Focused, Solid and Ready for Growth Annual Report 2002

Leif Höegh & Co – Annual report 2002 report Annual – Co & Höegh Leif ...focused, solid and ready for growth Annual report 2002

Leif Höegh & Co Wergelandsveien 7 P.O. Box 2596 Solli, N-0203 Oslo

Phone: +47 22 86 97 00 Telex: 70935 HSHIP Fax: +47 22 20 14 08

E-mail: [email protected] www.hoegh.no

Org no: 921483957

JØMERK IL ET M

241 344

Trykksaker Contents The fleet per 31.12.2002

Service Vessel LHC-share % Built Dwt Cargo capacity Service Vessel LHC-share % Built Dwt Cargo capacity Ro/Ro HUAL Trailer 100 1980 15 5935 250 Dry Bulkceu SG Prosperity 100 1996 211 202 HUAL Tramper 100 1980 12 169 3 550 ceu SG Enterprise 100 1997 211 485 HUAL Trubadour 100 1980 12 169 3 550 ceu Open Hatch Höegh Merchant 100 1977 44 895 1 724 teu HUAL Tropicana 100 1980 11 977 3 550 ceu Höegh Merit 100 1977 44 926 1 724 teu HUAL Tracer 100 1981 12 961 3 640 ceu Höegh Musketeer 100 1977 44 892 1 724 teu President’s report 1 HUAL Trapper 100 1981 12 961 3 640 ceu Höegh Marlin 100 1977 45 0631 740 teu Company profile 2 HUAL Trekker 100 1981 11 977 3 550 ceu Höegh Mascot 100 1977 45 0631 740 teu Financial summary 4 HUAL Trinity 100 1981 17 938 5 550 ceu August Oldendorff 1) 100 1979 43 571 1 492 teu Main events 5 HUAL Transit 100 1981 17 650 5 550 ceu Max Oldendorff 2) 100 1979 44 016 1 492 teu HUAL Trapeze 100 198316 694 4 110 ceu Höegh Mistral 100 1986 30 402 1 204 teu HUAL Traveller 100 1983 15 370 3 710 ceu Höegh Monal 100 1996 49 755 2 217 teu Annual report HUAL Trotter 100 1983 15 392 3 710 ceu Höegh Morus 100 1997 49 755 2 217 teu Annual report 2002 6 HUAL Trophy 100 1987 20 600 5 910 ceu Reefer vessels Summer Flower 100 1984 13 556 589 903 kbft HUAL Tribute 100 1988 21 385 5 910 ceu Summer Breeze 100 1985 13 613 588 955 kbft HUAL Triton 100 1988 23 147 6 400 ceu Summer Meadow 100 1985 13 584 590 134 kbft Organisation HUAL Tricorn 100 1988 23 069 6 400 ceu Summer Wind 100 1985 13 636 599 258 kbft Corporate Governance 12 HUAL Triumph 100 1988 20 885 5 910 ceu Ivory Dawn 3) 100 1991 10 412 527 399 kbft Organisation 13 HUAL Trident 100 1995 20 600 6 100 ceu Crystal Prince 100 1992 7 721 375 000 kbft HUAL Trooper 100 1995 21 414 6 100 ceu Crystal Pride 100 1992 7 721 375 000 kbft HUAL Trader 100 1998 21 502 6 100 ceu Crystal Primadonna 100 1992 7 721 375 723 kbft Vessel types HUAL Transporter 100 1999 21 347 6 100 ceu Crystal Privilege 100 1992 7 721 375 477 kbft Ro/Ro 14 HUAL Treasure 100 1999 22 138 6 100 ceu Caribbean Reef 100 199310 614 515 862 kbft LNG 16 City of Rome 100 1999 2 779 805 ceu Coral Reef 100 199310 614 516 530 kbft City of Paris 100 1999 2 793805 ceu Lady Racisce 36 2000 12 914 590 227 kbft Activities HUAL Asia 100 2000 21 485 6 100 ceu Lady Korcula 36 2000 12 914 590 227 kbft HUAL Trove 100 2000 21 200 6 100 ceu Ro/Ro 20 Newb. JLZ-020401 50 2004 5 200 6 720 m2 LNG 26 Newb. DSME-4432 100 2005 21 500 6 100 ceu 1) Will change name to Höegh Miranda abt. 15 April 2003 Other segments 32 Newb. DSME-4433 100 2005 21 500 6 100 ceu 2) Will change name to Höegh Minerva abt. 15 April 2003 Höegh Fleet Services 36 Newb. DSME-4434 100 2005 21 500 6 100 ceu 3) Sold December 2002. Delivered to new owners February 2003 Gas – LNG Norman Lady 50 197350 922 87 3 000 m Accounts Höegh Galleon 100 1974 50 922 87 000 m3 Höegh Gandria 50 1977 71 630 126 000 m3 Accounts – Consolidated 3 Matthew 0 1979 75 171 126 000 m Statements of income 40 Newb. MHI-2184 34 10/2005 74 400 147 000 m3 Balance sheets 41 3 Cashflow statements 42 Newb. MHI-2185 50 2/2006 74 400 147 000 m Notes 43 Accounts – Leif Höegh & Co ASA Statements of income 53 Balance sheets 54 Cashflow statements 55 Notes 56 Auditor’s report 59 Vessels operated by Leif Höegh & Co Consolidated per 31.12.2002

Shareholder relations and Wholly Total no. analytical information Vessel or partly Owned Chartered in Chartered in of vessels Annual general meeting 10.04.2003 type owned by LHC by others >12 months <12 months operated Shareholder relations 60 Ro/Ro 26.0 - 9.0 10.0 45.0 Analytical information 62 Financial calendar Report 1st quarter 10.04.2003 Gas – LNG 2.0 2.0 - - 4.0 Report 2nd quarter 10.07.2003 Dry Bulk 2.0 - - - 2.0 Words and expressions 64 Report 3rd quarter 17.10.2003 Open Hatch 10.0 - - - 10.0 The fleet Preliminary report 2003 05.02.2004 Reefers 11.5 1.5 - - 13.0 Total 51.5 3.5 9.0 10.0 74.0

Design: Anisdahl, Sand & Partnere. Photo: Ole Walter Jacobsen and Höegh archive. Print: GAN Grafisk AS. March 2003. LHC’s corporate strategy is producing results 1

Satisfactory results for the core segments Ro/Ro and LNG strengthened Leif Höegh & Co’s financial position in 2002. Considerable investments have been decided in these two business areas, which will provide a foundation for future growth.

World economy grew marginally in 2002, while uncertainty and turbulence characterised Thor Jørgen Guttormsen major finance markets. The US dollar weakened, whereas the oil price increased considerably. This influenced the company’s results. The growth in world trade was also weaker in 2002 than during the 1990s. While several shipping segments were influenced by large fluctuations, the markets for Ro/Ro vessels and LNG carriers were stable with a good balance between supply and demand. The demand for car carrying tonnage was at a high level throughout the year, and the global LNG carrier fleet is for the most part employed on long- term charters. LHC’s core segments, Ro/Ro (HUAL) and LNG, were less vulnerable to market fluctuations. The company’s activities in these two segments have been built on a high level of competence, competitive transportation and logistics solutions, as well as long-term transportation contracts and customer relations. The entry barriers for new operators are considered to be high. At the start of 2003 there are no clear signs of improvement in the world economy and the situation in the Middle East is uncertain. In spite of this, we believe that the Ro/Ro segment will continue to develop positively, based on long-term customer relations and flexibility in the adaptation of services and products in the logistic chain. The growth in the LNG segment will continue to be based on long-term contracts with well established partners. Important steps have been made in the implementation of the company’s strategy. Today, LHC has become a more focused company, involved in fewer, but historically profitable segments. Remaining activities have either been sold or the commercial operations have been transferred to other companies. In 2003 we will continue to strengthen our position for future growth. This will involve continued adjustment of the organisation, further development of IT systems and focus on efficient operation. Environmental awareness and protection of the environment are integrated parts of LHC’s strategy. A satisfactory year is behind us, and we see interesting opportunities to develop the company further and to offer services which meet the customers’ needs and requirements.

Thor Jørgen Guttormsen President

We see interesting opportunities for a continued growth of the company 2 Company profile

Leif Höegh & Co is an international shipping company with head office in Oslo. The company offers competitive transportation and logistics solutions to customers worldwide within selected industrial shipping segments.

Ownership and strategy

Leif Höegh & Co (LHC) was founded in 1927. The Høegh family owns or controls 66% of the shares in the company, ensuring a stable ownership structure and a long-term perspective of the company’s strategy and operations. LHC’s main strategy is to be a major player in the Ro/Ro segment and in the transportation of liquefied natural gas (LNG). The target is to increase the long-term return on invested capital through less diversification and a sharper focus on the historically profitable segments, Ro/Ro and LNG. LHC also aims to have the necessary financial strength to develop these two segments further.

Operational structure

Leif Höegh & Co ASA (LHC)

Höegh Fleet Services AS (HFS) HUAL AS (HUAL) Leif Höegh & Co Shipping AS (LHS) Leif Höegh (U.K.) Ltd. (LHUK) HFS Philippines HUAL Benelux B.V. HFS China Ltd. HUAL UK Ltd. HUAL Germany GmbH HUAL France S.A.R.L. CETAM S.A.S. HUAL North America, Inc. HUAL Japan K.K. HUAL Middle East LHC China/HUAL China Kiwi Car Carriers (NZ) Ltd. 3

Activities

Ro/Ro Through HUAL, LHC operates a fleet of about 45 vessels within the deep sea and short sea segments and is thus one of the world’s largest operators in the transportation of cars and high/heavy rolling stock. The company has four newbuildings on order.

LNG LHC operates four LNG carriers, of which three are wholly or partly owned, and has two newbuildings on order. All the vessels are employed on long-term contracts for the transportation of liquefied natural gas. LHC is one of a limited number of established players in this market.

Dry Bulk LHC operates two Capesize dry bulk vessels, both employed on long-term contracts.

Reefer vessels LHC has ownership interests in 12 reefer vessels. The vessels are commercially operated by LauritzenCool AB, one of the world’s largest operators of this type of tonnage.

Open Hatch LHC owns 10 vessels, which are commercially operated by Saga Forest Carriers International AS. Saga is one of the world’s three largest operators of this type of tonnage.

Höegh Fleet Services Höegh Fleet Services (HFS) is a wholly owned subsidiary responsible for the technical management, crewing, safety and quality of the fleet. In addition, HFS is responsible for purchasing, insurance and the planning and supervising of all newbuilding projects. HFS plays an important part in maintaining and improving the quality of the products and services of LHC. 4 Financial summary

Amounts in 2002 2001 2000 1999 1998 Statements of income Freight revenues USD mill 667 680 774 486 505 Operating profit before sales gain and depreciation USD mill 160 164 124 64 113 Operating profit USD mill 88 10256 2371 Net profit USD mill 6283 19 (38) 51

Balance sheets Vessels and other fixed assets USD mill 971 1 083 1 170 855 796 Current assets USD mill 251 253 258 217 192 Total assets USD mill 1 223 1 336 1 428 1 072 988 Equity at book value USD mill 511 468 420 376 441 Long-term debt USD mill 626 783 923 604 500 Current liabilities USD mill 75 80 85 9247 Total equity and liabilities USD mill 1 223 1 336 1 428 1 072 988

Equity ratio % 4236 2935 45

Key figures per share EBITDA 1) USD 5.44 5.16 3.64 2.14 3.77 Earnings USD 2.1 2.62 0.60 (1.25) 1.69 Cash flow USD 4.61 4.71 3.03 1.66 2.95 Price/earnings ratio 6.8 3.4 13.9 - 6.9 Price/cash flow ratio 3.1 1.9 2.8 7.0 4.0 Dividend NOK 3.50 2.00 0.00 0.00 4.00 Dividend ratio % 23.8 8.6 0.0 0.0 29.6 Market price per 31 December NOK 99.50 79.00 74.00 95.00 89.00 Equity at book value USD 17.50 15.80 12.80 12.50 14.70

1) Operating profit before sales gain and depreciation EBITDA per segment Investments per segment, book value

• Ro/Ro 71.1% • Ro/Ro 64.8% • LNG 8.5% • LNG 5.2% • Dry Bulk 6.9% • Dry Bulk 8.3% • Reefers 6.3% • Reefers 12.5% • Open Hatch 7.2% • Open Hatch 9.1% Main events 5

2002

Contracts entered into with Mitsui O.S.K. Lines Ltd., for two 145 000 m LNG newbuildings Long-term contract with Statoil at Mitsubishi Heavy industries Ltd. based on long-term employment to the Snøhvit Seller Group and TotalFinaElf Exploration Norge AS

Contract entered into with Louis Dreyfus Armateurs S.A., for one sophisticated Ro/Ro vessel at the Chinese shipyard Jinling, for transportation of airplane components based on long-term employment to Airbus Industrie G.I.E.

Three Ro/Ro vessels chartered on long-term contracts from 2003

Otto Granli, Statoil and

Three Ro/Ro vessels ordered at Daewoo Shipbuilding for delivery in 2005 Thor Jørgen Guttormsen, LHC

Open hatch commercial activity transferred to Saga Forest International AS Long-term agreement with Airbus

Three reefer vessels sold

2001 2000 1999 1998 Sale of remaining part Sale of the reefer Sale of the tanker activity Sale of part of the liner of the liner activity commercial management, (Bona) to Teekay activity (USA/Southeast (Höegh Lines) Cool Carriers AB, to Asia) J. Lauritzen Commenced a 17 year Purchase of the LNG vessel LNG charterparty to Enron Mystic Lady (Höegh (Tractebel) Galleon)

Purchase of Kiwi Car Carriers

Long-term contracts were entered into with Statoil, TotalFinaElf and Airbus 6 Annual report 2002

After the acquisition of the remaining share of HUAL in March 2000, LHC’s objective has been to strengthen its financial position in order to create a basis for further growth in the core segments Ro/Ro and LNG. The objective has been achieved through a significant cash flow during the period and sale of non-core assets. Total assets have been reduced and the book equity ratio has increased from 27% to 42%. Important contracts were entered into in 2002 both in the Ro/Ro and LNG segments. This gives a basis for increased revenues in the future. HUAL Europe’s grounding and subsequent total loss outside Japan has been a strain on the company. The Directors are, however, relieved that the accident did not cause any loss of life and that the environmental impacts were limited.

Results 2002

LHC achieved an acceptable result in 2002. Operating profit before sales gain and depreciation was USD 160 million (USD 164 million in 2001). Operating profit was USD 88 million (USD 102 million in 2001) and ordinary profit before tax was USD 65 million (USD 99 million in 2001). Net cash flow from operating activities was USD 122 million (USD 128 million in 2001). Operating profit within the company’s core segments Ro/Ro and LNG was better than in 2001, while the reefer vessels and the open hatch fleet experienced a negative development. Return on total assets before tax was 8%. The Directors are satisfied with the company’s results in 2002 considering the development in the world economy.

Financial position

The company has a long-term objective of an equity ratio of minimum 40%. After the acqui-

Equity ratio development, 1987-2002 sition of the remaining share of HUAL in 2000, this ratio has been below this level and was (%) 36% at the beginning of 2002. The company’s cash flow has, h owever, been good during the 50 year, and debt was repaid by USD 164 million. Only a small amount, USD 8 million, was used

40 for investments in newbuildings. Despite significant repayments of debt, the company’s liquidity reserve has increased during the year from USD 178 million to USD 186 million. The 30 equity ratio was 42% at the end of 2002.

20 The development of the company’s financial position has strengthened considerably the possibilities for growth within the Ro/Ro and LNG segments. During the year newbuilding 10 contracts for a total amount of USD 336 million were entered into for vessels which will be 0 delivered during 2004-2006. In addition, three car carriers have been chartered in on long- 88 90 92 94 96 98 00 02 term time charters. Annual report 2002

The company is exposed to fluctuations in currency exchange rates, interest rates and bunker prices. A considerable part of the floating interest rate debt in USD has been swapped 7 into fixed rate. The bunker prices have been high for a long period. About one third of the company’s bunker consumption is covered through bunker adjustment clauses in the freight contracts and time charters. Freight rates are partly secured through medium-term contracts in the Ro/Ro segment and fully secured through time charter contracts in the LNG and dry bulk segments. The Directors confirm, as required by §3-3 of the Financial Reporting Act (Norway), that the annual accounts have been prepared on the basis that the company is a going concern.

Activities

Ro/Ro HUAL is LHC’s most important business segment, and during the year the company strengthened its position as an independent, global player. The focus will consequently be on growth in this segment in the future. Long-term time charter contracts for three new, large flexible car carriers were entered into in 2002. All vessels are scheduled for delivery during 2003. In addition, three similar vessels were ordered for delivery in 2005 with options for another two vessels. This will improve HUAL’s ability to meet customer requirements. In December 2001 HUAL acquired Kiwi Car Carriers, which is a leading operator in the transportation of used cars from Japan to New Zealand. The results from this activity were good in 2002. In the spring of 2002 HUAL’s French subsidiary CETAM, together with a French partner, entered into a 20-year contract with Airbus Industrie G.I.E. for transportation of components to the new aircraft A380. A new vessel was ordered for delivery in 2004. The short sea market in Europe is growing, and HUAL wishes to strengthen its position in this market through CETAM, among others. In spite of a decline in global new car sales, the Ro/Ro market tightened during the year. An increase in the import of new cars by USA and Europe was the main reason behind this market development. The tight market resulted in improved freight rates for transportation of used cars and high/heavy Ro/Ro cargo, which are important markets for HUAL. With its adaptability through short- and long-term contracts and developed trade systems, the company managed to benefit from this market situation. A new IT system was introduced during the year. This system will cover booking of cargo, scheduling and document handling and will, together with other IT systems, improve communication and exchange of information with the customers and thereby create additional value for them. This will again strengthen HUAL’s position in the market. A general shortage of tonnage created logistical challenges for HUAL in connection with HUAL Europe’s grounding. HUAL attaches great importance to flexibility, which became useful in the company’s efforts to limit the impact of the accident to the customers. The Directors are satisfied with the way in which the company managed this difficult situation. HUAL generated an operating profit of USD 73 million in 2002 (USD 61 million in 2001), or about 71% of LHC’s total operating profit.

LNG Agreements for the ordering of two 147 000 m3 LNG vessels were entered into in 2002, of which one will be chartered out to Statoil and some of the other owners in the Snøhvit project. The other vessel will be chartered out to TotalFinaElf Exploration Norge. LHC will own 34% of the first vessel and 50% of the second. The vessels will be delivered at the end of 2005 and the beginning of 2006. They will be operated by Leif Höegh (U.K.) Ltd. The

Good results in the core segments Annual report 2002

contracts, which are for a minimum of 20 years, form an important basis for further expan- 8 sion of LHC’s activities in the LNG segment. Höegh Galleon started a 17-year time charter to Enron LNG Shipping in 2001. When Enron got financial difficulties, the time charter was taken over by Tractebel LNG Trading in July 2002. LHC was already responsible for the management of the LNG vessel Matthew for Tractebel, and the transfer of the time charter for Höegh Galleon has further improved the Westye Høegh (60) Westye Høegh has served as member of the Board of LHC since 1974 and good relationship with this company. has been Chairman since 1984. He has The other vessels in the company’s LNG fleet have traded under their long-term time experience from banking and several positions in LHC. For many years he charters to Pertamina and gasNatural without significant disruptions. held various positions within the The Directors are satisfied with the results from the LNG activities and the new contracts Norwegian Shipowners’ Association entered into in 2002. and was its President in 1994/95. Westye Høegh has been a member of The operating profit for the LNG vessels was USD 13 million (USD 11 million in 2001). the European Community Shipowners’ Association Council and served as Chairman of Intertanko from 1999 to Dry Bulk 2001. He is a member of Norsk Hydro The company reduced its engagement in this segment during the year, and today owns and Shareholder Board (Bedriftsforsamling) operates only two Capesize bulk carriers. Both vessels are on long-term contracts to a compa- and chairman of Norsk Hydro Shareholders’ Association (Aksjonær- ny in the Shougang group. The vessels have performed according to budgets and generated forening). Westye Høegh has a results as expected. Bachelor of Law from the University of Oslo and holds an MBA from Wharton Dry Bulk is not defined as a core business area for the company, and no new investments School, University of Pennsylvania. are planned in this segment. On the LHC Board he participates in The operating profit for the dry bulk carriers was USD 7 million (USD 6 million in 2001). the Executive Committee and the Compensation Committee. Reefer vessels The reefer market was weak also in 2002 and the results achieved were not satisfactory. Despite the low newbuilding activity, the fleet was not significantly reduced due to a low level of scrapping. A weak containership market puts further pressure on rate levels in the reefer market. Three reefer vessels were sold during 2002 (one for delivery in 2003) and LHC’s reefer fleet today consists of 10 wholly owned and two partly owned vessels. LauritzenCool is responsible Leif O. Høegh (39) Leif O. Høegh is a joint controlling shareholder in LHC, and has been a for the commercial operation of the vessels, whereas IUM Shipmanagement AS is responsible Director since 2000. He is Managing for the technical management. Director of Leif Höegh (UK) Ltd and serves as Vice Chairman of the Board The company will continue its strategy to reduce its presence in the reefer segment. of LHC. He is Chairman of Höegh The operating profit for the reefer vessels was USD 3 million (USD 21 million in 2001 inclu- Capital Partners and Parkveien 55 AS ding a sales gain of USD 15 million). and a Director of life science investment group NeoMed Management and leading tanker owner Teekay Open Hatch Shipping Corporation Ltd. Prior to joining LHC, Leif O. Høegh worked as The market for open hatch vessels was weak in 2002 and the return on new vessels was management consultant with therefore not satisfactory. However, the company owns several 1970-built vessels which McKinsey & Company in Copenhagen, are fully written down, and produce an acceptable return. The commercial operation of the Stockholm and Atlanta and as an investment banker with the Royal vessels was transferred to Saga Forest Carriers International during the year. Bank of Canada Group in London and The operating profit for the open hatch vessels was USD 8 million (USD 14 million in 2001). Toronto. As Norwegian national, he holds an MA in Economics from the University of Cambridge and an MBA Höegh Fleet Services from Harvard Business School. 2002 was a year with large challenges for HFS. It was primarily the grounding and total loss In the LHC Board he participates in of HUAL Europe which created considerably additional work both internally and externally. the Executive Committee and the Audit Committee. As a natural follow-up, all routines and procedures will be evaluated to prevent such accidents again. The company’s vessels are covered under a Hull and Machinery insurance and a Protection and Indemnity insurance. When the insurance company declared HUAL Europe a total loss, LHC received the insured amount of USD 55 million. The P&I club took over the responsibility for removing the wreck and cleaning up a minor oil spill. HUAL Europe’s accident will lead to Annual report 2002 higher insurance premiums to be paid by LHC in the future. The development of the manning offices in the Philippines and China continued in 2002. 9 Great emphasis was put on internal education and training of the crew in order to keep the high standard. Programs for recruitment and education of officers are steadily being improved. A closer cooperation between the offices in the Philippines and China has resulted in a better utilization of the total resources within these two offices. Truls Bergersen has been a Director Truls Bergersen (64) During 2002 HFS focused on increasing the fleet’s operating efficiency and thereby lowe- since 1987 and is currently part-time ring the vessels’ operating expenses without reducing the quality. Positive results were achie- employed by LHC. He has previously been President of LHC and HUAL ved in this respect. and prior to joining LHC in 1966, he was an officer in the Royal Norwegian Navy and Instructor in the Shipping Employers’ Federation. General conditions for the shipping industry Truls Bergersen is a member of the board of AS Uglands Rederi and Chairman of several private invest- In the annual report for 2001 the Directors emphasized the importance of Norwegian ship- ment companies connected to Høegh ping companies being able to compete internationally on a level playing field. The quad- Invest. He graduated from the rupling of the tonnage tax over the last years was particularly mentioned. The Directors are Norwegian Naval Academy in 1960. therefore pleased to note that the tonnage tax was reduced by 30% effective for the fiscal In the LHC Board he participates in the Audit Committee. year 2002. There is a strong focus on the general conditions for the shipping industry throughout the EU area, and it is important that our authorities follow this development closely and bring the Norwegian system more in line with the practice in other leading European shipping nations. Stability and predictability is important in an industry investing large amounts in vessels that have a working life of 25-30 years. Even with today’s system, the Norwegian regulations are far more stringent than those prevailing in the EU area. One example is the practice of deferment of tax and not exemption from tax. Another is the tonnage tax, which is still higher in Norway than in other European countries. It is also important that the tax structure incites accumulation of capital, ownership and the will to contribute, which again creates added value in Norway. When it comes to the refund scheme for the seafarers’ tax or a system with net wages, Truls Holthe has been a Director Truls Holthe (54) LHC employs relatively few Norwegian seafarers and this question is therefore of less impor- since 1994. He is working as an tance to the company. independent consultant. Truls Holthe has experience as accountant, After the accident involving the oil tanker Prestige there has been a new round of political controller and financial director in activity. This has led to a review of the regulations concerning safety and environmental several Norwegian companies inclu- aspects, and the construction of a vessel has become a major issue. It is important that such ding Financial Director of Olav Thon Gruppen and Norske Liv AS. regulations are agreed upon in international maritime organisations and that there are no Truls Holthe is a member of several national or regional regulations. boards. In 1974 he graduated as MSc in Business from Norwegian School of Economics and Business Administration (NHH) and in 1977 he was Licenced as State Authorised Shareholder relations Public Accountant. In the LHC Board he leads the Audit The company’s shares traded well below their underlying book value also in 2002. The Committee. annual general meeting therefore authorized the Board of Directors to buy back a further 10% of the company’s shares. The Directors decided to exercise this authority after previously acquired shares were amortized in July 2002. At the end of the year the company owned 79 800 own shares equivalent to 0.3% of the total number of outstanding shares. Another 331 050 shares were bought in 2003. The Directors are aware that the repurchases of shares reduce the liquidity. However, the underlying value of the remaining shares increases, which is considered to offset possible negative effects. The Directors will propose to the annual general meeting that a dividend of NOK 3.50 is paid for 2002. This is an increase of 75% compared to 2001 and must be viewed against

Considerable growth within Ro/Ro and LNG Annual report 2002

the result and the fact that only a small amount has been used for repurchase of own shares 10 during the year.

Organisation Karl Otto Gilje (66) Karl Otto Gilje has been a Director since 1995. He has had an interna- LHC had a total of 2 281 employees at the end of 2002, compared with 2 383 one year tional career in Upstream and Down- earlier. 1 895 are employed on board the vessels and 386 in offices ashore. The employees stream functions of Exxon Corp. When he retired from Exxon in 2000 he had are competent, well educated and well qualified to carry out their tasks. held positions as Chairman and CEO A renewed share option scheme for the company’s senior management was implemented. of several Esso Companies in Europe. The Directors wish to thank all employees for their hard work during the year. From 1990 to1993 he served as President of the Norwegian Petroleum The Directors have decided to gather the land based organisation in Norway in a new, spe- Society (NPF) and as Board member cially designed office building at Skøyen in Oslo. With the company’s focus on fewer core seg- of the Norwegian Employers’ Fede- ration (NHO). Karl Otto Gilje gradua- ments, the present division of the organisation between two offices has proved inefficient. ted as MSc (Hons.) Chemical Engi- The new and more efficient offices will require less floor space and the rent will be lower. neering in 1959. Parkveien 55, a company owned by the Høegh family, has released LHC from its current long In the LHC Board he leads the lease in Wergelandsveien 7 and will own the new head office. The new offices will be com- Compensation Committee. pleted in the late autumn of 2004.

Environment

LHC is directing great efforts towards reducing the environmental impacts of the company’s operations. A separate environmental report is prepared and distributed together with the annual report. This year’s environmental report is a follow-up of the one produced last year and shows a positive development in the environmental work and that the efforts are producing results. The environmental accounting shows that the largest improvements have been obtained in areas such as disposal of waste, use of freon gases and use of non-toxic paints. LHC believes that the ballast water problem represents one of the industry’s largest environ- Jörgen Ekberg (43) Jörgen Ekberg has been a Director since 2000. He is a Senior Partner mental challenges. Pending a technical solution to this problem, the company has imple- of Litorina Capital Management AB in mented various procedures both with regard to exchange of ballast water and to minimize Stockholm. Prior to that he was the President & CEO of ASG/Danzas AB the transfer of harmful aquatic organisms. and has experience as Senior The company is a member of the World Business Council for Sustainable Development. Engagement Manager for McKinsey & Through this international cooperation the company seeks to contribute to a better environ- Co in Stockholm and Hong Kong. He is a member of several boards. ment in a broader perspective. Jörgen Ekberg holds a Master of Absence through illness was 1.7% in 2002, compared with 1.6% in 2001, which is conside- Science in Economics and Business Administration from Stockholm School red to be low for the industry. All the same, the Directors wish to emphasize that efforts to of Economics. reduce the absence will continue. In the LHC Board he participates in the Compensation Committee. Leif Höegh & Co ASA

The parent company Leif Höegh & Co ASA generated a net profit of NOK 98 million in 2002. Proposed distribution of the net profit:

Dividend NOK 103 million Other equity NOK (5) million Total distributed NOK 98 million

At the end of the year the free equity of the company was NOK 2 853 million. Annual report 2002 Outlook 11 The last couple of years have been characterized by turbulence in major finance markets and many countries are struggling with low economic growth. Private consumption in the major economies has been at a high level, but rising unemployment may reduce the purchasing power of the consumers. Going into 2003 there is risk of war in areas of vital importance to Gunnar Reitan has been a Director Gunnar Reitan (48) the world economy. For this and other reasons the oil price increased during the year, which since 2000. He is the Deputy CEO again led to higher bunker prices. of the SAS Group. He joined SAS in 1988 where he held the position as Interest rates in USA and EU were lowered during 2002. This will reduce LHC’s future Executive Vice President & CFO of the borrowing costs. At the same time the USD depreciated considerably against the Euro and SAS Group ut ro 2002. Gunnar Reitan has previous experience from the NOK. Even if the weaker USD resulted in a significant currency exchange gain in 2002, banking, industry and engineering a weak USD will have a negative effect on the company’s future results. and was Managing Director of AS Several shipping markets were influenced by large fluctuations in 2002. LHC has, however, Trondheim Trafikkselskap before joining the SAS Group. He is a mem- by focusing on Ro/Ro and LNG positioned the company in industrial shipping segments which ber of several boards. Gunnar Reitan historically have been less vulnerable to market fluctuations, and where the entry barriers for graduated as BA from Trondheim new players are higher. Business School in 1975. In spite of the uncertainty characterizing several economies, there are also positive signs. In the LHC Board he participates in the Audit Committee. Several countries in Asia continue to expect considerable economic growth, and an increase in both imports and exports of new and used cars is expected. HUAL will continue to strengthen its position in these markets. The orderbook for new car carriers increased in 2002. However, part of the existing car carrier fleet is built in the 1970s and does not meet today’s requirements for flexibility. There is consequently a large scrapping potential in the fleet if the market weakens. Market conditions for the company’s main business areas are not expected to change much from 2002, as they are characterized by stability and long-term contracts. Bunker costs may, however, remain high as a consequence of the risk of war. The general economic situation is also uncertain.

Oslo, 5 March, 2003 The Board of Directors, Leif Höegh & Co ASA

Westye Høegh Chairman

Leif O. Høegh Truls Bergersen Jörgen Ekberg Vise Chairman

Karl Otto Gilje Truls Holthe Gunnar Reitan

Thor Jørgen Guttormsen President 12 Organisation

Corporate Governance

Corporate Governance is about the governing mechanisms in the triangle between the Owners (shareholders), the Board of Directors and the Administration of a company, but Corporate Governance is also about a company’s external relations. Increased focus on Corporate Gover- nance has followed in the wake of financial scandals in the business world. When it comes to the Board of Directors of Leif Höegh & Co ASA, the following Board Committees were established in 2000 in order to increase the efficiency of the work of the Board of Directors.

Executive Committee The Executive Committee ensures that preparations for the Board meetings and implementation of Board decisions are done timely and with the highest quality.

Audit Committee The main tasks of the Audit Committee is assistance to the Board of Directors in • assessing the administration of the company and decision manuals • assessing and managing business and financial risk • overseeing legal and regulatory compliance • monitoring annual and interim financial reporting • assessing the performance of internal control and external auditors • overseeing investor relations activities The Audit Committee meets with the external auditors two to three times per year.

Compensation Committee The Compensation Committee’s main tasks comprise reviewing of the company’s compensation and benefit strategy for top management, the management’s objectives and plans for recruitment, career planning and management development.

Election procedures

A proposition naming candidates for a position on the Board is placed before the Annual General Meeting, duly considering the complementary qualifications of the candidates. Board Members are elected for one year by the Annual General Meeting.

Decision processes

The company’s Decision Guides define authorizations and extent of decisions to be made by each business unit, the President of the company and the Board of Directors or Board Committees.

Communication with shareholders

The company practices a policy of openness towards all shareholders to ensure that the company’s objectives and results are communicated. Presentations are frequently held for analysts and annually for shareholders at the Annual Shareholders’ Meeting.

Corporate Governance being emphasized Organisation Equal treatment of shareholders 13 All shares are issued in the same class and each share represents one vote at the Annual Shareholders’ Meeting.

Organisation

Leif Höegh & Co Board of Directors

President Executive Audit Compensation Thor Jørgen Guttormsen Committee Committee Committee

Corporate staff & Communication Olav Sollie

HUAL AS Höegh Fleet Services AS Finance/IR/Portfolio management Höegh LNG Karl Terjesen Johannes Tvedte Roar Flom Stephan Tschudi-Madsen

Controller Finance/Portfolio Budget/Accounting Dry Bulk Reefers Open Hatch Per Øivind Rosmo Erik Norman Tor Løchsen Trond Evju Trond Evju Erik Falkenberg

Thor Jørgen Guttormsen Karl Terjesen Johannes Tvedte

President, LHC President, HUAL President, HFS

Roar Flom Stephan Tschudi-Madsen

C.F.O., LHC Senior Vice President, Höegh LNG 14 Vessel types

Ro/Ro

Roll on/Roll off Approximately 57 million new cars were sold globally in 2002. Around 7.5 million of these new cars (plus more than one million used cars and a large number of high/heavy Ro/Ro units) were transported by sea over long distances, in the so-called deep sea market. In addition, a large number of cars were transported by sea between countries on the same continent, the so-called short sea market.

Pure car carrier (PCC) and pure car truck carrier (PCTC)

Concept and technology Previously, sea transportation of cars took place by lifting them onboard bulk carriers whose cargo holds were equipped with hanging decks. The first car carriers were converted bulk carriers, but the early 1970s saw the construction of specialized car carriers with external and internal ramps to enable the cars to be driven on board. These pure car carriers (PCC) were relatively inflexible, but later years saw the development of more flexible vessels (PCTC) with ramps and decks able to carry higher and heavier cargo. Some of the decks can be ele- vated or lowered in order to adjust the height according to requirement. These vessels (PCTC) carry new and used cars, trucks and buses as well as high and heavy construction machinery and agricultural equipment. In this way the utilization of the vessels can be improved by combining several types of cargo. The main ramp can take cargo with a weight of up to 150 tons. The world fleet of large car carriers counted 420 ships at the end of 2002. The newbuilding order book numbered 44 ships.

Capacity The deck area of HUAL’s new PCTC will be 54 000 m 2, corresponding to close to nine football fields. The vessels can load up to 6 100 standard car units. However, the actual maximum number of units on board will in practice depend on the size of the cars to be carried. A growing share of the cars transported by HUAL in recent years have been relatively large, but HUAL has also carried a single load of 8 000 small cars from Korea to Europe. Normal load rate is about 1 000 cars per eight hour shift, and the process of loading a vessel to maximum capacity will take about 48 hours. Vessel types 15

Safety The cargo transported by car carriers is neither hazardous nor polluting. The specific weight of the cargo is relatively low, and the cargo does not expose the vessel’s construction to substantial strain. Due to their shape the vessels have large external surfaces, and can be exposed to extreme force of wind. The vessels normally have double bottoms.

Freight The value of a full cargo of new cars will of course depend on the makes and models; a typical figure would be USD 40-50 million. The freight for one car from Japan to Europe is around USD 500, amounting to about 2%-5% of the price of the car to the consumer. The freight is normally stipulated as price per cubic meter. Most car carriers are controlled by large operators with close connections to the car manufacturers.

Vessel specifications Length overall 200 m Breadth moulded 32.2 m Air draft 46.9 m Max. draft 10.0 m Deadweight 20 400 tons No. of car decks 12 Car deck area 54 000 m2 Intake capacity 6 100 standard car units Engine output 14 300 kW (19 460 BHP) Speed 21.3 knots Crew 23

No. 12 – Deck

No. 11 – Deck

No. 10 – Deck

No. 9 – Deck

No. 8 – Liftable deck

No. 7 – Deck

No. 6 – Liftable deck

No. 5 – Deck

No. 4 – Liftable deck

D.L.W.L. No. 3 – Deck

No. 2 – Liftable deck

No. 1 – Deck

The deck area of the new PCTC vessels is the size of nine football fields, and the vessel can swallow 6 100 cars, a queue more than 30 km long 16 Vessel types

LNG

Natural gas Natural gas consists mainly of methane (CH4), the most applicable energy source available today, and amounts to approximately 24% of the global consumption of primary energy. Known reserves of natural gas are larger than those for oil. Natural gas is being transported by pipelines where the distance to the market is within reach. Over larger distances the gas is being transported by gas carriers, but in liquid state as LNG (liquefied natural gas). Approximately 26% of the international trade in natural gas is being produced as LNG. Natural gas becomes liquid at 163 degrees below freezing and the volume is reduced to about 1/600.

LNG carrier

Concept and technology Cross section of a spherical tank The first LNG carriers were built in 1959. LHC took delivery of the first LNG vessel ever constructed with spherical tanks (Norman Lady) in 1973. Today the world LNG carrier fleet numbers 138 vessels, with an additional 58 on order. Two containment systems are currently in use, the membrane system and spherical tanks, with about half of the existing fleet using each of these systems. The cargo tanks need to be able to withstand the low temperatures and are constructed in stainless steel alloys or aluminum. The containment systems are well insulated to keep the cargo temperature low. When the tanks have been filled with LNG, the temperature in the tanks is regulated by controlling the pressure. Some of the gas, approximately 0,1%-0,25% of the cargo, vaporises In 1973, LHC took delivery of the world’s first LNG vessel equipped with spherical per day and is used as fuel for the steam turbines that constitute the vessel’s propulsion. tanks. The vessel is operating under Technology to liquefy the vapour has been developed, so that the vaporised cargo can be contract until 2012. returned to the cargo tanks and more economical machinery be used to propel the vessel.

Capacity The LNG carriers being built for the Snøhvit project have four spherical tanks and will be able to load 147 000 m3 LNG at -163°C. A full cargo will have a weight of 63 000 tons. The loading operation will take 24 hours. The spherical tanks will have a diameter of 42 metres, and the energy content of a full cargo will correspond to 80 000 tons of crude oil.

Safety LNG carriers are very safe despite the large concentration of energy that is transported on board each vessel. Gas in a liquefied state is not explosive and severe accidents with LNG vessels have not yet occurred. The greatest danger from a puncture of a cargo tank is that the LNG, at an extremely low temperature, will leak and cause cracks in the surrounding hull of the vessel. The vessels have therefore been constructed with double hulls and the cargo tanks are particularly well protected against physical stress from external forces. Natural gas is not toxic, and is lighter than air. If a leak should occur, the gas will vaporise and quickly be diluted by air so that it will become non-ignitable. The ignition temperature for natural gas is more than 500°C, whilst petrol vapour ignites at 250°C. Vessel types 17

A large emission of LNG can increase the risk of fire, but the environmental impact will be modest.

Freight The price of natural gas in the US market varies typically in the range USD 2.00-USD 4.50 per million Btu*. The value of a cargo of 147 000 m3 of LNG is about USD 12 million. The freight for such a cargo will amount to USD 2.5 million, and can represent 15-30% of the price paid by the consumer. Most LNG vessels are fixed on long-term contracts where the producer or the distributor of natural gas controls the vessel and employs it on a fixed route.

* BTU (British Thermal Unit): 1 Btu = 1055,06 Joule = the energy required to raise the temperature in 1 pound (0,45 litres) of water by 1 degree Fahrenheit.

Vessel specifications Length Overall 288 m Breadth 49.0 m Air Draught 53 m Maximum Draught 12.3 m Cargo Capacity 147 000 m3 Deadweight 74 400 tons ME Power 27 600 KW Speed 20.5 knots Crew 29

LNG tank

D.L.W.L.

A full cargo load of LNG from one of the Snøhvit vessels is sufficient to cover the yearly energy consumption of all households in a city with a population of 45 000 18 Activities Activities 19

...flexible

Flexible in providing services and products 20 Ro/Ro

The Ro/Ro activity in HUAL is LHC’s largest business segment. A determined strategy with focus on the core business within the deep sea market, combined with strengthening of HUAL’s logistics know-how and solutions in order to create value for the customers, has produced good results.

Karl Terjesen President, HUAL Results

(USD 1 000) 2002 2001 2000 1999 1998 Freight revenues 548 327 494 536 408 294 227 350 232 696 Voyage expenses (271 139) (236 677) (200 666) (103 157) (94 273) Income on T/C-basis 277 188 257 859 207 628 124 193 138 423 Charterhire expenses (105 588) (96 056) (77 783) (49 214) (60 139) Operating expenses (47 897) (46 886) (41 176) (22 777) (16 083) Operating profit before sales gain and depreciation 123 703 114 917 88 669 52 202 62 201 Gain/(loss) on sale of vessels (13) (198) (598) - - Depreciation (50 913) (51 512) (42 016) (15 208) (8 860) Write-down/Change of estimate - (1 808) - - - Operating profit 72 777 61 399 46 055 36 994 53 341 Book value vessels 522 586 616 556 658 286 313 442 218 211 Investments 730 0 472 753 109 069 879 679

Per-Gustav Lyngås Niels Ronald Bugge Anders Kristoffersen

Executive Vice President Executive Vice President Senior Vice President

2002 was a good year for HUAL, with growth in both shipping activities, transported volumes and freight income 21

• HUAL representative HUAL office During 2002 a total of 4 065 port calls were made. • Trade routes

Operations

2002 was a good year for HUAL, with significant growth in activities, transported volumes Cargo types (%) and freight revenues. There was also an improvement in the operating profit, in spite of substantially higher bunker prices than in the preceding year and the loss of HUAL Europe. The vessel grounded outside Tokyo Bay during a powerful typhoon on October 1 and was later declared a total loss. The sudden reduction of capacity necessitated a substantial re- allocation of HUAL’s other tonnage. Global sales of new cars in 2002 were slightly lower than the year before. In spite of this decline, HUAL experienced good cargo availability on most of its trade routes, both for new and used cars and for high/heavy Ro/Ro cargo. The composition of HUAL’s cargo portfolio was relatively stable, and the breakdown on cargo segments showed only minor changes from previous years. A relatively tight market for car carrier tonnage during 2002 made it at times problematic to get hold of sufficient tonnage capacity on spot basis in certain trades. • New cars 58% This market environment resulted in a moderate increase in freight rates, both in connection • Used cars 23% High/heavy 19% with contract renewals with car manufacturers and in the liner market for used cars and • high/heavy Ro/Ro cargo.

Key events

New flexible PCTC vessels As part of the renewal of the HUAL fleet, LHC entered into a contract with Daewoo Ship- building & Marine Engineering in December 2002 for the construction of three flexible PCTC vessels. These vessels have an intake capacity of 6 100 cars each and will be delivered in 2005. The contract includes options for further vessels. In addition, HUAL has entered into agreements for long-term charters of three PCTC newbuildings that will be delivered in 2003 from shipyards in Japan and Poland. Also these vessels will have an intake capacity of around 6 100 cars, and their specifications are close to those of HUAL’s own ships. HUAL’s core fleet – which today numbers 26 vessels – will therefore increase to 32 vessels. In addition HUAL operates on average about 20 vessels 22 Activities

chartered in for shorter periods, so that the total fleet operated by HUAL will number about 45 vessels.

Airbus contract During the spring of 2002 HUAL’s French subsidiary CETAM, in partnership with the French shipping company Louis Dreyfus Armateurs, entered into a 20-year contract with Airbus Indu- strie G.I.E. A new vessel was ordered at the Jingling yard in China for delivery in 2004. The vessel will be used for transportation of airplane parts and components for the new Airbus A380 from ports in the UK, Germany, Spain and France to Bordeaux. From there the parts will be transported to Toulouse for final assembly.

The first year with Kiwi 2002 was the first year in which Kiwi Car Carriers (Kiwi) was included in HUAL’s activity after the acquisition became effective in December 2001. As market leader for the transportation of used cars from Japan to New Zealand, Kiwi benefitted from a strong market in 2002 and produced very satisfactory results.

The office in China Tung last LHC’s office in Shanghai has in recent years increasingly worked for HUAL. The car market and car industry in China is growing rapidly, and significant growth is expected both for vehicle imports and exports in the years ahead. Through its local organisation HUAL has secured a presence in the Chinese market that should give a good foundation for participating in this development in the years to come.

Optimal utilisation of the vessels As an increasing share of the vehicles transported by car carriers in recent years are higher than traditional passenger cars. During 2002, HUAL implemented a project to increase the vessels’ flexibility to carry such vehicles.

HUAL Europe The loss of HUAL Europe was the first of its kind during LHC’s close to 40 years in the vehicle carrying trade. Fortunately all officers and crew were rescued, and the environmental impacts were limited.

Network strategy for better logistics solutions

Deep sea transport continues to be HUAL’s core business. The company is continuously strengthening and developing this activity, by among other things expanding the organisation in Norway and abroad in order to meet the customers’ requirements in the best possible way. Logistics know-how and IT solutions play a vital role in this development. In 2002 HUAL implemented important projects aimed at better communication and exchange of information in the supply chain in order to reduce costs and create added value for the customers. This strategy will be continued. Activities 23

Competitive situation Main operators’ transportation capacity (%) The competitive situation in the car carrying market has been relatively stable for a number of years, and there have only been minor changes in the market shares of the main operators. It is unlikely that the takeover of the car carrier division of Hyundai Merchant Marine by Wallenius Wilhelmsen Lines will change this to any significant degree. As the world’s fifth largest vehicle carrier operator HUAL has through many years established a solid cargo portfolio based on multi-year contracts with many of the leading manufacturers of cars and commercial vehicles. With basis in this cargo portfolio HUAL has developed robust trade systems and roundvoyage combinations, and is today more than ever a global player in the deep sea vehicle carrying industry. An expanded and rejuvenated fleet, together with logistics solutions adapted to the customers’ needs, makes HUAL a competitive alterna- • NYK 19% • WWL 14%* tive in the years to come for an auto industry which is becoming increasingly more global. • MOSK 16% • HUAL 7% • HMM 16%* • GRIMALDI 5% • KKK 13% • Others 10% The market * HMM taken over by WWL per December 2002

Factory new cars Around 57 million new cars were sold globally in 2002, of which ca. 7.5 million units were transported by sea. The largest export regions for new cars are the Far East, Europe and USA. Around 80% of the shipments originate from the Far East, where Japan’s export increased

by 12.8% in 2002, whereas South Korea’s export of new cars fell somewhat from the previ- No. of units transported by HUAL ous year. per year (1 000 ceu) The most important import regions for new cars are USA and Europe. One of the positive factors in the car carrier market in 2002 was that imported cars increased their market shares 1 200 in most of the major markets. In USA, where car sales remained at a high level in 2002, the 1 000 import of new cars increased by 7%, with higher volumes both from Japan, South Korea and 800 Europe. Despite a declining trend in new car sales in Europe, Japanese cars increased their 600 markets shares in several countries. However, the sale of South Korean cars in the European 400 market fell somewhat from the previous year. 200

Used cars 0 Around one million used cars were transported globally by sea in 2002, with the largest 1998 1999 2000 2001 2002 trades from Japan to New Zealand and South America, as well as from Europe to West Africa. New Zealand is Japan’s largest market for used cars and the country’s import set a new record with a large increase compared with the previous year.

High/heavy Ro/Ro cargo Around 10 million m3 high/heavy Ro/Ro cargo (construction and agricultural machinery) was transported globally by sea in 2002, especially to the Middle East and other oil exporting countries, where high oil prices contributed to a high level of activity. The most important export areas for high/heavy Ro/Ro cargo in 2002 were Europe and Japan. All three Ro/Ro segments thus remained at a high level in the passing year. In addition, changing trade patterns and longer roundtrips contributed to an increase in the total demand for car carrying tonnage. At the same time the growth in supply of tonnage was limited to less than 1%, as 11 new car carriers were delivered, whereas 10 were scrapped/lost.

HUAL is one of the world’s largest car carrier operators 24 Activities

Captain Cesar D. Manalaysay HUAL Trader left Japan beginning of November. During the vessel’s Europe roundtrip 29 ports were visited before Market outlook arriving back in Yokohama by the end The global sale of new cars is expected to remain around 56-57 million units also in 2003, of January. with the largest growth in China, India and other Asian markets, as well as in some East European countries. Improved economic conditions in South America could result in an increase in new car sales in this region as well. It is further expected that imported cars will retain their market shares in the major markets, although this to a certain extent depends on currency exchange rates. Shipments of used cars are expected to increase also in 2003. The Middle East is an important import region for high/heavy Ro/Ro cargo, and the activity in the area is influenced by the oil price. At the start of the year, the situation in general in the Middle East is highly uncertain. It is projected that the total demand for car carrying tonnage will grow in 2003. At end 2002 the world fleet of car carriers amounted to 420 vessels. Delivery of a further 18 new car carriers in 2003 will increase the supply of tonnage, but there is a large scrapping potential in the fleet. Vessels built prior to 1980 are considered unsuitable for today’s cargo mix. An increase in the capacity utilization in the global car carrier fleet is therefore expected also in 2003. Activities 25

Cornelio C. De Vera, Jr., Boatswain Kjell Arne Berger, Port Captain 26 LNG

The LNG market is experiencing rapid growth and is one of two main core segments for LHC. Large contracts have been entered into during 2002 with leading companies within the industry.

Stephan Tschudi-Madsen Senior Vice President, Höegh LNG Results

(USD 1 000) 2002 2001 2000 1999 1998 Freight revenues 26 577 23 253 18 578 15 153 12 625 Voyage expenses 13 0 14 0 0 Income on T/C-basis 26 590 23 253 18 592 15 153 12 625 Charterhire expenses - - - 0 0 Operating expenses (9 952) (7 965) (4 264) (6 902) (4 215) Operating profit before sales gain and depreciation 16 638 15 288 14 328 8 251 8 410 Gain/(loss) on sale of vessels Depreciation (5 168) (4 736) (3 532) (3 560) (1 741) Write-down/Change of estimate 1 769 ---- Operating profit 13 239 10 552 10 796 4 691 6 669 Book value vessels 55 630 50 390 50 843 34 217 32 967 Investments 8 634 4 287 21 329 8 762 13 960

LNG Project team 27

Sailing patterns

LNG

LHC today represents one link in the LNG industry’s logistical chain and works closely with the World LNG trade other players, both on the import and export side, with an objective of offering the custo- (bill. m3) mers competitive transportation and logistics solutions. Cooperation, creativity and flexibility will be vital competitive factors in the future. In addition to a secure income for many years 300 through long-term timecharters, LHC also has the financial strength to develop further the 250

LNG segment. 200

150 Operations 100 50

The vessels 0 LHC owns, wholly or partly, three LNG carriers, all of which have secured long-term employ- 1975 1985 1995 2000 2002***2005 2010 ment. In addition LHC is responsible for the management of one LNG carrier. Two newbuil- * Estimates dings have been ordered. Höegh Gandria, owned on a 50/50 basis with Mitsui O.S.K. Lines Ltd. (MOL), is employed on a timecharter to Pertamina that expires at the end of 2006. The ship trades between Arun in Indonesia and South Korea. Norman Lady, which is also owned 50/50 with MOL, is employed on a timecharter to gasNatural until 2012, with an option to extend the timecharter until 2019. The vessel transported LNG mainly to Spain in 2002. Höegh Galleon in Barcelona Höegh Galleon, which is 100% owned by LHC, is under contract to Tractebel until 2017. The vessel does not trade in a fixed pattern. Matthew is owned by Tractebel, whilst LHC is responsible for the technical and maritime operation of the vessel. This contract has contributed to the development of LHC’s competence and network.

Knowhow and quality The development of competence and quality of technical, operational and commercial services is a continuous process as the requirements from customers grow. The older LNG vessels 28 Activities

have a considerable income potential for many years to come, which has to be secured through increased focus on quality. This also involves education and training of human resources both on board and ashore. During the last couple of years it has become common practice for the large oil and gas companies to carry out periodical inspections of vessels and offices, including quality systems. It is necessary to meet these companies’ requirements with respect to quality and documen- tation of work carried out. This applies to all aspects of health, environment and safety. A philosopy of pro-active operation is increasingly emphasized.

Important events

Snøhvit The LNG activity in LHC took a major step forward in 2002. Together with MOL and Statoil a 147 000 m3 LNG carrier was ordered from Mitsubishi Heavy Industries in Japan to serve a 20-year employment contract for transportation of LNG from the Snøhvit field. A sister ship was also ordered at the same yard together with MOL. This vessel will be employed under a long-term contract with TotalFinaElf Exploration Norge, also for transportation of LNG from Snøhvit. Both vessels will be operated by Leif Höegh U.K. Ltd. and are financed through UK leases.

Contract with Enron taken over by Tractebel Höegh Galleon was originally under contract to Enron until 2017. After Enron sought protection under Chapter 11 in the US, the vessel was temporarily re-let to British Gas. All contractual obligations were met until Tractebel took over the charterparty in July 2002. Activities 29

Norman Lady – Accident SRV On November 13 Norman Lady was hit by a US submarine. The accident did not endanger the crew, the vessel or the environment, but the vessel had to be docked for repairs. The vessel was out of service for a short period, but this is not expected to lead to any financial conse- quences for LHC.

New technology

One of LHCs objectives is to be at the forefront of development and improvement of systems and technology within shipping. In the LNG segment this has contributed to the installation of a new fully integrated automation system on board Höegh Galleon when rebuilt. This has later become the standard for new vessels. During the past two years LHC has worked actively in developing new technological solu- Two SRV-vessels provide a continuous sendout of gas through submerged turret- tions for the LNG logistical chain. LHC’s “Shuttle and Regasification Vessel System”, or SRV sys- buoys and a pipeline on the seabed. tem, makes it possible to regasify LNG onboard an LNG vessel at an offshore location and send the natural gas to shore via a pipeline, thus eliminating the need for traditional land-based LNG receiving terminals. The SRV concept was created by an LHC project team in January 2001 and has been further developed to a solution which, together with floating production of LNG, could form a comple- te offshore LNG chain. LHC is also taking part in Joint Industry Projects (JIP) for development of new systems, such as transfer of LNG between vessels through a flexible hose with specially designed end-fittings. The transportation costs for LNG can also be reduced by introduction of larger vessels and installation of diesel propulsion instead of steam turbines. LHC also wishes to contribute to this development, as part of the industry’s search for cost efficiency.

The market

Global consumption of natural gas has increased by an average annual rate of 4.7% over the past 20 years. This means that the share of natural gas in the world’s total consumption of energy during this period has increased from 18% to 24%. This development is expected to continue in the years ahead, as the environmental advantages and the availability of natural gas has made it a winner in the production of electric power. All over the world large amounts are being invested in pipelines, distribution plants and storage, all necessary to support this ‘age of gas’. Transportation of natural gas takes place either through pipelines or as LNG (liquefied natural gas). The share of LNG in the total transportation of natural gas has increased from 6% in 1970 to 26% today. It is estimated that transportation of LNG reached around 150 billion m3 in 2002, which is an increase of 3%-4% from the previous year. The expansion of the existing plant in Trinidad contributed considerably to this increase. Most shipments of LNG are tied to long-term contracts, but sale of LNG based on single voyages or short-term charter parties are increasing and represented in 2002 around 8% of the total trade in LNG. During the past couple of years USA has been the largest buyer of these cargoes, followed by South Korea and Spain.

The LNG market is experiencing rapid growth 30 Activities

Captain Hans Petter Gangdal Höegh Galleon carried 16 cargoes in 2002, with a total volume of 1.4 million m3 LNG. The vessel loaded Following a fall in 2001, the price of natural gas in the US market in 2002 recovered to le- LNG at four different terminals on vels which led to increasing imports of LNG, not only from Trinidad and Nigeria, but also from three Continents and discharged her cargo in seven different ports in more remote countries. USA, the world’s largest consumer of natural gas, will not be able to Europe and North America. meet the growing demand for gas from domestic production, or via pipelines from Canada. Several LNG import terminals are consequently planned in the USA and Mexico. In the European market, Spain has experienced the largest growth in import of LNG during the past couple of years. Europe is seeking to expand the number of suppliers of natural gas, and new LNG import terminals are under construction in Spain and Portugal, whereas several others are planned in the Mediterranean region. Expansions of existing plants in Trinidad, Nigeria and Malaysia are expected to be comple- ted in 2003. Additional expansions and new LNG projects are planned in Qatar, Oman, Brunei, Indonesia and Australia. In Norway the Snøhvit project is under construction with completion planned for end 2005. Egypt has launched the construction of two projects with planned start of shipments in 2005/2006. Based on existing import contracts the trade in LNG will increase by an average annual rate of 5.7% to 2006. The last newcomer in the LNG market, China, has now signed its first import contract, with planned start in 2007. India is also a potential large market for import of LNG. Nine new LNG carriers were delivered in 2002, and at end year the orderbook numbered 58 vessels. It is estimated that 10-15 of these vessels have not yet secured long-term Activities 31

employment. However, a number of these orders have been placed by large multinational oil and gas companies with owning interests in several export and import projects. The expansion of the world LNG carrier fleet will mostly be based on traditional long-term contracts, but it could help boost the development of short-term trade. In addition, during the next two–five years several LNG carriers will terminate their long- term contracts and will thus be available for renewed employment, which will increase the competition and encourage larger flexibility on the shipping side.

Roy Larsen, Chief engineer Christopher Robin Smith, Cargo engineer 32 Other segments

Dry bulk, reefer and open hatch activities are defined as non-strategic segments for LHC. The reefer and open hatch activities will be discontinued.

Trond Evju Director, Dry Bulk and Reefers Dry Bulk

Results (USD 1 000) 2002 2001 2000 1999 1998 Freight revenues 18 061 25 978 36 838 23 956 28 540 Voyage expenses (1 312) (5 535) (13 997) (2 138) (2 994) Income on T/C-basis 16 749 20 443 22 841 21 818 25 546 Charterhire expenses (1 628) (5 934) (8 273) (5 870) (10 938) Operating expenses (3 333) (3 790) (4 169) (4 127) (4 197) Operating profit before sales gain and depreciation 11 788 10 719 10 399 11 821 10 411 Gain/(loss) on sale of vessels Depreciation (4 704) (4700) (4 697) (4 697) (4 697) Write-down/Change of estimate ----- Operating profit 7 084 6 019 5 702 7 124 5 714 Book value vessels 76 731 81 439 86 007 90 704 95 403

Operations By end 2002 the LHC dry bulk fleet consisted of two Capesize bulk carriers, built 1996/1997 – both of 211 000 dwt. The two vessels are on long-term charters to a company in the Shougang Group in Hong Kong until 2012. Both vessels performed according to budgets during the year.

Moving iron ore on conveyor belts Activities 33

LHC has for many years operated charter vessels under contracts of affreightment and in the spot market. As this operation does not fit into the present commercial strategy of the company, the charter vessels were redelivered to their owners upon expiry of the freight contracts during 2002.

The market 2002 was the year in which China really became the driving force in the dry bulk market. The large growth in the country’s steel production led to a corresponding growth in the country’s import of raw materials. It was especially the Capesize segment which benefitted from this development. China is expected to remain the driving force in the dry bulk market in 2003. Low growth in the supply of Capesize tonnage is expected to contribute to a continued improvement in the capacity utilization of the fleet.

Reefer vessels

Results (USD 1 000) 2002 2001 2000 1999 1998 Freight revenues 32 859 38 991 174 329 95 905 104 364 Voyage expenses (53) (573) (104 528) (39 222) (33 259) Income on T/C-basis 32 806 38 418 69 801 56 683 71 105 Charterhire expenses - - (30 165) (38 591) (44 290) Operating expenses (21 988) (23 442) (22 841) (19 145) (14 770) Operating profit before sales gain and depreciation 10 818 14 976 17 155 (1 053) 12 045 Gain/(loss) on sale of vessels 207 15 374 - (98) 1 383 Depreciation (8 472) (9 001) (8 965) (8 140) (8 488) Write-down/Change of estimate - (555) (3 880) - (12 450) Operating profit 2 553 20 794 4 310 (9 291) (7 510) Book value vessels 115 320 133 705 137 258 153 679 115 808 34 Activities

Operations Three reefer vessels were sold in 2002, of which one was delivered to its new owners in February 2003. The vessels were commercially operated by LauritzenCool in Stockholm. All vessels performed without significant off-hire during the year. Six went through their routine drydockings during the low season. According to the company’s strategy plan, further sale of reefer vessels is continuously being evaluated.

The market The reefer market was weak also in 2002. The market was influenced by severe drought in important regions in Australia and South East Asia, as well as by hurricanes and floods in Central America and the Caribbean. There were also several incidents of plant diseases, which led to reduced exports of bananas from Ecuador. The activities in the market picked up again during the fall, due to among other things a pickup in the poultry trade from USA to Russia. Seaborne trade in fruit and other produce increases by an average annual rate of 2.5%. However, there is still a surplus of tonnage in the reefer market. One positive factor is that the conventional reefer fleet is declining, as scrapping of old and inefficient vessels is outpacing the few newbuildings being delivered. However, several new containerships with large reefer capacity will be delivered during the next couple of years. A modest increase in freight rate levels is expected in 2003. Activities 35

Open Hatch

Results (USD 1 000) 2002 2001 2000 1999 1998

Erik Falkenberg Freight revenues 41,107 92 721 131 679 126 153 126 345 Director, Open Hatch Voyage expenses (9 631) (46 237) (83 400) (77 053) (66 171) Income on T/C-basis 31 476 46 485 48 279 49 100 60 174 Charterhire expenses (885) (7 479) (21 051) (18 214) - Operating expenses (18 312) (21 316) (23 090) (27 899) (33 732) Operating profit before sales gain and depreciation 12 279 17 690 4 138 2 987 26 442 Gain/(loss) on sale of vessels - - 1 560 (3 574) - Depreciation (4 442) (4 141) (4 142) (4 806) (6 829) Write-down/Change of estimate ----- Operating profit 7 837 13 549 1 502 (5 393) 19 613 Book value vessels 83 244 87 685 91 508 99 441 142 734

Operation At the end of 2002, LHC owned a fleet of 10 open hatch vessels. Two vessels have been chartered out on timecharters during the year. The vessels have otherwise been employed in world wide trades for the forest products industry, both in cooperation with other players and for own account. In the future it will become increasingly important to offer the customers an expanded liner network. As a consequence, LHC entered into an agreement with Saga Forest Carriers (Saga), effective from 1 May 2002, which includes the transfer of the commercial management of the open hatch fleet to Saga. This process has run satisfactorily and in parallel to the downsizing of the organisation in Oslo and closing of the office in Vancouver. HFS will continue to be responsible for the technical management of the vessels.

The market The open hatch market was weak also in 2002, but Asia’s growing import requirements contributed to a somewhat improved market towards the end of the year. This was mainly a result of China’s requirements for import of forest products, as well as steel products and other construction materials. However, the weak economy in Japan and Europe had a negative impact. It is expected that Asia, and particularly China, again will be the driving force in the open hatch market in 2003. Few newbuildings will lead to only a modest increase in the supply of open hatch tonnage, which could result in an improvement in the capacity utilization of the fleet in 2003. 36 Höegh Fleet Services

Höegh Fleet Services' (HFS) main focus area is technical management of the vessels employed in LHC’s core segments, Ro/Ro and LNG. Recruitment and training of officers and crew continues with a long-term perspective and with basis in the company’s local offices in the Philippines and China.

Johannes Tvedte President, Höegh Fleet Services

HFS is responsible for the technical management and crewing of vessels owned by LHC, and in certain cases owned by others. In addition to technical management, recruitment and training of officers and crew, HFS has the overall responsibility for safety and quality, purchasing, insurance and newbuilding projects.

Technical management

As of January 1, 2003, HFS was responsible for the technical management of 38 vessels, of which one LNG vessel owned by others. HFS’ main focus area is technical management of the vessels employed in LHC’s core segments. An exchange consequently took place in 2002, where the technical management of 11 car carriers was transferred to HFS, and the technical management of 10 reefer vessels was transferred from HFS to another management company. The objective set last year for increasing the fleet’s operating efficiency was reached – with a 20% margin better than the target.

Accidents Following a long period without serious accidents, the car carrier HUAL Europe was declared a total loss after having grounded during a typhoon outside Japan on October 1, 2002. There were no injuries to the crew. A routine investigation of the standard operational procedures in connection with the accident will be made to evaluate whether there is basis for further improvements. The LNG vessel Norman Lady was hit by a U.S. submarine outside the southern coast of Spain and was out of service for 23 days due to repairs. Compensation for expenses incurred is being sought from the owner of the submarine. Fortunately, there were no injuries to the crew and the incident had no environmental impact.

Drydocking Twelve vessels were drydocked during 2002. Activities 37

Manning

As of January 1, 2003, HFS was responsible for the manning of 48 vessels, including 10 reefer vessels technically operated by others. During 2002 the organisation was adjusted to be able to offer manning services to other companies besides LHC. This was done in order to increase flexibility in general and also to have the opportunity to implement the long-term strategy for recruitment and training of future seafarers. The development of the local office in Manila, HFS Philippines, was positive in 2002. Focus First International Employers Award was placed on the development of in-house training for officers and crew. The expansion of the office in Manila has made this possible, and HFS Philippines can today offer a range of tailor-made seminars. In November 2002 HFS received "First international Employers Award" from the Department of Labour for "outstanding employment of seafarers over the past many years". The company also received "The Presidential Award of Distinction" from the President’s Office for "having the best comprehensive welfare and benefit program for the seafarers and their families". The development of the office in Quanzhou, HFS China, was also positive. As of January 1, 2003, three Ro/Ro vessels were fully manned with Chinese crew. The experience so far is very positive and there are good possibilities to further develop manning of vessels with Chinese crew. A close co-operation between HFS China and HFS Philippines was established in 2002, in order to achieve optimal utilization of all resources within the two offices.

Seafarers by nationality On board vessels where HFS is responsible for the crewing, the split between nationalities is as follows:

Philippinos 1 507 Chinese 236 Norwegians 66 Other Europeans 47 Indonesian 39 Total 1 895

“First International Employers Award” was received from Department of Labour in the Philippines 38 Accounts & notes Accounts & notes 39

...reliable 40 Accounts – Consolidated

Statement of income 01.01. – 31.12.

(USD 1 000) Note 2002 2001 2000 Freight revenues 667 150 680 353 773 646 Voyage expenses (282 122) (289 024) (402 601) Income on T/C basis 385 028 391 329 371 045 Charterhire expenses (108 101) (109 469) (137 272) Crew expenses (37 633) (39 673) (37 522) Other operating expenses 4 (70 565) (69 837) (64 056) General administrative expenses 5 (8 778) (8 341) (8 621) Operating profit before sales gain and depreciation 15 159 951 164 009 123 574 Gain/(loss) on sale of fixed assets 21 15 176 908 Depreciation 12 (73 702) (74 340) (64 525) Write-down fixed assets/changes in estimates 12 1 769 (2 363) (4 380) Operating profit 88 039 102 482 55 577 Profit/(loss) associated companies 11 271 329 (15 520) Profit (loss) from disposal of associated companies 11 0 4 244 0 Interest income 7 217 9 042 9 727 Interest expenses (35 030) (51 430) (59 312) Other financial items 6 4 076 34 102 32 513 Ordinary profit before tax 64 573 98 769 22 985 Tax 7 (2 937) (15 594) (3 499) Net profit 61 636 83 175 19 486

Earnings per share 18 2.10 2.62 0.60 Diluted earnings per share 18 2.08 2.62 0.60 Accounts – Consolidated 41

Balance sheets 31.12.

(USD 1 000) Note 2002 2001 2000 Assets Deferred tax assets 7 3 457 2 769 9 568 Goodwill 12 73 080 76 126 85 524 Total intangible fixed assets 76 537 78 895 95 092 Vessels 845 120 963 234 1 023 902 Newbuildings 8 390 0 0 Other tangible fixed assets 26 686 23 303 21 333 Total tangible fixed assets 12 880 196 986 537 1 045 235 Investments in shares 11 5 594 4 660 15 805 Long-term receivables 9 067 13 194 14 202 Total financial fixed assets 14 661 17 854 30 007 Total fixed assets 971 394 1 083 2861 170 334 Bunker and inventory 9 413 7 039 15 720 Receivables 55 580 67 976 64 041 Marketable securities 10 120 958 121 798 112 639 Bank deposits 9 65 442 55 923 65 625 Total current assets 251 393 252 736258 025 Total assets 1 222 787 1 336 022 1 428 359

Shareholders’ equity and liabilities Share capital 8 437 9 375 10 416 Tresury shares (23) (840) (985) Share premium reserve 55 311 55 311 55 349 Paid in equity 63 725 63 846 64 780 Retained earnings 447 599 403 769 354 902 Total shareholders’ equity 2 511 324 467 615 419 682 Total provisions 5 9 860 5 861 4 175 Mortgage debt/lease obligations 14 615 741 781 295 915 914 Other long-term liabilities 10 774 1 299 3 356 Total long-term liabilities 626 515 782 594 919 270 Total current liabilities 13 75 088 79 952 85 232 Total debt 711 463 868 407 1 008 677 Total shareholders’ equity and liabilities 1 222 787 1 336 022 1 428 359

Guarantees and long-term charter commitments 17 Pledges 14

The Board of Leif Höegh & Co Oslo, 5 March 2003

Westye Høegh Leif O. Høegh Truls Bergersen Jörgen Ekberg Chairman Vise Chairman

Karl Otto Gilje Truls Holthe Gunnar Reitan Thor Jørgen Guttormsen President 42 Accounts – Consolidated

Cashflow statements 01.01. – 31.12.

(USD 1 000) Note 2002 2001 2000 Cashflow from operational activities Profit before tax 64 573 98 769 22 985 Tax paid (724) (6 024) (4 802) Loss/(gain) on sale of fixed assets (21) (15 176) (908) Ordinary depreciation 73 702 74 340 64 522 Write down of fixed assets/change in estimate (1 769) 2 364 4 383 Profit associated companies (271) (4 573) 15 520 Movements in stocks, accounts receivable and accounts payable (14 117) (12 385) (20 700) Sale/(purchase) of marketable securities 840 (9 159) (14 442) Net cashflow from operational activities 122 213 128 156 66 558

Cashflow from investment activities Sale of fixed assets 59 800 1 649 33 129 Purchase of fixed assets (1 801) (8 250) (269 868) Payments made on newbuildings 12 (8 390) 0 0 Sales of shares in other entities 0 32 414 0 Purchase of shares in other entities (150) 0 (96 910) Net cashflow from investment activities 49 459 25 813 (333 649)

Cashflow from financial activities Long-term debt raised 8 390 0 401 822 Repayments of long-term debt (164 469) (136 677) (145 013) Changes in long-term receivables 4 128 1 008 (4 705) Rights issue 0 0 51 156 Sale/(purchase) of treasury shares 2 (3 183) (28 002) (27 154) Dividend paid (7 019) 0 0 Net cashflow from financing activities (162 153) (163 672) 276 106

Net movements in cash and cash equivalents 9 519 (9 703) 9 014

Cash and cash equivalents per 01.01 55 923 65 625 56 611 Cash and cash equivalents per 31.12 9 65 442 55 923 65 625 Notes to the accounts – Consolidated 43

1 Accounting policies or broker assessments. Such writedowns are reversed if the basis for writedown is no longer present. The values are assessed on a portfolio basis for vessels which are operating in pools and as such benefit from The accounts have been prepared in accordance with the Norwegian joint future cashflows. Accounting Act and generally accepted accounting principles in Norway. The principal accounting policies applied by the group are presented E) Newbuilding contracts below: Instalments paid on newbuilding contracts and related interest charges are capitalised. A) Basis of consolidation Group companies F) Foreign exchange The LHC group comprises the parent company LHC and companies in Current account items in other currencies than USD are included in the which LHC directly or indirectly controls more than 50% of the voting accounts at year end exchange rates. Foreign exchange gain/loss is capital (see also C below). The group accounts have been prepared on included under financial items in the statements of income. Forward the basis of uniform accounting policies. contracts, which do not represent hedging, are valued at market rate. The companies included in the group accounts prepare accounts in Net unrealised loss is expensed. Profit/loss on future forward contracts both the local currency and USD, with the latter being used to prepare entered into in order to convert currency exposure on liquid assets the group accounts as the main part of the transactions are in USD. from NOK to USD are included in the accounts. All transactions in other currencies than US dollar are included in the Year end rate of exchange between NOK/USD is 6.97. accounts at the rate of exchange at the date of the transaction. G) Expenses related to new loans Elimination of inter-company balances, transactions, profits Major expenses related to new loans are capitalised and depreciated and shareholdings over the repayment period of the loan. In the event of refinancing, All inter-company balances, transactions and profits are eliminated in the remaining capitalised expenses are charged directly against profit the group accounts. and loss. Shares in subsidiaries are eliminated in line with the principles of acquisition accounting. Any excess of the purchase price paid for the H) Leasing subsidiary over the book value of its equity at the time of acquisition Rights and obligations in respect of vessels chartered in on the basis or formation is allocated to the relevant assets and depreciated over of finance leases are included in the balance sheet under vessels the estimated useful economic life of these assets. Any amount that and long-term liabilities, respectively. The interest element of rental cannot be allocated to specific assets in this way is reported separately payments is included in interest expenses and the capital element is as goodwill and amortised on a straight-line basis over a period of treated as a reduction in the long-term liability. The lease obligations 10 years. Subsidiaries acquired in stages are consolidated on the basis are the remaining part of the principal amounts outstanding. Rights to of the value of their identifiable assets and liabilities at the time of vessels chartered out on the basis of long-term agreements are inclu- consolidation, with any discrepancies in the premiums/discounts allo- ded in the balance sheets as long-term receivables. The interest ele- cated to identifiable assets and liabilities between previous acquisitions ment of rental payments is included in interest income and the capital of shares and consolidation being recorded directly against equity. element is treated as a reduction in these long-term receivables.

B) Reporting by segments I) Financial current assets The division of the group's business into different segments is based Marketable financial current assets held in a trading portfolio are recor- on the group's internal management and reporting systems and an ded at net realisable value, while other marketable financial current assessment of risk and return profiles. Transactions between the assets are recorded at the lower of cost and net realisable value. various segments are undertaken at market prices and are eliminated Financial current assets in the form of shares and bonds not held in the group accounts. in a trading portfolio are treated as two separate portfolios and valued on a portfolio basis. Option premiums are netted against shares. C) Investments in other companies Unrealised losses on financial instruments not used as an interest rate The company's investments in joint ventures are included in the group hedge are charged against profit and loss. accounts using the proportional consolidation method, which means that only LHC's share of income, expenses, assets and liabilities are J) Income recognition included in the accounts. Revenues and expenses relating to voyages not finished at year-end Companies in which LHC holds or controls between 20% and 50% of are recognised on a pro-rata basis. the shares and which are not joint ventures are included in the accounts using the equity method if these investments are of a long- K) Timecharters and freight contracts term nature and LHC group has considerable influence. The value of long-term charters and other freight contracts are Other long-term investments in shares and limited partnerships are assessed at the year-end and provisions are made for estimated losses. included at cost and written down to net realisable value in the event These assessments are performed on a portfolio basis for contracts of a drop in value for reasons that cannot be considered temporary. relating to the same operation. Such writedowns are reversed if the basis for writedown no longer is valid. Investments in subsidiaries, associated companies and joint ven- L) Periodic maintenance tures are dealt with similarly in the parent company accounts. Classification-related expenses and upgrading in connection with the dry-docking of vessels are capitalised and depreciated over the period D) Depreciable assets to the next classification/dry-docking (varying between 30 and 60 Depreciable assets are recorded in the balance sheet at cost less months). The same applies to expenses for class certification. When depreciation and writedowns. second-hand vessels are purchased and newbuildings are delivered, a Vessels are depreciated on a straight-line basis over a useful eco- proportion of the price paid is deducted and capitalised as classification nomic life of 25 years, except in the case of capesize dry bulk carriers expenses. When vessels are sold, capitalised expenses are charged and gas carriers which are depreciated over 20 years and 30 years, re- against profit as part of the capital gain/loss on the sale. Other main- spectively. Upgrading of gas carriers for long-term charter agreements tenance expenses are charged directly against profit. is depreciated over the time charter period if this period expires after the vessel is 30 years. The vessels' scrap value is taken into account at M) Bunkers and other inventories the end of this period. Depreciation of office equipment are reported Inventories are reported at the lower of cost and net realisable value under administration expenses. The depreciation rate used is between on a first-in/first-out basis. 15% and 25%. Writedown of vessels is made if actual values are less than book N) Extraordinary items values. Actual values are the highest of discounted future cashflows According to the classification criteria applied by the company, income Notes to the accounts – Consolidated

44 (Amounts in tables USD 1 000)

cont. note 1

and expenses must be unusual, irregular and substantial to be reported Q) Cashflow statements as extraordinary. The effects of changes in accounting policies and the The cashflow statements have been prepared using the indirect correction of material errors are recorded directly against shareholders' method. The cash and cash equivalent figures exclude shares and equity. financial instruments with a maturity of more than three months from the date of acquisition. O) Pensions and pension liabilities Pension expenses and liabilities are included in the statements of R) Contingent assets and liabilities income and balance sheets in line with the Norwegian accounting Provisions are made for contingent losses deemed probable and quan- standard. The year's net pension expenses comprise the pension bene- tifiable. Contingent gains are not recognised. fits accrued during the period adjusted for future wage growth and estimated interest on pension liabilities, less the estimated return on S) Estimates pension scheme assets and the effects of any changes in schemes and The accounts are based on the information available at the time the estimates. Changes in estimates are amortized over 10 years. accounts are produced. The effects of changes in estimates are accoun- ted for in the statements of income during the same period in which P) Tax the estimates are changed. The year's tax charge includes both the tax payable for the period and the change in deferred tax. For the part of the group's operations T) Classification of balance sheet items falling outside Norway's special tax scheme for shipowning companies, Current assets and liabilities are defined as those that fall due for pay- deferred tax liabilities/assets are calculated based on each country's ment within one year of being purchased/taken out and those relating taxrate, timing differences and tax losses brought forward. Temporary to the working capital cycle. Other items are classified as fixed assets timing differences that reverse or may reverse during the same period and long-term liabilities. First year repayments of long-term debt is are offset and reported net. Net deferred tax assets considered re- classified as long-term debt. coverable on the basis of future earnings are reported in the balance sheets as intangible fixed assets. U) Receivables The present value of deferred tax related to temporary timing diffe- Trade and other receivables are recorded at their nominal value less a rences in companies covered by the special tax scheme for shipowning provision for anticipated bad debts. companies is considered immaterial as the company does not expect the taxable income that these differences represent to materialise V) Earnings per share in the foreseeable future. This assessment is based on the company's The earnings per share is calculated by dividing consolidated net result dividend policy, its liquid assets, the fleet's market value, the distribu- by a weighted average of the outstanding shares during the reporting table taxed equity in those parts of the group not covered by the period. Treasury shares are considered in the calculation. Shares which new tax scheme, and the company's intention to continue its shipping are bought back during the reporting period are weighted based on activities. time outstanding. When the share options are in the money, they will be included in the calculation of diluted earnings per share.

2 Equity Share Share Treasury premium Other capital shares reserve equity Total Shareholders' equity on 01.01.2002 9 375 (840) 55 311 403 769 467 615 Amortization of treasury shares (938) 938 - - 0 Net profit - - - 61 636 61 636 Dividend - - - (14 744) (14 744) Purchase/dividend treasury shares - (121) - (3 062) (3 183) Shareholders’ equity on 31.12.2002 8 437 (23) 55 311 447 599 511 324

At the annual general meeting in April 2002 it was decided to amortize the treasury shares. The Board was at the same time authorized to buy back another 10% of treasury shares.

Treasury shares Treasury shares 01.01.2002 2 934 710 The share capital consists of Number Face value Book value Bought during the year 407 590 Shares 29 362 500 NOK 2 58 725 000 Amortized (3 262 500) Treasury shares 31.12.2002 79 800

As of March 2003 another 331 500 shares had been purchased.

3 Major transactions in 2002 and subseqent events

Major transactions in 2002 • A 20 year contract was entered into with Louis Dreyfus Armateur SA for the construction of an advanced Ro/Ro vessel for transportation of airplane parts for Airbus Industries G.I.E. • Open hatch commercial operation transfered to Saga Forrest Carriers International AS. • A 20 year contract was entered into with Mitsui O.S.K. Lines Ltd. and Statoil for the building of an LNG vessel to be employed in the transportation of LNG from the Snøhvit field on behalf of the Snøhvit Seller Group. Notes to the accounts – Consolidated

(Amounts in tables USD 1 000) 45

cont. note 3

• A 20 year contract was entered into with Mitsui O.S.K. Lines Ltd. for the construction of another LNG-vessel to be employed on the Snøhvit field on behalf of TotalFinaElf. • Three Ro/Ro vessels (newbuildings) chartered in on long-term contracts from 2003. • Three Ro/Ro newbuildings ordered for delivery in 2005. • HUAL Europe – total loss. • Contract entered into for sale of the reefer vessel Ivory Dawn (delivery 2003).

Subsequent events • No major events.

4 Other operating expenses 2002 2001 2000 Services 7 983 10 316 8 317 Docking expenses 7 386 7 242 6 422 Spare parts/consumables 27 352 27 561 25 936 Damage expenses 3 526 3 923 3 094 Insurances 7 810 6 412 5 143 Administrative expenses – ship management/other 9 472 9 324 9 244 Tonnage tax 1 693 2 141 2 051 Miscellaneous operating expenses 5 343 2 918 3 849 Total 70 565 69 837 64 056

5 Wages, pensions, number of employees, auditor’s fee, employee loans, etc.

Wages 2002 2001 2000 Wages administration 23 986 18 896 22 466 Employer's tax 3 695 2 616 3 699 Pension expenses 2 698 2 328 1 581 Other benefits 3 544 2 116 2 276 Total 33 923 25 95630 022

The Group’s administrative expenses related to the operation and expenses” therefore covers expenses relating to the group's top management of vessels are included under “Voyage expenses” and management, president's office and finance & accounting. “Other operating expenses”, respectively. “General administrative

Number of employees 2002 2001 2000 Office-based 386 363 423 Seamen 1 895 2 020 1 708 Total 2 281 2 383 2 131

Total loans to employees in 2002 amounted to USD 698 000 (USD 576 000 in 2001 and USD 734 000 i 2000).

Remuneration to leading emloyees Vice- President Board Chairman Chairman Salaries 293 - 279 128 Pension expenses 49 - 74 21 Other benefits 24 - 16 - Remuneration -77- -

In accordance with previous agreement, the President has, for 2002, any salary from new employment. The President had, per 31 Decem- earned a bonus in the amount of USD 77 000, which will be paid ber 2002, a loan from the company in the amount of NOK 4 million. in 2003. No instalments are presently required on the loan, which is interest The President of the parent company is entitled to 24 months' salary bearing at 6% p.a. The loan is guaranteed by a third party. in the event his employment is terminated before he reaches 60, less Notes to the accounts – Consolidated

46 (Amounts in tables USD 1 000)

cont. note 5

Incentive program for group management A share option program has been established which gives 19 executi- OSE as per March 3, 2003 (NOK 89 per share). All executives accepted ves of the company the right to purchase at the offering dates a total the offer, including the President (25 000 shares). This settlement of up to 407 500 shares in LHC. The Board has been authorized to resulted in a cost for the company of USD 300 000. issue options up to 500 000 shares. 167 500 (41%) of the offered opti- 240 000 options were offered on June 6, 2002 at a value of NOK 98 ons could be exercised on March 3, 2003. As an alternative to purcha- per share for the period from January 1, 2004 to April 24, 2004. The se of shares, all the executives were offered a synthetic option in the President was offered 40 000 options under this program. A condition form of a cash settlement representing the difference between the for exercising the options is that the executive is employed by the value of the options offered (NOK 79 per share) and the share price at company at the time the option is being exercised.

Auditor's fee 2002 2001 2000 Auditing405 348 617 Consulting and other services 180 144 170 Total 585 492 787

Pensions LHC operates its own pension scheme for employees. The scheme In addition to the pension obligations funded through the group provides for a retirement pension of 66% of the final annual salary pension scheme, LHC has unfunded pension obligations in respect of up to a maximum of 12 times the social security multiplier after 30 supplementary pensions for salaries in excess of 12 times (and up to years' service. The scheme also provides for disability pensions and a maximum of 24 times) the social security multiplier, and in respect benefits for surviving spouses and dependants. All pension payments of early retirement pensions. are coordinated with anticipated benefits from the government.

2002 2001 2000 The following assumptions are used to estimate future pension obligations Discount rate of interest 6% 6% 6% Return on pension scheme assets 7% 7% 7% Wage growth/inflation 4% 4% 4% Pension adjustment 3% 3% 3%

The year’s pension expenses are calculated as follows (USD 1 000) Present value of benefits accrued this year (1 949) (2 030) (1 816) Interest payable on pension obligations accrued this year (1 976) (1 618) (1 482) Estimated return on scheme assets 1 656 1 574 1 591 Amortisation (429) (254) 126 Net pension expenses (2 698) (2 328) (1 581)

Net pension assets/obligations per 31. December (USD 1 000) Obligations (40 486) (30 521) (29 847) Assets 25 798 21 533 24 000 Net pension assets/(-obligations) (14 688) (8 988) (5 847) Impact of changes in estimats, differences between estimated and actual returns and changes in pension schemes not included in statements of income 4 828 3 127 1 672 Net pension obligations reported in balance sheets (9 860) (5 861) (4 175)

No. of persons covered by the scheme Retired 171 166 180 Active 245 257 239

Specification secured/unsecured pensions Secured Unsecured pension pension Total Gross pension obligations (30 334) (10 152) (40 486) Assets 25 798 - 25 798 Estimates-/pension scheme changes, etc. 4 629 198 4 828 Net pension assets/(-obligations) 93 (9 953) (9 860)

6 Other financial items 2002 2001 2000 Dividends 480 1 535 3 535 Gains/losses on shares/bonds 15 091 33 607 37 197 Exchange gains/losses 94 813 (1 061) Value regulation of financial assets in a trading portfolio (8 428) (279) (9 865) Value regulation of other financial current assets (362) 164 (471) Other Items (2 799) (1 738) 3 178 Total 4 07634 102 32 513

The spesification above includes currency gain/loss. Notes to the accounts – Consolidated

(Amounts in tables USD 1 000) 47

7 Taxes

Tax charge 2002 2001 2000 Tax payable 3 624 16 293 4 578 Ordinary change in deferred tax (687) (699) (1 079) Tax charge 2 937 15 594 3 499

USD 1.6 million in tonnage tax is included under other operating ex- the tax scheme for shipowning companies is not recorded in the penses. The companies in the group covered by the special tax scheme accounts as the loss is unlikely to be utilized within the 10 year time for shipowning companies generated no taxable income during the limit for losses carried forward. year. Deferred tax assets related to finance loss carried forward under

Tax effect of timing differences 31.12.02 31.12.01 31.12.00 Companies outside the tax scheme for shipowning companies Shares, fixed assets 118 (704) 1 135 Uncovered pension obligations (2 758) (1 641) (1 170) Other (817) (424) (1 544) Tax losses brought forward 0 0 (15 472) Tax benefit not recorded 0 0 7 483 Deferred tax assets (3 457) (2 769) (9 568)

Equity under the tax scheme for shipowning companies 2002 2001 2000 Negative account for taxed income 419 166 419 166 501 719 Accumulated retained, untaxed income 149 198 167 230 66 592 Total untaxed equity under the tax scheme for shipowning companies 568 364 586 396 568 311

Paid-in capital and the negative account for taxed income is translated into USD at historical rates of exchange for entry under the tax scheme.

8 Financial market risk/off balance sheet financial instruments

The company makes use of different financial instruments in managing financial risk.

Interest rate risk Exchange rate risk Interest rate risk arises in the short and medium term from liabilities Freight, ships, loans etc. are mostly denominated in USD. The company subject to floating interest rates. Interest hedge contracts are entered is therefore only exposed to currency fluctuations to a limited extent into when this seems appropriate. As of 31.12.2002 LHC had secured since the currency used for reporting is also USD. The largest exposure approx. 85% of the outstanding debt (except lease obligations) through is in NOK through administrative expenses and some opearing expen- interest rate swaps. The contracts expire between 2004 and 2008. ses, which as per 31.12.2002 is covered through part of the company’s Per year-end unrealised loss on these swaps amounted to USD 27 mil- liquidity being in NOK. lion. Hedge accounting is applied, hence the loss is not recorded.

Currency instruments per 31.12.2002 Amount Average Gain/loss Currency forwards per 31.12.2002 in 1 000 forward rate Maturity (USD 1 000) Sell NOK/buy USD NOK 165 129 6.88 2003 684 Sell EUR/buy USD EUR 4 570 0.95 2003 (407) Sell GBP/buy USD GBP 3 290 4.47 2003 (388) Sell CHF/buy USD CHF 2 804 1.69 2003 (362) Sell NOK/buy SEK NOK 29 551 0.82 2003 (131) Sell SEK/buy USD SEK 5 172 10.34 2003 (85)

Credit risk and liquidity risk Bunker Credit risk and liquidity risk are considered to be low. The company’s vessels (excluding vessels on long-term contracts) will in 2003 use about 550 000 tons of bunker and are therefore exposed to changes in the bunker prices. In excess of 30% of this consumption is covered by bunker clauses in the freight agreements. No further bunker hedging is entered into. A change of USD 10 in the prices will effect the company's result by USD 3-4 million. Notes to the accounts – Consolidated

48 (Amounts in tables USD 1 000)

cont. note 8

Freights The risk for loss on long-term contracts from technical offhire is reduced through loss of hire insurances, while other vessels only have freight interest insurance against total loss. No further freight hedging is entered into.

9 Bank deposits 2002 2001 2000 By currency USD 36 489 33 374 35 813 NOK 2 888 4 863 3 008 GBP 13 977 11 783 12 787 EUR 2 191 0 0 Other 9 897 5 903 14 017 Total 65 442 55 923 65 625

The equivalent of USD 13.8 million of these deposits was held in restricted accounts, of which USD 1.0 million in respect of employee taxes withheld and USD 12.8 million (GBP 7.9 million) in connection with the leasing of HUAL Trader.

10 Marketable securities 2002 2001 2000 Bonds, Norwegian 28 440 45 915 21 812 Bonds, other currencies 61 997 62 562 26 130 Total bonds at market values 90 437 108 477 47 942

Shares, at market values 13 424 14 216 11 096 Shares with sold options 13 568 11 220 18 910 Shares with guaranteed sales price 3 695 5 968 5 091 Market value sold options (332) (1 355) (1 800) Total shares and options valued at market values 30 355 30 049 33 297 Total bonds, shares and options at market values 120 792 138 52681 239

Shares, valued at lowest value principle 464 (1 507) 24 785 Other marketable securities – acc. receivables (299) (15 221) 6 615 Total 120 958 121 798 112 639

Cost price for shares and options valued at market value principle amounts to USD 36 million. The difference against market values is expensed.

Bonds Average yield Cost price to maturity Duration (year) in currency Cost price Market value Norwegian Governmental 4% 3.4 - 812 922 Municipal 10% 1.5 - 3 661 4 109 Financial institutions 14% 1.8 - 8 879 10 060 Private issuers 19% 2.2 - 13 429 12 830 Interest accrued - - - 521 521 Total 12% 2.1 - 27 301 28 440

Other currencies USD 11% 1.1 53 937 53 937 49 520 EUR - 3.7 5 883 5 792 4 802 GBP - 8.5 3 531 5 558 5 066 CHF - 1.6 2 759 1 862 1 688 Interest accrued - - - 920 920 Total 12% 1.8 - 68 069 61 997 Notes to the accounts – Consolidated

(Amounts in tables USD 1 000) 49

cont. note 10

The bond portfolio consists primarily of corporate bonds with either of the share ownership to approximately 97% of the risk without fixed or floating interest rate. Average duration is 1.4 years. The share options. The underlying shares represent security for non-standardised portfolio consists primarily of Norwegian shares. Per 31.12.2002 LHC options. Market value of shares with guaranteed sales price was per had written sales and purchase options on 18 Norwegian quoted com- 31.12.2002 USD 3.7 million. The underlying shares are security for the panies. The market value of the underlying shares was USD 17.3 mil- agreements. Average lock-up time was per year-end approximately lion. Normal maturity is 2 to 3 months. The options reduced the risk 2 months.

11 Shares (fixed assets) 2002 2001 2000 Shares in asssociated companies: (see specification below) 3 139 2 108 13 001 Shares in other companies 2 455 2 552 2 804 Total 5 594 4 660 15 805

Consolidated companies Registered Share of Share of office capital % votes % Consolidated companies owned by Leif Höegh & Co ASA Leif Höegh & Co Shipping AS Oslo 100 100 Höegh Fleet Services AS Oslo 100 100 HUAL AS Oslo 100 100 Liquimarine Gandria Shipping AS* Oslo 50 50 Höegh Holdings BV. Amsterdam 100 100 Leif Höegh (U.K.) Ltd. London 100 100 Pacific Commerce Line Holding Ltd. Monrovia 100 100 Lady Navigation Inc.* Monrovia 36 36 Kiwi Car Carriers Ltd. Auckland 100 100 Leif Hoegh Shipping (China) Co Ltd. Shanghai 100 100

Consolidated companies owned by other consolidated companies Methane Carriers Ltd.* Oslo 50 50 Liquimarine Gandria Chartering Ltd.* Oslo 50 50 Joint Vessels Ltd. Oslo 100 100 Höegh Galleon Gas Ltd. Oslo 100 100 Joint Gas Ltd.* Georgetown 34 34 Joint Gas Two Ltd.* Georgetown 50 50 HFS China Ltd. Quanzhou 51 51 Auto Marine Feeder B.V. Amsterdam 60 60 CETAM S.A.S. Paris 100 100 HUAL Benelux B.V. Amsterdam 100 100 HUAL France S.A.R.L. Paris 100 100 HUAL North America Inc. New York 100 100 HUAL Germany GmbH Bremen 100 100 HUAL Japan K.K. Yokohama 100 100 HUAL U.K. Ltd. London 100 100 Pacific Commerce Line Ltd. Monrovia 100 100 Pacific Commerce Line Inc. Vancouver 100 100

* Joint Ventures

Associated companies Year of Registered Share of Share of acquisition office capital % votes % Euro Marine Carrier B.V. 1990 Amsterdam 24.5 24.5 HFS Philippines Inc. 1998 Manila 25 25 LHC Real Estate Philippines Inc 1998 Manila 40 40 Manx Car Carrier Ltd. 1990 Amsterdam 24.5 24.5

2002 2001 2000 Total associated companies Book value of equity at time of acqusition 2 090 18 102 18 867 Excess value 0 9 381 9 381 Purchase price 2 090 27 483 28 248

Calculation of year's earnings Share of year’s earnings 271 329 854 Write down 0 0 (16 374) Share of year’s earnings 271 329 (15 520) Notes to the accounts – Consolidated

50 (Amounts in tables USD 1 000)

cont. note 11

2002 2001 2000 Calculation of book value per 31.12. Book value 01.01. 2 868 12 191 28 612 Share of year’s earnings 271 329 (15 520) Dividends 0 0 (110) Gain/loss from sales 0 4 244 0 Increase 02919 Retirement 0 (14 684) 0 Book value per 31.12. 3 139 2 108 13 001

12 Fixed assets Acc. Acc. Net Cost Additions* Disposals depreciation write- book value Depreciation Depreciation 01.01. 2002 2002 31.12. downs 31.12. 2002 2001 Vessels 1 242 534 1 879 58 512 439 985 50 581 695 335 54 946 58 148 Vessels, leased 169 396 0 0 19 611 0 149 785 6 535 6 535 Newbuildings 0 8 391 0 0 0 8 390 0 0 Capitalised classification 11 294 3 645 0 0 0 14 940 0 0 Containers 000000033 Goodwill 92 253 7 200 0 26 373 0 73 080 10 247 9 398 Other fixed assets 25 978 4 603 1 336 17 500 0 11 746 205 226 Total 1 541 455 25 718 59 848 503 469 50 581 953 276 71 933 74 340

* Capitalised classification is net

Other fixed assets comprise primarily vehicles, fixtures and fittings, company has a gain of USD 3.8 million which is included in freight and depreciation charges of USD 3.2 million are included in administra- revenues as compensation for loss of freight income through the tive expenses. Regarding the total loss of the vessel HUAL Europe the freight interest insurance.

Spesification newbuildings

Name/buildning no. Type Shipyard Share Delivery Paid** Total cost** 2184* LNG Mitsubishi, Japan 34% 4th quarter 2005 3 151 67 490 2185* LNG Mitsubishi, Japan 50% 1st quarter 2006 4 509 99 250 JLZ-020401* Ro/Ro Jinling, China 50% 1st quarter 2004 730 18 800 4432 Car carrier Daewoo, Korea 100% 1st quarter 2005 0 50 000 4433 Car carrier Daewoo, Korea 100% 2nd quarter 2005 0 50 000 4434 Car carrier Daewoo, Korea 100% 3rd quarter 2005 0 50 000 Total 8 390 335 540

* Financed through leases (100%) ** LHC-share

The contracts are in USD. Calculated interests during the building period is added to the cost price, however insignificant for 2002.

Spesification goodwill

Company Cost Depreciation HUAL 92 253 10 year straight line Kiwi 7 200 10 year straight line Total 99 453

The investments in HUAL and Kiwi are based on a long-term nature. The chosen depreciation time is therefore 10 years.

13 Other current liabilities 2002 2001 2000 Holiday pay, tax withheld and social security 3 571 2 777 2 043 Tax payable 2 114 10 131 539 Tonnage fee 1 595 1 836 1 982 Suppliers 5 937 4 070 5 105 Accrued ship management and administrative expenses 40 932 38 600 65 832 Accrued interest on mortgage debt 1 637 3 564 5 767 Other short term debt 2 609 9 866 1 811 Dividend 14 744 7 240 0 Crew related liabilities 1 948 1 868 2 153 Total 75 088 79 952 85 232 Notes to the accounts – Consolidated

(Amounts in tables USD 1 000) 51

14 Mortage debt and lease obligations Average Book value rate of Currency 31.12.02 interest Mortage debt USD 459 295 4.53% Debt related to lease agreements USD 156 446 - Total 615 741

LHC has originally floating interest rate loans, but has entered into interest rate swaps for amounts equicalent to 85% of outstanding mortage debts excluding lease obligations as per 31.12.2002.

Repayment schedule for mortage debt 31.12.02 31.12.01 31.12.00 Less than one year 93 290 86 405 77 548 Between one and five years 338 063 502 750 448 700 More han five years 27 942 38 108 228 945 Total 459 295 627 263 755 193

Repayment schedule lease obligations 31.12.02 31.12.01 31.12.00 Less than one year 5 279 5 829 6 686 Between one and five years 101 140 106 517 21 653 More han five years 50 027 41 686 132 282 Total 156 446 154 032 160 621

Book value of pledged assets 2002 2001 2000 Containers 0 0 1 194 Vessels 795 310 912 484 701 248 Total 795 310 912 484 702 442

In addition to the above pledged assets the debt is secured by a financial covenant related to minimum liquidity. The company is assignment of earnings and insurances. The agreements include compliant with this clause as of 31.12.2002.

Interest rate swaps LHC has entered into the following interest rate swaps:

USD 120 mill. for 3 years at 5.00% with maturity 10.04.2004 USD 50 mill. for 5 years at 4.55% with maturity 15.11.2006 USD 50 mill. for 3 years at 3.95% with maturity 15.11.2004 USD 60 mill. for 7 years at 5.58% with maturity 10.04.2008 USD 60 mill for 5 years at 5.34% with maturity 10.04.2006 USD 50 mill. for 7 years at 4.92% with maturity 15.11.2008

15 Reporting by segments

LHC's business consists of sea transportation. The group's interest- material transactions between segments in 2000, 2001 or 2002. bearing debt has not been allocated to the different segments as each Management reportering in LHC is not divided into geographical areas. segment is not responsible for its own financing. There were no

RO/RO LNG 2002 2001 2000 2002 2001 2000 Freight revenues, net 548 327 494 536 408 294 26 577 23 253 18 578 Voyage expenses (271 139) (236 677) (200 666) 13 0 14 Income on T/C basis 277 188 257 859 207 628 26 590 23 253 18 592 Charterhire expenses (105 588) (96 056) (77 783) 0 0 0 Crew and other operating expenses (47 897) (46 886) (41 176) (9 952) (7 965) (4 264) General administrative expenses 000000 Operating profit before capital gains and depreciation 123 703 114 917 88 669 16 638 15 288 14 328 Capital gains/(losses) on sale of vessels (13) (198) (598) 0 0 0 Ordinary depreciation (50 913) (51 512) (42 016) (5 168) (4 736) (3 532) Write-downs/changes in estimates 0 (1 808) 0 1 769 0 0 Operating profit/loss 72 777 61 399 46 055 13 239 10 552 10 796 Book value of vessels 522 586 616 556 658 286 55 630 50 390 50 843 Net non interest bearing debt (4 847) (13 535) (10 836) (7) 0 0 Investments during the year 730 0 472 753 8 634 4 287 21 329 Notes to the accounts – Consolidated

52 (Amounts in tables USD 1 000)

cont. note 15

CAPESIZE OPEN HATCH 2002 2001 2000 2002 2001 2000 Freight revenues, net 18 061 25 978 36 838 41 107 92 721 131 679 Voyage expenses (1 312) (5 535) (13 997) (9 631) (46 237) (83 400) Income on T/C basis 16 749 20 443 22 841 31 476 46 485 48 279 Charterhire expenses (1 628) (5 934) (8 273) (885) (7 479) (21 051) Crew and other operating expenses (3 333) (3 790) (4 169) (18 312) (21 316) (23 090) General administrative expenses 000000 Operating profit before capital gains and depreciation 11 788 10 719 10 399 12 279 17 690 4 138 Capital gains/(losses) on sale of vessels 000001 506 Ordinary depreciation (4 704) (4 700) (4 697) (4 442) (4 141) (4 142) Write-downs/changes in estimates 000000 Operating profit/loss 7 084 6 019 5 702 7 837 13 549 1 502 Book value of vessels 76 731 81 439 86 007 83 244 87 685 91 508 Net non interest bearing debt 1 292 793 1 983 721 (1 183) 4 683 Investments during the year 0 128 0000

REEFERS OTHER 2002 2001 2000 2002 2001 2000 Freight revenues, net 32 859 38 991 174 329 219 4 871 3 925 Voyage expenses (53) (573) (104 528) 0 (6) (23) Income on T/C basis 32 806 38 418 69 801 219 4 865 3 902 Charterhire expenses 0 0 (30 165) 0 0 0 Crew and other operating expenses (21 988) (23 442) (22 481) (6 717) (6 105) (6 387) General administrative expenses 0 0 0 (8 778) (8 340) (8 621) Operating profit before capital gains and depreciation 10 818 14 97617 155 (15 275) (9 580) (11 106) Capital gains/(losses) on sale of vessels 207 15 374 0 (173) 0 0 Ordinary depreciation (8 472) (9 001) (8 965) (3) (250) (1 673) Write-downs/changes in estimates 0 (555) (3 880) 0 0 0 Operating profit/loss 2 553 20 794 4 310 (15 452) (9 830) (12 779) Book value of vessels 115 320 133 705 137 258 0 0 0 Net non interest bearing debt 4 665 (560) (10 861) 0 0 0 Investments during the year 906 0 21 031 0 0 0

Both the company's open hatch vessels and the reefer vesssels are disposal for an agreed period and thereby also have the right to parti- participating in pool arrangements. This means that the company's cipate in the pool during the same period. income is based on each vessel's trade factor in the pool. In this connection the company has committed to place vessels at the pools’

16 Related parties transactions

Leif Höegh & Co rents offices at Wergelandsveien 7 from Höegh Invest owned by the Høegh family. The total annual rent is USD 0.1 million. AS, a company owned by the Høegh family. The lease covers a floor The Board has decided to move the headoffice to a new office building area of 7 273 m2 plus basement/store and parking. The total annual in 2004. The company will then be released from the contract in rent was USD 1.8 million in 2002 and the lease runs until 31 December Wergelandsveien 7. Lessor will be Parkveien 55 AS, a company owned 2010. The company also rents Prinsessealléen 8 from Gadus AS, also by the Høegh family. The rent will be based on marked terms.

17 Guarantees and long-term charter commitments

The group is a partner in limited partnerships and liable for partnership in connection with long-term charter commitments for three vessels as capital not yet called of USD 3.1 million. The group had no operational from 2003 the company will after delivery have operational charter charter commitments exceeding one year as of 31.12.2002. However, commitments in the region of USD 150 million.

18 Earnings per share

The calculation is based on an average number of outstanding shares group management were by 31.12.2002 in the money and are there- adjusted for treasury shares. The number of shares per 1.1.2002 was fore taken into account in the calculation of diluted earnings per share. 29 690 290 and per 31.12.2002 it was 29 282 700. Share options to Accounts – Leif Höegh & Co ASA 53

Statements of income 01.01. – 31.12.

(NOK million) Note 2002 2001 Operating income and expenses Operating income 309 299 Crew expenses 3 (140) (129) Ordinary depreciation 8 (7) (1) Other operating expenses (144) (134) Gain on sale of assets 71 6 Operating profit 89 41 Interest income from consolidated companies 83 115 Interest income 9 17 Other financial income 9 372 Write-down financial fixed assets 0 (4) Currency exchange gain/(loss) (20) 5 Interest expenses (1) 0 Other financial expences (36) (8) Ordinary profit before tax 133 538 Taxes 4 (35) (159) Net profit 2 98 379 Dividend 103 65 54 Accounts – Leif Höegh & Co ASA

Balance sheets 31.12.

(NOK million) Note 2002 2001 Assets Deferred Tax asset 4 27 44 Goodwill 8 59 0 Intangible assets 86 44 Tangible fixed assets 8 60 60 Shares in consolidated companies 7 2 375 1 284 Loan to consolidated companies 952 123 Other shares 7 2 1 Long-term receivables 58 1 073 Total financial fixed assets 3 387 2 481 Total fixed assets 3 533 2 585 Receivables consolidated companies 233 1 245 Other assets 21 60 Marketable securities 5 17 21 Bank deposits 6 20 36 Total current assets 291 1 362 Total assets 3 824 3 947

Shareholders’ equity and liabilities Share capital 59 65 Treasury shares 0 (6) Share premium reserve 460 460 Total paid in capital 519 520 Retained earnings 2 853 2 887 Total shareholders' equity 2 3 372 3 407 Total provisions 3 69 53 Loan from consolidated companies 231 304 Other long-term liabilities 0 4 Total long-term liabilities 231 308 Current liabilities 9 152 180 Total Liabilities 452 541 Total shareholders' equity and liabilities 3 824 3 947

Guarantees 10

The Board of Leif Höegh & Co Oslo, 5 March 2003

Westye Høegh Leif O. Høegh Truls Bergersen Jörgen Ekberg Chairman Vise Chairman

Karl Otto Gilje Truls Holthe Gunnar Reitan Thor Jørgen Guttormsen President Accounts – Leif Höegh & Co ASA 55

Cashflow statements 01.01. – 31.12.

(NOK million) 2002 2001 Cashflow from operational activities Profit before tax 132 538 Tax paid 0 (28) Loss/(gain) on sale of fixed assets (71) 6 Ordinary depreciation 7 15 Write down financial fixed assets 4 12 Movement in stocks, accounts receivable and accounts payable 1 022 (920) Liquidation loss subsidiaries 7 0 Sale/purchase of marketable securities 0 175 Net cashflow from operational activities 1 101 (202)

Cashflow from investment activities Sale of fixed assets 0 14 Sale/(purchase) of shares in other entities (1 023) 427 Purchase of fixed assets (14) (53) Net cashflow from investment activities (1 037) 388

Cashflow from financial activities Long-term debt raised 0 136 Repayments of long-term debt (77) (17) Changes in long-term receivables 188 (24) Purchase/dividend treasury shares (126) (254) Dividends paid (65) - Net cashflow from financing activities (80) (159)

Net movements in cash equivalents (16) 27

Cash and cash equivalents per 01.01. 36 9 Cash and cash equivalents per 31.12. 20 36 56 Notes to the account – Leif Höegh & Co ASA

(Amounts in tables NOK million)

1 Accounting policies

The group and parent company apply identical accounting policies and reference should be made to note 1 to the group accounts. The parent company accounts are prepared in NOK and include shares in subsidiaries and joint ventures and associates using the cost method.

2 Equity Share Share Treasure premium Other capital shares reserve equity Total Equity 01.01.2002 65 (6) 460 2 887 3 407 Amortization of treasury shares (6) - - - (6) Net profit - - - 98 98 Purchase/dividend treasury shares - 6 - (132) (126) Equity 31.12.2002 59 0 460 2 853 3 372

Principal shareholders on 31.12.2002 Shares Votes Gadus International* 9 153 200 31.17% Pomor Holding Ltd* 9 153 200 31.17% Bank Morgan Stanley AG Zurich 4 067 225 13.85% Folketrygdfondet 1 234 500 4.20% Leif Höegh’s Stiftelse 845 833 2.88% Fraternitas* 602 766 2.05% Verdipapirfondet Skagen Vekst 463 007 1.58% Ajavoff* 287 961 0.98% UBS AG 287 850 0.98% Argon Ltd* 241 666 0.82% Vital Forsikring ASA 189 415 0.65% JP Morgan Chase Bank 152 153 0.52% Norsk Kjøttsamvirke 120 000 0.41% Bjørgvin AS 110 015 0.37% Parkveien 55 AS* 18 602 0.06% Subtotal 26 927 393 91.71% Others (ownership <100.000) 2 435 107 8.29% Total 29 362 500 100.00%

* The Höegh family controls indirectly 66,27% of the shares

Shares held by senior officers, board members and related parties No. of Name Position shares Board Leif O. Høegh Vice Chairman 9 153 200 Westye Høegh Chairman 890 727 Truls Holthe 7 250 Karl Otto Gilje 5 000 Jörgen Ekberg 4 000 Management Thor Jørgen Guttormsen President 79 639 Roar Flom 345 Charles Jensen 486 Olav Sollie 190 Karl Terjesen 0 Erik Falkenberg 1 002 Johannes Tvedte 680 Total 10 142 519 Notes to the account – Leif Höegh & Co ASA

(Amounts in tables NOK million) 57

3 Wages, pensions, number of employees, auditor’s fees, employee loans, etc.

2002 2001 The company had an average of 165 employees during the year, Wages 95 91 compared with 150 in 2001. Total loans to employees in 2002 are Employer's contributions 16 13 NOK 5 million (NOK 5 million in 2001). For remuneration to the group Pension expenses 20 20 management see note 5 in the consolidated accounts. Other benefits 9 5 Total 140 129

Autidor’s fees Pensions 2002 2001 Regarding assumptions of estimated future pension obligations Auditing0.6 0.7 (calculated at a closing rate of exchange of 6.97 between NOK and Consulting and other services 0.9 1.1 USD) and calculated pension expensese (calculated at an average rate Total 1.5 1.8 of exchange of 7.91) see note 5 in consolidated accounts.

4 Tax

Tax effects from tax increasing (tax reducing) differences 31.12.02 31.12.01 Marketable securities (3) (2) Shares (6) (27) Pension obligations (19) (15) Tax losses brought forward 00 Other 1 (0) Total (27) (44) 28% tax on profit before tax 37 151 Permanent differences (28%) 11 Change in deferred tax asset (3) 7 Calculated tax 35 159

5 Marketable securities 2002 2001 Shares, valued at lowest value principle 34 Shares, valued at market value principle 13 17 Shares with buy/sale options 10 Total 17 21

6 Bank deposits

NOK 7.0 million of the company's bank deposits were held in a restricted account in respect of employee taxes withheld (NOK 4.6 million in 2001). Notes to the account – Leif Höegh & Co ASA

58 (Amounts in tables NOK millions)

7 Shares held as fixed assets Registered Share of Share of Bool value Company office capital % votes % (NOK mill) Leif Höegh & Co Shipping AS Oslo 100 100 2 179 HUAL AS Oslo 100 100 9 Höegh Holdings B.V. Amsterdam 100 100 131 Lady navigation Inc. Monrovia 36 36 36 Pacific Commerce Line Holding Ltd. Monrovia 100 100 9 Leif Höegh Shipping China Co Shanghai 100 100 8 Other 5 Total 2 377

8 Fixed assets Acc. Cost Additions Disposals depreciation Book value Depreciation Depreciation 01.01. 2002 2002 31.12. 31.12. 2002 2001 Ship equipment 18 1 0 16 3 1 1 Goodwill 0 65 0 6 59 6 0 Other fixed assets 138 11 0 92 57 13 14 Total 15676 0 114 119 20 15

Other fixed assets comprise primarily vehicles, fixtures and fittings. The associated depreciation charges of NOK 13.1 million are included in other operating expenses.

9 Other current liabilities 2002 2001 Holiday pay, taxes withheld and social security 18 16 Tax payable 19 87 Suppliers 56 Short term loans 30 Dividend 103 65 Other short term debt 46 Total 152 180

10 Guarantees and long time charter commitments

In connection with financing of vessels owned by group companies, the company has given guarantees totalling USD 229 million. The company also guarantees GBP 6.1 million related to the financing of HUAL Trader. In addition, the company has guaranteed USD 3.1 million (24.5%) of a loan raised by Euro Marine Carriers B.V. (EMC) to finance two vessels. Höegh Holdings B.V. holds a 24.5% stake in EMC. Auditor’s report 2002 59 60 Shareholder relations and analytical information

LHC aims to give shareholders a good return on their investments relative to the underlying risks associated with the company's activities through a combination of increased share value and dividend.

Shareholder relations

Dividend/repurchase of treasury shares The payment of dividend will depend on the company's earnings and investment needs. LHC will, however, as an alternative also repurchase own shares if this is believed to be more optimal for creating value for shareholders. The Board will propose to the annual general meeting that a dividend of NOK 3.50 per share is paid for 2002.

Shareholders A total of 6.1 million LHC shares were traded in 2002 (5.9 million in 2001) and the number of shareholders in the company at year-end was 1 383 (1 606 end 2001). Foreign share- holding increased from 72.4% to 80.8% during the year, and shares owned or controlled by the Høegh family increased from 59.6% to 66.3%. As in previous years, employees were invited to purchase LHC shares worth NOK 7 500 for NOK 6 000. The offer was taken up by 143 employees, who acquired a total of 11 869 shares. Other main shareholders are shown in the table below. The 2001 annual general meeting authorised the Board to buy back up to 10% of the company's shares. This authority was exercised in full and the shares were cancelled in July 2002. The 2002 annual general meeting authorised the Board to repurchase a further 10% of the company's shares. At year-end the company owned 79 800 treasury shares corresponding to 0.27% of the share capital, at an average price of NOK 80.00. Another 331 050 shares have been purchased as per 5 March 2003 at an average price of NOK 85.50.

Shares owned directly or indirectly by board members and the president of Leif Höegh & Co Leif O. Høegh 9 153 200 Westye Høegh 890 727 Karl Otto Gilje 5 000 Truls Holthe 7 250 Jörgen Ekberg 4 000 Gunnar Reitan 0 Truls Bergersen 0 Thor Jørgen Guttormsen, President 79 639 Total 10 139 816 (34.5%) Shareholder relations and analytic information 61

Distribution of shares per 31 December 2002 Shareholders Shares Number % Number % 1-100 421 30.4 19 888 0.1 101-1 000 738 53.4 304 011 1.0 1 001-10 000 192 13.9 623 429 2.1 Over 10 000 322.328 415 17296.8 Total 1 383 100.0 29 362 500 100.0

Shareholders in Leif Höegh & Co on 31 December 2002 Shares % Shares owned or controlled by the Høegh family 19 457 395 66.3

Other principal shareholders Bank Morgan Stanley AG Zurich 4 067 225 13.9 Folketrygdfondet 1 234 500 4.2 Leif Høegh's Stiftelse 845 833 2.9 Verdipapirfondet Skagen Vekst 463 007 1.6 UBS AG 287 850 1.0 Vital Forsikring 189 415 0.6 J.P. Morgan Chase Bank 152 153 0.4 Norsk Kjøttsamvirke 120 000 0.4 Bjørgvin AS 110 015 0.4 Total 26 927 393 91.7 Other shareholders (holdings <100 000) 2 435 107 8.3 Total 29 362 500 100.0

The share 2002 2001 2000 1999 1998 Earnings per share (USD) 2.10 2.62 0.60 (1.25) 1.69 Development of the LHC share relative Price/earnings per share 6.8 3.4 13.9 - 6.9 to the transportation and all-share indexes for the period 02.01.02-15.02.03 Cash flow per share (USD) 4.61 4.71 2.98 1.66 2.95 Price/cash flow per share 3.1 1.9 2.8 7.1 4.0 150 Dividend per share (NOK) 3.50 2.00 0.00 0.00 4.00

Dividend ratio (%) 23.9 8.6 0.0 0.0 29.6 125 Share price on 31 December (NOK) 99.50 79.00 74.00 95.00 89.00 100 Repurchase treasury shares No. of shares (million) 0.4 3.1 3.4 75 Average share price (NOK) 83.05 81.39 73.92 Total purchase amount (USD million) 4.00 28.00 27.00 50 • LHC-stock • Transportation index Oslo Stock Exchange • All-share index Oslo Stock Exchange

LHC share market price increased by 26% 62 Shareholder relations and analytic information

LHC's share price on the Oslo Stock Exchange increased by 26% from NOK 79.00 to NOK 99.50 during the year, with a low of NOK 72.50 in October and a high of NOK 108.00 in May. During the same period, the Oslo Stock Exchange's transport index and all-share index decreased by 34.6% and 31.1%, respectively. The stock market value of LHC per 31 Decem- ber 2002 was NOK 2 922 million, an increase of NOK 345 million from a year earlier.

No. of shares and share capital The table below shows movements in the company's share capital and the number of shares outstanding since the flotation of Leif Höegh & Co ASA on the Oslo Stock Exchange (OSE) in 1987:

Change in Par value Total

Development of the LHC share, 01.01.02-17.02.03 Year Transaction share capital of shares share capital No. of shares 1987 Floating OSE 10 56 000 000 5 600 000 110 1988 New Issue 4 000 000 10 60 000 000 6 000 000 1990 Five-for-one split 260 000 000 30 000 000 100 2000 Rights’ issue 12 500 000 2 72 500 000 36 250 000 2001 Cancellation of shares 7 250 000 2 65 250 000 32 625 000 90 2002 Cancellation of shares 6 525 000 2 58 725 000 29 362 500

80 Investor relations 70 LHC aims to keep shareholders, stockbrokers and investors updated about the company's operations by providing regular information and presentations. The publication dates for the company's quarterly interim reports are listed in the annual report. The company's website at www.hoegh.no includes a special section with information for investors. Reports, presentations, press releases and other relevant information are imme- diately made available on the website.

Analytical information

Exchange rates The group's income is primarily denominated in USD or converted into USD. Expenses are also mainly denominated in USD, with the exception of administration expenses in the region of NOK 350 million per year, or 9% of total expenses. The value of vessels and other vessel-related assets are expressed in USD. Cash may be invested in either USD or NOK. In the latter case, foreign exchange gains/losses will arise as a result of movements in the NOK/USD exchange rate. All debt is in USD. Shareholder relations and analytic information 63

Interests rates All loans are on floating interest rate basis, but may be hedged when considered attractive. The group had interest swaps and other interest hedge contracts with a combined notional principal amount of USD 390 million per year-end. These contracts mature in 2004-2008 and cover a substantial proportion of the group's mortgage debt. This means that the group's exposure to interest rate fluctuations is currently limited.

Financial ratios and key figures 2002 2001 2000 1999 1998 Profitability Operating margin 1) %232615923 Return on equity 2) % 13 19 5 (10) 12 Return on total assets 3) % 8 10 6 (1) 8

Liquidity Cash and marketable securities USD mill 186 178 178 154 156 Cashflow 4) USD mill 135 149 103 49 88 Net interest USD mill (28) (42) (50) (18) (20) Current ratio 5) % 335 316 303 239 400 Debt service ratio 6) %3125141126 Net interest bearing debt USD mill 440 605 741 443 339

1) Operating profit as a percentage of income on a T/C basis 2) Profit before tax, less tax, as a percentage of average shareholders' equity including minority interests 3) Profit before tax, plus financial expenses, as a percentage of average total assets 4) Profit before tax, plus depreciation, less income from associated companies, less tax payable and less gain on sale of vessels, with no adjustments for minority interests 5) Current assets as a percentage of current liabilities 6) Cashflow as a percentage of net interest bearing debt

Freight income Impact on net profit (USD million) 2002 2001 2000 1999 1998 Change in T/C income of USD 1 000 per day 18 19 18 14 12

Bunkers In 2003, the total fleet of vessels operated by the company (except vessels on long-term contracts) will consume approximately 550 000 tons of bunker fuel. In excess of 30% of this consumption is covered by bunker clauses in the freight agreements. A change in bunker prices of USD 10 per ton will therefore affect the group's earnings by USD 3-4 million.

Valuation LHC primarily wants the valuation of the company to be based on growth in earnings and cash flow and does not publish figures for value-adjusted equity. At year-end the company's shares were trading at 82% of book equity.

Interest rate risk is to a large extent reduced through hedge contracts 64 Words and expressions

Bareboat charter Chartering a vessel with all crew and operating expenses for charterer's account Booking Reservation of space for cargo Capesize vessel Dry bulk vessel over 140 000 dwt Charter a vessel To hire a vessel (in or out) Charterparty (C/P) An agreement about chartering a vessel for a single voyage (voyage charterparty) or for a longer period (timecharter party) CEU – Car Equivalent Unit A mesurement for a Ro/Ro vessel's cargo carrying capacity Contract shipping Long-term agreement for the hire of vessels at fixed rates Deep Sea market Market for sea transportation over long distances between continents Dry bulk cargo Mainly grain, coal and ore DWT – Dead Weight Ton The vessel's cargo capacity measured in tons of cargo and supplies Freight income on T/C-basis Freight income less voyage related costs (excluding operating expenses) ISO 14001 International environmental standard LNG vessel A vessel carrying LNG (Liquefied Natural Gas) cooled to minus 160 degrees Celsius Membrane tanker LNG vessel with a containment system of the membrane type Open hatch vessel A vessel with hatches without overhang, used for carrying general cargo, especially for the forest product industry, as well as containers and dry bulk commodities Off-hire Out of service Operating expenses Include crewing costs and all expenses related to the technical management of the vessels including insurance PCC – Pure Car Carrier Vessel for transporting standard passenger cars PCTC – Pure Car Truck Carrier Vessel for transporting rolling stock (cars, buses, a.o.) Pool A cooperation between owners who place vessels in a jointly controlled operational unit where freight income on T/C-basis is divided between the partners according to a predetermined key (“pool key”) Ro/Ro vessel A vessel carrying rolling stock (Roll on/Roll off), such as cars carriers, liner vessels or a combination of these Scheduling Planning a vessel's voyage Short Sea market Market for sea transportation over short distances within regions Spherical tanker LNG vessel with a containment system of the spherical type Spot rate Describes rate for single voyages agreed on the basis of current market situation TEU Twenty feet Equivalent Unit, i.e. a 20 feet long container. A measurement for the vessel's container capacity Voyage expenses Mainly bunkers, port dues, canal dues, loading and discharing costs Contents The fleet per 31.12.2002

Design: Anisdahl, Sand & Partnere. Photo: Ole Walter Jacobsen and Höegh archive. Print: GAN Grafisk AS. March 2003. Leif Höegh & Co – Annual report 2002 report Annual – Co & Höegh Leif ...focused, solid and ready for growth Annual report 2002