Annual Report Dampskibsselskabet NORDEN a/s

Transcription

1 Annual Report 2002 Dampskibsselskabet NORDEN a/s

2 Contents 3 Our vision 4 Our mission 5 Company data 6 Endorsement of the Board of Directors and Management 7 Independent auditors report 8 The Group: Key figures and ratios 9 Management report 14 Dry cargo 18 Tankers 22 Risk profile 25 Financial review 28 Human resources 29 Environmental protection 30 Shareholder information and statutory disclosure 38 Accounting policies 45 Income statement 1 January-31 December 46 Balance sheet at 31 December 48 Statement of changes in equity 49 Consolidated cash flow statement 50 Notes 68 Definition of financial ratios 69 Group s tonnage at the end of The company's history 74 Technical terms and abbreviations NORDEN is engaged in worldwide tramp shipping in the dry cargo and tank sectors.

3 3 our vision For the part of the activity relating to the Company s customers and the servicing of them it is our vision that true partnerships go further By gradually changing our focus FROM TO reliance on the spot market adding long-term relationships with customers and offering risk and award-sharing alliances with our key partners we will achieve sustainable growth in the global shipping market.

4 4 our mission Our background More than 130 years of experience from ocean transportation of dry and liquid cargoes put Dampskibsselskabet NORDEN A/S in a unique position to choose its own future. Through this heritage the Company has emerged as a reliable and flexible world market player with strong and clear core values and beliefs. It is extremely well suited to enter into long-term customer relations and partnerships. Our customers benefit from our core competencies Our key competency is our profound knowledge of international shipping markets, ship building and maintenance, risk management and our understanding of the individual customer needs and requirements. Getting there safely on time is our highest priority. Each customer benefits from our two main assets: a modern, cost efficient and environmentally safe tanker and bulk fleet a highly skilled and enthusiastic group of employees whom we attract and retain with our commitment to training and personal development. Our market approach We approach the market in three different ways: In the spot market we fulfil individual customer needs on a day-to-day basis by delivering fast, reliable and cost efficient transportation. With our core customers we develop long lasting relationships by constantly adapting our services to meet their ever changing needs and requirements. When dealing with key partners we aim to add value to their business through the exchange of knowledge and share group structure Dampskibsselskabet NORDEN A/S Nortide Shipping Limited Bermuda Nortide II Shipping Limited Bermuda NORDEN Tankers & Bulkers Pte. Ltd, Singapore NORDEN Tankers & Bulkers (USA) Inc., USA 50% 50% 100% 100% Nordholm Pte. Ltd. Singapore Nordafrika Pte. Ltd. Singapore Nordmit Shipping S.A. Panama 51% 66% 51%

5 5 risks and rewards through partnerships with the aim of generating win-win opportunities. company data Our global thinking and local acting We constantly strive to extend our global presence close to our customers by establishing local offices managed by competent people who share and support our common values and objectives. The Company Dampskibsselskabet NORDEN A/S Amaliegade 49, DK-1256 Copenhagen K Telephone: Fax: Our goal Our goal is to be the best in our industry by maximising customer and employee satisfaction. In so doing, we create value for our shareholders, the Company and its partners. Our core values Reliability: We deliver what we promise. Flexibility: We meet customer needs as regards timing, location and handling. Empathy: We understand and respect local cultures and traditions. Company Registration No.: Accounting year: 1 January 31 December Place of domicile: Copenhagen Tanker Department Fax: Dry-cargo Department Fax: Technical Department Fax: Comtext A43DK448 A53DK033 (Tank) Homepage: admin@ds-norden.com Dampskibsselskabet NORDEN A/S was founded in Board of Directors Mogens Hugo Jørgensen, Chairman Alison J.F. Riegels, Vice Chairman Erik Gregers Hansen Erling Højsgaard Frederick W. Meier, Jr. Kirsten Hansen (employee representative) Torry Sørensen (employee representative) Management Steen Krabbe, President Jens Fehrn-Christensen, Executive Vice President Auditors KPMG Borups Allé 177, DK-2000 Frederiksberg Pricewaterhouse Coopers Strandvejen 44, DK-2900 Hellerup General Meeting The Annual General Meeting will be held on Monday, 28 April 2003 at 11 a.m. at the Danish Shipowners Association, Amaliegade 33, DK-1256 Copenhagen K. The head office of NORDEN

6 6 Endorsement of the Board of Directors and Management The Board of Directors and Management have today considered and adopted the Annual Report of Dampskibsselskabet NORDEN A/S for the financial year 1 January 31 December The Annual Report was prepared in accordance with the Danish Financial Statements Act, Danish accounting standards and the general requirements of the Copenhagen Stock Exchange on the financial reporting of listed companies. We consider the accounting policies applied appropriate, and in our opinion the Annual Report gives a true and fair view of the assets, liabilities, financial position and results of operations of the Group and the Parent Company and of the cash flow of the Group. We recommend that the Annual Report be adopted at the General Meeting. Copenhagen, March 24, 2003 board of management Steen Krabbe President Jens Fehrn-Christensen Executive Vice President board of directors Mogens Hugo Jørgensen Chairman Alison J.F. Riegels Vice Chairman Erik Gregers Hansen Erling Højsgaard Frederick W. Meier, Jr. Kirsten Hansen Torry Sørensen

7 7 Independent Auditors Report to the shareholders of dampskibsselskabet norden a/s We have audited the Annual Report of Dampskibsselskabet NORDEN A/S for the financial year The Company s Board of Directors and Management are responsible for the Annual Report. It is our responsibility to express an opinion on the Annual Report based on our audit. Basis of opinion We performed our audit in accordance with Danish auditing standards. These standards require that we plan and perform our audit to obtain reasonable assurance that the Annual Report is free of material errors and omissions. The audit includes examining, on a sample basis, evidence supporting the amounts and disclosures in the Annual Report. The audit also includes assessing the accounting policies applied and significant estimates made by the Board of Directors and the Management, as well as evaluating the overall Annual Report presentation. We believe that the audit performed provides a reasonable basis for our opinion. Our audit did not give rise to any qualifications. Opinion In our opinion, the Annual Report gives a true and fair view of the assets, liabilities and financial position of the Group and the Parent Company at 31 December 2002 and of the results of operations of the Group and the Parent Company, and of the cash flows of the Group for the financial year 2002 in accordance with the Danish Financial Statements Act, Danish accounting standards and the general requirements of the Copenhagen Stock Exchange on financial reporting. Copenhagen, 24 March 2003 KPMG PricewaterhouseCoopers Finn L. Meyer Jørgen Skovbæk Johansen Per Nørgaard Sørensen Kjeld Bøgild State-Authorised State-Authorised State-Authorised State-Authorised Public Accountant Public Accountant Public Accountant Public Accountant

8 8 8 The Group: Key figures and ratios Key figures are in DKK million Net revenues 2, , , , Costs -1, , , Profit before depreciation Profit from sale of ships Depreciation and write-downs Operating profit/loss Share of profit/loss before tax, associated undertakings Net finance Profit/loss before tax Profit/loss on ordinary activities after tax Profit on extraordinary activities after tax Consolidated profit/loss Profit/loss for the year Equity at year-end Balance sheet total at year-end 1, , , , ,373.8 Change in cash for the year Gross investments for the year in property, ships and equipment , Average number of employees Ratios Number of shares (excl. own shares) 2,182,500 2,182,500 2,302,000 2,425,000 2,425,000 Profit/loss per share of DKK Dividend per share of DKK Dividend for the year 50% 60% 50% 12% 8% Net asset value per share (book value) Return on equity 26.3% 39.3% 27.8% 5.4% -19.7% Solvency ratio 51.3% 33.4% 27.3% 29.1% 26.6% Share price at year-end Price/net asset value Net Asset Value (NAV) per share Net interest-bearing debt (DKK 000) 292, , , , ,486 Invested capital (DKK 000) 1,191,394 1,117,478 1,265, ,728 1,105,749 USD rate at year-end The key figures and ratios have been calculated in accordance with the guidelines (Computation of Financial Ratios and Key Figures of 1977) issued by the Danish Association of Financial Analysts. In accordance with the definition of the Danish Association of Financial Analysts, unadjusted figures have been used. Reference is made to definitions in the section on Accounting Policies applied. Key figures and ratios for have been adjusted to reflect the reduction of the denomination of the Company s shares from DKK 100 to DKK 20. Furthermore, adjustment has been made for the Company s holding of own shares. 1 : Excluding purchase options for ships. Added value of ships on order and buildings and property were not included for the period

9 9 Management report result for the year Accounting policies The accounting policies are unchanged compared to Profit for the year NORDEN achieved a profit before tax of DKK 25.3 million. In 2002 there were no profits from the sale of ships (2001: DKK million excluding DKK million in profits from the sale of ships). The profit for the year was DKK million (2001: million), and the Company s capital and reserves at year-end totalled DKK 849 million (2001: DKK 640 million). Profit includes costs of DKK 7.4 million as a consequence of an unsolicited bid to the Company s shareholders. The return on the Company s equity was 26% (2001: 39%), and the year-end solvency ratio was 51% (2001: 33%). On 26 February 2003 the Company announced a profit before tax of about. DKK 25 million and a profit after tax and minority interests of roughly DKK 175 million. Carry-back of deferred tax As a consequence of the Danish Tonnage Tax Act adopted on 18 April 2002 and of the Company having decided to enter into this regime with effect from 2001, the deferred tax of DKK million set aside at 31 December 2001 was carried back in In connection with the release of the provision for deferred tax, DKK million was recognised in the income statement, with a substantial impact on the year s profit. DKK 20.5 million was recognised directly in capital and reserves in the form of tax carried back on hedging transactions recognised in previous years. Dry cargo activity The profit for the year of the dry cargo department is DKK 26 million. The profit for the year includes no profits from the sale of ships. In 2001 the profit for the year was DKK 40 million excluding profits from the sale of ships amounting to DKK 87 million. Tanker activity The profit for the year of the tanker department is DKK 51 million. The profit for the year includes no profits from the sale of ships. In 2001 the profit for the year was DKK 70 million, excluding profits from the sale of ships amounting to DKK 78 million. Market value of the Group s fleet According to average brokers assessments (January 2003), the market value of the Company s own ships amounts to about DKK 896 million (USD 127 milllion), including charters. This amount is DKK 92 million higher than the carrying amounts totalling DKK 804 million at year-end At the end of 2002 NORDEN had contracted seven newbuildings, of which three have been sold, with delivery to the new owners to take place in The profit will be included in the result for 2003 upon delivery of the ships. According to the brokers assessments the seven newbuildings contracted and the 50% owned ship m.t. Nordscot have an estimated added value including charters of roughly DKK 18 million. The total fleet of the Group and the orders for the seven newbuildings thus represent a total estimated added value, including charters, of roughly DKK 110 million compared to carrying amounts. This corresponds to DKK 50 per share calculated on the basis of number of shares less own shares. Ships on finance leases In February 2002 the Company purchased the ships m.t. Nordasia and m.s. Nord Cecilie operated under a finance lease from St. Frederikslund Group. In that connection the company s lease liabilities were repaid at a discount. Hence the Company had no ships on finance leases at year-end Reduction of the share capital At the Annual General Meeting on 29 April 2002 it was decided to reduce the Company s share capital by a nominal amount of DKK 2,425,000 or 5%, from DKK 48,500,000 to DKK 46,075,000 by cancelling 121,250 own shares with a nominal value of DKK 20 each. This reduction of the share capital was implemented in Merger between Dampskibsselskabet NORDEN A/S and Nordfarer A/S On 1 January 2002 NORDEN merged with its fully-owned subsidiary Nordfarer A/S. Nordfarer A/S was included as a fully-owned subsidiary in both Parent Company and Group accounts for As a result of the merger the Parent Company comparative figures for 2001 have been adjusted. The merger was implemented at carrying amounts and has no impact on the result of operations or the capital and reserves. The two subsidiaries of Nordfarer A/S, Nordasia Ltd. and Nordholt Ltd., were liquidated in this connection.

10 10 Management Report Dividend On the basis of the profit for the year and the expectations for 2003, the Board of Directors recommend payment of a dividend of DKK per share of DKK (2001: DKK 12.00). NORDEN employees We thank all employees for their outstanding and loyal efforts during what has in many ways been a challenging year. the development of the group s fleet Tanker activities In February 2002 the Company purchased the Aframax tanker m.t. Nordasia from St. Frederikslund Group, from which the ship had been financially leased. By agreement with the shipyard, the planned delivery of the Aframax tanker m.t. Nordpacific was postponed to January Dry cargo activities In February 2002 the Company purchased the Handymax bulk carrier m.s. Nord Cecilie from St. Frederikslund Group, from which the ship had been financially leased. The ship was subsequently resold to Greek interests. During the spring the Company contracted two additional Handymax bulk carriers, one of which is partially owned by the company. Moreover, the Company concluded agreements on longterm charter of one Capesize unit and five Handymax bulk carriers with purchase options. Towards the end of the year three Handymax newbuildings, one partially owned, were sold for delivery in Total tonnage At the beginning of units totalling about 3,886 million dwt, distributed on 61 dry-cargo ships (roughly 3,379 million dwt) and eight tankers (507,000 dwt), were at the Company s disposal. torm s offer to norden's shareholders On 1 July 2002 A/S Dampskibsselskabet Torm (Torm) made a public offer to certain shareholders of NORDEN to buy their shares in the Company at a price of DKK 360 cash per share of nominal value DKK 20. On 14 July 2002 the Board of Directors of NORDEN presented a statement on Torm s bid in accordance with section 7 of Danish Securities Council Order No. 827 of 10 November According to this statement: Torm s offer to certain shareholders of NORDEN had not been made with the consent of the Board of Directors and Management of the Company. It was expected that a merger of NORDEN and Torm under Torm s ownership would be met with resistance from staff and partners. Shareholders with total shareholdings of 53% of the shares and the votes in NORDEN (after deduction of NORDEN s holding of own shares) had announced that they would not accept Torm s offer. Philippine crew members on the new building m.t. "NORDPACIFIC"

11 11 The price of DKK 360 per share offered did not reflect the market value of NORDEN s net assets, which in the opinion of the Board of Directors amounted to DKK 471 per share based on the preliminary accounts at 30 June To this should be added the possible added values of purchase options on ships estimated at DKK 76 per share. The conclusion of the Board of Directors The price offered was significantly lower than the market value of NORDEN s net assets and provided no remuneration for the goodwill value of a competent and well-run Company. Therefore shareholders with a medium or longterm investment horizon should not accept Torm s bid. As the price offered was somewhat higher than the historical quoted price, shareholders wishing to optimise their profit in the short term by selling their shares in NORDEN should consider accepting the bid or selling their shares on the Copenhagen Stock Exchange. At the time the offer was made Torm s ownership share was reported to be 30.8% after deduction of NORDEN s holding of own shares (10%). At the expiry of the offer Torm announced that the company had acquired a further 1.56%. After the expiry of the bid and until 9 August 2002, according to a statement to the Copenhagen Stock Exchange of that date, Torm had acquired another 0.99% so that their share of ownership now constitutes 33.35% after deduction of NORDEN s own shares. At the time the accounts were submitted, there was no information from Torm about changes in their shareholding. After the expiry of Torm s public offer the Board of Directors of NORDEN began a dialogue with the major shareholders Attransco Inc., A/S Motortramp and A/S Dampskibsselskabet Torm on the Company s future ownership structure. So far this dialogue has not brought any clarification. events after the expiry of the financial year Newbuildings etc. During the first quarter of 2003 three ships were delivered to the Company two Handymax bulk carriers and one Aframax tanker out of the seven newbuildings contracted at the end of The two Handymax bulk carriers have been sold. One has already been delivered to its new owner; the other is expected to be delivered in the summer of The new Aframax tanker m.t. Nordpacific of 105,300 tdw has been chartered to Italian interests under a timecharter for three years at an attractive rate. The ship will commence its charter at the end of the second quarter of In February 2003 the Group contracted a 56,000 tdw Handymax bulk carrier from a Japanese shipyard. The ship is expected to be delivered ex-yard at the beginning of In March 2003 the associated company Normit Shipping contracted a 48,600 tdw Handymax bulk carrier from a Japanese shipyard. The ship is expected to be delivered ex-yard at the beginning of Also in March 2003 the Group sold a product tanker under construction at the STX shipyard in South Korea to Swiss interests. This ship will be delivered to the new owner after delivery ex-yard at the beginning of July The newbuilding is owned by the associated company Nortide II Shipping Limited. General market terms 2002 was a year characterized by instability and uncertainty. Extreme market fluctuations reflected the volatility on the shipping market, with market conditions open to speculation. The general freight market reflected the fragile world economy for a large part of the year, ranging from stagnation to marginal growth. nordpacific Type Aframax tanker Year built 2003 DWT Flag DIS Home port Nykøbing Mors

12 12 Management Report In spite of historically low interest rates, the Western world and Japan in particular failed in their efforts to re-establish consumer confidence and generate increased economic activity. At the same time, sluggish share markets and declining employment rates set the pace during a period characterised by one financial scandal after the other. The Far East region, however, experienced dramatic industrial growth, with China as a dominant market player. China s explosive growth, increased openness towards the outside world and thus increased imports and exports were the driving forces behind the regional market development throughout the Far East (Korea-India). Other events as well had a significant influence on the Company s business activities. The Australian grain harvest was dismally meagre as a consequence of prolonged drought. The countries of the Far East in particular were thus forced to import grain products from more remote areas, whereby demand for dry cargo ships increased. Nuclear reactor problems in Japan led to the shutdown of more than half of the country s nuclear plants, resulting in increased imports of alternative energy sources predominantly oil and coal. At the same time, the instability in the Middle East and the increased focus on Iraq resulted in an increase in demand for oil products and thus in increasing prices, with OPEC generally increasing its production towards the end of the year. The entire tanker market benefited from the events mentioned above. The single-hull oil tanker Prestige, built in 1976, sank on 19 November 2002 in the Bay of Biscay off the Spanish coast causing major oil pollution. The sinking of the ship revived the focus on safety, maintenance and, not least, the use of older ships, and the demand for modern double-hull ships increased. At the beginning of December, Venezuela s large oil exports were obstructed by a far-reaching general strike. The oil-consuming countries especially the USA had to find alternatives, often resulting in increased transportation costs. offices abroad As part of the Company s strategy to move closer to its customers and provide better service, a new office was opened in Shanghai, China, in The new office is a strong supplement to the Company s existing offices in Singapore and the US. When viewing 2002 from a financial perspective, it is difficult to see much optimism. However, in spite of the indisputable presence of a recession, the events mentioned above nevertheless contributed to many bright spots on the markets. NORDEN is in a favourable position to benefit from market volatility, although the Company also attaches great importance to long-term employment and therefore remains relatively unaffected by short-term fluctuations positive as well as negative. expectations for 2003 Under normal circumstances, global economic trends and the shipping markets are closely interlinked. The scenario emerging at the beginning of 2003, however, is a paradox. Although much of the world suffers from recession, the Company s two market segments tankers and dry cargo are surprisingly strong and active. Quality tonnage involving a high level of maintenance, supervision and safe operation is gaining ground among charterers. At the same time international class companies, shipping companies and the industry are working together to identify criteria to ensure that future ships are built to higher standards than previously. This will automatically increase charterers interest in tonnage inspection prior to entering into a possible engagement. The Shipping Company NORDEN, which runs and operates one of the world s most modern fleets, welcomes such initiatives. The effects from the PRESTIGE oil spill disaster have not yet subsided. The Company sympathises with the concept of a quicker phase-out of old single-hull tonnage, but this should be done on an international scale rather than on a regional or a local basis. The Company is trying to exploit the significantly improved market terms in an optimum manner given that, particularly within the tanker sector, a recession is expected to set in during the spring which will be a more realistic reflection of economic trends. As a result, NORDEN plans to sell tonnage and enter into long-term charters. In general, the Company anticipates a higher level of activity in 2003 due to projected market terms, and the Company s strong position at the beginning of 2003 is expected to lead to a significantly higher profit for both activity segments. The profit for 2003 (after tax) is expected to be roughly DKK 150 million based on a USD exchange rate of 7.00.

13 13 Elavated walkway to Technical department

14 14 Management Report Dry cargo competitive situation Demand Industrial output in the OECD dropped for the second consecutive year. The 0.7% decline from 2001 was, however, more moderate than the year before, but the trend was the same, with a decline in the USA (-0.5%), Europe (-0.8%) and Japan (-1.6%). China and the rest of Asia, on the other hand, seemed better at handling the situation. Chinese industrial output grew by as much as 12% in 2002 compared to the year before. South Korea and Taiwan neighbours of China benefited from these favourable trends, and both these countries output increased by about 7%. Total global steel production is estimated to amount to 886 million tonnes in 2002 (about 87-88% capacity utilisation), of which China accounted for 20.5% or 182 million tonnes. China imported 112 million tonnes of iron ore in 2002: 24% more than the year before and 115% more than in 1998 (52 million tonnes). All in all, ocean transportation of iron ore rose by 5% in 2002 compared to In March 2002, the USA introduced additional duties on imported steel products in order to protect the country s own steel production. This led to a general price increase on the world market for steel products and added to the general growth in demand. This price increase was not actually reflected in transport activities (increased volume) until during the second half of Production/shipping of coal to power plants increased by 7% for the second consecutive year, and growth was particularly significant during the fourth quarter of After a very mild winter in 2001/2002, coal prices (FOB Richards Bay) dropped on an overall scale from USD 33 per tonne in October 2001 to USD 20 in August However, low stocks and an early winter (in Europe as well as the USA) meant that the demand for coal for power supply rose drastically during the fourth quarter. Towards the end of 2002, nine out of the 17 nuclear power plants in the Tokyo area were shut down (extraordinary maintenance activities), which also led to a heavy increase in coal imports to Japan. During the fourth quarter of 2002, coal prices rose to USD 28 per tonne. Shipment of grain products dropped again in 2002 by 1% compared to the year before. In transport terms, the sector was affected by the economic instability in Argentina in the second quarter, which resulted in major delays in shipments out of the country. All in all, bulk shipments rose by 2.5% in volume compared to 2001, with the fourth quarter in particular generating a handsome increase. Supply After a record high delivery year in 2001, with 20.3 million twd being delivered, deliveries dropped in 2002 to 14 million dwt, which should be compared to scrapping of seven million dwt. This equals an increase in the global dry cargo fleet of 3.2%. Given the dismal freight market during the first eight months of the year, it was disappointing that only 7 million tonnes were scrapped. Under these poor market Key figures and ratios for the dry cargo segment DKK Net revenues 1,679,892 1,997,131 Profit from sale of ships 0 86,945 Profit for the year excluding profit from sale of ships 25,843 40,339 Profit for the year 25, ,284 Non-current assets 115, ,297 Liabilities 94, ,820 Net profit ratio 0 7% Return on assets 12% 42%

15 15 conditions, NORDEN had expected that million tonnes would be scrapped, which would have meant zero growth in the world fleet. Stricter environmental and safety requirements, however, mean that the scrapping potential is likely to increase in the years to come, when it is no longer profitable on the freight market to operate older units safely. In 2002, net changes per segment included af 2% growth in Handysize (10-60,000 dwt). However, the Handymax segment (40-60,000 dwt) rose by 8-9%, Panamax ( dwt) by 6 %, and Capesize (+80,000 dwt) by 2.5%. On 1 January 2002 the bulk fleet (excluding combination ships) totalled million dwt versus million dwt at the end of the year. NORDEN wishes to be a customer-oriented business, and a number of activities were launched in 2002 to ensure that the Company provides maximum service to its core customers. NORDEN is pleased to note that contract cover in 2003 looks promising following negotiations on extension at the end of In addition to its offices in the USA and Singapore, the Company opened a new office in Shanghai, China, at the end of The Company entered into contracts for long-term chartering with running purchase options for one additional Capesize unit and five Handymax units. The long-term fleet with purchase options at the end of the year thus includes: activity and earnings Activity NORDEN s total dry cargo activity measured in ship days increased in 2002 from 16,455 days to 17,463 days, or about 6%. Especially towards the end of the year, activities rose dramatically along with the increasing market. Compared with the first three quarters of the year spot rates for Cape, Panamax and Handymax were 72%, 41% and 28% higher, respectively, than during the fourth quarter. The Company continues to pursue a strategy in which its operations are run on a portfolio management basis in order to curb the risk of dramatic cyclical fluctuations in the industry as much as possible. Capesize Geared Panamax Handymax 4 units, of which 2 have been delivered 2 units, which have been delivered 14 units, of which 9 have been delivered nordhval Type Handymax bulkcarrier Year built 2003 DWT Flag Singapore

16 16 Management Report Earnings Although earnings dropped heavily from 2001 to 2002 due to the highly unfavourable market conditions during the first eight months of the year, the Dry Cargo department s profit for the year totalled DKK 26 million. The below diagram compares the TC rates earned by the Company with the average market spot rates for During the first eight months of the year, the respective spot T/C averages of Capesize, Panamax and Handymax were USD 9,697, USD 6,837 and USD 7,332 per day versus USD 16,644, USD 9,652 and USD 9,408 per day, during the last four months of the year. For the year in general, it is gratifying to see that the Company sailed better than the open spot market. USD per day Average Number of T/C equivalent spot T/C ship days NORDEN market Capesize ,386 16,142 20, ,343 16,665 12, ,107 15,692 11,918 Panamax ,104 9,603 11, ,725 9,575 8, ,704 8,041 7,725 Handymax ,581 9,509 9, ,387 9,639 8, ,652 8,393 7,978 Source: The Baltic Exchange purchase and sale of ships Newbuildings The very slow demand for bulk tonnage during the second half of 2001 continued far into 2002, which meant that the price of, Handymax units for instance, towards the end of the first quarter dropped to USD million. At year-end, prices had recovered as a direct consequence of increasing demand. It was gratifying for the future dry cargo market to learn that demand for other types of vessels returned during the third and fourth quarter. Quite a few dry cargo vessels were contracted in 2002 with expected delivery in 2004 and 2005, and NORDEN expects that new tonnage will be added to the market in those years in the range of million tdw. Deliveries could have been much higher, however, if the container, tanker and car vessels market had not taken an upturn. During the spring of 2002, the Company contracted another two Handymax units, of which one is partially owned, and at the end of the second quarter of 2002, the Company had thus placed orders for four Handymax units. During the second half of 2002, three of these units were sold for delivery in Secondhand ships The promising freight markets appearing at year-end apparently had an influence on secondhand prices. In addition, the low interest rates have resulted in historically low financing rates and paved the way for dramatic price increases which exceeded the drop in prices in From mid-2003, the Company may begin exercising its option on some of the long-term chartered ships. Naturally, this option will only be exercised if favourable for the Company. The number of vessels with an exercisable option will increase gradually as 2005 draws nearer. A strengthened secondhand market would therefore prove advantageous to the Company. Price developments Price trends for a 5-year-old unit Early 2002 Year-end 2002 USD million USD million Change Handymax (52,000 dwt) % Panamax (73,000 dwt) % Capesize (170,000 dwt) % Source: R.S. Platou Beg Year-end 2002 USD million USD million Change Handymax (45,000 dwt) % Panamax (70,000 dwt) % Capesize (160,000 dwt) % Source: R.S. Platou

17 17 expectations for 2003 (dry cargo) During recent years, China s influence on the bulk market has become increasingly evident. Although China s economy continues to account for only 5-6% of the total world economy (measured in GDP), the country s influence on the transport sector is far more significant. The world s steel consumption (excluding China) is expected to grow by 1%; steel consumption in China alone is expected to rise by 10-12%, boosting global growth to 3-3.5%. Several other Asian countries are managing even better and expect moderate growth in However, the USA and Europe are still struggling with slow economies in spite of low interest rates. After two years of negative industrial growth the USA industry, however, is expected to grow by 2.6% in 2003 (source: Consensus Forecast). Although this figure may appear to be a trifle optimistic, NORDEN also expects a slight increase. The lean Australian harvest will inevitably result in a longer tonne-miles ratio during the first and second quarter of 2003, and consequently have a positive influence on the freight rates. Also, it seems as if Japan will import significantly more coal in 2003 for power supply purposes in connection with the maintenance works being performed on the nuclear power plants. All in all, a 3-3.5% growth is expected on the bulk market in 2003 compared to If the adverse trends on the share market fail to reverse, world economies will be facing declining consumption and investment and thus a reduced demand for transport services. The war in the Middle East may also have a negative impact on world economy. Deliveries of new ships in 2003 are expected to amount to about 11 million dwt, and even with a relatively healthy market, about 6-8 million tdw will be scrapped. An increase in the supply of tonnage of 1-2% and a 3-3.5% growth in demand for the bulk market provide the basis for a significantly better freight market in 2003 than in NORDEN expects the first six months of 2003 in particular to generate positive results. Based on the above, the Company appears to be wellpositioned for 2003, and it is expected that the Dry Cargo Department will produce a significantly higher profit in 2003 than in In addition, the Company expects to establish yet another office abroad in 2003 in order to provide even better service to its core customers. Chartering staff in Dry Cargo Department's Handymax section

18 18 Management Report Tankers competitive situation Demand Moderate growth in the world economy of 1.7% led to minuscule growth of 0.5% in global oil demand in This equals an increase in demand of 390,000 barrels of oil per day. However, the oil market was characterised by marked changes, which had a direct influence on the transport patterns and producing countries. Although total oil production increased by a mere 0.4 million barrels per day, OPEC lost vast market shares. OPEC production dropped from 27.0 million barrels per day in 2001 to 25.1 million in 2002, whereas non-opec countries increased production from 46.7 million barrels per day in 2001 to 48.0 million in OPEC defended global oil prices by minimising production, the result being market shares lost to non-opec countries, most markedly to Russia which, with a production throughout 2002 of 9.4 million barrels per day, outrivaled Saudi Arabia as the world s largest oil producer. The increased production and exports from Russia are carried out from the Baltic Sea and the Black Sea in smaller units (Suezmax and Aframax) as opposed to the traditional exports from the Arabic Gulf in VLCC units. As a consequence of the changes mentioned above, seaborne transport of crude oil dropped in 2002 to 1,565 million tonnes from 1,592 million tonnes in 2001, corresponding to 1.7%. Typically, oil prices stayed within the price range of USD per barrel in accordance with OPEC s wishes. During the first quarter of 2002, however prices were markedly lower due to poor demand resulting from a mild winter in the northern hemisphere in 2001/2002. However, during the second and third quarter, oil prices managed to stay within the price range defined by the OPEC countries. As a consequence of the persistent war threats against Iraq, prices increased drastically, however, towards the end of the year. The first three quarters of 2002 were relatively undramatic in terms of fluctuations and events. After this period, the combination of three political events occurring simultaneously resulted in drastic growth in the demand for oil and thus a dramatic increase in freight rates. Japan shut down more than half of its water-cooled nuclear power plants for inspection and maintenance after previous spillage from these plants became publicly known. This led to an immediate shortage of electricity with attempts being made to maintain production by strongly increasing imports of oil and coal to the power plants which benefited freight rates considerably. From the beginning of December, Venezuela was paralysed by a general strike which also had a devastating effect on the country s oil industry. For the first time in 100 years, Venezuela had to import refined oil products, and the US, which obtains about 13% of its oil imports from Venezuela, had to import immediately from other parts of the world, including the North Sea, West Africa and the Arabic Gulf. The longer transport distances also proved very beneficial to freight rates. Key figures and ratios for the tanker segment DKK Net revenues 391, ,684 Profit from sale of ships 0 77,551 Profit for the year excluding profit from sale of ships 51,144 70,139 Profit for the year 51, ,690 Non-current assets 1,031,744 1,025,789 Liabilities 652, ,299 Net profit ratio 21% 44% Return on assets 5% 4%

19 19 Iraq continued to be a menace to the rest of the world, and the constant war threats against the country in autumn 2002 resulted in increased oil prices, with a so-called psychological war premium being charged on top of the oil price in anticipation of an imminent war. Apart from the events mentioned above, the demand for double-hull tanker tonnage increased when the 26-year-old single-hull tanker m.t. Prestige sank off the west coast of Spain in November, while carrying fuel oil onboard. The EU Commission dealt with the matter immediately also before an in-depth inquiry into whether the severity of the disaster could have been reduced and submitted a proposal to ban ships carrying fuel oil in single-hull tonnage. Furthermore, the EU plans to speed up the process of phasing out single-hull tonnage, which was adopted in the IMO in April While these lines are being written, the EU seems ready to adopt a solitary approach, in spite of the fact that shipping is a global trade and global measures need to be adopted rather than regional ones. The Company s tanker tonnage solely consists of modern double-hull tonnage. Consequently, NORDEN welcomes the increased focus on more environmentally friendly tanker tonnage design. Supply of tonnage Throughout 2002, the world s tanker tonnage increased only mildly, by 0.8%, from million tdw to million tdw. Delivery of new tonnage (excluding chemical vessels) accounted for 21.4 million tdw, whereas scrapping of tonnage reached its record peak with 20.1 million tdw against only 16.1 million tdw in New contracting of tanker tonnage was down significantly throughout 2002, from 26.6 million tdw in 2001 to 19.4 million tdw in This equals 6.6% of the active fleet. Tanker tonnage order volumes dropped from 61.6 million tdw in 2001 to 55.4 million tdw in 2002, which equals 18.9% of the active fleet and makes up a rather significant order book. From this order book, 55% will be delivered in 2003 (30.4 million tdw), 36% in 2004 (20.0 million tdw) and 9% in 2005 (5.0 million tdw) with a few slipways, however, still standing idle. To ensure a reasonable balance in the world fleet it is crucial that scrapping of older tonnage continues at a high level in The incentive to do so could come from the EU in the form of increased political pressure following in the wake of the loss of the tanker Prestige. activity and earnings Activity NORDEN s activities measured in ship days rose in 2002 by about 15% compared to 2002 from 2,675 ship days to 3,074. This increase was attributable to the addition of two Aframax newbuildings at year-end 2001 which have been in operation throughout nordatlantic Type Aframax tanker Year built 2001 DWT Flag DIS Home port Aabenraa

20 20 Management Report USD per day Market Number of T/C equivalent average ship days NORDEN one-year T/C Aframax ,580 22, ,530 24, ,095 21,365 16,856 Product tanker(45,000 tdw) ,563 14, ,970 17, ,016 13,423 Product tanker (35,000 tdw) ,300 16,260 13, ,088 15,330 17, ,095 14,404 13,068 Source: ACM Shipping The Company s associated company Nortide Shipping Limited (50% owned) operated the product tanker Nordscot which has concluded a long-term charter. In 2001 the Company s associated company Nortide II Shipping Limited (50% owned) contracted a product tanker from the South Korean shipyard STX Shipbuilding Co. Ltd. This ship is expected to be delivered during the summer of During the year, NORDEN had a total of nine units at its disposal, i.e. six product tankers and three crude oil tankers, or a total of roughly 551,600 tdw. In 2002 the Company continued to pursue its strategy of maximum risk cover of own tanker tonnage on long-term timecharters. Thus all the Company s own tonnage was employed in attractive timecharters in The Company s two chartered units in the spot market benefited from the increased rate level towards the end of the year. At the beginning of the year, four chartered units were added to own tonnage, of which one product tanker was returned during the second quarter of Three product tankers will be added to chartered tonnage in Earnings From an overall perspective, the year was characterised by lower freight rates in the spot market than in 2001, but average rates continued to be satisfactory. Rate levels dropped evenly during the year until the sudden recovery in the fourth quarter of The Department s profit for the year was DKK 51 million. In the table below, the Company s T/C equivalents are compared to the average market rates for 12-month timecharters. The table to the left shows the number of ship days broken down into segments. As a result of the Company s strategy for long-term risk cover through employment of its own units on fixed timecharters, NORDEN has been able to maintain regular and positive earnings in an otherwise sluggish market. This trend is expected to continue in the years to come. The chartered units employed in the spot market were affected by the declining market, but performed about USD 600 per day better than the average market indicators. purchase and sale of ships Newbuildings In 2002, contracting of new tonnage on the world market totalled 19.4 million tdw, which was a great deal lower than in 2001 when it totalled 26.6 million tdw. The declining rate level throughout 2002 combined with a naturally sceptical attitude towards the intense new con- Average rate trends USD per day Av Av / year s t/c Spot market 1 year s t/c Spot market 1 year s t/c Spot market VLCC 36,000 34,700 26,100 22,700 27,000 66,600 Aframax 24,100 31,600 16,500 17,700 17,000 29,800 Handymax (45,000 tdw) 17,800 18,400 13,300 12,000 13,500 16,900 Source: R. S. Platou

21 21 tracting activities throughout 2001 had an impact until the end of 2002, when an interest in further contracting of tanker tonnage began to emerge. The reduced interest in tanker tonnage led to falling prices quoted by the shipyards, which also saw a declining interest in both dry cargo and container vessels during the first half. The number of tanker tonnage contracts was 27.1% lower than in 2001, and prices dropped by 2-10% the larger the units, the higher the price decline. The price level hit bottom just before the end of the year, when a drastic increase in freight rates led to a new interest in tanker tonnage contracting and thus to slightly increasing prices. The planned delivery of the Aframax newbuilding m.t. Nordpacific was postponed from the end of November 2002 to the beginning of January 2003 by mutual agreement between NORDEN and the shipyard. Secondhand ships The price level governing secondhand tonnage fell moderately until October 2002 and was clearly interlinked with the freight market, which also declined until November. Prices dropped throughout the year by 5-12%, with the major units experiencing the greatest decline. Generally, the number of secondhand transactions, however, was rather limited in 2002 due to the major discrepancies between willing seller and willing buyer. The sellers were not interested in reducing prices sufficiently to attract buyers, and given the increased freight rates by the end of the year, the buyers were the ones who had to adjust their price ideas in an upward direction, modern tonnage also being affected by the loss of the Prestige. The prices for single-hull tonnage have dropped and will drop even more. In February 2002, the Company repurchased the Aframax tanker m.t. Nordasia from the St. Frederikslund Group, from which company the ship had been leased. expectations for 2003 (tankers) Economists expect increased global growth in GDP for 2003, although still at a moderate level of 2.3% against 1.7% in For the predominant economies, the following growth projections (2002 in parentheses) are: the USA 2.6% (2.4%), the EU 1.6% (1.0%), Asia 2.3% (2.0%) and Japan 0.4% (-0.3%) The International Energy Agency, the IEA, expects growth in global oil demand of 1.04 million barrels per day, equivalent to 1.3% compared with a marginal growth of 0.5% (0.39 million barrels per day) in OPEC market shares will most likely continue to be under pressure, particularly from Russia. Due to considerable deliveries of newbuildings in 2003, the rate level will be under pressure. The active tanker fleet is expected to increase by 5.1%, but the seaborne transport of oil is generally expected to increase by only 1.3%. However, during the first quarter of the year, rates will be positively affected by the events mentioned above: reduced nuclear power capacity in Japan, the aftermath of the general strike in Venezuela and a winter that turned out to be colder than usual in the northern hemisphere. Furthermore, the war in Iraq is likely to affect the market in the long as well as the short term, depending on its duration and the magnitude. The Company s three chartered units to be delivered some time in 2003 will be employed in the spot market, whereas existing units which are all employed in attractive long-term charters will not be affected by rate fluctuations in the spot market. The Aframax tanker m.t. Nordpacific, which was delivered from the shipyard at the beginning of January 2003 has been chartered out on a timecharter for a period of three years at an attractive rate. Delivery under this charter will be made at the end of the second quarter of The positive effect of the long-term charters will thus continue in It is therefore expected that the Company will be able to maintain average rates exceeding those on the spot market in Contracting price trends for tanker tonnage in 2002 Secondhand price trends for a 5-year-old unit in 2002 Beg Year-end 2002 USD million USD million Change VLCC % Handymax product tankers % Aframax % Source: Platou Beg Year-end 2002 USD million USD million Change VLCC % Handymax product tankers % Aframax % Source: Fearnleys A/S

22 22 Management Report Risk profile The shipping industry is highly sensitive to market fluctuations; this is also reflected in the sometimes wide fluctuations in freight rates and ship prices. When ships are chartered the risk profile is increased. However, the Company manages this increased risk from a portfolio point of view by chartering and by concluding freight agreements, forward freight agreements and option cargo contracts. risk management The overall guidelines for financial risk management have been defined by the Board of Directors and are handled on a day-to-day basis by the Financial Department. As part of the general risk management, the Board of Directors has decided to curb the financial risks. Financial management comprises the Company s currency, interest rate, market and credit risks. value-at-risk (var) In 2002 the Company added the management tool Value-at- Risk to its range of management tools. VaR is a statistical target for the maximum loss on the Group s positions within a given period with a given probability. VaR is primarily used to manage the Company s longterm T/C arrangements in the dry cargo department. interest rate risks NORDEN s business areas are based exclusively on the US dollar because all the Company s income in the form of freight income and income from sale of ships is in that currency. Therefore, the Company has chosen the US dollar as its functional currency. In order to minimise its exchange rate risk, the Company seeks to match expenses and income and liabilities and assets, primarily by denominating as many costs and liabilities as possible in US dollars. NORDEN s reporting currency is Danish Kroner because the Danish Financial Statements Act requires financial statements to be presented in DKK (or Euro). Thus the Company s reporting currency is different from its functional currency. The overall objective of the Company s exchange-rate strategy is to minimise exchange-rate risks in relation to its functional currency (USD) and not in relation to itsreporting currency (DKK). The Company does not convert its excess functional liquidity (USD) into the reporting currency (DKK) or other currencies for accounting or speculative purposes. NORDEN s profit whether from current operations or sale of ships is accumulated in the Company s functional currency (USD) for reinvestment in the same currency in connection with the Company s continued operation. The Company s actual exchange-rate risk arises as a result of the continuous exchange-rate effect on administrative The product tankers Nordeuropa and Nordscot in Come-by-Chance, Canada

23 23 and commercial payments and dividends paid to the shareholders in currencies other than the functional currency (USD). These payments will equal about USD 13 million for It is the Company s policy to hedge these payments for a period of six months and two years, depending on the movements of the USD rate. At the end of 2002 a total of USD 5 million had been sold forward at an average USD/ DKK rate of 8.12, corresponding to a period of about six months. In connection with the contracting of a ship in Japanese yen, 1,899 million were bought at the end of 2002 at an average USD/yen rate of , corresponding to the balance payable on the ship. Se also Note 30, Financial Instruments. interest rate risks The shipping sector is a capital-intensive industry, and the interest paid in connection with financing of ships has a signi ficant impact on the profit for the year. All ship loans are raised in USD in an amount which is usually 60% of the total investment sum and with a repayment profile equivalent to at least 50% of the ship s economic life. As there is no clear correlation between freight rates and the price of ships on the one hand and the USD interest rate on the other, NORDEN has as part of its overall risk management programme adopted the policy of locking the interest rate for a period which can fluctuate between two and six years for the Company s overall loan portfolio. The rate of interest is normally locked for each ship loan and is based on the degree and length of financing, the loan repayment profile, the duration of the ship s fixed employment, sales expectations, the interest rate level and interest curve. At the close of 2002, the Group s loan portfolio totalled roughly USD 86 million, and the interest rate was locked at 5.9%, including the lenders margin, for a period of about 2.5 years. market risks Insurances NORDEN s ships are insured at highly competitive premiums by recognised international insurance companies. This is the result of the work of qualified employees on board and of the good maintenance standard of the ships. The ships are continuously insured at values above market level. derivative financial instruments The Group uses derivative financial instruments to manage the risks for the Group that fluctuating freight rates and oil prices present. Staff in Dry Cargo Department's control section

24 24 Management Report Forward freight agreements NORDEN uses forward freight agreements (FFA contracts) solely as a supplement to the physical activity in connection with the cover of physical cargoes and ships. The forward freight agreements run typically 12 months ahead and are used in connection with the Company s risk management of the portfolio when physical alternatives are more costly or not possible due to time pressure. At the close of 2002 NORDEN had no open forward freight agreements. Option cargo contracts At the close of 2002 the Company had an option cargo contract for a calculated amount of about USD 3 million. This is intended as an alternative to the chartering of ships. Bunker hedging contracts It is NORDEN s policy to wholly or partly hedge the expected future bunker needs for the Company s cargo volume contracts. The extent and duration of the hedge are determined annually in connection with the formulation of the strategy for the subsequent year. The strategy depends on the Company's expectations with respect to future oil prices % of NORDEN s total needs for 2003 are hedged in connection with the Company s cargo contracts. This relatively high level of hedging is a consequence of the Company s anticipating substantial uncertainty regarding oil prices. If the Company s attitude to this uncertainty changes as a result of the war against Iraq and the situation in Venezuela, the extent of hedging will be changed accordingly. At the close of 2002 bunker-hedging contracts totalling roughly USD 8 million had been purchased, covering 90% of the Company s cargo contracts. See also Note 30 Financial instruments. Cargo contracts (dry cargo) It is NORDEN s policy to have a relationship between cargo and cargo capacity of between 50% and 150% 12 months ahead. The value of the cargo contracts at the beginning of 2003 corresponded to freight income of roughly USD 44 million. The contracts mostly cover 2003, but a few cargo contracts run until the beginning of credit risks NORDEN s credit risks mainly comprise freight receivables, prepaid T/C hire, prepayments, and cash and cash equivalents. The amounts of these items as stated in the balance sheet correspond to the maximum credit risk. Freight receivables are oil companies, oil traders, shippers and shipping companies with an acceptable credit rating. In addition, freight receivables are composed in such a way that the Company s credit risks are not regarded as unusual. For chartered tonnage, the timecharter is prepaid for a period of maximum 30 days, and the prepayments are composed in such a way that the Company s credit risks are not regarded as unusual. Prepayments to shipyards are safeguarded by means of guarantees that depend on the shipyard s credit standing and the amount of the prepayments. As collateral for NORDEN s contracting of an Aframax tanker, the Company received a company guarantee from one of the largest Japanese trading houses, and as collateral for the Group s contracting of two product tankers from STX Shipbuilding Co., Ltd. in South Korea, the Company received a letter of guarantee from a major Danish bank with a high credit rating. The Group s cash and cash equivalents are deposited with banks that have high credit ratings. counterpart risks The Company s counterpart risks include forward sales of foreign currencies, interest-rate swaps, bunker hedging contracts, forward freight agreements, option cargo contracts, prepaid T/C hire, port charges and cargo contracts. Forward sales of foreign currencies and interest-rate swaps are made through major Danish banks with a high credit rating. Forward freight agreements and cargo contracts were entered into with large, well-known producers, shippers, recipients and traders with satisfactory credit ratings, and the Company collaborates only with recognised shipowners and port agents. environment In accordance with NORDEN s declared environmental policies the Company has taken a number of specific initiatives aimed at reducing and, where possible, eliminating risks. Our fleet of tankers consists exclusively of modern double-hull vessels which satisfy all relevant national and international requirements at any time. All crews are managed by Danish senior officers selected on the basis of their wide experience and competence. Our foreign junior officers and ordinary crew members are recruited through partner undertakings, enabling NORDEN to maintain total control of the selection process and thus ensure the highest level of competence among these crew categories. NORDEN has developed and continuously implements a specially designed highly intensive training programme in environmental protection and combating of pollution for all responsible officers at sea and on land.

25 25 Financial review The Annual Report of the Group and the Parent Company is presented in accordance with the provisions of the Danish Financial Statements Act for listed companies in accounting class D, current Danish accounting standards, and the requirements otherwise imposed by the Copenhagen Stock Exchange on the presentation of financial statements for listed companies. Accounting policies are unchanged compared with last year. Merger with Nordfarer A/S On 1 January 2002 NORDEN merged with its whollyowned subsidiary Nordfarer A/S. Nordfarer A/S was included as a wholly-owned subsidiary in both Parent Company and Group accounts for As a result of the merger the comparative figures for 2001 have been adapted for the Parent Company. The merger was implemented at carrying amounts and has no impact on the result or the equity. The two subsidiaries of Nordfarer A/S, Nordasia Ltd. and Nordholt Ltd., were liquidated in this connection. Profit for the year and equity The profit for the year after tax was DKK 196 million against a profit of DKK 217 million in Before tax the profit was DKK 25 million versus DKK 312 million in Costs relating to A/S Dampskibsselskabet Torm s public offer to certain NORDEN shareholders amounted to DKK 7.4 million, and they are recognised under the item Other external costs in the income statement. Equity totalled DKK 849 million against DKK 640 million in Activities and profitability Net revenues dropped by DKK 399 million, or 16%, compared with The decline is due to diminished freight rates and a lower USD exchange rate, whereas the number of ship days was larger for both segments than in to Dry cargo Freight income for own dry cargo vessels dropped by DKK 90 million to DKK 13 million. The decline is attributable to sale of own tonnage in 2002 and the second half of The Company had no dry cargo vessels of its own at the end of Freight income for chartered ships dropped by DKK 228 million due to lower freight rates and a lower USD exchange rate. At the beginning of 2002 the Company purchased Nord Cecilie from the St. Frederikslund Group at a refinancing profit of DKK 34 million. The ship was depreciated by DKK 19 million at market value and subsequently sold without gain or loss. The Dry Cargo Department s profit for the year was DKK 26 million. At the end of 2002, a bill of lading claim of USD 6.75 million was tiled against the Company in connection with the delivery of a bulk cargo to a recipient in the Middle East in August NORDEN has claimed obsolescence and that NORDEN is not the rightful defendant. The Company and its legal advisors consider the claim to be unjustified and do not believe that the Company will incur a loss as a consequence of the case. nordeuropa Type Product Tanker Year built 2000 DWT Flag DIS Home port Helsingør

26 26 Management Report Tankers Freight income for own tankers increased by DKK 40 million to DKK 259 million. The increase is due to the acquisition of two new Aframax tankers during the fourth quarter of As a consequence of a drop in the number of chartered tankers, lower freight rates and the decline in the USD rate compared to 2001 freight income from chartered tankers dropped by DKK 112 million. The Tanker Department s profit for the year was DKK 51 million. Financial items Financial income is DKK 9 million above the 2001 level. The capital gain resulting from the repayment of leasing debt in connection with the purchase of the ships Nord Cecilie and Nordasia from St. Frederikslund Group amounts to DKK 34 million. The positive foreign-currency adjustments were 22 million in Financial costs were up DKK 11 million from the 2001 level. Interest costs on long-term debt dropped by DKK 21 million following the sale of ships; foreign-currency adjustments were minus 32 million. Ships In 2002 NORDEN purchased the dry cargo ship Nord Cecilie and the tanker Nordasia from St. Frederikslund Group. The former was resold in April Previously, the two vessels were recognised in the balance sheet as ships operated under a finance lease. The value of the ships The Company s ships are recognised in the balance sheet in Danish kroner at cost less accumulated depreciation and write-downs. The carrying amount of the ships is subject to ongoing comparison with their earnings capabilities and value indicators. To the extent there are indications of a diminution in value exceeding the annual depreciation, the ships are written down to the lower value of recapture. To support the assessment of the carrying amount of the ships the Company has its ships regularly assessed by two independent brokers. As the brokers assessments are in USD, the exchange rate plays an important role in comparisons with carrying amounts in DKK. Average brokers assessments (January 2003) of own ships totalled DKK 896 million (USD 127 million) including charter parties. This amount is DKK 92 million higher than the carrying amounts of DKK 804 million at the end of Subsidiaries and associated undertakings At the end of 2002 the Company opened an office in Shanghai, China, in order to move closer to our customers in that region. Also in 2002, together with Mitsui, NORDEN established the company Normit Shipping S.A. of which 51% is owned by NORDEN Tankers & Bulkers Pte. Ltd., Singapore, and 49% by Mitsui. The Company contracted a Handymax dry cargo vessel which was resold for delivery in NORDEN s share (50%) of the result of Nortide Shipping Ltd. and Nortide II Shipping Ltd. is included under associated undertakings. Cash and cash equivalents Cash and cash equivalents dropped by DKK 171 million in 2002, primarily as a result of repayment of debt and payments to the shareholders, and amounted to DKK 286 million at the end of Cash flows from operating activities amounted to DKK 51 million. An amount of DKK 13 million was invested in property, plant and equipment, and net amounts from sale of ships totalled DKK 134 million. Prepayments on newbuildings increased by DKK 153 million. Investment activities contributed a negative DKK 32 million. nordasia Type Aframax tanker Year built 1998 DWT Flag DIS Home port København

27 27 Financing by shareholders was negative at DKK 54 million: DKK 26 million in dividends for 2001 excluding dividend on own shares, DKK 35 million for the purchase of the Company s own shares, and a DKK 7 million contribution to Normit Shipping S.A. from minority shareholders. Long-term loans of DKK 280 million were raised, and amortisation/repayment and other long-term debt totalled DKK 443 million. Prepayments received on ships for resale amounted to DKK 26 million. Total loan financing dropped by DKK 137 million. The Group s cash and cash equivalents are primarily bank deposits in USD. The Danish Tonnage Tax Act The Tonnage Tax Act was passed by the Danish parliament on 18 April Shipping companies may decide whether they wish to join the Tonnage Tax regime effective 2001 or 2002; once they have joined, however, their participation is binding for ten years. As NORDEN decided to join the regime with effect from 2001, deferred tax of DKK million allocated at 31 December 2001 was carried back in When the allocation for deferred tax was carried back DKK million was recognised as income in the income statement, with a substantial impact on the year s result. DKK 20.5 million was recognised directly in capital and reserves in the form of tax carried back on hedging transactions recognised in previous years. Hereafter the Company s taxable income is made up of income related to shipping acitivities, which is calculated in accordance with the provisions of the Tonnage Tax Act, and other income, which is calculated in accordance with general tax provisions. Income calculated in accordance with the provisions of the Tonnage Tax Act comprises notional taxable income calculated on the basis of the tonnage used by the Company during the year in the form of profits from sale of ships. Thus the taxable income is no longer computed as the difference between taxable income and tax-deductible costs. The profit from sale of ships is calculated as the sales price of the ship less its purchase price plus subsequent improvements and it is taxed in accordance with the general rules of the taxation legislation. The calculation of tonnage tax is thus to some extent independent of the Company s actual earnings and costs. Other income is based on the taxable income for the specific subactivity, which is calculated as the difference between taxable income and tax-deductible costs. Moreover, if the Company s net investment in ships drops significantly, or the Company is liquidated, depreciation recaptured from the time before the Company joined entry into the Tonnage Tax regime will be taxed. Based on the carrying amount of the ships, the contingent liability is DKK 109 million at the end of This liability will be reduced in coming years as the ships are depreciated in the accounts. See also Note 24 ( Contingent tax/deferred tax ). With the Company s present tonnage mix and investment strategy, this tax is not expected to mature. Tax on the profit for the year Tax on the profit for the year is DKK 171 million, made up of DKK 7 million in current tax for the year and DKK 178 million in deferred tax carried back (see Note 12, Tax on the profit for the year ). Long-term debt commitments Long-term debt commitments, comprising debt in own ships and ships operated under a finance lease (2001) have decreased by DKK 362 million to DKK 516 million. The decline in leasing debt of DKK 450 million is attributable to the purchase of the leased ships Nord Cecilie and Nordasia. The increase in bank debt of DKK 128 million is primarily due to the purchase of Nordasia.

28 28 Management Report Human resources The human resources of "NORDEN" encompass the head office, the subsidiaries and the sailing units as well as all resources, processes and results of NORDEN s activities both in respect of customers, employees and organisations. Thus changes in its human resources give an impression of how the Company will be able to fulfil its objectives and strategies. NORDEN s human resources should especially support the primary strategies such as an increased focus on longterm customer relationships and continued expansion of international activities. Therefore, it is particularly important that NORDEN is capable of retaining and devel oping competent employees. Although the Company s human resources have improved in a number of important fields in 2002, there are still major challenges ahead. One of the targeted areas in which NORDEN achieved results was the development and systematisation of its knowledge of market and customers. At the same time its focus has been on optimising organisational precesses to ensure that NORDEN will be able to handle the Company s increased activity level. The work has been organised in descriptions of work procedures (Standard Operating Procedures), and a Human Resources (HR) project has been launched sceduled for completion in The project will result in a number of specific solutions to further enhance knowledge retrieval and development. NORDEN s employees are the Company s most important asset, and the initiatives launched are intended to strengthen this resource. The Company is focusing on expanding the synergistic effects across the organisation, its branches and sailing units and on obtaining a high level of know-how for the benefit of employees, partners, customers and shareholders. This process also involves improved opportunities for the professional and personal development of our employees, irrespective of level. We make great demands on the motivation and qualifications of our employees, but in return we offer continuing education and a salary to match the effort Number of administrative employees Sales DKK mill. x 10

29 29 Environmental protection It is an objective of the Company to be a leader in the environmental field, both in the protection of the surrounding environment and society and the protection of the health and safety of our employees. Consequently, the Company intends not only to live up to, but also to surpass, the national and international environmental standards and regulations applying to the Company. Moreover, NORDEN fully recognises its responsibility in terms of measuring and controlling the environmental impact arising as a consequence of the Company s operational activities. Thus NORDEN aims specifically at reducing and, whenever feasible, eliminating pollution at its source. NORDEN is convinced that the best way to achieve these objectives is to invest constantly and consistently in the fleet in order to keep its average age at the lowest possible level. This ensures the implementation of the newest and most environmentally friendly technology at all times. Today the average age of NORDEN s fleet is three years. This is the lowest average age of all comparable shipping companies. In addition, NORDEN monitors technological developments and pursues its aim to participate in fields where the Company s experience and competence may help obtain significant research and development results for the protection of the environment. In general, NORDEN strives to curb its impact on the environment through the systematic and efficient control of our operative processes and budgets. Finally, NORDEN continuously strives to increase the know-how of its employees and their awareness of how important it is to respect the environment in their everyday work, both at sea and on land. In order to protect the environment even more and especially improve the working environment for the Company s employees, a number of initiatives have been taken: Pre-treatment and painting is to be carried out primarily when the vessel is docked. The shipyards normally have efficient and correct equipment that reduces the environmental impact. Painting on board is to be carried out using paint qualities with the lowest MAL code possible. The code number refers to the directions of the Danish Maritime Authority on the use of ventilation and personal protection equipment. Paints used in closed environments must primarily be water-based. Tin-free self-polishing antifouling paints must be used. A high standard of training and instruction of crews in safe environmental behaviour must be maintained. Uniform paint systems and thus instructions for maintenance and painting of the Company s vessels are to be implemented. Paint qualities are to have the highest content of solid matter possible, as a high solid-matter contents means in lower emissions of solvent into the environment. Suppliers with environmental certification are to be preferred. NORDEN will also in the future strive to raise the standards of the industry for the purpose of contributing to lasting and long-term improvements in environmental and work safety.

30 30 Management Report Shareholder information and statutory disclosure Corporate governance Matters such as sense of responsibility, morale and ethics which are also expressed in the core values of the Company (see page 2) play an important role in the value generation and management of the Company. In addition, the Company is governed in accordance with the principles regulating the interaction between the management bodies and the Company s partners as contained in the Danish Public Limited Companies Act, the Danish Financial Statements Act, the guidelines of the Copenhagen Stock Exchange, the articles of association, business procedures, policies and directives of the Company. The following is an outline of important matters relating to the corporate governance of the Company. Corporate governance and shareholders An evaluation of the initiatives to attract new and retain long-term shareholders and other interested parties is carried out regularly by the Company. This is also ensured by focusing on long-term value generation, a high level of information in quarterly and annual reports, a stable dividend policy, frequent state ments to the Copenhagen Stock Exchange, risk management of important activities in the Company, information via the Company s website, and communication through the daily press. In order to make it easier for new shareholders to purchase shares in the Company, the denomination of the Company s shares is DKK 20. The Company has no limitations on the number of votes cast by individual shareholders, or the number of shares owned by individual shareholders. The Company has one class of shares, and each DKK 20 share carries one vote. General meeting General meetings are held in Copenhagen following notification in the newspaper Berlingske Tidende and the Danish Official Gazette, and by letter to recorded shareholders with a period of notice of no more than four weeks and no less than 14 days. In case of proposals to amend the articles of association, the notice convening the general meeting must contain the full wording of the proposal. The Board of Directors must receive any proposal from shareholders of items to be added to the agenda of the ordinary general meeting no later than at the end of February. Eight days before the general meeting the agenda, the complete proposals and the Company s annual report must be available for inspection at the Company s office. All shareholders are entitled to participate in the general meeting provided they have obtained an admittance card at the Company s office on appropriate proof of identity as a shareholder no later than two days before the general meeting. The voting right may be exercised by proxy be means of written and dated power of attorney. The validity of such power of attorney may not exceed one year. Reporting The Company seeks to ensure a consistent and high level of information through regular statements to the Copenhagen Stock Exchange, including quarterly reports and reports for other limited periods as well as the annual report. In 2002 the Company issued a total of 14 statements to the Stock Exchange (see page 43). nordamerika Type Product Tanker Year Built 2000 DWT Flag DIS Home port Nykøbing Mors

31 31 The statements to the Copenhagen Stock Exchange, which are published both in Danish and in English, are available at the Company s website. In recent years the Company has increased the level of information it provides and wishes to continue this development, to Company shareholders and partners with due respect for the rules of conduct of the Copenhagen Stock Exchange. In recognition of the high level of information it provides, the Company received the Accounts Award of the Danish business newspaper Børsen for its annual report for Board of Directors and Management The general tasks and responsibilities of the Board are described in the business procedure for the Board. The business procedure is continuously adjusted and reviewed at least once every year by the Board. The Board oversees the activities of the Company and verifies its sound management in accordance with the articles of association of the Company, the Danish Public Limited Companies Act and other legislation which may be of importance. The Board sets up the common guidelines and keeps them up to date for the subsidiaries in Singapore, China and the US, as well as for other general matters of importance. In addition, the management of these subsidiaries is handled by their Boards and managements. The Chairman of the Board represents the Board of Directors externally and internally and is also in regular contact with the Company. The Chairman verifies that all formalities are complied with. The Chairman sees to it that the other Board members are informed of all matters of importance to the Company which may have occurred since the last Board meeting. The Chairman presides over the meetings of the Board of Directors and attends to the establishment and keeping of all statutorily prescribed books, records and protocols. The Management prepares monthly, quarterly and annual reports and supplementary reports on the activities of the Company which are sent out to the members of the Board together with the letters convening the Board meetings. These reports contain information on, among other things, interim accounts (profit and loss account, balance and cash position), any significant action for approval, financing transactions and risk reporting. In the quarterly reports the management renders an account of the Company s operation since the last Board meeting. The Board is composed of persons with broad, professional and relevant competencies and with a broad business experience nationally as well as internationally. With the exception of the staff representatives, the Board, which is elected by shareholders at the general meeting, is to consist of at least four and no more than six members. At the ordinary general meeting, the two Board members having served for the longest period of time resign. Resigning members may then be reelected. A Board member retires from the Board at the first ordinary general meeting after his 72nd birthday at the latest. The number of staff representatives on the Board shall be half the number of Board members elected at the general meeting in accordance with the articles of association. The period of election for staff-elected Board members is four years, and retiring members may be reelected. At present, the Company's employees elect two out of the seven members of the Board of Directors. The Board members elected at the general meeting are all independent of the Company, its Management and other day-to-day conduct of the business. None of them have previously been employed by the Company, nor do they have any material strategic interest in the Company except in their capacity as shareholders. The Board holds at least four Board meetings annually. Extraordinary Board meetings are held when important arrangements are to be approved, for instance in case of major investments saw some extraordinary activities as a consequence of the public takeover bid for the Company, with a total of 12 Board meetings. In addition, the Board holds one full-day strategy seminar every year with the participation of the Management and other senior

32 32 Management Report executives, at which strategy plans, budgets and long-term prognoses for the Company are reviewed and discussed. Only in very rare cases does the Board set up select committees. This only takes place under special circumstances where the special competence of individual Board members may be utilised when very time-consuming and specialised presentations are to be made to the entire Board. In these particular cases all crucial information is submitted to the entire Board, which then reaches a final decision. If there is a conflict of interest between the Company and the individual Board member decisions are made without the member in question being present. triton eagle Type Handymax bulkcarrier Year built 2003 DWT Flag Panama Long-term charter Any corporate governance functions held by members of the Board and management in other Danish limited companies as well as their shareholdings in the Company appear on pp. 36. The Board of Directors and the Management receive an annual remuneration as stated on page 52. The Board, the Management and a number of senior executives are invited to participate in a share ownership plan. This incentive is described in more detail in this Annual Report on pp In addition, the Management and a number of senior executives have special bonus and retirement plans. The incentive programme and the bonus plans were introduced to secure the Company s long-term strategies and objectives. Internal rules on insider information In compliance with the Danish Securities Trading Act, the Company keeps records of persons who by virtue of their position are considered to have insider knowledge of the Company. Moreover, the Company has drawn up internal regulations for the access of these persons dealing with the shares of the Company and any derivative financial contracts.

33 33 In the Company this applies to the Board of Directors, the Management and all other employees (excluding staff members who are permanently stationed on ships in the Company s service) as well as the spouses, partners and children living at the home of these persons, as well as the companies in which the persons subjected to these regulations have a majority share of ownership or votes. These persons may only trade in the Company s shares and any derivative financial contracts for a period not exceeding six weeks following the ordinary general meeting, or for six weeks following the publication of the Company s annual report, interim reports or other similar announcements involving Company accounts. The ban on trading insider knowledge also applies to the period in question. Trade in the Company s own shares The Company has introduced procedures to ensure that the purchase and sale of the Company s shares and any derivative financial contracts is subject to the rules adopted by the shareholders at the general meeting, and only at times at least three weeks before the publication of the Company s annual report, interim reports and other similar announcements involving Company accounts. The ban on trading insider knowledge also applies to the period in question. Risk management The shipping industry is highly sensitive to market fluctuations; this is also reflected in the sometimes substantial fluctuations in freight rates and ship prices. When ships are chartered this risk is increased. The Company attaches great importance to quantifying these risks and collating them within the limits imposed by the Board in this respect. The Company's operational and financial risk policies are described in the Annual Report (see pp ). Dividend policy The Company strives to implement a stable dividend policy with due regard to earnings, consolidation and cash position. For 2002 the Board proposes a dividend of DKK per share (DKK for 2001). This should be seen against the background of the Company s financial results and subsequent economic development. Ownership, beginning of March Number Nom. of shares Value (DKK) Share in % A/S Dampskibsselskabet Torm, Sundkrogsgade 10, DK-2100 Copenhagen Ø 727,803 14,556, % A/S Motortramp, Stensbygaard, DK-4773 Stensved 711,928 14,238, % Attransco (Bermuda) Ltd c/o Codan Services Limited, Clarendon House, 2 Church Street, Hamilton, Bermuda 345,567 6,911, % Dampskibsselskabet NORDEN A/S (own shares) Amaliegade 49, DK-1256 Copenhagen K 121,250 2,425, % Registered shares, more than 5%, total 1,906,548 38,130, % Registered shares, less than 5% 285,420 5,708, % Not registered shares 111,782 2,235, % TOTAL 2,303,750 46,075, %

34 34 Management Report share capital, share denominations etc. Share capital The Company s nominal share capital is DKK 46,075,000, corresponding to 2,303,750 shares of DKK 20 each. The price of the shares in the Company rose from DKK 264 to DKK 369 in 2002, corresponding to an increase of 40%. The price of the shares in the Company during 2002 is illustrated in the chart below. Own shares At the beginning of 2002 the Company owned 123,000 of its own shares, corresponding to 5.1% of the share capital at the time (nominal value DKK 48,500,000). In January 2002 the Company acquired 119,500 of its own shares. Following this the Company owned 242,500 own shares, corresponding to 10% of the share capital at the time. Hereafter, the purchase price for the total shareholding was to DKK 69 million. The acquisition of own shares was made for the purpose of reducing the size of the share capital and to create a basis for the incentive programme for the Board, Management and senior executives. In accordance with the accounting practices applied, the Company has carried the depreciation of the purchase price for these shares to DKK 0 in the equity capital. Share capital reduction At the ordinary general meeting on 29 April 2002 the Company resolved to reduce the share capital by a nominal value of DKK 2,425,000 (or 5%) from DKK 48,500,000 to DKK 46,075,000 (both figures nominal values) by annulling 121,250 of its own shares, each of which had a nominal value of DKK 20. The share capital reduction was implemented in The Company now owns 121,250 own shares, corresponding to 5.26% of the present share capital of DKK 46,075,000. Trends in share capital since 1965 Development of share price for NORDEN in 2002 Nominal DKK Share capital 1 January ,000, Bonus shares 1:1 5,000, Bonus shares 1:1 10,000, Bonus shares 2:1 10,000, Capital increase in connection with merger 5,928, Share capital augmentation through issue 3:1 11,976, Issue, employees , Issue, employees , Share capital reduction through annulment of own shares -2,425,000 Share capital end ,075,000 Kurs January February March April May June July August September October November December January financial calendar for 2003 Apr 28 The Annual General Meeting May 27 Publication of interim announcement for the first quarter Aug 25 Publication of interim announcement for the first half of 2003 Nov 24 Publication of interim announcement for the third quarter

35 35 management Lars Bagge Christensen Senior Vice President Jens Fehrn-Christensen Executive Vice President Carsten Mortensen Senior Vice President Kjeld Rasmussen Senior Vice President Steen Krabbe President Lars Lundegaard Senior Vice President Announcements to the Copenhagen Stock Exchange : : Announcement of purchase of own shares 2 : : Purchase of ships 3 : : Preliminary statement of annual accounts for : : Sale and contracting of Handymax dry cargo ships 5 : : Ordinary general meeting 6 : : Interim announcement for the 1st quarter : : A/S D/S Torm s purchase of shares in Dampskibsselskabet NORDEN A/S 8 : : A/S D/S Torm s offer to the shareholders of Dampskibsselskabet NORDEN A/S 9 : : The Board s account of A/S D/S Torm s offer 10 : : Adjusted expectations for : : A/S D/S Torm s offer 12 : : Interim announcement for the first half of : : Capital reduction in Dampskibsselskabet NORDEN A/S 14 : : Interim announcement for the 3rd quarter : : Reporting of quarterly specification of shareholdings 2 : : Dates for preliminary statements of accounts/general meeting : : Adjusted expectations for the profit for 2002

36 36 Management Report management and offices held in other companies The Company s Board of Directors and Management and other executive employees, including related and controlled companies, have the following shareholdings in Dampskibsselskabet NORDEN A/S and hold the following offices in other Danish public limited companies apart from NORDEN s wholly-owned subsidiaries. Shareholding (Number) Offices held in other Danish public limited companies BOARD OF DIRECTORS Mogens Hugo Jørgensen 0 C. W. Obel Aktieselskab (P), GN Store Nord as (CB), Fritz Hansen A/S (MB) Alison J.F. Riegels 325 A/S Motortramp (P, MB) Erik Gregers Hansen 11,044 Investeringsselskabet, Energy Holding A/S (CB), Enxco A/S (CB), Nordic Bioscience A/S (CB), Polaris Management A/S (CB), T.T.i.T. A/S (CB), Nykredit Portefølje Bank A/S (MB), Danionics A/S (MB), Ejendomsselskabet Norden A/S (MB), PFA Holding A/S (MB) Skandinavisk Group A/S (MB) Erling Højsgaard 4,492 A/S Motortramp (MB), Danbulk A/S (MB) Frederick W. Meier, Jr. 0 Kirsten Hansen, Crew Manager (*) 0 Torry Sørensen, Chief Engineer (*) 290 MANAGEMENT Steen Krabbe, President 1,350 ICC Denmark (International Chamber of Commerce) (CB) Jens Fehrn-Christensen, 475 NCS Holding A/S (CB), Sun-Air of Scandinavia A/S (MB), Executive Vice President Stensbygaard Aktieselskab af 18. maj 1956 (MB) EXECUTIVE EMPLOYEES Kjeld Rasmussen, Senior Vice President 815 Lars Bagge Christensen, Senior Vice President 360 Carsten Mortensen, Senior Vice President 195 Lars Lundegaard, Senior Vice President 3 Søren Huscher, General Manager, deputy 142 Jacob Meldgaard, Vice President 140 Kristian Wærness, Vice President 0 Claus A. Madsen, Risk Manager 0 (CB) = Chairman of the Board of Directors, (VCB) = Vice Chairman of the Board of Directors (MB) = Member of the Board of Directors, (P) = President, (*) = elected by employees

37 37 board of directors and management Alison J.F. Riegels Kirsten Hansen Erling Højsgaard Erik Gregers Hansen Jens Fehrn-Christensen Vice Chairman Executive Vice President Mogens Hugo Jørgensen Frederick W. Meier, Jr. Steen Krabbe Torry Sørensen Chairman President

38 38 Accounts Accounting Policies The Annual Report of Dampskibsselskabet NORDEN A/S for 2002 has been prepared in accordance with the provisions of the Danish Financial Statements Act applying to listed companies in accounting class D, current Danish accounting standards and the general requirements made by the Copenhagen Stock Exchange on the financial reporting of listed companies. The accounting policies are unchanged compared to last year. The accounts are presented in DKK General recognition and measurement criteria Revenues are recognised in the income statement for the accounting period as they are earned. Whether revenues qualify as earned is determined on the basis of the following criteria: a binding sales agreement has been made, the sales price has been determined, delivery has been made, and payment has been received or may with reasonable certainty be expected to be received. Financial assets and liabilities measured at fair value or amortised cost always qualify as earned. Furthermore, all costs paid to achieve the earnings for the year are recognised in the income statement, including depreciation, amortisation, write-downs and provisions as well as reversals due to changed accounting estimates of amounts that have previously been recognised in the income statement. Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Group, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when it is probable there will be an outflow of future economic benefits from the Group, and the value of the liability can be measured reliably. Upon initial recognition, assets and liabilities are measured at cost. Subsequently, assets and liabilities are measured as described for each item below. Certain financial assets and liabilities are measured at amortised cost, which involves the recognition of a constant effective yield to maturity. Amortised cost is calculated as original cost less repayments and with addition/deduction of the accumulated amortisation of the difference between cost and the nominal amount payable upon maturity. Consequently, capital gains and losses are allocated over the term to maturity. Recognition and measurement take into account all circumstances, including predictable risks and losses, occurring before the preparation of the Annual Report which confirm or disconfirm circumstances existing at the balance sheet date. Consolidation principles The Annual Report comprises the Parent Company, Dampskibsselskabet NORDEN A/S, and undertakings in which the Parent Company directly or indirectly holds the majority of the votes (subsidiaries). Undertakings in which the Group holds between 20% and 50% of the votes and exercises significant but not dominant influence are classified as associated undertakings. On consolidation, elimination has been made of intercompany income and costs, shareholdings, dividends and accounts as well as of realised and unrealised internal profits and losses on transactions between the consolidated undertakings. The financial statements used for the purpose of the Group s Annual Report have been prepared in accordance with the accounting policies of the Group. The Group s Annual Report has been prepared on the basis of financial statements of the Parent Company and subsidiaries by combining accounting items of a uniform nature. The Parent Company s investments in the consolidated subsidiaries have been set off against the Parent Company s share of the net asset value of subsidiaries stated at the time when the group relationship was established. Newly acquired or newly established undertakings are recognised in the consolidated financial statements as of the date of acquisition. Undertakings sold or wound up are recognised in the consolidated income statement up until the time of disposal. Comparative figures are not restated for newly acquired, sold or wound up undertakings. The financial and operating review and the notes provide information to enable meaningful comparison where the composition of the Group has changed materially during the year. Minority interests In the statement of the group results and group capital and reserves, the parts of the results and capital and reserves of subsidiaries attributable to minority interests are stated as

39 39 separate items in the income statement and the balance sheet. Leases Agreements to charter ships and to lease other property, plant and equipment where the individual group companies have substantially all the risks and rewards of ownership (finance leases) are recognised in the balance sheet. Ships and other property, plant and equipment are recognised at a value equal to the present value of the finance charges determined in the agreements, including any purchase options. For the purpose of calculating the present value, the interest rate implicit in the lease or an approximate value is used as a discount factor. Ships and other property, plant and equipment acquired under finance leases are depreciated and written down under the same accounting policy as the ships owned by the Group. The capitalised remaining lease obligation is recognised as a liability in the balance sheet, and the interest element of the lease payment is charged to the income statement as incurred. At the time of the initial recognition of finance leases, the leased asset and the related liability are therefore recognised at the same value. Other charter agreements concerning ships and other leases are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Payments which the Group is committed to make under operating leases for ships delivered (including any daily operating costs) are separately disclosed in a note. The note also discloses the present value of these lease obligations reduced by any estimated daily operating costs. The present value is calculated for each contract by discounting the payments using the interest rate implicit in the individual contract. The interest rate implicit in the individual contract is calculated by comparing the lease payments exclusive of any estimated daily operating costs plus any purchase option with the estimated market value of the ship at the time of conclusion of the contract. Present values, lease payments and any purchase options are translated into Danish kroner at the exchange rates at the balance sheet date. Foreign currency translation Transactions in foreign currencies during the year are translated at the exchange rates at the transaction date. Gains and losses arising between the exchange rates at the transaction date and the exchange rates at the settlement date are recognised in Financial income or Financial charges in the income statement. Receivables, payables and other monetary items in foreign currencies not settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Differences between the exchange rates at the transaction date and the exchange rates at the balance sheet date are recognised in Financial income or Financial charges in the income statement. Non-current liabilities and finance lease liabilities are stated in USD to achieve forward cover of the Group s future revenues in USD in the form of freight income and proceeds from the sale of ships. This is considered to constitute compliance with the criteria for hedging of the Danish Financial Statements Act. As mentioned above, non-current liabilities and finance lease liabilities in USD are translated at the exchange rates at the balance sheet date. The unrealised foreign exchange adjustment at the balance sheet date of these liabilities, which equals the difference between the exchange rate at the time of raising of the loan and the exchange rate at the balance sheet date, is recognised directly in capital and reserves. The exchange rate adjustment is recognised in the income statement as repayment of the loans is made. The Group s foreign subsidiaries and associated undertakings are considered independent entities, and the income statements of these undertakings are translated at the average exchange rates for the period, whereas balance sheet items are translated at the exchange rates at the balance sheet date. Exchange rate adjustments arising upon translation of the capital and reserves of these undertakings at the beginning of the year at the exchange rates at the balance sheet date and the exchange rate adjustment of the net profits of these undertakings from the average exchange rates for the period to the exchange rates at the balance sheet date are recognised directly in capital and reserves. Derivative financial instruments All of the Group s derivative financial instruments provide efficient financial hedging in accordance with the risk management policy of the Group, but certain derivative financial instruments are not considered to comply with the criteria for recognition as hedging instruments in accordance with the Danish Financial Statements Act. Changes in the fair

40 40 Accounts value of any derivative financial instruments which are not considered to comply with the criteria for recognition as hedging instruments are recognised in the income statement. Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair value. Positive and negative fair values of derivative financial instruments are included in accrued items under assets and liabilities respectively. Changes in the fair value of derivative financial instruments hedging the fair value of a recognised asset or a recognised liability are recognised in the income statement under the same item as changes to the carrying amount of the hedged asset or the hedged liability. Changes in the fair value of derivative financial instruments hedging expected future transactions are recognised in Accumulated profits/(losses) under capital and reserves. Where the expected future transaction results in the acquisition of assets or the assumption of liabilities, amounts deferred under capital and reserves are transferred from capital and reserves to the cost of the asset or liability. Where the expected future transaction results in an income or a cost, amounts deferred under capital and reserves are transferred from capital and reserves to the income statement and included in the same item as the hedged transaction. Statement of fair value The fair value of listed derivative financial instruments and securities is based on quoted market prices at the balance sheet date (the market value). The fair value of interest swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. In assessing the fair value of non-traded derivatives and other financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at the balance sheet date. For non-current liabilities the fair value is based on a discounted value of future cash flows. The discount factor used is the zerocoupon rate plus the undertaking s interest margin. For the remaining instruments, the value of similar listed instruments is used where possible. If this is not possible, the fair value is based on the discounted value of the future cash flows. The face values less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments. Segment information Information is specified on the Group s two business segments Tank and Dry Cargo. The information is based on the Group s returns and risks and on the Group s organisation and business management, including internal financial management. Information is not provided by geographical segment because the Group considers the global market a compact whole, and the activities of the individual ships are not limited to specific parts of the world. The items included in net profit for the year, including income from associated undertakings and financial income and charges, are allocated to the extent that the items are directly or indirectly attributable to the segments. Items allocated both directly and indirectly comprise Staff costs and Other external charges. Parts of these items are not attributable, whether directly or indirectly, to a segment and are therefore not allocated. Indirect allocation of items is based on distribution keys determined on the basis of the segment s drain on key resources. Segment non-current assets consist of the non-current assets used directly for segment operations, including ships and investments in associated undertakings. Land and buildings as well as fixtures, fittings and equipment are not allocated as they are primarily used for NORDEN s headquarters. Current assets are allocated to segments to the extent that they are directly attributable to segments, e.g. inventories and freight receivables. Some of the freight receivables cannot be allocated directly, and allocation is therefore based on an estimate. Segment liabilities comprise operating liabilities, including non-current liabilities, prepayments received on ships for resale, trade receivables, payables to associated undertakings and other liabilities. Some of the liabilities such as trade receivables and other liabilities are either not allocated or allocated solely by indirect allocation.

41 41 income statement Net revenues Net revenues comprise freight revenues from ships and management revenues. Net revenues are recognised if they meet the general criteria mentioned under General recognition and measurement criteria. Accordingly, freight revenues and management revenues are recognised upon delivery of the services in accordance with the charter parties/management agreements concluded. Other operating income Other operating income comprises items of a secondary nature to the Group s main activity. This includes administration fees received, rents received and profits on the sale of property, plant and equipment other than ships. Operating expenses ships Operating expenses ships comprise the expenses, exclusive of depreciation and staff costs, incurred to achieve revenues for the year. Operating expenses ships therefore include charter hire for chartered ships (operating lease), bunker oil consumption, other voyage costs such as commissions and harbour charges, repair and maintenance costs, insurance costs, docking provisions and other operating expenses. Operating expenses ships are accrued in conformity with net revenues upon delivery of services in accordance with the charters concluded. Other external charges Other external charges comprise costs of properties, office expenses, external assistance, etc. Profits from the sale of ships Profits from the sale of ships are stated as the difference between the sales price for the ship less selling costs and the carrying amount of the ship in question at the time of sale. Furthermore, any gains and losses upon repayment of related ship loans are included. Income from investments in subsidiaries and associated undertakings The item Income from subsidiaries before tax in the income statement of the Parent Company includes the Parent Company s pro rata shares of the subsidiaries results for the year before tax, whereas the Parent Company s shares of the subsidiaries tax are included in the item Tax on the profit for the year. The item Income from associated undertakings before tax in the income statement of both the Group and the Parent Company includes their pro rata shares of the associated undertakings results for the year before tax, while their shares of the tax of the associated undertakings are included in the item Tax on the profit for the year. Net financials Financial income and expenses comprise interest, financing costs of finance leases, realised and unrealised exchange rate adjustments, price adjustments of securities and dividends received on shares recognised in securities. Tax on the profit for the year The Company s current tax consists of tax paid according to the regulations of the Danish Tonnage Tax Act for shipping activities and according to general tax regulations for other activities. Other activities comprise letting of premises in the Company s property of residence and management revenues. balance sheet Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and write-downs. Land is not depreciated. Cost comprises acquisition price and costs directly related to the acquisition up until the time when the asset is ready for use. For assets of own construction, cost comprises direct and indirect costs of labour, materials, components, sub-suppliers and capacity. Interest costs on borrowings made directly for financing the construction of property, plant and equipment are included in cost over the period of construction. All borrowing costs that are indirectly attributable are recognised in the income statement. Depreciation is calculated on a straight-line basis over the expected useful lives of the assets which are: Buildings Ships, including ships on finance leases Fixtures, fittings and equipment 50 years Max. 20 years 5-10 years The depreciation period for second-hand ships is determined based on the condition and age of the ships at the time of

42 42 Accounts acquisition, but the depreciation period does not exceed 20 years from delivery from the shipyard. Docking expenses relating to ships recognised in the balance sheet are added to the carrying amount of the ships at the time of payment of the expenses. Docking expenses are allocated on a straight-line basis over the estimated useful life of the improvements. New acquisitions below the minimum limit for tax purposes are expensed in the income statement in the year of acquisition. Writing down property, plant and equipment The carrying amount of property, plant and equipment is assessed on an annual basis to determine whether there are any indications of impairment other than that provided for by normal depreciation. In the event of such impairment, the asset is written down to its recoverable amount. The recoverable amount of the asset is calculated as the higher of net selling price and value in use. Where the recoverable amount of the individual asset cannot be determined, the impairment requirement is assessed for the smallest group of assets for which the recoverable amount can be calculated. Investments in subsidiaries and associated undertakings Investments in subsidiaries and associated undertakings are recognised and measured in the Parent Company s Annual Report under the equity method. The item Investments in associated undertakings in the balance sheet of the Group includes the Group s proportionate ownership share of the net asset value of the associated undertaking calculated according to the accounting policies of the Parent Company with deduction or addition of the proportionate share of unrealised intercompany profits and losses. The items Investments in subsidiaries and Investments in associated undertakings in the balance sheet of the Parent Company include the proportionate ownership share of the net asset value of the companies calculated according to the accounting policies of the Parent Company with deduction or addition of unrealised intercompany profits and losses. However, in the case of associated undertakings these adjustments are made solely in proportion to ownership share. Subsidiaries and associated undertakings with a negative net asset value are valued at DKK 0. Where the Parent Company has a legal or constructive obligation to cover the undertaking s negative balance, the obligation is recognised by way of a provision or a liability. Upon profit distribution, the total net revaluation of investments in subsidiaries and associated undertakings is allocated to a Reserve for net revaluation under the equity method in the financial statements of the Parent Company. Inventories Inventories comprise primarily oil kept on board ships. Inventories are measured at the lower of cost under the FIFO method and net realisable value. Receivables Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which corresponds to nominal value less provisions for bad debts. Provisions for bad debts are calculated on the basis of an individual assessment of each receivable. Securities Securities recognised in current assets comprise listed shares and bonds measured at fair value at the balance sheet date. Listed securities are measured at market price. Cash and cash equivalents Cash and cash equivalents are measured in the balance sheet at nominal value. Capital and reserves Dividends Dividends are recognised as a liability at the time of adoption at the Annual General Meeting. Dividends for the year proposed by management are shown as a separate item under capital and reserves. No dividend is declared on own shares. Own shares Own shares are recognised directly in capital and reserves at cost under Accumulated profits/losses. Part of the portfolio of own shares is used to hedge the value of share options granted under NORDEN s Incentive Programmes, cf. below. Upon subsequent disposal of own shares, the sales amount is also recognised directly in capital and reserves. Incentive Programme The Board of Directors, the Management and a number of senior executives participate in a share option programme. Part of the portfolio of own shares is used to cover share options grant-

43 43 ed under NORDEN s Incentive Programme, cf. above. The value of share options granted is not expensed, neither at the time of granting nor at the later time of exercise. At the time of exercise the payments received are recognised directly in capital and reserves. The key terms and conditions of the programme are disclosed in the notes to the financial statements. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of events prior to or on the balance sheet date, and it is probable that an outflow of resources will be required to settle the obligation. Provisions for docking expenses are recognised for bareboat-chartered ships where the agreement entails a commitment on the part of the Group to bring ships into dock regularly. Provisions are made on a current basis at an amount equal to a pro rata share of the estimated cost of the next docking of each individual ship as the value of the liability increases continuously. The provisions are recognised in the income statement in the item Operating expenses ships. Deferred tax The Company has entered the Danish Tax regime beginning in Based on NORDEN s planned use of vessels and discontinuation of recaptured depreciation, respectively, the Tonnage Tax regime does not result in a liability, hence it does not result in any deferred tax in the balance sheet. The liability is merely a contingent tax liability. The amount of contingent tax is stated in the note Contingent tax. Financial liabilities Bank loans expected to be held to maturity are recognised initially at the proceeds received net of transaction costs incurred. In subsequent periods the loans are measured at amortised cost equal to the capitalised value by using the effective yield method in order for the difference between the proceeds and the redemption value (the debt discount) to be recognised in the income statement over the period of the loan. Financial liabilities also include the capitalised remaining lease obligation on finance leases. Other liabilities comprising trade payables, prepayments received on ships for resale, payables to subsidiaries and associated undertakings and other liabilities are measured at amortised cost corresponding substantially to nominal value. Prepayments, accruals and deferred income Prepayments stated as assets comprise expenses paid relating to subsequent financial years such as rent, insurance premiums, subscription fees and interest as well as adjustments to the fair value of derivative financial instruments with a positive fair value. Accruals and deferred income stated as liabilities comprise payments received relating to income in subsequent years, interest and adjustments to the fair value of derivative financial instruments with a negative fair value. cash flow statement The cash flow statement shows the Group s cash flows for the year broken down by operating, investing and financing activities, the change in cash and cash equivalents for the year and the Group s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities Cash flows from operating activities are stated as the consolidated profit/loss adjusted for non-cash operating items (such as depreciation, amortisation and write-downs, profits from the sale of ships, provisions and exchange rate adjustments of non-current liabilities), changes in working capital, interest received and paid and corporation taxes paid or received. Working capital comprises current assets less current liabilities excluding the items included in cash and cash equivalents. Cash flows from investing activities Cash flows from investing activities comprise cash flows from the purchase and sale of property, plant and equipment and financial assets. Cash flows from financing activities Cash flows from financing activities comprise cash flows from the raising and repayment of long-term loans as well as payment of dividends to shareholders. Cash and cash equivalents Cash and cash equivalents comprise realisable securities (current assets), cash and bank balances and short-term bank debt. Positive amounts indicate inflow, whereas negative amounts indicate outflow. The cash flow statement cannot be derived solely from the financial records disclosed.

44 44 Accounts

45 Accounts 45 Income Statement 1 January - 31 December the group the parent Note Amounts in DKK ,2 Net revenues 2,071,777 2,470,815 2,071,777 2,470,628 3 Other operating income Operating costs ships -1,838,233-2,124,205-1,838,233-2,124,205 5 Other external costs -33,329-22,915-38,472-28,745 6 Staff costs -70,256-69,339-65,777-67,048 Profit before depreciation and write down 130, , , ,412 Profits from the sale of ships 0 164, ,134 7 Depreciation and write-down -76,286-78,762-75,911-78,513 Profit from operations 54, ,872 53, ,033 8 Income from subsidiaries before tax - - 4,166 49,063 9 Income from associated undertakings before tax 7,567 5,964 7,567 5, Financial income 37,404 28,106 36,285 30, Financial costs -73,988-62,776-77,036-68,096 Profit before tax 25, ,166 24, , Tax on the profit for the year 170,954-72, ,954-72,806 Consolidated profit 196, , , , Minority interests , NET PROFIT FOR THE YEAR 195, , , ,498 Proposed profit distribution Proposed dividend DKK 10 per share (2001: DKK 12) 23,038 29,100 Allocation to reserve for net revaluation under the equity method 11,733 56,929 Allocation to accumulated profits 161, , , ,498

46 46 Accounts Balance Sheet at 31 December Assets the group the parent Note Amounts in DKK Properties 24,229 18,500 24,229 18, Ships 804, , , , Ships acquired on finance leases 0 393, , Fixtures, fittings and equipment 18,678 17,876 17,473 17, Prepayments for newbuildings 254, , ,734 65,947 Property, ships and equipment 1,102,475 1,155,509 1,053,026 1,110, Investments in subsidiaries , , Investments in associated undertakings 83,324 90,874 83,324 90,874 Financial assets 83,324 90, , ,801 Non-current assets 1,185,799 1,246,383 1,231,855 1,449,209 Inventories 35,870 32,896 35,870 32,896 Freight receivables 69,423 53,556 69,423 53,556 Receivables from related parties Receivables from associated undertakings 1,634 1,507 1,634 1,507 Other receivables 19,674 29,500 19,241 29,152 Accruals 56,619 44,244 56,236 44,213 Receivables 147, , , , Securities 1,935 2,473 1,935 2, Cash and cash equivalents 284, , , ,896 Current assets 469, , , ,630 TOTAL ASSETS 1,655,222 1,915,769 1,580,525 1,997,839

47 47 Balance Sheet at 31 December Equity and Liabilities the group the parent Note Amounts in DKK Share capital 46,075 48,500 46,075 48,500 Reserve for net revaluation under the equity method 46, ,867 Accumulated profit carried forward 779, , , ,310 Proposed dividend for the year 23,038 29,100 23,038 29, Equity 848, , , , Minority interests 50,385 51, Contingent tax/deferred tax 0 157, , Provisions for docking costs (Bareboat) 1, , Provisions 1, ,769 1, ,769 Bank debt 355, , , ,057 Danmarks Skibskreditfond 160, , , ,491 Lease obligations 0 450, , Non-current liabilities 515, , , , Current portion of long-term debt 62,536 56,478 62,536 56,478 Prepayments received on ships for resale 25, Trade payables 78,665 66,185 78,247 65,742 Payables to affiliated undertakings - - 1, ,791 Company tax Other liabilities 14,385 16,410 14,385 16,410 Accruals 57,225 50,244 57,225 50,244 Current liabilities 238, , , ,665 Liabilities 754,626 1,066, ,314 1,200,293 TOTAL EQUITY AND LIABILITIES 1,655,222 1,915,769 1,580,525 1,997, Operating lease obligations 28 Other contingent liabilities 29 Mortgages and security 30 Financial instruments 31 Related party transactions 32 Incentive programme

48 48 Accounts Statement of Changes in Equity the group the parent Note Amounts in DKK Share capital at 1 January 48,500 48,500 48,500 48,500 Reduction of share capital -2, ,425 0 Share capital at 31 December 46,075 48,500 46,075 48,500 Reserve for net revaluation under the equity method at 1 January 155,867 98,938 Allocated from net profit for the year 11,733 56,929 Allocated to Profit carried forward -120,967 0 Reserve for net revaluation under the equity method at 31 December 46, ,867 Profit carried forward at 1 January 562, , , ,147 Allocated from net profit for the year 172, , , ,469 Allocated from Reserve for net revaluation under the equity method ,967 0 Exchange rate adjustment of foreign subsidiaries and associated undertakings -32,508 3,740-32,508 3,740 Acquisition of own shares -34,773-34,256-34,773-34,256 Own shares used for reduction of share capital 2, ,425 0 Reversal, dividend own shares 2,910 1,230 2,910 1,230 Opening adjustment of foreign currency loans in USD 59,388 78,904 59,388 78,904 Closing adjustment of foreign currency loans in USD 96,102-59,388 96,102-59,388 Opening adjustment of other hedging instruments 8,945 3,686 8,945 3,686 Closing adjustment of other hedging instruments -37,401-8,945-37,401-8,945 Opening tax on equity changes, cf note 12-20,500-24,777-20,500-24,777 Closing tax on equity changes, cf note , ,500 Profit carried forward at 31 December 779, , , ,310 Proposed dividend at 1 January 29,100 24,250 29,100 24,250 Dividend paid -26,190-23,020-26,190-23,020 Dividend, own shares -2,910-1,230-2,910-1,230 Allocated from net profit for the year 23,038 29,100 23,038 29,100 Proposed dividend at 31 December 23,038 29,100 23,038 29,100 Equity at 31 December 848, , , ,777

49 49 Consolidated Cash Flow Statement Note Amounts in DKK Profit from operations 54, ,872 Reversal of depreciation and write-downs 76,286 78,762 Reversal of profits from sale of ships, etc 0-164,496 Change in provision for docking 1,398 0 Other adjustments ,600 Change in working capital -32,537 19,190 Cash flows from operating activities before net financials 99, ,928 Financial receipts 3,173 22,337 Financial disbursement -44,718-61,678 Cash flows from ordinary activities 57, ,587 Paid tax -7,000 0 Cash flows from operating activities 50, ,587 Investments in ships -2,514-1,334,763 Investments in other property and equipment -11,771-10,657 Change in prepayments for newbuildings -152, ,061 Net proceeds from the sale of ships 134,423 1,507,290 Net proceeds from the sale of property and equipment 1, Investments in associated undertakings 0-43,429 Cash flows from investment activities -31, ,903 Dividend paid to shareholders (excl dividend from own shares) -26,190-23,020 Purchase/sale of own shares, net -34,773-34,256 Contribution to Normit Shipping S.A. from minority shareholders 7,299 0 Financing from shareholders -53,664-57,276 Long-term borrowings 280, ,695 Instalment on/repayment of lease liabilities -396, ,479 Instalment on/repayment of other long-term borrowings -47, ,995 Prepayments received for ships for resale 25,637-29,868 Financing by borrowing -136, ,647 Cash flows from financing activities -190, ,923 Change in cash equivalents at 31 December -171, ,567 Cash and cash equivalents at 1 January 507, ,270 Unrealised exchange rate adjustments of securities for the year Exchange rate adjustments -49,503 7,259 Change in cash and cash equivalents for the year -171, ,567 Cash and cash equivalents at 31 December 286, ,683 Cash and cash equivalents comprise: Securities* 1,935 2,473 Cash and bank balances 284, , , ,683 *This amount include DKK 1,801 regarding listed shares.

50 50 Accounts Notes Amounts in DKK 000 Tank Dry Cargo Not allocated Group total 1 Segment information Net revenues 391,885 1,679, ,071,777 Other operating income Operating costs ships -208,293-1,629, ,838,233 Other external costs -8,082-13,229-12,018-33,329 Staff costs -41,484-21,870-6,902-70,256 Profit before depreciation 134,026 14,853-18, ,554 Profits from the sale of ships Depreciation and write-down -51,360-22,437-2,489-76,286 Profit from operations 82,666-7,584-20,814 54,268 Profit before tax 51,760 32,515-59,024 25,251 NET PROFIT FOR THE YEAR 51,144 25, , ,915 Ships 804, ,590 Prepayments for newbuildings 143, , ,978 Other property and equipment 0 4,306 38,601 42,907 Financial assets 83, ,324 Non-current assets 1,031, ,454 38,601 1,185,799 Current assets 32, , , ,423 TOTAL ASSETS 1,064, , ,804 1,655,222 Provisions 1, ,456 Non-current liabilities 515, ,921 Current liabilities 136,539 94,700 7, ,705 Liabilities 652,460 94,700 7, ,626 TOTAL PROVISIONS AND LIABILITIES 653,916 94,700 7, ,082 Average number of employees excluding employees on timecharter ships Profit margin 21% -0.5% - 3% Return on net assets 5% 12% - 2% Brokers valuations of ships in USD million, cf. description in the executive report

51 Notes 51 the group the parent Amounts in DKK Net revenues Tank Freight income - own ships 259, , , ,971 Freight income - chartered ships 131, , , ,568 Commercial management income 1,120 10,958 1,120 10, , , , ,497 Dry Cargo Freight income - own ships 12, ,421 12, ,421 Freight income - chartered ships 1,666,081 1,893,904 1,666,081 1,893,904 Commercial management income ,679,892 1,997,131 1,679,892 1,997,131 2,071,777 2,470,815 2,071,777 2,470,628 3 Other operating income Administration fees Rents received Profits from sale of fixtures, fittings and equipment Operating costs ships Charter hire for ships chartered for less than 1 year 670, , , ,534 Charter hire for ships chartered for more than 1 year 528, , , ,562 Bunker oil 271, , , ,984 Other voyage costs 325, , , ,293 Other operating costs 43,587 68, ,832 1,838,233 2,124,205 1,838,233 2,124,205 5 Fees to auditors appointed by the general meeting Other external costs include total fees to audit firms for the past financial year: KPMG PricewaterhouseCoopers 969 1, ,265 including non-audit services of KPMG PricewaterhouseCoopers

52 52 Accounts the group the parent Amounts in DKK Staff costs Wages and salaries 62,853 62,482 58,934 60,459 Pensions 3,731 4,729 3,731 4,729 Other social security costs 3,672 2,128 3,112 1,860 70,256 69,339 65,777 67,048 Remuneration to Parent Company Board of Directors 1,650 1,004 1,650 1,004 Remuneration to Parent Company Management 3,776 4,512 3,776 4,512 5,426 5,516 5,426 5,516 Average number of employees excluding employees on time charter ships The management and other executives are comprised by bonus and severance schemes. Reference is made to note 32 which describes incentive programmes offered to members of management. 7 Depreciation and write-down Ships - depreciation 50,286 42,908 50,286 42,908 Ships - write-down 19, ,003 0 Ships acquired on finance leases 3,094 33,244 3,094 33,244 Buildings - depreciation Fixtures, fittings and equipment - depreciation 3,783 2,510 3,408 2,261 76,286 78,762 75,911 78,513 8 Income from subsidiaries before tax NORDEN Tankers & Bulkers Pte. Ltd., Singapore 4,022 42,914 NORDEN Tankers Bulkers (USA) Inc., USA Nordholt Ltd. Bahamas 0 1,185 Nordasia Ltd. Bahamas 0 4,940 4,166 49,063 9 Investments before tax, associated undertakings Nortide Shipping Ltd., Bermuda 7,408 5,925 7,408 5,925 Nortide Shipping II Ltd., Bermuda ,567 5,964 7,567 5, Financial income Dividend Other interest receipts 3,158 6,546 2,039 6,069 Capital gain on repayment of lease debt 34, ,231 0 Other foreign exchange adjustments 0 21, ,258 37,404 28,106 36,285 30,340

53 Notes 53 the group the parent Amounts in DKK Financial costs Interest costs, long-term debt, etc 41,120 62,363 41,120 62,363 Interest costs and foreign exchange rates, affiliated undertakings ,320 Capital loss, securities Other exchange rate adjustments 32, , ,988 62,776 77,036 68, Tax on the profit for the year Current tax for the year 7, ,257 0 Deferred tax for the year -157,711 77, ,711 75,246 Tax in subsidiaries ,837 Tax in associated undertakings Tax for the year -150,454 77, ,454 77,083 Which is broken down as follows: Tax on the profit for the year -170,954 72, ,954 72,806 Tax on changes in equity 20,500 4,277 20,500 4,277 Tax for the year -150,454 77, ,454 77,083 Tax on the profit for the year is calculated as follows: Tax calculated at 30% on the profit before tax 7,638 93,650 7,638 87,091 Tax effect of: Reversal of accounting result -7,638-7,638 Non-deductible costs Lower tax rate in subsidiaries - -19, ,881 Lower tax rate in associated undertakings - -1, ,789 Applied tonnage 4,646-4,646 - Gain on the sale of ships 2,642-2,642 - Taxable loss previous years Reversal of deferred tax -178, ,211 - Tax on the profit for the year -170,954 72, ,954 72,806 Tax on changes in equity calculated as follows: Value adjustment of foreign currency loan in USD 17,816 5,855 17,816 5,855 Value adjustment of other hedging instruments 2,684-1,578 2,684-1,578 20,500 4,277 20,500 4,277 The company has entered The Danish Tonnage Tax system, which have entailed, that the deferred tax of tdkk 157,711 is reversed, of which tdkk 178,211 is credited in the profit and loss statement.

54 54 Accounts the group the parent Amounts in DKK Properties Cost at 1 January 19,300 16,706 19,300 16,706 Additions for the year 5,849 2,594 5,849 2,594 Cost at 31 December 25,149 19,300 25,149 19,300 Depreciation at 1 January Depreciation for the year Depreciation at 31 December Carrying amount at 31 December 24,229 18,500 24,229 18,500 The official property assessment value of Danish properties at 1 January amounted to 24,000 19,400 24,000 19, Ships Cost at 1 January 644, , , ,815 Additions for the year 2, ,913 2, ,216 Transferred during the year from other items 434,984 1,068, , ,913 Disposals for the year -167,917-1,574, ,917-1,385,086 Cost at 31 December 914, , , ,858 Depreciation and write-downs at 1 January -29, ,582-29, ,582 Transferred during the year from other items -44, ,851 0 Depreciation for the year -50,286-42,908-50,286-42,908 Write downs for the year -19, ,003 0 Reversal of depreciation and write-downs of disposal of ships 33, ,287 33, ,287 Depreciation and write-downs at 31 December -109,849-29, ,849-29,203 Carrying amount at 31 December 804, , , ,655 Amount insured in USD million Additions for the year include financial expenses in the construction period of

55 Notes 55 the group the parent Amounts in DKK Ships acquired on finance leases Cost at 1 January 434, , , ,726 Transferred during the year to other items -434, ,984 0 Disposals for the year 0-120, ,742 Cost at 31 December 0 434, ,984 Depreciation and write-downs at 1 January -41,757-76,336-41,757-76,336 Transferred during the year to other items 44, ,851 0 Depreciation for the year -3,094-33,244-3,094-33,244 Reversal of depreciation and write-downs of disposal of ships 0 67, ,823 Depreciation and write-downs at 31 December 0-41, ,757 Carrying amount at 31 December 0 393, ,227 Amount insured in USD million Fixtures, fittings and equipment Cost at 1 January 22,940 15,545 21,817 14,853 Foreign exchange adjustment, foreign subsidiaries Additions for the year 5,922 8,063 4,980 7,217 Disposals for the year -3, , Cost at 31 December 25,656 22,940 23,955 21,817 Depreciation at 1 January -5,064-2,842-4,738-2,668 Foreign exchange adjustment, foreign subsidiaries Depreciation for the year -3,783-2,510-3,408-2,261 Reversal of depreciation of disposals 1, , Depreciation at 31 December -6,978-5,064-6,482-4,738 Carrying amount at 31 December 18,678 17,876 17,473 17, Prepayments for newbuildings Cost at 1 January 110, ,121 65, ,603 Foreign exchange adjustment, foreign subsidaries -8,240 3, Additions for the year 152, , , ,560 Transfer to other items 0-1,068, ,216 Carrying amount at 31 December 254, , ,734 65,947 Specified as follows: Prepayments for own newbuildings 150, , ,091 65,947 Prepayments for newbuildings for resale 104, , , , ,734 65,947

56 56 Accounts the group the parent Amounts in DKK Investments in subsidiaries Cost at 1 January 120, ,929 Additions for the year 8, Disposals for the year -59,083 0 Cost at 31 December 69, ,013 Value adjustments at 1 January 127,914 77,609 Results for the year 4,166 47,226 Foreign exchange adjustment of investments -17,391 3,079 Reversal of value adjustments on disposals -88,458 Value adjustment at 31 December 26, ,914 Carrying amount at 31 December 95, ,927 Net asset value is specified as follows: Capital Ownership Net asset value Net asset value NORDEN Tankers & Bulkers Pte. Ltd., Singapore SGD 14, % 95, ,277 NORDEN Tankers & Bulkers (USA) Inc., USA USD % Nordholt Ltd. Bahamas UDS 5 100% 0 30,442 Nordasia Ltd. Bahamas USD 9, % 0 117,100 95, , Investments in associated undertakings Cost at 1 January 62,921 19,492 62,921 19,492 Additions 0 43, ,429 Cost at 31 December 62,921 62,921 62,921 62,921 Value adjustments at 1 January 27,953 21,329 27,953 21,329 Share of profit for the year before tax 7,567 5,964 7,567 5,964 Foreign exchange adjustment of investments -15, , Value adjustments at 31 December 20,403 27,953 20,403 27,953 Carrying amount at 31 December 83,324 90,874 83,324 90,874 Net asset value is specified as follows: Capital USD Ownership Net asset value Net asset value Nortide Shipping Ltd., Bermuda 7,200 50% 48,737 48,787 Nortide Shipping II Ltd., Bermuda 10,000 50% 35,587 42,087 84,324 90,874

57 Notes 57 the group the parent Amounts in DKK Securities Shares 1,801 2,339 1,801 2,339 Bonds ,935 2,473 1,935 2, Cash and cash equivalents Short-term bank deposits 284, , , ,862 Other cash and cash equivalents , , , ,896 Weighted average interest rate on short-term bank deposits, end of year 2% 3% 2% 3% Short-term bank deposits, end of year have an average term of 7 days 7 days 7 days 7 days 22 Equity The share capital consists of 2,303,750 shares of a nominal amount of DKK 20 each. On the Company's ordinary general meeting 2002 it was decided to reduce the share capital by a nominal amount of DKK 2,425,000 corresponding to 121,250 shares by cancellation of own shares. In 1998 the share capital was increased by a staff issue of 14,750 shares of a nominal amount of DKK 20 each. Other than that, share capital has not changed in the past 5 years. Own shares Number of shares Nominal value % of share capital January 123, , Purchase 119, ,000 2,390 2, Applied for cancellation -121, , December 121, ,000 2,425 2, The Company is authorised by the general meeting to acquire a maximum of 230,375 of its own shares, equal to 10% of the share capital. Own shares are primarily acquired for the purpose of the incentive programmes offered to the Group s Board of Directors, Management and other Executives. In 2002 the Company acquired own shares equal to 4.9% of the share capital. The purchase price amounted to DKK 34.8 million. The Company's outstanding shares as of 31 December 2002 is 2,182,500 shares of DKK 20.

58 58 Accounts the group the parent Amounts in DKK Minority interests Balance at 1 January 51,278 27,839 Additions to minority interests upon establishment of Normit Shipping S.A., Panama 7,299 0 Foreign exchange adjustment -8,482 1,350 Share of profit for the year ,089 Balance at 31 December 50,385 51, Contingent tax/deferred tax Property, ships and equipment 0 306, ,848 Lease obligations 0-141, ,660 Provision for docking Other liabilities Accruals 0-2, ,684 Carry-forward tax loss 0-4, , , ,711 The company has entered into The Danish Tonnage Tax system, which has entailed, that the deferred tax of DKK 157,711k is reversed, of which DKK 178,211k is credited in the profit and loss statement. Entry into the Tonnage tax system is binding for a period of 10 years. The contingent tax under the Tonnage tax system amounts to 108, ,650 - Contingent tax been calculated with 30% equal to the current tax rate. 25 Provisions for docking expenses (Bareboat) Balance at 1 January Provisions for the year 1, , Utilised during the year Reversal for the year , , The terms to maturity of provisions are expected to be as follows: Within 1 year Between 1 and 5 years 1, , , ,456 58

59 Notes 59 the group the parent Amounts in DKK Non-current liabilities and short-term bank debt Interest-bearing liabilities are comprised within the following items: Long-term bank debt 515, , , ,548 Lease obligations 0 450, ,080 Current portion of long-term debt 62,536 56,478 62,536 56, , , , ,106 Mortgages and security provided in relation to liabilities are disclosed in a separate note below. Risk relating to changes in interest rates on debt and the periods when loans will be re-priced are as follows: Within Between After 1 year 1-5 years 5 years Total the group 2002 Total liabilities 578, ,457 Effect of interest rate swaps, cf. Note , , , , , Total liabilities 461, , ,106 Effect of interest rate swaps, cf. Note , , , , , ,748 the parent 2002 Total liabilities 578, ,457 Effect of interest rate swaps, cf. Note , , , , , Total liabilities 461, , ,106 Effect of interest rate swaps, cf. Note , , , , , ,748

60 60 Accounts the group the parent Amounts in DKK Non-current liabilities and short-term bank debt continued Long-term bank debt and the current portion hereof excluding liabilities relating to finance leases show the following values: Carrying amount 578, , , ,906 Fair value 578, , , ,906 The terms to maturity are: Within 1 year 62,536 34,358 62,536 34,358 Between 1-5 years 250, , , ,436 After 5 years 265, , , , , , , ,906 Terms to maturity for liabilities relating to finance leases: the group Lease Carrying Lease Carrying payment Interest amount payment Interest amount Within 1 year ,585 27,465 22,119 Between 1-5 years ,121 96,402 91,719 After 5 years , , , , , ,200 Fair value 0 478,952 the parent Lease Carrying Lease Carrying payment Interest amount payment Interest amount Within 1 year ,585 27,465 22,119 Between 1-5 years ,121 96,402 91,719 After 5 years , , , , , ,200 Fair value 0 478,952 The fair value has been calculated on the basis of discounted cash flows by using a discount factor based on the borrowing rate at the balance sheet date expected by management. The fair value of short-term loans and short-term lease obligations is assumed to be expressed by nominal values.

61 Notes 61 Amounts in DKK Operating lease obligations At the balance sheet date the Group has the following lease obligations in relation to ships delivered with purchase option on time charter: Number of dry cargo vessels Number of tankers Total number of ships Charter hire including any estimated daily operating costs Dry cargo vessels 322, , , ,948 45,490 Tankers , , , ,948 45,490 Charter hire excluding estimated daily operating costs (excl value of purchase option) Dry cargo vessels 210, , ,607 84,496 29,937 Tankers , , ,607 84,496 29,937 the group Present values of charter hire excluding any daily operating costs calculated on the basis of the interest rate implicit in the individual leases Dry cargo vessels 631, ,079 Tankers 0 0 Leases have substantially been entered into with a mutually interminable lease period of 5 years. As a general rule, leases include an option on renewal for an additional one year at a time, for up to 3 years. As a general rule, leases include purchase options typically exercisable as of the end of the third year up until the expiry of the period of renewal. The exercise of the purchase option on the individual ship is based on an individual assessment.

62 62 Accounts Amounts in DKK Operating lease obligations continued At the balance sheet date the Group has the following lease obligations in relation to ships delivered without purchase option: Number of dry cargo vessels Number of tankers Total number of ships Charter hire for ships on time charter Dry cargo vessels 253,440 11, Tankers 13, ,804 11, Charter hire for ships on bareboat charter Dry cargo vessels Tankers 31,020 31,105 31,048 29, ,020 31,105 31,048 29,377 0 The Group has no charter obligations relating to ships delivered beyond Charter hire including any estimated daily operating costs recognised in the income statement for the year is disclosed in note 4 Operating costs ships.

63 Notes 63 the group the parent Amounts in DKK Other contingent liabilities NORDEN has transport commitments for cargo contracts which within one year amount to 230, , , ,000 and in the following year to 80, ,000 80, ,000 Guarantee commitments do not exceed 2,700 2,700 2,700 2,700 The Company has entered into agreements for future delivery of newbuildings and ships not delivered on long-term charter, which amount to 2,736,158 2,782,590 2,592,198 2,666,413 A claim has been made against the Company. The Company and its legal advisors consider the claim as unwarranted and do not believe that this will inflict the Company any loss as a result of the action for damages. The maximum risk is estimated to USD 6.75 mio. corresponding to DKK 47,805-47, Mortgages and security As security for long-term bank debt 578, , , ,906 a total number of ships of with a carrying amount of 804, , , ,655 have been mortgaged at 750, , , ,547 Finance lease assets at a carrying amount of 0 393, ,227 have been provided as security for lease obligations of 0 472, ,200

64 64 Accounts Amounts in DKK Financial instruments As part of its hedging of recognised and unrecognised transactions, the Group uses hedging instruments such as foreign currency loans, lease obligations, forward exchange contracts, interest rate swaps, forward freight agreements and bunker hedging agreements. Recognised transactions Hedging of recognised transactions relates primarily to receivables and liabilities. Currency exposure Payment Currency /maturity Receivables Liabilities Net position USD Below 1 year 81, ,173-57, years 0-250, ,143 Beyond 5 years 0-265, ,778 Other Below 1 year 9,674-43,307-33, years Beyond 5 years , , ,670 At 31 December 2002 the unrealised foreign exchange adjustment of the Group s non-current liabilities and lease obligations in USD equals a gain of DKK 96,102k (2001: DKK -59,388k) which has been recognised directly in equity. Future transactions The Group s actual currency exposure arises on costs that are not paid in USD. The amount of the exposure is the equivalent value of USD 13m (2001: USD 13m). It is the Group s policy to hedge these costs for a period of 6-24 months depending on the development in the USD rate. Further the Company has contracted a ship to be delievered in The contract is settled in JPY. To cover the currency exposure the Company has entered a forward exchange rate agreement of JPY 1,899 mio. against USD 17 mio. Deferred recognition in the income statement of gains/ losses expected to be realised Period Contractual value after the balance sheet date Forward exchange contacts DKK/USD 0-6 months 35,411 65, ,372 Forward exchange contacts USD/JPY 1-2 years 117, , ,275 65,983-2,105-1,372

65 Notes 65 Amounts in DKK Financial instruments continued Interest rate exposure The Group s surplus cash is accumulated in USD as it is expected to be reinvested in ships. As the Group wishes to limit its financial exposure, it has adopted the policy of fixing the interest rate for a period varying between 2 and 6 years for the Group s total loan portfolio excluding ships acquired on finance leases. As regards the Group s total financial assets and liabilities, the following times of contractual re-evaluation and maturity may be indicated, based on the earlier of the two dates. Time of re-evaluation/maturity Within Between After Fixed-interest % effective Category 1 year 1-5 years 5 years part yield Cash and cash equivalents 284, Receivables 90, Long-term bank debt -578, Other non-current liabilities -118, Interest rate swaps (principal), variable leg 578, Interest rate swaps (principal), fixed leg -62, , , , , ,457 The effective yield has been calculated on the basis of the current interest rate level at 31 December Commodity instruments For the purpose of managing the Group s exposure to fluctuations in freight rates and oil prices, the Group enters into derivative financial instruments to hedge against this exposure. Deferred recognition in the income statement of gains/losses expected to balance sheet date Contractual value be realised after the Forward freight agreements purchases 15,563 31,310 3, Forward freight agreements sales 15,935 52,987-2,961 6,046 Bunker hedging agreements purchases 54,508 10,261 2, Bunker hedging agreements sales

66 66 Accounts Amounts in DKK Financial instruments continued Credit exposure The Group s credit exposure relates primarily to freight receivables, prepaid T/C hire, prepayments to shipyards for newbuildings and cash and cash equivalents. Generally, the Group s receivables are spread to the effect that there is no concentration of credit exposure on single customers. The amounts at which the mentioned items are stated in the balance sheet correspond to the Group s maximum credit exposure. The Group s credit exposure in relation to derivative financial instruments, including commodity instruments, has been limited by the fact that they have been entered into with major banks in the Nordic countries with a high credit rating or with major wellknown manufacturers, shippers, consignees and traders with a satisfactory credit rating. 31 Related party transactions Shareholders with major influence, subsidiaries and associated undertakings and the Company s management are considered as related parties. Apart from intercompany transactions eliminated in the consolidated financial statements and management fees as descibed in notes 6 and 32, no transactions with related parties have been made during the year. 32 Incentive programmes As of 2001, the Shipping Company has established an incentive programme by way of share options offered to the Board of Directors (7 persons), the Management (2 persons) and other executives (6 persons). The share option scheme has been increased during 2002 with 1,200 share options as a result of an increase of the number of Boardmembers, and the share option scheme hereafter comprises a total of 97,012 share options. Each share option entitles the option holder to acquire a share of the Shipping Company of a nominal amount of DKK 20. The share option scheme corresponds to a right to acquire 4.21% of the share capital if all share options are exercised. The share options are granted in equal portions at four different dates. Granting was effected twice in 2001, once in 2002 and will be effected once in The value of the share options granted to each of the above persons equals a specified percentage of that person s annual pensionable salary or director s fee for The remaining share options for 2002 was granted on March The remaining share options for 2003 will be granted at the board meeting on March , where the Annual Report 2002 are signed, recommended for approval at the Annual General Meeting and disclosed. The share options have been covered by the Shipping Company by acquisition of own shares. The option prices (exercise prices) have been fixed at the average of market price (price all deals at 5 p.m.) of shares listed at the Copenhagen Stock Exchange within 10 days of the Company s announcement of its financial statements for the financial year preceding the respective year of granting. The share options may be exercised after at least 3 and not more than 5 years from the respective dates of granting. As regards the Management and other Executives, the exercise of share options is conditional upon the person in question not being under notice to quit at the time of exercise. Special provisions apply in case of illness and death. The granting of share options to the Board of Directors was approved at the Annual General Meeting on 2 May 2001.

67 Notes 67 Amounts in DKK Incentive programmes continued Number Other Board of Directors Management Executives Total Granted 15 January ,500 10,218 9,235 23,953 Granted 15 March ,500 10,218 9,235 23,953 Outstanding at 31 December ,000 20,436 18,470 47,906 Granted 22 March ,100 10,218 9,235 24,553 Outstanding at 31 December ,100 30,654 27,705 72,459 Option Year-end exercise share price Market value price per option in DKK 000* Exercise periode Granted 15 January / / Granted 15 January / / Value adjustment Outstanding 31 December Granted 22 March ,227 22/ / Value adjustment - - 4,298 Outstanding 31 December ,863 *The Market value has been calculated as the difference between the exercise price on the time of granting and the market value of the Company s shares at the balancesheet date.

68 68 Definition of financial ratios Financial ratios have been calculated in accordance with the guidelines (Computation of Financial Ratios and Key Figures of 1977) issued by the Danish Association of Financial Analysts. The financial ratios included under Key figures and Ratios have been calculated as follows: Investments for the year in property, = plant and equipment, gross Sum of investments for the year in property, plant and equipment not reduced by sold or scrapped assets. Earnings per share of DKK 20 = Net profit for the year Number of shares, excluding own shares, year-end Dividend per share of DKK 20 = Dividend yield x nominal value of shares 100 Dividend yield for the year = The Parent Company s dividend yield Net asset value per share of DKK 20 = Equity excluding minority interests, year-end Number of shares excluding own shares, year-end Return on equity (%) = Net profit for the year x 100 Average equity excluding minority interests Equity ratio = Year-end equity excluding minority interests x 100 Total assets Return on net assets = Net profit from primary activities + financial income x 100 Net assets Profit margin = Result of primary activities x 100 Net turnover Year-end price of share of DKK 20 = The price of the Company s shares quoted at the Copenhagen Stock Exchange on the balance sheet date P/NAV = Year-end price of share of DKK 20 Net asset value of share of DKK 20 Equity excluding minority interests Net Asset Value (NAV) per share = + added value of ships, ships ordered, land and buildings compared to year-end book value Number of shares excluding own shares, year-end Net interest-bearing debt = Interest-bearing debt less cash and cash equivalents and securities, year-end Capital invested = Equity + minority interests + net interest-bearing debt, year-end Year-end USD rate = The USD exchange rate quoted at the Copenhagen Stock Exchange on the balance sheet date

69 69 Group s tonnage at the end of 2002 tankers Own tonnage/partly owned tonnage Year of constructiom DWT M.t. Nordeuropa M.t. Nordscot * M.t. Nordamerika M.t. Nordatlantic M.t. Nordasia Bareboat tonnage Year of constructiom DWT M.t. Nord Stealth Timecharter tonnage Year of constructiom DWT M.t. Melodia M.t. Emerald Gloria On order Year of constructiom DWT M.t. Sumitomo newbuilding M.t. STX newbuilding S * M.t. STX newbuilding S * Ships under construction chartered on a long-term basis by NORDEN, with purchase option Year of constructiom DWT M.t. Shin Kurushima S ** M.t. Shin Kurushima S M.t. Shin Kurushima S Ships under construction chartered on a long-term basis by NORDEN, without purchase option Year of constructiom DWT M.t. Shin Kurushima S *) Partly owned **) Also sales option for NORDEN

70 70 dry cargo vessels Ships chartered on a long-term basis by NORDEN, with purchase option Year of constructiom DWT M.s. Nordkraft M.s. Nordtramp M.s. Nordkap M.s. Nordpol M.s. Nordvind M.s. Nordstjernen M.s. Nordbright M.s. Nordflex M.s. Nord Monaco M.s. Nordsund M.s. Nord Phoenix M.s. Nordglimt M.s. Nordholm Timecharter tonnage Year of constructiom DWT M.s. North Prince M.s. Maddalena D Amato M.s. Transgiant M.s. Marquesa M.s. Maja Vestida M.s. Jin Pu Hai M.s. Deng Zhou Hai M.s. Ark Fortune M.s. Sun Bulker M.s. Port Estoril M.s. Yasa Ilhan M.s. Medi Monaco M.s. Kang Zhong M.s. Navios Meridian M.s. Pacific Mercury M.s. Mystras M.s. Prabhu Satram M.s. New Auspicious M.s. Million Trader M.s. Maritime Skill M.s. Nord Ace M.s. Stellar Light M.s. Stellar Might M.s. Spring Drake M.s. Western Viking

71 71 Timecharter tonnage (continued) Year of constructiom DWT M.s. Glarus M.s. Bulk Orion M.s. TK Gloria M.s. J Suda M.s. Darya Rani M.s. Vindonissa M.s. Coral Gem M.s. Costas G.O M.s. Great Peace M.s. Stargold Trader M.s. Nord Viking M.s. Aditya Gautam M.s. Dimitris C M.s. Edip Karahasan M.s. Prabhu Yuvika M.s. Prabhu Puni M.s. Prabhu Mihika M.s. Pacific Governor M.s. Aliki L M.s. Western Island M.s. You Mei M.s. Pacific Wisdom M.s. Top Glory On order Year of constructiom DWT M.s. Nordhval M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn * Ships under construction chartered on a long-term basis by NORDEN, with purchase option Year of constructiom DWT M.s. Norden tbn ,000 M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn M.s. Norden tbn * M.s. Norden tbn *) Partly owned

72 72 The Company s History 1871 Dampskibsselskabet NORDEN A/S is founded by Mads C. Holm on February 11. He is Managing Director of the Company until his death in The Company s first steamship, m.s. NORDEN (1,400 dwt), is delivered from a shipyard in Glasgow Helsingør Shipyard is founded by Mads C. Holm Dampskibsrederi-Foreningen (later Danmarks Rederiforening ~ Danish Shipowners Association) is founded with Mads C. Holm as co-founder Mads C. Holm dies at the age of almost 65 years. Dampskibsselskabet NORDEN A/S head office relocates from Havnegade to Amaliegade NORDEN acquires Dampskibsselskabet Danmark with a fleet of four steamships NORDEN acquires Dampskibsselskabet Hafnia with a fleet of five steamships The Company s first motor vessel, Nordbo (8,250 dwt, price: DKK 2.8 million), is delivered from Burmeister & Wain (B&W) B&W and Nakskov Shipyard deliver eight liner-type motor vessels of approx. 8,300 dwt to NORDEN Of the fleet comprising eight motor vessels and one steamship four are lost during the war, of which three in Allied services. Three motor vessels are docked in Nakskov during the occupation Nakskov Shipyard delivers eight liner-type motor vessels of 8,300/10,200 dwt to Dampskibsselskabet NORDEN A/S The Company s last steamship, Nordlys, is sold. From 1946, according to an amicable agreement between Dampskibsselskabet Orient and NORDEN, Orient begins to acquire shares in NORDEN. Around 1955 Orient owns the majority of shares in NORDEN, while the majority of shares in Orient is owned by Motortramp M.s. Nordpol is lost during the armed conflict between India and Pakistan about East Pakistan (now Bangladesh) M.s. Nordtramp, bulk carrier of 34,000 dwt with six cranes, is delivered from Mitsui Shipbuilding, Japan. Five more bulkcarriers are delivered from Mitsui in The last liner-type vessel, m.s. Nordfarer, is sold. Mads C. Holm, the founder of Dampskibsselskabet NORDEN A/S