Contents. Management review. Management s statement and Independent Auditors opinion. Annual accounts

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2 2 Annual Report 2014 Contents Contents Management review About Ultrabulk Shipping a partner you can trust highlights and 2015 outlook. 4 Group key figures and ratios 5 Strategic insight.. 6 Market review and 2015 outlook 8 Financial review 9 Corporate Governance. 10 Corporate Social Responsibility 11 Management s statement and Independent Auditors opinion Management s statement on the Annual Report 12 Independent auditors report 13 Annual accounts Consolidated Financial Statements 14 Notes to the consolidated Financial Statements 18 Parent Company 38 Group structure 47 Definition of key figures and financial ratios 48 Company information 49 Ultrabulk Shipping A/S Smakkedalen Gentofte CVR. No

3 Annual Report 2014 About Ultrabulk Shipping 3 The geographical spread of offices enables Ultrabulk Shipping to serve its partners in their own time zone both in relation to chartering and operation. The business model is centred on the control of exposure thereby contributing towards sustainable development. Ongoing efforts are invested in the pursuit of operational improvement. The control of exposure is managed via a purpose built risk management system, which has proven its value by assisting in the mitigating of risk and thereby positively contributing towards the controlled development of the core business segments. Detailed market surveillance and planning systems also support the business development process, especially in relation to efforts to optimize the balance between cargo contracts and tonnage commitments. Ultrabulk Shipping is a globally recognized dry bulk cargo operator, servicing customers within the Handy, Supramax and Panamax segments. A core element in Ultrabulk Shipping s business model is a strong focus on cargo client relations through a range of longterm partnerships. To enhance market position, performance, and value creation for the company and its clients, Ultrabulk Shipping is in a process of expanding its ship owning position. In addition, the company pursues opportunities to make strategic investments in areas that create synergies with core shipping activities, such as tonnage procurement, cargo handling and warehousing facilities. The company controls a fleet of between 100 and 150 vessels fluctuating due to market developments, seasonal trades, as well as contractual commitments. The core fleet consists of 25 vessels, which are either wholly or partly owned or on long term time charter. In addition a combination of short to medium term vessels with optional charter periods assures optimal operational flexibility and reduces the impact of changes in supply and demand, or change in trading patterns. The core fleet has been developed as a strategic tonnage supply program and as a physical hedge against the company s portfolio of cargo contracts. The company had a staff of 93 employees as of end 2014, strategically located in eight offices in; Copenhagen (Head office), Santiago, New York, Beijing, Rio de Janeiro, Hamburg, Singapore and Hong Kong. Beginning March 2015 Ultrabulk Shipping started up a new business unit with the aim of providing services with Multi Purpose vessels (MPP) between Europe and Africa. MISSION STATEMENT A partner you can trust VISION STATEMENT We strive to be your preferred partner in global dry bulk shipping CORE VALUES Excellence: We constantly measure, analyse and adjust in order to enhance quality in all aspects of seagoingand land based activities, whilst respecting and protecting the environment Ultrabulk Shipping is part of the Ultranav Group. From the Group head office in Santiago, Chile and from the network of offices around the world the group is actively serving customers in: Gas Carriers (LPG), Crude Oil Tankers, CPP Tankers, Chemical Tankers, Container and Break Bulk Carries and Bulk Carriers. The Group operates a global fleet of more than 240 units, of which around 60 are fully owned. Integrity: We are committed to be reliable, trustworthy, and dependable Passion: We address challenges with passion and positive commitment

4 4 Annual Report highlights and 2015 outlook 2014 highlights A STRONG TEAM EFFORT IN A DEPRESSED MARKET Despite dry cargo supply outpacing demand and depressed market conditions, Ultrabulk Shipping recorded a positive result, which is deemed to be acceptable under the prevailing adverse and volatile conditions. This was achieved mainly due to the long term balanced book, the ability to generate margins from arbitrage business, a solid team performance, and a continued strong focus on risk management. Level of activity for the year remained stable compared with Ultrabulk Shipping controlled an average of 123 vessels during 2014, which was on par with 122 vessels for the previous year. Cargo contractual commitments made during the year were matched by corresponding long term vessel time charters whereby the company was able to maintain a balanced portfolio. The long term core fleet grew by 4 units in 2014 to reach 25 units. One strategically important new 12 year long term cargo commitment was made in 2014, which provided access to the carriage of a new commodity and to be operated in an important trading area. A further 22 vessels will be delivered by 2018 as physical hedge against the company s COA cargo commitments. The newbuildings include units within all size segments where the company is active. The total number of physical ship days in 2014 increased to 42,013 days slightly up from the 40,602 recorded in Cargo lifted was stable at 40.1 million tons, compared to million tons for the previous year. The Ultrabulk Steel Service which was established in 2013 gained momentum during 2014 via the fixing of its first COA for the carriage of steel pipes from the North Continent to the Mediterranean. The joint venture with the Sumitomo Corporation in the name of Ultra Summit was developed further by the contracting of two additional super eco dwt Supramax vessels. Both will be built at the Imabari Shipyard in Japan and will be delivered in The planned Ultra MO joint venture, which was established in 2013 and was scheduled to commence operation in 2014, did not materialize due to a Chinese shipyards inability to deliver the first vessel within the agreed delivery window. The vessel was subsequently agreed cancelled, and the joint venture will be dissolved. Ultrabulk Shipping s commitment to the project was protected via a refund guarantee by a major Chinese bank and the refund has been duly received. The Board of Directors proposed not to pay out any dividend for 2014, in order to maintain Ultrabulk Shipping s financial flexibility and thus be prepared to address the challenges and the business opportunities that may arise in outlook THE CHALLENGE OF OPERATING IN A DEPRESSED MARKET An EBITDA of USD 0-8 million is expected based on the company s current coverage and while acknowledging the prevailing difficult and very volatile market conditions. End of February 2015 Ultrabulk Shipping had cargo coverage of 99% on the known vessel days in In 2015, the focus of Ultrabulk Shipping will remain on developing partnerships and increasing earnings from operating activities. These efforts will be directed towards further developing triangular trades, specific commodities and trades, as well as deriving further synergies and creating new business opportunities based on the company s business platform. Ultrabulk Shipping aims to maintain its market position and develop as a result of addressing the opportunities that will inevitably arise under such depressed market condition. Our more general market outlook for 2015 is described on page 8.

5 Annual Report 2014 Group key figures and ratios 5 KEY FIGURES (USD '000) USD ' INCOME STATEMENT Revenue 886, , , , ,050 Gross profit (Net earnings from shipping activites) 30,903 45,613 45,796 25,036 21,795 Operating profit before depreciation, amortization and impairment loss (EBITDA) 5,918 21,880 19,732 1, Operating profit (EBIT) 5,257 11,628 15,399-3, Net financials 338 1, ,151 Profit before tax 5,595 12,851 15,903-4,042-1,563 Net profit 5,385 12,076 14,075-3,962-1,477 Profit for the year for the Ultrabulk Shareholders 5,374 12,067 14,068-3,994-1,537 STATEMENT OF FINANCIAL POSITION Non-current assets 77,913 47,041 81,694 79,529 16,098 Current assets 187, , , ,643 94,790 Total assets 265, , , , ,888 Equity, excl. non-controlling interests 135, , , ,356 42,055 Non-controlling interests Non-current liabilities 32, ,500 1,052 Current liabilities 97, ,520 76, ,998 67,486 Net interest-bearing (liabilities)/assets 63,112 65,539 29,081-49,163 23,361 Cash and securities 79,648 65,539 28,412 10,873 27,488 CASH FLOW From operating activities 3,770 25,498 83,716-3,763-8,034 From investing activities -6,148 11,629-8,104 49, From financing activities 16, ,074 36,459 11,572 Total net cash flow 14,109 37,127 17,538-16,616 2,682 FINANCIAL RATIOS AND PER SHARE DATA Gross profit margin (Net earnings from shipping activities margin) 3.5% 5.2% 6.6% 3.2% 3.7% EBITDA margin 0.7% 2.5% 2.9% 0.2% 0.0% Return on equity (ROE) 3.8% 8.4% 10.0% -4.3% -4.6% Payout ratio Equity ratio USD/DKK rate year-end Average USD/DKK rate Total number of physical ship days 42,013 40,602 30,727 29,517 19,339 Average number of employees Proposed dividend Interim dividend The financial ratios were computed in accordance with Recommendations and Ratios 2010 issued by the Danish Society of Financial Analysts The key figures for 2010 (marked in grey) have been calculated based upon the combined pro forma figures of Eitzen Bulk Shipping A/S and Dampskibsselskabet Orion A/S. (i.e. before the merger with Ultrabulk) Re. 2012: Cash flow from operating activities totalled USD 83.7 million which was primarily related to the transfer of ownership of the Handy-size unit. Adjusted for same the cash flow from operating activities in 2012 amounted to USD 13.3 million. Cash flow from financing activities consequently totalled USD million mainly due to repayment of intercompany loan of USD 38.5 million, and paying out dividend of USD 19.8 million to the shareholders of Ultrabulk S.A. prior to the business combination with Ultrabulk Shipping A/S.

6 6 Annual Report 2014 Strategic Insight Strategic insight EXECUTING THE STRATEGY The overall strategic objectives of Ultrabulk Shipping remain the ability to develop strategic partnerships and thereby achieve a sustainable profitable platform: Develop, strengthen and maintain partnerships Focus on sustainable profitability rather than growth Optimizing fuel consumption, and thereby reduce our carbon footprint A MODERN FLEET WITH FOCUS ON QUALITY AND ENVIRONMENT The fleet renewal program is essential to meeting the partners growing and varying needs with high quality and environmentally friendly vessels. Average age of core fleet vessels is three years Developing this program is focused on finding the optimal balance, in terms of COA coverage and tonnage procurement; thereby getting the best of both worlds by meeting Ultrabulk Shipping s and partner s long term needs, whilst maintaining flexibility and the ability to react to market fluctuations and opportunities. FINANCIAL POSITION Ultrabulk Shipping maintained a strong equity base in 2014 in excess of 50%, thereby providing the freedom and flexibility to execute strategies during challenging times. A positive operating cash flow and result was achieved and a conservative balance is maintained of borrowings and equity, in order to facilitate unhampered trading in a depressed and volatile market. Two credit agreements were made in 2014 with the Japan Bank for International Cooperation (JBIC) in combination with new building contracting at Japanese yards. Cooperation (JBIC) in Core fleet (25 vessels); 5 Handysize 15 Supramax and 5 Panamax/Kamsarmax Including, 1 wholly owned and 2 partly owned units. Newbuildings (22 vessels); 5 Handysize 11 Supramax 6 Panamax/Kamsarmax Including, 3 wholly owned and 2 partly owned units.

7 Strategic Insight Annual Report

8 8 Annual Report 2014 Market Review and 2015 Outlook Market Review and 2015 Outlook 1 The economic outlook from IMF in October 2013 was for 2014 to see a significant recovery of growth levels. However, 2014 became a disappointment for economic growth especially in emerging markets including China, while advanced economies recovered slightly. Growth pct World Adv Emg Fleet TC USD pd BCI 7,700 14,600 13,800 BPI 7,700 9,500 7,700 BSI 9,500 10,300 9,800 BHSI 7,700 8,200 7,700 The Chinese property market entered and sustained a tougher recession than two years ago including an industrial slowdown reducing coal demand; Indonesia imposed and maintained its mineral export ban fully; and South American sub-cape congestion amounted to less than half the level seen in At the same time the coal market changed to the disadvantage of volumes transported as weather and economic recession made US exports to EU unprofitable and reduced Chinese demand; especially for longer haul routes. Grain volumes were up year on year but mostly in the first half due to the base effect of the US 2012 drought that reduced exports until August ended with a collapse in oil prices as strong as the collapse in iron ore prices (50%). Cheaper oil quickly translated into lower bunker prices, potentially increasing vessel s speed and productivity on many front haul trade routes. On the supporting side, Indian coal demand grew by 15 pct. and Chinese iron ore imports grew 14 pct., which provided for some alleviation of the tonnage surplus. Expectations for 2015 have successively been revised downwards. IMF s October Report predicted a significant increase in world GDP growth for 2015 (from 3.3 to 3.8%) much like the October 2013 report for This has at the time of writing been revised down in their January update. Emerging markets were generally not revised down. Coal and iron ore mine expansions will slow a little and China is enforcing regulations to restrict growth in coal imports. However the Chinese coal import reduction in 2014 was in part driven by high hydropower production which is unlikely to repeat itself. The grain volume out of South America is expected to be the same as in 2014 though congestion in Brazil may be slightly lower again year on year. For minor commodities, growth is expected to be good as Indonesia is slowly replaced as a source of nickel ore and bauxite. Bunker prices are expected to increase a little from their lows at the end of 2014 and time charter rates are unlikely to support an increased speed until after Fleet growth has recently been revised down in view of recent cancellations and vessel demolitions thus resulting in a fleet growth outlook about 5% for 2015 as was the case for For the total dry bulk market, demand growth is expected to be slightly lower than in 2014 and time-charter rates are thus expected to average a little below the 2014 level. After the rate recovery in 2013 and the outlook for lower fleet growth as well as continued coal and iron ore mine capacity expansions in 2014, the expectation was for time-charter rates to average a level higher than what was seen in The threat of a Chinese setback was expected to be met with new credit expansion to maintain social stability, the laws for an export ban of Indonesian mineral ore were expected to be brief or substituted by a duty structure on the back of a poor Indonesian economic outlook, and the expectations for sub-cape vessel congestion in South America were for a repeat of the high levels seen in 2013, if not higher. However, none of these expectations were met. 1 Ultrabulk Research using data from Bloomberg, Clarksons, Baltic Exchange, IMF, USDA, SSY, Trademap, and others.

9 Financial Review Annual Report Financial Review Despite the challenging market conditions Ultrabulk Shipping was able to deliver a positive result in Whilst short of the original expectations, Ultrabulk Shipping recorded a net profit of USD 5.4 million for 2014 which is regarded as acceptable under the prevailing market conditions. RESULTS EBITDA was USD 5.9 million (USD 21.9 million in 2013), corresponding to an EBITDA margin of 0.7% (2.5% in 2013), whereas net profit amounted to USD 5.4 million (USD 12.1 million in 2013). Net Profit / EBITDA Net Profit (USD mill.) EBITDA (USD mill.) Revenues in 2014 were USD 886 million, on level with corresponding to the flat development in activity. Gross profit was USD 30.9 million in 2014 corresponding to a gross margin of 3.5%, against 5.2% in The lower margin was mainly driven by high repositioning costs in first half of Depreciation totalled USD 0.7 million only, reflecting the sale/investing activities in Share of results from joint ventures and associated companies totalled USD 0.6 million (USD 1.0 million in 2013). This result was negatively impacted by an impairment loss of USD 0.7 million on a vessel. Net financial items amounting to USD -0.3 million (USD 0.2 million in 2013) is mainly related to currency adjustments. Relatively low income tax at USD 0.2 million in 2014 was impacted by adjustment to previous year s tax. BALANCE SHEET Total assets amounted to USD million, on level with Non-current assets totalled USD 77.9 million. The increase of almost USD 31 million relates mainly to delivery of a new building in joint venture, instalments on new buildings and fair value adjustment of financial instruments. Current assets totalled USD million, down by USD 14.8 million due to reductions in inventories and asset held for sale in 2013, countered somewhat by increase in cash deposits. Total liabilities amounted to USD million compared to USD million in The increase is related to funding of new building and fair value adjustment of financial instruments, to some extend countered by a decrease in payables. Total equity was USD million (USD million in 2013), the reduction being driven by a negative comprehensive income from value adjustment of financial instruments (this negative comprehensive income will be reversed over the coming years, as hedges mature). Return on equity was 3.8%, and equity ratio was 50.9% at the end of 2014 compared to 59.6% end of At the Annual General Meeting on 22nd May 2015 the Board of Directors will propose not to pay out dividend for 2014 to maximize the company s financial flexibility and thus be prepared for the business opportunities that may arise. CASH FLOW Cash and cash equivalents at year end were USD 79.6 million, up by USD 14.1 million from Cash flow from operating activities was positive by USD 3.8 million, despite some adverse impact from fair value adjustments of financial instruments. Working capital adjustments was neutral in Cash flow from investing activities netted USD -6.1 million (USD 11.6 million in 2013) due to payment of new building instalments and investment in joint ventures reduced by the sale of the vessel Ultra Dynamic. Cash flow from financing activities totalled USD 16.5 million (USD 0 million in 2013) due to finalising a Loan Agreement with JBIC/BNPP.

10 10 Annual Report 2014 Corporate Governance Corporate Governance The Board of Directors and Executive Management of Ultrabulk Shipping are convinced that efficient and clear division of responsibilities as well as transparent decision making processes are prerequisites of a company s long-term value creation. Ultrabulk Shipping therefore reviews at least annually the company s corporate governance practices and principles in accordance with legislation, customs and recommendations. As part of this process, the Board and Executive Management reviews the company s strategy, organisation, business processes, risks, control mechanisms and relations with its shareholders, customers, employees and other stakeholders. REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT The Danish Public Companies Act provides that shareholders adopt, at the general meeting, guidelines for incentive pay to members of the company s board and its executive management. Such guidelines have been adopted. The main elements of the current guidelines are set out in the following. BOARD OF DIRECTORS The Board of Directors has refrained from receiving any fixed compensation for their work in 2014, unchanged from In 2015, the members of the Board of Directors will also refrain from receiving any compensation for their work. If company activities require a temporary, but extraordinary workload by the Board, a fee can be authorised. The members of the Board receive no incentive pay for their work on the board. EXECUTIVE MANAGEMENT Members of the Executive Management are employed under executive service contracts, and all terms are fixed by the Board of Directors based on the guidelines approved by the general meeting. The Executive Management of Ultrabulk Shipping consists of the CEO, CFO and two Executive Vice Presidents. Members of Executive Management receive a competitive remuneration package consisting of the following elements: A fixed salary, benefits such as company car and phone, and incentive payment in terms of cash bonus. Performance criteria for the cash bonus is tied to earnings and business targets. In 2014 a total remuneration package of USD 1.3 million was paid to the Executive Management. RISK MANAGEMENT Main risk exposures and risk management processes are described in note 24.

11 Corporate Social Responsibility Annual Report Corporate Social Responsibility Ultrabulk Shipping is committed to a sustainable and responsible growth plan which balances business results and the company s corporate social responsibility. Ultrabulk Shipping applies CSR policies primarily on; Human capital The environment Human rights & anti-corruption HUMAN CAPITAL Ultrabulk Shipping s most valuable asset is the employees - our human capital. Earnings are generated on the basis of an asset light business model, based on chartering staff and operators ability to make the right decisions, as well as back-office employee s capacity to deliver high quality support. A flat organizational structure is applied to assure short lines of communication and that staff is duly empowered. Ultrabulk Shipping has no directly employed sea-going personnel, however the company constructively participates in relevant matters via an on-going dialog with vessel owners and third party suppliers regarding owned vessels. Ultrabulk Shipping makes a conscious effort to maintain and develop an inspiring and innovative working environment. In 2014 a complete workplace environment survey was conducted, and outcome was put into action plans enhancing above goal even further. Ultrabulk Shipping applies a policy stating that gender composition of management shall reflect the gender balance of society as a whole - with due regard to the specific conditions in the shipping business. Objectives for the gender composition of the Board of Directors and the Management have remained unchanged in i.e. to have both genders represented in the Board of Directors at the latest by the annual general meeting to be held in Likewise it is the goal of Management to have both genders included in Senior Management by The gender composition in Board of Directors and Management has not changed during however, our staff policy is assuring equal career opportunities for men and women and is actively used as a tool for recruiting and working with both genders, and equality in general. Therefore above 2017 objective is still considered achievable. THE ENVIRONMENT Ultrabulk Shipping s policy is to optimize energy consumption, and thereby minimize carbon emissions. Goal is to reduce the emission in average measures per vessel, year over year. Ultrabulk Shipping adheres to all relevant legislation set by national or international legal bodies, and strongly supports the measures adopted by International Maritime Organisation (IMO) to reduce shipping s CO2 emissions. Ultrabulk Shipping takes a proactive approach in further identifying fuel and CO2-efficient solutions on both its owned and long term chartered fleet by having the technical, operational and commercial departments working closely together with ship yards and ship owners. Reduction of emissions and costs is continuously pursued when performing a cargo voyage by e.g. optimising vessel speed and ballasting condition. Further to this the company selects it s chartered fleet based on the analysis of international vetting agencies as well as membership of the International Group of P&I clubs, a type of mutual insurance scheme for ship owners covering mainly personal injuries, cargo damage and pollution. Ultrabulk Shipping continued its fleet renewal program by concluding 7 new long term tonnage additions to the Ultrabulk Shipping fleet, all of which being new generation eco-friendly vessels. In 2014 Ultrabulk Shipping joined the Trident Alliance, which is a network of shipping companies and other stakeholders with a shared interest in robust and transparent enforcement of environmental regulations. A permanent internal Ultranav working group was established in focusing on constant energy saving actions, incl. developing better measures for monitoring and followup. HUMAN RIGHTS & ANTI CORRUPTION Ultrabulk Shipping s overall policy is to support and respect the protection of human rights. Company staff is comprised of numerous nationalities, cultures and age groups. This is considered an asset and Ultrabulk Shipping appreciates the need for respect for such diversity. The company is committed to maintaining a workplace free of harassment and discrimination for any reason, whilst assuring there is an acceptable balance between time for work and private time. Ultrabulk Shipping has a zerotolerance policy towards bribery and works proactively against facilitation payments. Neither the company nor its staff, accept nor offer bribes of any form.

12 12 Annual Report 2014 Statement of the Board of Directors and Executive Management on the Annual Report STATEMENT OF THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT ON THE ANNUAL REPORT The Board of Directors and Executive management have prepared the 2014 Annual Report. The Annual Report was considered and adopted today. The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and further disclosure requirements according to the Danish Financial Statements Act. We consider the accounting policies used appropriate and the accounting estimates made reasonable, and in our opinion the consolidated financial statements and the financial statement of the parent company provide the relevant information for assessing the financial position of the Group and the parent company. In our opinion the consolidated financial statements and the financial statement of the parent company give a true and fair view of the assets, liabilities and financial position of the Group and the parent company and the results of the Group s and the parent company s operation and cash flows for the period 1 January - 31 December In our opinion the Management s review in the preceding pages gives a true and fair presentation of the development in the activities and the financial position of the Group and the parent company, the results for the year and of the Group s and the parent company s financial position in general. Further, in our opinion the Management s review describes the most significant risks and uncertainties that may affect the Group and the parent company. We recommend that the Annual Report is adopted at the annual general meeting. Copenhagen, 17 March EXECUTIVE MANAGEMENT Per Lange Søren M. Christoffersen Henrik Sleimann Petersen Hans Christian Olesen CEO CFO Head of Shipholding Head of Panamax & Supramax BOARD OF DIRECTORS Dag von Appen Enrique Ide Carsten Haagensen Chairman Vice chairman Peter Stokes Per von Appen

13 Independent Auditors Report Annual Report INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF ULTRABULK SHIPPING A/S INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AND THE PARENT COMPANY FINANCIAL STATEMENTS We have audited the consolidated financial statements and the parent company financial statements of Ultrabulk Shipping A/S for the financial year 1 January 31 December The consolidated financial statements and the parent company financial statements comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting policies for the Group as well as for the parent company. The consolidated financial statements and the parent company financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. Management's responsibility for the consolidated financial statements and the parent company financial statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act and for such internal control that Management determines is necessary to enable the preparation of consolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on the consolidated financial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the parent company financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the parent company financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company's preparation of consolidated financial statements and parent company financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the parent company financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's financial position at 31 December 2014 and of the results of the Group's and the parent company's operations and cash flows for the financial year 1 January 31 December 2014 in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act. STATEMENT ON THE MANAGEMENT'S REVIEW Pursuant to the Danish Financial Statements Act, we have read the Management's review on page We have not performed any further procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information provided in the Management's review is consistent with the consolidated financial statements and the parent company financial statements. Copenhagen, 17 March 2015 Ernst & Young Godkendt Revisionspartnerselskab Torben Bender State Authorised Public Accountant Thomas Bruun Kofoed State Authorised Public Accountant

14 14 Annual Report 2014 Consolidated Income Statement and Consolidated Statement of Comprehensive Income Consolidated Income Statement Figures in USD '000 Note Freight income 3 886, ,625 Voyage related expenses -425, ,142 Time-charter hire -429, ,870 Gross profit (Net earnings from shipping activities) 30,903 45,613 Other income Other external expenses -11,553-9,749 Staff costs 5-13,432-14,888 Operating profit before depreciation, amortization and impairment loss (EBITDA) 5,918 21,880 Depreciation ,717 Impairment loss, vessel 6 0-5,535 Operating profit (EBIT) 5,257 11,628 Share of associates' profit after tax Share of joint ventures' profit after tax Other financial items, net Profit before tax 5,595 12,851 Tax Net profit 5,385 12,076 Attributable to: Profit attributable to the equity holders of the parent 5,374 12,067 Profit attributable to non-controlling interests ,385 12,076 Consolidated Statement of Comprehensive Income Figures in USD '000 Note Profit/loss (-) for the year 5,385 12,076 Other comprehensive income Items that will be reclassified subsequently to the consolidated income statement, when specific conditions are met: Value adjustments of hedging instruments -18, Tax effect 0 0 Value adjustments of hedging instruments after tax -18, Exchange adjustments of foreign entities Other comprehensive income for the year, net of tax -18,729-1,810 Total comprehensive income for the year, after tax -13,344 10,266 Attributable to: Equity holders of the parent -13,355 10,257 Non-controlling interests ,344 10,266

15 Consolidated Balance Sheet Annual Report Consolidated Balance Sheet Figures in USD '000 ASSETS Note Vessel 9 23,531 19,036 New building contracts 10 9,405 4,667 Fixtures, fittings and equipment Total tangible assets 33,075 23,963 Investment in associates 12 2,825 2,580 Investment in joint ventures 13 28,124 17,652 Derivative financial instruments 24 10,639 0 Deferred tax assets 19 3,250 2,845 Financial assets, non-current 44,838 23,077 Total non-current assets 77,913 47,041 Inventories 14 23,821 41,444 Trade and other receivables 15 58,223 59,540 Prepayments 21,922 20,125 Derivative financial instruments 24 4,004 2,249 Cash and short-term deposits 16 79,648 65, , ,897 Assets classified as held for sale 0 13,500 Current assets 187, ,397 TOTAL ASSETS 265, ,438 EQUITY AND LIABILITIES Figures in USD '000 Note Share capital 17 5,134 5,134 Share premium 12,048 12,048 Retained earnings 55,853 50,479 Other reserves 62,194 80,923 Total equity of majority interest 135, ,584 Non-controlling interests Total equity 135, ,918 Interest bearing loans and borrowings 18 14,979 0 Derivative financial instruments 24 17,730 0 Total non-current liabilities 32,709 0 Trade and other payables 21 80,162 97,698 Interest-bearing loans and borrowings 18 1,557 0 Derivative financial instruments 24 13,934 1,934 Income tax payable 1, Total current liabilities 97, ,520 Total liabilities 129, ,520 TOTAL EQUITY AND LIABILITIES 265, ,438

16 16 Annual Report 2014 Consolidated Cash Flow Statement Consolidated Cash Flow Statement Figures in USD '000 Note Profit/loss(-) before tax 5,595 12,851 Adjustment for non-cash items etc. Depreciation and impairment 6, 9, ,252 Share of gain/loss in associated companies Share of gain/loss in joint venture Interest expenses Interest income Net foreign exchange differences Net forward contract activity -1, Other changes Working capital adjustments: 25 Change in current assets 17,143-17,889 Change in current liabilities -17,535 22,238 Net cash flows from operating activities 3,771 25,498 Investments in tangible assets 9, 10-28,938-6,364 Investment in joint venture 13-6,500-6,008 Disposal of joint venture 1,485 0 Dividend received Repayment of loan Sale of tangible assets 9, 11 27,200 22,866 Interest received 43 0 Other changes 0 70 Net cash flows from investing activities -6,149 11,629 Bank loan 18 18,684 0 Repayment loan Loan related fees -1,370 0 Interest paid Net cash flows from financing activities 16,488 0 Net change in cash and cash equivalents 14,109 37,127 Cash and cash equivalents at 1 January 16 65,539 28,412 Cash and cash equivalents at 31 December 16 79,648 65,539

17 Consolidated Statements of Changes in Equity Annual Report Consolidated Statement of Changes in Equity Figures in USD '000 Other Reserves Share Trans- Total Non- Total capital Retained Hedging lation other controlling (Note 17) Share premium Majority earnings reserves reserve Other reserves interest interests Total Equity At 1 January ,134 12,048 50, ,623 80, , ,918 Comprehensive income 0 0 5,374-18, ,729-13, ,344 Total comprehensive income 0 0 5,374-18, ,729-13, ,344 Changes during the year At 31 December ,134 12,048 55,853-18, ,623 62, , ,574 Figures in USD '000 Other Reserves Share Trans- Total Non- Total capital Retained Hedging lation other Majority controlling (Note Share earnings reserves reserve Other reserves interest interests 17) premium Total Equity At 1 January ,134 12,048 38, ,623 82, , ,652 Comprehensive income , ,810 10, ,266 Total comprehensive income , ,810 10, ,266 Changes during the year At 31 December ,134 12,048 50, ,623 80, , ,918

18 18 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements Note 1 - Group accounting policies Note 2 - Significant accounting judgment, estimates and assumptions Note 3 - Business activities reporting Note 4 Remuneration to the auditor appointed at the general meeting Note 5 Staff costs Note 6 Depreciation and impairment Note 7 Financial items Note 8 Tax Note 9 Vessel Note 10 New building contracts Note 11 Fixtures, fittings and equipment Note 12 Investments in associates Note 13 Investments in joint ventures Note 14 Inventories Note 15 Trade and other receivables Note 16 Cash and short-term deposits Note 17 Share capital Note 18 Interest bearing loans and borrowings Note 19 Deferred tax asset Note 20 - Financial risk management, objectives and polices Note 21 Trade and other payables Note 22 Operating lease liabilities and COAs commitments Note 23 Contingent assets and liabilities Note 24 Financial instruments Note 25 Change in net working capital Note 26 Mortgages and security Note 27 Related party disclosures Note 28 Subsequent events Note 29 New financial reporting regulation... 37

19 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 1 - Group accounting policies Ultrabulk Shipping A/S is a company domiciled in Denmark. The annual report of Ultrabulk Shipping A/S for 2014 has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and the statutory order on the adoption of IFRS by enterprises subject to the Danish Financial Statements Act issued pursuant to the Danish Financial Statements Act. As the company is unlisted it has been decided not to follow IFRS 8 Operating segments. Basis of preparation The annual report has been prepared on the historical cost basis except all financial assets and liabilities held for trading and all financial assets that are classified as available for sale. These financial assets and liabilities have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges and otherwise carried at cost are adjusted to record changes in the fair values attributable to the risks that are being hedged. The accounting policies set out below have been used consistently in respect of the financial year and the comparative figures. The annual report has been presented in USD thousands (USD 000), except when otherwise indicated. Accounting standards effective in 2014 Ultrabulk Shipping A/S has adopted all new or amended and revised accounting standards and interpretations (IFRSs ) endorsed by the EU effective for the accounting period beginning on 1 January Based on an analysis made by Ultrabulk Shipping A/S, most of the IFRSs effective for 2014 have no material impact or are not relevant to the Group. Basis of consolidation The consolidated financial statements comprise the parent company Ultrabulk Shipping A/S and subsidiaries in which Ultrabulk Shipping A/S has control, i.e. the power to govern the financial and operating policies so as to obtain benefits from its activities. Control is obtained when the Company directly or indirectly holds more than 50% of the voting rights in the subsidiary or which it, in some other way, controls. Enterprises over which the Group exercises significant influence, but which it does not control, are considered associates. Significant influence is generally obtained by direct or indirect ownership or control of more than 20% of the voting rights but less than 50%. When assessing whether Ultrabulk Shipping A/S exercises control or significant influence, potential voting rights which are exercisable at the balance sheet date are taken into account. Common control transactions are accounted for using the book values method. The receiving company of the net assets initially recognizes the assets and liabilities transferred at their carrying amount. The result of operations for the period in which the transfer occurs is presented as though the transfer had occurred at the beginning of the period. Financial statements and financial information for prior years are restated to provide appropriate comparative information. The consolidated financial statements have been prepared as a consolidation of the parent company's and the individual subsidiaries' financial statements prepared according to the Group accounting policies. On consolidation, intra-group income and expenses, shareholdings, intra-group balances and dividends, and realised and unrealised gains on intra-group transactions are eliminated. Unrealised gains on transactions with associates are eliminated in proportion to the Group's ownership share of the enterprise. Unrealised losses are eliminated in the same way as unrealised gains to the extent that impairment has not taken place. The accounting items of subsidiaries are included in full in the consolidated financial statements. Non-controlling interests' share of the profit/loss for the year and of the equity of subsidiaries which are not wholly owned are included in the Group's profit/loss and equity, respectively, but are disclosed separately. Foreign currency translation For each of the reporting entities in the Group, a functional currency is determined. The functional currency is the currency used in the primary financial environment in which the reporting entity operates. Transactions denominated in other currencies than the functional currency are foreign currency transactions. On initial recognition, foreign currency transactions are translated to the functional currency at the exchange rates at the transaction date. Foreign exchange differences arising between the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses. Receivables and payables and other monetary items denominated in foreign currencies are translated to the functional currency at the exchange rates at the balance sheet date. The difference between the exchange rates at the balance sheet date and at the date at which the receivable or payable arose or was recognised in the latest annual report is recognised in the income statement as financial income or financial expenses. In the consolidated financial statements, the income statements of entities with another functional currency than USD are translated at the exchange rates at the transaction date and the balance sheet items are translated at the exchange rates at the balance sheet date. An average exchange rate for each month is used as the transaction date exchange rate to the extent that this does not significantly distort the presentation of the underlying transactions. Foreign exchange differences arising on translation of the opening balance of equity of such foreign operations at the exchange rates at the balance sheet date and on translation of the income statements from the exchange rates at the transaction date to the exchange rates at the balance sheet date are recognised in other comprehensive income and presented in equity under a separate translation reserve. Derivative financial instruments and hedging Ultrabulk Shipping uses derivative financial instruments such as forward currency contracts, bunker hedge and FFA s to hedge part of risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivate contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to profit or loss. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of bunker and the fair value of FFA s are determined by reference to market values for similar instruments. For the purpose of accounting, hedges are classified as: fair value hedges when hedging the exposure to change in fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk); or cash flow hedge when hedging exposure to variability in cash flow that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment. At time of entering into a hedge relationship, Ultrabulk Shipping designates and documents the hedge relationship to which Ultrabulk Shipping wishes to apply for hedge accounting and the risk management objectives and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedges item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument s effectiveness in offsetting the exposure to changes in the hedged item s fair value or cash flows attributable to the hedged risk, Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. The criteria for classifying a derivate as a hedging instrument are as follows:

20 20 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements the hedge is expected to be effective in achieving offsetting changes in fair value or cash flows attributable to the hedged item a hedging efficiency within the range of per cent over the life of the hedging relationship is expected, the effectiveness of the hedge can be reliably measured, there is adequate documentation when the hedge is entered into that the hedge is expected to be effective, for cash flow hedges of forecast transaction, the transaction must be highly probable, and the hedge is evaluated regularly and has proven to be effective. Hedges which meet the strict criteria for hedge accounting are accounted for as follows: Fair value hedges Derivatives designated as hedging instruments are measured at fair value and changes in fair value are recognised in the income statement. Correspondingly, a change in the fair value of the hedged item attributable to the hedged risk is recognised in the income statement. The fair value hedge accounting is discontinued if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting stated above. Cash flow hedges Changes in the fair value of a hedging instrument that meet the criteria for cash flow hedge accounting are recognized in comprehensive income. The ineffective part of the hedging instrument is recognised directly in the income statement. Gains and losses that are recognised in comprehensive income are taken to the income statement in the same period or periods as the cash flow which comprises the hedged item is recognised in the income statement. The principle also applies if the hedged forecasted transaction results in an asset or liability being recognised in the balance sheet. If the cash flow hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued. The cumulative gain or loss of the hedging instrument recognised in comprehensive income remains separately recognised in comprehensive income until the forecast transaction occurs. If the cash flow hedged transaction is no longer expected to occur, any previously accumulated gain or loss of the hedging instrument that has been recognised in comprehensive income will be carried to profit or loss. Derivatives not accounted for as hedging instruments are classified as financial assets at fair value through profit or loss and measured at fair value. Changes in the fair value of such derivatives are recognised in the income statement. If an active market does not exist, the fair value is measured according to generally accepted valuation techniques. Market-based parameters are used to measure fair value. For bunker contracts the price is based on the prices from Platts Bunkerwire. The value of FFAs is assessed on basis of daily recorded prices from the Baltic Exchange. Business activities As the company is unlisted it has been decided not to follow IFRS 8 Operating. The business activities are reported basis the freight income from the business activities. Non-controlling interests Non-controlling interests represent the portion of profit or loss and net assets not held by Ultrabulk Shipping A/S and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from the parent shareholders equity. Initially the non-controlling interest is recognised based on their share of the fair value of the assets and liabilities acquired. INCOME STATEMENT Revenue and expenses All voyage revenues and voyage expenses are recognised basis percentage of completion. Ultrabulk Shipping A/S uses a discharge-todischarge basis in determining percentage of completion for all spot voyages and voyages servicing contract of affreightment (CoA). With this method, voyage revenue is recognised evenly over the period from the departure of a vessel from its original discharge part to departure from the next discharge port. Vessels without signed contracts in place at discharge have no revenue before a new contract is signed. Voyage related expenses incurred for vessels in the idle time are expensed. Demurrage is included if a claim is considered probable. Losses arising from time or voyage charter are provided for in full when they become probable. Profit and loss from the sale of vessels etc. Profits and losses from the sale of vessels are stated as the difference between the sales price of the vessel less selling costs and the carrying amount of the vessel at the time of delivery. Profit from investments in associates The proportionate share of the result after tax of associates is recognized in the consolidated income statement after elimination of the proportionate share of intra-group profits/losses. Financial income and expenses comprise interest income and expense, gains and losses on payables and transactions denominated in foreign currencies, amortisation of financial assets and liabilities. Taxes Ultrabulk Shipping A/S is jointly taxed with the parent company Ultranav ApS and the parent company is the administration company for the jointly taxed companies. The current Danish corporation tax is allocated between the jointly taxed companies in proportion to their taxable income. In relation to the shipping activities Ultrabulk Shipping A/S participates in the Danish Tonnage Tax Scheme. Companies that use tax losses in other companies pay the joint tax contribution to the parent company at an amount corresponding to the tax value of the tax losses used. Companies whose tax losses are used by other companies receive joint tax contributions from the parent company corresponding to the tax value of the losses used (full absorption). The jointly taxed companies are taxed under the tax prepayment scheme. Tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit/loss for the year is recognised in the income statement. Tax attributable to entries directly under comprehensive income is recognised directly in other comprehensive income. BALANCE SHEET Tangible assets Tangible assets are measured at cost less accumulated depreciation and impairment losses. Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when the asset is available for use. Instalments and costs incurred during the construction period on new building contracts are capitalised as they are paid. Borrowing costs (interest) that are attributable to the construction of the vessels are capitalised and included as part of the cost. The capitalised value is reclassified from new buildings to vessels upon delivery from the yard. Where individual components of an item of tangible assets have different useful lives, they are depreciated separately. Depreciation is provided on a straight-line basis over the expected useful lives of the assets/components. The expected useful lives are as follows: Determination of fair value The fair value of financial assets and liabilities is measured on the basis of quoted market prices of financial instruments traded in an active market. If an active market exists, fair value is based on the most recent observed market price at the end of the reporting period. Profit from investments in joint ventures The proportionate share of the result after tax of the joint ventures is recognized in the consolidated income statement after elimination of the proportionate share of intra-group profit/losses. Financial income and expenses Vessels: 20 years Fixtures, fittings and equipment: 3-10 years Depreciation is calculated on the basis of the residual value and impairment losses, if any. The useful life and residual value is determined at the acquisition date and reassessed annually.

21 Notes to the Financial Statements Annual Report Notes to the Financial Statements If the residual value exceeds the carrying amount, depreciation is discontinued. The residual value of the vessels is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. When changing the depreciation period or the residual value, the effect on the depreciation is recognised prospectively as a change in accounting estimates. The carrying values of vessels and newbuildings are reviewed for impairments when events or changes in circumstances indicate that the carrying value may not be recoverable. Valuations are performed frequently to ensure that the fair value of the asset does not differ materially from its carrying amount. Investments in associates Investments in associates are recognised in the consolidated financial statements according to the equity method. Investments in associates are measured at the proportionate share of the enterprises' net asset values calculated in accordance with the Group's accounting policies minus or plus the proportionate share of unrealised intra-group profits and losses and plus additional value on acquisition, including goodwill. Investments in associates are tested for impairment when impairment indicators are identified. Investments in associates with negative net asset values are measured at USD 0 (nil). If the Group has a legal or constructive obligation to cover a deficit in the associate, the remaining amount is recognised under provisions. Amounts owed by associates are measured at amortised cost. Write-down is made for bad debt losses. Investments in joint ventures Undertakings which are contractually operated jointly with one and more undertakings (joint ventures) and thus are jointly controlled are recognised in the consolidated financial statements according to the equity method. Investments in joint ventures are measured at the proportionate share of the enterprises' net asset values calculated in accordance with the Group's accounting policies minus or plus the proportionate share of unrealised intra-group profits and losses and plus additional value on acquisition, including goodwill. Investments in joint ventures are tested for impairment when impairment indicators are identified. Investments in joint ventures with negative net asset values are measured at USD 0 (nil). If the Group has a legal or constructive obligation to cover a deficit in the joint ventures, the remaining amount is recognised under provisions. Amounts owed by joint ventures are measured at amortised cost. Write-down is made for bad debt losses. Other investments Shares and bonds not included in the Group's trading portfolio (available-for-sale) are recognised under non-current assets at cost at the trade date and are measured at fair value corresponding to the market price of quoted securities and for unquoted securities an estimated fair value computed on the basis of current market data and generally accepted valuation methods. Unrealised value adjustments are recognised directly in comprehensive income except for impairment losses as well as foreign exchange adjustments of bonds denominated in foreign currencies, which are recognised in the income statement as financial income or financial expenses. On realisation, the accumulated value adjustment recognised in comprehensive income is transferred to financial income or financial expenses in the income statement. Impairment of non-current assets Deferred tax assets are subject to annual impairment tests and are recognised only to the extent that it is probable that the assets will be utilised. Impairment of vessels and new building contracts are described separately. The carrying amount of other non-current assets is tested annually for indicators of impairment. When there is an indication that assets may be impaired, the recoverable amount of the asset is determined. The recoverable amount is the higher of an asset's fair value less expected costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or the cash-generating unit to which the asset belongs. An impairment loss is recognised if the carrying amount of an asset or a cash-generating unit, respectively, exceeds the recoverable amount of the asset or the cash-generating unit. Impairment losses are recognised in the income statement in a separate line item. Impairment is reversed only to the extent of changes in the assumptions and estimates underlying the impairment calculation. Impairment is only reversed to the extent that the asset's increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. Receivables Receivables are measured at amortised cost. Write-down is made for bad debt losses when there is objective evidence that a receivable or a portfolio of receivables has been impaired. If there is objective evidence that an individual receivable has been impaired, write-down is made on an individual basis. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first-in, first-out (FIFO) basis. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expense. Costs of bunkers include the transfer from equity to profit and loss on qualifying cash flow hedges. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and shortterm deposits with an original maturity of three months or less. Statement of changes in equity Dividends Dividends are recognised as a liability at the date when they are adopted at the annual general meeting (declaration date). The proposed dividend payment for the year is disclosed as a separate item under equity. Interim dividends are recognised as a liability at the date when the decision to pay interim dividends is made. Translation reserve The translation reserve comprises foreign exchange differences arising on translation of financial statements of entities that have a functional currency different from USD. On full or partial realisation of the net investment, the foreign exchange adjustments are recognised in the income statement. Hedging reserve The hedging reserve comprises the cumulative net change in the fair value of hedging transactions that qualify for recognition as a cash flow hedge and where the hedged transaction has not been realised. Provisions Provisions are recognised when Ultrabulk Shipping A/S has a present obligation (legal or constructive) as a result of a past event, it is probable that the obligation has to be settled and that a reliable estimate of the obligation can be made. Financial liabilities Other liabilities, including trade payables, payables to related parties as well as other payables, are measured at amortised cost, which corresponds to the net realizable value in all essentials. Leases All significant leases are classified as operational lease. The payments (time-charter hire) are recognised as an expense and charged to profit or loss on a straight line basis over the term for the lease. Deferred tax All significant Danish entities within the Group entered into the Danish tonnage taxation scheme for a binding 10 year period with effect from 1 January Under the Danish tonnage taxation scheme, taxable income is not calculated on the basis of income and expenses

22 22 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements as under the normal corporate taxation. Instead, taxable income is calculated with reference to the tonnage used during the year. The taxable income for a company for a given period is calculated as the sum of the taxable income from the activities under the tonnage taxation scheme and the taxable income from the activities that are not covered by the tonnage taxation scheme made up in accordance with the ordinary Danish corporate tax system. Cash flows in other currencies than the functional currency are translated using average exchange rates unless these deviate significantly from the rate at the transaction date. If the participation in the Danish tonnage taxation scheme is abandoned, or if the entities' level of investment and activity is significant reduced, a deferred tax liability will become payable. The taxable income which is made up in accordance to the ordinary corporate tax system, a deferred tax is recognized in each period end and is accounted for using the balance sheet liability method. Deferred tax assets, including the tax value of tax loss carry forwards, are recognised under other noncurrent assets at the expected value of their utilisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction. Deferred tax assets and liabilities are offset if the Company has a legally enforceable right to set off current tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets on a net basis or to realise the assets and settle the liabilities simultaneously. Cash flow statement The cash flow statement shows the cash flows from operating, investing and financing activities for the year, the year's changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated according to the indirect method as the profit/loss before tax adjusted for non-cash operating items, changes in working capital, interest, payments, dividends and income taxes paid. Cash flows from investing activities comprise payments in connection with acquisitions and disposals of businesses and of intangible assets, property, plant and equipment and other noncurrent assets as well as acquisition and disposal of securities not classified as cash and cash equivalents. Cash flows from financing activities comprise changes in the share capital and related costs as well as the raising of loans, repayment of interest-bearing debt, acquisition and disposal of treasury shares and payment of dividends to shareholders. Cash and cash equivalents comprise cash and short-term marketable securities with a term of three months or less at the acquisition date which are subject to an insignificant risk of changes in value.

23 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 2 - Significant accounting judgment, estimates and assumptions The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustments to the carrying amounts of asset and liability affected in future periods. Judgments In the process of applying Ultrabulk Shipping A/S s accounting policies, management has made the following judgments which have the most significant effect on the amounts recognised in the financial statements. Hedge accounting In connection with forward freight agreements (FFA s), purchase of bunkers and currencies Ultrabulk Shipping A/S uses hedge accounting. Several qualifications have to be met before a hedge is qualified as hedge accounting. One of the qualifications is that the hedge is expected to be highly effective. If a hedge is subsequently measured as ineffective, and therefore deviates from the original judgment, the result must be carried to profit and loss immediately. This could result in a dislocation of the result from one accounting year to another. Operational versus financial lease of vessels Based on the contents of the lease agreements it is determined if the lease is considered as an operational or a financial lease agreement. In this determination, assumptions are made, that if same were judged differently, it could have an effect on the income statement and the balance sheet. The most significant judgment is the forecasted future market value of the vessel at the dates where the purchase options can be utilized. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material judgment to the carrying amount of assets and liabilities within the next financial year are discussed below. Impairment of vessels Ultrabulk Shipping A/S assesses at each reporting date whether there are indications of impairment. If any indication exists or when annual impairment testing for an asset is required, Ultrabulk Shipping A/S estimates the assets recoverable amount. to be the fair value of the assets. The exact value used to measure the impairment charges is encumbered with uncertainty and is based on what the Company believes is the best estimate of the fair value. The value in use is calculated as the present value of the total expected cash flows during the rest of the vessels economic lives including entered COAs, time charters and by using estimated rates on the basis of historical data for uncovered capacity. Onerous contract At each balance sheet date Ultrabulk Shipping A/S assesses if there are contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received. These are defined as onerous contracts. Ultrabulk Shipping A/S assesses the contracts as a total value within the separate segments. If the contracts within the separate segments are onerous, the present obligation under the contract will be measured and recognised as a provision. At 31 December 2014, no provision for onerous contracts has been recognized (31 December 2013: nil). Provision for losses: Ultrabulk Shipping Group is a party to various litigation proceedings and claims have been made against the company. Provision for estimated losses is made in the income statement if both of the following criteria are met: The information that was available prior to the publication of the financial statements indicates that it is more likely than not that an obligation has arisen at the balance sheet date. The amount of the loss can be reliably measured Deferred tax assets: Deferred tax is recognized based on Ultrabulk Shipping continues under the tonnage tax regime, and on expectations to future activity (i.e. number of shipping days). The recoverable amount is measured using the highest of the fair value less cost to sell or value in use approach, and impairment is charged if the highest of the fair value less cost to sell or value in use is less than the carrying amount of the assets. The fair value less cost to sell is estimated based on independent broker valuations and historical sale price in the present market conditions. The broker valuations and sale prices will give a range for what is expected

24 24 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements Note 3 - Business activities reporting tusd Handysize 236, ,924 Supramax 428, ,312 Panamax 221, ,389 Total 886, ,625 The company operates in the Handysize, Supramax and Panamax activities. The company s activities are global and therefore no geographic split applies. Note 4 Remuneration to the auditor appointed at the general meeting Figures in USD ' Audit Other assurance service 0 0 Tax consultancy Other services 0 0 Total Note 5 Staff costs Figures in USD ' Fixed salaries 9,776 10,847 Pensions - defined contribution plan Other expenses for social security etc. 1,764 1,486 Incentive payment (cash based) 1,400 1,999 Staff costs included in administration expenses 13,432 14,888 Average number of employees Remuneration for certain employees in 2014 and 2013 are expensed as a management fee, and consequently recognized as Other external expenses. Remuneration for the Management Figures in USD '000 Board of Directors Executive Management Board of Directors Executive Management Fixed salaries 0 1, ,073 Pensions - defined contribution plan Incentive payment (cash based) Total remuneration for the Board of directors and executive management 0 1, ,410 The members of the executive management are subject to a notice of up to 18 months and can resign from management with a notice up to 9 month. No severance payment applies. Senior management and a number of the employees are covered by an incentive scheme (cash based).

25 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 6 Depreciation and impairment Figures in USD ' Depreciation vessel 669 4,427 Depreciation fixtures, fittings and equipment Total depreciation 661 4,717 Impairment loss, vessel 0 5,535 Total depreciation and impairment ,252 Note 7 Financial items Figures in USD ' Interest income Interest expense on loan Other financial items, net Total Note 8 Tax Figures in USD ' Current tax on profit for the year ,231 Deferred tax on profit for the year Tax on profit for the year -1,059-1,719 Adjustments related to previous years - current tax Adjustments related to previous years - deferred tax 755 1,052 Tax in the income statement Computation of effective tax rate (%): Statutory corporate income tax rate in Denmark Effects from Tonnage Tax Scheme Effects of adjustments related to prior years Deviation in foreign subsidiaries' tax rates compared to the Danish tax rate (net) Write down of deferred tax assets Non-tax income less non-tax deductible expenses (net) Effective tax rate Tax on fair value adjustments on financial instruments 0 0 Tax relating to other comprehensive income 0 0

26 26 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements Note 9 Vessel Figures in USD ' Cost at 1 January 22,953 67,467 Additions for the year 24,200 0 Assets transferred to assets held for sale 0-22,953 Disposals for the year -22,953-21,561 Cost at 31 December 24,200 22,953 Depreciation and impairment at 1 January -3,917-10,408 Depreciation for the year ,427 Assets transferred to assets held for sale 0 9,453 Disposals for the year 3,917 7,000 Impairment for the year 0-5,535 Depreciation and impairment at 31 December ,917 Carrying amount at 31 December 23,531 19,036 Expected useful life of vessels: 20 years 20 years Impairment is recognised if the highest of (1) the fair value less cost to sell or (2) value in use is less than the carrying amount of the assets. Based on estimates from independent brokers the market value of a vessel was above the carrying amount by USD 1.5 million at 31 December Note 10 New building contracts Figures in USD ' Cost at 1 January 4,667 6,608 Additions for the year 7,041 6,364 Disposals for the year -2,303-8,305 Cost at 31 December 9,405 4,667 Carrying amount at 31 December 9,405 4,667

27 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 11 Fixtures, fittings and equipment Figures in USD ' Cost: Cost at 1 January 5,283 5,501 Additions for the year 0 0 Disposals for the year Cost at 31 December 4,466 5,283 Depreciation and impairment at 1 January -5,023-4,943 Depreciation for the year Reversed depreciation and impairment for the year Depreciation and impairment at 31 December -4,327-5,023 Carrying amount at 31 December Expected useful life: 3-10 years 3-10 years Note 12 Investments in associates Figures in USD ' Cost: Cost at 1 January 1,920 2,790 Exchange rate adjustment Cost at 31 December 1,980 1,920 Value adjustment at 1 January Exchange rate adjustment Dividends received Share of the result for the year Value adjustment at 31 December Carrying amount at 31 December 2,825 2,580 The carrying amount can be specified as follows: Pérola S.A., Brasil, interest 20% 2,825 2,580 Key figures for investment in associates: 2,825 2,580 Assets 15,064 17,494 Liabilities -3,518-7,174 Net assets 11,546 10,320 Revenue 33,104 30,277 Profit/loss before tax 5,514 4,539 Income tax -1,882-1,510 Profit/loss for the year 3,631 3,029 Total comprehensive income for the year 3,631 3,029 Ultra Summit owned two vessels and have contracts on further two new buildings. The vessels are chartered out to Ultrabulk.

28 28 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements Note 13 Investments in joint ventures Figures in USD ' Cost: Cost at 1 January 16,333 10,325 Disposals for the year -1,502 0 Additions for the year 12,036 6,008 Cost at 31 December 26,867 16,333 Value adjustment at 1 January 1, Exchange adjustment 29 0 Share of the result for the year Reversed value adjustments on disposals for the year 18 0 Value adjustment at 31 December 1,257 1,319 Carrying amount at 31 December 28,124 17,652 The carrying amount can be specified as follows: Ultra Summit (Singapore) Pte. Ltd., 50% 23,659 11,675 Ultra MO One (Singapore) Pte. Ltd., 50% 4,465 4,494 Ultra MO Two (Singapore) Pte. Ltd., 100% 0 1,484 28,124 17,652 Key figures for investment in joint ventures: Assets 85,609 55,750 Liabilities -38,664-20,447 Net assets 46,945 35,303 Revenues 9,325 5,979 Profit/loss before tax 1, Income tax 0-1 Profit/loss for the year 1, Total comprehensive income for the year 1, Note 14 Inventories Figures in USD ' Bunker (at cost) 23,821 41,444 Total inventories at lower of cost and net realisable value 23,821 41,444 Bunker expenses recognised in profit and loss 238, ,264 Part of the bunker consumption has been hedged in accordance with the Groups risk management policy. This is described in Note 24.

29 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 15 Trade and other receivables Figures in USD ' Customers (trade receivables) 55,439 58,534 Receivables from related companies 2,784 1,007 Total 58,223 59,540 Trade receivables are non-interest bearing and are generally of 5-30 day terms. Maturity analysis for trade receivables - receivables not due 31,125 37,368 - less than 90 days 13,154 9,749 - between 91 days and 180 days 3,325 3,818 - between 181 days and 360 days 2,547 3,866 - more than 360 days 5,288 3,732 Carrying amount of trade receivables 55,439 58,534 Trade receivables at initial value impaired and fully provided for 8,306 6,375 Note 16 Cash and short-term deposits Figures in USD ' Cash at bank and in hand 79,648 65,539 Total 79,648 65,539 As of 31 December 2014, included in total cash at bank USD 12.8 million is restricted deposits in favour of clearing houses (2013: USD 3.4 million). Note 17 Share capital Number of shares DKK'000 USD' and before 2,500,000 25,000 4, ,500,000 25,000 4, ,500,000 25,000 4, ,638, ,385 46, ,100,000 27,100 5,134 At 1 January ,100,000 27,100 5,134 Increase in share capital Decrease in share capital At 31 December ,100,000 27,100 5,134 No shares confer any special rights upon its holder shares or on voting rights. No restrictions have been imposed on negotiability of the shares or on voting rights. All issued shares are fully paid.

30 30 Annual Report 2014 Notes to the Financial Statements Notes to the Financial Statements Note 18 Interest bearing loans and borrowings Figures in USD ' Fixed/ Book Book Principal Variable Interest rate value value Mortgage on vessel 9,342 Fixed 3.08% 8,268 - Mortgage on vessel 9,342 Variable 2.43% 8,268 - Total 18,684 16,536 - Long term part 14,979 Current part 1,557 Total 16,536 - The fair value of the fixed part of the loan is estimated to USD 9.3 million. The loans are subject to financial and operational covenants. Management considers that Ultrabulk Shipping and the guarantor Naviera Ultranav Limitada meet these covenants at 31 December Loans are secured on vessels. The carrying amount of the vessels provided as security is USD 23.5 million. Note 19 Deferred tax asset Figures in USD' Deferred tax at 1 January 2,845 2,281 Deferred tax on profit for the year Adjustments related to previous years 1,368 1,263 Change in tax percentage Exchange rate adjustments Total deferred tax assets/-liabilities, net at 31 December 3,250 2,845 Deferred tax gross: Deferred tax assets 3,250 2,845 Deferred tax liabilities 0 0 Total deferred tax assets/-liabilities, net at 31 December 3,250 2,845 Deferred tax are allocable to the various items in the balance sheet: Tax-loss carried forward 3,250 2,845 Deferred tax, net 3,250 2,845 In 2011 the Danish based companies entered the Danish tonnage taxation system of which adoption is binding until at least Ultrabulk Shipping does not expect to leave the system and therefore no deferred tax provision is made on assets and liabilities. If the companies leave the tonnage tax system no significant tax provision will be released.

31 Notes to the Financial Statements Annual Report Notes to the Financial Statements Note 20 - Financial risk management, objectives and polices Risk management overview Generally the market conditions for shipping activities are volatile and, as a consequence, the company s results may vary from year to year. In addition, the company is exposed to a number of different financial market risks arising from the company s normal business activities. Market risks Freight rates The business model for an operator is to build a portfolio of vessels on one hand and a portfolio of cargoes on the other. Depending on the market expectations the company can decide on being long on cargoes (typically when expecting a decreasing market) or long on vessels (typically when expecting an increasing market). Unexpected fluctuation in freight rates is the key factor affecting cash flow and the value of committed assets. The level of risk depends firstly on the level of such unexpected fluctuations and secondly on the size of the imbalance between the commitment on cargoes and commitment on vessels taken by the company. Ultrabulk Shipping A/S s business model is to maintain a relatively balanced book building and to constantly keep a strict control of the level of exposure by utilising state of the art back office exposure systems, which allows the company to timely adjust its book building. Fuel Prices Contracts of Affreightment (cargo contract containing multiple cargoes) are based on fixed freight rates, which expose the company to fluctuations on fuel prices. The Company seeks to reduce the exposure to fluctuating bunker fuel prices through compensation clauses in contracts with clients. On contracts (CoA s) where this is not possible the Company uses commodity based derivative to reduce bunker exposure. Counterparty risk The company s main credit risks are related to its counterparty risk. The risk profile is determined by the counterparty s solvency and the type legal contract upon which the deal is based. Single cargoes It is industry standard that freight payment is made within very few days of departing from the loading port. It is also an industry standard that the vessel owner has a lien in the cargo, should the freight payment not have been paid prior to the arrival at the discharge port. The counterparty risk on these types of deals is therefore limited. Contract of Affreightment (multiple cargoes) It is important for Ultrabulk Shipping to carefully evaluate counterparty risk on CoA contracts, as the company is highly dependent on the counterparty s solvency and its ability and willingness to fulfil their obligations. Approval of CoA counterparties is done on senior management level only, and involves the following elements: Positive credit rating report from a London based maritime credit rating bureau Positive industry references Satisfactory performance on existing commitments, if any, between Ultrabulk Shipping and the counterpart Positive reference from the fuel purchase market Approval of counterparties may vary from one cargo to multiple year contracts. Time charter out Ultrabulk Shipping does only on a limited basis use time charter out, however occasionally Ultrabulk Shipping vessels are on shorter or longer time charter to other ship operators. The approval process is very similar to that outlined above, with extra emphasis on positive industry references. Time charter in Although it is Ultrabulk Shipping paying hire to the owners of the vessel, there is a risk that the owners may default and the contract terminate early. The loss of such charter may represent a significant risk, therefore Ultrabulk Shipping evaluates these types of contracts in line with those of the CoAs and time charter out. Derivative financial instruments are only entered with highly rated financial institutions, which imply that the credit exposures for these transactions are expected to be at an acceptable level. Forward Freight Agreements (FFA) Several contract types are being offered in the derivatives market, Ultrabulk Shipping however only utilizes swaps. FFAs are utilised both as an instrument for hedge and speculation, for cargo as well as vessel commitments. The company utilises extensive risk management systems in order to control the market value of all open positions. Based on the risk systems, the company is able to monitor the market position on a daily basis. Interest rate risk exposure Interest rate and currency risks are moderate financial risks for Ultrabulk Shipping. Management periodically reviews and assesses the primary financial market risks. Ultrabulk Shipping will use financial derivatives to manage such risks. These may include interest rate swaps, forwards contracts and options. Currency risk The company s reporting currency is USD. Most of the company s revenues and expenses are denominated in USD. The company has owned vessels. The company s strategy is to finance the vessels in the same currency as the vessels receive income. As a consequence, the vessels will be financed in USD. The company may use financial derivatives to reduce the net operational currency exposure. Currency risks on administrative expenses can be hedged for a period up to 12 month. Liquidity exposure It is the company s objective to maintain a balance between continuity of funding and flexibility through the usage of available bank facilities, either in the form of overdraft facilities, or through revolving credit facilities. Currently, funding from bank facilities is not needed. The company s surplus liquidity is placed in bank accounts with interest on deposits, or through term deposits. Capital management The primary objective of the Company s capital management is to ensure that it maintains an adequate capital ratio in order to support its business and maximise shareholder value. Ultrabulk Shipping manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the company can make dividend payment to shareholders, or issue new shares. Other risks Environment The majority of the vessels controlled by Ultrabulk Shipping are chartered and therefore the majority of risk in connection with environmental issues rests with the owner of the vessel. There are however situations, whereby Ultrabulk Shipping may become liable for spills or other environmental impacts. Ultrabulk Shipping has an insurance against these types of accidents limited to USD 400 million for charter vessels and to USD 1,000 million for owned vessels for each single incident. Piracy The risks encountered transiting Somalia waters and the Arabian Sea area are substantial. It is the policy of the company that transit within joint war committee zone is subject to Management approval. The company is constantly following the recommendations made by the UN subsidiary International Maritime Organisation (IMO), and the recommendations made by the underwriters.

32 32 Annual Report 2014 Notes to the Financial Statements. Notes to the Financial Statements Note 21 Trade and other payables Figures in USD ' Trade payables 29,231 32,523 Payables from related companies 1, Accrued expenses 49,174 64,222 Total 80,162 97,698 Terms and conditions of the above financial liabilities: Trade payables are non-interest bearing and are normally settled on 30 days terms. Other payables are non-interest bearing and have an average term of six months. Note 22 Operating lease liabilities and COAs commitments Lease agreements have been entered into with a mutually interminable lease period up to 10 years. As a general rule, leases include an option to renew for one additional year at a time for up to three years. Some of the lease agreements include a purchase option, exercisable as from the end of the fifth year to the expiry of the period of renewal. Exercise of the purchase option on the individual vessel is based on an individual assessment. The lease liabilities are assessed at nominal amount. The Group has purchase options on 27 operational leases. However the majority of such purchase options are partly shared. The table below illustrates the earliest possible time of declaration of the purchase option: Segment Total Handysize Supramax/Handymax Panamax/Kamsamax

33 Notes to the Financial Statements Annual Report Figures in USD ' Charter hire for vessels not delivered Within one year 13,280 6,794 Between 1-5 years 281, ,414 More than 5 years 323, ,818 Total 619, ,026 Charter hire for vessels on time charter with purchase option Within one year 105,947 97,236 Between 1-5 years 395, ,406 More than 5 years 243, ,361 Total 744, ,003 Charter hire for vessels on time charter without purchase option Within one year 25,512 48,254 Between 1-5 years 11,632 24,493 More than 5 years 0 0 Total 37,144 72,747 Other leases (operational lease) Within one year 866 1,401 Between 1-5 years 1,190 1,931 More than 5 years 0 0 Total 2,056 3,333 Total operating lease liabilities 1,403,081 1,226,109 At 31 December, the Group had entered into COAs and time charters with customers amounting to: COAs and Time Charter commitments as service provider Within one year 148, ,198 Between 1-5 years 604, ,193 More than 5 years 327, ,641 Total 1,081,422 1,277,032

34 34 Annual Report 2014 Notes to the Financial Statements. Notes to the Financial Statements Note 23 Contingent assets and liabilities Contingent assets Following a customer default to perform under a three year Contract of Affreightment, Ultrabulk Shipping initiated arbitration against the customer. An arbitration award was made in favour of Ultrabulk Shipping in the amount of 36.4 MUSD. The claim is to be enforced. At this point in time, Ultrabulk Shipping cannot predict how long the enforcement will take or when the company will be able to provide additional information. Contingent liabilities Ultrabulk Shipping is engaged in certain litigation proceedings. In the opinion of management, settlement or continuation of these proceedings are not expected to have a material effect on Ultrabulk Shipping s financial position, operating profit or cash flow. Agreements for future delivery of new buildings and other guarantees Figures in USD ' Agreements for future delivery of new buildings Remaining contract amount until delivery in USD translated at the exchange rate at year end 106,619 43,600 The remaining contract amounts in USD is payable as follows: Within one year 47,161 21,800 Between one and five years 59,458 21,800 Total 106,619 43,600 Other guarantees Ultrabulk Shipping A/S has issued a guarantee for loan to joint venture and associated companies 35,645 13,500 The remaining contract for new buildings until delivery include amount for new building which will be sold and leased back on an operational leasing agreement. Note 24 Financial instruments Carrying amount and fair value of financial items by class of financial assets and liabilities Set out below is a decomposition of the financial assets into categories as defined in IAS 39. Furthermore, the table below includes a comparison of the carrying amount and fair value of financial assets by class of assets. The fair value is estimated using appropriate market information and valuation methodologies. The carrying amount of cash and cash equivalents and loan payables to bank are a reasonable estimate of their fair value. Fair value for derivatives and borrowings has been calculated by discounting the expected future cash flows at relevant interest rates. Judgement is required to develop estimates of fair value. Hence, the estimates provided herein are only indicative of the amounts that could be realised in the market.

35 Notes to the Financial Statements Annual Report Categories of financial instruments The fair value of financial assets and financial liabilities measured at amortized cost is approximately equal to the carrying amount apart from interest bearing loans and borrowings, note 18. Figures in USD ' Noncurrent Current Non-current Current Available for sale ,500 0 Receivables measured at amortized cost including cash and cash equivalents 183, ,648 0 Financial assets measured at fair value (Derivative financial instruments) 4,004 10,639 2,249 0 Financial liabilities measured at amortized cost 81,758 14,979 98,586 0 Financial liabilities measured at fair value (Derivative financial instruments) 13,934 17,730 1,934 0 Fair value hierarchy of financial instruments Fair value hierarchy: Financial instruments measured at fair value are divided in accordance with the following accounting hierarchy: - Level 1: observable market prices of identical instruments. - Level 2: valuation models primarily based on observable prices or trading prices of comparable instruments. - Level 3: valuation models primarily based on non-observable prices. The fair value of all derivative financial instruments, forward exchange contracts and other derivative financial instruments (commodity instruments), is considered fair value measurement at level 2 as the fair value can be calculated based on the published price at the reporting date. All other financial instruments are considered fair value measurement at level 1. Bunker hedge Ultrabulk Shipping has entered into contracts in order to hedge future bunker expenses. The contracts are accounted for as cash flow hedges, when the criteria is in compliance with the criteria for cash flow hedge accounting. The bunker hedges are entered simultaneously with the Contracts of Affreightment (CoA), as part of the Group s risk management. The bunker hedges cover the bunker expenses in connection with the CoA and the duration of the bunker hedge is therefore similar to the duration of the CoA. The trade dates are between and FFA hedge Ultrabulk Shipping has entered into contracts in order to hedge future cargo and vessel commitments. The contracts are accounted for either as fair value hedge or as cash flow hedges, when the criterias are in compliance with the criteria for hedge accounting. The FFA hedges are entered simultaneously with the cargo and vessel commitments as part of the Group s risk management. The trade dates are between and Interest rate risks Interest rate risks concern the interest-bearing financial assets and liabilities of Ultrabulk Shipping. The interest-bearing financial assets consist primarily of cash in financial institutions and the interest-bearing liabilities mainly consist of mortgage debt. Interest rate risks occur when interest rate levels change and/or if the pricing, which the Ultrabulk Shipping has agreed with the financial institutions changes. As at 31 December 2014, 50% of the Ultrabulk Shipping s interest-bearing long term debt (31 December 2013: 0%) carried a floating rate, defined as duration more than one year. Hedge accounting reserve in equity The hedge accounting reserve in equity is related to cash flow hedging financial derivatives and amount to USD 18.8 million (31 December 2013: USD 0.1 million).

36 36 Annual Report 2014 Notes to the Financial Statements. Notes to the Financial Statements Note 25 Change in net working capital Figures in USD ' Change in inventories 17,623-4,104 Change in trade and other receivables 1,317-8,282 Change in prepayments -1,798-5,503 Change in trade and other payables -17,535 22,238 Total ,349 Note 26 Mortgages and security The Group has issued a pro rate guarantee for the mortgages in the joint venture Ultra Summit (Singapore) Pte. Ltd. Note 27 Related party disclosures Ultrabulk Shipping A/S is controlled by Ultranav ApS, Denmark. The ultimate parent of the Group is Naviera Ultranav Limitada, El Bosque Norte 500, 20 th floor, Las Condes, Santiago, Chile. Other related parties are considered to be companies within Ultranav Group, associated companies, the directors and officers of the entities and management of Ultrabulk Shipping A/S. There have not been any material transactions with any member of the Board of Directors, Executive Management of Ultrabulk Shipping A/S, Naviera Ultranav Limitada. or associated companies. For information on remuneration to the Board of Directors and Executive Management of

37 Notes to the Financial Statements Annual Report Ultrabulk Shipping A/S, please refer to note 5. Outstanding balances at year-end apart from loans are short-term, unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. The Group has not made any provision for doubtful debts relating to amounts owed by related parties. The assessment hereof is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Joint taxation The Danish companies in the Group are in joint taxation with the other Danish companies in the Naviera Ultranav Group. Note 28 Subsequent events No other significant events have occurred between the reporting period and the publication of the annual report that have not been included and adequately disclosed in the annual report and that materially affect the income statement or the balance sheet. Note 29 New financial reporting regulation IASB has issued a number of new or amended and revised accounting standards and interpretations that have not yet come into force. Amendments to IAS 19, Defined Benefit Plans: Employee Contributions. The amendment is not expected to have any impact on the financial statements. Standards and interpretations which have not been approved for use in the EU and have therefore not yet come into force. IFRS 15, Revenue from contracts with customers IFRS 9, Financial instruments: Classification and Measurement and Hedge Accounting Amendments to IAS 16 and IAS 38 Amendments to IFRS 10 and IAS 28 Amendments to IFRS 11 Annual Improvements to IFRS Annual Improvements to IFRS Annual Improvements to IFRS IASB has issued re-exposure drafts on IAS 17 Leasing and IAS 18 Revenue. The revised IAS 18 is expected to have only immaterial impact on the consolidated financial statements. Depending on the wording of the final IAS 17 standard, the change in lease accounting is expected to require capitalisation of the majority of the Group s operating leases which may have a material impact on the Group s assets, liabilities and result. Ultrabulk Shipping expects to implement the new standards and interpretations as they become mandatory in EU.

38 38 Annual Report 2014 Parent Company 2014 Financial Statements Ultrabulk Shipping A/S - Parent Company

39 Parent Company Annual Report Income Statement Figures in USD '000 Note Management fees 1,168 3,837 Administration expenses 4-1,104-3,403 Profit before tax and finance costs (EBIT) Financial income Financial expenses Profit before tax 21 1,231 Tax Net profit Distribution of Net profit for the year: Retained earnings Total Statement of Comprehensive Income Figures in USD '000 Note Profit for the year Other comprehensive income Items that will be reclassified subsequently to the consolidated income statement, when specific conditions are met: Fair value adjustments other investments and other changes(gain/-loss) 0 0 Reversal hedging reserve 0 0 Other comprehensive income for the year, net of tax 0 0 Total comprehensive income for the year, after tax

40 40 Annual Report 2014 Parent Company Balance Sheet ASSETS Figures in USD '000 Note Investment in subsidiaries 8 86,783 80,283 Deferred tax Total financial non-current assets 87,190 80,584 Total non-current assets 87,190 80,584 Other receivables ,364 Cash and short-term deposits 10,074 39,413 Total current assets 10,402 48,777 TOTAL ASSETS 97, ,361 EQUITY AND LIABILITIES Figures in USD '000 Note Share capital 10 5,134 5,134 Share premium 12,048 12,048 Total paid-in capital 17,182 17,182 Retained earnings 72,962 72,897 Total equity 90,144 90,079 Payables to Group enterprises and other payables 11 7,321 39,173 Corporate tax Total current liabilities 7,448 39,281 Total liabilities 7,448 39,281 TOTAL EQUITY AND LIABILITIES 97, ,361

41 Parent Company Annual Report Statement of Changes in Equity Figures in USD '000 Paid in capital Share capital Share premium Retained earnings Total equity (Note 21) At 1 January ,134 12,048 72,897 90,079 Profit for the year Total comprehensive income At 31 December ,134 12,048 72,962 90,144 At 1 January ,134 12,048 71,936 89,118 Profit for the year Total comprehensive income At 31 December ,134 12,048 72,897 90,079

42 42 Annual Report 2014 Parent Company Cash Flow Statement Figures in USD ' Profit/loss(-) before tax Adjustment to reconcile profit before tax to net cash flows Non-cash: Interest income/expense Working capital adjustments: Change in current assets Change in current liabilities Net cash flows from operating activities Capital contribution in subsidiary Interest, received Net cash flows from investing activities Interest, paid Net cash flows from financing activities Net change in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December

43 Financial Statements Parent Company Annual Report Note 1 - Summary of significant accounting policies The accounting policies of the Parent, Ultrabulk Shipping A/S, are identical with the policies applicable to the consolidated financial statements, except for the following: Dividends from investments in subsidiaries and associates Dividends from investments in subsidiaries and associates are recognised as income in the Parent's income statement under financial income in the financial year in which dividends are declared. Investments in subsidiaries in the Parent's financial statements Investments in subsidiaries are measured at cost. Impairment tests are conducted when there is an indication of impairment. Writedown is made to the recoverable amount if this is lower than the carrying amount. Note 2 - Significant accounting judgement, estimates and assumptions The preparation of the Parent's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustments to the carrying amounts of asset and liability affected in future periods. In the process of applying the Parent's accounting policies, management deems the following estimates and the pertaining assessments to be essential for the preparation of the Annual Report of the Parent. Investments in subsidiaries Management assesses annually whether there is an indication of impairment of investments in subsidiaries. In the assessment of Management, there is no such indication at 31 December 2014, and therefore investments in subsidiaries have not been tested for impairment. Note 3 Remuneration to the auditor appointed at the general meeting Figures in USD ' Audit Other assurance service 0 0 Tax consultancy 0 0 Other services 0 0 Total Note 4 Staff costs Figures in USD ' Salaries and wages 607 1,479 Other expenses for social security ,654 Average number of employees 4 18 Please refer to the consolidated financial statements, note 5.

44 44 Annual Report 2014 Parent Company Note 5 Financial income Figures in USD ' Interest from subsidiaries Other financial income Total Note 6 Financial expenses Figures in USD ' Other financial expenses 41 0 Bank Charges 6 13 Total Note 7 - Tax Figures in USD ' Current tax on profit for the year Deferred tax on profit for the year Tax on profit for the year Adjustments related to previous years - deferred tax Tax in the income statement The tax of profit breaks down as follows: Calculated 24.5%/25% tax on profit for the year before tax Other effects Non-tax income less non-tax deductible expenses (net) 0 0 Change in tax percentage 0-41 Adjustment of tax relating to prior years Total tax of profit for the year

45 Parent Company Annual Report Note 8 Investments in subsidiaries Figures in USD ' Cost: Cost at 1 January 80,283 80,283 Additions for the year 6,500 0 Cost at 31 December 86,783 80,283 Carrying amount at 31 December 86,783 80,283 Ownership share Share capital Registered office in DKKm Ultrabulk A/S Copenhagen, Denmark 1.0 Ultrabulk Rederi A/S Copenhagen, Denmark Ultrabulk Shipholding A/S Copenhagen, Denmark 1.0 P.E.P. Shipping A/S Copenhagen, Denmark 1.0 Note 9 Receivables from Group enterprises and other receivables Figures in USD ' Receivables from Group enterprises 0 8,877 Other receivables Total 328 9,364 Note 10 - Equity The composition of the share capital is presented in note 17 to the consolidated financial statements. The targets for the capital structure or Ultrabulk Shipping A/S is determined and assessed for the Group as a whole, for which reason no operational goals or policies are set for the parent company. Note 11 Payables to Group enterprises and other payables Figures in USD ' Payables to Group enterprises 4,955 35,766 Other payables 2,366 3,407 Total 7,321 39,173 The fair value of payables to Group enterprises and other payables equals the carrying amount.

46 46 Annual Report 2014 Parent Company Note 12 Mortgages and security Figures in USD ' Other guarantees Ultrabulk Shipping A/S has issued a guarantee for loan to joint venture 23,963 13,500 Ultrabulk Shipping A/S has issued a guarantee for time charter hire to subsidiaries 310, ,888 Ultrabulk Shipping A/S has issued a guarantee for remaining payments under new building contracts 64,098 60, , ,588 Joint taxation The Company is in joint taxation with other Danish Companies in the Naviera Ultranav Group. The joint taxation also covers withholding taxes in the form of dividend tax, royalty tax and interest tax. The Danish companies are jointly and individually liable for the joint taxation. Any subsequent adjustments to income taxes and withholding taxes may lead to a large liability. The tax for the individual companies is allocated in full on the basis of the expected taxable income. Note 13 Contingent assets and liabilities For information regarding contingent assets and liabilities, please refer to the consolidated financial statements, note 23. Note 14 Related party transaction Management fee income has been charged to Ultrabulk Shipholding A/S, 97 KUSD (2013: 284 KUSD), Ultrabulk A/S, 954 KUSD (2013: 3.2 MUSD), Ultrabulk Steel Service A/S, 117 KUSD (2013: 213 KUSD) and Ultrabulk S.A., 144 KUSD (2013: 144 KUSD). Note 15 Subsequent events For subsequent events, please refer to the consolidated financial statements, note 28. Note 16 New financial reporting regulation For new financial reporting regulation, please refer to the consolidated financial statements, note 29. The new financial reporting regulation is not expected to be of any importance for the financial statements of the Parent.

47 Annual Report Group Structure 100% owned unless specified otherwise.

48 48 Annual Report 2014 Definition of key figures and financial ratios Definitions of key figures and financial ratios

49 Annual Report

50 50 Annual Report 2014 Definition of key figures and financial ratios