GriegShippingGroup_omslag.indd 2 3/26/08 11:32:14 AM

our VISION

“ CreAte lAStiNG vAlue tHrouGH our CommoN effort’’the value we create emerges from a conscientious long-term relationship with our main stakeholders.

• Ourtrademarkwithintheshippingbusinessshallbesafety,quality,integrityandfinancialstrength

• Weshallfurtherdevelopourstrongpositionbycreatingandseizingbusinessopportunitiesandenteringnewmarkets

• Weshallworkrelentlesslytopreventharmfulemissionstoairandsea

• WeshallactivelysupportandshapethefutureofthemaritimesectorinNorwayandabroad tothegreatestextentpossible

CoNteNtS

our vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

the Ceo´s perspectives . . . . . . . . . . . . . . . . . . . . . . . . . 6

CorporateSocialResponsibility . . . . . . . . . . . . . . . . .8

our environmental vision . . . . . . . . . . . . . . . . . . . . . . . 11

Grieg Shipping Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2007 in Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

the Naming of Star Java . . . . . . . . . . . . . . . . . . . . . . . 20

Director´s report 2007 . . . . . . . . . . . . . . . . . . . . . . . . 24

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

KeyFiguresinUSD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

the fleet and operation . . . . . . . . . . . . . . . . . . . . . . . 39

fleet list . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Next Generation of vessels . . . . . . . . . . . . . . . . . . . . 42

management Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Star Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Grieg Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

Grieg foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

financial statements 2007 . . . . . . . . . . . . . . . . . . . . 57

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The future is our continuous focus in the search for the right direction, the right decisions at the right time, to find our platform over and above our competitors, and to secure our people and our business also for the coming period. Last year gave us additional strength to build our business further, both with good financial results and with new and improved competence in our organization. Although the strong shipping market has given us many challenges in our technical operation, there is no doubt that our 23 state-of-the-art open-hatch vessels are valuable in this market. And with close and professional collaboration with Star Shipping throughout the year, substantial values were created for our company. I think the whole shipping industry is more humble in its approach to the market now. The fundamentals are still strong, but the risk factors many and difficult to predict. We are preparing ourselves for more volatility and a lower market in the coming periods. These are the everyday concerns of our business; however, there are the more overall responsibilities that need our attention as well. And we try to contribute. There are several issues that have high priority in Grieg Shipping Group at the moment. One of these is the severe challenges that face our society in terms of global warming. We do not face this alone. Regardless of business, industry and country, the people of this world are concerned with how we have taken care of the environment in recent time and how we can correct the damage that has been done.

It is a fact that seaborne transportation is the most environ-mentally friendly means of transporting goods from one place to another. It is, however, also a fact that we still pollute, both to the air and to the sea. Less than before, but more than we want to. We have therefore developed a separate environmental strategy describing what we in Grieg Shipping Group shall do to contribute to reducing emission from our ships in the coming years. There is much talk, both nationally and interna-tionally about the consequences of global warming; however, we must do more than talk! Another matter that we work on together in our global industry is how to deal with corruption. Grieg Shipping Group cannot save the world from corruption alone, but we can be extremely clear in that we do not accept it and speak loudly and clearly in all relevant forums to contribute to the war against corruption being placed on the agenda both nationally and internationally. This is challenging work, and sometimes we expose our seafarers to extremely uncomfortable situations. But to contribute towards changing something, difficult decisions must be made, and it is imperative that we make them. During 2007 our government implemented a new tax regime for ship-owning companies. A good tax regime. However, the transition regulations were a disaster, demanding that we pay tax on our net profits over the past 11 years, whereas under the previous agreement there was only tonnage tax if we continued our business in the same structure. Both we and the Norwegian shipping industry worked very hard last year

THE CEO’S PERSPECTIVE - future CHAlleNGeS Theworldisbecomingincreasinglysmaller;ourindustryispartofaglobalenvironment,andwefacesomechallengesthatwecannotsolvealoneandothersthatweshallhavetosolvebyourselves.

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G r i e G S H i P P i N G G r o u P A N N u A l r e P o r t 2 0 0 7

to fight this, but failed. Now we shall have to evaluate the consequences. Will Norway be the best place to establish new business in the future? All these overall strategic questions, and many more, are of course important for the continuation of our business. But underneath this strategy work, trying to contribute to the global challenges, there is work to be done – every day of the week, throughout the year. Hard work, essential work, done by all our colleagues at sea and on shore, to keep our business going in the direction that is described in our company strategy.

I want to take this opportunity to thank my colleagues for their contributions and loyalty and for investing their careers in our company. We can only do it together, as a team, in which all players have their roles and responsibilities.

It is an honor for me to be part of the Grieg Shipping Group Team. And to all our business partners; thank you all for your support and efforts in 2007.

Camilla Grieg CEO Grieg Shipping Group

foto: Caroline J. roka

The International Maritime Organisation (IMO) regulates shipping activities for 157 countries under a United Nations charter. Extensive regulations cover safety and environment and are globally binding. Aside from compliance with all relevant rules and regulations, Grieg Shipping Group has been seeking better solutions through more focus on innovation and technology development within the industry.

The concept of Corporate Social Responsibility has different meanings across the world. Grieg Shipping Group is in line with the European Union’s definition of Corporate Social Responsibility, which states that CSR is ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their operations with their stakeholders on a voluntary basis’. We are committed to doing more than what is required of us by laws and regulations. We want to be recognized for our proactive approach to corporate social responsibility and make a true difference in the industry.

Our vision for the environment is zero emissions to air and water. In 2008 we will also become member of the UN Global Compact and further strengthen our CSR activities internally.

our StAkeHolDerS AND PArtNerSHiPSWe recognize the importance of an open relationship with our stakeholders: employees, customers, suppliers and business partners, the environment and society in general.

Good co-operation between business, public authorities and non-governmental organizations is a premise to achieving long-term goals in critical areas such as climate changes and international corruption. We cannot win the fight against corruption alone, but by being open about the dilemmas we experience we wish to pave the way for change. We support Transparency International and its anti-corruption efforts.

In 2006 Grieg Shipping Group was also invited to join The World Business Council for Sustainable Development, a coalition of almost 200 companies that share a commitment to sustainable development.

CorPorAte SOCIAL RESPONSIBILITY

Werecognizetheenvironmentalandsocialimpactsofourbusinessactivitiesandfocus stronglyoncorporatesocialresponsibilityandsustainablebusinessdevelopment,onboth a strategic and operational level.

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ACHievemeNtS iN 2007Global climate changes are at the top of the international agenda. The contribution of industry is critical to the mitigation of global warming and reduction of harmful emissions. The environment is at the top of our business agenda. High environmental standards and continuous efforts to reduce energy consumption on our vessels are key sustainability efforts, and considerable investments were made throughout 2007. Achievements as well as priorities for 2008–2009 are highlighted in the subsequent chapter.

We are exposed to ethical dilemmas in our international operations and have over the past years focused actively on dilemma training. We have well-functioning routines for reporting on ethical dilemmas related to corruption and facilitation payments. In 2007 we made continuous efforts to maintain our ethical awareness by highlighting dilemmas and addressing them openly.

meASuriNG PerformANCe To ensure that our performance is continuously improved, we acknowledge the need for more measures. Reporting on environmental and social matters is based on performance indicators established by the Global Reporting Initiative. The reporting guidelines will be implemented by the end of 2008.

The safety and well-being of our people is a key focus area. To ensure that we have high standards for health and safety and the general working environment on board our vessels, we have established a program to strengthen these areas. This program also includes an extensive family medical plan.

We have dedicated more resources to further strengthen our corporate social responsibility efforts.

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Cargo vessels carry approximately 90% of the world’s merchandise by volume, and international trade continues to increase. The shipping industry accounts for more than 3% of the world’s CO2 emissions; other harmful emissions include nitrogen oxide (NOx) and sulfur dioxide (SOx).

Grieg Shipping Group takes a proactive approach in reducing the impact of our business on the environment in which we operate. Reducing emissions to air and sea and improving our environmental standards are key sustainability efforts for us. These efforts also include contributing to impel the industry to a higher environmental standard. New technology is being developed to enable further reduction in emissions of CO2, NOx and SOx from our fleet. Ballast water treatment, waste handling and ship recycling represent other challenges that we are targeting actively.

We are proud of what we have achieved and will continue our efforts to reach our goals and ultimately our vision.

our ACHievemeNtS iN 2007Grieg Shipping Group AS has during 2007 made considerable investments in improving the environmental standard of the fleet. Reductions in emissions of NOx to air have been achieved by equipping 10 vessels in the fleet with sliding fuel valves for the main engines, hence reducing the NOx emissions by up to 35% per vessel.

We have taken further steps to reduce the amount of garbage/waste by focusing on good housekeeping. Achievements include completion of a drain management system for the engine rooms, whereby, for instance, all pumps are equipped with mechanical seals, avoiding spilling of water and oil on the tank top.

A second set of bilge water separators has been installed on board the majority of the vessels, to double the safeguarding against unintentional spill of oil-containing water to the sea.

A holding tank for cleaning water from cargo compartments has been installed onboard, to enable delivering cleaning water to shore facilities. Implementation will continue in 2008.

The charterer of our vessels, Star Shipping, signed the Long Beach Green Flag Incentive Program in 2006 and continued participating in 2007. This program offers reduced dockage rates and environmental awards for vessels that help improve air quality by voluntarily reducing their speed when they enter or depart from the port of Long Beach, in southern California.

OuR OVERALL GOALS

Grieg Shipping Group AS is based on tradition, high technological standards and professional seamanship. We shall make use of this expertise and knowledge to pave the way and make continuous improvements towards a modern, competitive and sustainable business.

Our fleet of high-quality and environmentally friendly vessels shall be our trademark, and we shall consolidate our position as a leading company within quality and environmental issues. We firmly believe that setting our environmental standard at a high level will be recognized by our customers and further cement our market position

our eNviroNmeNtAl viSioN NO HARMFuL EMISSIONS TO AIR AND SEA transportbyseaisthemostenvironmentallysoundoptionfortransportingtheworld’s goods and merchandise.

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meASuriNG PerformANCe To measure our environmental performance, Grieg Shipping Group AS employs a set of Key Performance Indicators (KPIs) and indexes;

The Environment Protection Index (EPI) measures our environ-mental performance related to incidents that result in emissions to air, releases to water and other harmful environmental influences. The EPI does not include emissions during normal operations or the use of non-polluting articles of consumption etc. In 2006 there were five incidents, corresponding to 3.2 on the index. This is far below our target of 1.3. Through active measures we improved our EPI in 2007, with zero incidents.

The CO2 Index calculates the efficiency of transported goods over a distance relative to the emission of CO2. We apply IMO’s measuring methods, which allow for a company-specific modification of parameters. IMO recommends basing the CO2 index on measurement of consumption and cargo-miles between two ports. We are measuring the total consumption and cargo-miles on a tertiary basis.

EPI indexesTotal 2006 - 2007

ActualObjectives Deviation

EPI 2006 EPI 2007

-2.0

-1.0

-3.0

0.0

1,3 1,3

0,0

1,3

3,2

-2,0

1.0

2.0

3.0

4.0

-2.0

-1.0

-3.0

0.0

1.0

2.0

3.0

4.0

CO2 index average for all vessels

CO2 index

2006 2007 2008 2008

1

2

0

3

4

5

1

2

0

3

4

5

12


CO2 index per vessel on tertiary basis

CO2 index 3rd tertial CO2 index 2nd tertial CO2 index 1rd tertial

Star

Ala

bam

a

Star

Am

eric

a

Star

Atla

ntic

Star

Der

by

Star

Die

ppe

Star

Dov

er

Star

Eag

le

Star

Evv

iva

Star

Flo

rida

Star

Fra

ser

Star

Fuj

i

Star

Gra

n

Star

Grip

Star

Han

sa

Star

Har

mon

ia

Star

Her

dla

Star

Hid

ra

Star

Is�o

rd

Star

Ism

ene

Star

Istin

d

Star

Japa

n

Star

Juve

ntas

Star

Java

1

2

0

3

4

5

6

7

8

1

2

0

3

4

5

6

7

8

Key PerformanCe IndICatorsEmissions to air: 2006 (22 vessels) 2007 (23 vessels)

Fuel consumptions in tons 156 123 164 000 NOx emissions in tons 16 052 15 597 CO2 emissions in tons 486 167 510 696

Values for produced SOx will be available from 2008.

Grieg Shipping Group AS took delivery of one new vessel in November 2006; hence a higher consumption of heavy fuel oil is noticeable in 2007. Reduction in NOx emissions from 2006 – 2007 are due to active measures taken - i.e. installation of sliding fuel valves.

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PrioritieS for 2008 - 2009Efforts to reduce energy consumption on board our vessels will continue, thereby reducing harmful emissions to air and water. Legal requirements by authorities in various regions force the industry to take environmental measures. Grieg Shipping Group is positive to regulations that contribute to a more sustainable business development and create a balanced playing field in the international shipping industry.

Sustainability reporting based on the global standard GRI (Global Reporting Initiative) will be fully implemented by the end of 2008, thus enabling Grieg Shipping Group to better compare efforts with the industry and measure continuous improvements. Monitoring the SOx production will be one of our priorities and further decide our strategy for reducing this harmful emission in the future. We will target global climate challenges by actively continuing our sustainability efforts and approaching new collaborating partners in the industry, ensuring that the best available technology in the market is used on our vessels.

In the first half of 2008 the Group will be certified in accordance with ISO 14001, the international standard for the protection of the environment. This certification involves both vessels and office premises.

Five of our oldest vessels will be provided with Green Passports during 2008, thus preparing the vessels for a safe and environmentally sound recycling. In the longer term all our vessels will be provided with Green Passports.

Clean Ship is a notation given to vessels in compliance with all regulations for emissions to air and release of harmful materials to water. Grieg Shipping Group AS is in compliance with most classification rules, with the main exception of low sulfur fuel usage on auxiliaries while in port. For vessels built after 1994 we are planning to implement the notation by the end of 2009.

SAFETY AND QuALITY THROuGHOuT

THE LIFE CYCLE OF OuR VESSELS!

WHAT IS A GREEN PASSPORT?

Provides information on potential hazards in materials, systems or components on board the vessel. Safeguards on board personnel or ship breakers against harmful exposure associated with the issues of health, safety and the environment

Enables the planning of a safe and environmentally sound recycling of the vessels.

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Grieg Shipping GroupHolding AS

Star Shipping AS(Commercial & operation)

Grieg Shipping Group AS(Managment company)

Grieg Shipping AS(Shipowning 15 vessels)

Grieg International II AS(Shipowning 8 vessels)

50%

The Grieg Shipping Group owns and manages 23 open-hatch general cargo vessels. In addition, we have shipbuilding contracts for four new vessels, with delivery in 2009 and 2010. The Group consists primarily of the management company Grieg Shipping Group AS and the two ship-owning companies Grieg Shipping AS and Grieg International II AS. We are located in Bergen and Oslo, Norway; Mobile, Alabama, USA; Shanghai, PRC; and Manila, the Philippines. In 2007, the Group employed 599 persons, of whom 556 were sailing personnel.

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

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

The vessels are chartered to Star Shipping on long-term charter parties. Star Shipping, which is jointly owned by Masterbulk Pte. Ltd. and the Grieg Shipping Group, is the world’s largest marketing and operating company within seaborne transportation of wood pulp and has 19 offices world wide.

The strategy of Star’s open-hatch pool is customer-focused, long-term and industrial, and the business is characterized by long-term freight contracts. Star’s vision is to be a world-class industrial shipping company and the preferred carrier in its chosen business segments.

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

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

As a further development of our position as ship owner, we also utilize our competencies to create new shipping business in addition to the open-hatch activities. The new investments are based on synergies and spin-offs from our existing shipping know-how and network. In addition to the shipping activities, the Grieg Shipping Group manages an investment portfolio with investment strategy founded on the Group’s business principles and long-term strategy. The portfolio is invested in stocks, hedge funds, bonds and money market instruments.

GRIEG SHiPPiNG GrouP

TheGriegShippingGroup,whichownsoneoftheworld’slargestopen-hatchfleets, isanimportantparticipantininternationalindustrialshipping.Ourhighlyspecializedvessels aretailor-madetomeetcustomers’requirementsanddeliversuperiorcargocare.

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Grieg Shipping Group’s net result before tax in 2007 •amounted to NOK 663 million, which represents an improvement of 85% compared with 2006

The Group purchased and sold a handymax dry bulk •vessel, which contributed a solid profit to the Group’s overall result

Star Shipping carried 21.0 million metric tons of cargo, •which is 1.8 million tons less than last year. Approxi-mately 7.1 million metric tons were forestry products, which is up from 6.7 million metric tons in 2006

In February, hull no. 1533 from Mitsui Engineering & •Shipbuilding Co. was named Star Java by her sponsor, Nina Willumsen Grieg, at the port of Bergen, being the largest ship that has ever been moored at Bryggen

Star Hansa was run into by a harbor tug while she was •safely moored alongside. This resulted in 30 days off-hire. There was no harm to the environment

By equipping 10 vessels in the fleet with sliding fuel valves •for the main engines, the NOx emissions have been reduced by up to 35% per vessel

The “Grieg counts 4 safety” campaign was launched •to further increase the safety awareness for all on board and ashore

A new tonnage tax system was ratified by the Parliament •in December 2007. The new system forces ship-owning companies out of the previous system. A decision has been made to let Grieg’s ship-owning companies subject to taxation according to the old system enter the new tonnage tax system with effect from 1 January 2007

In March 2007 Grieg instituted legal proceedings against •Masterbulk, our partners in Star Shipping. The arbitration panel ruled in favor of Grieg on important issues and in favor of Masterbulk on other issues. Overall, Grieg is pleased with the arbitration award and will now focus fully on the further development of Star Shipping

So fAr tHiS yeAr…..In the first half of 2008 the company will be certified in •accordance with ISO 14001, the international standard for the protection of the environment. This certification involves both vessels and office premises

2007 iN Brief

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Star Java made her maiden voyage from the shipyard in Japan to British Colombia, the U.S. West Coast, Europe, and, finally, Bergen. With her main dimensions at 198 meters in length and 31 meters in breadth, the sight of the ship alongside Bryggen was no less than astonishing. All employees in Grieg Shipping Group and Star Shipping, their spouses, and special guests were invited to take part in the celebration.

The naming ceremony took place on the deck of Star Java and it was indeed a moment of pride, joy and emotions when the godmother fulfilled her duties with excellence, followed by a massive display of fireworks. In the rainy weather a huge party tent combined with the rain protection on the gantry cranes onboard ensured that guests could stay dry during the ceremony!

The owner’s dinner party in the evening took place in the Grieg Concert Hall. The extensive program during the dinner with a great variety of artists and musicians made the event an unforgettable experience.

We wish the captain and his crew safe and happy sailing with Star Java!

tHe NAmiNG of STAR JAVA iN BerGeN

17February2007willalwaysberememberedasagreateventinthehistoryofGriegShippingGroupandStarShipping.Hullno.1533fromMitsuiEngineering&ShipbuildingCo.wasnamedStarJavabyhergodmother,NinaWillumsenGrieg,attheportofBergen,beingthelargestshipthathaseverbeenmooredatBryggen.

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BuSiNeSS SummAry After a restructuring of the Grieg Group’s shipping interests during 2007, all shipping activities are now controlled through the parent company Grieg Shipping Group Holding AS and located with headquarters in Bergen and offices in Oslo, Manila, Mobile and Shanghai. The consolidated Group consists primarily of the ship-owning companies Grieg Shipping AS, Grieg International II AS, Grieg Poseidon AS and Grieg Maritime AS, as well as the management company, Grieg Shipping Group AS. Grieg Shipping Group AS delivers all services within strategy, administration and human resource, asset management, accounting and finance, insurance, market analysis, business and product development, as well as technical ship management.

The Group controls 23 open-hatch gantry-craned general cargo vessels and holds a shipbuildingcontract with Hyundai Mipo Dockyard Co. Ltd., South Korea, for four new vessels with delivery in 2009 and 2010. The fleet is chartered on long-term charter parties to Star Shipping AS, which operates the vessels under short- and long-term contracts of affreight-ment. Star Shipping, which is jointly owned by Masterbulk Pte. Ltd. (Singapore) and the Grieg Group, is the world’s largest marketing and operating company within seaborne transportation of wood pulp and has 19 offices world wide. Star Shipping utilized 64 vessels on average in 2007, of which 47 vessels were open-hatch vessels.

To expand the Group’s role as shipowner and to utilize our shipping knowhow, we also engage in developing new shipping activities beyond our open-hatch investments. In 2007 we purchased and sold a handymax dry bulk vessel, which contributed a solid profit to the Group’s total results.

In addition, the Group manages a financial investment portfolio with an investment strategy founded on the Grieg Group’s business principles and long-term strategy.

THEWORKiNGENviRONMENTAt the year end, the Group employed 43 persons in its offices ashore and 556 employees at sea. In general, the Board of Directors regards the working environment as good. A recent survey carried out among the onshore employees established that 70% of the employees feel a high degree of job satisfaction and are enthusiastic about their work. There are, however, some areas that call for improvements. This will be followed up closely in 2008 through various measures and initiatives in order to make improvements.

The Group keeps records of absence due to sickness, in accordance with prevailing rules and regulations. Total sickness absence in 2007 for onshore personnel was 3.24%, of which 1.59% was due to long-term illness. There are no records of injuries or accidents.

equAl oPPortuNityThe Group does not accept discrimination on the basis of sex, religion, cultural heritage, race, handicap, or any other form of discrimination. The Group performs its activities on the basis of respect for all employees.

At the year end, the Group had an equal mixture of the sexes among its employees, with 47% women and 53% men. An equal gender split is also the situation in the management group. Thus, the Board of Directors does not see any partic-ular need for implementing special gender equality measures.

DIRECTOR´S REPORT 2007 GRIEG SHIPPING GROuP HOLDING AS - CONSOLIDATED

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

CorPorAte GoverNANCeThe Group makes an effort to work in accordance with the Norwegian standard for good corporate governance to the extent such practice is applicable for a family-owned group of companies like Grieg Shipping Group Holding AS.

exterNAl eNviroNmeNtThe Group’s operation of its vessels is exposed to the risk of harmful emissions to sea and air. Extensive regulations cover safety and environment and are globally binding. Aside from compliance with all relevant rules and regulations, the Group takes a proactive approach in reducing any negative impact of the business on the environment in which it operates.

We seek to find solutions through innovation and technology development within the industry to, for example, enable reduction in emissions of CO2, NOx and SOx from the fleet. Ballast water treatment, waste handling and ship recycling represent other challenges that are targeted actively.

During 2007 the Group made considerable investments in improving the environmental standard of its fleet, such as equipping vessels with sliding fuel valves for the main engines to reduce NOx emissions by up to 35% per vessel, trimming down the amount of garbage on board, providing pumps with mechanical seals to avoid spill of water and oil on the tank top, as well as installing a second set of bilge water separa-tors for double safeguarding against unintentional spill of oil-containing water to sea.

In the first half of 2008 the Group will be certified in accord-ance with ISO 14001, which is the international standard for the protection of the environment.

Profit AND loSS After yet another year with surprisingly strong shipping and financial markets coupled with good work by everybody on board and ashore, the Group was once again able to produce very good results and outperform its long-term return targets. The consolidated accounts of Grieg Shipping Group Holding AS for 2007 show a net result before tax of NOK 663 million, which constitutes a 85% improvement over the NOK 358 million in 20061.

The revenues of NOK 1,154 million for 2007 ended up NOK 345 million higher than the previous year, which is due both to higher time charter hire earned with the open-hatch vessels and to net vessel sale gains after the purchase and subsequent sale of a handymax dry bulk vessel.

Operating expenses increased by 3% over the previous year to NOK 560 million and is expected to continue climbing in the year ahead. Given strong economic growth worldwide, this has a negative impact on prices and availability of supplies and services. As a result, the cost of anything from lubricating oil and spare parts to human resources was on the increase. Insurance costs also rose compared with 2006, being partly due to higher premiums, given incidents in the fleet over the last couple of years and partly to the decision to establish loss of hire coverage for the fleet. Further on, the vessels enjoyed more trading days in 2007, as this was the first full

1 NOK 20 Comparative figures for 2006.

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operational year for the vessel Star Java, delivered in November 2006. This increased the absolute cost level both in terms of fleet operating expenses and depreciation costs.

In spite of increased operational costs but given the sound revenue figures, the Group’s operating profit increased from NOK 265 million in 2006 up to NOK 594 million in 2007.

Net financial items for 2007 showed a positive contribution of NOK 69 million in profit. An important factor contributing

to the result was the above benchmark return achieved by the management of the Group’s financial investment portfolio, which is invested in stocks, hedge funds, bonds and money market instruments. Although U.S. interest rates fell consider-ably during the second part of year, this had less impact on borrowing costs, as about 60% of the Group’s interest rate exposure is hedged at fixed rate levels.

2006 2007

USD / NOK

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

USD / NOK USD / NOK

4

4.5

5

5.5

6

6.5

7

4

4.5

5

5.5

6

6.5

7

Capesize Panamax Handymax

Average monthly rates

Source: Clarkson

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

USD 1000 USD 1000

0

20

40

60

80

100

120

140

160

0

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80

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160

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NEWNORWEGiaNTONNaGETaxSySTEM,trANSitioN tAx A new tonnage tax system was ratified by the Parliament in December 2007. The new system forces ship-owning companies out of the previous system. A decision has been made by the Board of Directors to let Grieg’s ship-owning companies, subject to taxation by to the old system, enter the new tonnage tax system with effect from 1 January 2007.

Transitional regulations when entering into the new system imply that undistributed profit kept within the old system will be taxed over a 10-year period. The tax is calculated on the basis of the untaxed equity as of 1 January 2007, accumu-lated under the previous tonnage tax system. The transition tax leads to a back-tax of the shipping industry from 1996 up till 2006. Two thirds of the transition tax, i.e. NOK 523 million for the Group, is payable with one tenth annually, while the remaining third, constituting NOK 262 million will be waived by the tax authorities provided an equal amount is spent on or invested in environmental measures.

The companies controlled through Grieg Shipping Group Holding AS have accrued a tax liability related to 100% of the transition tax, as it is still uncertain whether the one third (earmarked for environmental measures) should be accounted for as debt or equity. The Board of Directors strongly believe that this part of the transitional taxes should be accounted for as equity. When the regulations with regard to accounting are finalized, the accounting of the last third will be reviewed.

The effect on the balance sheet for 2007 is that 100% of the transition tax payable has been accrued at a present value of NOK 600 million. This reduces the Group’s pre-tax result of NOK 663 millions to an after-tax result of NOK 27 million. The transitional tax thus reduces the Group’s book equity ratio from 67% to 56%.

The Board of Directors is of the opinion that the transitional regulations are in breach of the prohibition in paragraph 97 of the Norwegian constitution stating that no legislation may be implemented with retroactive effect. The obligation to pay the transitional taxes will be challenged when filing the tax returns.

Swap 31.12.2006 Swap 31.12.2007

Swap rates

6md libor 2 year 5 year 10 year

0%

1%

2%

3%

4%

5%

6%

0%

1%

2%

3%

4%

5%

6%

29


BalaNCESHEETaNDCaSHFlOWSWith higher earnings and reduced investment activities, cash flow from operation in 2007 amounted to NOK 455 million, and net change in cash was NOK 80 million after payments of dividends, loan instalments and purchasing the shares in Grieg Poseidon AS. Long-term interest-bearing debt, which also includes part of the pre-delivery financing for the ship-building contract for four new vessels, decreased from NOK 1,310 million to NOK 1,259 million over the year, while total long-term debt increased, given the effect of the transition tax. The Group’s total assets was NOK 5,405 million per year end, of which current assets constitute NOK 1,870 million. In spite of the significant and unjust transition tax stemming from the new tonnage tax system, the Board of Directors considers the Group to be in a strong financial position on entering 2008, with a total book equity of NOK 3,017 million. This should make the Group well equipped for further growth.

mArket outlook for 2008Owners of dry bulk vessels can look back on a fantastic year. In 2006 the average earnings for a handymax vessel were USD 20,400 per day. Twelve months later the same average rate was USD 42,600 per day, which is well above expectations at the start of the year. The background for the upward movement in freight rates was continued growth in China, with significant imports of energy-related commodities and other raw materials, together with low fleet productivity due to traffic jams in many key ports. Another important cause of the strong market was increasing use of deep-sea tonnage in Chinese coastal traffic. With major seaborne dry bulk commodities and the fleet each showing a growth of 6% in 2007, while freight rates doubled, the impact of so-called other factors has become an almost overwhelming market driver.

Within the Group’s main market, which is forestry products, world trade increased by 1% in 2007, but there were some major changes. These are changes that have been seen coming for a while but which became reality in 2007. British Columbian pulp producers have been struggling to remain competitive, and this year many of them lost out against new mills in South America and Indonesia as well as against an appreciating CAD. As a result, two of Star Shipping’s main competitors decided to more or less leave the area. Overnight, there was no longer an overcapacity of vessels, and there was not sufficient space for the shippers. The tonnage that moved out was either put into trading in the dry bulk market or employed in forestry trades from South America. Star Shipping, however, decided to stay, and given the limited tonnage and the strong general shipping markets, they also managed to improve freight rates.

From Brazil, the fastest-growing pulp supplier in the world, Star Shipping reduced their volumes over the year, although several long-term contracts were also entered into in the South American region. Instead, Star Shipping moved some of the vessel capacity out to the Far East. This provided the opportunity to further increase the business from China and at the same time benefit from the strong dry bulk market. In summary, Star Shipping seems to be well balanced between the Atlantic and the Pacific basin, between growing economies and more industrialized countries as well as between cargo contracts and vessels when entering 2008 and is thus expected to deliver another strong year.

The dry bulk market outlook for 2008 is, however, ambiguous, given an estimated increase of nearly 8% new tonnage and a growth prognosis of 4% for the overall seaborne dry trade.

30


There are also other uncertainties in the cards, such as the impact on China and the developing Far East region in general and dry bulk transportation in particular as a result of the international financial credit crisis. Furthermore, the container market is surrounded by scepticism. The consensus points to several tough years ahead, given an increased vessel capacity, which could have a harmful impact on the market for trans-portation of forestry products. Combined, these uncertain and negatively flavored elements will most likely lead to some sort of a market downturn, but the question remains, when and of what magnitude?

aRBiTRaTiONaWaRDAs described above, Star Shipping is owned by the Grieg Group and Masterbulk. The joint ownership is regulated through a shareholder agreement, which among other things states that disputes between the partners shall be solved by arbitration. In March 2007 Grieg instituted legal proceedings against Masterbulk. The arbitration panel ruled in favor of Grieg on important issues and in favor of Masterbulk on other issues. Overall, Grieg is pleased with the arbitration award and will now focus fully on the further development of Star Shipping.

riSkThe Group is exposed to various types of risks.

The market risk consists mainly of risks related to the development in freight rates, vessel prices, exchange rates, and interest rates. In terms of earnings and vessel prices, this risk is described above. Although freight rates for 2008 may well decrease compared with the previous year, one should bear in mind that the main part of the Group’s business is industrial, as the income from Star Shipping is characterized by a high

degree of long-term freight contracts. Thus, the earnings are less volatile than in the general dry bulk market and also tend to be lagging.

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

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

Being in a financially strong position, the liquidity risk is considered close to non-existent. Parts of the financial investment portfolio are also regarded as a support for the core business, and these funds are governed by a financial strategy with moderate risk-taking.

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

31


AlloCAtioN of Net iNComeThe Group’s financial position is good. The annual accounts provide a fair view of the enterprise’s assets and liabilities, financial position, and results. The Board of Directors recom-mends that this year’s result after tax in Grieg Shipping Group Holding AS (the parent company) of minus NOK 59,000 is distributed in the following manner:

Dividend: NOK 166,430,000 From other equity: NOK 166,489,000

The Board of Directors would like to thank the employees of Grieg Shipping Group ashore and on board the vessels and likewise the worldwide organization of Star Shipping for their contributions throughout the year.

Oslo, 11th of March 2008 Board of Directors of Grieg Shipping Group Holding AS

Elisabeth Grieg Cato A. Holmsen sr. Camilla Grieg Jarle Roth Bjørn Gabriel ReedChair Deputy Chair Board member Board member Board member

32


Cato A. Holmsen, Sr. Elisabeth Grieg Camilla Grieg Jarle Roth Bjørn Gabriel Reed.Cato A. Holmsen Sr. Elisabeth Grieg Camilla Grieg Bjørn Gabriel Reed Jarle Roth

fo

to: C

aro

line

J. r

ok

a

eliSABetH GrieG (48)Chair

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

CaTOa.HOlMSEN,SR.(66)dePuty ChaIr Mr. Holmsen has previously held top executive positions in shipping and industrial companies, the last being Executive Group Vice president of Aker AS and Dep. CEO of Scancem AB. At present he is Chairman and Partner of FSN Capital Partners AS. He is also Chairman of the Board of Eien-domsspar AS and Fesil Holding AS, as well as board member of Kongsberg Automotive AS, NorgesGruppen ASA, Align-ment System AB, Aura Light AB, Teres Medical Group AS, VIA Travel Group ASA, and Victoria Eiendom AS, among others.

CAmillA GrieG (44)Board memBerMrs. Grieg is co-owner of the Grieg Group and CEO of the Grieg Shipping Group. She is a member of the founding family. Mrs. Grieg has an MBA with a major in finance from the University of San Francisco and is Certified Financial Analyst (AFA). She is Chairperson in Bergen Rederiforening and member of the Board of Directors in GC Rieber AS, Star Shipping AS and Storebrand ASA.

JArle rotH (46) Board memBer Mr Roth is CEO of Umoe Industri AS and chairman in many of the group’s subsidiaries. Umoe Industri is engaged in a wide range of businesses, including maritime safety, IT, defense, and restaurants. He was President and CEO of Unitor ASA during the period 2001-2005. He is educated as a naval architect and holds a Master of Science in Business (siviløkonom) from the Norwegian School of Economics and Business Administration (NHH), in addition to a doctorate program within organization and strategy from NHH.

BJørN GABriel reeD (48)Board memBerMr. Reed is partner in BA-HR and head of the company’s M&A and Finance practice group. His experience from legal work is broad, with specialization in mergers and acquisitions, restructuring of businesses, corporate law, as well as securities and exchange law. Mr. Reed is a member of the Board of Directors of Star Shipping AS and has previously had board positions in, among others, Aker, Aker Maritime and Pareto.

BOARD of DireCtorS

35


KEY FIGuRES iN uSD

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

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

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

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

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

7 Currenct assets divided by current liabilities8 Book shareholders’ equity as percentage of

total assets

36


aggregate of Grieg shipping as, Grieg International II as, Grieg maritime as and Grieg Poseidon as.

figures in 2007 2006 2005 2004 2003

from Profit and Loss statementGross Revenue Mill. 204 127 158 148 93EBITDA (1) Mill. 96 70 109 105 54Operating Result Mill. 117 51 90 87 39Net Financial Items Mill. 13 12 8 4 -3Result before Tax Mill. 130 62 98 90 36

from Balance sheetShips and other fixed assets Mill. 455 469 341 347 286Current assets Mill. 355 218 191 175 117Shareholder’s equity at book value Mill. 377 391 339 285 233Long term liabilities Mill. 331 248 154 174 130Current liabilities Mill. 93 48 39 65 42Total assets Mill. 800 687 532 524 405

Profitability and financial ratiosReturn on total assets (2) % 19.3 12.6 19.8 21 10.6Return on equity (3) % 33.8 17.1 31.3 34.9 15.3Cash flow (4) Mill. 151 82 116 108 51Interest bearing debt Mill. 233 242 146 164 125Liquid assets (5) Mill. 331 206 184 169 114Debt repayment capability (6) Years 0 0.4 0 0 0.2Current ratio (7) 3.8 4.5 4.9 2.7 2.8Equity ratio (8) % 47.1 56.9 63.8 54.4 57.5

USD/NOK per 31.12 5.41 6.26 6.77 6.04 7.08Average USD/NOK 5.86 6.42 6.45 6.74 7.08


Interest bearing debtResult before tax

Liquid assets

Key Figures2003–2007

EBITDA

2003 2004 2005 2006 2007

0

100

200

300

400

0%

20%

40%

60%

80%

USD mill.

54%

64%

Book equity ratioReturn on equity

57%58%

47%

15%

31%35% 34%

17%

37


Our onboard and office personnel have worked hard to achieve the best possible operation of our vessels from a safety aspect, while maintaining the focus on an efficient operation.

Last year one severe personnel injury was reported and no fatal accidents.

We experienced less hull and machinery damage than during the previous two years. None of the damage resulted in harmful emissions to the environment. The major incident was one of our vessels being run into by a harbor tug while safely moored alongside. The consequences of damage to the vessels during 2007 have been off-hire days and costly repairs, thus lowering the result for the company. We continuously evaluate the reported incidents in order to implement necessary corrective actions and transfer experience.

As in previous years, close to 50% of all purchases related to our technical operation were carried out through Norwegian-based vendors and suppliers. We are pleased to see that Norwegian banks, insurance companies and the Norwegian-based ship-broking community continue to be internationally competitive.

We have further increased efforts to reduce energy consumption. A major part of the efforts is obviously to optimize speed and consumption, as well as to select new equipment with energy efficiency as an important criterion.

The installation of S-VDR (simplified voyage data recorder) in all vessels will be finalized during the first months of 2008, well ahead of the IMO requirement.

Our main resource is our sailing personnel, and we are pleased to report that our goal for the return rate of officers and crew was also achieved in 2007. All our seafarers are of Philippine nationality, and a large number of them have been with us for more than 10 years, some for more than 20 years. We have continued to take on cadets for deck, engine and electrical departments. A human resource project has been initiated with the main focus on ensuring sufficient, well-educated and trained sailing personnel. This has been achieved in close co-operation with our manning agency. The company values and ethical guidelines as well as safety and security are continuous areas of training. To further increase the safety awareness for all onboard and ashore, the “Grieg counts 4 safety” campaign was launched last spring, and signboards to daily remind all of this focus have been installed in the offices and are now being installed onboard.

The operation of our vessels involves environmental risk, and we are working continuously to limit risk through adequate training of all our personnel, planned maintenance routines, and safe operational procedures. ISO 14001 is an important tool in this work, and our Key Performance Indicators are measured through our quality assurance system.

THE FLEET AND itS oPerAtioN agoodmarketandahighactivitylevelhavenotinterferedwithourfocusonthesafeoperationof the vessels in 2007.

Technical / Manning 2007 2006 2005 2004

Drydockings NO 2 8 6 9 Return rate crew % 90 90 93 90 Grieg employees at sea NO 556 518 518 500 Grieg employees on shore NO 43 43 37 36

39


FLEET liSt

Abbreviations:

GS:GriegShippingaS,GI:GrieginternationaliiaS,GP:GriegPoseidonaS,GM: Grieg maritime AS

*50%ownedbyGriegShippingaS.

41


Vessel owner Built dead

weight Length

o.a. BeamCargo

volume speedGross

reg. ton

Container capacity

(teu)

sWL gantry

cranes

star dover GI 1977 43 082 182.91 31.10 47 232 15.0 27 911 1 392 2 x 32 mtstar dieppe GS 1977 43 082 182.91 31.10 47 232 15.0 27 911 1 392 2 x 32 mtstar derby GS 1979 43 700 183.00 31.10 47 171 15.0 27 104 1 444 2 x 32 mt

star eagle GS 1981 39 749 179.61 29.40 41 991 15.0 24 479 1 200 2 x 40 mtstar evviva GS* 1982 39 718 179.61 29.40 41 991 15.0 24 479 1 200 2 x 40 mt

star florida GI 1985 40 790 187.30 29.40 42 198 15.0 25 345 1 112 2 x 37 mtstar fraser GI 1985 40 840 187.30 29.40 42 198 15.0 25 345 1 112 2 x 37 mtstar fuji GI 1985 40 850 187.30 29.40 42 198 15.0 25 345 1 112 2 x 37 mt

star alabama GS 1985 30 175 169.33 26.60 37 748 15.0 20 916 1 198 2 x 40 mtstar america GS 1985 30 168 169.33 26.60 37 748 15.0 20 929 1 198 2 x 40 mtstar atlantic GM 1986 30 402 168.50 26.60 37 991 15.0 20 125 1 204 2 x 40 mt

star Grip GS 1986 43 712 197.80 29.40 47 335 15.0 27 192 1 532 2 x 40 mtstar Gran GI 1986 43 759 197.80 29.40 47 335 15.0 27 192 1 532 2 x 40 mt

star herdla GS 1994 46 580 198.00 31.00 61 491 16.0 32 744 1 950 2 x 40 mtstar hidra GS 1995 46 580 198.00 31.00 61 491 16.0 32 744 1 950 2 x 40 mtstar hansa GS 1995 46 580 198.00 31.00 61 491 16.0 32 744 1 950 2 x 40 mtstar harmonia GP 1998 45 590 198.00 31.00 61 491 16.0 32 744 1 950 2 x 40 mt

star Istind GS 1999 46 547 198.00 31.00 61 491 16.0 32 628 1 914 2 x 68 mtstar Ismene GI 2000 46 489 198.00 31.00 61 491 16.0 32 628 1 914 2 x 68 mtstar Isfjord GS 2000 45 859 198.00 31.00 61 491 16.0 32 628 1 914 2 x 68 mt

star Juventas GI 2004 44 837 198.00 31.00 61 491 16.0 32 844 2 074 2 x 68 mtstar Japan GS 2004 44 807 198.00 31.00 61 491 16.0 32 844 2 074 2 x 68 mtstar Java GS 2006 44 837 198.00 31.00 61 491 16.0 32 844 2 074 2 x 68 mt

star tBn GI 2009 48 800 208.20 32.20 65 000 16.0 – 1 420 2 x 70 mtstar tBn GS 2009 48 800 208.20 32.20 65 000 16.0 – 1 420 2 x 70 mtstar tBn GI 2009 48 800 208.20 32.20 65 000 16.0 – 1 420 2 x 70 mtstar tBn GS 2010 48 800 208.20 32.20 65 000 16.0 – 1 420 2 x 70 mt

Cooperation with the building yard is going well, and so far the experience with HMD as a new business partner for building our next generation of open-hatch vessels has been successful.

The design is based on the well-proven open-hatch concept with two 70-ton SWL gantry cranes with full rain protection.

The cargo holds are box-shaped for optimum cargo handling. Tween decks will be fitted in two levels in cargo holds 4 and 8. In cargo holds 5, 7 and 9 brackets will be fitted for one level of tween decks. The tween decks will, among other things, provide very good flexibility with regard to handling of various types of project cargoes. The yard has moved the building schedules ahead several times since the contract was signed, and building schedules as of January 2008 are as follows:

NEXT GENERATION of veSSelS – tHe k-ClASS

on 15 May2006theshipbuildingcontractfordeliveryoffournewvesselstoGriegShippingGroupwassignedbyHyundaiMipoDockyard(HMD)inKoreaandGriegShippingGroup.

HuLL NO. 1: HuLL NO. 2: HuLL NO. 3: HuLL NO. 4: Start steel cutting 7 Oct. 2008 5 Dec. 2008 13 Feb. 2009 21 Apr. 2009 Keel laying 21 Jan. 2009 30 Mar. 2009 1 Jun. 2009 14 Aug. 2009 Launching 28 Mar. 2009 29 May 2009 12 Aug. 2009 9 Nov. 2009 target delivery 29 may 2009 31 Jul. 2009 19 oct. 2009 8 Jan. 2010 Contract delivery 31 Jul. 2009 31 Oct. 2009 31 Dec. 2009 28 Feb. 2010

42


As can be seen in the table, the first delivery is close to two months ahead of the scheduled contract delivery.

The project is so far proceeding in accordance with the initial plans. Approval of the drawings has already started and will continue throughout the spring and summer 2008.

Optimum hull lines are important for the speed and seakeeping performance of the vessels. The contract speed was agreed to be 16.0 knots at 90% of maximum continuous rating (MCR) of the main engine including 15% sea margin. The design of the vessels hull form started in the autumn of 2007. In order to obtain the best possible vessel performance, we were during this stage of the project in close collaboration with the yard.

In January 2008 the final model test for determining the vessels’ speed and power predictions was conducted. The model test was a great success, and the results predicted that we will reach a speed of more than 16.2 knots, compared with the 16.0 knots stipulated in the contract. Daily fuel consump-tion at 16.2 knots is calculated to be 43.2 tons. A difference in 0.2 knots for the new K-class corresponds to a saving of approx 5% in power. These savings are USD 200,000 annually. This is based on 220 sailing days annually and a fuel cost of USD 420 per ton.

Throughout the design process of the vessel we are constantly seeking to find technical solutions that are in line with our company’s environmental profile. Together with the yard and subcontractors we are looking for the best possible solutions to be able to serve the vessels’ expected 30-year lifetime with environmentally friendly solutions and the state-of-the-art technology available for our vessel type.

CAmillA GrieG (44)Chief exeCutive OffiCer

Camilla is co-owner of the Grieg Group and CEO of Grieg Shipping Group. She is a member of the founding family. Camilla has an MBA with major in finance from the University of San Francisco and is Certified Financial Analyst (AFA). She is Chairperson in Bergen Rederiforening and member of the Board of Directors in GC Rieber AS, Star Shipping AS and Storebrand ASA.

ANNiCkeN G. kilDAHl (40)Chief finanCial OffiCer and COmpany SeCretary

Annicken has been working in the maritime industry since 1992, both in relation to commercial ship management and derivatives trading in The Torvald Klaveness Group as well as in finance and banking in Union Bank of Norway. Annicken holds a Master of Business and Economics from the Norwegian School of Management and is a Certified Financial Analyst (AFA). She is a board member of Maris AS, Grieg Group Resources AS, Holmen Industri Invest 1 AS, Grieg Investor ASA, Norwegian Shipowners’ Social Security Fund and Menerga AS as well as deputy board member in the Norwegian Shipowners Association’s Pension Fund, member of the election committee in Silver Pensjonsforsikring AS and member of Norwegian Shipowners Association’s Tax and Capital Group. Annicken started in Grieg Shipping Group in 2000.

eli vASSeNDeN (45)Chief OperatiOn OffiCer

Eli joined Grieg Shipping Group in 1982 and has since then been working in various departments; shipmanagement, crewing, technical and purchasing. She became Purchasing Manager in 1991 and was in 2004 appointed COO. Eli is board member of GS Hydro OY and Incentra.

HeNry SveNDSeN (55) direCtOr, teChniCal & prOjeCt develOpment

Henry is educated a Naval Architect and has broad experience within project development, technical/ship management and operations from various leading companies in the shipping industry in Norway. He came to Grieg Shipping Group in 1998 from Jo Tankers AS where he spent 8 years as Director Ship Management. Henry is representing Grieg Shipping Group in the board of Star Shipping AS/Pool Committee. He is a Chairman of Norwegian Shipowners’ Tank and Bulk Carrier Group, and member of the DnV Nordic Safety Committee. HAlvor SveeN (47) direCtOr, BuSineSS develOpment & market

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

ole SteiNAr mJell (50)direCtOr, human reSOurCeS

Ole Steinar has over the last 20 years held several leading positions within the field of human resources development in international businesses. His background comprises public as well as governmental companies. He joined Grieg Shipping Group in 2007 after 9 years as Vice President HR in Norske Skog. He holds a degree in social sciences from the University of Bergen and courses at Master of Management level from Norwegian School of Management.

MANAGEMENT GrouP – GrieG SHiPPiNG GrouP

44


Star’s business also includes carrying other types of forestry products, bulk commodities for several different industries, and a large number of containers. In addition to a network of agents and terminals, Star has 19 offices world wide, including the headquarters in Bergen. Star’s goal is to be considered the preferred carrier within its business segment.

StAr oPeN-HAtCH PoolStar has a unique position in the transportation of forestry products world wide, with close to 50 highly specialized open-hatch general cargo vessels that are tailor-made for the carriage of wood pulp, rolled paper and other forestry products. In addition, the vessels carry a wide range of other cargoes such as pet-coke, fertilizer, metals, soda ash, salt, coal, grain, alumina, cement, concentrates, scrap, steel cargoes, project cargoes and containers. The strategy of the Open-Hatch Division is customer-focused, strong relationships, long-term and industrial, and the business is characterized by long-term affreightment contracts. This means that the pool earnings

are less volatile than in the general dry-bulk and container market. The open-hatch pool operates a considerable network of trades with regular sailings and frequencies adapted to its customers’ requirements. Punctuality, efficiency, quality and flexibility are Star’s primary competitive advantages to ensure customer satisfaction in the long run. Nevertheless, work is continuously being carried out to improve every aspect of the cargo handling and transportation process.

StAr CoNveNtioNAl Pool Star’s Conventional Bulk Carrier Division operates a modern fleet of about 20 geared handysize/handymax bulk carriers, equipped with cranes and grabs. The vessels are provided to the pool by London-based Rethymnis & Kulukundis and Star, as well as being chartered from the market. On the basis of Star’s future market view, the vessels in the pool are traded in freight contracts and in the spot market. The CBCD pool operates world wide, carrying a large variety of cargoes such as coal, coke, alumina, fertilizers, cement, concentrates, steel products, grain, sugar, salt, scrap and logs.

Fleet / Cargo 2007 2006 2005 2004 2003 Total Star cargo volume carried Mill. MT 21.0 22.7 24.5 24.9 23.5 Total Star forestry volume carried Mill. MT 7.1 6.8 7.1 6.6 6.4

Total Star Fleet No. of vessels 64 69 71 74 74 Star Open Hatch fleet No. of vessels 47 46 45 47 43

Grieg Open Hatch Fleet No. of vessels 23 23 22 22 19

STAR SHIPPING - mArketiNG AND oPerAtioN of our veSSelS Star ShippingaS,foundedin1961,isjointlyownedbyMasterbulkPteltd.andGrieg ShippingGroupandistheworld’slargestmarketingandoperatingcompanywithinseaborne transportation of wood pulp.

48


Bulk Forestry

Star ShippingCargo carried (MT)

Total carried

0

5

10

15

20

25

USD mill.

0

5

10

15

20

25

USD mill.

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2007

Star ShippingOpen-Hatch cargo mix 2007

Pulp (50%)Container (5%)Other bulk (18%)

Fertilizer (3%)

Steel (15%)

Other wood products (1%)

Paper (5%)

Lumber (3%)

StAr CoNtAiNer ServiCeS Star Shipping operates regular container services in the Atlantic. The company’s Swedish subsidiary, Atlanticargo AB, offers reliable and frequent services between Europe and the U.S. East Coast/Gulf and between Europe and the U.S. West Coast. Star also frequently transports containers in other trades, either as empty positioning moves or full containers on behalf of other operators. The combination of containers, break bulk and project cargoes makes this service unique and competitive. Star staff in North America and the agency network in Europe are dedicated to providing the container shippers with fully integrated door-to-door transportation

solutions. Container depots are kept in all major locations in Europe and the United States, and there is a well-established network for inland transportation.

termiNAlSStar offers integrated transport solutions from shipper to end receiver. As an important part of the logistic chain, Star Shipping has long-term agreements with terminals in all major ports around the world, serving as consolidation and distribution hubs. In Squamish, British Columbia, in Canada, Star owns a purpose-built forestry terminal, Squamish Terminals Ltd.

49


the GrieG GrOup iS a privately Owned line Of

COmpanieS whiCh OperateS GlOBally within

a variety Of BuSineSS areaS:

Shipping and ship management (Grieg Shipping Group)•

Ship broking (Joachim Grieg) •

Global logistics services (Grieg Logistics) •

Fish farming (Grieg Seafood and Grieg Cod Farming) •

Maritime information systems (MARIS) •

Investment consulting services (Grieg Investor) •

Offshore windmills (NorWind) •

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

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

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

GRIEG GrouP

75%Grieg Maturitas

Holding Company

Management Services: Grieg Group Resources

25%Grieg FoundationCharity and sponsoring

Grieg Shipping Group

Maritime information systemsMARIS (61%)

Fish farming

(50%)

Global logisticsGrieg Logistics

Shipbroking AON Grieg (50%)

51


Our companies have offices in several cities and locations in Norway, and also Canada, USA, China, the Philippines and the Netherlands. The strategic management is executed from the headquarters in Bergen and Oslo. By the end of 2007 the Grieg Group employed 1291 people, of whom 556 were sailing personnel onboard vessels owned by the Group. In order to maintain an ethical foundation for business and a strong and solid company culture, we have worked thoroughly for several years to implement our four core values; solid, proud, open and committed. All employees in the Grieg Group shall be aware of the significance of a common value base in daily work.

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

1884Joachim

Grieg establishes

ship broking business in Bergen

1900sOne of

Europe’s leading ship

brokers. Office in Oslo

1930sJG & Co

builds up a significant

tanker department

1962Per Grieg Sr. reorganizes

the firm, and starts widening

the scope of activities.

Star Shipping is

founded

1969Grieg

Logistics (Grieg

Transport) is established

as a separate unit

70/80sGrieg

increases its stake in Star

Shipping to 50%

1984100 years!

Restructured as The Grieg

Group

1991The Grieg

Group’s head

quarters in Bergen gathered

under one roof in Grieg

Gaarden

1992Grieg

Seafood (Grieg

Norwegian Salmon) is

established

1994The

Shipowning Group is

reorganized: Grieg

ShippingGrieg

Inter nationalGrieg

Billabong

1998Grieg

Insurance merges with AON Norway

under the name AON

Grieg

19994th

generation Grieg takes

over. Per Grieg Jr., Elisabeth

Grieg, Camilla Grieg

and ElnaKathrine

Grieg take leading roles

for each of their part of the Group

2001Grieg

Logistics expands to

cover global logistic services

2002Grieg

Foundation is

established in Os outside

Bergen

2006 Grieg

Seafood merges

with Volden Group

Grieg International,

Grieg Billabong

and Grieg

Shipping II merge

into Grieg Shipping

Group

2007Grieg

Seafood ASA was listed at Oslo Stock Exchange

21 June 2007.

The Grieg Group has

taken a 40 % ownership in NorWind AS

53


GRIEG fouNDAtioN

TheGriegFoundationwasestablishedinitspresentformintheautumnof2002andowns25%oftheGriegGroup’soperativecompanies.ithasnovotingpower,butisguaranteedadividendsecuringthataproportionofthevaluescreatedbytheGriegGroupwillbetothebenefitofthesociety.

The foundation contributes with substantial amounts to a wide range of activities. Internationally, there is an increasing need for support and follow-up of children and youth. A main objective of the foundation is to contribute to projects under the auspices of SOS Children Villages. Grieg Foundation’s largest single-contribution has been the building of a SOS College in Costa Rica. Later this college has entered into a co-operation with United World College (UWC), an organiza-tion which runs 12 colleges around the world. The admission requirements for these schools are very high, and the teaching is focused around the subjects of international understanding, peace work and tolerance. Thus, Grieg Foundation achieves what has been the fundamental idea for its support to SOS Children Villages, namely to give talented SOS youth an education which further will have impact on the development in their home country.

Also in Norway, Grieg Foundation is focusing on contribu-tions to support and develop children and youth. Many of the projects are in the intersection between youth work and culture work.

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

Grieg Foundation contributed to national and international projects with about NOK 26 million during 2007 and is committed with considerable additional funds for accepted projects over coming years. The Grieg Group is very proud to have a shareholder like Grieg Foundation and the work the foundation represents.

54


foto: Claire mathisse

56

G r i e G S H i P P i N G G r o u P f i N A N C i A l S t A t e m e N t S 2 0 0 7


PROFIT AND LOSS StAtemeNt

GrIeG shIPPInG GrouP hoLdInG as Figures in NOK 1 000

GrIeG shIPPInG GrouP hoLdInG GrouP Figures in NOK 1 000

2007 2006 note note 2007 2006reveNueS

– Operating revenues 922 769 – Profit from sale of vessel 230 770

– oPeratInG reVenues 1 153 539

oPerAtiNG exPeNSeS– Vessels operating expenses 272 398 – Bare boat hire 29 334 – Tonnage Tax 1 424 – Payroll and social security exp 14 42 532 – Other operating exp 38 735

63 Depreciation 175 286

63 – total operating expenses 559 708 –

-63 – operating profit 593 831 –

fiNANCiAl itemS3 Interest income 6 601 – Interest income from group companies 91 – Other financial income 1 343 – Interest expenses -72 719

-23 Interest to group companies -23 – Other financial expenses -2 028 – Change in value of market-based financial investments -8 549 – Realized return on market-based financial investments 76 104 – Gain/loss on foreign exchange 68 264

-20 – net financial items 69 084 –

-83 – Profit before tax 662 915 –

24 13 tax 13 -636 119

-59 – ProfIt for the year 26 796 –

– – Minority interest 7 242 – -59 – Majority interest 19 554 –

– Proposed dividend -169 668 – -59 – To/from other equity -142 872 –

57


BALANCE SHEET AS of 31.12.07

GrIeG shIPPInG GrouP hoLdInG as Figures in NOK 1 000


2007 2006 note note 2007 2006

ASSetS

fIXed assets

Intangible fixed assets – Contracts 3 115 574 – Goodwill 3 69 296

24 13 Deferred tax assets 13 –

24 total intangible assets 184 870 –

tangible assets – Fixtures and fittings, other equipment 2 632 – Vessels 2 688 915 – – New building contracts 658 217 –

– – total tangible assets 4 3 349 765 –

fixed financial assets 2 307 342 5 Investments in subsidiaries –

– Investments in stocks and shares 7 99 – Long term receivables 9 311

2 307 342 – total fixed financial assets 409 –

2 307 366 – total fixed assets 3 535 045

Currents assets

accounts receivables – 11 Receivables from group companies 11 248 – Market-based investments 8 1 429 076 – Other receivables 39 138

– – total receivables 1 468 462 –

103 Bank deposits, cash in hand, etc. 17 401 949

103 – total current assets 1 870 411 –

2 307 469 – totaL assets 5 405 456 –

58



BALANCE SHEET AS of 31.12.07

GrIeG shIPPInG GrouP hoLdInG asFigures in NOK 1 000


2007 20062007 2006 note note 2007 20062007 2006

equity AND liABilitieS

eQuQuQ Ity

Paid-in capitalPaid-in capital100 150 12 Share capital (1.001.500 shares à kr 100)Share capital (1.001.500 shares à kr 100)Share capital (1.001.500 shares à kr 100) 12 100 150

0 Share premium reserveShare premium reserve 02 030 704 Other paid-in capitalOther paid-in capital 2 030 704

2 130 854 – 854 – total paid-in capitalotal paid-in capitaltotal paid-in capitalt 2 130 854 –854 –

retained earningsetained earnings– – – – Revaluation reserve 3 809– Other equityOther equity 13 334– Minority interestMinority interest 869 227

– – – – total retained earningsotal retained earningstotal retained earningst 886 371 –371 –

2 130 854 – 2854 – 2854 – 2 total equityotal equitytotal equityt 2 32 3 017 225 –225 –

LIaBILItIes

Provisions– Pension liabilities 15 1 084– Deferred tax 13 71 203

– – – – total provisionsotal provisionstotal provisionst 72 288 –288 –

other long-term liabilitiesther long-term liabilities– Mortgage loansMortgage loans 10 1 258 815

Transition tax long-termTransition tax long-term 13 547 841

– total long-term liabilitiesotal long-term liabilitiestotal long-term liabilitiest 1 806 656 –656 –

Current liabilities10 185 11 Liabilities to group companiesLiabilities to group companies 11 184 190

– Accounts payableAccounts payable 37 591– Public duties payablePublic duties payable 4 053

166 430 Dividend 169 668– Taxes payableTaxes payable 13 63 583– Other short-term liabilities 50 202

176 615 – 615 – total current liabilitiestotal current liabilitiest 509 287 –287 –

176 615 – 615 – total liabilitiestotal liabilitiest 2 388 231 –231 –

2 307 469 – 469 – totaL eQQuQuQ Ity and LIaBILItIes 5 405 456 –456 –

Bergen, 11th of March, 2008

Elisabeth Grieg Cato A. Holmsen sr. Camilla Grieg Jarle Roth Bjørn Gabriel ReedChair Deputy Chair CEO/Board member Board member Board member

59


CASH FLOW ANAlySiS

Parent ComPanyFigures in NOK 1 000

GrouPFigures in NOK 1 000

2007 2006 2007 2006

CaSHFlOWFROMOPERaTiONS-83 Profit before tax 662 915

Taxes paid in the period -23 532Gain/loss from sale of fixed assets -271 186Ordinary depreciation (including dry dock) 198 499Change in accounts payable -6 464Difference between expensed pensions and payments in/out of the pension scheme -3 437Effect of exchange fluctuations -187 683Items classified as investment or financial activities -2 863Classified as investments or financing 88 962

-83 – net cash flow from operations 455 212 –

CaSHFlOWFROMiNvESTMENTSProceeds from sale of fixed assets 335 414Purchase of fixed assets -139 803Proceeds from loans to other group companies 431Proceeds from sale of market based investments 380 000Purchase of market based investments -847 726

-2 307 342 Purchase of shares in subsidiaries -3 590 726

-2 307 342 – net cash flow from investments -3 862 410 –

CaSHFlOWFROMFiNaNCiNG10 185 Proceeds from short term loans 108 888

Repayment of long term loans -49 2752 297 343 New equity received 3 484 805

Payment of dividend -56 823

2 307 528 – net cash flow from financing 3 487 595 –

103 – net change in cash and cash equivalents 80 396 –– Cash and cash equivalents at the beginning of the period 321 552

103 – Cash and cash equivalents at the end of the period 401 949 –

sPeCIfICatIon of Cash and Cash eQuIVaLents at the end of the PerIod

103 Bank deposits, cash, etc. 401 949

60



The annual accounts have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles.

SuBSiDiArieSSubsidiaries are posted in the company accounts applying the cost method. The investments is stated at historical cost of the shares unless a write-down has been necessary. The investment is written down to fair value when the impaired value is due to causes which are not deemed to be temporary and are considered to be necessary in accordance with good accounting practice. Write-downs are reversed when the grounds for the write-down no longer exist.

Dividends and other group distributions are recognised in the year in which they are recognised for in the accounts of the subsidiary. If the dividend exceeds the profit after the acquisition, the surplus amount represents repayment of the capital investment and the distributions are deducted from the amount of the investment in the balance sheet.

iNveStmeNt iN JoiNt veNtureSOwner interests in joint ventures are stated applying the proportionate consolidation method. The shares of income, costs, assets and liabilities is incorporated in the accounts, line for line. The figures are specified for each main group in a note to the accounts. oPerAtiNG reveNueS Operating revenues are entered as income at the time of delivery. The time of delivery is understood to mean the time of transfer of risk and control related to the delivery. Freight revenues from voyages are recognised on the basis of the number of days the voyage lasts. ClASSifiCAtioN AND vAluAtioN of BAlANCe SHeet itemS Current assets and current liabilities relate to items which mature within one year from the date of purchase. Other items are classified as fixed assets / long-term liabilities.

Current assets are valued at the lower of historical cost and fair value. Current liabilities are carried at nominal value at the date of issue.

Fixed assets are valued at historical cost, but are written down to fair value in the event of impairment which is not deemed to be tempo-rary. Long-term liabilities are carried at the nominal amount at the establishment date.

iNtANGiBle ASSetSThe cost of intangible assets is posted in the balance sheet if it is considered likely that the future economic benefits related to the assets will accrue to the company and a reliable measurement of the historical cost of the asset in question has been established.

fixeD ASSetS Fixed assets are valued at historical cost less accumulated depre-ciation. Depreciation is charged on a straight line basis over the remaining economic lifetime of each asset adjusted for the residual value. The estimated lifetime for the vessels is 27 years.

Maintenance and improvements are capitalised and depreciated in pace with the asset involved. Docking costs are capitalised and depreciated over the period to the next scheduled dry-docking. Depreciation of the capitalised docking cost is classified as an operating expense.

The recoverable amount of an asset is measured whenever there is an indication that an asset may be impaired. The asset is stated at the lower of the recoverable amount and the cost price less accumulated depreciation.

The write-down is reversed when the grounds for the write-down no longer exist. NEWBUilDiNGCONTRaCTS Shipyard instalments paid are posted as fixed assets in pace with the payment schedule. reCeivABleS Trade debtors and other debtors are carried at nominal value after deducting provisions for expected losses. Loss provisions are based on an assessment of individual receivables. SHort-term iNveStmeNtS Short-term investments in shares and mutual funds are regarded as part of the trading portfolio and are stated at fair value at year-end. Dividends received and other distributions are entered as income under other financial income.

foreiGN CurreNCyAssets and liabilities denominated in foreign currencies are stated at the year-end exchange rate. foreiGN exCHANGe HeDGiNG Derivatives purchased in order to reduce currency risk are treated as hedging transactions for accounting purposes. Gains and losses on foreign exchange contracts are therefore recognised in the same period as the hedged transactions. iNtereSt rAte HeDGiNG Interest rate hedging contracts are recognised and classified in the same way as the related mortgage loan. The interest received/paid under the contract is therefore recognised in the interest period in question and is included in interest expenses for the period.

NOTE 1 ACCouNtiNG PriNCiPleS

61


PeNSioNS The pension costs and pension liabilites are calculated on a straight line earning profile basis, based on assumptions relating to discount rates, projected salaries, the amount of benefits from the National Insurance Scheme, future return on pension funds, and actuarial calculations relating to mortality rate, voluntary retirement, etc. Pension funds are recognised at fair value and deducted in the net pension liability in the balance sheet. Changes in the pension liability due to changes in the pension plans are recognised over the estimated average remaining service period. When the accumulated effect of changes in and deviations from actuarial assumptions (changes in estimates) exceed 10 percent of the higher of pension obligations and pension plan assets, the excess amount is recognised over the estimated average remaining service period.

Social security fees are expensed on basis of pension premiums paid for insured (collective) pension schemes, whilst for uninsured pension commitment accruals have been made in line with the changes in pension commitment. tAxeS The tax charge in the profit and loss account includes taxes payable for the period and changes in deferred tax. Deferred tax is calculated at 28%, based on the temporary differences that exist between accounting and tax values, and taking account of the tax loss carried forward at the end of the financial year. Tax enhancing and tax reducing temporary differences which are reversed or can be reversed in the same period have been set off. The net deferred tax advantage is posted in the balance sheet where it is expected that this can be utilised.

The company is subject to the taxation regime for shipowning compa-nies pursuant to chapter 8 of the Taxation Act. In connection with the transition to the new taxation regime, long-term tax payable and the fund for environmental initiatives are stated at their discounted present value. For other information, please refer to note 14. eStimAteS When preparing the annual accounts in accordance with good accounting practice, the management make estimates and assump-tions which affect the profit and loss account and the valuation of assets and liabilities, as well as information about contingent assets and liabilities at year-end.

Contingent losses which are likely and quantifiable are recognised against income on an ongoing basis.

CaSHFlOWSTaTEMENTCash flow statements are prepared according to the indirect method. Accordingly, the cash flows from investment and financing activities are reported gross, while the profit and loss is reconciled against the net cash flow from operations. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments that can immediately and with no major exchange rate risk be converted into a known amount and maturing less than three months from the transaction date. CoNSoliDAtioN The consolidated accounts include the subsidiaries specified below and show the parent company and subsidiaries as a single enterprise. Shares in subsidiaries are eliminated using the purchase method. Shares in subsidiaries are set off in an amount corresponding to the book value of equity attributable to the shares at the date of purchase. Any difference arising on elimination is assigned to specific assets. Excess values that can not be assigned to specific assets are posted as goodwill and amortised over the expected lifetime. Intra-group transactions and balances are eliminated.

ComPany oWnershIPGrieg Shipowning AS 74,61%Grieg Shipping Group AS 100,00%

Grieg shipowning is a group which comprises the following companies:Grieg Shipping AS 97,32%Grieg International II AS 100,00%Grieg Maritime AS 100,00%Grieg Poseidon AS 75,00%

Grieg Poseidon AS was purchased at the end of December 2007. The consolidated balance sheet therefore includes balance sheet items from Grieg Poseidon AS, while the consolidated profit and loss account is exclusive of profit and loss account items from Grieg Poseidon AS; this also applies to the notes.

62



NOTE 2 equity(Figures in NOK 1 000)

PAreNt ComPANy

equity movementsshare

capital

other paid-in equity

share premium

reserveother equity total

Equity at 01.01.07 0 0 0 0 0Capital increase 100 150 2 197 193 2 297 343Capital reduction 2 197 193 -2 197 193 0Profit from sale of shares to subsidiary 862 855 862 855Effect related to predecessor accounting -862 855 -862 855Provision for dividends -166 430 -166 430Profit for the year -59 -59Other disposals -166 489 166 489 0equity at 31.12.07 100 150 2 030 704 0 0 2 130 854

GrouP

equity movementsshare

capital

other paid-in equity

share premium

reserveother equity total

Equity at 01.01.07 0Capital increase 100 150 2 197 193 2 297 343Minority interests on capital increase 830 978 830 978Capital reduction 2 197 193 -2 197 193 0Minority interests on purchase of companies 31 776 31 776Provision for dividends -169 668 -169 668Profit for the year 26 796 26 796equity at 31.12.07 100 150 2 197 193 0 719 882 3 017 226

Other equity included the reserve for valuation variances related to ANS Billabong II and totalling NOK 3 809.

minority interests consist of the following:ownership equity Profit

Grieg Shipowning AS 25,39% 817 392 6 453Grieg Shipping AS 2,68% 51 835 789total - Group 869 227 7 242

NOTE 3 iNtANGiBle ASSetS (Figures in NOK 1 000)

GrouPIntangible assets Goodwill Contracts totalAcquisition cost at 01.01.07 69 280 163 265 232 545Additions 21 497 0 21 497Disposals 0 0 0Acquisition cost at 31.12.07 90 776 163 265 254 041Accumulated amortisation at 31.12.07 21 480 47 691 69 171Book value at 31.12.07 69 296 115 574 184 870

Amortisation 5 729 8 163 13 892Economic lifetime 5-20 years 20 yearsAmortisation plan Linear Linear

Contracts represent excess values related to the vessels’ contracts of affreightment. Parts of goodwill relate to the companies’ right to renominate tonnage in Star Shipping.

63


NOTE 4 fixeD ASSetS(Figures in NOK 1 000)

GrouP

Vessels newbuildings docking fundmachinery, vehicles etc. total

Purchase cost at 01.01.07 4 213 142 658 218 125 062 1 798 4 998 220Additions 500 580 0 14 396 1 633 516 609Disposals 105 289 0 7 564 0 112 853Cost price at 31.12.07 4 608 434 658 218 131 894 3 431 5 401 977Accumulated depreciation at 31.12.07 1 960 553 0 90 860 799 2 052 211Book value at 31.12.07 2 647 881 658 218 41 034 2 632 3 349 765

depreciation charge for the year 160 841 0 23 211 556 184 607Depreciation plan Linear Linear Linear

Depreciation of the vessels is based on an expected economic lifetime of 27 years and a residual value equal to the estimated scrap value. Capitalised docking costs are depreciated on a linear basis over the period between two drydockings and recognised as operating expenses.

Vessels includes 50% ownership of Star Eviva from the company ANS Billabong II which is included in joint ventures.

The remaining contract amounts to be paid for newbuildings totals NOK 850 619.

Machinery, vehicles etc. are depreciated over a time period of five to ten years.

NOTE 5 SuBSiDiArieS(Figures in NOK 1 000)

PAreNt ComPANy

subsidiary registered officeownership / voting rights

equity 2007 (100%)

result 2007 (100%)

Balance sheet value (100%)

Grieg Shipowning AS (1) Oslo 74,61% 3 178 856 26 204 2 292 110Grieg Shipping Group AS Bergen 100% 7 155 2 833 15 232Book value at 31.12.07 2 307 3421 The equity and results for 2007 are for the Grieg Shipowning AS Group

(including Grieg Shipping AS, Grieg International II AS and Grieg Poseidon AS).

64



NOTE 6 JoiNt veNtureS(Figures in NOK 1 000)

THEGROUPHaSTHEFOllOWiNGiNvESTMENTS

Company date of acquisition registered officeownership and

voting rightsJoint and several

liabilityAns Billabong II 15-10-92 Bergen 50% 1 382

ans Billabong IIAllocated excess value 7 891net excess value at 01.01.07 7 833of which undepreciated excess value 963Additions/disposals in period 0Share of profit for the year 6 424Depreciation of excess value -428Transfers to/from the company -7 231Other changes during the year 0net value at 31.12.07 6 598of which undepreciated excess value 535

The main figures included in the accounts in accordance with the gross method are specified below:

ans Billabong II

Share of operating revenues 14 030Share of gain on disposal of fixed assets 0Share of operating expenses -6 980Share of depreciation -338Depreciation of excess value -428Share of net financial items -288share of profit for the year 5 996

Share of fixed assets 4 586Excess value pertaining to fixed assets 535Share of current assets 2 735share of assets 7 856

Share of shipowner tax 0Share of long-term debt 0Share of short-term debt 1 259share of debt 1 259

Share of equity 6 597

65


NOTE 7 iNveStmeNtS iN SHAreS etC. (Figures in NOK 1 000)

GrouPregistered office ownership Book value

Incentra Oslo 2,7% 20Seabound Maritime Manila 20,0% 79Book value at 31.12.07 99

NOTE 8 mArket-BASeD iNveStmeNtS(Figures in NOK 1 000)

GrouPCost price market value

Individual shareholdings 36 066 25 518Mutual funds 507 660 569 849Bonds 349 964 338 244Money market funds 468 600 416 531Hedge funds 77 349 78 935Book value at 31.12.07 1 439 639 1 429 076

NOTE 9 reCeivABleS mAturiNG lAter tHAN oNe yeAr(Figures in NOK 1 000)

GrouP2007 2006

Employee loans 311 0total 311 0

66



NOTE 10 iNtereSt-BeAriNG DeBt(Figures in NOK 1 000)

GrouPmortgage loans Borrower exchange rate usd noKI. DnB NOR Grieg Shipping AS 5,411 108 000 584 388II. DnB NOR Grieg Shipping AS 5,411 26 200 141 768III. DnB NOR Grieg International II AS 5,411 60 500 327 366IV. DnB NOR Grieg International II AS 5,411 26 200 141 768V. DnBNOR Grieg Maritime AS 5,411 2 500 13 528VI. Royal Bank of Scotland Grieg Poseidon AS 5,411 9 240 49 998total loans 232 640 1 258 815

structure of maturity exchange rate usd noKInstalments due in 2008 5,411 13 008 70 388Mortgage debt maturing later than five years after year-end 5,411 132 300 715 875

Instalments in 2007 usd noKGrieg Shipping AS 7 000 37 877Grieg International II AS 0 0Grieg Maritime AS 714 3 865Grieg Poseidon AS 1 680 9 090total instalments 9 394 50 832

Book value of mortgaged assets Book valueLoan I: The vessels Star Istind, Star Isfjord, Star Japan and Star Java have been given as security 1 041 263Loan II: Grieg Shipping AS has given its newbuilding contracts as security 329 156Loan III: The vessels Star Ismene and Star Juventas have been given as security 459 594Loan IV: Grieg International II AS has given its newbuilding contracts as security 329 062Loan V: The lender has a first preferred mortgage on the vessel Star Atlantic 33 070Loan VI: The lender has a first preferred mortgage on the vessel Star Harmonia 213 002

Loan covenantsThe main covenants are as follows: Grieg Shipping AS is required at all times to have liquid funds of USD 10 million; Grieg Maritime AS is required at all times to have liquid funds of USD 1 million; Grieg International II AS is required at all times to have liquid funds of USD 10 million. The loan covenants have been met in full throughout the year.

scope to increase the amount available under loan I.Grieg Shipping AS is entitled to increase the amount available under loan I by a further USD 55 million by 15 November 2008. Star Hansa, Star Herdla and Star Hidra have been given as security for this part of the loan. These vessels have a total book value of NOK 432 million.

67


NOTE 11 iNtrA-GrouP ACCouNtS(Figures in NOK 1000)

PAreNt ComPANyother receivables 2007 2006

Other receivables from other group companies 0 0total 0 0

other current liabilities 2007 2006Grieg Shipping Group AS 63 0Grieg Shipping II AS 10 123 0total 10 186 0

GrouPother receivables 2007 2006Grieg Investor AS 232 0Grieg Group Resources AS 16 0total 248 0

other current liabilities 2007 2006Grieg Athena AS 46 670 0Grieg International AS 127 368 0Grieg Shipping II AS 10 123 0total 184 161 0

NOTE 12 SHAre CAPitAl AND SHAreHolDer iNformAtioN

PAreNt ComPANy

The share capital of NOK 100 150 000 consists of 1 001 500 shares of NOK 100. All of the shares carry the same rights.

shareholders at 31.12.07 no. of shares ownershipGrieg Maturitas AS 255 018 25,46%Grieg Llt AS 412 378 41,18%Grieg International AS 334 104 33,36%total 1 001 500 100%

68



NOTE 13 tAxeS(Figures in NOK 1000)

PAreNt ComPANytax charge and tax payable in the accounts 2007Taxable result -86Tax payable (28% of taxable basis of tax payable in profit and loss account) 0Excessive/insufficient tax provision in previous years 0Total tax payable 0Change in deferred tax -24tax charge 0Deferred tax assets 24

GrouPtax charge in the accounts 2007Tax payable on taxable income 1 123Change in deferred tax 38 283Tax payable on transition to new shipping taxation (short-term) 52 452Long-term shipping tax 547 841Excessive/insufficient tax provision in previous years -3 580tax charge in the accounts 636 119

tax payable 2007Tax payable on profit for the year 1 123Tax payable on transition to new shipping taxation (short-term) 52 452Tax payable from previous years 2 150Tonnage tax 1 520Tax payable by Grieg Poseidon AS 6 337tax payable in the balance sheet 63 583

deferred tax/deferred tax assets 2007Revaluation account 258 524Other temporary differences -54 652Tax loss carried forward -21 833Profit/loss account 72 258Basis for deferred tax 254 297deferred tax (28%) 71 203

The tonnage tax for 2007 amounts to NOK 1 520 000 and is booked under operating costs.

CAlCulAtioN of GAiN At 01.01.2007 oN trANSitioN to SHiPPiNG tAx iN 2006

The calculated tax and the fund for environmental initiatives are discounted values, based on a discount rate of of 4.81%. Tax payable matures over 10 years, with 1/10 payable each year. The fund for environmental initiatives will be realised in the tenth year.

Calculated income settlement at 01.01.2007 2 802 179Latent nominal tax liability (28%) 784 610Tax payable in year 1 52 452

Provision for tax payable (long-term)Provision for tax payable by 2016 at latest (present value) (2) 171 839Provision for tax payable in period 2009 - 2016 (present value) 376 001total provisions for tax payable/environmental fund (present value) 547 8412 The requirement to pay in tax lapses in so far as the company invests in environmental

initiatives which are approved under regulations for this purpose by 2016.

69


NOTE 14 PayROllExPENSES,NUMBEROFEMPlOyEES, remuNerAtioN etC.(Figures in NOK 1 000)

PAreNt ComPANy

The company has no employees. No remuneration has been paid to the Board of Directors in 2007, and no loans or loan security have been given to shareholders or other related parties.

GrouPPayroll expenses 2007Salaries/wages 31 968Employer’s National Insurance contributions 5 717Pension costs 2 150Other 2 697total 42 532

The average number of employees over the year was 43 The average number of sailing personnel was 556

Salary costs related to sailing personnel totalled NOK 81 million and were directly debited to the shipping companies.

remuneration to senior personnel CeoBoard of

directorsSalary 1 529 2 150Pension costs 0 0Other remuneration 70 0

No loans or loan security have been given to the managing director, the chairman of the board of directors or any related parties. No loans or loan security has been given which individually correspond to more than 5% of the company’s equity.

70



NOTE 15 PeNSioNS(Figures in NOK 1 000)

GrouP

The Group has pension schemes covering 39 persons. The schemes give the right to defined future benefits which are mainly dependent on the number of years of service, the salary level on retirement and the level of benefits under the National Insurance Scheme. The Group’s pension schemes meet the requirements of the Compulsory Occupational Pension Act. In the case of full entitlement to pension rights, employees who are members of the common scheme receive a pension corresponding to 70% of salary up to 12 time the National Insurance base rate (G). The pension agreements are funded through accumulated reserves managed by an insurance company.

2007 Net present value of pension entitlements 2 336Interest expenses on pension commitments 1 419Return on pension fund assets -1 504Administrative charges 65net pension expenses 2 316

In 2007, Employer’s National Insurance contributions on pension premiums paid are posted as part of the pension cost for the year.

2007 Pension commitments at 31.12.07 31 496Pension fund assets (fair value) at 31.12.07 24 600Changes in estimates/plan changes not recorded in the accounts -5 812net pension fund assets at 31.12.07 1 084

economic assumptions:Discount rate 5,50%Anticipated rise in salaries 5,00%Anticipated return on pension fund assets 5,75%Anticipated increase in National Insurance base rate 4,25%

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

NOTE 16 aUDiTOR’SREMUNERaTiON (Figures in NOK 1 000)

PAreNt ComPANyauditor’s remuneration 2007 2006Audit 63 0Technical accounting assistance 0 0Other services 0 0total auditor’s remuneration, excl. Vat 63 0

GrouPauditor’s remuneration 2007 2006Audit 577 0Tax counselling 36 0Technical accounting assistance 235 0Other services 17 0total auditor’s remuneration, excl. Vat 865 0

The audit fee for 2007 includes fees of NOK 247 500 to the previous auditor of some companies.

71


NOTE 17 reStriCteD BANk DePoSitS

GrouP

Restricted bank deposits totalled NOK 1 705 000 at 31.12.07.

NOTE 18 GuArANteeS

GrouP

No guarantees have been given by the Group for external commitments.

NOTE 19 fiNANCiAl mArket riSk GrouPThe Group uses various financial derivatives to manage its financial market risk. This includes forward contracts, options, interest rate swaps and forward rate agreements.

Interest rate riskInterest rate risk arises in the short and long term when parts of the Group’s debt carry floating rate of interest. The Group’s strategy is to hedge the company’s net interest rate exposure. This is done mainly by using interest rate swaps. The interest rate swap agreements are recorded and classified in the same way and as the related mortgage loan.

At 31.12.07 the Group was party to interest rate swap agreements totalling USD 145.5 million. At 31.12.07 the unrealised loss on these agreements amounted to NOK 14.2 million.

foreign exchange riskThe Group’s basic currency is the USD, and the main focus is therefore on ensuring that both revenues and costs are mainly in USD. It is also the Group’s strategy to take appropriate action where significant parts of the future funding requirement, as well as management fees, operating costs and dividends are in another currency than the USD. Gains/losses on foreign currency contracts are booked in the period when the hedging transactions are settled.

At 31.12.07 the Group had entered into forward contracts to hedge a total of NOK 59 000 000. At 31.12.07 the unrealised gain on these contracts amounted to NOK 5 552 000.

freight rate riskThe shipping industry is very cyclical and characterised by large and unforeseeable fluctuations in freight rates. The Group hedges its exposure by using long-term time charters. This means that earnings do not fluctuate as much as the spot rates. The Group also uses freight forward agreements (FFA) as a risk management instrument. Gains/loss on FFAs are posted on an ongoing basis.

In 2007 the Group had one FFA which ran from 01.01.07 to 31.12.07. The total loss posted on this agreement was NOK 21 480 000. At as 31.12.07 the Group was not party to any new FFAs.

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GRIEG SHIPPING GROUPGRIEG SHIPPING GROUP

NOTE 20 ComPArAtive fiGureS for 2006 – GrouP(Figures in NOK 1 000)

GrouPrevenues 2 006Operating revenues 809 340Profit from sale of vessel 0total revenues 809 340

operating expensesVessel operating expenses 312 095Bareboat hire 22 136Tonnage tax 488Payroll and social security expenses 0Other operating expences 47 459Depreciation 161 962total operating expenses 544 141

Operating profit 265 199Total financial items 92 786

Pre-tax profit 357 985Taxes -10 698

Profit after tax 347 287

Minority’s share 35 468

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To the Annual Shareholders’ Meeting of Grieg Shipping Group Holding AS

AuDITOR’S REPORT for 2007We have audited the annual financial statements of Grieg Shipping Group Holding AS as of December 31, 2007, showing a loss of NOK 58 960 for the parent company and a profit of NOK 26 796 212 for the group. We have also audited the information in the directors’ report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The annual financial statements comprise the balance sheet, the statements of income and cash flows, the accompanying notes and the group accounts. The regulations of the Norwegian accounting act and accounting standards, principles and practices gener-ally accepted in Norway have been applied in the preparation of the financial statements. These financial statements are the respon-sibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors.

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

In our opinion,the financial statements have been prepared in accordance with the law and regulations and give a true and fair view of the finan-•cial position of the company and of the group and as of December 31, 2007, and the results of its operations and its cash flows for the year then ended, in accordance with accounting standards, principles and practices generally accepted in Norway

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

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

Bergen, March 11 2008 PricewaterhouseCoopers as Jon Haugervåg State Authorised Public Accountant (Norway)

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

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www.grieg.no

Bergen, norway

Grieg-Gaarden C. Sundtsgate 17/19

P.O. Box 245 5804 BERGEN,

NORWAY

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

oSLo, norway

Karenslyst Allé 2 P.O. Box 513 Skøyen

0214 OSLO, NORWAY

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

Shanghai, PrC

Unit 1519-1520 Shanghai Central Plaza

NO381, Huai Hai Zong Road Shanghai 200010

P.R. China

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

ManiLa, PhiLiPPineS

c/o Seabound Maritime Services Inc. Room 307,

1526 P. Santos St. Bangkal, Makati,

Philippines

Tel.: +63 2 843 9420

MoBiLe, aLaBaMa

c/o Star Shipping Inc. 1100b Dauphin St.

Mobile, Alabama 36604 USA

Tel.: +1 251 434 6247 Fax.: +1 251 434 6259

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Photo: Skjalg Ekeland

GriegShippingGroup_omslag.indd 4 3/14/08 9:04:42 PM

Grieg Group, Grieg Star Group, Grieg Seafood

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