below sets out a summary of Former Golden Ocean s audited consolidated income statement information for the years ended December 31, 2014, 2013 and USD thousands For the Year Ended December 31 (audited) Operating revenues Time charter and voyage charter revenues , , ,137 Other operating revenue... 7,453 32,444 2,703 Total operating revenue , , ,840 Operating expenses Voyage expenses and commission... 75,971 70,448 37,054 Impairment of trade receivables... 6,199 Vessel operating expenses... 56,404 46,012 41,468 Charter hire expenses... 43,268 57,723 29,747 Administrative expenses... 11,864 12,233 13,207 Depreciation... 47,475 38,664 35,792 Impairment of vessels and vessels under construction ,300 30,288 Total operating expenses , , ,755 Other gains/(losses) Impairment of available-for-sale financial assets... Share of income from associates and Joint Ventures... 2,017 4,149 1,422 Adjustment of financial lease obligation... 51,454 Other gains/(losses) net... 9,397 7,291 (3,142) Total other gains/(losses) net... 62,868 11,440 (1,720) Operating profit/(loss)... (101,956) 95,262 34,365 Interest income... 1,134 1,096 1,372 Interest expense... (31,394) (19,115) (21,356) Other financial items... (3,188) 7,423 (2,717) Total net financial items... (33,448) (10,596) (22,701) Profit/(loss) before income tax... (135,404) 84,666 11,664 Income tax... (197) (174) (67) Profit/(loss) for the period... (135,601) 84,492 11, Selected Segment Information The revenues and operating results of the Company relates to its chartering operations which are carried out internationally and cannot be attributable to any particular geographical location or separate into any various products. No analysis by either business or geographical segment is required by key management and is therefore not included in the financial reporting. 59

61 10.3 Selected Balance Sheet Information The Company The table below sets out a summary of the Company s unaudited consolidated balance sheet information as of December 31, 2015, and the Company s audited consolidated balance sheet information as of December 31, 2014, 2013 and USD thousands As of December 31 (unaudited) As of December 31 (audited) Assets Current assets Cash and cash equivalents ,617 42,221 98,250 79,259 Restricted cash Marketable securities... 14,615 Trade accounts receivable, net... 9,631 2,770 3,298 2,102 Related party receivables... 8, Other receivables... 14,992 3, ,691 Inventories... 15,156 13,243 1,729 1,181 Voyage in progress... 1,690 1,322 Value of favorable long term charter contracts, short term positions... 28,829 Derivative instruments receivable... 1,641 Prepaid expenses and accrued income... 5, Total current assets ,660 64, ,741 85,849 Restricted cash... 48,521 18,923 15,000 15,000 Vessels, net... 1,488, , , ,826 Vessels under capital lease, net... 8,354 Newbuildings , ,340 26,706 Investments in associated companies... 6,225 Value of favorable long term charter contracts... 74,547 Vessels held for sale... 21,523 Other long term assets... 4,744 Deferred charges... 5,797 3, ,222 Total assets... 2,178,667 1,262, , ,420 Equity and liabilities Current liabilities Current portion of long-term debt... 54,541 19,812 4,700 Current portion of obligations under capital lease... 15,749 Related party payables... 4,101 2,555 Trades accounts payable... 2,533 4,937 1,430 1,277 Accrued expenses... 17,878 4,190 2,364 2,501 Other current liabilities... 13,993 3,285 3,623 3,020 Derivative instruments payable... 5,400 Total current liabilities ,195 34,779 7,417 11,498 Long-term liabilities Long term debt , ,688 95, ,978 Obligations under capital lease... 17,531 Other long term liabilities... 8,540 1,250 Total liabilities... 1,020, , , ,726 Equity Share capital (December 31, 2015: 172,675,637 shares outstanding, par value USD 0.01, 2014: 80,121,550, 2013: 30,472,061, 2012: 24,437,000)... 1, Additional paid in capital , , ,766 Contributed capital surplus... 1,378, , , ,700 Retained deficit... (221,844) (1,005) (7,919) (4,016) Total equity... 1,158, , , ,694 Total liabilities and equity... 2,178,667 1,262, , ,420 60

62 Former Golden Ocean The table below sets out a summary of Former Golden Ocean s audited consolidated balance sheet information as of December 31, 2014, 2013 and USD thousands As of December 31 (audited) Assets Non-current assets Vessels and equipment , , ,517 Vessels held under finance leases... 56, , ,217 Vessels under construction... 42,398 16, ,082 Other long term receivables... 9,189 8,588 8,026 Available-for-sale financial assets... 9,164 16,916 Derivative financial instruments... 2,093 2,735 Installments on cancelled newbuildings , ,325 Investment in associated companies and joint ventures... 10,481 17,419 1,248 Intangible assets... Total non-current assets ,118 1,053, ,415 Current assets Inventories... 8,513 10,775 5,750 Trade and other receivables... 21,554 25,495 14,677 Available for sale financial assets... Refundable instalments on cancelled newbuildings ,561 Restricted deposit... 3,531 4,960 8,178 Cash and cash equivalents ,147 93, ,359 Total current assets , , ,964 Total assets... 1,079,424 1,188,471 1,110,379 Equity and liabilities Equity attributable to equity holders of the parent Share capital... 44,731 44,726 44,726 Additional paid in capital... 99,187 99,156 99,156 Other reserves... 42,999 23,466 16,550 Retained earnings , , , , , ,805 Non-controlling interests... 1, Total equity , , ,296 Non-current liabilities Long term debt , , ,432 Obligations under finance leases... 55, , ,055 Derivative financial instruments... 2,106 7,782 Other long term liabilities... 2,201 3,476 3,782 Total non-current liabilities 456, , ,051 Current liabilities Long-term debt current position ,435 41,214 38,733 Obligations under finance leases current positions... 4,290 7,370 6,837 Derivative financial liabilities... Amount due to related parties... 1,180 1,216 1,328 Trade payables and current liabilities... 19,991 40,084 41,134 Total current liabilities ,896 89,884 88,032 Total liabilities and shareholders equity... 1,079,424 1,188,471 1,110,379 61

63 10.4 Selected Changes in Equity Information The Company The table below sets out a summary of the Company s audited changes in equity information for the years ended December 31, 2014, 2013 and 2012, and the Company s unaudited changes in equity information for the year ended December 31, USD thousands, except number of shares For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Number of shares outstanding Balance at the beginning of the period... 80,121,550 30,472,061 24,437,000 24,425,699 Shares issued... 92,554,087 49,649,489 6,035,061 11,301 Balance at the end of the period ,675,637 80,121,550 30,472,061 24,437,000 Share capital Balance at the beginning of the period Shares issued Balance at the end of the period... 1, Additional paid in capital Balance at the beginning of the period , , , ,256 Shares issued , ,557 51,106 Value of vested options in Former Golden Ocean Stock option expense Restricted stock unit expense (229) Transfer to contributed capital surplus... (1,207,448) Balance at the end of the period , , ,766 Contributed capital surplus Balance at the beginning of the period , , , ,019 Contribution from shareholder... 59,746 Distributions to shareholders... (19,906) (18,180) (29,319) Value of vested options in Former Golden Ocean Restricted stock unit expense... (102) Transfer from additional paid in capital... 1,207,448 Balance at the end of the period... 1,378, , , ,700 Retained (deficit)/earnings Balance at the beginning of the period... (1,005) (7,919) (4,016) 49,413 Net income/(loss)... (220,839) 15,995 (3,903) (53,429) Distributions to shareholders... (9,081) Balance at the end of the period... (221,844) (1,005) (7,919) (4,016) Total equity... 1,158, , , ,694 62

64 Former Golden Ocean The table below sets out a summary of Former Golden Ocean s audited changes in equity information for the years ended December 31, 2012, 2013 and Additional Non- USD thousands Share Paid in Other Retained Controlling Total Capital Capital Reserves Earnings Total Interests Equity Balance at December 31, , ,801 14, , , ,884 Comprehensive income for the period... 11,602 11,602 (5) 11,597 Purchase and cancellation of treasury shares... (973) (5,646) 2,465 (4,153) (4,153) Dividends and related tax... (22) (22) (22) Values of services under stock options scheme Balance at December 31, ,726 99,156 16, , , ,296 Comprehensive income for the period... 6,916 83,875 90, ,408 Dividends and related tax... (8,946) (8,946) (8,946) Values of services under stock options scheme... 1,132 1,132 1,132 Balance at December 31, ,726 99,156 23, , ,782 1, ,890 Comprehensive income/(loss) for the period... (8,581) (135,008) (143,589) (593) (144,182) Equity portion convertible bond... 28,114 28,114 28,114 Issue of new share capital Dividends and related tax... (36,680) (36,680) (520) (37,200) Value of services under stock options scheme Shares purchased from minority... (121) (121) (16) (137) Stock option paid in cash... (54) (54) (54) Balance at December 31, ,731 99,187 42, , , ,976 63

65 10.5 Selected Cash Flow Information The Company The table below sets out a summary of the Company s unaudited consolidated cash flow information for the three months ended December 31, 2015 and 2014 and the year ended December 31, 2015 and the Company's audited consolidated cash flow information for the years ended December 31, 2014, 2013 and USD thousands Cash flow from operating activities For the Three Months Ended December 31 (unaudited) For the Year Ended December 31 (unaudited) For the Year Ended December 31 (audited) Net income/(loss) for the period... (69,268) 5,162 (220,839) 15,995 (3,903) (53,429) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization of deferred charges... 13,973 7,815 54,290 20,246 11,637 21,364 Net loss on sale of assets and amortization of deferred gain... 8,492 10,788 (254) 13,088 Impairment loss on vessels... 4, ,597 5,342 41,597 Impairment loss on securities... 23,323 23,323 Results from associated companies... (144) 433 Amortization of time charter contract value... 2,303 Restricted stock unit expense (366) (10) Bargain purchase gain arising on consolidation. (78,876) Other... 13,189 43, ,155 Change in operating assets and liabilities... (299) (10,238) 33 (11,619) (1,654) 815 Net cash (used in)/provided by operating activities... (6,161) 2,373 (14,827) 24,864 12,313 36,799 Cash flow from investing activities Placement of restricted cash... 1,888 (3,923) 4,052 (3,924) Additions to newbuildings... (65,339) (106,905) (519,013) (357,402) (26,706) Purchase of investments... (32,159) Cash acquired on purchase of SPCs ,645 68,560 Purchase of vessel... (24,085) Proceeds from sale of assets... 46, ,723 17,075 66,993 Refund of newbuilding installments... 40,148 Dividends received from associated companies Cash acquired on merger with the Former Golden Ocean ,084 Net cash (used in)/provided by investing activities... (17,236) (110,828) 112,568 (316,851) (9,631) 66,993 Cash flow from financing activities Proceeds from long-term debt... 60, , ,000 Repayment of long-term debt... (11,446) (1,500) (244,338) (1,500) (16,678) (42,062) Debt fees paid... (3,825) (3,555) Net proceeds from share issuance... 51,167 Repayment of capital leases... (1,725) (5,157) Distributions to shareholders... (4,006) (28,987) (18,180) (29,319) Net cash provided by/(used in) financing activities... (13,171) 54,494 (37,345) 235,958 16,309 (71,381) Net change in cash and cash equivalents... (36,568) (53,961) 60,396 (56,029) 18,991 32,411 Cash and cash equivalents at start of the period ,185 96,182 42,221 98,250 79,259 46,848 Cash and cash equivalents at end of the period ,617 42, ,617 42,221 98,250 79,259 64

66 Former Golden Ocean The table below sets out a summary of Former Golden Ocean's audited consolidated cash flow information for the years ended December 31, 2012, 2013 and USD thousands For the Year Ended December 31 (audited) Cash flow from operating activities Profit/(loss) for the period... (135,601) 84,492 11,597 Adjustments for: Share based payment , Stock options paid in cash... (54) (40) Gain on sale and impairment of available-for-sale financial assets... (4,126) (339) (505) Share of (profit)/loss from associates and joint ventures... (2,017) (4,149) (1,422) Gain from purchase of shares in joint venture... (6,198) Gain from refundable installments for cancelled newbuildings... (19,458) Interest income... (1,134) (1,096) (1,372) Interest expensed... 22,624 10,280 20,581 Depreciation and amortization... 47,475 38,664 35,791 Amortization of deferred charges... 1, Impairment of owned vessels and vessels under construction ,300 30,288 Adjustment for financial lease obligation... (51,454) Imputed interest on other long term receivables... (601) (562) (525) Foreign currency gain/(losses) (521) (383) Change in operating assets and liabilities... (3,645) (27,824) 31,671 Net cash provided by operating activities... 31, , ,486 Cash flow from investing activities Changes in restricted deposits... 1,429 3,217 3,382 Interest received... 1,134 1,096 1,372 Payments on vessels... (154,536) (62,680) (41,431) Payment of business combination... (13,600) Capitalized docking and periodic maintenance... (13,231) (1,485) (3,430) Investment in financial assets-available-for sale... (136) (10,000) Investments in joint ventures... (13,275) Dividend received joint venture... 1,252 1,750 Proceeds from cancelled newbuildings ,569 Net proceeds from sale of vessels under construction... 14,970 Sale of available-for-sale financial assets... 4, ,835 Net cash provided by/(used in) investing activities... (71,245) (81,536) 10,448 Cash flow from financing activities Payment of financing charges... (3,685) (1,709) (2,031) Payment of interest... (17,880) (10,103) (20,522) Payment of interest swaps... (6,384) (3,954) (3,001) Purchase of treasury shares... (4,154) Repayment of obligations under finance leases... (6,817) (6,594) (6,255) Repayment of long term debt... (71,412) (36,770) (127,864) Proceeds from long term debt... 33,947 11,250 Repayment of convertible bonds... (7,700) Payment of dividends and related tax... (41,670) (4,473) (22) Proceeds from convertible bonds ,000 Net cash (used in)/provided by financing activities... 52,188 (29,656) (160,298) Net change in cash and cash equivalents... 12,266 (10,478) (22,364) 65

67 USD thousands For the Year Ended December 31 (audited) Cash and cash equivalents at start of the period , , ,724 Cash and cash equivalents at end of the period ,147 93, , Other Selected Financial and Operating Information The table below sets out certain other unaudited key financial and operating information for the Company on a consolidated basis. USD thousands, except ratios As of or for the Year Ended December 31, 2015 As of or for the Year Ended December 31, EBITDA (1)... 41,581 38,995 NIBD (2) , ,356 Equity ratio (3) Debt-to-equity ratio (4) Interest coverage ratio (5)... (6.13) 7.51 (1) The Company defines EBITDA as net income from continuing operations before tax, depreciation, net interest expense, (2) (3) (4) (5) amortization of debt issue expenses and vessel impairment loss and impairment losses on marketable securities and investment in associated company. Net interest bearing debt, which is interest bearing debt less cash and cash equivalents and restricted cash. Total shareholders' equity divided by total assets, multiplied by 100. Total liabilities to shareholders equity. EBIT divided by net interest expense Unaudited Pro Forma Financial Information Introduction The following unaudited pro forma condensed combined financial information is presented to illustrate the combination of the Company before the Merger (also referred to as Knightsbridge ) and Former Golden Ocean pursuant to which the two companies agreed to merge, with the Company as surviving legal entity (the Combination ). The Merger was completed on March 31, The unaudited pro forma condensed combined statement of income for the year ended December 31, 2014 is based upon, derived from, and should be read in conjunction with the audited financial statements of Knightsbridge, which are available in Knightsbridge s Annual Report on Form 20-F for the year ended December 31, 2014, which was filed with the U.S. Securities and Exchange Commission ( SEC ) on April 29, 2015, and the audited financial statements of Former Golden Ocean for the year ended December 31, 2014, included in Appendix E (Annual Financial Statements for Former Golden Ocean Group Limited) included in this Prospectus. Knightsbridge's audited financial statements were prepared in accordance with U.S. GAAP and presented in thousands of U.S. dollars. Former Golden Ocean's audited financial statements were prepared in accordance with IFRS as issued by the IASB and presented in thousands of U.S. dollars. For purposes of preparing the unaudited pro forma condensed combined financial information, Former Golden Ocean's audited financial statements prepared under IFRS as issued by the IASB were reconciled to U.S. GAAP, as applicable, and as further described in Notes 2 and 3 and other accompanying notes to the unaudited pro forma condensed combined financial information based on a U.S. GAAP analysis. This reconciliation has not been audited. The unaudited pro forma condensed combined financial information does not contain any pro forma balance sheet since the Merger transaction was effective on March 31, 2015 and the Merger transaction is reflected in the interim financial information of the Company for the three and twelve months periods ended December 31, The accompanying unaudited pro forma condensed combined financial information give effect to adjustments that are (i) directly attributable to the Combination and (ii) factually supportable. The unaudited condensed combined statement of income for the year ended December 31, 2014 gives effect to the Combination as if it happened on January 1, All pro forma adjustments are expected to have a continuing impact on consolidated results except for the pro forma adjustment related to the bargain purchase gain (see note 4 (B) 8.). Please refer to note 3 below regarding the accounting for the Combination of Knightsbridge and Former Golden Ocean. 66

68 The unaudited pro forma condensed combined financial information has been prepared by management in accordance with Annex II to EU Regulation No. 809/2004 as incorporated in Norwegian law through section 7-13 of the Norwegian Securities Trading Act and in accordance with the principles that are consistent with the accounting principles as applied by the Company. The unaudited pro forma information has been prepared for illustrative purposes only. Because of its nature, the unaudited pro forma information addresses a hypothetical situation and, therefore, does not represent the Company s actual results. The unaudited pro forma condensed combined financial information is hence not necessarily indicative of the combined financial results of operations that would have been realized had the combination occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial future results of operations that the Company will experience after the Combination. This unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions as well as the above referenced audited financial statements of both Knightsbridge and Former Golden Ocean. The pro forma financial information is included solely to comply with the requirements of the applicable securities laws in Annex II to EU Regulation No. 809/2004 as incorporated in Norwegian law through section 7-13 of the Norwegian Securities Trading Act. Such pro forma financial information has not been prepared in accordance with the requirements of Regulation S-X of the U.S. Securities and Exchange Commission or generally accepted practice in the United States of America (U.S.). In addition, the rules and regulations related to the preparation of pro forma financial information in other jurisdictions may also vary significantly from the requirements applicable in Annex II to EU Regulation No. 809/2004 as incorporated in Norwegian law through section 7-13 of the Norwegian Securities Trading Act. The examination of the pro forma financial information by PricewaterhouseCoopers AS has not been carried out in accordance with the auditing standards generally accepted in the U.S. and accordingly should not be relied upon by U.S. Investors as if it had been carried out in accordance with those standards or any other standards besides the standards mentioned above. The amounts are presented in thousands of U.S. dollars unless otherwise stated, except per share amounts. Unaudited Pro Forma Condensed Combined Statement of Operations The table below sets out the Company s unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014, as if the Merger had taken place at January 1, USD thousands Knightsbridge Former Golden Ocean, IFRS IASB US GAAP Selected Adjustments Notes 4(A) Pro Forma Adjustments Notes 4(B) Pro Forma Combined Operating revenue Time charter revenue... 22, ,301 (30,417) (1) 121,540 Voyage charter revenue... 53, , ,410 Other income... 20,353 7,453 (1,034) (2) 26,772 Total operating revenue... 96, ,458 (31,451) 318,722 Gain on newbuilding contracts... 57,414 (1)(2) 57,414 Operating expenses Voyage expenses and commissions... 33,955 75,971 (1,034) (2) 108,892 Ship operating expenses... 18,676 56,404 11,367 (2) 86,447 Charter hire expenses... 43,268 (1,567) (3) 41,701 Administrative expenses... 5,037 11,864 16,901 Depreciation... 19,561 47,475 (3,930) (2) (11,093) (4) 52,013 Loss on freight forward agreements... 16,259 (1) 16,259 Impairment loss ,300 (116,600) (2) 66,700 Total operating expenses... 77, ,282 (92,904) (13,694) 388,913 Other gains, net... 62,868 (62,868) (1) Net operating income (loss)... 19,486 (101,956) 87,450 (17,757) (12,777) Interest income ,134 1,163 Interest expense... (2,525) (31,394) 6,425 (2) (2,826) (5) (30,320) Loss on interest rate swaps... (7,401) (1) (7,401) Income from associated companies... 8,215 (1) (190) (6) 8,025 Profit on sale of securities... 4,165 (1) 4,165 Other financial items... (737) (3,188) 3,236 (1) (300) (7) (989) Bargain purchase gain... 78,876 (8) 78,876 67

69 USD thousands Knightsbridge Former Golden Ocean, IFRS IASB US GAAP Selected Adjustments Notes 4(A) Pro Forma Adjustments Notes 4(B) Pro Forma Combined Income (loss) from continuing operations before income taxes... 16,253 (135,404) 102,090 57,803 40,742 Income taxes (197) (197) Income (loss) from continuing operations after income taxes... 16,253 (135,601) 102,090 57,803 40,545 Net loss attributable to noncontrolling interest Net earnings (loss) from continuing operations attributable to common shareholders... 16,253 (135,008) 102,090 57,803 41,138 Weighted-average number of common shares outstanding Basic... 52, , ,889 Diluted... 52, , ,669 Net earnings attributable to common shareholders (USD) Basic (0.30) 0.23 Diluted (0.30) Description of Transaction On October 7, 2014, Knightsbridge and Former Golden Ocean entered into a merger agreement pursuant to which the two companies agreed to merge, with Knightsbridge as the surviving legal entity. Knightsbridge was renamed Golden Ocean Group Limited upon completion of the merger on March 31, Shareholders in Former Golden Ocean at the time the Merger was completed received shares in the Company as merger consideration. One share in Former Golden Ocean gave the right to receive shares in the Company, and the Company issued 61.4 million shares to shareholders in Former Golden Ocean. Upon completion of the Merger, existing shareholders in Knightsbridge and Golden Ocean owned approximately 57% and 43%, respectively, of the Company. Upon completion of the merger, the Convertible Bond Issue 2014/2019 that was issued by Former Golden Ocean in January 2014 was converted into a convertible bond of the Company pursuant to the terms of the bond agreement. Hemen Holding Limited, a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family, and certain of its affiliates, owned approximately 41% and 59%, respectively, of the issued and outstanding common shares of Golden Ocean and Frontline 2012 at the time of the announcement of the Merger. In connection with the special general meetings that were held by Knightsbridge and Former Golden Ocean to approve the merger, Hemen, and certain of its affiliates, (including Frontline 2012) entered into voting agreements to vote all of their respective shares in favor of the merger. Approval of the merger by the shareholders of each Company required the affirmative vote of those shareholders, as of the record date, representing 75% of the ordinary shares of that company which are voted at its special general meeting. Upon completion of the merger, Hemen and such affiliates, collectively, own approximately 61% of the shares and votes in the Company, which includes Hemen's indirect ownership in the shares owned by Frontline The Merger valued the entire issued share capital of Former Golden Ocean at USD million based on the closing share price of USD 5.00 on March 31, 2015, the completion date of the Merger, and the value of vested options of USD 0.9 million. 2. Accounting Policies During the preparation of this unaudited pro forma condensed combined financial information, management has performed a review and comparison of Former Golden Ocean's IFRS accounting policies with Knightsbridge's U.S. GAAP accounting policies and has identified certain adjustments for purposes of preparing the unaudited pro forma condensed combined financial information. 68

70 3. Accounting for the Combination The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Knightsbridge and Former Golden Ocean. The acquisition method of accounting, based on ASC 805, uses the fair value concepts defined in ASC 820, "Fair Value Measurement" ( ASC 820 ). Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their acquisition date fair value. For pro forma purposes, the fair value of Former Golden Ocean's identifiable tangible and intangible assets acquired and liabilities assumed are based on management s estimate of fair value as of March 31, Occasionally, an acquirer will make a bargain purchase, which is a business combination in which the consideration amount is less than the aggregate fair value of the assets acquired and the liabilities assumed. Before recognizing a gain on a bargain purchase, the acquirer shall reassess whether it has correctly identified all of the assets acquired and all of the liabilities assumed and shall recognize any additional assets or liabilities that are identified in that review. If that shortfall remains, the acquirer shall recognize the resulting gain in earnings on the acquisition date. The gain shall be attributed to the acquirer. Management believes the estimated fair values utilized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions. The combination of Knightsbridge and Former Golden Ocean has been accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805, with Knightsbridge selected as the accounting acquirer under this guidance. The factors that were considered in determining that Knightsbridge should be treated as the accounting acquirer in the merger transaction were the relative voting rights in the Company, the composition of the board of directors in the Company, the relative sizes of Knightsbridge and Former Golden Ocean, the composition of senior management of the Company and the name of the Company. Management believes that the relative voting rights in the Company and the composition of the board of directors in the Company were the most significant factors in determining Knightsbridge as the accounting acquirer. The valuation of consideration transferred is based on the number of common shares issued by Knightsbridge and Knightsbridge's closing share price of USD 5.00 on March 31, 2015, the completion date of the Merger, and the value of vested options. The following represents the purchase price calculation (in thousands, total amounts may not recalculate due to rounding): (number of shares in thousands) Former Golden Ocean outstanding shares ,314 Exchange ratio Knightsbridge common stock issued to Former Golden Ocean shareholders... 61,444 Closing price per share on March 31, 2015 (USD) ,220 Fair value of vested stock options Total estimated purchase price consideration ,146 The following represents the calculation of the bargain purchase gain, which has been recorded in the unaudited financial information of the Company for the year ended December 30, 2015 which is not intended to be a full set of interim financial statement, and the allocation of the total purchase price based on management's valuation (in thousands, total amounts may not recalculate due to rounding): Total estimated purchase price consideration ,146 Fair value of net assets acquired and liabilities assumed ,022 Bargain purchase gain... (78,876) Current assets ,599 Vessels, net ,997 Vessels held under capital lease... 14,029 Newbuildings... 12,030 Investments in associated companies... 11,345 Available for sale financial assets... 5,785 Other long term assets ,146 Current liabilities... (77,189) Non-current liabilities... (589,720) Fair value of net assets acquired and liabilities assumed... (387,022) For pro forma purposes, the fair value of Former Golden Ocean's identifiable tangible and intangible assets acquired and liabilities assumed are based on management s estimate of fair value and this is in excess of the consideration amount. 69

71 Management has reassessed whether it has correctly identified all of the assets acquired and all of the liabilities assumed and this excess remains. Consequently, Knightsbridge recognized the resulting gain in earnings on the acquisition date. 4. Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Year Ended December 31, 2014 (A) Adjustments from IFRS to U.S. GAAP Former Golden Ocean's audited financial statements were prepared in accordance with IFRS as issued by the IASB and presented in thousands of U.S dollars. For purpose of preparing the unaudited pro forma condensed combined financial information, Former Golden Ocean's audited financial statements prepared under IFRS as issued by the IASB were reconciled to U.S. GAAP, as applicable, based on a U.S. GAAP analysis. The applicable adjustments following from this reconciliation have been included in the "U.S. GAAP Selected Adjustments" column to the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, in USD thousands Reclassifications (1) Adjustments (2) Total Gain on cancellation of newbuilding contracts... 70,912 (13,498) 57,414 Ship operating costs... (11,367) (11,367) Depreciation... 3,930 3,930 Loss on freight forward agreements... (16,259) (16,259) Impairment loss , ,600 Other gains, net... (62,868) (62,868) Net operating loss... (8,215) 95,665 87,450 Interest expense... 6,425 6,425 Loss on interest rate swaps... (7,401) (7,401) Income from associated companies... 8,215 8,215 Profit on sale of securities... 4,165 4,165 Other financial items... 3,236 3,236 Net loss attributable to common shareholders , ,090 (1) IFRS to U.S. GAAP Reclassifications In order to conform IFRS income statement classifications to U.S GAAP classifications part of Former Golden Ocean's other gains, net of USD 1.4 million have been reclassified to separate line items (as shown in the table above) in conformity with U.S. GAAP and Knightsbridge s classifications. (2) IFRS to U.S. GAAP Adjustments Gain on cancellation of newbuilding contracts and termination of leases Gains of USD 13.5 million relating to refundable installments and interest for cancelled newbuilding contracts as of December 31, 2014, have been recognized under IFRS upon reclassification of the newbuilding installment payments as a financial asset measured at fair value upon conclusion of the arbitration proceedings. However, this gain has not been recognized under U.S. GAAP since gain contingencies regarding the receipt of cash have not been fully resolved as of December 31, Ship operating costs and depreciation Former Golden Ocean capitalizes dry docking costs as a separate component of the carrying value of its vessels and amortizes this cost over its estimated useful life. Such costs are expensed as incurred by Knightsbridge and so dry docking costs, which have been capitalized in the period have been expensed and the amortization relating to dry docking costs has been reversed. Interest expense Interest expense has been adjusted to reflect the fact that Former Golden Ocean bi-furcated the convertible loan and the conversion option and recorded an equity element under IFRS whereas there would be no bifurcation of this equity element under U.S. GAAP. This resulted in the IFRS interest expense being USD 6.4 million higher than it would have been under U.S. GAAP. The Company has applied a straight-line amortization method for this element since this approximates the effective interest rate method. (B) Pro Forma Adjustments The following notes describe the pro forma adjustments made to Former Golden Ocean's audited financial statements and the elimination of historical transactions between Knightsbridge and Former Golden Ocean. 1. Time charter revenue The fair value of favorable time charter contracts-out recognized as part of the purchase price allocation will be amortized on a straight line basis over the length of those contracts, except for 70

72 a contract of affreightment which will be amortized to reflect when the economic benefit of the contract is received, for which the remaining contract lengths range from 10 months to 7.5 years, and estimated amortization of USD 30.4 million has been recorded in the year ended December 31, Other income and voyage expenses and commissions Former Golden Ocean was the manager of Knightsbridge's dry bulk vessels and received a management fee equal to 1.25% of the gross freights earned by these vessels. This management fee has been eliminated from the combined pro forma statement of operations. 3. Charter hire expenses The fair value of unfavorable time charter contracts-in recognized as part of the purchase price allocation will be amortized on a straight line basis over the length of those contracts, for which the remaining contract lengths range from three months to 10 years, and estimated amortization of USD 1.6 million has been recorded in the year ended December 31, Depreciation This adjustment comprises two elements: (i) The depreciation expense for owned vessels for the period has been reduced by USD 7.1 million as a consequence of the fair value adjustment to the carrying balance of vessels, for which the remaining estimated useful lives range from 8.5 years to 25 years, as part of the purchase price allocation, and (ii) The depreciation expense related to two vessels held under capital lease has been reduced by USD 4.0 million as a consequence of the fair value adjustment to the carrying balance of vessels held under capital lease as part of the purchase price allocation. The estimated useful lives of the capital lease assets were reconsidered in connection with the purchase price allocation adjustment since the lease term has been reassessed as of December 31, The estimated useful lives of the capital lease assets range from approximately 5 months to 5 years. 5. Interest expense This adjustment comprises of four elements; (i) (ii) The interest expense related to the convertible bond has been increased by USD 8.9 million to reflect the effective interest based on an assessment of the fair value of the convertible bond. Management determined that the fair value of the USD million convertible loan was USD million based on the quoted trading price for the bond on December 31, The Company does not believe that the nominal interest rate on the convertible loan changed in its fair valuation and has calculated the additional interest expense in the year ended December 31, 2014 to be USD 8.9 million based on the amortization of the difference in the fair valuation of the principal amount. Deferred charges relating to the convertible bond were eliminated and reflected in the fair value assessment of the bond. Former Golden Ocean has recognized USD 0.6 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense. (iii) The interest expense related to two vessels held under capital lease has been reduced by USD 4.8 million as a consequence of the fair value adjustment related to the lease obligations as part of the purchase price allocation. The average implicit rate in these two leases has been reduced from approximately 8.5% to 7% based on management's best estimate for effective cost of financing that could be obtained in the market as of December 31, (iv) Deferred charges relating to Former Golden Ocean's long-term debt, excluding the convertible bond, were eliminated and reflected in the fair value assessment of the debt. Golden Ocean has recognized USD 0.6 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense. 6. Income from associated companies The share of results from associated companies has been adjusted as a consequence of the purchase price allocation to investment in associated companies. 7. Other financial items This adjustment comprises the amortization of a deferred gain arising on the saleleaseback of a vessel which has been valued as USD Bargain purchase gain This is the bargain purchase gain that was recorded at the time of the merger on March 31, 2015 and is the amount by which the aggregate fair value of the assets acquired and the liabilities assumed exceeded the value of the consideration. 71

73 6. Earnings Per Share The unaudited pro forma condensed combined basic and diluted earnings per share calculations are based on the consolidated basic and diluted weighted average shares of the Company. The pro forma basic and diluted weighted average shares outstanding are a combination of historic Knightsbridge shares and the shares issued as part of the combination to Former Golden Ocean shareholders at an exchange ratio of Knightsbridge share per Former Golden Ocean share and the 62.0 million shares issued to Frontline 2012 as consideration for the Company s acquisition of 25 SPCs from Frontline 2012, each owning a fuel efficient dry bulk newbuilding. In September 2014, the Company acquired 13 of these SPCs. The consideration for the SPCs consisted of the issuance of 31.0 million shares, valued at USD per share. The remaining 12 SPCs were acquired on March 16, 2015 and the Company issued 31.0 million shares as consideration, valued at USD 4.10 per share. The Company s unaudited pro forma condensed combined statement of income results in net income for the year ended December 31, 2014 and the dilutive effect of 112,000 restricted stock units ( RSUs ) and 668,000 stock options for the year ended December 31, 2014 have been included in the calculation of the diluted weighted-average number of common shares outstanding. The weighted average numbers of common shares outstanding for the year ended December 31, 2014 was calculated as follows: shares in thousands Knightsbridge Former Golden Ocean Frontline 2012 Pro Forma Combined Weighted average number of common shares outstanding Basic... 52,445 61,444 62, ,889 Dilutive effect of RSUs Dilutive effect of stock options Diluted... 52,557 62,112 62, ,669 72

74 11. OPERATING AND FINANCIAL REVIEW This operating and financial review should be read together with Section 10 "Selected Financial Information and Other Information" and the financial statements which are incorporated by reference to this Prospectus, see Section 20 Incorporation by Reference; Documents on Display. The following discussion contains Forward-looking statements that reflect the Company s plans and estimates. Factors that could cause or contribute to differences to these Forwardlooking Statements include those discussed in Section 2 "Risk Factors", see also Section 4.1 "General Information Cautionary Note Regarding Forward-Looking Statements" Introduction The Company is an international shipping company that owns and operates a fleet of drybulk carrier vessels, focusing on the Capesize, Supramax and Panamax markets. As of the date of this Prospectus, the Company has a fleet of 71 vessels, including 13 vessels chartered-in long term on bareboat charter or time charter and one owned in a joint venture, with an aggregate capacity of 9.3 million dwt. The fleet of the Company consists of 58 operating vessels and 13 vessels currently under construction at shipyards, of which one is sold and will be delivered to new owners upon completion from the yard. For more details about the Company s fleet, see Section 7.3 Fleet. The Company s vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes. The Company s executive management team comprises Herman Billung, CEO of Golden Ocean Management AS, and Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS. The Company s business strategy is to operate a diversified fleet of dry bulk carriers with flexibility to adjust its exposure to the dry bulk market depending on existing factors such as charter rates, newbuilding costs, vessel resale and scrap values and vessel operating expenses resulting from, among other things, changes in the supply of and demand for dry bulk capacity. The Company may adjust its exposure through time charters, bareboat charters, sale and leasebacks, sales and purchases of vessels, newbuilding contracts and acquisitions. The Company s long term goal is to renew and grow its fleet through selective acquisitions. The main currency of the Company is USD and normally all revenues and expenses are in USD. The main exceptions from this are related to port costs, part of the operating expenses and the administrative costs with the offices located in Oslo and Singapore. The Company prepares its consolidated financial statements in USD and in accordance with U.S. GAAP. The carrying values of the Company s vessels and newbuildings may not represent their fair market value at any point in time since the market prices of second-hand vessels and the cost of newbuildings tend to fluctuate with changes in charter rates. Historically, both charter rates and vessel values tend to be cyclical. The carrying amounts of vessels that are held and used by the Company and newbuildings under development are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular vessel or newbuilding may not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future cash flows expected to result from the use of the vessel and its eventual disposition is less than the vessel's carrying amount. This assessment is made at the individual vessel level as separately identifiable cash flow information for each vessel is available. Fair value is estimated based on values achieved for the sale/purchase of similar vessels and appraised valuations. The Company believes that the basic charter-free market value for all of its vessels is lower than its carrying value. The Company believes that the future undiscounted cash flows expected to be earned by each of these vessels over its remaining estimated useful life will exceed the vessel's carrying value as of December 31, 2015, and accordingly, have not recorded an impairment charge Principal Factors Affecting the Group s Financial Condition and Results of Operations The business, financial condition, results of operations and cash flows, as well as the period-to-period comparability of the financial results of the Group, are affected by a number of factors, see Section 2 "Risk Factors". Some of the factors that have influenced the Group s financial condition and results of operations during the periods under review and which are expected to continue to influence the Company's business, financial condition, results of operations and cash flows, as well as the period-to-period comparability of the Company s financial results, are: The level of charter rates in the dry bulk carrier market. The Company earns its revenues through employment of its vessels in the dry bulk carrier market, and the charter rates for dry bulk carrier vessels are subject to market fluctuations. Historically, the Company has had a high degree of fixed rate charter contracts with long duration, and during the last years these rates have been higher than the spot market rates. When the fixed rate charter contracts have expired, the vessels have started to trade in the spot market at the prevailing rates and thus the 73

75 revenues per vessel have dropped in this period. The rates in the spot market depend on a various supply and demand factors, see Section 8 Industry Overview. The number of vessels owned or chartered in. The Company has expanded its fleet significantly during the last few years and also chartered in vessels for longer and shorter durations. The number of vessels in the Company s portfolio will affect the revenues and expenses. The costs and expenses associated with the Company s operations. The operating expenses for the Company s vessels include crewing, repairs, maintenance and insurance, as well as docking costs. The Company also has other operating expenses, mainly general and administrative expenses for its offices in Norway and Singapore. Level of debt and related interest expense. The Company normally finances its acquisitions of new vessels with equity and debt financing and this may affect the cash position and financial gearing of the Company. The vessels are normally financed with ordinary bank financing, whereby the loan is repaid in instalments over fifteen to twenty years with quarterly repayments, a balloon repayment after around five years and with interest at LIBOR plus a margin. Alternatively, the Company can finance acquisition through unsecured bond financing, where there typically is no repayment prior to maturity, but quarterly interest payments. For more information about the borrowing arrangements of the Company, see Section 11.8 Operating and Financial Review Borrowing Activities Reporting Segments The Company s revenues and operating results relates to its chartering operations which are carried out internationally and cannot be attributable to any particular geographical location or separate into any various products. No analysis by either business or geographical segment is required by key management and is therefore not included in the financial reporting Recent Developments In January 2016, the Company took delivery of Golden Barnet, Golden Bexley, Golden Scape and Golden Swift, two Capesize and two Newcastlemax dry bulk newbuildings, The Company paid in total USD million on delivery and drew USD million in loan on delivery. In February 2016, the Company took delivery of, and simultaneously sold (further to a prior agreement), the KSL Caribbean and chartered the vessel in for a period of twelve months. The final installment of USD 33.4 million was paid upon delivery and sales proceeds of USD 46.2 million were received at the same time. There was no related debt. In January 2016, the Company entered into a Capesize vessel revenue sharing agreement with Bocimar International NV, C Transport Holding Ltd. and Star Bulk Carriers Corp. The Company has agreed to include 21 Capesize dry bulk vessels in the revenue sharing agreement. These vessels had previously been operating in the spot market as part of Capesize Chartering Ltd s ( CCL ) fleet. The revenue sharing agreement will initially apply to 65 modern Capesize vessels and will be managed from the Company s offices in Singapore and Bocimar s offices in Antwerp. Each vessel owner shall continue to be responsible for the operation and technical management of their respective vessels. The Company expects to achieve improved scheduling ability through the joint marketing opportunity that CCL represents for its Capesize vessels, with the overall aim of enhancing economic efficiencies. In February 2016, the Company agreed with its lenders to amend certain of the terms in its senior, secured loan agreements. For the period from April 1, 2016 to September 30, 2018 there will be no repayments, the minimum value covenant is set at 100% and the market adjusted equity ratio is waived. The Company has also agreed that for the nine remaining newbuilding contracts where the Company has financing in the USD million term loan facility, there will be a fixed drawdown of USD 25.0 million per vessel subject to compliance with the minimum value covenant of 100%. A cash sweep mechanism will be put in place whereby the Company will pay down on the deferred repayment amount should the cash position of the Company improve. The principal margins on the loans are unchanged and in average 2.3%, however the Company will pay a slightly increased margin of 4.25% for the at any given time deferred amount under the loan facilities. The agreement with the lenders was subject to the Company raising USD 200 million in equity. Prior to any equity contribution from the Company s shareholders, an amendment to the minimum value covenant and a waiver of the market adjusted equity ratio was agreed from February 2016 to, but not including, June 30, On February 18, 2016, the Company launched and completed the Private Placement, see Section 5.2 The Equity Raise The Private Placement. 74

76 On February 22, 2016, the Company increased its authorized share capital by USD 1,000,000, from USD 5,000,000 to USD 6,000,000, by way of shareholders written resolution. Apart from the above, and as further detailed elsewhere in this Prospectus, there has been no significant change in the Group s financial and trading position since December 31, Results of Operations of the Company Operating Results for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014 Operating Revenues For the year ended December 31, 2015, time charter revenues were USD 86.0 million compared to USD 22.7 million for the year ended December 31, The increase was primarily due to the increased size of the trading fleet, partly offset by a larger portion of the fleet trading on voyage charter as well as amortization of estimated fair value allocated to favorable time charter contracts which has been recognized as a reduction of time charter revenue. For the year ended December 31, 2015, voyage charter revenues were USD million compared to USD 53.7 million for the year ended December 31, The increase was primarily due to the increased size of the trading fleet and a larger portion of the fleet trading on voyage charter. For the year ended December 31, 2015, other operating income was USD 1.0 million compared to USD 20.4 million for the year ended December 31, Other operating income in the year ended December 31, 2015 mainly consists of management fee revenues received by Golden Ocean Group Management (Bermuda) Ltd for management services provided to related parties. Other operating income in the year ended December 31, 2014 mainly consists of amounts received in respect of claims for unpaid charter hire. Voyage Expenses and Commission For the year ended December 31, 2015, voyage expenses and commission were USD 81.7 million compared to USD 34.0 million for the year ended December 31, 2014, an increase which was primarily due to the significantly larger fleet, partly offset by lower fuel costs on the fleet. Ship Operating Expenses Ship operating expenses are the direct costs associated with running a vessel and include crew costs, vessel supplies, repairs and maintenance, lubricating oils and insurance. For the year ended December 31, 2015, ship operating expenses were USD 83.0 million compared to USD 18.7 million for the year ended December 31, The increase was primarily due to the significantly larger fleet. The operating expenses in USD/day per vessel have been stable between the periods. Charter Hire Expenses For the year ended December 31, 2015, charter hire expenses were USD 30.7 million due to the vessels chartered in by Former Golden Ocean. Charter hire expenses for the year ended December 31, 2014 were USD nil as the Company did not charter in any vessels prior to the Merger with Former Golden Ocean. Administrative Expenses For the year ended December 31, 2015, administrative expenses were USD 12.5 million compared to USD 5.0 million for the year ended December 31, The increase was primarily due to the Merger with Former Golden Ocean. Provision for Uncollectible Receivables The Company recorded a provision for uncollectible receivables of USD 4.7 million in the year ended December 31, 2015 relating to a long term receivable. Depreciation For the year ended December 31, 2015, depreciation was USD 52.7 million compared to USD 19.6 million for the year ended December 31, The increase was primarily due to a significantly larger fleet. Vessel Impairment Loss The Company recorded a vessel impairment loss of USD million in the year ended December 31, This loss comprises (i) a loss of USD million recorded in the first quarter relating to five vessels (KSL China, Battersea, Belgravia, Golden Future and Golden Zhejiang), which the Company agreed in April 2015 to sell to, and lease back, from Ship Finance, (ii) a loss USD 7.1 million recorded in the third quarter relating to three of the four Capesize newbuildings, 75

77 which the Company agreed to sell to in April 2015 (the Company completed the sale of one of these newbuildings in August and recorded a loss on disposal of USD 2.3 million) and (iii) a loss of USD 4.5 million recorded in the fourth quarter relating to the Golden Lyderhorn, which is a vessel held under capital lease. Impairment losses are taken when events or changes in circumstances occur that cause the Company to believe that future cash flows for an individual vessel will be less than its carrying value and not fully recoverable. In such instances an impairment charge is recognized if the estimate of the undiscounted cash flows expected to result from the use of the vessel and its eventual disposition is less than the vessel's carrying amount. Impairment Loss on Securities The Company recorded an impairment loss on securities of USD 23.3 million in the year ended December 31, 2015 relating to its investments in listed and unlisted equity securities. Other Financial Items For the year ended December 31, 2015, other financial items were USD 9.6 million compared to USD 0.8 million for the year ended December 31, 2014, an increase which was primarily due to an impairment loss of USD 4.6 million relating to an equity investment and unfavourable movements in the mark-to-market valuations of derivative instruments. Bargain Purchase Gain The Company recorded a bargain purchase gain of USD 78.9 million in the year ended December 31, 2015, which resulted from the merger of the Company with Former Golden Ocean in March 2015, and is the amount by which the fair value of the net assets acquired exceeded the value of the consideration paid. Interest Income For the year ended December 31, 2015, interest income was USD 849,000 compared to USD 29,000 for the year ended December 31, 2014, and relates solely to interest received on bank deposits. Interest Expense For the year ended December 31, 2015, interest expense was USD 28.3 million compared to USD 2.5 million for the year ended December 31, The increase was primarily due to a larger debt portfolio due to the increased size of the fleet, and the amortization of the fair value adjustment to the Company s convertible bond at the time of the Merger with Former Golden Ocean. Net Loss From Discontinued Operations For the year ended December 31, 2015, net loss from discontinued operations was USD 0 compared to USD 258,000 for the year ended December 31, The net loss from discontinued operations for the year ended December 31, 2014 relates to the operations of Knightsbridge s VLCCs. Knightsbridge had one VLCC at the start of 2013, which was sold in April Operating Results for the Three Months Ended December 31, 2015 Compared to the Three Months Ended December 31, 2015 Operating Revenues For the three months ended December 31, 2015, time charter revenues were USD 28.0 million compared to USD 6.2 million for the three months ended December 31, The increase was primarily due to the increased size of the trading fleet, partly offset by a larger portion of the fleet trading on voyage charter as well as amortization of estimated fair value allocated to favorable time charter contracts which has been recognized as a reduction of time charter revenue. For the three months ended December 31, 2015, voyage charter revenues were USD 28.1 million compared to USD 25.9 million for the three months ended December 31, The increase was primarily due to the increased size of the trading fleet trading and a larger portion of the fleet trading on voyage charter, offset by lower charter rates obtained. For the three months ended December 31, 2015, other operating income was USD 0.4 million compared to USD 4.5 million for the three months ended December 31, Other operating income in the three months ended December 31, 2014 was mainly related to an amount received in respect of a claim for unpaid charter hire. 76

78 Voyage Expenses and Commission For the three months ended December 31, 2015, voyage expenses and commission were USD 22.8 million compared to USD 15.5 million for the three months ended December 31, 2014, an increase which was primarily due to a significant increase in the fleet, however partly offset by lower bunker prices. Ship Operating Expenses Ship operating expenses are the direct costs associated with running a vessel and include crew costs, vessel supplies, repairs and maintenance, lubricating oils and insurance. For the three months ended December 31, 2015, ship operating expenses were USD 25.5 million compared to USD 5.7 million for the three months ended December 31, The increase was primarily due to a significantly larger fleet. Charter Hire Expenses For the three months ended December 31, 2015, charter hire expenses were USD 12.6 million due to the vessels chartered in by Former Golden Ocean. Charter hire expenses for the three months ended December 31, 2014 were USD nil as the Company did not charter in any vessels prior to its merger with Former Golden Ocean. Administrative Expenses For the three months ended December 31, 2015, administrative expenses were USD 3.4 million compared to USD 2.0 million for the three months ended December 31, The increase was primarily due to the merger with Former Golden Ocean. Provision for Uncollectible Receivables The Company recorded a provision for uncollectible receivables of USD 4.7 million in the three months ended December 31, 2015 relating to a long term receivable. Depreciation For the three months ended December 31, 2015, depreciation was USD 13.8 million compared to USD 7.6 million for the three months ended December 31, The increase was primarily due to a significantly larger fleet. Impairment Loss on Securities The Company recorded an impairment loss on securities of USD 23.3 million in the three months ended December 31, 2015 relating to its investments in listed and unlisted equity securities. Other Financial Items For the three months ended December 31, 2015, other financial items were USD 0.8 million compared to USD 0.2 million for the three months ended December 31, 2014, an increase which was primarily due to an impairment loss of USD 4.6 million relating to an equity investment, which was partially offset by favorable movements in the mark-to-market valuations of derivative instruments. Interest Income For the three months ended December 31, 2015, interest income was USD 301,000 compared to USD 16,000 for the three months ended December 31, 2014, and relates solely to interest received on bank deposits. Interest Expense For the three months ended December 31, 2015, interest expense was USD 6.0 million compared to USD 502,000 for the three months ended December 31, The increase was primarily due to a larger debt portfolio due to the increased size of the fleet, and the amortization of the fair value adjustment to the Company s convertible bond at the time of the Merger with Former Golden Ocean. Operating Results for the Year Ended December 31, 2014 Compared with Year Ended December 31, 2013 Operating Revenues Time charter revenues decreased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to a decrease in revenues of USD 9.3 million from the Belgravia, which traded on time charter to mid- June 2014 at which time it was redelivered to the Company and commenced trading in the spot market. This was partially offset by an increase in revenues of USD 3.5 million from the Golden Zhejiang, which resulted in part due to USD

79 million received as partial settlement of a claim for unpaid charter hire and damages. This amount was received in March 2014 and was recorded as time charter revenue as it related to unrecognized time charter revenue in respect of servic es previously rendered. Voyage charter revenues increased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to the following reasons; An increase in revenues of USD 41.4 million, which resulted from the delivery of eight newbuildings in 2014 (KSL Seattle and KSL Singapore were delivered in May; KSL Sapporo and KSL Sydney were delivered in June and July, respectively; KSL Salvador and KSL Santiago were delivered in September and KSL San Francisco and KSL Santos were delivered in October) and the delivery of Bulk China (renamed KSL China), purchased from Karpasia, in April 2014, all of which commenced trading in the spot market upon delivery. An increase in revenues of USD 5.5 million from the Belgravia, which commenced trading in the spot market during the second half of 2014 following its redelivery from time charter. This was partially offset by a decrease in revenues of USD 3.0 million from the Battersea, which traded in the spot market to August 2014 at which time it commenced a time charter terms with an earliest redelivery in July Other operating income in the year ended December 31, 2014 comprises; USD 17.5 million received in respect of a claim for unpaid charter hire and damages for early termination of the time charter for the Golden Zhejiang. The Company also received USD 1.9 million in this respect and this amount was recorded as time charter revenue as it related to unrecognized time charter revenue in respect of services previously rendered. USD 0.3 million received in respect of a claim for unpaid charter hire and damages for early termination of the time charter for the Battersea, and UDS 2.6 million received as settlement for the early charter termination of a time charter for the Belgravia. Operating Expenses Voyage expenses and commissions increased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to the following reasons; An increase USD 25.6 million, which resulted from the delivery of eight newbuildings in 2014 (KSL Seattle and KSL Singapore were delivered in May; KSL Sapporo and KSL Sydney were delivered in June and July, respectively; KSL Salvador and KSL Santiago were delivered in September and KSL San Francisco and KSL Santos were delivered in October) and the delivery of Bulk China (renamed KSL China), purchased from Karpasia, in April 2014, all of which commenced trading in the spot market upon delivery. An increase of USD 3.1 million from Belgravia, which commenced trading in the spot market during the second half of 2014 following its redelivery from time charter. This was partially offset by a decrease of USD 1.7 million from the Battersea which traded on the spot market to August and upon redelivery from the charterer commenced trading on time charter terms. Ship operating expenses are the direct costs associated with running a vessel and include crew costs, vessel supplies, repairs and maintenance, lubricating oils and insurance. Ship operating expenses increased in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to the addition of nine vessels to the fleet during Administrative expenses increased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to an increase in professional fees and audit fees incurred in connection with the Company's then prospective merger with Former Golden Ocean, which was partially offset by a decrease in RSU expense. On January 1, 2014, the Company changed the estimated scrap rate for its four Capesize vessels from an average of USD 281 per lightweight ton to USD 361 per lightweight ton. The resulting change in salvage value has been applied prospectively and reduced depreciation by approximately USD 0.3 million for the year ended December 31, This change also resulted in an increase in net income of approximately USD 0.3 million for the year ended December 31, Depreciation increased in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to the addition of nine vessels to the fleet during

80 Bulk China (renamed KSL China) was purchased in April KSL Seattle and KSL Singapore were delivered in May; KSL Sapporo and KSL Sydney were delivered in June and July, respectively; KSL Salvador and KSL Santiago were delivered in September and KSL San Francisco and KSL Santos were delivered in October. Other Income (Expenses) Interest income in the years ended December 31, 2014 and December 31, 2013 relates solely to interest received on bank deposits. Interest expense decreased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to the following reasons; An increase in bank loan interest expense of USD 2.2 million, which resulted from USD million of additional borrowings in connection with the Company's newbuilding program. An increase in commitment fees of USD 1.3 million resulting from an increase in committed, undrawn loan facilities. This was offset by an increase in capitalized interest on newbuildings of USD 3.8 million, primarily due to the newbuildings acquired from Frontline 2012 in April 2014 and September Losses related to other financial items increased in the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to increased amortization of deferred charges. Net loss from Discontinued Operations Net loss from discontinued operations relates to the operations of the Company s VLCCs. The Company had one VLCC at the start of 2013, which was sold in April There were no operating revenues in the year ended December 31, 2013, while a provision of USD 0.2 million was made in respect of a doubtful demurrage balance. There was a gain of USD 0.3 million relating to the sale of equipment, operating costs of USD 7.3 million (including an impairment loss on vessels of USD 5.3 million) and non operating expenses of USD 0.2 million. Operating Results for the Year Ended December 31, 2013 Compared with Year Ended December 31, 2012 Operating Revenues For the year ended December 31, 2013, time charter revenues were USD 27.7 million compared to USD 35.0 million for the year ended December 31, The decrease which was primarily due to the following reasons; A decrease in revenues of USD 4.5 million from the Battersea, which commenced trading in the spot market upon redelivery from time charter in April A decrease of USD 6.3 million in Golden Future revenues as a result of the reduced daily rate of the new time charter, which commenced in January A decrease in revenues of USD 0.4 million from the Belgravia as a result of the daily rate reduction in March 2012 from USD 52,670 to USD 46,412 per day. This decrease in revenues was partially offset by an improvement in the results from the Golden Zhejiang. This vessel had no time charter revenues in the year ended December 31, 2012 after unamortized costs of USD 2.1 million relating to the time charter taken over upon the acquisition of the Golden Zhejiang, accrued income of USD 3.4 million and unpaid charter hire of USD 1.5 million were written off in the six months ended June 30, 2012 following default of the Golden Zhejiang charterer. Time charter revenues from the Golden Zhejiang in the year ended December 31, 2013 were USD 3.8 million. In December 2013, the Company received USD 756,000 from Sanko as a partial settlement of a USD 17 million claim for unpaid charter hire and claims of the Battersea. This amount was recorded as time charter income in the fourth quarter of For the year ended December 31, 2013, voyage charter revenues were USD 9.9 million compared to USD 2.3 million for the year ended December 31, The increase was primarily due to an increase in revenues of USD 8.7 million from the Battersea, which commenced trading in the spot market upon redelivery from time charter in April This was partially offset by a decrease in revenues of USD 1.1 million from the Golden Zhejiang, which operated in the spot market between August and September

81 Operating Expenses For the year ended December 31, 2013, voyage expenses and commission were USD 6.8 million compared to USD 4.3 million for the year ended December 31, The increase was primarily due to an increase of USD 4.4 million from the Battersea, which commenced trading in the spot market upon redelivery from time charter in April This was partially offset by a decrease of USD 1.3 million from the Golden Zhejiang, which operated in the spot market between August and September For the year ended December 31, 2013, administrative expenses were USD 4.9 million compared to USD 4.3 million for the year ended December 31, The increase was primarily due to an increase in legal fees incurred in connection with the Company s claims against certain charterers. Depreciation of USD 11.1 million in the year ended December 31, 2013 was consistent with the year ended December 31, 2012 and relates to the same four Capesize vessels. Other Income (Expenses) For the year ended December 31, 2013, interest income was USD 41,000 compared to USD 106,000 for the year ended December 31, 2012, and relates solely to interest received on bank deposits. For the year ended December 31, 2013, interest expense was USD 2.8 million compared to USD 3.8 million for the year ended December 31, The decrease was primarily due to a reduction in the debt outstanding as a result of repayments and the capitalization of interest on newbuildings of USD 0.4 million in the year ended December 31, Losses related to other financial items was USD 508,000 in the year ended December 31, 2013 compared to USD 467,000 in the year ended December 31, The increase was primarily due to lower foreign exchange gains and an increase in bank charges. Net Loss From Discontinued Operations For the year ended December 31, 2013, net loss from discontinued operations was USD 7.4 million compared to USD 59.3 million for the year ended December 31, Net loss from discontinued operations was related to the operations of the Company s VLCCs. The Company had one VLCC at the start of 2013, which was sold in April There were no operating revenues in the year ended December 31, 2013, while a provision of USD 0.2 million was made in respect of a doubtful demurrage balance. There was a gain of USD 0.3 million relating to the sale of equipment, operating costs of USD 7.3 million (including an impairment loss on vessels of USD 5.3 million) and non-operating expenses of USD 0.2 million. The Company had four VLCCs at the start of 2012 and sold three of them during The net loss from discontinued operations in the year ended December 31, 2012 resulted from operating revenues of USD 24.5 million, a loss from the sale of vessels of USD 13.1 million, operating expenses of USD 69.1 million (including an impairment loss of USD 41.6 million) and non-operating costs of USD 1.6 million. Net loss from discontinued operations in the year ended December 31, 2014, comprises primarily of legal fees incurred in connection with claims for unpaid charter hire and damages following early termination of charters Results of Operations of Former Golden Ocean Operating Results for the Twelve Months Ended December 31, 2014 Compared to the Year Ended December 31, 2013 Operating Revenues For the twelve months ended December 31, 2014, time and voyage charter revenues were USD million compared to USD million for the year ended December 31, 2013, a decrease which was primarily due to vessels coming off profitable charter contracts and started trading in the spot market, however partly offset by an increased fleet size and more vessels trading in the freight market. Other operating revenues for the twelve months ended December 31, 2014, were USD 7.5 million compared to USD 32.5 million for the year ended December 31, 2013, a decrease which was primarily due to a settlement in 2013 of a claim in the total amount of USD 30.0 million, compared to settlement of claims in 2014 of USD 5.5 million. The remaining amounts related to other operating revenues are smaller claims and management fees. 80

82 Operating Expenses For the twelve months ended December 31, 2014, voyage expenses and commission were USD 76.0 million compared to USD 70.5 million for the year ended December 31, 2013, an increase which was primarily due to more vessels trading in the freight market relative to the time charter market. For the twelve months ended December 31, 2014, vessel operating expenses were USD 56.4 million compared to USD 46.0 million for the year ended December 31, 2013, an increase which was primarily due to the increase from twenty-one to twenty-seven vessels owned or chartered in on bareboat over the period. For the twelve months ended December 31, 2014, charter hire expenses were USD 43.3 million compared to USD 57.7 million for the year ended December 31, 2013, a decrease which was primarily due to lower activity on chartering in vessels short term for trading purposes. For the twelve months ended December 31, 2014, administrative expenses were USD 11.9 million compared to USD 12.2 million for the year ended December 31, 2013, a decrease which was primarily due to lower legal fees in 2014, partly offset by higher employee related costs. For the twelve months ended December 31, 2014, depreciation was USD 47.5 million compared to USD 38.7 million for the year ended December 31, 2013, an increase which was primarily due to an increase from nineteen to twenty five owned vessels in the fleet. For the twelve months ended December 31, 2014, impairment was USD million, compared to no impairment for the twelve months ended December 31, The impairment is related write down of asset values on owned vessels and leased assets, whereby to vessels will be redelivered to owners. Other Gains (Losses) For the twelve months ended December 31, 2014, other gains were USD 64.9 million compared to other gains of USD 11.4 million for the year ended December 31, 2013, an increase which was primarily due to adjustment of financial lease obligation of USD 51.5 million and gain on cancelled newbuilding contracts, partly offset by negative mark-to-market changes on freight derivatives in 2014 relative to Net Financial Items For the twelve months ended December 31, 2014, interest income was USD 1.1 million, which was at the same level as for the year ended December 31, For the twelve months ended December 31, 2014, interest expense was USD 31.4 million compared to USD 19.1 million for the year ended December 31, 2013, an increase which was primarily due to the convertible bond issued in January 2014, where interest is booked at 6.5% p.a. in the financial statements (the cash interest paid is 3.07%). For the twelve months ended December 31, 2014, loss related to other financial items was USD 3.2 million compared to a profit of USD 7.4 million for the year ended December 31, The loss was primarily due to negative mark-to-market changes on the interest rate swaps, the same contracts which had a positive mark-to-market change in Operating Results for the Year Ended December 31, 2013 Compared with Year Ended December 31, 2012 Operating Revenues For the year ended December 31, 2013, time and voyage charter revenues were USD million compared to US D million for the year ended December 31, 2012, an increase which was primarily due to more vessels trading in the portfolio. Other operating revenues for the year ended December 31, 2013, were USD 32.5 million compared to USD 2.7 million for the year ended December 31, 2012, an increase which was primarily due to a settlement in 2013 of a claim in the total amount of USD 30.0 million. Operating Expenses For the year ended December 31, 2013, voyage expenses and commission were USD 70.5 million compared to USD 37.1 million for the year ended December 31, 2012, an increase which was primarily due to more vessels trading in the voyage charter market, both owned vessels and vessels chartered in short term. 81

83 For the year ended December 31, 2013, vessel operating expenses were USD 46.0 million compared to USD 41.5 million for the year ended December 31, 2012, an increase which was primarily due to four vessels added to the fleet during 2012 and For the year ended December 31, 2013, charter hire expenses were USD 57.7 million compared to USD 29.7 million for the year ended December 31, 2012, an increase which was primarily due to higher activity on chartering in vessels short term in 2013 than in For the year ended December 31, 2013, administrative expenses were USD 12.2 million compared to USD 13.2 million for the year ended December 31, 2012, a decrease which was primarily due to lower legal fees in For the year ended December 31, 2013, depreciation was USD 38.7 million compared to USD 35.8 million for the year ended December 31, 2012, an increase which was primarily due to an increased number of vessels in the fleet. For the year ended December 31, 2013, there was no impairment, compared to impairment of USD 30.3 million for the year ended December 31, The impairment in 2012 was related write down of asset values on six sailing vessels and one vessel disposed of during the year. Other Gains (Losses) For the year ended December 31, 2013, share of income from associates and joint ventures was USD 4.1 million compared to USD 1.4 million for the year ended December 31, 2012, an increase which was primarily due to new joint ventures entered into in For the year ended December 31, 2013, other gains were USD 7.3 million compared to other losses of USD 3.1 million for the year ended December 31, 2012, which was primarily due to positive mark-to-market changes on the freight forward agreements. Net Financial Items For the year ended December 31, 2013, interest income was USD 1.1 million compared to USD 1.4 million for the year ended December 31, 2012, a decrease which was primarily due to lower average cash equivalents at hand in 2013 than in For the year ended December 31, 2013, interest expense was USD 19.1 million compared to USD 21.4 million for the year ended December 31, 2012, a decrease which was primarily due to lower debt in 2013 than in For the year ended December 31, 2013, profit for other financial items were USD 7.4 million compared to a loss of USD 2.7 million for the year ended December 31, 2012, an increase which was primarily due to positive mark-to-market changes on interest rate swaps in 2013, as opposed to negative changes for the same contract type in Liquidity and Capital Resources Overview; Sources and Uses of Funds The Company operates in a capital intensive industry and has historically financed its purchase of vessels through a combination of equity capital and borrowings from commercial banks, as well as the convertible bond issuance which was originally issued by Former Golden Ocean. The Company s ability to generate adequate cash flows on a short and medium term basis depends substantially on the trading performance of its vessels in the market. Periodic adjustments to the supply of and demand for dry bulk carriers cause the industry to be cyclical in nature. The Company s short-term liquidity requirements relate to service of debt, payment of operating costs, funding working capital requirements and maintaining cash reserves against fluctuations in operating cash flows and payment of cash distributions. Sources of short-term liquidity include cash balances, restricted cash balances, short-term investments and receipts from customers. Restricted cash balances are related to the minimum cash covenant in the Company s loan agreements and to margin calls on derivative positions or minor amounts secured for tax payments or for claims processes. Revenues from time and bareboat charters are generally received monthly or bi-weekly in advance while revenues from voyage charters are received on negotiated terms for each voyage, normally 90/95% after completed loading and the remaining after completed discharge. The Company has a significant exposure to the spot market as only six of the Company s vessels have fixed time charter contracts. The revenues and net operating income are therefore dependent on the earnings in the spot market. Based on 82

84 the current level of operating expenses, interest expenses, general and administrative cost and including debt repayment the average cash break even for Capesize vessels are around 14,000 USD/day, for Panamax and Kamsarmax vessels the average cash break even is 10,000 USD/day and for Supramax vessels the average cash break even is 9,000 USD/day. Excluding debt repayment as agreed in the amended terms of the Company s senior, secured loan agreements, the numbers are 10,500 USD/day, 6,500 USD/day and 5,500 USD/day respectively. In addition to the short term funding requirements, the Company s liquidity requirements include funding the newbuilding vessels, the acquisition of second-hand vessels and the repayment of long-term debt balances. As of December 31, 2015, the Company had 18 vessels under construction, of which two have been sold and will be delivered to the new owners on delivery from the yard. The Company expects to receive net sales proceeds of USD 92.4 million in 2016 upon delivery of the two vessels which have been sold. There is no debt drawn in relation to these vessels. The Company s outstanding commitments as of December 31, 2015, for its 18 newbuildings amount to USD million with expected payments of USD million in 2016 and USD 67.2 million in 2017, for expected delivery of 16 vessels in 2016 and two vessels in During the period from January 1, 2016 and up to the date of this Prospectus, the Company has taken delivery of five vessels, of which one vessel has been delivered to its new owner. The Company has paid USD million in final installments for these five vessels and received USD 46.2 million for the sale of the vessel. The Company has also paid USD 10.1 million in pre-delivery installments on vessels under construction. As of the date of this Prospectus, following these deliveries, the Company has 13 vessels under construction, of which one has been agreed to be sold and will be delivered to the new owners on delivery from the yard. As of the date of this Prospectus, the Company s outstanding newbuilding commitment amounts to USD million. As of December 31, 2015, the Company had available, undrawn, debt financing of USD 395 million for 13 Capesize newbuilding contracts. During the period from January 1, 2016 and up to the date of this Prospectus, the Company has taken delivery of four of the financed vessels and drawn down debt in total of USD million. Based on the amended terms under the loan agreement and draw down on delivered vessels, as of the date of this Prospectus, the available debt financing for the remaining 9 vessels is USD 225 million. As of the date of this Prospectus, no debt financing has been obtained for three vessels under construction. The Company intends to finance the remaining newbuilding commitments and any shortfall in financing commitments arising from a fall in vessel values with cash on hand, operating cash flow and, if market conditions permit, proceeds from debt and equity financings. As of the date of this Prospectus, the Company s available sources of liquidity, including the proceeds from the Private Placement, comprise of USD 311 million in cash and USD 225 million under undrawn facilities, which are reserved for commitments under the Company s newbuilding program. There are currently no material legal or economic restrictions on the ability of the Company s subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances Borrowing Activities Borrowing Activities Entered Into by the Company Introduction The Company has six loan facilities with a combination of eight different banks. While the facilities have different terms on items such as margin, profile and gearing amount, the Company has aligned the financial covenants and other general terms in the agreement. Due to the current market conditions, in February 2016, the Company agreed with its lenders to amend certain of the terms in its senior, secured loan agreements. For the period from April 1, 2016 to September 30, 2018 there will be no repayments, the minimum value covenant is set at 100% and the market adjusted equity ratio is waived. The Company has also agreed that for the nine remaining newbuilding contracts where the Company has financing in the USD million term loan facility, there will be a fixed drawdown of USD 25.0 million per vessel subject to compliance with the minimum value covenant of 100%. A cash sweep mechanism will be put in place whereby the Company will pay down on the deferred repayment amount should the cash position of the Company improve. The principal margins on the loans are unchanged and in average 2.3%, however the Company will pay a slightly increased margin of 4.25% for the at any given time deferred amount under the loan facilities. The agreement with the lenders was subject to the Company raising USD 200 million in equity. Prior to any equity contribution from the Company s shareholders, an amendment to the minimum value covenant and a waiver of the market adjusted equity ratio was agreed from February 2016 to, but not including, June 30, The agreement applies to all of the bank facilities listed below. 83

85 USD Million Term Loan Facility In June 2014, the Company entered into a USD million term loan facility divided into fourteen tranches of USD 30.0 million each to part finance fourteen of the Company's current and future newbuildings. In total, the loan is repayable by quarterly installments of USD 5.2 million and all amounts outstanding shall be repaid on the final maturity date, which is June 30, The loan has an interest rate of LIBOR plus a margin of 2.50%. As of December 31, 2015, USD million was outstanding on this facility and the facility is fully drawn. Following the valuations at December 31, 2015, the Company paid down USD 2.2 million to be in compliance with the minimum value covenant under the facility. USD Million Senior Secured Post-Delivery Term Facility In February 2015, an agreement was signed between the Company (as guarantor), various SPCs (as borrowers), a syndicate of banks and ABN AMRO Bank N.V. as agent for a senior secured post-delivery term loan facility of up to USD million, depending on the market values of the vessels at the time of draw down, to partially finance 14 newbuilding vessels. The facility is divided into 12 tranches of USD 30.0 million and two tranches of USD 32.5 million. Each tranche is repayable in consecutive quarterly installments commencing three months after draw down with a sixteen year profile and all amounts outstanding shall be repaid in the final maturity date, which is March 31, The loan bears interest at LIBOR plus a margin of 2.20%. As of December 31, 2015, USD 26.9 million was drawn under the facility in relation to Golden Finsbury. In January 2016, the Company drew four tranches to part finance Golden Swift, Golden Scape, Golden Bexley and Golden Barnet, of USD million in total. In addition to the amended terms of the Company s senior secured loan agreements as described above, the Company agreed to an amended commitment per vessel to USD 25.0 million per tranche for the vessels not yet delivered. This is not subject to a drawdown test on delivery, whereby the loan can be maximum a percentage of the market value, and with a Minimum Value Covenant (as defined below) of 100% the Company expects to draw the full amount. Therefore, the current undrawn commitment is USD 225 million for the nine remaining vessels secured under the facility. USD Million Credit Facility In May 2013, Former Golden Ocean entered into a USD million credit facility to cover post-delivery financing of two vessels bought from third parties but delivered directly after construction at Pipavav shipyard in India, Golden Pearl and Golden Diamond. The loan is secured by, among other things, a first priority mortgage on the applicable vessel. This loan is repayable on a quarterly basis with USD 0.6 million and a balloon payment at the final maturity date May 27, 2018 of USD 22.6 million and has an interest rate of LIBOR plus a margin of 2.75%. As of December 31, 2015, USD 28.8 million was outstanding under this facility and there was no available undrawn amount. USD 82.5 Million Credit Facility In October 2013, Former Golden Ocean entered into a USD 82.5 million credit facility consisting of six tranches relating to two Capesize vessels, Channel Alliance and Channel Navigator, and four Panamax vessels, Golden Strength, Golden Ice, Golden Saguenay and Golden Opportunity. The loan is secured by, among other things, a first priority mortgage on the applicable vessel. In May 2015 the Company sold the vessels Channel Alliance and Channel Navigator and the corresponding debt was paid down. Following this the loan is repayable via quarterly payments of USD 1.2 million. Following the valuations at December 31, 2015, the Company paid down USD 2.0 million to be in compliance with the minimum value covenant under the facility. The facility mature in October 2018 and has an interest rate of LIBOR plus a margin of 2.75%. As of December 31, 2015, USD 47.6 million was outstanding under this facility and there was no available, undrawn amount. USD Million Credit Facility In December 2014, Former Golden Ocean entered into a USD 284 million credit facility to cover financing of nineteen vessels. The loan is secured by, among other things, a first priority mortgage on the applicable vessel. This loan is repayable on a quarterly basis with a balloon payment at the final maturity date December 31, 2019 and has an interest rate of LIBOR plus a margin of 2.00%. As of December 31, 2015, USD million was drawn under the facility and there was no available, undrawn amount. USD 200 Convertible Bond In January 2014, Former Golden Ocean issued a USD 200 million convertible bond with a 5 year tenor and coupon of 3.07% per year. The convertible bond has no regular repayments and matures in full on January 27, There are no financial covenants in the convertible bond agreement. At the time of the Merger, the Company assumed the convertible bond and the conversion price was adjusted based on the exchange ratio in the Merger. The conversion price is currently at USD/share and is subject to adjustment for any dividend payments in the future. As a result of the Equity Raise, the conversion price in the convertible bond will be amended after the date of this Prospectus. 84

86 Seller Credit on Golden Pearl and Golden Diamond In 2013, Former Golden Ocean bought two vessels built at Pipavav, Golden Peal and Golden Diamond, with a seller credit for 30% of the purchase price. As per December 31, 2015, one third of the seller credit was outstanding, and due in January The total amount outstanding was USD 4.7 million, which at the date of this prospectus is paid and settled in full. Loan Covenants All of the above loan agreements contain a loan-to-value clause (the Minimum Value Covenant ), which could require the Company to post collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings decrease below a required level. In addition, the loan agreements contain certain financial covenants, including the requirement to maintain a certain level of free cash, positive working capital and a value adjusted equity covenant. The minimum value covenant is set at 100% for the period starting now until September 30, 2018 and the value adjusted equity covenants are waived for the same period. The loans also include cross default provisions. Failure to comply with any of the covenants in the loan agreements could result in a default, which would permit the lender to accelerate the maturity of the debt and to foreclose upon any collateral securing the debt. Under those circumstances, the Company might not have sufficient funds or other resources to satisfy the Company s obligations. In addition, none of the Company s vessel owning subsidiaries may sell, transfer or otherwise dispose of their interests in the vessels they own without the prior written consent of the applicable lenders unless, in the case of a vessel sale, the outstanding borrowings under the credit facility applicable to that vessel are repaid in full. The Company is in compliance with all of the financial and other covenants contained in its loan agreements as of the date of this Prospectus. Maturity Overview The table below sets out the repayment schedule of the Company s financing arrangements as of December 31, Expected drawdowns for certain of the loans are also included in the numbers. The overview includes estimated interest payments for the bank financing based on an assumed 3 month LIBOR of 0.5% and including entered into interest rate swaps and fixed rate for the convertible bond. For the USD 425 million facility, drawdown is assumed during the period for 13 newbuilding vessels. The repayment schedule does not include any ordinary scheduled debt repayment for the period starting 1 April 2016 to 30 September Should the market improve, the cash sweep mechanism described under Borrowing Activities Entered Into by the Company Introduction above, will ensure that debt is repaid up to the scheduled annual repayment for approximately USD 65 million. USD million Original Loan Outstanding Payments Due by Period Loan Amount Principal USD 420 million facility USD 425 million facility USD million facility USD 82.5 million facility USD 284 million facility USD 200 million convertible bond Seller credit Total... 1, Cash Flows The Company Operating Cash Flows Net cash flow used in operating activities was USD 6.2 million and net cash flow provided by operating activities was USD 2.4 million for the three months ended December 31, 2015 and 2014, respectively. The difference was primarily due to a deterioration in the Company s operating results (based on net loss for the period excluding the impairment loss on securities), which was primarily attributable to a deterioration in the dry bulk market and the Company s increased fleet size following the merger with Former Golden Ocean. Net cash flow used in operating activities was USD 14.8 million for the year ended December 31, 2015 and net cash flow provided by operating activities was USD 24.9 million for the year ended December 31, The difference was primarily due to a deterioration in the Company s operating results (based on net loss for the period excluding vessel impairment loss, impairment loss on securities and bargain purchase gain), which was primarily attributable to a 85

87 deterioration in the dry bulk market and the Company s increased fleet size following the merger with Former Golden Ocean. Net cash flow provided by operating activities was USD 24.9 million and USD 12.3 million for the year ended December 31, 2014 and 2013, respectively. The increase was primarily due to an improvement in the Company s operating results in 2014, explained by an increased fleet size due to delivery of newbuilding contracts and acquisition of KSL China. Net cash flow provided by operating activities was USD 12.3 million and USD 36.8 million for the year ended December 31, 2013 and 2012, respectively. The decrease was primarily due to the sale of four VLCCs in 2012 and a deterioration in the Company s operating results in 2013, as TC contracts on favorable rates were either renegotiated to lower rates or had expired. Investing Cash Flows Net cash flow used in investing activities was USD 17.2 million and USD million for the three months ended December 31, 2015 and 2014, respectively. The decrease was primarily due to a decrease in capital expenditures on the Company s newbuilding program and the proceeds from the sale of assets in the three months ended December 31, Net cash flow provided by investing activities was USD million for the year ended December 31, 2015 and net cash flow used in investing activities was USD million for the year ended December 31, The difference was primarily due to the year ended December 31, 2015 (i) cash proceeds from the sale of eight vessels to Ship Finance and two vessels to a third party, (ii) an increase in cash acquired on the purchase of SPCs, (iii) a refund of newbuilding installments, and (iv) cash that was acquired on the merger with Former Golden Ocean. Additionally, one sailing vessel was purchased in the year ended December 31, 2014 and, other than those acquired at the time of the Merger with Former Golden Ocean, no sailing vessels were purchased in the year ended December 31, These items were partially offset by an increase in capital expenditure on newbuildings and investments in the year ended December 31, Net cash flow used in investing activities was USD million and USD 9.6 million for the year ended December 31, 2014 and 2013, respectively. The increase was primarily due to the funding of the company s newbuilding program in 2014 and the purchase of a vessel, partially offset by cash acquired on the purchase of SPCs. Net cash flow used in investing activities was USD 9.6 million and net cash flow provided by investing activities was USD 67.0 million for the year ended December 31, 2013 and 2012, respectively. The difference was primarily due to the newbuilding costs of USD 26.7 million offset against the proceeds from the sale of VLCCs of USD 17.1 million in 2013 compared to proceeds from the sale of VLCCs of USD 67.0 million in Financing Cash Flows Net cash flow used in financing activities was USD 13.2 million and net cash flow provided by financing activities was USD 55.4 million for the three months ended December 31, 2015 and 2014, respectively. The difference was primarily due to the repayment of debt related to the vessels sold to Ship Finance during 2015 while in 2014 the cash flow provided by financing activities was related to draw down of debt on delivered and purchased vessels, which was partially offset by debt repayments and distributions to shareholders. Net cash flow used in financing activities was USD 37.3 million for the year ended December 31, 2015 and net cash flow provided by financing activities was USD million for the year ended December 31. The difference was primarily due to a decrease in borrowings, the repayment of debt related to the vessels sold to Ship Finance during 2015 and capital lease repayments, which was partially offset by the cash distributions to shareholders in Net cash flow provided by financing activities was USD million and USD 16.3 million for the year ended December 31, 2014 and 2013, respectively. The increase was primarily due to increased debt drawdown related to delivered and purchased vessels during Net cash flow provided by financing activities was USD 16.3 million and net cash flow used in financing activities was USD 71.4 million for the year ended December 31, 2013 and 2012, respectively. The difference was primarily due to the repayment of long term debt of USD 16.7 million and the distribution of dividend payments to shareholders of USD 18.2 million offset against the proceeds from the issuance of shares of USD 51.2 million for the year ended December 31, 2013 compared to the repayment of long term debt of USD 42.1 million and distribution of dividend payments to shareholders of USD 29.3 million for the year ended December 31,

88 Former Golden Ocean Operating Cash Flows Net cash flow provided by operating activities was USD 31.3 million and USD million for the year ended December 31, 2014 and 2013, respectively. The decrease was primarily due to lower net result for the period, when adjusting for impairment effects, compared to the net result for the twelve months ended December 31, Net cash flow provided by operating activities was USD million and USD million for the year ended December 31, 2013 and 2012, respectively. Although the result was better in 2013 than in 2012, the decrease was primarily due to smaller non-cash adjustments and negative change in working capital during 2013, as opposed to a positive change in working capital in Investing Cash Flows Net cash flow used in investing activities was USD 71.2 million and USD 81.5 million for the twelve months ended December 31, 2014 and 2013, respectively. During 2014, Former Golden Ocean bought four vessels and paid newbuilding instalments on the eight Supramax vessels, but also received more than USD 100 million from Zhoushan Jinhaiwan Shipyard Co. Ltd. ( Jinhaiwan ) on the cancelled newbuildings. During 2013, Former Golden Ocean bought one vessel and also paid newbuilding instalments and invested in shares in Greenship Bulk Trust Ltd., and at the same time invest ed in some vessels owned through joint ventures. No refund was received during that period. Net cash flow used in investing activities was USD 81.5 million and net cash flow provided by investing activities was USD 10.5 million for the year ended December 31, 2013 and 2012, respectively. The difference was primarily due to less payment in newbuildings and vessels in 2012, as well as cash provided by the sale of shares in Knightsbridge Tankers Limited. Financing Cash Flows Net cash flow provided by financing activities was USD 52.2 million and net cash flow used in financing activities was USD 29.7 million for the twelve months ended December 31, 2014 and 2013, respectively. The difference was primarily due to that in the twelve months ended December 31, 2013, the financing activities consisted mainly of ordinary debt repayment while in the twelve months ended December 31, 2014 there was extra down payments in relation to the loans on newbuildings at Jinhaiwan, and Former Golden Ocean raised a convertible bond of USD 200 million in January Net cash flow used in financing activities was USD 29.7 million and USD million for the year ended December 31, 2013 and 2012, respectively. The decrease was primarily due to extraordinary down payments in 2012 in order to comply with minimum value covenants in the loan facilities. In addition, two vessels were delivered and financing established in 2013 as opposed to one vessel in Balance Sheet Data The Company Total Assets As of December 31, 2015, the Company s total assets were USD 2,178.7 million compared to USD 1,262.7 million as of December 31, 2014, an increase which was primarily due to the acquisition of newbuildings from Frontline 2012 and from the Merger with Former Golden Ocean Group. As of December 31, 2014, the Company s total assets were 1,262.7 million compared to USD million as of December 31, 2013, an increase which was primarily due to increase in fleet size from the acquisition of Capesize vessels, mainly from Frontline As of December 31, 2013, the Company s total assets were USD million compared to USD million as of December 31, 2012, an increase which was primarily due to increase in cash and cash equivalents. There were no significant changes for the total of vessels, newbuildings and vessel held for sale. Total Liabilities As of December 31, 2015, the Company s total liabilities were USD 1,020.0 million compared to USD million as of December 31, 2014, an increase which was primarily due to new debt drawn in relation to vessels delivered from the yard as well as the debt assumed by the Company upon the Merger with Former Golden Ocean. 87

89 As of December 31, 2014, the Company s total liabilities were USD million compared to USD million as of December 31, 2013, an increase which was primarily due to new debt drawn in relation to vessels delivered from the yard or purchased to the Company. As of December 31, 2013, the Company s total liabilities were USD million compared to USD million as of December 31, 2012, a decrease which was primarily due to the repayment of long term debt following the sale of VLCCs. Total Equity As of December 31, 2015, the Company s total equity was USD 1,158.6 million compared to USD million as of December 31, The increase was primarily due to the impact of the share issuance in connection with the Merger with Former Golden Ocean and the contribution from the shareholder in connection with the purchase of 12 SPCs, each owning a fuel efficient Capesize dry bulk newbuilding, from Frontline 2012, partially offset by the net loss for the year ended December 31, As of December 31, 2014, the Company s total equity was USD million compared to USD million as of December 31, 2013, an increase which was primarily due to issuance of new shares to part finance the acquisition of vessels. As of December 31, 2013, the Company s total equity was USD million compared to USD million as of December 31, 2012, an increase which was primarily due to the issuance of common shares following a public offering, which was partially offset by the net loss in the year ended December 31, 2013 and distributions to shareholders. Former Golden Ocean Total Assets As of December 31, 2014, Former Golden Ocean s total assets were USD 1,079.4 million compared to USD 1,188.5 million as of December 31, 2013, a decrease which was primarily due to impairment charges in As of December 31, 2013, Former Golden Ocean s total assets were USD 1,188.5 million compared to USD 1,110.4 million as of December 31, 2012, an increase which was primarily due to investments in vessels and in joint ventures. Total Liabilities As of December 31, 2014, Former Golden Ocean s total liabilities were USD million compared to USD million as of December 31, 2013, an increase which was primarily due to the issuance of the USD 200 million convertible bond. As of December 31, 2013, Former Golden Ocean s total liabilities were USD million compared to USD million as of December 31, Total Equity As of December 31, 2014, Former Golden Ocean s total equity was USD million compared to USD million as of December 31, 2013, a decrease which was primarily due to impairment charges in 2014, but also that dividends paid exceeded the result through the period. As of December 31, 2013, Former Golden Ocean s total equity was USD million compared to USD million as of December 31, 2012, a decrease which was primarily due to the positive net result in 2013 and limited dividend payments Funding and Treasury Policies The Company s funding and treasury activities are conducted within corporate policies to maximize investment returns while maintaining appropriate liquidity for its requirements. Cash and cash equivalents are held primarily in United States dollars and primarily in cash or short term deposits. The Company s bank financing has a floating interest rate exposure, while the convertible bond has a fixed interest rate exposure. The Company has entered into some interest rate derivatives and will monitor its aggregate interest rate exposure going forward, and may use further interest rate derivatives to further adjust the position Working Capital Statement As of the date of this Prospectus, the Company is of the opinion that its working capital is sufficient for its present requirements and for at least the next twelve months from the date of this Prospectus. 88

90 11.13 Investing Activities The principal investments of the Company and Former Golden Ocean made during 2012, 2013, 2014, 2015 and up to the date of this Prospectus have consisted of investments in newbuildings and second-hand vessels. For more information about the fleet of the Company, see Section 7.3 Business Overview Fleet. Golden Ocean has also invested in shares in other dry bulk companies. Each vessels is mortgaged in favor of the banks providing the relevant financing, see Section 11.8 Operating and Financial Review Borrowing Activities for more information about the financing of the vessels. The table below sets forth a summary of the capital expenditures of the Company for the years ended 2015, 2014, 2013, 2012 and up to the date of this Prospectus: USD thousands Year to the date of this Prospectus Year ended December Additions to newbuildings , , ,403 26,706 Purchase of vessel... 24,085 Total , , ,488 26,706 Additions to newbuildings comprise installments paid to the yards as well as costs related to financing, capitalized interest expenses, legal fees and supervision of the newbuilding contracts. The Company has significant capital requirements for its newbuilding vessels. As of the date of this Prospectus, the remaining commitments for the 13 newbuilding vessels are approximately USD million. As of the date of this Prospectus, the Company has committed financing for 9 of these vessels, in a total amount of USD 225 million and one vessel, with no related debt, is sold upon delivery from the yard with expected sales proceeds of USD 46.2 million. The Company intends to finance the remaining 3 newbuilding vessels with a combination of credit facilities and equity, depending on market conditions. See also Section 11.7 Liquidity and Capital Resources Overview; Sources and Uses of Funds. Of the newbuildings, one vessel is under construction in Japan, and 12 in China. The payment schedules for newbuildings vary, but payments normally become due on certain milestones, like steel cutting, keel laying, launching and delivery. For more information about the newbuildings, see Section 7.3 Business Overview Fleet Environmental Issues The Company s operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which its vessels operate or are registered, which can significantly affect the ownership and operation of its vessels. These requirements include European Union regulations, the OPA, requirements of the USCG and the EPA, the CAA, the CWA, the IMO, the CLC, the Bunker Convention, the MARPOL, including the designation of ECAs thereunder, the SOLAS, the IMO International Convention on Load Lines of 1966, as from time to time amended, and the MTSA. Compliance with such laws and regulations, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of the Company s vessels. Compliance with such laws and regulations may require the Company to obtain certain permits or authorizations prior to commencing operations. The EPA has enacted rules requiring a permit regulating ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters under the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels ( VGP). For a new vessel delivered to an owner or operator after September 19, 2009 to be covered by the VGP, the owner must submit a Notice of Intent ( NOI ) at least 30 days before the vessel operates in United States waters. On March 28, 2013, EPA re-issued the VGP for another five years; this 2013 VGP took effect December 19, The 2013 VGP contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in US waters, more stringent requirements for exhaust gas scrubbers and the use of environmentally acceptable lubricants. The Company has submitted NOIs for our vessels where required and do not believe that the costs associated with obtaining and complying with the VGP will have a material impact on the Company s operations. USCG regulations adopted under the U.S. National Invasive Species Act (the NISA ), also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters, which require the installation of equipment to treat ballast water before it is discharged in U.S. waters or, in the alternative, the implementation of other port facility disposal arrangements or procedures. Vessels not complying with these 89

91 regulations are restricted from entering U.S. waters. The USCG must approve any technology before it is placed on a vessel The IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments (the BWM Convention ) in February The BWM Convention will not enter into force until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world s merchant shipping. As of the date of this Prospectus, he BWM Convention has not yet been ratified but proposals regarding implementation have recently been submitted to the IMO. Many of the implementation dates originally written into the BWM Convention have already passed, so on December 4, 2013, the IMO Assembly passed a resolution revising the dates of applicability of the requirements of the BWM Convention so that they are triggered by the entry into force date, and not the original dates in the BWM Convention. In effect, this makes all vessels constructed before the entry into force date existing vessels, and delayed the date for installation of ballast water management systems on vessels until the first renewal survey following entry into force of the convention. Furthermore, in October 2014 the MEPC met and adopted additional resolutions concerning the BWM Convention s implementation. Upon entry into force of the BWM Convention, mid-ocean ballast water exchange would become mandatory. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers, and the costs of ballast water treatment may be material. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. Although the Company does not believe that the costs of such compliance would be material, it is difficult to predict the overall impact of such a requirement on the Company s operations. It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remain in effect until the EPA issues a new VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and IMO BWM Convention, some which are in effect and some which are pending, will coexist Significant Recent Trends The current oversupply of dry bulk vessels is not sustainable for owners and will have a strong impact on supply over time if the physical market delivers in accordance with the prevailing Forward Freight Agreements market. But significant increases in scrapping and non-deliveries could lead to a negative fleet growth within the next two years. The current scrapping run rate for the dry bulk fleet is at all time high with ~60m dwt p.a. and 21 Capesize vessels have been scrapped so far in Most analysts have a bleak demand outlook for 2016 which supports the supply case as described above. But even with zero steel production growth in China it is expected that iron ore imports to the country will increase due to substitution of low quality domestic iron ore. The biggest disappointment in transportation demand over the last two years has been from the thermal coal sector. It is worth mentioning that China produced about 3.5 billion mt of coal in About 1,000 coal mines ceased operation last year and it is expected that a similar number of mines will be closed within the next two years. The Chinese Energy Bureau does not foresee a major shift in the energy mix for the coming three years. With a modest increase in the overall energy consumption, it is expected that coal consumption will remain more or less unchanged. Coal will remain the biggest uncertainty when it comes to dry bulk demand. One per cent reduction in domestic production substituted by import is equivalent to increased imports of 35 million mt. Over the last 12 months, the Company has taken several measures to preserve its liquidity position, including postponement of newbuilding deliveries, sale of vessels, sale of newbuildings and sale and leaseback agreements. In light of the continued weak freight markets, the Company has been exploring additional measures to further preserve and improve its liquidity position to better position the Company through the current market cycle. The Company has therefore announced further proactive measures to strengthen its balance sheet, including amendment of all debt facilities, positive discussions with yards about further postponements of newbuilding deliveries, and the Equity Raise. The refinancing creates a comfortable liquidity position while preserving an attractive and leveraged exposure to the dry bulk market. 90

92 The agreement with the Company s lenders demonstrates the strong support the Company has from its bank relationships. This, together with the support from the main shareholder, that has also subscribed for new Shares in the Private Placement, puts the Company in a strong position to manage the current down turn in the dry bulk market Off-Balance Sheet Arrangements The Company guarantees debt and other obligations of certain of its equity method investees. The debt and other obligations are primarily due to banks in connection with financing the purchase of vessels and equipment used in the joint venture operations. As of December 31, 2015, the joint venture owning Golden Opus had total bank debt outstanding of USD 18.3 million. The Company has guaranteed for 50% of the outstanding debt in the joint venture. Therefore the maximum potential amount of future principle payments (undiscounted) that the Company could be required to make relating to equity method investees secured bank debt was USD 9.15 million and the carrying amount of the liability related to this guarantee was USD 0. In October 2013, the Company entered into a long term Time Charter for the Supramax vessel Golden Hawk. The vessel was built in Japan and delivered to the Company in February 2015 on a 7 year Time Charter at a daily time charter rate of USD 13,200. The Company has the option to extend the charter for 1 plus 1 plus 1 year at a daily time charter rate of USD 13,700, USD 14,200 and USD 14,700 respectively. After five years the Company has the option to purchase the vessel throughout the remaining time charter period. In April 2015, the Company agreed to a sale and leaseback transaction with Ship Finance for eight Capesize vessels. These vessels were built in Korea and China between 2009 and 2013 and have been sold en-bloc for an aggregate price of USD million. All eight vessels were delivered to Ship Finance in the third quarter of 2015 and have been time charteredin by one of the Company's subsidiaries for a period of 10 years. The daily time charter rate is USD 17,600 during the first seven years and USD 14,900, thereafter, of which USD 7,000 is for operating expenses (including dry docking costs). In addition, 33% of the profit from revenues above the daily time charter rate for all eight vessels aggregated will be calculated and paid on a quarterly basis to Ship Finance. The Company has a purchase option of USD 112 million en-bloc after 10 years and, if such option is not exercised, Ship Finance will have the option to extend the charters by 3 years at a time charter rate of USD 14,900 per day. Apart from the above, the Company is currently not subject to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial condition. 91

93 12. RELATED PARTY TRANSACTIONS This Section provides information about related party transactions the Company is, or has been, subject to with its related parties during the three years ended December 31, 2015, 2014, 2013 and 2012 and up to the date of this Prospectus. The Company transacts business with the following related parties, being companies in which Hemen and companies associated with Hemen have a significant interest: Frontline Ltd. and its subsidiaries (Frontline Management (Bermuda) Ltd, ICB Shipping (Bermuda), Ltd and Seateam Management Pte Ltd), Karpasia Shipping Inc., and Frontline 2012 Ltd. In March 2012, Former Golden Ocean sold its entire holding of shares in the Company and was no longer considered to be a related party. Former Golden Ocean was considered a related party from September 2014 when the Company became a majority-owned subsidiary of Frontline 2012 following the acquisition of thirteen SPCs from Frontline Frontline 2012 Transactions In April 2014, the Company acquired five SPCs from Frontline 2012, each owning a fuel efficient 180,000 dwt Capesize dry bulk newbuilding and a subsidiary of the Company acquired a 2013-built Capesize dry bulk carrier, Bulk China (renamed KSL China), from Karpasia. The consideration was settled by the issuance of 15.5 million shares and 3.1 million shares to Frontline 2012 and Hemen (on behalf of Karpasia), respectively, which were recorded at a price of USD per share, USD million was assumed in remaining newbuilding installments in connection with the SPC's acquired from Frontline 2012 and USD 24.0 million was paid in cash to Karpasia. Cash of USD 43.4 million was acquired on the purchase of the five SPC's. No other working capital balances were acquired. In April 2014, the Company agreed to acquire 25 SPCs from Frontline 2012, each owning a fuel efficient dry bulk newbuilding. In September 2014, the Company acquired 13 of these SPCs. The consideration for the 13 SPCs was settled by the issuance of 31.0 million shares. The issuance of the 31.0 million shares was recorded at an aggregate value of USD million based on the closing price of USD per share on September 15, the closing date of the transaction. USD million was assumed in remaining newbuilding installments and cash of USD 25.1 million was acquired on the purchase of the thirteen SPCs. The Company acquired the remaining twelve SPCs in March 2015 and issued 31.0 million shares as consideration. USD million was assumed in remaining newbuilding installments and cash of USD million was acquired on the purchase of the twelve SPCs, so that the net capital expenditure acquired was USD 404 million. Ship Finance Transactions In April 2015, the Company agreed to a sale and leaseback transaction with Ship Finance for eight Capesize vessels. Five of these vessels (KSL China, Battersea, Belgravia, Golden Future and Golden Zhejiang) were owned by the Company prior to the completion of the Merger and three vessels (Golden Zhoushan, Golden Beijing and Golden Magnum) were acquired as a result of the Merger. These vessels were built in Korea and China between 2009 and 2013 and were sold en-bloc for an aggregate price of USD million or USD 34.0 million per vessel on average. The vessels were delivered to Ship Finance in the third quarter of 2015 and were time chartered-in by one of the Company's subsidiaries for a period of 10 years. The daily time charter rate is USD 17,600 during the first seven years and USD 14,900 thereafter, of which USD 7,000 is for operating expenses (including dry docking costs). In addition, 33% of the Company s profit from revenu es above the daily time charter rate for all eight vessels aggregated will be calculated and paid on a quarterly basis to Ship Finance. The Company has a purchase option of USD 112 million en-bloc after 10 years and, if such option is not exercised, Ship Finance will have the option to extend the charters by 3 years at USD 14,900 per day. Frontline Transactions In November 2015, the Company entered into an agreement with the yard to convert two Capesize newbuilding contracts to Suezmax newbuilding contracts, and on November 23, 2015, agreed to sell these newbuilding contracts to Frontline Ltd. The sale of these newbuilding contracts was completed on December 31, Management Agreements General Management Agreement Up to March 31, 2015, the Company was provided with general administrative services by ICB Shipping (Bermuda) Limited (the General Manager ). The General Manager is a wholly owned subsidiary of Frontline. The General Manager subcontracted the services provided to the Company and its subsidiaries to Frontline Management (Bermuda) Limited, another wholly owned subsidiary of Frontline. Pursuant to the terms of the an amended general management agreement with the General Manager effective April 2, 2010, the General Manager was entitled to a management fee of USD 2.3 million per annum from January 1, 2010, which was subject to annual adjustments, plus a commission of 1.25% on gross freight revenues from the Company s tanker vessels, 1% of proceeds on the sale of any of the Company s vessels, and 1% of the cost of the purchase of vessels. In addition, the Company, in its discretion, awarded equity incentives to the 92

94 General Manager based upon its performance. Such awards were subject to the approval the Company s Board. The Company was responsible for paying all out-of-pocket expenses incurred by the General Manager from third parties in connection with the services provided under the Amended General Management Agreement, such as audit, legal and other professional fees, registration fees and directors' and officers' fees and expenses. The Company s Board believed that the terms of the Amended General Management Agreement were substantially similar to those obtained in arm'slength negotiations in the market. The Amended General Management Agreement with the General Manager effective April 2, 2010, was terminated on March 31, Technical Management Agreement The Company receives technical management services from Frontline Management (Bermuda) Limited, a wholly owned subsidiary of Frontline. Pursuant to the terms of the Agreement Frontline receives a management fee of USD 33,000 per vessel per year. Frontline also manage the newbuilding supervision for the company and charges the company for cost incurred in relation to the supervision. Ship Management The ship management of the Company s vessels is provided by ship managers subcontracted by the Technical Manager. Commercial Management Golden Ocean is commercial manager for the dry bulk vessel and container vessel owned and operated by Ship Finance. In addition Golden Ocean is commercial manager for dry bulk vessels owned and operated by affiliated companies to Hemen. Pursuant to the management agreements Golden Ocean receives 125 USD/day for managing the dry bulk vessels and 65 USD/day for managing the container vessels. Other Management Services The Company aims to operate efficiently through utilizing competence from Frontline or other companies with the same main shareholder and these costs are allocated based on a cost plus mark-up model. Specifically the Company receives assistance in relation to consolidation and reporting as well as management of its SOX compliance from Frontline. The Company currently pays a fee of USD 115,000 per quarter for this service. A summary of net amounts charged by related parties in the years ended December 31, 2015, 2014, 2013 and 2012 is as follows: USD thousands Year ended December (1) ICB Shipping (Bermuda) Ltd ,315 2,315 2,315 Frontline Management (Bermuda) 2, Ltd... 13,273 Former Golden Ocean , Seateam Management Pte Ltd... 1, (1) Amounts for 2015 are unaudited. Net amounts charged by related parties comprise of general management and commercial management fees, newbuilding supervision fees and newbuilding commission fees. A summary of net amounts charged to related parties in the years ended December 31, 2015, 2014, 2013 and 2012 is as follows: USD thousands Year ended December (1) Ship Finance International Limited Seatankers Management Co Ltd (1) Amounts for 2015 are unaudited. Net amounts charged to related parties comprise of commercial management fees. 93

95 While comparatives have been given for the years ended December 31, 2013 and 2012 in the table above and as of December 31, 2013 and 2012 in the tables below, it should be noted that certain of these companies were not considered to be related parties in 2013 and A summary of balances due from related parties for the years ended December 31, 2015, 2014, 2013 and 2012 is as follows: USD thousands Year ended December (1) Herman Billung Frontline 2012 Ltd Golden Opus Inc... 2,534 Seateam Management Pte Ltd Frontline Management (Bermuda) Ltd... 9 Frontline Ltd... 4, Seatankers Management Co Ltd... 1,139 United Freight Carriers Inc... 2 Ship Finance International Limited.. 36 Total... 8, (1) Amounts for 2015 are unaudited. A summary of balances due to related parties for the years ended December 31, 2015, 2014, 2013 and 2012 is as follows: USD thousands Year ended December (1) Former Golden Ocean Frontline Management (Bermuda) Ltd... 3,924 1,558 Frontline Ltd ICB Shipping (Bermuda) Ltd Seateam Management Pte Ltd Total... 4,101 2, (1) Amounts for 2015 are unaudited. Receivables and payables with related parties comprise unpaid commercial management fees and newbuilding supervision fees. In addition certain payables and receivables arise when the Company pays an invoice on behalf of a related party and vice versa. 94

96 13. THE BOARD OF DIRECTORS AND MANAGEMENT This Section provides summary information about the Board of Directors and the executive management of the Company and disclosures about their arrangements with the Company and other relations with the Group, summary information about the certain other corporate bodies and the governance of the Company Overview The Board of Directors of the Company is responsible for the overall management of the Company and may exercise all the powers of the Company. In accordance with Bermuda law, the Board of Directors is responsible for, among other things, supervising the general and day-to-day management of the company's business; ensuring proper organization, preparing plans and budgets for its activities; ensuring that the company's activities, accounts and asset management are subject to adequate controls and to undertake investigations necessary to ensure compliance with its duties. The Board of Directors may delegate such matters as it seems fit to the executive management of the Company (the Management ). The Management is responsible for the day-to-day management of the Company's operations in accordance with instructions set out by the Board of Directors. Among other responsibilities, the Management is responsible for keeping the Company s accounts in accordance with existing Bermuda legislation and regulations and for managing the Company's assets in a responsible manner Board of Directors and Management Board of Directors The Bye-Laws of the Company provide that the Board of Directors shall consist of not less than two members and shall at all times comprise a majority of directors who are not residents in the United Kingdom. The Board of Directors of the Company consists of the following members: Name Position Served Since Expiry of Term Ola Lorentzon Chairman September 1996 AGM 2016 Hans Petter Aas Director September 2008 AGM 2016 Gert-Jan van der Akker Director March 2015 AGM 2016 Kate Blankenship Director March 2015 AGM 2016 John Fredriksen Director March 2015 AGM 2016 The Company s registered business address, Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08 Bermuda, serves as c/o address for the members of the Board of Directors in relation to their directorship of the Company. Set out below are brief biographies of the directors of the Company, along with disclosures about the companies and partnerships of which each director has been member of the administrative, management and supervisory bodies in the previous five years, not including directorships and executive management positions in the Company or its subsidiaries. Ola Lorentzon, Chairperson Ola Lorentzon has been a director of the Company since its incorporation on September 18, 1996, Chairman since May 26, 2000 and Chief Executive Officer from May 5, 2010 to the completion of the Merger on March 31, He is also a director of Frontline and Erik Thun AB. Mr. Lorentzon was the Managing Director of Frontline Management AS, a subsidiary of Frontline, from April 2000 until September Hans Petter Aas, Director Hans Petter Aas has been a director of the Company since September Mr. Aas has a long career as a banker in the international shipping and offshore market, and retired from his position as Global Head of the Shipping, Offshore and Logistics Division of DNB Bank ASA in August He joined DNB Bank ASA (then Bergen Bank) in 1989 and has previously worked for the Petroleum Division of the Norwegian Ministry of Industry and the Ministry of Energy, as well as for Vesta Insurance and Nevi Finance. Gert-Jan van der Akker, Director Gert-Jan van der Akker has been a director of the Company from the time of the completion of the Merger. Mr. van der Akker is President and Chief Executive Officer at Cargill International SA. He is a member of Cargill s Executive Team. In 2013 and 2014 he was Senior Head of Region at Louis Dreyfus Commodities, but prior to this he had 27 years of experience at Cargill where his last position was a platform leader for the global energy, transportation and metals platform. 95

97 Kate Blankenship, Director Kate Blankenship has been a director of the Company since March Mrs. Blankenship also serves as a director of Seadrill Limited, Frontline, Ship Finance, Archer Limited, NADL, Avance Gas and Independent Tankers Corporation Limited. She has also served as Chief Accounting Officer and Secretary of Frontline. She is a member of the Institute of Chartered Accountants of England and Wales. John Fredriksen, Director John Fredriksen has been a director of the Company since March Mr. Fredriksen has served as Chairman of the Board, President and a director of Seadrill Limited since Mr. Fredriksen has established trusts for the benefit of his immediate family which indirectly control Hemen. Mr. Fredriksen is Chairman, President, Chief Executive Officer and a director of Frontline Ltd., a Bermuda company listed on the NYSE and the Oslo Stock Exchange. Management The Company's management team comprises Herman Billung, CEO of Golden Ocean Management AS and Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS. Set out below are brief biographies of the members of the Management. Herman Billung, CEO of Golden Ocean Management AS Herman Billung has served as CEO of Golden Ocean Management AS since April 1, Mr. Billung s previous position was as Managing Director of Maritime Services in, responsible for the Commercial management of the Torvald Klaveness Group s dry bulk pools, Bulkhandling and Baumarine. Herman Billung was Managing Director of the dry bulk operating company, Frapaco Shipping Ltd. between 1994 and Mr. Billung graduated from the Royal Norwegian Naval Academy in Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS Birgitte Ringstad Vartdal has served as CFO of Golden Ocean Management AS since June 21, Ringstad Vartdal s previous position was Vice President, Investments, in the Torvald Klaveness Group. She has held several positions within the Torvald Klaveness Group, as VP Head of Commercial Controlling, Risk Manager and Financial Analyst. Before this she was Structuring Analyst in Hydro Energy. Birgitte Ringstad Vartdal holds the degree of Siv.Ing. (MSc) in Physics and Mathematics from the Norwegian University of Science and Technology (NTNU) and an MSc in Financial Mathematics from Heriot-Watt University, Scotland Disclosure of Conflicts of Interests Certain of the directors of the Company, including Hans Petter Aas, John Fredriksen and Kate Blankenship, also serve on the boards of one or more of the Hemen Related Companies, including Frontline, Ship Finance, Seadrill and NADL. There may be real or apparent conflicts of interest with respect to matters affecting Hemen and other Hemen Related Companies whose interests in some circumstances may be adverse to the interests of the Company. To the Company's knowledge, there are currently no other actual or potential conflicts of interest between the Company and members of the Board of Directors or Management Disclosure About Convictions in Relation to Fraudulent Offences During the last five years preceding the date of this Prospectus, no member of the board of directors or the Management has: any convictions in relation to indictable offences or convictions in relation to fraudulent offences; received any official public incrimination and/or sanctions by any statutory or regulatory authorities (including designated professional bodies) or ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company; or been declared bankrupt or been associated with any bankruptcy, receivership or liquidation in his capacity as a founder, director or senior manager of a company. 96

98 13.5 Disclosure About Directorships and Other Positions Board of Directors Ola Lorentzon, Chairperson Current other directorships and management positions...frontline Ltd. (Director), Erik Thun AB (Director). Previous directorships and management positions held during the last five years...sea Bird Exploration Ltd (Director), Remedial Offshore (Director), Laurin Shipping AB (Director). Hans Petter Aas, Director Current other directorships and management positions...ship Finance International Limited (Chairman), Deep Sea Supply plc (Director), Golar LNG Limited (Director), Golar LNG Partners LLP (Director), Knutsen NYK Offshore Tankers AS (Director), ), Knutsen NYK Offshore Partners (Director), Gearbulk Holding AG (Director), HPA Consult AS (CEO) and Solvang ASA (Director). Previous directorships and management positions held during the last five years...j O Odfjell Tankers (Director), The Norwegian Export Credit Guaranty Institute (Director). Gert-Jan van der Akker, Director Current other directorships and management positions...cargill International SA (President and Chief Executive Officer). Previous directorships and management positions held during the last five years...cargill International S.A. Switzerland (Vice president) and Cargill International Asia Pacific Ltd. (Vice president). Louis Dreyfus Commodities Suisse S.A. (Senior head of regions) and L.D.C. Argentina S.A. (Director) Kate Blankenship, Director Current other directorships and management positions...seadrill Limited (Director), Seadrill Partners LLP (Director), Frontline Ltd. (Director), Ship Finance International Limited (Director), Archer Limited (Director), North Atlantic Drilling Ltd. (Director), Avance Gas Holding Ltd. (Director) and Independent Tankers Corporation Limited (Director). Previous directorships and management positions held during the last five years...golar LNG Limited (Director), Golar LNG Partners LLP (Director), Frontline 2012 Ltd. (Director). John Fredriksen, Director Current other directorships and management positions...seadrill Limited (Chairman and President), Frontline Ltd. (Chairman, President and CEO), North Atlantic Drilling Ltd. (Chairman). Previous directorships and management positions held during the last five years...golar LNG Limited (Chairman and President), Frontline 2012 Ltd. (Director). 97

99 Management Herman Billung, CEO of Golden Ocean Management AS Current other directorships and management positions...golden Ocean Management AS (Director) and AS Sofies Plass 3 (Director). Previous directorships and management positions held during the last five years...fc Lyn Oslo AS (Director) Birgitte Ringstad Vartdal, CFO of Golden Ocean Management AS Current other directorships and management positions...sevan Drilling Ltd (Chairperson), Kvart Invest AS (Director), Vartdal Fiskeriselskap AS (Director), Sevan Drilling Managament AS (Director) and Golden Ocean Management AS (Director) Previous directorships and management positions held during the last five years...sevan Drilling ASA 13.6 Remuneration and Benefits Board of Directors and Management The compensation for the members of the Board of Directors is determined on an annual basis by the shareholders of the Company at the Annual Shareholders Meeting. At the time of completion of the Merger, Herman Billung and Birgitte Ringstad Vartdal became the management of the Company through their positions in Golden Ocean Management AS. For these management services, the Company pays an annual fee to Golden Ocean Management AS which also includes other additional services. The compensation for the members of the Board of Directors and management of the Company for the financial year 2015 was USD 1,500,000. The members of management are entitled to severance pay from Golden Ocean Management AS from six to fifteen months upon termination of their management of the Company. Herman Billung has a loan from the Company with an outstanding amount of USD 286,000 as of December 31, Disclosure on Shareholdings The table below shows the shareholdings and rights to shares in the Company of each member of the Board of Directors and the Management. USD Position Shareholding Options etc. Ola Lorentzon... Chairman 31,688 18,063 RSUs Hans Petter Aas... Director 23,765 13,551 RSUs Gert-Jan van der Akker... Director Kate Blankenship... Director 28,322 10,312 options John Fredriksen (1)... Director 137,490 options Herman Billung... CEO of Golden Ocean 13,749 75,620 options Management AS Birgitte Ringstad Vartdal... CFO of Golden Ocean 8,249 54,996 options Management AS (1) Hemen, a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family, and certain of its affiliates, including Frontline 2012, currently owns 232,436,122 Shares in the Company. In addition, In addition, Hemen Holding holds TRS agreements with underlying exposure to 195,648 shares in the Company. Franklin Enterprises Inc., a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family, owns USD 93.6 million of the USD 200 million convertible bond, which is convertible into 4,696,438 Shares in the Company at an exercise price of USD per share. As a result of the Equity Raise, the conversion price in the convertible bond will be amended, but this will occur after the date of this Prospectus and is accordingly not reflected in the said calculation Nomination Committee As permitted under Bermuda law and the Company s Bye-Laws, the Company does not have a nomination committee. The Board of Directors is responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. 98

100 13.8 Audit Committee The Company has an audit committee, the members of which as of the date of this Prospectus are Kate Blankenship (Chair) and Hans Petter Aas, both members of the Board of Directors. The primary purposes of the audit committee are to: assist the Board of Directors in discharging its duties relating to the safeguarding of assets; the operation of adequate system and internal controls; control processes and the preparation of accurate financial reporting and statements in compliance with all applicable legal requirements, corporate governance and accounting standards; and provide support to the board of directors on the risk profile and risk management of the Company. The audit committee reports and makes recommendations to the Board of Directors, but the board of directors retains responsibility for implementing such recommendations. Both Ms. Blankenship and Mr. Aas have relevant qualifications within accounting/auditing Corporate Governance The Company reports on the corporate governance practices followed by U.S. companies under the NASDAQ listing standards, on a comply or explain basis in its annual report. The deviations mainly relate to items where the Company has chosen to follow Bermuda law instead. The significant differences between the Company s corporate governance practices and the NASDAQ standards applicable to listed U.S. companies are set forth below: Executive sessions: NASDAQ requires that non-management directors meet regularly in executive sessions without management. As permitted under Bermuda law and the Bye-Laws, the Company s non-management directors do not regularly hold executive sessions without management and the Company do not expect them to do so in the future. Nominating/corporate governance committee: NASDAQ requires that a listed U.S. company have a nominating/corporate governance committee composed solely of independent directors. As permitted under Bermuda law and the Bye-Laws, the Company does currently not have a nominating or corporate governance committee. The Board of Directors is responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. Compensation committee: NASDAQ requires that a listed U.S. company have a compensation committee composed solely of independent directors. As permitted under Bermuda law and the Bye-Laws, compensation of executive officers is not required to be determined by a committee composed of independent members. Related party transactions: NASDAQ requires that a listed US company conduct appropriate review and oversight of all related party transactions for potential conflict of interests on an ongoing basis by the Company s audit committee or another independent body of the Board of Directors. As permitted under Bermuda law and the Bye-Laws, the directors of the Company are not prohibited from being a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise interested, provided that the director makes proper disclosure of same as required by the bye-laws and Bermuda law. Proxy Materials: NASDAQ requires that a listed U.S. company solicit proxies and provide proxy statements for all shareholder meetings. Such company must also provide copies of its proxy solicitation to NASDAQ. As permitted under Bermuda law and the Company s bye-laws, the Company does not currently solicit proxies or provide proxy materials to NASDAQ. The Company s bye-laws also require that the Company notifies its shareholders of meetings no less than 5 days before the meeting Employees As of December 31, 2015, the Group employed 28 people in its offices in Oslo and Singapore, compared to 23 employees as of December 31, 2014, 16 employees in 2013 and 16 employees in In addition the Company has a crew of approximately 22 people on each vessel, implying currently around 1,200 seafarers onboard the Company s vessel at any given time. The Group contracts with independent ship managers to manage and operate its vessels. The fleet of the Company is managed by its fully owned subsidiary Golden Ocean Group Management (Bermuda) Ltd and technical operations and crewing of all owned vessels are outsourced to a few leading ship management companies, as further described in Section 7.4 Business Overview Management. 99

101 14. DIVIDEND AND DIVIDEND POLICY This Section provides information about the Company s dividend policy and dividend history, as well as certain legal constraints on the distribution of dividends under the Bermuda Companies Act. For a discussion of certain financial covenants under the Company s borrowing arrangements which may restrict distribution of dividends, see Section 11.8 "Operating and Financial Review Borrowing Activities". Any future dividends declared by the Company on the Shares listed on the Oslo Stock Exchange will be paid in NOK as this is the currency that currently is supported by the VPS Dividend Policy The Company s dividend policy is to declare quarterly cash distributions to shareholders, substantially equal to or at times greater than net operational cash flow in the reporting quarter less reserves that the Board of Directors may from time to time determine are necessary, such as reserves for drydocking and other possible cash needs. The Company intends to finance its future vessel acquisitions not from the Company s cash flow from operations, but from external sources, such as equity offerings and additional indebtedness. There is no guarantee that the Company s shareholders will receive quarterly cash distributions from the Company. The Company s cash distribution policy may be changed at any time at the sole discretion of the Board, who will take into account, among other things, the Company s newbuilding commitments, financial condition and future prospects, any restrictions in borrowing arrangements or other contractual arrangements and the requirements of Bermuda law in determining the timing and amount of cash distributions, if any, that the Company may pay Dividend History The following table sets forth, for the respective calendar year and quarters indicated, the high and low closing prices on NASDAQ and the Oslo Stock Exchange of the Company s shares and the declared dividends per share. USD NASDAQ Oslo Stock Exchange High Low High Low Dividend per Share 2012 First Quarter... USD USD USD 0.35 Second Quarter... USD USD 7.83 USD Third Quarter... USD 8.79 USD 6.06 USD Fourth Quarter... USD 6.69 USD 5.04 USD First Quarter... USD 8.20 USD 5.94 USD Second Quarter... USD 8.21 USD 6.24 USD Third Quarter... USD USD 6.96 USD Fourth Quarter... USD USD 7.27 USD First Quarter... USD USD 8.98 USD 0.20 Second Quarter... USD USD USD 0.20 Third Quarter... USD USD 8.79 USD 0.05 Fourth Quarter... USD 9.03 USD 3.46 USD First Quarter... USD 5.49 USD 4.01 Second Quarter... USD 5.73 USD 3.58 NOK NOK Third Quarter... USD 4.45 USD 2.46 NOK NOK Fourth Quarter... USD 2.83 USD 0.99 NOK NOK Legal Constraints on the Distribution of Dividends Under the Bermuda Companies Act, a company may, subject to its bye-laws and by resolution of the directors, declare and pay a dividend, or make a distribution out of contributed surplus, provided there are reasonable grounds for believing that after any such payment (a) the company will be solvent and (b) the realizable value of its assets will be greater than its liabilities. Pursuant to the Bye-Laws, the Board of Directors of the Company may from time to time declare cash dividends or distributions out of contributed surplus to be paid to the shareholders according to their rights and interests including such interim dividends as appear to the Board of Directors to be justified by the position of the Company. The Company 100

102 may by resolution of a shareholders meeting or the Board of Directors fix any date as the record date for any such dividend. The Board of Directors may also pay any fixed cash dividend which is payable on any shares of the Company half yearly or on such other dates, whenever the position of the Company, in the opinion of the Board of Directors, justifies such payment. Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide: (i) (ii) all dividends or distributions out of contributed surplus may be declared and paid according to the amounts paid up on the shares in respect of which the dividend or distribution is paid, and an amount paid up on a share in advance of calls may be treated for the purpose of the Bye-Laws as paid-up on the share; dividends or distributions out of contributed surplus may be apportioned and paid pro rata according to the amounts paid-up on the shares during any portion or portions of the period in respect of which the dividend or distribution is paid. The Board of Directors may deduct from any dividend, distribution or other moneys payable to a shareholder by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of shares of the Company. No dividend, distribution or other moneys payable by the Company on or in respect of any share shall bear interest against the Company. Any dividend distribution, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the mail addressed to the holder at his address in the shareholder register or, as the case may be, the VPS, or, in the case of joint holders, addressed to the holder whose name stands first in the register or, as the case may be, the VPS, in respect of the shares at his registered address as appearing in the shareholder register or, as the case may be, the VPS, or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in the shareholder register or, as the case may be, the VPS, in respect of such shares, and shall be sent at his or their risk, and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends, distributions or other moneys payable or property distributable in respect of the shares held by such joint holders. Any dividend or distribution out of contributed surplus unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to the Company and the payment by the Board of Directors of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof. With the sanction of a resolution the Board of Directors may direct payment or satisfaction of any dividend or distribution out of contributed surplus wholly or in part by the distribution of specific assets, and in particular of paid-up shares or debentures of any other company, and where any difficulty arises in regard to such distribution or dividend the Board of Directors may settle it as it thinks expedient, and in particular, may authorize any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution or dividend purposes of any such specific assets and may determine that cash payments shall be made to any shareholders upon the footing of the values so fixed in order to secure equality of distribution and may vest any such specific assets in trustees as may seem expedient to the Board of Directors. 101

103 15. CORPORATE INFORMATION; SHARES AND SHARE CAPITAL The following is a summary of certain corporate information and other information relating to the Company, the Shares and share capital of the Company summaries of certain provisions of the Company s Memorandum of Association and Bye-laws and applicable Bermuda law in effect as of the date of this Prospectus, including the Bermuda Companies Act. This summary does not purport to be complete and is qualified in its entirety by the Company s Bye-Laws and applicable Bermuda law Incorporation; Registration Number; Registered Office and Other Company Information Golden Ocean Group Limited is an exempted company, and was incorporated under the laws of Bermuda and in accordance with the Bermuda Companies Act on September 18, The Company s business registration number is EC The head office and registered address of the Company is Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08 Bermuda, its telephone number is +1 (441) , and its website is Legal Structure The Company is a holding company and its operations are carried out through its operating subsidiaries. As of the date of this Prospectus, the Company has 87 directly wholly-owned vessel owning subsidiaries, being: KTL Belgravia I Inc., KTL Belgravia II Inc., Golden Future Inc., Golden Zhejiang Inc., KTL Bromley Inc., Paila Inc., Parula Inc., Petrel Inc., Piper Inc., Front Singapore Inc., Front San Francisco Inc., Front Seol Inc., Front Stockholm Inc., Front Santiago Inc., Front Santos Inc., Front Shanghai Inc., Front Savannah Inc., Front Sakura Inc., Front Seville Inc., Golden Finsbury Inc., Golden Fulham Inc., Golden Bexley Inc., Golden Barnet Inc., Golden Scope Inc., Golden Swift Inc., Front Fuji Inc., Front Aso Inc, Front Atlantic Inc., Front Baltic Inc., Front Caribbean Inc., Front Mediterranean Inc., Golden Cirrus Inc., Golden Cumulus Inc., Golden Nimbus Inc., Golden Arcus Inc., Golden Incus Inc., Golden Calvus Inc., Golden Aries Inc., Golden Arima Inc., Golden Beppu Inc., Golden Brilliant Inc., Golden Crystal Inc., Golden Daisy Inc., Golden Diamond Inc., Golden Eclipse Inc., Golden Effort Inc., Golden Eminence Inc., Golden Empress Inc., Golden Endeavour Inc., Golden Endurer Inc., Golden Enterprises Inc., Golden Excalibur Inc., Golden Excellence Inc., Golden Explorer Inc., Golden Express Inc., Golden Exquisite Inc., Golden Extreme Inc., Golden Eye Inc., Golden Feng Inc., Golden Future Inc., Golden Gemini Inc., Golden Ginger Inc., Golden Hilton Shipping Corp., Golden Ice Inc., Golden Leo Inc., Golden Libra Inc., Golden Magnum Inc., Golden Nantong Inc., Golden Opportunity Inc., Golden Pearl Inc., Golden President Shipping Corp., Golden Rose Inc., Golden Ruby Inc., Golden Saguenay Inc., Golden Sapphire Inc., Golden Shui Inc., Golden Strenght Inc., Golden Taurus Inc., Golden Virgo Inc., Golden Beijing Inc., Golden Zhoushan Inc., KTL Camden Inc., KTL Hampstead Inc., KTL Kensington Inc., KTL Mayfair Inc., KTL Brompton Inc. and KTL Brixton Inc. The Company also has the following wholly-owned subsidiaries; Golden Ocean Group Management (Bermuda) Ltd, Golden Ocean Management AS, Golden Ocean Management Asia Pte Ltd, Golden Ocean Trading Limited, Golden Ocean (Cyprus) Limited, Golden Ocean Shipping Co Pte Ltd and Golden Lyderhorn Inc. In addition, the Company owns 21.25% of SeaTeam Management Pte Ltd, 50% of Golden Opus Inc. and 50% of United Freight Carriers Inc. The Company has also established a joint venture, CCL, with Bocimar International NV, C Transport Holding Ltd, Golden Union Shipping Co S.A. and Star Bulk Carriers Corp, with the purpose of combining and coordinating the chartering services of all the parties within the Capesize segment. The Company owns 20% of CCL. The chart below shows a high-level overview of the corporate structure of the Group. Unless otherwise shown in the structure chart, the subsidiaries are 100% owned. 102

104 15.3 Information on Holdings The following table sets out information about the entities in which the Company holds (directly or indirectly) more than 10% of the outstanding capital and votes (dormant companies are not included). Name Country of Incorporation Field of Activity % Holding Golden Ocean Group Management (Bermuda) Ltd Bermuda Management 100% Golden Ocean Management AS Norway Management 100% Golden Ocean Management Asia Singapore Management 100% Pte Ltd Golden Ocean Trading Ltd Bermuda 100% Golden Ocean (Cyprus) Ltd Cyprus 100% Golden Ocean Shipping Co Pte Singapore Trading company 100% Ltd United Freight Carriers Inc Liberia 50% Sea Team Management Pte Ltd Singapore Technical 21.25% Capesize Chartering Ltd Bermuda Management 20% Golden Aries Inc Liberia Shipowning (Golden Aries) 100% Golden Arima Inc Liberia Shipowning (Golden Cecilie 100% Golden Beijing Inc Liberia 100% Golden Beppu Inc Liberia Shipowning (Golden Cathrine) 100% Golden Brilliant Inc Liberia Shipowning (Golden Brilliant) 100% Golden Crystal Inc Liberia Shipowning (Golden Bull) 100% Golden Daisy Inc Liberia Shipowning (Golden Daisy) 100% Golden Diamond Inc Liberia Shipowning (Golden Diamond) 100% Golden Eclipse Inc Liberia Bareboat charterer (Golden Eclipse) 100% Golden Effort Inc Liberia 100% Golden Eminence Inc Liberia Shipowning (Golden Eminence) 100% Golden Empress Inc Liberia Shipowning (Golden Empress) 100% Golden Endeavour Inc Liberia Shipowning (Golden Endeavour) 100% Golden Endurer Inc Liberia Shipowning (Golden Endurer) 100% Golden Enterprise Inc Liberia Shipowning (Golden Enterprise) 100% Golden Excalibur Inc Liberia 100% Golden Excellence Inc Liberia 100% Golden Explorer Inc Liberia 100% 103

105 Golden Express Inc Liberia 100% Golden Exquisite Inc Liberia 100% Golden Extreme Inc Liberia 100% Golden Eye Inc Liberia 100% Golden Feng Inc Liberia Shipowning (Golden Feng) 100% Golden Gemini Inc Liberia Shipowning (Golden Gemini) 100% Golden Ginger Inc Liberia Shipowning (Golden Ginger) 100% Golden Ice Inc Liberia Shipowning (Golden Ice) 100% Golden Leo Inc Liberia Shipowning (Golden Leo) 100% Golden Libra Inc Liberia Shipowning (Golden Libra) 100% Golden Nantong Inc Liberia 100% Golden Opportunity Inc Liberia Shipowning (Golden Opportunity) 100% Golden Opus Inc Liberia Shipowning (Golden Opus) 50% Golden Pearl Inc Liberia Shipowning (Golden Pearl) 100% Golden Rose Inc Liberia Shipowning (Golden Rose) 100% Golden Ruby Inc Liberia Shipowning (Golden Ruby) 100% Golden Saguenay Inc Liberia Shipowning (Golden Saguenay) 100% Golden Sapphire Inc Liberia Shipowning (Golden Suek) 100% Golden Shui Inc Liberia Shipowning (Golden Shui) 100% Golden Strenght Inc Liberia Shipowning (Golden Strength) 100% Golden Taurus Inc Liberia Shipowning (Golden Taurus) 100% Golden Virgo Inc Liberia Shipowning (Golden Virgo) 100% Palila Inc Liberia Shipowning (KSL Seattle) 100% Parula Inc Liberia Shipowning (KSL Sapporo) 100% Petrel Inc Liberia Shipowning (KSL Sydney) 100% Piper Inc Liberia Shipowning (KSL Salvador) 100% Front Singapore Inc Liberia Shipowning (KSL Singapore) 100% Front San Francisco Inc Liberia Shipowning (KSL San Francisco) 100% Front Seol Inc Liberia Shipowning (KSL Seoul) 100% Front Stockholm Inc Liberia Shipowning (KSL Stockholm) 100% Front Santiago Inc Liberia Shipowning (KSL Santiago) 100% Front Santos Inc Liberia Shipowning (KSL Santos) 100% Front Shanghai Inc Liberia Shipowning (Golden Surabaya) 100% Front Savannah Inc. Liberia Shipowning (Golden Savannah) 100% Front Sakura Inc Liberia Shipowning (KSL Sakura) 100% Front Seville Inc Liberia Shipowning (KSL Seville) 100% KTL Finsbury Inc Liberia Shipowning (Golden Finsbury) 100% KTL Fulham Inc Liberia Shipowning (Golden Fulham) 100% KTL Bexley Inc Liberia Shipowning (Golden Bexley) 100% KTL Barnet Inc Liberia Shipowning ( Golden Barnet) 100% Front Scape Inc Liberia Shipowning (Golden Scape) 100% Front Swift Inc Liberia Shipowning (Golden Swift) 100% Font Fuji Inc Liberia Shipowning ( Golden Kathrine) 100% Front Aso Inc Liberia Shipowning (Golden Aso) 100% Front Atlantic Inc Liberia 100% Front Baltic Inc Liberia 100% Front Caribbean Inc Liberia 100% Front Mediterranean Inc Liberia Shipowning (KSL Mediterranean) 100% Golden Cirrus Inc Liberia Shipowning (Golden Cirrus) 100% Golden Cumulus Inc Liberia Shipowning (Golden Cumulus) 100% GoldenNimbus Inc Liberia Shipowning (Golden Nimbus) 100% Golden Arcus Inc Liberia Shipowning (Golden Arcus) 100% Golden Incus Inc Liberia Shipowning Golden Incus) 100% Golden Calvus Inc Liberia Shipowning (Golden Calvus) 100% Golden Lyderhorn Inc Liberia Bareboat charterer (Golden Lyderhorn) 100% As of the date of this Prospectus, the Company is of the opinion that its holdings in all of the entities specified above are likely to have a significant effect on the assessment of its own assets and liabilities, financial condition or profits and losses. 104

106 15.4 Share Capital and Share Capital History As of the date of this Prospectus, the Company has an authorized share capital of USD 6,000,000 comprising of 600,000,000 common shares, fully paid and with a par value of USD 0.01 each. The Company has issued 516,359,637 common shares, each with a par value of USD The table below shows the development in the share capital of the Company since January 1, 2012 and up to the date of this Prospectus. Date Capital Increase/ decrease (USD) Share Capital After Change (USD) Par Value of Shares (USD) Subscription Price per Share New Shares Total Number of Outstanding Shares Share capital increase , USD ,301 24,437,000 Share capital increase , USD ,061 24,472,061 Share capital increase , , USD ,000,000 30,472,061 Share capital increase , USD ,489 30,521,550 Share capital increase , , USD ,600,000 49,121,550 Share capital increase , , USD ,000,000 80,121,550 Share capital increase ,000 1,111, USD ,000, ,121,550 Share capital increase , ,112, USD , ,231,678 Cancellation of shares (1) (514.98) 1,111, (51,498) 111,180,180 Share capital increase (merger) ,000 1,726, USD ,500, ,680,180 Cancellation of shares (2) (45.30) 1,726, (4,530) 172,675,650 Cancellation of shares (2) (0.13) 1,726, (13) 172,675,637 Share capital increase ,436,840 5,163, NOK ,684, ,359,637 (1) This cancellation of Shares was made pursuant to the merger agreement pertaining to the Merger with Former Golden Ocean. (2) This cancellation of Shares accounted for fractional shares not being distributed as merger consideration in the Merger with Former Golden Ocean Authorization to Increase the Share Capital The Company s memorandum of association authorizes the issuance of up to 600,000,000 common shares, with a par value of USD 0.01 per share Other Financial Instruments As of the date of this Prospectus, the Company has issued 351,125 RSUs to certain directors and members of the management, of which 233,688 RSUs have been settled. In September 2010, the Board of Directors approved the adoption of the 2010 Equity Incentive Plan (the "Plan") and reserved 800,000 Shares in the Company for issuance pursuant to the Plan. The Plan permits RSUs to be granted to directors, officers, employees of the Company and its subsidiaries, affiliates, consultants and service providers. The RSUs will vest over 3 years at a rate of 1/3 of the number of RSUs granted on each annual anniversary of the date of grant, subject to the participant continuing to provide services to the Company from the grant date through the applicable vesting date. Payment upon vesting of RSUs may be in cash, in shares of common stock or a combination of both as determined by the Board. They must be valued in an amount equal to the fair market value of a share of common stock on the date of vesting. The participant shall receive a cash distribution equivalent right with respect to each RSU entitling the participant to receive amounts equal to the ordinary dividends that would be paid during the time the RSU is outstanding 105

107 and unvested on the shares of common stock underlying the RSU as if such shares were outstanding from the date of grant through the applicable vesting date of the RSU. Such payments shall be paid to the participant at the same time at which the RSUs vesting event occurs, conditioned upon the occurrence of the vesting event. The Board may at any time change or amend the terms of the Plan. As of December 31, 2015, the Company had 515,592 outstanding share options under various share incentive programs for the management and directors of the Company, of which 381,713 million are vested and exercisable. The current strike price for the share options is NOK per share. Apart from the above, the Company does not have any warrants, options or other instruments convertible into shares in issue as of the date of this Prospectus Disclosure on Notifiable Holdings As of February 23, 2016, which was the latest practicable date prior to the date of this Prospectus, and insofar as known to the Company, the following persons had, directly or indirectly, interest in 5 % or more of the issued share capital of the Company (which constitutes a notifiable holding under the Norwegian Securities Trading Act): Number of shares % Hemen Holding Limited (1) ,436,122 45% (1) In addition, Hemen Holding holds TRS agreements with underlying exposure to 195,648 shares in the Company. Franklin Enterprises Inc., a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family, owns USD 93.6 million of the USD 200 million convertible bond, which is convertible into 4,696,438 Shares in the Company at an exercise price of USD per share. As a result of the Equity Raise, the conversion price in the convertible bond will be amended, but this will occur after the date of this Prospectus and is accordingly not reflected in the said calculation. When agreements are being entered into between the Company and Hemen, or other companies controlled by Hemen, the Board of Directors has particular focus on acting in the best interest of the Company, in accordance with good corporate governance practice. If needed, external, independent opinions are sought. The Company is not aware of any arrangements, the operation of which may at a date subsequent to the date of this Prospectus result in a change of control in the Company. None of the major shareholders have different voting rights than the other shareholders of the Company The Bye-Laws and Certain Aspects of Bermuda Company Law The Company s Memorandum of Association and Bye-Laws are set out in Appendix B Memorandum of Association and Appendix C Bye-Laws to this Prospectus. Objective The objects, purposes and powers of the Company are set forth in Items 6 and 7 of its Memorandum of Association and in the Second Schedule of the Bermuda Companies Act. These purposes include exploring, drilling, moving, transporting and refining petroleum and hydro-carbon products, including oil and oil products; acquiring, owning, chartering, selling, managing and operating ships and aircraft; the entering into of any guarantee, contract, indemnity or suretyship to assure, support, secure, with or without the consideration or benefit, the performance of any obligations of any person or persons; and the borrowing and raising of money in any currency or currencies to secure or discharge any debt or obligation in any manner. Registered Office The Company s registered office is at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda. Board of Directors, Management and Supervisory Bodies It follows from the Bye-Laws section 97 that the Company s Board of Directors shall consist of not less than two members and shall at all times comprise a majority of directors who are not residents in the United Kingdom. The Company s shareholders may change the number of directors by the vote of shareholders representing a majority of the total number of votes which may be cast at any annual or special general meeting, or by written resolution. Each director is elected at an annual general meeting of shareholders for a term commencing upon election and expiring on the date of the next scheduled annual general meeting of shareholders. The Bye-Laws do not permit cumulative voting for directors. 106

108 Share Class The Company has one class of common shares and the holders of the shareholders are entitled to one vote per share on each matter requiring the approval of the holders of the common shares. At any annual or special general meeting of shareholders where there is a quorum, a simple majority vote will generally decide any matter, unless a different vote is required by express provision of the Bye-Laws or Bermuda law. In general, only shareholders registered in the company s Register of Members are entitled to vote on the shares. No Restrictions on Transfer of Shares The Bye-Laws do not provide for a right of first refusal on transfer of shares. Share transfers are not subject to approval by the Board of Directors, however, the Board of Directors may decline to register any transfer in certain circumstances described in the Bye-Laws. Such circumstances include, where the transfer might breach any law or requirement of any authority or listing exchange and if the transfer could result in 50% or more of the Company s voting share capital being held by a person resident for tax purposes in Norway. General Meetings Under the Bermuda Companies Act, an annual general meeting of the shareholders shall be held for the election of directors on any date or time as designated by or in the manner provided for in the bye-laws and held at such place within or outside Bermuda as may be designated in the bye-laws. Any other proper business may be transacted at the annual general meeting. The Bye-Laws provide that the Board of Directors may fix the date, time and place of the annual general meeting within or without Bermuda (but never in the United Kingdom or Norway) for the election of directors and to transact any other business properly brought before the meeting. Under the Bermuda Companies Act, any meeting that is not the annual general meeting is called a special general meeting, and may be called by the board of directors or by such persons as authorized by the company s bye-laws. It further follows from the Bermuda Companies Act, that holders of 1/10 of a company s issued common shares may also call special general meetings. At such special general meeting, only business that is related to the purpose set forth in the required notice may be transacted. Additionally, under Bermuda law, a company may, by resolution at a special general meeting, elect to dispense with the holding of an annual general meeting for (a) the year in which it is made and any subsequent year or years; (b) for a specified number of years; or (c) indefinitely. The Bye-Laws provide that special general meetings may be called by the Board of Directors and when required by the Bermuda Companies Act, i.e., by holders of one-tenth of a company s issued common shares through a written request to the board. Under the Bermuda Companies Act, notice of any general meeting must be given not less than five days before the meeting and shall state the place, date and hour of the meeting and, in the case of a special general meeting, shall also state the purpose of such meeting and the that it is being called at the direction of whoever is calling the meeting. Under Bermuda law, accidental failure to give notice will not invalidate proceedings at a general meeting. Under the Bye-Laws, quorum at annual or special general meetings shall be constituted by two or more shareholders either present in person or represented by proxy, provided that if the Company has only one shareholder, one shareholder present in person or by proxy shall constitute the necessary quorum, while under the current Bye-Laws such quorum is constituted by one or more shareholder, either in person or represented by proxy, holding the aggregate shares carrying 33 1/3% of the total voting rights of the Company. Change of Control The Company s Memorandum of Association and Bye-Laws contain provisions that may have an effect of delaying, deferring or preventing a change of control of the Company, including (i) the authorization of up to 600,000,000 common shares with potential voting powers, designations, preferences and other rights as may be provided for by the Board of Directors and (ii) no provision allowing for cumulative voting in the election of directors. Additionally, as required by the Bermuda Companies Act, at least 10% of the issued and outstanding shares entitled to vote are allowed to call for a special general meeting to effectuate change at the Company, which may prevent a shareholder from forcing a special general meeting of shareholders and impede a change of control of the Company or the removal of management. Disclosure of Shareholdings Pursuant to the Bye-Laws section 41, if 50% or more of the aggregate issued share capital or votes of the Company or are found to be held or owned directly or indirectly by a person or persons resident for tax purposes in Norway, other than the registrar in respect of those shares registered in its name in the register as nominee of persons whose interests in 107

109 such shares are reflected in a branch register, such as the VPS, the Board of Directors shall make an announcement to such effect through the Oslo Stock Exchange. The Board of Directors and the registrar of the relevant branch register shall thereafter be entitled and required to dispose of such number of shares of the Company or interests therein held or owned by such persons as will result in the percentage of the aggregate issued share capital of the Company held or owned as aforesaid being less than 50%, and, for these purposes, the Board of Directors and the registrar shall in such case dispose of shares or interests therein owned by persons resident for tax purposes in Norway on the basis that the shares or interests therein most recently acquired shall be the first to be disposed of (i.e. on the basis of last acquired first sold) save where there is a breach of the obligation to notify tax residency pursuant to the foregoing, in which event the shares or interests therein of the person in breach thereof shall be sold first. Shareholders shall not be entitled to raise any objection to the disposal of their shares, but the provisions of the Bye Laws relating to the protection of purchasers of shares sold under lien or upon forfeiture shall apply mutatis mutandis to any disposal of shares or interests therein made in accordance with the Bye-Laws. In addition, pursuant to the Bye-laws section 49, any person (other than the registrar as the nominee of persons whose interests in such shares are reflected in a branch register, such as the VPS) who acquires or disposes of an interest in shares to the effect that the requirements of the Oslo Stock Exchange in effect from time to time concerning the duty to flag changes in a person s interest in shares require such changes to be notified shall notify the registrar immediately of such acquisition or disposal and the resulting interest of that person in shares. Share Capital The Memorandum of Association of the Company provides for an authorized share capital of USD 6,000,000.00, divided into 600,000,000 common shares, with a par value of USD 0.01 per share. The Bye-Laws section 5A provides that the Company s Board of Directors may exercise all the powers of the Company to: (a) (b) (c) (d) divide the Company s shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions; consolidate and divide all or any of the Company s share capital into shares of larger amount than its existing shares; subdivide the Company s shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; or make provision for the issue and allotment of shares which do not carry any voting rights. Treasury Shares The Bye-Laws section 58 permit the Company to have the option, but not the obligation, to repurchase from any shareholder all fractions of shares, and all holdings of fewer than 100 shares. Such repurchase shall be on such terms and conditions as the Company's board of directors may determine, provided that in any event, the repurchase price shall be not less than the closing market price per share quoted on the Oslo Stock Exchange on the effective date of the repurchase. Amendments to the Memorandum of Association and Bye-Laws Subject to the Bermuda Companies Act, all or any of the special rights attached by the Company's Board of Directors to any class of shares may only be altered or abrogated with the consent in writing of the holders of not less than 75% of the issued shares of that class or with the sanction of a resolution passed at a separate general meeting of the holders of such shares voting in person or by proxy. Additionally, the special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be altered by the creation or issue of further shares ranking pari passu therewith. Under Bermuda law, a company may, by resolution passed at an annual or special general meeting of shareholders, alter the provisions of the memorandum of association. An application for alteration can only be made by (i) holders of not less in the aggregate than 20% in par value of a company's issued share capital, (ii) by holders of not less in the aggregate that 20% of the company's debentures entitled to object to alterations to the memorandum, or (iii) in the case a company that is limited by guarantee, by not less than 20% of the shareholders. 108

110 The Bye-Laws may be amended in the manner provided for in the Bermuda Companies Act, provided that such amendment should only become operative to the extent that it has been confirmed by resolution passed at an annual or special general meeting of shareholders by a simple majority vote. Additional Issuances and Pre-Emptive Rights The Bye-Laws do not provide a shareholder of the Company with any pre-emptive rights to subscribe for additional issues of the Company s shares. Rights of Redemption and Conversion of Shares The Bye-Laws do not provide for any shareholder rights of conversion or redemption of the common shares in the Company. Shareholder Vote on Certain Reorganizations Under the Bermuda Companies Act, any plan of merger or amalgamation must be authorized by the resolution of a company s shareholders and must be approved by a majority vote of 3/4 of those shareholders voting at such special general meeting. A quorum of two or more persons holding or representing more than 1/3 of the issued and outstanding common shares of the company on the record date of such special general meeting must be in attendance in person or by proxy at such special general meeting. Liability of Directors Under Bermuda law, directors and officers shall discharge their duties in good faith and with that degree of diligence, care and skill which reasonably prudent people would exercise under similar circumstances in like positions. In discharging their duties, directors and officers may rely upon financial statements of the company represented to them to be correct by the president or the officer having charge of its books or accounts or by independent accountants. The Bermuda Companies Act provides that a company s bye-laws may include a provision for the elimination or limitation of liability of a director to the corporation or its shareholders for any loss arising or liability attaching to him by virtue of any rule of law in respect to any negligence, default, breach of any duty or breach of trust of which the director may be guilty of; provided that such provision shall not eliminate or limit the liability of a director for any fraud or dishonesty he may be guilty of. Indemnification of Directors and Officers Bermuda law permits the bye-laws of a Bermuda company to contain a provision indemnifying the company s directors and officers for any loss arising or liability attaching to him or her by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer or person may be guilty, save with respect to fraud or dishonesty. Bermuda law also grants companies the power generally to indemnify directors and officers of a company, except in instances of fraud and dishonesty, if any such person was or is a party or threatened to be made a party to a threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director and officer of such company or was serving in a similar capacity for another entity at such company s request. The Bye-Laws section 159 provide that each director, alternate director, officer, person or member of a board committee, if any, resident representative, and his or her heirs, executors or administrators will be indemnified and held harmless out of the Company s assets to the fullest extent permitted by Bermuda law against all liabilities, loss, damage or expense (including but not limited to liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him or her as such director, alternate director, officer, person or committee member or resident representative. The restrictions on liability, indemnities and waivers provided for in the Bye-Laws do not extend to any matter that would render the same void under the Bermuda Companies Act. In addition, each such person shall be indemnified out of the assets of the Company against all liabilities incurred in defending any proceedings, whether civil or criminal, in which judgment is given in such person s favor, or in which he or she is acquitted. Under the Bye-Laws section 164, shareholders have further agreed to waive any claim or right of action they may have at any time against any director, alternate director, officer, person or member of a board committee on account of any action taken by such person or the failure of such person to take any action in the performance of his or her duties with or for the Company with the exception of any claims or rights of action arising out of fraud or dishonesty. Distribution of Assets on Liquidation Upon a liquidation, dissolution or winding up, the shareholders of the Company will be entitled under Bermuda law to receive, pro rata, the net assets available after the payment of all of the Company s debts and liabilities and any 109

111 preference amount owed to any preference shareholders. The rights of shareholders, including the right to elect directors, are subject to the rights of any series of preference shares the Company may issue in the future. 110

112 16. SECURITIES TRADING IN NORWAY The following is a summary of certain information in respect of trading and settlement of shares on the Oslo Stock Exchange, securities registration in Norway and certain provisions of applicable Norwegian securities law, including the Norwegian Securities Trading Act, in effect as of the date of this Prospectus. This summary does not purport to be complete and is qualified in its entirety by Norwegian law Trading and Settlement The Oslo Stock Exchange comprise two separate trading markets for trading in equities, Oslo Børs, a stock exchange operated by Oslo Børs ASA, and Oslo Axess, a regulated market operated by Oslo Børs ASA. Trading of equities on the Oslo Stock Exchange is carried out in the electronic trading system Millennium Exchange. This trading system is in use by all markets operated by the London Stock Exchange as well as by the Borsa Italiana and the Johannesburg Stock Exchange. Official trading on the Oslo Stock Exchange takes place between 9:00 a.m. CET and 4:30 p.m. CET each trading day, with pre-trade period between 08:15 a.m. CET and 9:00 a.m. CET, a closing auction from 4:20 p.m. CET to 4:25 p.m. CET, and a post-trade period from 4:25 p.m. CET to 5:30 p.m. CET. The settlement period for trading on the Oslo Stock Exchange is two trading days (T+2). Investment services in Norway may only be provided by Norwegian investment firms holding a license under the Norwegian Securities Trading Act, branches of investment firms from a member state of the EEA or investment firms from outside the EEA that have been licensed to operate in Norway. Investment firms in an EEA member state may also provide cross-border investment services into Norway Information, Control and Surveillance Under Norwegian law, the Oslo Stock Exchange is required to perform a number of surveillance and control functions. The Surveillance and Corporate Control unit of Oslo Stock Exchange monitors all market activity on a continuous basis. Market surveillance systems are largely automated, promptly warning department personnel of abnormal market developments. Under Norwegian law, a company that is listed on a Norwegian regulated market, or is subject to the application for listing on such market, must promptly release any inside information (that is, precise information about financial instruments, the issuer thereof or other matters that are likely to have a significant effect on the price of t he relevant financial instruments or related financial instruments, and that are not publicly available or commonly known in the market). A company may, however, delay the release of such information in order not to prejudice its legitimate interests, provided that it is able to ensure the confidentiality of the information and that the delayed release would not be likely to mislead the public. Oslo Stock Exchange may levy fines on companies violating these requirements Registration of the Shares with the VPS In order to facilitate registration of the beneficial interests in the Shares with the VPS, the Company has entered into a registrar agreement with the VPS Registrar Nordea Bank Norge ASA, who will operate the Company s VPS share register. Pursuant to the registrar agreement, the VPS Registrar is (directly or indirectly) registered as holder of the Shares listed on the Oslo Stock Exchange in the register of members that the Company maintains pursuant to Bermuda law. The VPS Registrar will register the beneficial interests in the Shares listed on the Oslo Stock Exchange in book-entry form with the VPS. Therefore, it is not the Shares in registered form issued in accordance with the Bermuda Companies Act, but the beneficial interests in such Shares in book-entry form that are registered with the VPS. The beneficial interests in the Shares are registered in book-entry form with VPS under the category of a share and it is such interest in the Shares that is registered and traded on the Oslo Stock Exchange. Each such share registered with the VPS will represent beneficial ownership of one Share. The beneficial interests registered with the VPS are freely transferable, with delivery and settlement through the VPS system, however, the Company cannot have 50% or more of its aggregated issued share capital or votes held by a person or persons resident for tax purposes in Norway, see Section 15.8 Corporate Information; Shares and Share Capital The Bye-laws and Certain Aspects of Bermuda Law Disclosure of Shareholdings. The VPS is the Norwegian paperless centralized securities register. It is a computerized bookkeeping system in which the ownership of, and all transactions relating to, Norwegian listed shares must be recorded. The VPS, Oslo Børs and Oslo Axess are all wholly owned by Oslo Stock Exchange VPS Holding ASA. 111

113 All transactions relating to securities registered with the VPS are made through computerized book entries. No physical share certificates are, or may be, issued. The VPS confirms each entry by sending a transcript to the registered shareholder irrespective of any beneficial ownership. To give effect to such entries, the individual shareholder must establish a share account with a Norwegian account agent. Norwegian banks, Norges Bank (that is, Norway's central bank), authorized securities brokers in Norway and Norwegian branches of credit institutions established within the EEA are allowed to act as account agents. The entry of a transaction in the VPS is prima facie evidence in determining the legal rights of parties as against the issuing company or any third party claiming an interest in the given security. The VPS is liable for any loss suffered as a result of faulty registration or an amendment to, or deletion of, rights in respect of registered securities unless the error is caused by matters outside the VPS control which the VPS could not reasonably be expected to avoid or overcome the consequences of. Damages payable by the VPS may, however, be reduced in the event of contributory negligence by the aggrieved party. The VPS must provide information to the Norwegian FSA on an on-going basis, as well as any information that the Norwegian FSA requests. Further, Norwegian tax authorities may require certain information from the VPS regarding any individual's holdings of securities, including information about dividends and interest payments Disclosure Obligations If a person's, entity's or consolidated group's proportion of the total issued shares and/or rights to shares in a company listed on a regulated market in Norway (with Norway as its home state, which will be the case for the Company) reaches, exceeds or falls below the respective thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 90% of the share capital or the voting rights of that company, the person, entity or group in question has an obligation under the Norwegian Securities Trading Act to notify the Oslo Stock Exchange and the issuer immediately. The same applies if the disclosure thresholds are passed due to other circumstances, such as a change in the company's share capital. Under U.S. securities laws and related SEC rules, any person (or group of persons) who, after acquiring directly or indirectly the beneficial ownership of more than 5% of a class of a registered equity security, is required to file a beneficial ownership report (i.e., a Schedule 13D or Schedule 13G) with the SEC to report the acquisition within 10 days. In addition, such person (or group of persons) must file an amendment to such Schedule 13D any time such person increases or decreases his or her holdings of such class of such equity security by 1% or more of the total outstanding class. A person will be attributed beneficial ownership of all shares held by persons that are acting in concert as part of a group. A person is deemed to have beneficial ownership of an equity security if he, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, has or shares: (i) voting power which includes the power to vote, or to direct the voting of, such security; or (ii) investment power which includes the power to dispose, or to direct the disposition of, such security Insider Trading According to the Norwegian Securities Trading Act, subscription for, purchase, sale or exchange of financial instruments that are listed, or subject to the application for listing, on a Norwegian regulated market, or incitement to such dispositions, must not be undertaken by anyone who has inside information, as defined in Section 3-2 of the Norwegian Securities Trading Act. The same applies to the entry into, purchase, sale or exchange of options or futures/forward contracts or equivalent rights whose value is connected to such financial instruments or incitement to such dispositions Tender Offer Rules Parties engaging in a tender offer must comply with certain SEC rules governing these types of transactions. While the SEC does not define a tender offer, several courts have provided guidance in determining whether a tender offer is taking place. If an offeror is making open market purchases of a company's shares with a view toward acquiring that company, the offeror will need to determine whether these purchases could be considered a tender offer, requiring the offeror to comply with certain tender offer rules. It is widely understood that a tender offer is an offer to purchase shares of stock directly from shareholders of a public company, however the tender offer rules may apply under certain circumstances for the offer to purchase shares of a private company. In circumstances where the tender offer rules apply, a tender offer requires the provision of a Schedule TO, an Offer to Purchase and a letter of transmittal. The Schedule TO is an SEC form document, which generally incorporates information by reference to the Offer to Purchase and requires the offeror to complete certain disclosure items. In a cash deal, the offeror must include a plain English summary term sheet describing the material terms of the transaction for the benefit of the stockholders. The offeror must file Schedule TO with the SEC (along with the accompanying exhibits such as the offer to purchase, letter of transmittal and any other materials) and pay the related filing fee as soon as practicable on the date the tender offer commences. 112

114 An Offer to Purchase sets out the terms of the transaction and is the primary disclosure document for the target company's stockholders. The offer to purchase includes information on (i) the identity and background of the parties; (ii) the material terms of the transaction, including conditions to completing the tender offer (for example, the minimum number of shares to be tendered, absence of a material adverse effect and receipt of regulatory approvals); (iii) previous dealings between the parties; (iv) the offeror's plans or proposals concerning the target company; (v) the source and amount of the offeror's funds, including a summary of financing arrangements; and (vi) audited financial statements of the offeror if its financial condition is material to the stockholders. A letter of transmittal details the process for stockholders to tender their shares and must be filed with the SEC. The offeror also files other documents providing instructions and means for tendering shares, as well as any other disclosure materials provided to stockholders. In an exchange offer, unless an exemption from SEC registration is available, the offeror must also prepare a registration statement on Form S-4 or F-4 containing a prospectus with additional disclosures. Information required in the Form S-4 or F-4 includes: (i) a description of both companies; (ii) a description of the offeror's securities; (iii) audited financial statements of the offeror and, if the acquisition is material to the offeror, the target company; and (iv) a description of the buyer's capital stock. The SEC rules further provide that the offer period must remain open for at least 20 business days from the date on which the tender offer commences, i.e. when the offeror files Schedule TO with the SEC and publishes the summary advertisement or mails the tender offer materials to the target company's stockholders. In addition, (i) the offeror must extend the offer period by 10 business days after any change in the percentage of target company shares being sought or the amount of consideration being offered; (ii) in an exchange offer (where shares are being issued as part of the consideration), if there are any other material changes to the offer, the offeror must extend the offer period by at least five business days (or ten business days if the change is significant, depending on the facts and circumstances); and (iii) a prospectus in an exchange offer is deemed "materially deficient" by the SEC, then the offer must remain open for an additional 20 business days from the time that the SEC made that determination. The SEC rules further require that the shareholders of the target company receive the highest consideration per share paid or agreed to be paid to any of the shareholders during the offer period. The payment for the shares tendered under the offer must be carried out promptly following the expiry of the acceptance period. When the offeror has filed the required documents with the SEC, the target company s Board of Directors must state a position regarding the cash tender offer within 10 business days. In this regard the Board of Directors has four options; (i) recommend acceptance of the offer; (ii) recommend rejection of the offer; (iii) state that it is expressing no opinion and is remaining neutral; or (iv) state that it is unable to take a position. In addition, the statement must include the reasons for the position, or express inability to take a position. The tender offer rules contain two tiers of exemptions based on the level of ownership by U.S. shareholders in the target securities of the company to be acquired, or the subject company. The exemptions are available where the subject company is a foreign private issuer. The Tier I exemption (the Tier I Exemption ) applies where U.S. shareholders of a subject company hold 10% or less of the subject company s securities. The effect of the Tier I Exemption is that the transaction will be exempt from most of the U.S. tender offer rules and the offeror will need to comply with any applicable rules of the subject company s home country relating to tender offers. The Tier II exemption (the Tier II Exemption ) applies where U.S. shareholders of the subject company hold more than 10% but less than 40% of the subject company s shares. The Tier II Exemption offers limited relief from the U.S. tender offer rules. Under the Tier II Exemption, among other things, it is permissible for an offeror to separate its offer into multiple offers, typically one offer made to U.S. holders, and one or more offers made to non-u.s. holders. The Company has been granted an exemption from the Norwegian take-over rules by the Oslo Stock Exchange in its capacity as take-over supervisory authority in Norway due to being subject to the U.S. tender offer rules Compulsory Acquisition Under Bermuda law, an acquiring party is generally able to acquire compulsorily the common shares of minority holders in the following ways: By a procedure under the Companies Act known as a "scheme of arrangement". A scheme of arrangement could be effected by obtaining the agreement of the company and of holders of common shares, comprising in the aggregate a majority in number representing at least 75% in value of the shareholders (excluding shares owned by the acquirer) present and voting at a meeting ordered by the Bermuda Supreme Court held to consider the scheme of arrangement. Following such approval by the shareholders, the Bermuda Supreme Court may then sanction the scheme of arrangement. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common shares could be compelled to sell their shares under the terms of the scheme of arrangement. 113

115 Where an acquiring party makes an offer in a scheme or contract for shares or class of shares in a company and the acquiring party receives acceptances, pursuant to the offer, for not less than 90% of the shares in issue (other than those already held by the acquiring party, its subsidiary or by a nominee for the acquiring party or its subsidiary as at the date of the offer) the acquiring party may, at any time within two months from the date the acceptance was obtained, give notice to any dissenting shareholder that it wishes to acquire his shares on the same terms as the original offer. The dissenting shareholders could be compelled to transfer their shares unless the Bermuda Supreme Court (on application made within a one-month period from the date of the offeror's notice of its intention to acquire such shares) orders otherwise. The holder(s) of not less than 95% of the shares or any class of shares of a company may give a notice to the remaining shareholders of the intention to acquire the shares of such remaining shareholders on the terms set out in the notice. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Bermuda Supreme Court for an appraisal of the value of their shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired Foreign Exchange Controls There are currently no foreign exchange control restrictions in Norway that would potentially restrict the payment of dividends to a shareholder outside Norway, and there are currently no restrictions that would affect the right of shareholders of a Norwegian company who are not residents in Norway to dispose of their shares and receive the proceeds from a disposal outside Norway. There is no maximum transferable amount either to or from Norway, although transferring banks are required to submit reports on foreign currency exchange transactions into and out of Norway into a central data register maintained by the Norwegian customs and excise authorities. The Norwegian police, tax authorities, customs and excise authorities, the National Insurance Administration and the Norwegian FSA have electronic access to the data in this register. 114

116 17. TAXATION This section describes certain tax rules in Bermuda and Norway applicable to shareholders in the Company who are resident in Norway for tax purposes ( Norwegian Shareholders ) and for shareholders who are not resident in Norway for tax purposes ( Non-Norwegian Shareholders ). The statements herein regarding taxation are based on the laws in force in Bermuda and Norway as of the date of this Prospectus and are subject to any changes in law occurring after such date. Such changes could be made on a retrospective basis. The following summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of shares in the Company. Investors are advised to consult their own tax advisors concerning the overall tax consequences of their ownership of shares in the Company. The statements only apply to shareholders who are beneficial owners of shares in the Company. Please note that for the purpose of the summary below, references to Norwegian Shareholders and Non-Norwegian Shareholders refers to the tax residency rather than the nationality of the shareholder Norwegian Shareholders Taxation of Dividends Dividends distributed by companies resident in Bermuda for tax purposes, including dividends from the Company, received by Norwegian corporate shareholders (i.e. limited liability companies and similar entities) ( Norwegian Corporate Shareholders ) are taxable as ordinary income in Norway for such shareholders at a flat rate of 25%. Dividends distributed to Norwegian individual shareholders (i.e. other Norwegian shareholders than Norwegian Corporate Shareholders) ( Norwegian Individual Shareholders and taken together with Norwegian Corporate Shareholders Norwegian Shareholders ) are taxable under the "shareholder model". According to the shareholder model, dividends distributed to individual shareholders are multiplied with a factor of 1.15 before taken to taxation at the ordinary income rate of 25% (resulting in an effective tax rate of 28.75%) to the extent the dividend exceeds a basic tax-free allowance. The tax-free allowance shall be computed for each individual shareholder on the basis of the cost price of each of the shares multiplied by a risk-free interest rate. The risk-free interest rate will be calculated every income year and is allocated to the shareholder owing the share on December 31 of the relevant income year. Any part of the calculated taxfree allowance one year exceeding the dividend distributed on the share ("unused allowance") may be carried forward and set off against future dividends received on (or gains upon realization of, see below) the same share. Any unused allowance will also be added to the basis of computation of the tax-free allowance on the same share the following year. Taxation of Capital Gains Sale, redemption or other disposal of shares is considered as a realization for Norwegian tax purposes. Norwegian Corporate Shareholders are taxable in Norway for capital gains on the realization of shares in the Company, and have a corresponding right to deduct losses. This applies irrespective of how long the shares have been owned by the Norwegian Corporate Shareholders and irrespective of how many shares that are realized. The taxable gain or deductible loss is calculated per share, as the difference between the consideration received and the tax value of the share. The tax value of each share is based on the Norwegian Corporate Shareholders cost price of the share. Costs incurred in connection with the acquisition or realization of the shares may be deducted in the year of sale. Any capital gain or loss is included in or deducted from the basis for computation of ordinary income in the year of disposal. Ordinary income is taxable at a rate of 25%. Norwegian Individual Shareholders are taxable in Norway for capital gains on the realization of shares, and have a corresponding right to deduct losses. This applies irrespective of how long the shares have been owned by the individual shareholder and irrespective of how many shares that are realized. Gains are taxable as ordinary income in the year of realization, and losses can be deducted from ordinary income in the year of realization. Any gains or losses are also multiplied with a factor of 1.15 before taken to taxation at the tax rate for ordinary income of 25%. Under current tax rules, gain or loss is calculated per share, as the difference between the consideration received and the tax value of the share. The tax value of each share is based on the individual shareholder's purchase price for the share. Costs incurred in connection with the acquisition or realization of the shares may be deducted in the year of sale. Unused tax-free allowance connected to a share may be deducted from a capital gain on the same share, but may not lead to or increase a deductible loss. Further, unused tax-free allowance may not be set off against gains from realization of the other shares. If Norwegian Shareholders realizes shares acquired at different times, the shares that were first acquired will be deemed as first sold (the "first in first out"-principle) upon calculating taxable gain or loss. 115

117 A shareholder who ceases to be tax resident in Norway due to domestic law or tax treaty provisions may become subject to Norwegian exit taxation of capital gains related to shares in certain circumstances. Controlled Foreign Corporation (CFC) taxation Norwegian Shareholders in the Company will be subject to Norwegian taxation according to the Norwegian Controlled Foreign Corporations regulations (the Norwegian CFC-regulations ) if Norwegian Shareholders directly or indirectly own or control (together referred to as Control ) the shares of the Company. Norwegian Shareholders will be considered to Control the Company if: Norwegian Shareholders Control 50% or more of the shares or capital in the Company at the beginning of and at the end of a tax year; or If Norwegian Shareholders Controlled the Company the previous tax year, the Company will also be considered Controlled by Norwegian Shareholders in the following tax year unless Norwegian Shareholders Control less than 50% of the shares and capital at both the beginning and the end of the following tax year; or Norwegian Shareholders Control more than 60% of the shares or capital in the Company at the end of a tax year. If less than 40% of the shares or capital are Controlled by Norwegian Shareholders at the end of a tax year, the Company will not be considered Controlled by Norwegian Shareholders for Norwegian tax purposes. Under the Norwegian CFC-regulations Norwegian Shareholders are subject to Norwegian taxation on their proportionate part of the taxable net income generated by the Company, calculated according to Norwegian tax regulations, regardless of whether or not any dividends are distributed from the Company. Net Wealth Tax The value of shares is taken into account for net wealth tax purposes in Norway. The marginal tax rate is currently 0.85%. Norwegian limited liability companies and similar entities are exempted from net wealth tax. Shares listed on the Oslo Stock Exchange are valued at the quoted value at 1 January in the assessment year. Norwegian Corporate Shareholders are not subject to net wealth tax. VAT and Transfer Taxes No VAT, stamp duty or similar duties are currently imposed in Norway on the transfer or issuance of shares. Inheritance Tax A transfer of shares through inheritance or as a gift does not give rise to inheritance or gift tax in Norway Non-Norwegian Shareholders Taxation of dividends Dividends received by Non-Norwegian Shareholders from shares in Non-Norwegian companies are not subject to Norwegian taxation unless the Non-Norwegian Shareholders holds the shares in connection with the conduct of a trade or business in Norway. Taxation of Capital Gains Capital gains generated by Non-Norwegian Shareholders are not taxable in Norway unless the Non-Norwegian Shareholders holds the shares in connection with the conduct of a trade or business in Norway. Net Wealth Tax Non-Norwegian Shareholders are generally not subject to Norwegian net wealth tax. Non-Norwegian personal shareholders may, however, be taxable if the shareholding is effectively connected to the conduct of trade or business in Norway. VAT and transfer taxes No VAT, stamp duty or similar duties are currently imposed in Norway on the transfer or issuance of shares. 116

118 Inheritance Tax A transfer of shares through inheritance or as a gift does not give rise to inheritance or gift tax in Norway Bermuda Withholding Tax There is no Bermudian withholding tax on dividends paid from a Bermuda resident company. 117

119 18. TERMS OF THE SUBSEQUENT OFFERING This Section provides important information on the terms of the Subsequent Offering. Investing in the Offer Shares involves inherent risks. In making an investment decision, each investor must rely on their own examination, and analysis of, and enquiry into the Company and the terms of the Subsequent Offering, including the merits and risks involved. None of the Company or the Managers, or any of their respective representatives or advisers, is making any representation to any offeree or purchaser of the Offer Shares regarding the legality of an investment in the Offer Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Offer Shares. You should read this Section in conjunction with the other parts, in particular Section 2 Risk Factors The Subsequent Offering The Subsequent Offering consists of up to 34,368,400 Offer Shares, each with a par value of USD 0.01, offered by the Company at a Subscription Price of NOK 5.00 per Offer Share (equal to the per Share subscription price that applied to the Private Placement), for gross proceeds of up to NOK 171,842,000, or approximately USD 20 million. The table below provides certain indicative key dates for the Subsequent Offering, subject to change. Last day of trading in the Company s Shares inclusive of Subscription Rights... February 18, 2016 Record Date for determination of Eligible Shareholders... February 22, 2016 Commencement of the Subscription Period... February 29, 2016, at 09:00 a.m. CET (1) Expiry of the Subscription Period... March 11, 2016, at 16:30 p.m. CET Allocation of Offer Shares... On or about March 14, 2016 Distribution of allocation letters... On or about March 14, 2016 Payment Due Date... On or about March 16, 2016 Date of issuance of the Offer Shares... On or about March 18, 2016 Delivery of the Offer Shares to investors VPS accounts... On or about March 21, 2016 Commencement of trading in the Offer Shares on the Oslo Stock Exchange... On or about March 21, 2016 (1) The Board of Directors of the Company may in its sole discretion decide to shorten or extend the Subscription Period. In such case, the other dates will be adjusted accordingly. Date The Company will use the information system of the Oslo Stock Exchange to publish information with respect to the Subsequent Offering, such as changes to the indicative dates set out in the table above and the results of the Subsequent Offering. Such information will be published under the trading symbol for the Shares of the Company, GOGL, and also be made available on the Company's web-site: The Subsequent Offering is not underwritten, and will be consummated regardless of whether or not it is fully subscribed. The Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and may not be deposited into any unrestricted depositary receipt facility in the United States, unless at the time of deposit the shares are no longer restricted securities. The Offer Shares may, for a period of six months after the full purchase price consideration for the Shares are paid, not be reoffered, resold, pledged or otherwise transferred, except (a) outside the United States in accordance with Rule 903 or Rule 904 of Regulation S, as applicable or (b) pursuant to an applicable exemption from the registration requirements of the U.S. Securities Act. The Offer Shares will therefore be delivered and registered on a separate ISIN BMG and listed on the Oslo Stock Exchange only under a separate trading symbol GOGL R. During the second half of 2016, after expiry of the restriction period for all Private Placement Shares and Offer Shares, the Offer Shares (and the Private Placement Shares) are expected to be registered with the ordinary ISIN BMG of the Company and thereafter commence to trade under the Company s ordinary trading symbol GOGL and become freely tradable on both the Oslo Stock Exchange and NASDAQ Global Select Market. See further section Delivery; VPS Registration; Admission to Trading below Resolution to Issue the Offer Shares The Board of Directors of the Company will resolve to issue the Offer Shares pursuant to the authorized share capital of the Company of USD 6,000,000, consisting of 600,000,000 common shares with a par value of USD 0.01 each. It is anticipated that the Board of Directors of the Company will resolve to issue the Offer Shares on or about March 18,

120 18.3 Subscription Price The Subscription Price in the Subsequent Offering is NOK 5.00 per Offer Share. The Subscription Price is equal to the per Share subscription price that applied to the Private Placement, which was set after close of trade on the Oslo Stock Exchange on February 18, 2016 on the basis of a book-building process. The market share price at the end of trading on February 18, 2016 was NOK 5.90, constituting a difference of approximately 15.25% between the market share price and the Subscription Price. The Subscription Price was set to NOK 5.00 per Share to obtain sufficient subscriptions in the Private Placement Subscription Period The Subscription Period will commence at 09:00 a.m. CET on February 29, 2016 and expire at 16:30 p.m. CET on March 11, The Board of Directors of the Company may in its sole discretion decide to shorten or extend the Subscription Period. In such case, the other dates will be adjusted accordingly Eligibility for Participation in the Subsequent Offering The Offer Shares will only be offered and sold outside the United States in reliance on Regulation S under the U.S. Securities Act and cannot be sold to U.S. persons as defined in Regulation S. In the Subsequent Offering, the Company will allocate the Offer Shares to subscribers who (i) were registered in the Company's register of shareholders with the VPS) as of expiry of February 22, 2016 (the Record Date) with a holding of less than 100,000 Shares, (ii) were not allocated shares in the Private Placement, and (iii) are not resident in a jurisdiction where such offering would be unlawful or, for jurisdictions other than Norway, would require any prospectus, filing, registration or similar action (each such shareholder an Eligible Shareholder, and collectively, Eligible Shareholders). For each Share recorded as held in the Company as of expiry of the Record Date, each Eligible Shareholder will be granted Subscription Right(s), rounded down to the nearest whole Subscription Right. One (1) Subscription Right will give the right to subscribe for one (1) Offer Share, subject to the selling and transfer restrictions set out in Section 19 Selling and Transfer Restrictions. The Shares of the Company began trading exclusive of Subscription Rights from and including February 19, Hence, the last day of trading inclusive of Subscription Rights was February 18, For the purposes of determining eligibility to Subscription Rights, the Company will, however, look solely to its register of shareholders as of expiry of the Record Date, which will show shareholders as of expiry of February 18, 2016 (and potentially shareholders that have purchased Shares thereafter with non-standard settlement cycle). The Subscription Rights will not be tradable, but will be visible as credited the individual Eligible Shareholder's investor account with the VPS. The Eligible Shareholders who do not use their Subscription Rights will experience a significant dilution, see Section 6.2 Use of Proceeds; Reasons for the Equity Raise Dilution. The Subscription Rights would normally have an economic value if the shares trade above the Subscription Price during the Subscription Period. Upon expiry of the Subscription Period, the Subscription Rights will expire and have no value. Oversubscription by Eligible Shareholders will be permitted. Subscription without Subscription Rights will not be allowed Subscription Office; Subscription Procedures Subscriptions for Offer Shares must be made by submitting a correctly completed subscription form to one of the subscription offices during the Subscription Period or, for Norwegian citizens, made online as further described below. The subscription form is set out in Appendix F to this Prospectus. Correctly completed subscription forms must be received by one of the subscription offices set out below, or, in the case of online subscriptions, online subscriptions must be registered, by no later than p.m. CET on March 11, 2016: 119

121 Danske Bank Bryggetorget 4 P.O. Box 1170 Sentrum N-0107 Oslo Norway Tel: Fax: emisjoner@danskebank.com Arctic Securities Haakon VII s gate 5 P.O. Box 1833 Vika N-0123 Oslo Norway Tel: Fax subscription@arctic.com DNB Markets, Registrars Department Dronning Eufemias gate 30 P.O. Box 1600 Sentrum N-0021 Oslo Norway Tel.: retail@dnb.no Clarksons Platou Munkedamsveien 62c N-0270 Oslo Norway Tel.: ecm.oslo@clarksons.com Nordea Markets Essendropsgate 7 P.O. Box 1166 Sentrum N-0107 Oslo Norway Tel.: nis@nordea.com Norwegian residents may subscribe for Offer Shares through the VPS online subscription system by following the link on one of the following internet pages: and (which will redirect the subscriber to the VPS online subscription system). All online subscribers must verify that they are Norwegian residents by entering their national identity number (Nw. personnummer). Neither the Company nor the Managers may be held responsible for postal delays, unavailable fax lines, internet lines or servers or other logistical or technical problems that may result in subscriptions not being received in time or at all by the relevant subscription office. Subscription forms received after the end of the Subscription Period and/or incomplete or incorrect subscription forms and any subscription that may be unlawful may be disregarded at the sole discretion of the Company and/or the Managers without notice to the subscriber. Subscriptions are binding and irrevocable, and cannot be withdrawn, cancelled or modified by the subscriber after having been received by the relevant subscription office, or in the case of applications through the VPS online subscription system, upon registration of the subscription. The subscriber is responsible for the correctness of the information entered on the subscription form, or in the case of applications through the VPS online subscription system, the online subscription registration. By signing and submitting a subscription form, or by registration of a subscription with the VPS online subscription system, the subscribers confirm and warrant that they have read this Prospectus and are eligible to subscribe for Offer Shares under the terms set forth herein. There is no minimum or maximum subscription amount for subscriptions in the Subsequent Offering. Oversubscription by Eligible Shareholders will be permitted. Subscription without Subscription Rights will not be allowed. Multiple subscriptions (i.e., subscriptions on more than one subscription form) are allowed. Please note, however, that two separate subscription forms submitted by the same subscriber with the same number of Offer Shares subscribed for on both subscription forms will only be counted once unless otherwise explicitly stated in one of the subscription forms. In the case of multiple subscriptions through the VPS online subscription system or subscriptions made both on a subscription form and through the VPS online subscription system, all subscriptions will be counted. All subscriptions in the Subsequent Offering will be treated in the same manner regardless of whether the subscription is made by delivery of a subscription form to one of the subscription offices or through the VPS online subscription system Financial Intermediaries Persons or entities holding Shares in the Company through financial intermediaries (i.e., brokers, custodians and nominees) should read this Section. All questions concerning the timeliness, validity and form of instructions to a financial intermediary in relation to subscription of Offer Shares on the basis of Eligible Shareholders' Subscription Rights should be determined by the financial intermediary in accordance with its usual customer relations procedure or as it otherwise notifies each beneficial shareholder. The Company is not liable for any action or failure to act by a financial intermediary through which Shares are held. 120

122 If an Eligible Shareholder holds Shares registered through a financial intermediary as of expiry of the Record Date, the financial intermediary will customarily give the Eligible Shareholder details of the Subscription Rights to which it will be entitled. The relevant financial intermediary will customarily supply each Eligible Shareholder with this information in accordance with its usual customer relations procedures. Eligible Shareholders holding their interests through a financial intermediary should contact the financial intermediary if they have received no information with respect to the Subsequent Offering. Eligible Shareholders who hold their interests through a financial intermediary and who are ineligible for participation in the Subsequent Offering due to the selling restrictions set forth in Section 19 Selling and Transfer Restrictions below, will not be entitled to be allocated Offer Shares in the Subsequent Offering. The time by which notification of instructions for subscription of Offer Shares must validly be given to a financial intermediary may be earlier than the expiry of the Subscription Period. Such deadline will depend on the financial intermediary. Eligible Shareholders who hold their interests through a financial intermediary should contact their financial intermediary if they are in any doubt with respect to such deadline. Eligible Shareholders who are not ineligible for participation in the Subsequent Offering and who wish to subscribe for Offer Shares in the Subsequent Offering, should instruct its financial intermediary in accordance with the instructions received from such financial intermediary. The financial intermediary will be responsible for collecting exercise instructions from the shareholders and for informing the Managers for the Subsequent Offering of their subscription instructions. Eligible Shareholders who hold their interests through a financial intermediary should pay the Subscription Price for the Offer Shares that are allocated to it in accordance with the instructions received from the financial intermediary. The financial intermediary must pay the Subscription Price in accordance with the instructions in this Prospectus. Payment by the financial intermediary for the Offer Shares must be made no later than the Payment Due Date. Accordingly, financial intermediaries may require payment to be provided to them prior to the Payment Due Date Allocation of Offer Shares Allocation of the Offer Shares will take place on or about March 14, Allocation will, subject to applicable securities laws, be made in accordance with the following allocation mechanism: (i) (ii) Allocation will be made in accordance with granted Subscription Rights which have been validly exercised by Eligible Shareholders during the Subscription Period. If not all Subscription Rights are fully utilized, Eligible Shareholders having validly exercised their Subscription Rights and who have over-subscribed will be allocated additional Offer Shares on a pro rata basis based on the number of Subscription Rights exercised by each subscriber, but each Eligible Shareholder will not be allocated more Offer Shares than necessary to obtain a holding equal to its pro rata holding of Shares in the Company as of the Record Date. To the extent that pro rata allocation is not possible, the Company will determine the allocation by drawing of lots. Allocation of fewer Offer Shares than subscribed for by a subscriber will not impact on the subscriber's obligation to pay for the number of Offer Shares allocated. The result of the Subsequent Offering is expected to be published on or about March 14, 2016, in the form of a stock exchange notice by Company through the information system of the Oslo Stock Exchange and at the Company's web-site. Notifications of allocated Offer Shares and the corresponding subscription amount to be paid by each subscriber are expected to be distributed in a letter from the VPS on or about March 14, Subscribers having access to investor services through their VPS account manager will be able to check the number of Offer Shares allocated to them from 12:00 p.m. (CET) on March 14, Subscribers who do not have access to investor services through their VPS account manager may contact the relevant Manager to obtain information about the number of Offer Shares allocated to them Payment Payment Due Date The payment for the Offer Shares allocated to a subscriber falls due on March 16, Subscribers Who Have a Norwegian Bank Account Subscribers who have a Norwegian bank account must, and will by signing the subscription form, or registering a subscription through the VPS online subscription system, provide each of the Managers, or someone appointed by them, 121

123 with a one-time irrevocable authorization to debit a specified bank account with a Norwegian bank for the amount payable for the Offer Shares which are allocated to the subscriber. The specified bank account is expected to be debited on or after the Payment Due Date. The Managers, or someone appointed by them, are only authorized to debit such account once, but reserves the right to make up to three debit attempts, and the authorization will be valid for up to seven working days after the Payment Due Date. The subscriber furthermore authorizes each of the Managers, or someone appointed by them, to obtain confirmation from the subscriber's bank that the subscriber has the right to dispose over the specified account and that there are sufficient funds in the account to cover the payment. Should payment not be made when due, the Offer Shares allocated will not be delivered to the subscriber, and the Managers reserve the right, at the risk and cost of the subscriber, to cancel at any time thereafter the application and to re-allot or otherwise dispose of the allocated Offer Shares, on such terms and in such manner as the Managers may decide (and that the subscriber will not be entitled to any profit there from). The original subscriber will remain liable for payment of the Offer Price for the Offer Shares allocated to the subscriber, together with any interest, costs, charges and expenses accrued, and the Managers may enforce payment of any such amount outstanding. Subscribers Who Do Not Have a Norwegian Bank Account Subscribers who do not have a Norwegian bank account must ensure that payment with cleared funds for the Offer Shares allocated to them is made on or before the Payment Due Date. Prior to any such payment being made, the subscriber must contact either of the Managers for further details and instructions. Overdue Payments Overdue payments will be charged with interest at the applicable rate from time to time under the Norwegian Act on Interest on Overdue Payment of 17 December 1976 No. 100, currently 8.75% p.a. If a subscriber fails to comply with the terms of payment, the Offer Shares will not be delivered to the subscriber Delivery; VPS Registration; Admission to Trading The Company expects, subject to full payment being received, that the resolution to issue Offer Shares pertaining to the Subsequent Offering will be carried out by the Company s Board of Directors on or about March 18, 2016 and that the Offer Shares will be delivered to the VPS accounts of the subscribers to whom they are allocated on or about March 21, The Offer Shares are restricted securities within the meaning of Rule 144 under the U.S. Securities Act and may not be deposited into any unrestricted depositary receipt facility in the United States, unless at the time of deposit t he shares are no longer restricted securities. The Offer Shares may, for a period of six months after the full purchase price consideration for the shares are paid, not be reoffered, resold, pledged or otherwise transferred, except (a) outside the United States in accordance with Rule 903 or Rule 904 of Regulation S, as applicable or (b) pursuant to an applicable exemption from the registration requirements of the U.S. Securities Act. The Offer Shares will therefore be delivered and registered on a separate ISIN BMG and listed on the Oslo Stock Exchange only under a separate trading symbol GOGL R. During the second half of 2016, after expiry of the restriction period for all Offer Shares and Private Placement Shares, the Offer Shares (and the Private Placement Shares) are expected to be registered with the ordinary ISIN BMG of the Company and thereafter commence to trade under the Company s ordinary trading symbol GOGL and become freely tradable on both the Oslo Stock Exchange and NASDAQ Global Select Market Rights Conferred by the Offer Shares The Offer Shares issued through the Subsequent Offering will be common shares in the Company having a par value of USD 0.01 each and will be registered with the VPS in book-entry form. The Offer Shares will rank pari passu in all respects with the existing Shares of the Company (including the Private Placement Shares) and will carry full shareholder rights in the Company from the time of registration of the share capital increase pertaining to the Subsequent Offering; and be created pursuant to the Bermuda Companies Act. The Offer Shares will be eligible for any dividends which the Company may declare after said registration. See Section 15 Corporate Information; Shares and Share Capital for a discussion of the rights attaching to the Company s Shares. The Company s register of shareholders with the VPS is administered by Nordea Issuer Services, Essendropsgate 7, 0107 Oslo, Norway. See Section 16.3 Securities Trading in Norway Registration of the Shares with the VPS Participation of Members of the Management and the Board of Directors in the Subsequent Offering Herman Billung and Birgitte Ringstad Vartdal, CEO and CFO of Golden Ocean Management AS, respectively, and Hans Petter Aas, director of the Company, all Eligible Shareholders, intend to subscribe for Offer Shares in the Subsequent Offering. 122

124 There have been no cash contributions from members of the Management and the Board of Directors for acquisition of Shares in the Company during the past year, as Shares being issued pursuant to the RSUs are not made against cash contributions Interests of Natural and Legal Persons Involved in the Subsequent Offering The Managers or their affiliates have provided from time to time, and may provide in the future, investment and commercial banking services to the Company and its affiliates in the ordinary course of business, for which they may have received and may continue to receive customary fees and commissions. Each of the Managers, its employees and any affiliate may currently own Shares in the Company. Further, in connection with the Subsequent Offering, each of the Managers, its employees and any affiliate acting as an investor for its own account may be entitled to be allocated Offer Shares in the Subsequent Offering (if they were recorded as shareholders of the Company as of expiry of the Record Date) and may exercise its right to take up such Offer Shares, and, in that capacity, may retain, purchase or sell Offer Shares (or other investments) for its own account and may offer or sell such Offer Shares (or other investments) otherwise than in connection with the Subsequent Offering. The Managers do not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In accordance with market practice, the Managers receive a certain percentage of the proceeds from the Private Placement and the Subsequent Offering. Beyond the abovementioned, the Company is not aware of any interest of natural or legal persons involved in the Private Placement or the Subsequent Offering Governing Law and Jurisdiction This Prospectus and the terms and conditions of the Subsequent Offering as set out herein shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Subsequent Offering or this Prospectus. 123

125 19. SELLING AND TRANSFER RESTRICTIONS 19.1 General The grant of Subscription Rights and issue of Offer Shares upon exercise of Subscription Rights and the offer of unsubscribed Offer Shares to persons resident in, or who are citizens of countries other than Norway, may be affected by the laws of the relevant jurisdiction. Investors should consult their professional advisors as to whether they require any governmental or other consents or need to observe any other formalities to enable them to exercise Subscription Rights or purchase Offer Shares. Receipt of this Prospectus will not constitute an offer in those jurisdictions in which it would be illegal to make an offer and, in those circumstances, this Prospectus is for information only and should not be copied or redistributed. Except as otherwise disclosed in this Prospectus, if an investor receives a copy of this Prospectus in any territory other than Norway, such investor may not treat this Prospectus as constituting an invitation or offer to it, nor should the investor in any event deal in the Offer Shares, unless, in the relevant jurisdiction, such an invitation or offer could lawfully be made to that investor, or the Offer Shares could lawfully be dealt in without contravention of any unfulfilled registration or other legal requirements. Accordingly, if an investor receives a copy of this Prospectus, the investor should not distribute or send the same, or transfer the Offer Shares to any person or in or into any jurisdiction where to do so would or might contravene local securities laws or regulations. If the investor forwards this Prospectus into any such territories (whether under a contractual or legal obligation or otherwise), the investor should direct the recipient's attention to the contents of this Section. Except as otherwise noted in this Prospectus and subject to certain exceptions: (i) the Offer Shares being offered in the Subsequent Offering may not be offered, sold, resold, transferred or delivered, directly or indirectly, in or into, any jurisdiction in which it would not be permissible to offer the Offer Shares; (ii) this Prospectus may not be sent to any person in any jurisdiction in which it would not be permissible to offer the Offer Shares; and (iii) the crediting of Subscription Rights to an account of an holder or other person who is a resident of any jurisdiction in which it would not be permissible to offer the Offer Shares does not constitute an offer to such persons of the Offer Shares. Holders of Subscription Rights who are resident in any jurisdiction in which it would not be permissible to offer the Offer Shares may not exercise Subscription Rights. If an investor exercises Subscription Rights to obtain Offer Shares, unless the Company in its sole discretion determines otherwise on a case-by-case basis, that investor will be deemed to have made or, in some cases, be required to make, the following representations and warranties to the Company and any person acting on the Company's or its behalf: (a) (b) (c) (d) (e) the investor is not located or residing in a jurisdiction in which it would not be permissible to offer the Offer Shares; the investor is not a person to which the Subsequent Offering cannot be unlawfully made; the investor is not acting, and has not acted, for the account or benefit of an a person to which the Subsequent Offering cannot be unlawfully made; the investor acknowledges that the Company is not taking any action to permit a public offering of the Offer Shares (pursuant to the exercise of the Subscription Rights or otherwise) in any jurisdiction other than Norway; and the investor may lawfully be offered, take up, subscribe for and receive Subscription Rights and Offer Shares in the jurisdiction in which it resides or is currently located. The Company, the Managers and their affiliates and others will rely upon the truth and accuracy of the above acknowledgements, agreements and representations, and agree that, if any of the acknowledgements, agreements or representations deemed to have been made by its purchase of Offer Shares is no longer accurate, it will promptly notify the Company and the Managers. Any provision of false information or subsequent breach of these representations and warranties may subject the investor to liability. If a person is acting on behalf of a holder of Subscription Rights (including, without limitation, as a nominee, custodian or trustee), that person will be required to provide the foregoing representations and warranties to the Company with respect to the exercise of Subscription Rights on behalf of the holder. If such person cannot or is unable to provide the foregoing representations and warranties, the Company will not be bound to authorize the allocation of any of the Subscription Rights and Offer Shares to that person or the person on whose behalf the other is acting. Subject to the specific restrictions described below, if an investor (including, without limitation, its nominees and trustees) is located outside Norway and wishes to exercise or otherwise deal in or subscribe for Offer Shares, the investor must satisfy itself as to full observance of the applicable laws of any relevant territory including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories. 124

126 The information set out in this Section is intended as a general guide only. If the investor is in any doubt as to whether it is eligible to exercise its Subscription Rights and subscribe for the Offer Shares, such investor should consult its professional advisor without delay. The Company reserves the right to reject any exercise (or revocation of such exercise) in the name of any person who provides an address in a jurisdiction in which the Subsequent Offering cannot be lawfully made, or who is unable to represent or warrant that such person is not located or residing in such jurisdiction. Furthermore, the Company reserves the right, with sole and absolute discretion, to treat as invalid any exercise or purported exercise of Subscription Rights which appears to have been executed, effected or dispatched in a manner that may involve a breach or violation of the laws or regulations of any jurisdiction. Notwithstanding any other provision of this Prospectus, the Company reserves the right to permit a holder to exercise i ts Subscription Rights if the Company, in its absolute discretion, is satisfied that the transaction in question is exempt from or not subject to the laws or regulations giving rise to the restrictions in question. Applicable exemptions in certain jurisdictions are described further below. In any such case, the Company does not accept any liability for any actions that a holder takes or for any consequences that it may suffer as a result of the Company accepting the holder's exercise of Subscription Rights. Neither the Company nor the Managers, nor any of their respective representatives, is making any representation to any offeree, subscriber or purchaser of Offer Shares regarding the legality of an investment in the Offer Shares by such offeree, subscriber or purchaser under the laws applicable to such offeree, subscriber or purchaser. Each investor should consult its own advisors before subscribing for Offer Shares. A further description of certain restrictions in relation to the Subscription Rights and the Offer Shares in certain jurisdictions is set out below United States This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any Offer Shares by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. Because of the below restrictions, prospective investors are advised to consult legal counsel prior to making any resale, pledge or transfer of the Offer Shares. The Offer Shares are subject to restrictions on transfer as summarized below. By purchasing the Offer Shares, each purchaser (on its own behalf and on behalf of any investor account for which it is purchasing the Offer Shares) will be deemed to have made the following acknowledgements, representations and agreements with the Company: Acknowledge that: (a) (b) (c) the Offer Shares have not been registered under the U.S. Securities Act or under any other securities laws of any state or jurisdiction of the United States; any sale of the Offer Shares to him/her is or will be made as a private placement without registration under the U.S. Securities Act; and unless so registered, the Offer Shares may not be offered, sold or otherwise transferred except under an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act or any other applicable securities laws. Represent that: (a) (b) the purchaser is not a U.S. person (as defined in Regulation S under the U.S. Securities Act) or purchasing for the account or benefit of a U.S. person, other than a distributor, and is purchasing the Offer Shares outside of the United States in an offshore transaction in accordance with Regulation S. the purchaser is purchasing the Offer Shares for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment and not with a view to, or for offer or sale in connection with, any distribution of the Offer Shares in violation of the U.S. Securities Act or any other securities laws. The purchaser is deemed to agree on its own behalf and on behalf of any investor account for which it is purchasing the Offer Shares, and each subsequent holder of the Offer Shares by its acceptance of the Offer Shares will agree, that until six months after the full purchase price consideration for the Offer Shares is paid, the Offer Shares may be offered, sold or otherwise transferred only: 125

127 (i) (ii) under a registration statement that has been declared effective under the U.S. Securities Act; through offers and sales that occur outside of the United States within the meaning of Regulation S under the U.S. Securities Act; or (iii) under any exemption from the registration requirements of the U.S. Securities Act. subject to each of the above cases to any requirement of law that the disposition of the seller s properly or the property of an investor s account or accounts be at all times within the seller or account s control and in compliance with securities and other applicable laws and regulations. Further acknowledge that: (a) each Offer Share will contain a legend substantially to the following effect: The shares are "restricted securities" within the meaning of Rule 144 under the U.S. Securities Act and may not be deposited into any unrestricted depositary receipt facility in the United States, unless at the time of deposit the shares are no longer "restricted securities". The shares may not be reoffered, resold, pledged or otherwise transferred, for a period of six months after the full purchase price consideration for the shares is paid, except (a) under a registration statement that has been declared effective under the U.S. Securities Act; (b) outside the United States in accordance with Rule 903 or Rule 904 of Regulation S, as applicable or (c) pursuant to an applicable exemption from the registration requirements of the U.S. Securities Act. (b) (c) (d) (e) (f) the purchaser had access to and has received such financial and other information regarding the Company, the Offer Shares and the Subsequent Offering as it deemed necessary in order to make its investment decision to subscribe for the Offer Shares, including, but not limited to, reviewing the Company s periodic reports and other filings to the date hereof as displayed on the Company s web site. If the purchaser had any questions regarding the Company or the Offer Shares, it has asked these questions and has received satisfactory answers from representatives of the Company. The purchaser has not relied on representations, warranties, opinions, projections, financial or other information or analysis, if any, supplied to the purchaser by any person other than the Company or any of its affiliates; the purchaser has relied upon its own tax, legal and financial advisers in connection with its decision to purchase Offer Shares and believes that an investment in the Offer Shares is suitable for the purchaser based upon its investment objectives, financial needs and personal contingencies; the purchaser has no need for liquidity of investment with respect to the Offer Shares; the purchaser was not offered the Offer Shares by means of any directed selling efforts as defined in Regulations S under the U.S. Securities Act; the purchaser acknowledges that the Company, the Managers, and others will rely upon the truth and accuracy of the above acknowledgments, representations and agreements. The purchaser agrees that if any of the acknowledgments, representations and agreements it is deemed to have made by its purchase of the Offer Shares is no longer accurate, the purchaser will promptly notice the Company. If the purchaser is purchasing any Offer Shares as a fiduciary or agent for one or more investor accounts, the purchaser represents that it has full power to make the above acknowledgements, representations and agreements on behalf of each account. the purchaser agrees to that it will give to each person to whom it transfer the Offer Shares notice of any restrictions on transfer of such Offer Shares United Kingdom Each Manager has represented, warranted and agreed that: (a) (b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA") received by it in connection with the issue or sale of any Offer Shares in circumstances in which Section 21(1) of the FSMA does not apply to the Company; and it has complied and will comply with all applicable provisions of the FSMA with respect to everything done by it in relation to the Offer Shares in, from or otherwise involving the United Kingdom. 126

128 19.4 European Economic Area In relation to each Member State of the EEA which has implemented Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses (the "Prospectus Directive") (a "Relevant Member State"), the Subsequent Offering is not made in any such Relevant Member State (other than in Norway) except that the Subsequent Offering may be made at any time in such Relevant Member State under the following exemptions under the Prospectus Directive, if they have been implemented in the Relevant Member State: (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) to fewer than 100 or if the Relevant Member State has implemented the relevant provision of Directive 2010/73/EU of the European Parliament and of the Council of 24 November 2010 amending the Prospectus Directive (the "PD Amending Directive"), 150, natural or legal persons natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or (d) in any other circumstances, not requiring the publication of a prospectus as provided under Article 3(2) of the Prospectus Directive, provided that no such offer of Shares shall result in a requirement for the publication by the Company or any Manager of a prospectus pursuant to Article 3 of the Prospectus Directive. Further, each person in a Relevant Member State other than, in the case of paragraph (a) below, persons receiving offers contemplated in this Prospectus in Norway who receives any communication in respect of, or who acquires any Offer Shares under, the offer contemplated in this Prospectus will be deemed to have represented, warranted and agreed to and with the Managers and the Company that: (a) (b) it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and in the case of any Offer Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) such Shares acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the Managers has been given to the offer or resale; or (ii) where such Shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those Shares to it is not treated under the Prospectus Directive as having been made to such persons. For the purposes of this provision, the expression an "offer" in relation to any of the Offer Shares or Shares in any Relevant Member States means the communication in any form and by any means of sufficient information on the terms of the offer and any Offer Shares or Shares to be offered so as to enable an investor to decide to purchase or subscribe for such Offer Shares or Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State Additional Jurisdictions The Offer Shares in the Subsequent Offering may not be offered, sold, resold, transferred or delivered, directly or indirectly, in or into, Canada, Japan, Australia, Hong Kong, Switzerland or any other jurisdiction in which it would not be permissible to offer the Offer Shares. 127

129 20. INCORPORATION BY REFERENCE; DOCUMENTS ON DISPLAY The Norwegian Securities Trading Act and the Norwegian Securities Trading Regulations, implementing Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements, allow the Company to incorporate by reference information into this Prospectus that has been previously filed with the Oslo Stock Exchange or the Norwegian Financial Supervisory Authority in other documents. The Company s audited financial consolidated financial statements as of and for the years ended 2014, 2013 and 2012 and the Company s consolidated interim financial statements as of and for the year ended December 31, 2015, are by this reference incorporated as a part of this Prospectus. Accordingly, this Prospectus is to be read in conjunction with these documents Cross Reference Table The information incorporated by reference in this Prospectus should be read in connection with the following crossreference table. References in the table to "Annex" and "Items" are references to the disclosure requirements as set forth in the Norwegian Securities Trading Act cf. the Norwegian Securities Trading Regulations by reference to such Annex (and Item therein) of Commission Regulation (EC) no. 809/2004. Disclosure Requirement Reference Document Page of Reference Document Annex I, Item 20.1 Audited historical financial information Annual Report 2014: Annual Report 2013: F-1 F-27 F-1 F-19 Annual Report 2012: F-1 F-19 Annex I, Item 20.3 Audit reports Audit report 2014: Audit Report 2013: Audit Report 2012: F-2 F-2 F-2 Annex I, Item 20.6 Interim financial information Fourth Quarter Report 2015: Page Documents on Display For twelve months from the date of this Prospectus, copies of the following documents will be available for inspection at the Company's registered office during normal business hours from Monday through Friday each week (except public holidays): The Memorandum of Association and the Bye-Laws of the Company. All reports, letters, and other documents, historical financial information, valuations and statements prepared by any expert at the Company's request any part of which is included or referred to in the Prospectus. The Group s consolidated financial statements as of and for the years ending December 31, 2014, 2013 and 2012, and the related auditor reports thereto. The Group s consolidated interim unaudited financial statements as of and for the three months and year ended December 31, 2015 and

130 The Former Golden Ocean group s consolidated financial statements as of and for the years December 31, 2014, 2013 and 2012, and the related auditor reports thereto. This Prospectus. 129

131 21. ADDITIONAL INFORMATION 21.1 Joint Bookrunners and Managers Danske Bank, DNB Markets, Arctic Securities, Clarksons Platou and Nordea Markets have acted as Joint Bookrunners and Managers for the Equity Raise Independent Auditors The Company s independent auditors are PricewaterhouseCoopers AS ( PwC ) which has their registered address at Dronning Eufemias gate 8, 0191 Oslo. PwC is a member of The Norwegian Institute of Public Accountants (Nw. Den Norske Revisorforening). PwC has been the Company s auditors since 2010 and has audited the annual financial statements of the Company for the years ended 2010 to Legal Advisors Advokatfirmaet BA-HR DA is acting as legal adviser (as to Norwegian law) to the Company in connection with the Equity Raise and admission to trading of the Offer Shares on the Oslo Stock Exchange. Seward & Kissel LLP is acting as legal adviser (as to United States law) and MJM Limited is acting as legal advisor (as to Bermuda law) to the Company in connection with the Equity Raise. 130

132 22. DEFINITIONS Capitalized terms used throughout this Prospectus shall have the meaning ascribed to such terms as set out below, unless the context require otherwise. Arctic Securities... Arctic Securities AS. ASC... Accounting Standards Codification. ASC Accounting Standards Codification 805. ASC Accounting Standards Codification 820. BDI... The Baltic Dry Index. Bermuda Companies Act... The Bermuda Companies Act of Bunker Convention... The IMO International Convention on Civil Liability for Bunker Oil Pollution Damage of BWM Convention... The International Convention for the Control and Management of Ship Ballast Water and Sediments. CAA... The U.S. Clean Air Act. CAGR... Compounded average growth. CCL... Capesize Chartering Ltd. CERCLA... The U.S. Comprehensive Environmental Response, Compensation and Liability Act. CISADA... The Comprehensive Iran Sanctions Accountability and Divestment Act. Clarksons Platou... Clarksons Platou Securities AS CLC... The International Convention on Civil Liability for Oil Pollution Damage of COA... Contract of Affreightment. Code... United States Internal Revenue Code of 1986 Company... Golden Ocean Group Limited. Control... Direct or indirect control by Norwegian shareholders. CWA... The U.S. Clean Water Act. DNB Markets... DNB Markets, a part of DNB Bank ASA ECAs... Emission Control Areas. EFSF... European Financial Stability Facility EFSM... European Financial Stability Mechanism Eligible Shareholders... Subscribers who were registered as holders of Shares in the VPS as of expiry of the Record Date and who did not participate in the Private Placement. EPA... U.S. Environmental Protection Agency Equity Raise... The equity raise in the Company comprising of the Private Placement and the Subsequent Offering. ESM... European Stability Mechanism EU... European Union EU Regulation 809/ Commission Regulation (EC) no. 809/2004 regarding information to be contained in prospectuses. Fearnleys... Fearnley Consultants. Former Golden Ocean... The former Golden Ocean Group Limited which was merged 131

133 into Knightsbridge. Forward-looking Statements... Has the meaning ascribed to it in Section 4.1. Frontline... Frontline Ltd. Frontline Frontline 2012 Ltd. FSMA... The Financial Services and Markets Act. GDP... Gross domestic product. General Manager... ICB Shipping (Bermuda) Limited Golden Ocean... Golden Ocean Group Limited. Group... The Company taken together with its consolidated subsidiaries. Hemen... Hemen Holding Limited. Hemen Related Companies... Publicly traded companies involved in various sectors of the shipping and oil services industries with Hemen as principal shareholder. IMO... The International Maritime Organization. Iran Threat Reduction Act... The Iran Threat Reduction and Syria Human Rights Act of IRS... The United States Internal Revenue Service. ISM Code... The International Management Code for Safe Operation of Ships and Pollution Prevention. Jinhaiwan... Zhoushan Jinhaiwan Shipyard Co. Ltd. JPOA... The Joint Plan of Action between the United States, the United Kingdom, Germany, France, Russia and China. Karpasia... Karpasia Shipping Inc. Knightsbridge... Knightsbridge Shipping Limited as the Company was named prior to the Merger. Management... The management of the Company. Managers... Arctic Securities AS, Clarksons Platou Securities AS, Danske Bank, DNB Markets, part of DNB Bank ASA and Nordea Bank Norge ASA, Markets. MARPOL... The International Convention for the Prevention of Pollution from Ships of Merger... The merger between the Company and Former Golden Ocean, with the Company as the surviving entity. Merger Agreement... The merger agreement as entered into between the Company and Former Golden Ocean on October 7, Minimum Value Covenant... The loan-to-value clause as described in Section 11.8 Operating and Financial Review Borrowing Activities Entered Into by the Company Loan Covenants. MTSA... The U.S. Maritime Transportation Security Act of NADL... North Atlantic Drilling Ltd. NASDAQ... NASDAQ Global Select Market NISA... U.S. National Invasive Species Act. NOI... Notice of Intent. Non-Norwegian Shareholders... Shareholders who are not resident in Norway for tax purposes. 132

134 Nordea Markets... Nordea Bank Norge ASA, Markets Norwegian CFC-regulations... Norwegian Controlled Foreign Corporations regulations. Norwegian Corporate Shareholders... Norwegian corporate shareholders (i.e. limited liability companies and similar entities). Norwegian FSA... The Norwegian Financial Supervisory Authority (Nw. Finanstilsynet). Norwegian Individual Shareholders... Norwegian individual shareholders (i.e. other Norwegian shareholders than Norwegian corporate shareholders). Norwegian Shareholders... Norwegian Corporate Shareholders taken together with Norwegian Individual Shareholders. Offer Shares... Shares offered in the Subsequent Offering. OPA... U.S. Pollution Act. OPEC Oslo Stock Exchange... Oslo Børs. The Organization of the Petroleum Exporting Countries. Payment Due Date... The due date for payment of allocated Offer Shares, March 16, PD Amending Directive... The Directive 2010/73/EU of the European Parliament and of the Council of 24 November 2010 amending the Prospectus Directive. PFIC... Passive foreign investment company. Plan... The 2010 Equity Incentive Plan of the Company. Private Placement... The private placement of 343,684,000 shares in the Company. Private Placement Shares... Shares issued in the Private Placement. Prospectus... This Prospectus dated February 23, Prospectus Directive... Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses. PwC... PricewaterhouseCoopers AS. Record Date... February 22, Relevant Member State... Each member state of the EEA which has implemented the Prospectus Directive. Resale Restriction Termination Date... Six months after the investor pays for the Private Placement Shares or the Offer Shares. RSUs... Restricted Share Units. Seadrill... Seadrill Limited. SEC... U.S. Securities and Exchange Commission. Securities Trading Act... The Norwegian Securities Trading Act of 27 June 2007 no. 75. Shares... The common shares in the Company, including Private Placement Shares and the Offer Shares. Ship Finance... Ship Finance International Limited. SOLAS... The IMO International Convention for the Safety at Sea of SPC... Special purpose company. Subscription Period... The subscription period in the Subsequent Offering; from 09:00 hours (CET) on February 29, 2016 to 16:30 hours (CET) on March 11,

135 Subscription Rights... Subscription rights which entitles Eligible Shareholders to subscribe for Offer Shares. Subsequent Offering... The subsequent offering of shares in the Company pursuant to the terms of this Prospectus. Tier I Exemption... Has the meaning ascribed to it in Section Tier II Exemption... Has the meaning ascribed to it in Section U.S. Securities Act... The United States Securities Act of 1933, as amended. USCG... Requirements of the U.S. Coast Guard VGP... Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels. VLCC... Very large crude oil carrier. VPS... The Norwegian Central Securities Depository (Nw. Verdipapirsentralen) VPS Registrar... Nordea Bank Norge ASA. 134

136 APPENDIX A VALUATION REPORTS A1

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144 APPENDIX B MEMORANDUM OF ASSOCIATION B1

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152 APPENDIX C BYE-LAWS C1

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175 APPENDIX D ASSURANCE REPORT ON PRO FORMA FINANCIAL INFORMATION D1

176 Golden Ocean Group Limited Par-la-Ville Place 14 Par-la-Ville Road Hamilton, HM 08 Bermuda Independent practitioner s report on the compilation of pro forma financial information included in the prospectus We have completed our assurance engagement to report on the compilation of pro forma financial information of Golden Ocean Group Limited ( Golden Ocean ) prepared by the Board of Directors. The pro forma financial information consists of the unaudited pro forma condensed combined statement of income for the year ended December 31, 2014 and related notes as set out in section 10.7 of the Prospectus issued by the Golden Ocean. The applicable criteria on the basis of which the Board of Directors has compiled the pro forma financial information are specified in Annex II to Commission Regulation (EC) 809/2004 (the PD Regulation ) as included in the Norwegian Securities Trading Act section 7-13 and described in Section 10.7 of the Prospectus (the applicable criteria ). Our work has not been carried out in accordance with auditing standards or other standards and practices generally accepted in the United States of America or auditing standards of the Public Company Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. The unaudited pro forma financial condensed combined statement of income for the year ended December 31, 2014 has been compiled by the Board of Directors of Golden Ocean to illustrate the impact of the merger transaction as set out in Section 10.7 of the Prospectus (the Merger ) that was effective as of March 31, 2015 as if the Merger had taken place at January 1, As part of this process, information about the Golden Ocean financial performance has been extracted by the Board of Directors of Golden Ocean from Knightsbridge (as defined in Section 10.7 of the Prospectus) and Former Golden Ocean (as defined in Section 10.7 of the Prospectus) audited financial statements for the year ended December 31, The Board of Directors Responsibility for the Pro Forma Financial Information The Board of Directors and Management are responsible for compiling the unaudited pro forma financial information on the basis of the requirements of EU Regulation No 809/2004 as included in the Norwegian Securities Trading Act. Practitioner s Responsibilities Our responsibility is to express an opinion, as required by item 7 of Annex II to the PD Regulation about whether the pro forma financial information has been compiled by the Board of Directors on the basis of the applicable criteria. PricewaterhouseCoopers AS, P. O. Box 748 Sentrum, NO-0106 Oslo T: ( ), org.no.: NO MVA, State authorised public accountants, members of The Norwegian Institute of Public Accountants, and authorised accounting firm

177 We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance engagements to report on the compilation of pro forma financial information included in a prospectus, issued by the International Auditing and Assurance Standards Board. This standard requires that the practitioner comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Board of Directors has compiled the pro forma financial information on the basis of the applicable criteria. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information. The purpose of pro forma financial information included in the Prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at January 1, 2014 would have been as presented. A reasonable assurance engagement to report on whether the pro forma financial information has been compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Board of Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: The related pro forma adjustments give appropriate effect to those criteria; The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information The procedures selected depend on the practitioner s judgment, having regard to the practitioner s understanding of the nature of the company, the event or transaction in respect of which the pro forma financial information has been compiled and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion: the pro forma financial information has been properly compiled on the basis stated; and the basis is consistent with the accounting policies of Knightsbridge. This report is issued solely for the purpose of the offering and listing of Golden Ocean's shares on the Oslo Stock Exchange (the Oslo Børs ), as set out in Section 5 of the Prospectus which has been submitted to the Norwegian Financial Services Authority (Finanstilsynet) for inspection and review before publication. Therefore, this report is not appropriate in other jurisdictions and should not be Page 2

178 used or relied upon for any purpose other than the offering and listing of Golden Ocean s shares. We accept no duty or responsibility to and deny any liability to any party in respect of any use of, or reliance upon, this report in connection with any other transactions than the offering and listing of the Golden Ocean s shares on the Oslo Børs. Oslo, February 23, 2016 PricewaterhouseCoopers AS Bjørn Lund State Authorised Public Accountant (Norway) Page 3