OFFERING MEMORANDUM NOT FOR GENERAL CIRCULATION IN THE UNITED STATES

Silk Bidco AS €455,000,000 7.50% Senior Secured Notes due 2022

Silk Bidco AS (the “Company”) is offering €455,000,000 aggregate principal amount of its 7.50% Senior Secured Notes due 2022 (the “Notes”). The Company will pay interest on the Notes semi-annually in arrears on each February 1 and August 1, commencing on August 1, 2015. Prior to February 1, 2018, the Company may redeem at its option all or a portion of the Notes by paying a “make-whole” premium. At any time on or after February 1, 2018, the Company may redeem at its option all or part of the Notes by paying a specified redemption price. In addition, prior to February 1, 2018, the Company may redeem at its option no more than 40% of the aggregate principal amount of the Notes with the net cash proceeds from certain equity offerings. Upon certain events defined as constituting a change of control, the Company may be required to make an offer to purchase the Notes. In the event of certain developments affecting taxation, the Company may redeem all, but not less than all, of the Notes. The Notes will be senior obligations of the Company and will be guaranteed (the “Notes Guarantees”) within 70 days of the Hurtigruten Tender Offer Settlement Date (as defined herein) on a senior secured basis by certain of the Company’s subsidiaries (together, the “Guarantors”). As of the Issue Date, subject to the operation of the Agreed Security Principles, the Notes will be secured by first- ranking security interests over substantially all of the assets of the Company and Silk Midco AS. In addition, within 70 days of the Hurtigruten Tender Offer Settlement Date, the Guarantors will, subject to the operation of the Agreed Security Principles (as defined herein), grant security on a first-ranking basis over their material assets as described herein. The Notes will be initially secured by first-ranking security interests over substantially the same assets that secure the Revolving Credit Facility (as defined herein), subject to the operation of the Agreed Security Principles and the Intercreditor Agreement (as defined herein). Under the terms of the Intercreditor Agreement, lenders under the Revolving Credit Facility, counterparties to certain hedging obligations and holders of certain other future indebtedness will receive proceeds from the enforcement of the security in priority to holders of the Notes. See “Summary—The Offering— Security.” The Notes were represented on issue by global notes. The Notes were delivered through Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”) on February 6, 2015 (the “Issue Date”). This offering memorandum includes information on the terms of the Notes and the Notes Guarantees, including redemption and repurchase prices, security, covenants and transfer restrictions. There is currently no public market for the Notes. Application was made to list the Notes on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF market of the Luxembourg Stock Exchange (the “Euro MTF”). This offering memorandum constitutes a prospectus for the purposes of Luxembourg law dated July 10, 2005 on prospectuses for securities as amended. This offering memorandum shall only be used for the purposes for which it has been published.

Investing in the Notes involves risk. See “Risk Factors” beginning on page 35.

Price: 100% plus accrued interest, if any, from the Issue Date.

The Notes and the Notes Guarantees have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the laws of any other jurisdiction. The Notes and the Notes Guarantees may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the U.S. Securities Act (“Rule 144A”) and to non-U.S. persons in offshore transactions in reliance on Regulation S under the U.S. Securities Act (“Regulation S”). You are hereby notified that sellers of the Notes and the Notes Guarantees may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A. Outside the United States, sellers may be relying on Regulation S under the U.S. Securities Act. See “Notice to Investors” and “Transfer Restrictions” for additional information about eligible offerees and transfer restrictions. Sole Global Coordinator and Bookrunner Goldman Sachs International

The date of this offering memorandum is February 26, 2015 FJORD_IFC.indd 1 15/01/2015 15:53 TABLE OF CONTENTS

Summary ...... 1 Risk Factors ...... 35 Use of Proceeds ...... 72 Capitalization ...... 73 Selected Historical Financial Data ...... 74 Management’s Discussion and Analysis of Our Financial Condition and Results of Operations . . . 78 Industry ...... 112 Business ...... 116 Management ...... 144 Principal Shareholders ...... 148 Related Party Transactions ...... 149 Description of Other Indebtedness ...... 150 Description of the Notes ...... 160 Taxation ...... 239 Certain Limitations on Validity and Enforceability ...... 247 Book-Entry, Delivery and Form ...... 251 Transfer Restrictions ...... 255 Plan of Distribution ...... 257 Legal Matters ...... 260 Independent Auditors ...... 261 Enforceability of Judgments ...... 262 Where You Can Find More Information ...... 263 Listing and General Information ...... 264 Index to Financial Statements ...... F-1

i IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM

We have not authorized anyone to provide any information or to make any representations other than those contained in this offering memorandum. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This offering memorandum is an offer to sell only the Notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this offering memorandum is current only as of its date. Our business, financial condition, results of operations and prospects may have changed since that date.

This offering memorandum is a document that we are providing only to prospective purchasers of the Notes. You should read this offering memorandum before making a decision whether to purchase the Notes. You must not use this offering memorandum for any other purpose.

We have prepared this offering memorandum, and we are solely responsible for its contents. You are responsible for making your own examination of us and your own assessment of the merits and risks of investing in the Notes. In making your investment decision, you should not consider any information in this offering memorandum to be investment, legal or tax advice. You should consult your own counsel, accountant and other advisors for legal, tax, business, financial and related advice regarding purchasing the Notes. By purchasing the Notes, you will be deemed to have acknowledged that: • you have reviewed this offering memorandum; • you have had an opportunity to request, receive and review additional information that you need from us; • you have made certain acknowledgements, representations and agreements as set forth under the captions “Notice to Investors;” and • the Initial Purchaser is not responsible for, and is not making any representation to you concerning, our future performance or the accuracy or completeness of this offering memorandum.

None of the Initial Purchaser, the Trustee, the Paying Agent or the Transfer Agent undertakes to review the financial condition or affairs of any of the Company or the Guarantors during the life of the Notes nor to advise any investor or potential investor in the Notes of any information coming to the attention of the Initial Purchaser.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The distribution of this offering memorandum and the Offering and sale of the Notes in certain jurisdictions may be restricted by law. The Company and the Initial Purchaser (as defined below) require persons into whose possession this offering memorandum comes to inform themselves about and to observe any such restrictions, and neither the Company nor the Initial Purchaser shall have any responsibility therefor. This offering memorandum does not constitute an offer of, or an invitation to purchase, the Notes in any jurisdiction in which such offer or invitation would be unlawful. For a description of certain restrictions on offers, sales and resales of Notes and distribution of this offering memorandum, see “Transfer Restrictions.”

The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the U.S. Securities Act and all other applicable securities laws. See “Plan of Distribution” and “Transfer Restrictions.” You should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time.

ii We have prepared this offering memorandum solely for use in connection with the Offering.

This offering memorandum summarizes material documents and other information, and we refer you to them for a more complete understanding of what we discuss in this offering memorandum. In making an investment decision, you must rely on your own examination of us and the terms of the Offering and the Notes, including the merits and risks involved. See “Where You Can Find More Information.”

We reserve the right to withdraw the Offering of the Notes at any time, and the Initial Purchaser reserves the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to any prospective purchaser less than the full amount of the Notes sought by such purchaser. The Initial Purchaser or certain of its affiliates may acquire for their own account a portion of the Notes.

Application was made to list the Notes on the Official List of the Luxembourg Stock Exchange and to admit the Notes to trading on the Euro MTF market.

See “Risk Factors” for a description of some important risks related to an investment in the Notes offered by this offering memorandum.

IN CONNECTION WITH THIS OFFERING, GOLDMAN SACHS INTERNATIONAL (THE “STABILIZING MANAGER”) (OR ANY PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER) MAY OVER-ALLOT OR EFFECT TRANSACTIONS FOR A LIMITED PERIOD OF TIME WITH A VIEW TO SUPPORTING THE MARKET PRICES OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, GOLDMAN SACHS INTERNATIONAL IS NOT OBLIGATED TO DO THIS, AND THERE CAN BE NO ASSURANCE THAT THE STABILIZING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATION ACTION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

iii NOTICE TO INVESTORS

European Economic Area This offering memorandum has been prepared on the basis that all offers of Notes will be made pursuant to an exemption under the Prospectus Directive, as amended, as implemented in member states of the European Economic Area (“EEA”), from the requirement to produce a prospectus for offers of the Notes. Accordingly, any person making or intending to make any offer within the EEA of the Notes which are the subject of the Offering contemplated in this offering memorandum must only do so in circumstances in which no obligation arises for the Company, any of the Guarantors or the Initial Purchaser to produce a prospectus for such offer. None of the Company, the Guarantors or the Initial Purchaser has authorized, nor do they authorize, the making of any offer of the Notes through any financial intermediary, other than offers made by the Initial Purchaser, which constitute the final placement of the Notes contemplated in this offering memorandum. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) of the European Parliament and of the Council of November 4, 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC, and includes any relevant implementing measure in the Relevant Member State (as defined below).

In relation to each Member State of the EEA which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), no offer of the Notes has been made to the public in that Relevant Member State, except that, with effect from and including the Relevant Implementation Date, an offer of the Notes may be made to the public in that Relevant Member State at any time to: • “qualified investors,” as defined in the Prospectus Directive; • fewer than 150, natural or legal persons (other than qualified investors, as defined in the Prospectus Directive) in any Relevant Member State subject to obtaining the prior consent of the Company and Initial Purchaser; or • in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes shall result in a requirement for the publication by the Company, any Guarantor or the Initial Purchaser of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes, as such expression may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State.

Each subscriber for or purchaser of the Notes in the Offering located within a Relevant Member State will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive. The Company, the Guarantors, the Initial Purchaser and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the Initial Purchaser of such fact in writing may, with the consent of the Initial Purchaser, be permitted to subscribe for or purchase the Notes in the Offering.

Netherlands The Notes will only be offered in the Netherlands to qualified investors (gekwalificeerde beleggers) as defined in section 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht).

Norway This offering memorandum has not been approved by, or registered with, any Norwegian securities regulators pursuant to the Norwegian Securities Trading Act of 29 June 2007. Accordingly,

iv neither this offering memorandum nor any other offering material relating to the Notes constitutes, or shall be deemed to constitute, an offer to the public in Norway within the meaning of the Norwegian Securities Trading Act of 2007. The Notes may not be offered or sold, directly or indirectly, in Norway except:

(a) in respect of an offer of Notes addressed to investors subject to a minimum purchase of Notes for a total consideration of not less than €100,000 per investor, or in minimum denominations of at least €100,000;

(b) to “professional investors,” as defined in section 7-1 of the Norwegian Securities Regulation of 29 June 2007 no. 876;

(c) to fewer than 150 natural or legal persons in the Norwegian securities market (other than “professional investors,” as defined in section 7-1 of the Norwegian Securities Regulation of 29 June 2007 no. 876);

(d) in any other circumstances provided that no such offer of Notes shall result in a requirement for the registration, or the publication by the Company or the Initial Purchaser of a prospectus pursuant to the Norwegian Securities Trading Act of 29 June 2007.

In no circumstances may an offer of Notes be made in the Norwegian market without the Notes being registered in the Norwegian Central Securities Depository (the “VPS”) in dematerialized form, to the extent such Notes shall be registered according to the Norwegian Securities Registry Act (Norwegian: Verdipapirregisterloven, 2002) and its regulations.

United Kingdom This offering memorandum is only being distributed to and is only directed at persons who (i) are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the “Order”), (ii) are persons falling within Article 49(2)(a) to (d) of the Order or (iii) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 of the United Kingdom, or “FSMA”) in connection with the issue or sale of any Notes may lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). Accordingly, by accepting delivery of this offering memorandum, the recipient warrants and acknowledges that it is such a relevant person. The Notes are available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. No part of this offering memorandum should be published, reproduced, distributed or otherwise made available in whole or in part to any other person without the prior written consent of the Company. The Notes are not being offered or sold to any person in the United Kingdom, except in circumstances which will not result in an offer of securities to the public in the United Kingdom within the meaning of Part VI of the Financial Services and Markets Act 2000.

Switzerland Neither this offering memorandum nor any other offering or marketing material relating to the Offering, the Company or the Notes have been or will be filed with or approved by any Swiss regulatory authority. In particular, this offering memorandum will not be filed with, and the offer of Notes will not be supervised by, the Swiss Financial Market Supervisory Authority, and the offer of Notes has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of Notes.

v USE OF TERMS

In this offering memorandum, the following words and expressions have the following meanings, unless the context otherwise requires or unless otherwise so defined. In particular, capitalized terms set forth and used in the sections entitled “Description of Other Indebtedness—Intercreditor Agreement” and “Description of the Notes” may have different meanings from the meanings given to such terms and used elsewhere in this offering memorandum. We specifically draw your attention to “Description of Other Indebtedness—Intercreditor Agreement—General.” Unless indicated otherwise in this offering memorandum or the context requires otherwise, all references to: •“305 Classification” are to the classification of our roll-on/roll-off ships (as defined in the November 1995 amendments to Chapter II-1 of SOLAS) as “passenger ships” under Regulation No. 305, issued under the Norwegian Ship Safety Act, on surveys, construction and equipment of passenger ships engaged in domestic voyages, dated March 28, 2000. •“Agreed Security Principles” are to the “Agreed Security Principles” set out in an annex to the Revolving Credit Facility Agreement, as applied mutatis mutandis with respect to the Notes in good faith by the Company. •“Bridge Facility Agreement” are to the bridge facility agreement dated October 6, 2014, as amended on October 13, 2014 and October 28, 2014, among, inter alios, the Company, Goldman Sachs International, as Mandated Lead Arranger, and the Security Agent and such facility thereunder is referred to as the “Bridge Facility.” •“Bus Business” are to our bus business, which was disposed of in July 2014 in connection with our sale of AS TIRB, in which we had a 71.3% ownership interest. •“CAGR” are to the Compound Annual Growth Rate. •“Charter Business” are to our charter of MS Finnmarken as a ship hotel to a company operating in the Australian oil industry, which charter was discontinued in January 2012. •“Coastal Service Contract” are to the contract between Hurtigruten and the Norwegian government represented by the Ministry of Transport dated April 13, 2011, with respect to the operation of the coastal passenger and cargo transportation service between Bergen and Kirkenes. •“Company” are to Silk Bidco AS, a private limited company incorporated on September 1, 2014, under the laws of Norway with business enterprise number 914 148 324 and with its registered office at c/o Advokatfirmaet BA-HR DA, Tjuvholmen allé 16, 0252 Oslo, Norway. •“EEA” are to the European Economic Area. •“EU” are to the European Union. •“euro”or“€” are to the lawful currency of the European Monetary Union. •“Fast Ferries Business” are to the operation of our two fast ferries, which we sold in March 2014. •“Former Coastal Service Contract” are to the contract between Hurtigruten and the Norwegian government represented by the Ministry of Transport dated December 17, 2004, with respect to the operation of the coastal passenger and cargo transportation service between Bergen and Kirkenes. •“Former Financing Agreements” are, collectively, to the following facilities, which were repaid in full and terminated on January 14, 2015: • NOK 2,600,000,000 Multicurrency Revolving Facility Agreement dated March 7, 2012 between amongst others Hurtigruten, as borrower, the original lenders named therein, the original swap providers named therein and Nordea Bank Norge ASA, as agent; and • NOK 150,000,000 Short-Term Revolving Facility Agreement dated September 11, 2014 between Hurtigruten ASA, as borrower, Nordea Bank Norge ASA, as original lender named therein, arranger and agent, and such facilities thereunder are referred to as the “Former Facilities.”

vi •“Former Financing Arrangements” are, collectively, to the Former Financing Agreements and the Former Notes. •“Former Notes” are to the NOK 500 million aggregate principal amount of the FRN Hurtigruten ASA Senior Unsecured Bonds 2012/2017 issued under the Bond Agreement dated March 16, 2012 between Hurtigruten, as issuer, and Nordic Trustee ASA (formerly named Norsk Tillitsmann ASA), as bond trustee, which were redeemed in full and discharged on January 26, 2015. •“Group,” “we,” “us”or“our” are to the Company and its subsidiaries. •“Guarantors” collectively refers to Hurtigruten, Spitsbergen Travel AS, Hurtigruten Pluss AS, Hurtigruten Sjø AS and Ingeniør G. Paulsen AS, and “Guarantor” refers to each of them. •“Home Capital” are to Home Capital AS, a private limited company incorporated on May 16, 2006, under the laws of Norway with business enterprise number 989 850 253 and with its registered office at Hoffsveien 70A, 0377 Oslo, Norway. •“Hurtigruten” are to Hurtigruten ASA, incorporated pursuant to the Norwegian Public Limited Liability Companies Act with business enterprise number 914 904 633 and with its registered office at Fredrik Langes gate 14, 9008 Tromsø, Norway. •“Hurtigruten Acquisition” are to the acquisition by the Company of 100% of the share capital in Hurtigruten pursuant to the Hurtigruten Tender Offer and the subsequent squeeze-out of any former shareholders, which was completed on the Hurtigruten Squeeze-out Completion Date. •“Hurtigruten Acquisition Transactions” are to: • the Hurtigruten Acquisition; • the indirect equity contribution by TDR Capital to the Company in relation to the Hurtigruten Acquisition and the Refinancing Transactions; • the repayment and termination of the Former Facilities; • the redemption and satisfaction of the Former Notes; • the termination of our former interest rate swaps, foreign currency exchange swaps and the majority of our bunker fuel swaps and the rollover of our remaining bunker fuel swaps; • the termination of our share option plan in December 2014 and the costs related to the cash settlement of such share option plan, which will be paid following the issuance of the Notes; • our entry into the Bridge Facility Agreement, under which we have borrowed an aggregate principal amount of €455 million to fund the foregoing; • our entry into the Proceeds Loan; and • our entry into the Revolving Credit Facility. •“Hurtigruten Squeeze-out Completion Date” are to December 22, 2014, which was the settlement date of the squeeze-out of any former shareholders that did not participate in the Hurtigruten Tender Offer. •“Hurtigruten Tender Offer” are to the voluntary offer by the Company to acquire all outstanding shares in Hurtigruten dated as of November 6, 2014. •“Hurtigruten Tender Offer Settlement Date” are to December 19, 2014, which was the settlement date of the Hurtigruten Tender Offer. •“IFRS” are to International Financial Reporting Standards, as adopted by the EU. •“Indenture” are to the indenture dated on the Issue Date governing the Notes by and among, inter alios, the Company, the Guarantors and the Trustee. •“Initial Purchaser” are to Goldman Sachs International. •“Intercreditor Agreement” are to the intercreditor agreement dated October 6, 2014, as amended on January 9, 2015, among, inter alios, the Company, the Security Agent, the lenders and agent under the Revolving Credit Facility Agreement, and to which the Trustee will accede on the Issue Date.

vii •“Investment Agreement” are to the investment agreement dated October 28, 2014, by and between TDR Capital, Periscopus and Home Capital relating to their investment in the Group. •“Issue Date Collateral” refers to security on a first-ranking basis, subject to the operation of the Agreed Security Principles, over (i) substantially all of the assets of the Company, including: shares of capital stock of Hurtigruten; certain bank accounts, certain intra-group receivables (including the rights of the Company under the Proceeds Loan); the securities register account of the Company opened with Verdipapirsentralen ASA (“VPS Account”); and an assignment of claims under the settlement agreement in connection with the Hurtigruten Acquisition, which has been granted by the Company and will be extended to secure the Notes on the Issue Date and (ii) substantially all of the assets of Silk Midco AS, including: shares of capital stock of the Company and certain intra-group receivables, which has been granted by Silk Midco AS and will be extended to secure the Notes on the Issue Date. •“Issue Date” are to the date of issuance of the Notes offered hereby. •“Local Line Facilities Agreements” are, collectively, to: • NOK 6,600,000 Loan Agreement dated March 31, 2005 between Ingeniør G. Paulsen AS, as borrower, and Sparebanken Nord-Norge, as lender; and • the Spitsbergen Local Line Facilities Agreements;

and such facilities thereunder are referred to as the “Local Line Facilities.” •“Ministry of Transport” are to the Ministry of Transport and Communications in Norway. •“NMD” are to the Norwegian Maritime Directorate. •“NOK”or“Norwegian kroner” are to the lawful currency of Norway. •“Normalized Discontinued Operations” are, for the purposes of the normalized numbers in this offering memorandum, to all of the Group’s operations that have been discontinued during the period from January 1, 2011 to September 30, 2014, which includes our Bus Business, Charter Business and Fast Ferries Business. This definition of Normalized Discontinued Operations varies from and is not comparable to the discontinued operations referenced in our audited consolidated financial statements for the years ended December 31, 2011, 2012 and 2013, prepared in accordance with IFRS. •“North America” when used in relation to population data from the United Nations, are to, collectively, Canada, the United States, Mexico and Bermuda. •“Notes” are to the €455 million aggregate principal amount of 7.50% Senior Secured Notes due 2022 offered hereby. •“Notes Collateral” are, collectively, to the Issue Date Collateral and the Post-Issue Date Collateral. •“Notes Guarantees” collectively refers to the guarantees of the Notes issued by the Guarantors, and “Notes Guarantee” refers to each of them. •“Offering” are to the offering of the Notes. •“Periscopus” are to Periscopus AS, a private limited company incorporated on April 16, 1970, under the laws of Norway with business enterprise number 826 636 572 and with its registered office at Hoffsveien 70A, 0377 Oslo, Norway. •“Post-Issue Date Collateral” refers to the security on a first-ranking basis, subject to the operation of the Agreed Security Principles, over the material assets of the Guarantors, including: shares of capital stock of the Guarantors; certain bank accounts; intra-group receivables; an assignment of insurance claims in respect of certain ships and any other insurance claims the Guarantors may have (if applicable); claims under the Coastal Service Contract; a pledge of customer receivables (factoring), inventory and machinery and plant (including intellectual property); and mortgages over certain ships owned by the Guarantors, in each case, to be granted by the Guarantors within 70 days of the Hurtigruten Tender Offer Settlement Date. •“pound sterling”or“£” are to the lawful currency of the United Kingdom.

viii •“Proceeds Loan Agreement” are to the agreement dated January 14, 2015 between the Company, as lender, and Hurtigruten, as borrower, pursuant to which the Company loaned to Hurtigruten amounts to be used to repay the Former Financing Arrangements in connection with the Hurtigruten Acquisition and such loan thereunder is referred to as the “Proceeds Loan.” •“Refinancing Transactions” have the meaning ascribed to the term under “Summary—The Refinancing Transactions.” •“Restricted Group” are to the Company and its wholly-owned subsidiaries and does not include (i) Green Dog Svalbard AS, in which we have a 50% ownership interest and (ii) the SPEs. The financial information for Green Dog Svalbard AS and the SPEs is included in the consolidated financial statements of Hurtigruten and its subsidiaries for the years ended December 31, 2011, 2012 and 2013 and the nine months ended September 30, 2014. •“RevPAR” are to the product of the average daily rate of a Spitsbergen Travel hotel or guest house room for a specified period multiplied by the room occupancy rate. •“Revolving Credit Facility Agreement” are to the €65,000,000 revolving credit facility dated October 6, 2014, as amended on October 13, 2014 and October 28, 2014, and as may be further amended or supplemented from time to time, among, inter alios, the Company, Goldman Sachs International, as Mandated Lead Arranger, and the Security Agent, as described more fully under “Description of Other Indebtedness—Revolving Credit Facility Agreement” and such facility thereunder is referred to as the “Revolving Credit Facility.” •“Security Agent” are to U.S. Bank Trustees Limited, as security agent under the Indenture, the Intercreditor Agreement and the Revolving Credit Facility, among other agreements. •“Security Documents” are to agreements creating security interests over the Notes Collateral as described under “Description of the Senior Secured Notes—Certain Definitions.” •“SPEs” are, collectively, to Kystruten KS and Kirberg Shipping KS, the special purpose entities from which we lease two of our ships and in which we have an ownership interest of 0% and 1%, respectively. •“Spitsbergen Local Facilities Agreements” are, collectively, to: • NOK 10,251,000 Loan Agreement dated October 7, 2007 between Spitsbergen Travel AS (formerly Svalbard Polar Hotel AS), as borrower, and Sparebanken Nord-Norge, as lender; • NOK 40,320,000 Loan Agreement dated March 31, 2005 between Spitsbergen Travel AS (formerly Spitsbergen Travel Hotel AS) as borrower, and Sparebanken Nord-Norge, as lender; • NOK 686,604 Loan Agreement between Spitsbergen Travel AS, as borrower, and Husbanken, as lender; • NOK 906,867 Loan Agreement between Spitsbergen Travel AS, as borrower, and Husbanken, as lender, with loan number 15 318061; • NOK 906,867 Loan Agreement between Spitsbergen Travel AS, as borrower, and Husbanken, as lender, with loan number 15 318062; • NOK 923,472 Loan Agreement between Spitsbergen Travel AS, as borrower, and Husbanken, as lender; and • NOK 456,515 Loan Agreement between Spitsbergen Travel AS, as borrower, and Husbanken, as lender, and such facilities thereunder are referred to as the “Spitsbergen Local Line Facilities.” •“TDR Capital” are to investment funds or limited partnerships managed or advised by TDR Capital LLP or, when the context otherwise requires or as otherwise indicated, TDR Capital LLP in its own right. •“Trustee” are to U.S. Bank Trustees Limited as trustee under the Indenture. •“U.S. dollar,” “dollar”or“$” are to the lawful currency of the United States.

ix FORWARD LOOKING STATEMENTS

Certain of the statements made in this offering memorandum may be considered to be “forward looking statements,” as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995, such as statements that include the words “expect,” “estimate,” “believe,” “project,” “plan,” “anticipate,” “should,” “intend,” “probability,” “risk,” “may,” “target,” “goal,” “objective” and similar expressions or variations on such expressions. These statements appear in a number of places throughout this offering memorandum, including in the sections captioned “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Our Financial Condition and Results of Operations” and “Business.” These statements concern, among other things: • strategies, outlook and growth prospects; • future plans and potential for growth; • trends affecting our financial condition or results of operations; • trends and developments affecting the markets in which we operate; • our liquidity, capital resources and capital expenditure; • the general economic outlook and industry trends; • competition in areas of our business; and • our plans to launch new or expand existing services.

Such forward looking statements are not guarantees of future performance and involve risks and uncertainties. Our actual results may differ materially as a result of various factors. These factors include, but are not limited to: • the adverse impact of recent economic conditions and natural conditions; • competition from cruise and transportation companies as well as vacation alternatives; • uncertainty as to the renewal of our Coastal Service Contract; • unprofitability of the Coastal Service Contract due to downward adjustments and increased operating costs; • limited ability to offer other profitable services due to the requirement under the Coastal Service Contract to provide certain services; • increases in bunker fuel prices or other operating costs; • fluctuations in currency exchange rates; • seasonality of our revenues; • susceptibility of our results to unseasonable changes in weather; • inability to grow our brand or inability to distinguish ourselves from our competitors; • incidents involving safety and security of our guests and employees; • dependence on our fleet of ships; • inability to implement our ship repairs, maintenance and refurbishments on terms and within timeframes that are favorable or consistent with our expectations; • overcapacity in the cruise ship industry; • incorrect, inaccurate or incomplete valuation of our ships; • failure to successfully implement our business strategy and the final phase of our efficiency improvement program; • diversion of management’s attention from existing operations to the process of taking the company private following the Hurtigruten Acquisition by the Shareholders; • risks and costs associated with ship leases; • increases in port taxes or fees, or other adverse change of our terms of business with the authorities operating the ports in which we call;

x • dependence on our IT systems; • breaches in data security or other disturbances to our information technology and other networks; • amendments to the collective bargaining agreements for crew members of our fleet and land- based employees and other employee relation issues; • the loss of key personnel or our inability to recruit or retain qualified personnel; • changes in laws and regulations, including environmental, health and safety laws and regulations; • dependence of our sea based operations on our ability to renew our annual ISM compliance certificates for our ships; • terrorist acts, acts of piracy, armed conflict and threats thereof, and other international events impacting the security of travel; • incidents affecting the health of guests and the crew, including spread of contagious diseases and viral outbreaks; • litigation, enforcement actions, fines or penalties; • insufficient insurance, increase in insurance premiums, decisions to self-insure against various risks or our inability to obtain insurance for certain risks at reasonable rates; • reliance on scheduled commercial airline services for guest connections; • increase in third-party internet travel intermediaries; • increased costs and risks related to conducting our business internationally; • reliance on third-party providers of various services integral to the operations of our businesses; • delays or cancellations of our services due to conditions beyond our control; • disruptions in our service due to assistance rendered to ships in distress at sea; • increased operating costs due to the aging of our fleet; • requisition of our ships during a period of war or emergency; • arrest of our ships by maritime claimants; • risks relating to the Hurtigruten Acquisition Transactions and the Refinancing Transactions; • risks relating to our substantial indebtedness, the Notes, our structure and our ability to meet our debt service obligations; and • other factors discussed in “Risk Factors.”

Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this offering memorandum. We undertake no obligation, and do not intend, to release publicly the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date of this offering memorandum, including changes in our business or strategy or planned capital expenditure, or to reflect the occurrence of unanticipated events.

We provide a cautionary discussion of risks and uncertainties under “Risk Factors” contained elsewhere in this offering memorandum. These are factors that we think would cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us.

AVAILABLE INFORMATION

We have agreed to provide certain information, as described in “Description of the Notes— Certain Covenants—Reports” to the Trustee and to make such information available to the holders of the Notes (the “Noteholders”) and to potential investors.

xi In addition, for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF market and the rules of the Luxembourg Stock Exchange so require, we will also provide a copy of all the foregoing information and reports to the Luxembourg Stock Exchange and make this information available in Luxembourg at the office of the Registrar.

Information on the website of Hurtigruten, any website directly or indirectly linked to the website of Hurtigruten or any other website mentioned in this offering memorandum is not incorporated by reference into this offering memorandum and prospective investors should not rely on any such website in making their decision to invest in the Notes.

See also “Where You Can Find More Information.”

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Data The Company was incorporated on September 1, 2014 for the purposes of facilitating the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including issuing the Notes offered hereby. Consequently, no historical financial information relating to the Company is available. All historical financial information presented in this offering memorandum is of Hurtigruten and its subsidiaries; accordingly, all references to “we,” “us,” “our” or the “Group” in respect of historical financial information in this offering memorandum are to Hurtigruten and its subsidiaries on a consolidated basis. In particular, this offering memorandum includes audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the years ended December 31, 2011, 2012 and 2013, prepared in accordance with IFRS, and accompanying notes; audited financial statements of Hurtigruten on a stand-alone basis as of and for the years ended December 31, 2011, 2012 and 2013, prepared and presented in accordance with simplified International Financial Reporting Standards pursuant to section 3-9, paragraph 5 of the Norwegian Accounting act, cf. regulation of January 21, 2008, and accompanying notes; and the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 and 2014, prepared in accordance with International Accounting Standards No. 34, Interim Financial Reporting (“IAS 34”), and accompanying notes. Hurtigruten’s unaudited condensed consolidated interim financial statements as of and for the nine months ended September 30, 2013 and 2014 are unaudited and all information contained in this offering memorandum with respect to those periods is also unaudited. All financial information presented herein, other than in the financial statements contained elsewhere in this offering memorandum, is in respect of Hurtigruten and its subsidiaries on a consolidated basis; the financial information with respect to Hurtigruten on a stand- alone basis appears only in the financial statements at the end of this offering memorandum.

Due to the changing nature of our continuing and discontinued operations in each of the years ended December 31, 2011, 2012 and 2013, the discontinued operations in our audited consolidated financial statements for each of these years include different discontinued operations and therefore are not presented on the same basis. In the years ended December 31, 2012 and 2013 and in our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2014, the comparative period financial information was changed in order to make it comparable with the current period presented. The financial information of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2011 disclosed in this offering memorandum have been derived from the comparative prior period information for the year ended December 31, 2011 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012; and the financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 disclosed in this offering memorandum have been derived from the comparative prior period information for the year ended December 31, 2012 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The financial information of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 disclosed in this offering memorandum have been derived from the comparative period information for the nine months ended September 30, 2013 included in the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2014. As a result,

xii the following businesses were classified as discontinued operations in the financial statements for the periods indicated with comparative balances revised to present the same discontinued operations as in the subsequent period: • Consolidated financial statements as of and for the nine months ended September 30, 2014: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2013: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2012: Charter Business. • Consolidated financial statements as of and for the year ended December 31, 2011: Fast Ferries Business. The Fast Ferries Business was reclassified as a continuing operation in the 2012 financial statements and the 2011 comparative balance was restated. The Fast Ferries Business no longer met the criteria to be classified as a discontinued operation even though we still intended to sell the Fast Ferries Business. The original audit reports for the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the years ended December 31, 2011, 2012 and 2013 were each issued on the statutory annual report in Norwegian containing the Board of Directors’ report and reports on Corporate Social Responsibility and Corporate Governance, in addition to the financial statements both for Hurtigruten and its subsidiaries and Hurtigruten on a stand-alone basis. Due to the changing nature of our continuing and discontinued operations in each of the years from 2008 to 2010, data relating to our Hurtigruten Norwegian Coast segment for the years ended December 31, 2008, 2009 and 2010 disclosed in this offering memorandum are based on the comparative period information in our audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the years ended December 31, 2009, 2010 and 2011, respectively. In addition, the comparative period information for 2008 in our audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2009 reflects a change in our segmental reporting. This change in segmental reporting was not reflected in our financial statements for 2007 and accordingly, data relating to the growth of our Hurtigruten Norwegian Coast segment between the year ended December 31, 2007 and the year ended December 31, 2008 in this offering memorandum are based on our financial statements in the years ended December 31, 2007 and 2008, respectively, and not the comparative period information for 2007 and 2008 presented in the financial statements for the subsequent years. The financial information presented herein for the twelve months ended September 30, 2014 is derived by adding the unaudited condensed consolidated interim financial information of Hurtigruten and its subsidiaries for the nine months ended September 30, 2014 to the audited consolidated financial statements of Hurtigruten and its subsidiaries for the year ended December 31, 2013 and subtracting the unaudited condensed consolidated interim financial information of Hurtigruten and its subsidiaries for the nine months ended September 30, 2013. The summary financial information of Hurtigruten and its subsidiaries for the twelve months ended September 30, 2014 presented herein is not required by or presented in accordance with IFRS or generally accepted accounting principles. It has been prepared for illustrative purposes only and is not necessarily representative of our results for any future period or our financial condition at any such date. The financial statements of Hurtigruten and its subsidiaries included in this offering memorandum have not been adjusted to reflect the impact of any changes to the income statements, balance sheet or cash flow statements that might occur as a result of purchase accounting adjustments to be applied as a result of the Hurtigruten Acquisition. The Company will account for the Hurtigruten Acquisition using the acquisition method of accounting under IFRS, which will affect the comparability of the Company’s audited consolidated financial statements with the financial information contained in this offering memorandum. Under IFRS 3 (Business Combinations) the cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred and the equity interests issued by the acquirer, including the fair value of any contingent consideration. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair market values at the Hurtigruten Tender Offer Settlement Date. The excess of the consideration transferred over the fair value of the acquirer’s share of the identifiable net assets acquired is recorded as goodwill. In accordance with IFRS, we have up to twelve months from the Hurtigruten Tender Offer Settlement Date to finalize the allocation of the purchase price.

xiii Our consolidated financial information is presented in Norwegian kroner. Rounding adjustments have been made in calculating some of the financial and other information included in this offering memorandum. As a result, figures shown as totals in some tables and charts may not be exact arithmetic aggregations of the figures that precede them. Other Financial Measures Throughout this offering memorandum, we present certain non-IFRS financial measures and adjustments that are not presented in accordance with IFRS, or any other internationally accepted accounting principles, including EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA, Normalized Adjusted EBITDA margin, capital expenditure, Normalized capital expenditure, Normalized change in net working capital, Normalized profit margin, Normalized total revenues and Pro forma Normalized Adjusted EBITDA. We have defined each of the following non-IFRS financial measures as follows: “Capital expenditure” is purchases of property, plant and equipment and purchases of intangible assets for the relevant period. “EBITDA” is profit/(loss) from continuing operations for the relevant period before the share of profit/(loss) of associates, net finance expense, depreciation and amortization, impairment (loss)/ reversal and income tax expense from continuing operations. “Gross cruise costs” represents ship operating costs and selling, general and administrative expenses. “Gross ticket revenues” represents ticket revenues, revenues from flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger revenues, including car transportation, travel insurance and retained deposits in cases of cancellations. “Net cruise costs” represents Gross cruise costs less commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. “Net ticket revenues” represents Gross ticket revenues less commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. “Normalized capital expenditure” is capital expenditure for the relevant period as adjusted to exclude capital expenditure for the relevant period relating to all Normalized Discontinued Operations and insurance proceeds received in connection with the fire in 2011 on MS Nordlys. “Normalized change in net working capital” is change in net working capital for the relevant period as adjusted to exclude change in net working capital for the relevant period relating to all Normalized Discontinued Operations and the reversal of a receivable amount due to a ruling by the ESA which required us to pay back to the Norwegian government certain revenues recorded under the Former Coastal Service Contract. “Normalized Adjusted EBITDA” is Normalized EBITDA for the relevant period adjusted for certain extraordinary charges, costs and non-cash items. “Normalized Adjusted EBITDA margin” is Normalized Adjusted EBITDA divided by Normalized total revenue for the period. “Normalized EBITDA” is EBITDA for the relevant period as adjusted to exclude EBITDA for the relevant period relating to all Normalized Discontinued Operations. “Normalized profit margin” is profit/(loss) for the period divided by Normalized total revenues. “Normalized total revenues” is total revenues for the relevant period as adjusted to exclude total revenues for the relevant period relating to all Normalized Discontinued Operations. “Pro forma Normalized Adjusted EBITDA” is Normalized Adjusted EBITDA for the twelve months ended September 30, 2014 as adjusted to (x) exclude the impact of foreign exchange fluctuations during that period, (y) include certain additional costs that we expect to incur on an on-going basis and (z) reflect the run-rate effects of cost saving and revenue generation initiatives that were commenced but not fully implemented during that period. The normalized financial information that appears in this offering memorandum has been adjusted to exclude the results of operations, in each period, of all of our Discontinued Operations, in order to allow investors to compare our historical results of operations as they relate to our continuing operations as of September 30, 2014. As a result, the normalized financial information of Hurtigruten and its subsidiaries in this offering memorandum excludes the following results in the periods indicated:

xiv • Year ended December 31, 2011: excludes results relating to our Bus Business and Fast Ferries Business. • Year ended December 31, 2012: excludes results relating to our Fast Ferries Business. • Year ended December 31, 2013, the nine months ended September 30, 2013 and 2014 and the twelve months ended September 30, 2014: excludes results relating to our Fast Ferries Business and Charter Business. We have presented these non-IFRS financial measures (i) as they are used by our management to monitor and report to our board members on our financial position for outstanding debt and available operating liquidity and (ii) to represent similar measures that are widely used by certain investors, securities analysts and other interested parties as supplemental measures of financial position, financial performance and liquidity. We believe these measures enhance the investor’s understanding of our indebtedness and our ability to fund our ongoing operations, make capital expenditure and meet and service our obligations. We have also presented adjusted debt and pro forma interest expense measures, as we believe these measures more appropriately reflect to investors the financial position of and cost of debt to Hurtigruten in light of the Refinancing Transactions. However, these non-IFRS financial measures are not measures of performance under IFRS, or other generally accepted accounting principles, and investors should not consider such items as an alternative to the historical financial position or other indicators of our cash flow, nor are such measures meant to be predictive of the company’s future results. The non-IFRS financial measures, as defined by us, may not be comparable to similarly titled measures as presented by other companies due to differences in the way our non-IFRS financial measures are calculated. The non-IFRS financial information contained in this offering memorandum is not intended to comply with the reporting requirements of the SEC and will not be subject to review by the SEC. Even though the non-IFRS financial measures are used by management to assess Hurtigruten’s financial position and these types of measures are commonly used by investors, they have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our position or results as reported under IFRS. For example, some of the limitations of Normalized Adjusted EBITDA, Pro forma Normalized Adjusted EBITDA and other EBITDA-related measures include the following: • they exclude certain tax payments that may represent a reduction in cash available to us; • they do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; • they do not reflect changes in, or cash requirements for, our working capital needs; and • they do not reflect the significant interest expense, or the cash requirements necessary to service interest payments on our debts.

Operational Measures Throughout this offering memorandum, we present certain key operational performance measures with respect to our Hurtigruten Norwegian Coast and our MS Fram segments. We have defined each of the following operational measures as follows: “Available passenger cruise nights”or“APCNs” is our measurement of capacity and represents the aggregate number of available berths on each of our ships (assuming double occupancy per cabin), multiplied by the number of operated days for the relevant ship for the period. “Occupancy rate” represents our PCNs for the relevant period as a percentage of our APCNs for the period. “Passenger cruise nights”or“PCNs” is our measurement of guest volume and represents the number of guests onboard our ships and the length of their stay.

Ship Valuation Data In August 2014, V.Ships Leisure SAM (“V.Ships”) prepared a valuation of our ships (the “Valuation Report”). V.Ships prepared a market valuation of each of our 10 owned ships based on estimated market value (the “Market Value”) and an estimated replacement valuation (the “Replacement Value”) of the following eight owned ships: MS Kong Harald, MS Nordkapp, MS Polarlys, MS Nordnorge, MS Finnmarken, MS Trollfjord, MS Midnatsol and MS Fram (together, the “Replacement Value Ships”). Due to the age of MS Lofoten and MS Vesterålen, which are our smallest two ships, a Replacement Value has not been provided for these owned ships.

xv V.Ships has estimated an individual Market Value for each of our 10 owned ships. The Market Value of each ship is based on adjustments made to the certificates of valuation provided by Octagon Shipping, an independent ship broker (the “Broker Valuation”). These adjustments reflect a technical assessment made by V.Ships based on various factors, including V.Ships’s assessment of: • the build date of the ship, alternative usage and remaining life of the ship; • the vessel type, navigation type and ice class of each ship; • classification records of each ship and a physical assessment of selected ships; • prior damage to the relevant ship (if any); • the dry-docking schedule for the relevant ship; and • the amount of capital expenditures estimated to be required for dry-docking, routine repair and maintenance and other expenses in relation to compliance with relevant regulatory requirements, including expenses in connection with the 305 Classification, that are expected to be required over the next five years for each ship.

The Broker Valuation of each ship has been adjusted to reflect the estimated market value of each ship after taking account of the specific characteristics of each ship and the expected capital expenditures required to comply with relevant regulations and to continue operation of the ship for its intended purpose.

V.Ships has estimated an individual Replacement Value for each of our eight Replacement Value Ships. The Replacement Value is based on V.Ship’s estimate of current shipbuilding costs for building a similar ship as of the date of the Valuation Report based on amounts charged by certain European shipyards to build ships of similar size and purpose.

Although V.Ships has stated that they have sufficient current knowledge of the ship market and industry, and have the skills and understanding to undertake the valuations competently and consistent with normal industry practice, neither V.Ships, nor any person acting on V.Ships’ behalf, makes any warranty, express or implied, or assumes any liability with respect to the reliance upon or use of any information or analysis disclosed in the Valuation Report. Any opinions or conclusions reached in the Valuation Report are dependent upon a number of assumptions and economic conditions that may or may not occur and a number of forward-looking estimates that may not be correct. In addition, the Valuation Report is based, in part, on information provided by third parties in relation to market values and estimated shipbuilding costs. You should not, and are not entitled to, rely upon the valuation taken from the Valuation Report and reported herein for the purposes of making, or refraining from making, any investment decision. V.Ships has agreed to the inclusion of these valuations only on the basis that you agree that you will use, or rely on, the reported valuations at your own risk and without recourse to V.Ships, who neither owe nor accept any duty to you in connection thereto and shall not be liable to you for any loss, damage, cost or expense of whatsoever nature which is caused by your use of, or reliance on, the reported valuations.

All conclusions presented in the Valuation Report are based on information available at the time of review. Changes in factors upon which the review was based could affect the reported conclusions. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen, including the actions of governments, individuals, third parties and competitors. See “Forward Looking Statements.” Data based on the Valuation Report that is included in this offering memorandum involves risks and uncertainties and is subject to change based on a variety of external factors, including those discussed in “Risk Factors.”

The extracts from the Valuation Report shown within this document are presented for information purposes only by agreement with V.Ships on the assumption that no reliance may be placed on the Valuation Report or the summary information shown herein by any party other than the addressees of the Valuation Report.

xvi INDUSTRY AND MARKET DATA

Unless otherwise indicated, statements in this offering memorandum regarding the market environment, market developments, growth rates, market trends and the competitive situation in the markets and segments in which we operate are based on data, statistical information, sector reports and third-party studies as well as on our own estimates.

In drafting this offering memorandum, we used industry sources, including reports prepared by the Cruise Lines International Association (“CLIA”), Cruise Norway, V.Ships Leisure SAM, the World Tourism Organization, the United Nations, the International Monetary Fund (“IMF”), the Adventure Travel Trade Association and Cruise Industry News.

To the extent that information was taken from third parties, such information has been accurately reproduced by us in this offering memorandum and, as far as we are aware and able to ascertain from the information published by these third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, market studies and analyses are frequently based on information and assumptions that may not be accurate or technically correct, and their methodology may be forward-looking and speculative.

We have not verified the figures, market data and other information used by third parties in our studies, publications and financial information, or the external sources on which our estimates are based. We therefore assume no liability for and offer no guarantee of the accuracy of the data from studies and third-party sources contained in this offering memorandum or for the accuracy of third-party data on which our estimates are based.

This offering memorandum also contains estimates of market data and information derived from such data that cannot be obtained from publications by market research institutes or from other independent sources. Such information is partly based on our own market observations, the evaluation of industry information or internal assessments. We believe that our estimates of market data and the information we have derived from such data helps investors to better understand the industry in which we operate and our position within it. Our own estimates have not been checked or verified externally. While we assume that our own market observations are reliable, we give no warranty for the accuracy of our own estimates and the information derived from them. They may differ from estimates made by our competitors or from future studies conducted by market research institutes or other independent sources. While we are not aware of any misstatements regarding the industry or similar data presented herein, such data involves risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this offering memorandum. As a result, neither we nor the Initial Purchaser make any representation as to the accuracy or completeness of any such information in this offering memorandum.

xvii EXCHANGE RATES

The following tables set out, for the periods set forth below, the high, low, average and period-end Bloomberg Generic Rate expressed as $1.00 per €1.00, NOK 1.00 per €1.00 and NOK 1.00 per $1.00, respectively. The Bloomberg Generic Rate is a “best market” calculation, in which, at any point in time, the bid rate is equal to the highest bid rate of all contributing bank indications and the ask rate is set to the lowest ask rate offered by these banks. The Bloomberg Generic Rate is a mid-value rate between the applied highest bid rate and the lowest ask rate. The rates may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this offering memorandum. None of the Company, the Guarantors or the Initial Purchaser represents that the U.S. dollar, euro or Norwegian kroner amounts referred to below could be or could have been converted into the other currencies referred to below at any particular rate indicated or any other rate.

The average rate for a year, a month, or for any shorter period, means the average of the daily Bloomberg Generic Rates during that year, month, or shorter period, as the case may be.

Period end Average High Low (U.S. dollar per €) Year 2011 ...... 1.2961 1.3926 1.4830 1.2907 2012 ...... 1.3193 1.2860 1.3458 1.2061 2013 ...... 1.3743 1.3285 1.3802 1.2780 2014 ...... 1.2098 1.3285 1.3934 1.2098 2015 (through February 24, 2015) ...... 1.1340 1.1502 1.2002 1.1204

Period end Average High Low (U.S. dollar per €) Month August 2014 ...... 1.3132 1.3314 1.3427 1.3132 September 2014 ...... 1.2631 1.2895 1.3150 1.2631 October 2014 ...... 1.2525 1.2682 1.2838 1.2516 November 2014 ...... 1.2452 1.2475 1.2554 1.2375 December 2014 ...... 1.2098 1.2307 1.2511 1.2098 January 2015 ...... 1.1291 1.1607 1.2002 1.1204 February 2015 (through February 24, 2015) ...... 1.1340 1.1372 1.1481 1.1316

Period end Average High Low (NOK per €) Year 2011 ...... 7.7423 7.7982 7.9652 7.5215 2012 ...... 7.3423 7.4773 7.7167 7.2697 2013 ...... 8.3436 7.8119 8.5245 7.2893 2014 ...... 9.0162 8.3612 9.3077 8.0982 2015 (through February 24, 2015) ...... 8.6048 8.7890 9.2114 8.5665

Period end Average High Low (NOK per €) Month August 2014 ...... 8.1400 8.2502 8.4249 8.1375 September 2014 ...... 8.1162 8.1849 8.2990 8.1068 October 2014 ...... 8.4561 8.3112 8.4725 8.1402 November 2014 ...... 8.7549 8.5065 8.7549 8.4356 December 2014 ...... 9.0162 8.9846 9.3077 8.6514 January 2015 ...... 8.7269 8.9227 9.2114 8.6972 February 2015 (through February 24, 2015) ...... 8.6048 8.6238 8.7115 8.5565

xviii Period end Average High Low (NOK per U.S. dollar) Year 2011 ...... 5.9751 5.6067 6.0268 5.2454 2012 ...... 5.5648 5.8184 6.1232 5.5569 2013 ...... 6.0713 5.8782 6.2516 5.4550 2014 ...... 7.4520 6.3083 7.8745 5.8491 2015 (through February 24, 2015) ...... 7.5880 7.6413 7.8315 7.5413

Period end Average High Low (NOK per U.S. dollar) Month August 2014 ...... 6.1975 6.1966 6.2794 6.1356 September 2014 ...... 6.4261 6.3480 6.4580 6.1874 October 2014 ...... 6.7510 6.5535 6.7510 6.4434 November 2014 ...... 7.0304 6.8191 7.0431 6.7169 December 2014 ...... 7.4520 7.3017 7.8745 6.9170 January 2015 ...... 7.7291 7.6881 7.8315 7.5532 February 2015 (through February 24, 2015) ...... 7.5880 7.5836 7.6495 7.5413

xix SUMMARY

This summary highlights information contained elsewhere in this offering memorandum and does not contain all the information that may be important to prospective investors and it is qualified in its entirety by the remainder of this offering memorandum. Prospective investors should carefully read this offering memorandum in its entirety, including the consolidated financial statements and interim consolidated financial statements, included elsewhere in this offering memorandum, as well as the “Description of the Notes” and the other considerations in the Notes outlined under “Risk Factors” and “Forward-Looking Statements.”

Overview We are a cruise line, local transport, cargo shipment and exploration tourism operator centered around the Norwegian coast as well as Polar waters. We have been providing our services along the Norwegian coast since 1893. Originally established to provide transportation services linking the south of Norway to the inaccessible parts of the north, the earliest Hurtigruten ships transported cargo and local passengers between ports. As a result of our long-established presence, public service origins and association with a long and naturally distinct coast line, we believe that we are one of Norway’s most recognized brands.

Today, our business operations are divided into three product segments: Hurtigruten Norwegian Coast, MS Fram and Spitsbergen Travel.

Our Hurtigruten Norwegian Coast segment is our largest segment, accounting for 84.9% of our total revenues from continuing operations in the twelve months ended September 30, 2014. 11 of our 12 ships provide services along the Norwegian coast under this segment, making 34 northbound and 33 southbound daily departures from ports located between Bergen in the south and Kirkenes in the north. Freight and passenger transport remain an important part of our offering, which includes basic transport infrastructure, carrying cargo and local residents across shorter distances, and for which we receive a fixed fee from the Norwegian government each year under an exclusive contract that expires on December 31, 2019 (the “Coastal Service Contract”). We leverage this vessel schedule and infrastructure to offer distinct expedition based services and activities to leisure seekers through our cruise voyage products. The ships that we use to provide local transport services and cargo shipments are also used to offer exploration based voyages for leisure travelers, including a high proportion of international guests. Unlike the traditional cruise ships of the Mediterranean or the Caribbean, our ships operate as both “working” ships and “cruise” ships, all while showcasing Norwegian nature and local culture, which we believe is a differentiated offering compared to traditional cruise operators. For the twelve months ended September 30, 2014, we generated NOK 744.5 million, or 20.8% of our total revenues, under the Coastal Service Contract.

Our second largest segment, the MS Fram segment, accounted for 9.7% of our total revenues from continuing operations in the twelve months ended September 30, 2014 and consists of our MS Fram explorer ship, which takes our guests on distinct Polar voyages year-round in Antarctic, Spitsbergen and Greenland waters.

Our Spitsbergen Travel segment comprises our activities in Spitsbergen, where we operate three hotels as well as an equipment store and a host of tourist activities. This segment accounted for 5.5% of our total revenues from continuing operations in the twelve months ended September 30, 2014.

Our Other segment comprises a number of non-core operations which have been discontinued. Therefore, we do not describe our Other segment in this offering memorandum; however, unless otherwise indicated, our historical financial data includes the results of our Other segment for the periods presented in this offering memorandum before such non-core operations were discontinued.

1 Our Strengths Positive industry fundamentals in a growing market Our business benefits from favorable underlying market drivers, including growth in the tourism market and the increased proportion of cruises in the overall tourism market, particularly in Europe, as well as the increased popularity of Norway as a cruise destination. According to CLIA, passenger volumes in the global cruise market grew at a CAGR of 5.5% per year from the year ended December 31, 2008 to the year ended December 31, 2013, compared to a CAGR of 3.2% for the tourism industry as a whole during the same period, according to tourist arrivals data from the World Tourism Organization. The number of cruise passengers originating from Europe grew at a CAGR of 7.4% from the year ended December 31, 2008 to the year ended December 31, 2013, according to CLIA. The higher growth in the cruise market reflects the increasing proportion of cruises in the tourism market, especially in Europe. Based on cruise passenger data from CLIA and population data from the United Nations, the proportion of the European population taking a cruise holiday more than doubled between the year ended December 31, 2003 and the year ended December 31, 2013, from 0.4% to 0.9%. We believe the potential for future growth can be illustrated by comparison to the North American market, where the proportion of the population taking a cruise holiday is higher than in Europe and is continuing to grow. In North America, the proportion of the population taking a cruise holiday increased by approximately 30% from 1.9% to 2.5% between the year ended December 31, 2003 and the year ended December 31, 2013, based on cruise passenger data from CLIA and population data from the United Nations.

The increased popularity of Norway as a cruise destination is evidenced by the increased number of foreign cruise passengers visiting Norway, which grew at a CAGR of 10.2% from the year ended December 31, 2008 to the year ended December 31, 2013, according to Cruise Norway. We believe that this growth has been stimulated by the increased awareness of the Norwegian coast as a place of natural beauty, and therefore as an attractive destination for nature-based tourism and exploration.

As a long-established Norwegian transport infrastructure provider, we have been able to leverage our operating model to offer a distinct expedition experience and a wide range of land-based excursions and activities. We have maintained the public service component of our offering, while developing our offering of exploration based voyages on our smaller ships that offer more direct access to nature and interaction with local culture.

We believe that the nature of our offering differentiates us from conventional cruise operators and attracts travelers seeking adventure nature-based vacations and local cultural experiences, which we believe is an attractive segment of the market.

In addition, over 70% of our guests in the twelve months ended September 30, 2014, were 50 years of age or older. As a result, we are positioned to benefit from the demographic trend of aging populations, particularly in Western Europe, which is a key customer market for us in terms of our existing client base.

Differentiated competitive positioning and high barriers to entry We believe that our product offering is distinct from the offering provided by large cruise operators and is designed to target a customer segment not fully served by other operators. Rather than offering cruises to classic tourist spots on a “floating hotel” style cruise liner, we aim to provide our guests with an opportunity to visit areas of natural beauty and to experience local culture through “expedition” style voyages to more remote, natural Polar regions. Our main Hurtigruten Norwegian Coast offerings attempt to appeal to guests who prefer to be “closer to nature” and who value “authentic” Norwegian experiences over the experiences provided by conventional cruises. Our smaller ships can be more easily maneuvered and therefore allow us to get closer to the coast and the sites of natural beauty that our guests seek, and our itinerary of 34 port calls throughout Norway provides guests with an opportunity to interact with local culture and enjoy a wide range of land-based excursions and activities, including in remote parts of northern Norway.

2 In addition to our Norwegian coastal voyage offerings, our MS Fram segment offers the opportunity to travel on our purpose-built ship and participate in expeditions in remote Polar waters around Svalbard (an archipelago on the border of the Arctic Ocean and the Norwegian Sea), Greenland and Antarctica year-round. Our hotel operations in Svalbard offer guests opportunities to go dog-sledding, cross-country skiing, kayaking, snowmobiling, sample local foods and observe the Svalbard flora and fauna (including polar bears, walruses, seals and arctic birds). We believe these offerings appeal to our more adventurous guests, who are seeking to try new, exciting activities and experiences.

Our Hurtigruten brand, which the New York Times called “one of Norway’s treasured national symbols,” has been cultivated over our 120-year history and draws upon our Norwegian heritage, enhancing our credentials with customers seeking authentic Norwegian cruise experiences. We believe that our brand has high recognition in our key markets, such as the Nordic countries and Germany. We believe that, based on our strong brand recognition and authentic, adventurous product offering, a large proportion of our guests would not view a cruise with a large cruise operator as an alternative to our voyages.

Our competitive position is supported by high barriers to entry in the exploration and nature-based tourism markets, especially for cruises. We have invested a significant amount in our fleet of 12 small cruise ships, which are specially designed to serve our distinctive product offering. Any new entrant into our market, seeking to provide expedition and nature-based tourism services, would need to make substantial investments in similar small ships before it could compete with our product offering. Based on the current terms of our Coastal Service Contract, we believe a full fleet of 11 ships would be required to provide the services stipulated by the contract, and few industry players would have such a fleet, or our long established history and brand recognition.

Resilient revenues, EBITDA and cash flow generation Our Normalized total revenues and Normalized Adjusted EBITDA have increased over recent years, and we had Normalized total revenues of NOK 2,859.5 million, NOK 3,262.6 million and NOK 3,303.7 million in the years ended December 31, 2011, 2012 and 2013, respectively. In addition, we had Normalized Adjusted EBITDA of NOK 210.0 million, NOK 524.6 million and NOK 565.0 million in the years ended December 31, 2011, 2012 and 2013. In addition to benefiting from the underlying growth in the European and Norwegian cruise markets during this period, we believe that this resilience can be attributed to a number of factors, including the relative economic stability of the countries from which we draw most of our guests and the infrastructure-like qualities of the local transportation service provided under our Coastal Service Contract, under which we receive a fixed fee, regardless of passenger volumes, and which accounted for 20.8% of our Normalized total revenues for the twelve months ended September 30, 2014 and 11.4%, 19.0% and 23.0% of our Normalized total revenues for the years ended December 31, 2011, 2012 and 2013, respectively.

3 The following charts show the nationality of our guests per PCN and the age range of our guests per PCN in the twelve months ended September 30, 2014:

Nationality of our guests per PCN Age of our guests per PCN

Other, 9% > 80 yrs Netherlands, 6% < 40 yrs 3% 18%

France, 4% Germany, 32% 70-79 yrs Switzerland, 20% 4%

Swed/Den/Fin, 5% 40-49 yrs 10%

US, 6%

UK, 14% 50-59 yrs 60-69 yrs 19% Norway, 22% 27%

As illustrated above, the majority of our guests are 50 years of age or older and are based in a number of countries with generally strong economies, including Germany, Norway, the United Kingdom and the United States. As a result, we draw guests from a variety of countries and economies, and we are not reliant on any single economy to drive our business. In addition, the older demographic profile of our guests, who tend to be retired or semi-retired and have more stable spending power because of their fixed pensions and accumulated savings, means that our guests should tend to be less affected by periods of economic downturn.

We believe that our Hurtigruten Norwegian Coast segment was more resilient during the recent economic downturn compared to select large cruise operators with operations in Norway, based on publicly available information of such competitors. During the period from 2007 to 2010, this segment only experienced a decline in revenues excluding revenues from the Former Coastal Service Contract (“non-contractual revenues”) in one year. Specifically, non-contractual revenues generated by our Hurtigruten Norwegian Coast segment increased by 3.2% in 2008 compared to 2007, decreased by 8.0% in 2009 compared to 2008 and increased by 4.2% in 2010 compared to 2009. The decline in non-contractual revenues for our Hurtigruten Norwegian Coast segment in 2009 compared to 2008 is attributable to a number of factors, including a 5% decrease in PCNs for our coastal voyage guests and a 10% decrease in PCNs for our port-to-port guests.

Our Hurtigruten Norwegian Coast operating profit before depreciation for the years ended December 31, 2008, 2009 and 2010 was NOK 227.7 million (resulting in a margin of 9.1% of Hurtigruten Norwegian Coast segment revenues), NOK 247.6 million (resulting in a margin of 10.8% of Hurtigruten Norwegian Coast segment revenues) and NOK 258.6 million (resulting in a margin of 10.9% of Hurtigruten Norwegian Coast segment revenues), respectively. Operating profit before depreciation for our Hurtigruten Norwegian Coast segment increased in the year ended December 31, 2009, despite a decline in revenue in that year, demonstrating resilience in this segment. Among other things, this was due to a significant reduction in certain operating costs in 2009, including a 5.1% decrease in payroll costs and an 11.7% decrease in certain other operating costs, including bunker fuel costs, which decreased during the recent economic downturn.

Since December 2012, we have been implementing a number of administrative and operational cost saving initiatives in connection with our Efficiency Improvement Program. Many of the measures we have implemented as part of the Efficiency Improvement Program have sought to streamline our operations and central functions in order to enhance our operational efficiency and profitability and to position us to achieve our growth strategies in the future. As a result, our Normalized total revenues and Normalized Adjusted EBITDA have consistently increased each year since 2011.

4 Revenue visibility We accept bookings for our Hurtigruten Norwegian Coast and MS Fram segments up to 27 months in advance, and our Spitsbergen hotels accept reservations up to 30 months in advance. We typically require our guests to pay a non-refundable deposit ranging from 10% to 30% of the total amount payable at the time the booking is made. Our advanced customer bookings provide us with visibility into near term revenue across our business segments. Moreover, the payment of the non-refundable deposit reduces the risk of cancellation. The balance is typically payable 30 to 60 days in advance of the commencement of our product offering. In the twelve months ended September 30, 2014, 34.7% and 76.4% of our reservations for our Hurtigruten Norwegian Coast products and MS Fram products, respectively, were made six months or more in advance of the month of the departure date. As of December 31, 2014, our pre-bookings for the next twelve months in terms of PCNs for the Hurtigruten Norwegian Coast segment were 9.2% higher than our pre-bookings for the next twelve months for the Hurtigruten Norwegian Coast segment were as of December 31, 2013.

The following charts show, for each of our Hurtigruten Norwegian Coast and MS Fram segments, pre- bookings in terms of value for the next twelve months as of December 31, 2013 and December 31, 2014:

Hurtigruten Norwegian Coast MS Fram

1,200 1,169 300 290 +18.9% +16.6% Using exchange rates 1,150 Using exchange rates 275 as of December 31, 2014 1,100 as of December 31, 2014 1,050 250

1,000 +9.0% At constant currency +6.3% At constant currency 225 950 versus prior year versus prior year 244 900 1,003 1,067 200 265 850 800 175 Pre-bookings for the next Pre-bookings for the next Pre-bookings for the next Pre-bookings for the next twelve months as of twelve months as of twelve months as of twelve months as of December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014

Well invested and fit for purpose asset base We own 10 of the 12 ships we operate. The ships in our fleet were primarily built from the 1990s onwards and according to the Valuation Report prepared by V.Ships, our 10 owned ships have a combined estimated market value of approximately €292 million to €311 million and a total estimated replacement value of €750 million to €820 million as of August 2014. See “Presentation of Financial and Other Information—Ship Valuation Data.” Our ships have between 10 and 35 years of working life remaining, except for our smallest ship, MS Lofoten, which we expect to continue to operate for the duration of the Coastal Service Contract. Our fleet is suitable for Polar waters and our expedition-based activities and the number, size and range of capabilities of our purpose-built ships operating along the Norwegian coast are well-suited to our business objectives and distinct offering, including delivering the services we provide under the Coastal Service Contract, thus strengthening our position as the incumbent operator under such government contract. Our ship, MS Fram, is purpose-built, specially designed and fitted for expedition voyages. Furthermore, based on our occupancy rate of 62.3% for our Hurtigruten Norwegian Coast segment for the twelve months ended September 30, 2014, we have the potential to increase PCNs without incurring significant development capital expenditures. We also own the buildings and leasehold interests in the land with respect to our three hotels in Spitsbergen.

Qualified and experienced management team Our CEO, Daniel Skjeldam, and his team successfully began a transformation of our business in 2012, which has since continued. Mr. Skjeldam was recently recognized for his efforts and was awarded Best leader in the travel industry in the Norwegian Grand Travel Awards 2015. Amongst other initiatives, members of our current management team have devised and implemented our Efficiency Improvement Program, which we introduced in December 2012. Since his appointment in October 2012, Mr. Skjeldam has continued to develop our management team with the appointment of, among others, Magnus Wrahme, our Senior Vice President Global Sales, in April 2013, who was subsequently appointed as our Chief Commercial Officer in April 2014 and Svein Taklo, our Chief Operational Officer and Senior Vice President of Maritime Operations, who was appointed in May 2014. In addition, during

5 2013, a number of new divisional managers were appointed to drive implementation of our new strategy and Efficiency Improvement Program. Our seven-person senior management team has a combined experience of 106 years in the tourism and maritime transportation sector industries and has a well-balanced mix of strategic leadership and organizational development expertise, industry experience and financial management skills. Our senior management team is supported by a strong team of operational managers. Drawing upon substantial operational and managerial expertise from within the cruise sector and other leisure sectors, our management team has realigned our strategy to focus on cost discipline and brand differentiation, positioning us for growth in the expedition market going forward.

Our Strategy Our primary strategy is the profitable organic growth of our business, which we intend to achieve by focusing on the following strategic objectives:

Operational initiatives capturing substantial margin benefits Our Normalized Adjusted EBITDA has increased by 27.6% from NOK 524.6 million in the year ended December 31, 2012 to NOK 669.5 million in twelve months ended September 30, 2014. The ongoing implementation of our four-phase Efficiency Improvement Program since December 2012 has been a key driver underlying such increase. We have established a strong operational focus on cost control and have introduced a number of administrative and operational cost saving initiatives, which sought to streamline our operations and central functions in order to enhance our operational efficiency and profitability and to position us to be able to achieve our growth strategies in the future. For example, in order to reduce costs and drive margins in our key markets and regions, we have introduced a new cost-effective infrastructure by relocating our headquarters, centralizing various administrative functions, reorganizing our global sales and marketing offices and our Customer Reservation Call Center in Tallinn, divesting certain non-strategic assets and developing and upgrading our IT operating platforms. As a result of our Efficiency Improvement Program, our operational costs have declined substantially since 2012, and for the twelve months ended September 30, 2014, we achieved total efficiency improvements of NOK 96.5 million in connection with the Efficiency Improvement Program.

In December 2013, we commenced the implementation of several new cost saving measures as part of phase four of our Efficiency Improvement Program. These initiatives include improved procurement processes, as well as measures designed to enhance our bunker fuel efficiency. The new procurement processes involve the introduction of a purchasing framework designed to align procurement contract pricing with prevalent, competitive market pricing for various procurement inputs. The bunker fuel efficiency measures primarily consist of cleaning the exterior of each of our ships to remove debris annually, which will reduce drag, as well as operating our ships at a more fuel efficient speed. In addition to the cost saving measures discussed above, we have also implemented a number of revenue generating measures including offering a wider selection of dining options including an à la carte menu in our restaurants, increasing the number of points of sale and suggesting room upgrades to passengers at the time of booking. Phase four of our Efficiency Improvement Program is expected to be fully implemented by mid-2015. We expect that the preliminary results of these initiatives will be reflected in our operating results for 2015 and the full effect will be reflected in our operating results for 2016.

Expand our customer base to drive revenue growth We carried approximately 84,765 coastal voyage guests (guests travelling more than five nights) in the twelve months ended September 30, 2014. We seek to increase occupancy rates by using our flexible pricing model to attract guests year round. A high proportion of our operating costs, particularly those which relate to the operation of our ships, are fixed. As a result, we are positioned to leverage our fixed cost base to increase profitability by increasing our utilization rates without a corresponding increase in our cost base. By optimizing excess capacity on board our ships, we can maximize our net revenues without substantial new investments. In recent years we have developed various seasonal concepts to complement our peak season theme, including, “Autumn Gold” in the fall, “Hunting the Light” in the winter and “Arctic Awakening” in the spring. We use such seasonal concepts to attract customers seeking a distinct travel and expedition experience that is only available during specific times of the year. Such specialty marketing campaigns and seasonal itineraries seek to expand our existing offering and to increase demand during non-peak seasons without incurring additional costs.

6 We also seek to expand the number of our guests through our marketing activities and to increase awareness of our distinct explorer based brand proposition. We are taking steps to achieve this by: • continuing to seek new guests in non-European geographies, where there is demand for exploration style activities, such as through our new sales and marketing office in Seattle, Washington, which services North America and which we opened in January 2014; • improving our marketing materials to appeal to customers, through emphasizing our explorer based brand proposition, the vast range of activities we offer and the distinct geographies in which we operate; and • strengthening our position as a key player in the Norwegian tourism market by working with local travel, trade and government agencies to develop Norwegian tourism and market the country internationally. We plan to continue working with local travel, trade and government agencies to increase the number of direct international flights to coastal destinations in Norway in order to encourage growth in the short-break market and to make our products along the Norwegian coast more easily accessible.

Enhance our product offering One of the key goals of our Efficiency Improvement Program has been to drive operational efficiencies in order to rationalize our expense base and also to prepare for future growth. We seek to enhance and expand our product offering and increase our number of guests through the following key initiatives: • continuing to use our explorer brand proposition and mindset, particularly with respect to our Hurtigruten Norwegian Coast business segment, in order to position our offerings in the niche Norwegian explorer leisure service industry. By marketing all of our voyages as explorer services, we intend to further distinguish ourselves from traditional cruise and hotel operators. We plan to achieve this by increasing the range of exploration and nature-based activities we offer; • continuing to use our longstanding Norwegian heritage and brand to align our offerings to reflect our Norwegian identity. For example, we intend to continue to serve local food and provide nature and history based lectures onboard our ships; • adding new voyage and expedition itineraries to expand our product offering and encourage repeat business; • extending our existing operations to offer an extended range of expedition activities in new areas on an opportunistic basis. For example, we plan to introduce an expedition voyage exploring the area around Spitsbergen from June to August 2015, which combines a sea voyage with our existing hotel operations in order to expand our product offering and to attract customers through these new offerings; • further developing our land-based activities such as local food tours, bird watching, Lapland (Sami) cultural tours and visits to land-based sights, including glaciers, the North Cape and city tours, and experience and activity-based products in Spitsbergen by focusing on year-round activities and experiences; and • securing incremental revenue through add-on services and improving products and services offered onboard our ships to increase onboard revenues.

Further expansion of our e-commerce channels We aim to reach our customers through our various e-commerce channels, including our websites, mobile platforms, search engine marketing, social media accounts and email communications. We operate seven country-specific versions and one global version of our website, and we have become increasingly focused on digital sales and marketing in recent years. We use our website to update customers and potential customers on our latest product offerings and promotions, and we have significantly increased our traffic to our website through search engine optimization and search engine marketing.

7 Over the course of 2015, we intend to launch a program for digitizing and streamlining our commercial processes in order to increase sales as well as to reduce our sales and distribution costs. Our aim is to increase our overall online sales through self-service solutions, both for travel agents and guests that book directly with us. The first stage of this e-commerce upgrade is expected to become operational during the second half of 2015 and will include a new website designed to increase interaction with users as well as more inspirational content to attract guests, and more effective booking functions. The second stage will introduce other improvements, including personal user profiles for every guest linked with our customer relation management system, which will enable us to directly provide our customers with targeted marketing materials, and enhanced functionality for offering various supplemental packages and additional services before, during and after a voyage. We intend to introduce mobile and tablet applications as part of our digital offering and a function allowing our port-to-port guests to book more quickly.

History The coastline between Bergen and Kirkenes is over 2,400 kilometers long, and prior to the 1890’s the communication between the south and north of Norway was limited, both on land and at sea. Maritime maps were unreliable, and there were only a few lighthouses established, especially in the north. It was essential for the Norwegian government to establish a safe trade and passenger route to link the southern and northern regions of Norway.

Established by Richard With, what is now known as Hurtigruten commenced its operations in 1893 by transporting mail, cargo, local passengers and international tourists along the Norwegian coast. To this day, our ships continue to carry cargo, but the proportion of passengers has steadily increased. We believe that for many locals, as well as being a means of transport, the ships are part of Norwegian tradition and culture. Historically, we established our operations based on public services through the transportation of cargo and provision of public transport. We have continued to provide such public services under our Coastal Service Contract and have used our geographic operations, ships and operating model to create what we believe is a distinct coastal voyage offering, by offering explorer and nature-based voyages to a largely international customer base. We continue to be a transport infrastructure provider, and we have expanded our operations to offer vacation and tourist services through our coastal voyage offering as part of our increasing focus on growing and developing our tourist based business.

A few years after commencing the Hurtigruten Norwegian Coast service in 1893, Richard With established an additional route from the North Cape to Spitsbergen, with the steam ship DS Lofoten. In 1896, he built Spitsbergen’s first hotel in the Advent Fjord, thus taking the first steps towards introducing tourism to the mining and hunting population of Spitsbergen. We now provide these tourism services through our Spitsbergen Travel segment, established in 1988.

In 2002, we entered the expedition segment by offering trips to Antarctica. In 2007, our new purpose-built expedition ship, MS Fram, was completed and embarked on its maiden voyage to Greenland.

In 2006, two shipping companies operating under the Hurtigruten brand, Ofotens og Vesterålens Dampskipsselskab and Troms Fylkes Dampskipsselskab, merged to become Hurtigruten ASA.

In 2008 and 2009, we implemented some initial measures aimed at reducing our operating costs. We integrated our sales office and commenced the process of corporate reorganization. We also divested most of our ferry and fast ferry operations, including a fleet of 45 smaller fast ferries in order to re-focus on our core business of exploration travel and coastal voyages.

In 2009, our shareholder Periscopus initially invested in Hurtigruten. This was followed by an investment by our shareholder Home Capital in 2011.

In 2012 and 2013, our new CEO, Daniel Skjeldam and his team implemented new cost efficiency measures through the introduction of our Efficiency Improvement Program. The program involved the continued disposition of non-core assets, including our Fast Ferries Business and Bus Business.

In December 2014, Hurtigruten and its subsidiaries were acquired by our current shareholders as part of the Hurtigruten Acquisition Transactions. Following the issuance of the Notes, Hurtigruten will be delisted from the Oslo Stock Exchange and will cease to be a publicly traded company. See “—Recent Developments—The Hurtigruten Acquisition and the Hurtigruten Acquisition Transactions.”

8 The Refinancing Transactions The gross proceeds from the Offering are €455.0 million, and was primarily be used to: • repay all outstanding borrowings under the Bridge Facility; and • pay fees and expenses in connection with the transactions contemplated hereby, including the Offering.

See “Use of Proceeds.”

Recent Developments The Hurtigruten Acquisition and the Hurtigruten Acquisition Transactions On December 19, 2014 and December 22, 2014, the Company purchased all the outstanding share capital of Hurtigruten pursuant to the Hurtigruten Tender Offer and the subsequent squeeze-out transaction.

The sources and uses with respect to the Hurtigruten Acquisition Transactions are set forth below:

Sources of Funds Uses of Funds (NOK millions) (€ millions)(1) (NOK millions) (€ millions)(1) Equity purchase price for the Hurtigruten Acquisition ...... 2,895.2 326.7 Repayment of Former Financing Equity contribution(2) . . . 1,826.8 206.1 Arrangements(5) .... 2,616.7 295.3 Transaction expenses and financing Bridge Facility(3) ...... 4,032.4 455.0 fees(6) ...... 222.4 25.1 Termination of former Revolving Credit hedging Facility(4) ...... 250.0 28.2 obligations(7) ...... 311.1 35.1 Impact of foreign currency exchange Cash on hand ...... 94.2 10.7 swap(8) ...... 158.0 17.8 Total sources ...... 6,203.4 700.0 Total uses ...... 6,203.4 700.0

(1) For purposes of this table, the euro and NOK amounts, as applicable, have been translated for convenience only at the rate of €1.00 = NOK 8.8625, which represents the rate of exchange as of January 29, 2015, as published by Bloomberg Generic Rate. (2) Represents the equity contribution made by TDR, the purchase price of the existing stake owned by TDR and the rollover of existing equity owned by Periscopus and Home Capital. (3) On December 16, 2014, we borrowed approximately €133.7 million under the Bridge Facility in connection with the Hurtigruten Tender Offer and to pay certain financing fees. On January 14, 2015, we borrowed €282.4 million under the Bridge Facility in connection with the repayment and cancellation of the Former Financing Arrangements, to terminate our former interest rate swaps, foreign currency exchange swaps and the majority of our bunker fuel swaps as well as to pay certain financing fees. We borrowed an additional €38.9 million under the Bridge Facility on January 22, 2015, in connection with the redemption and discharge of the Former Notes and to pay certain financing fees. As set forth under “Use of Proceeds,” the outstanding borrowings, together with accrued interest and any break costs, under the Bridge Facility will be repaid in full on the Issue Date with the proceeds of the Offering. (4) On January 22, 2015 we borrowed NOK 250.0 million under the Revolving Credit Facility for general working capital purposes, as the first calendar quarter is typically a low point in our cash cycle. Borrowings under the Revolving Credit Facility replaced borrowings under our former revolving credit facility, which was repaid and will provide additional funds to cover the cash payments made in connection with the termination of our former interest rate swaps, foreign currency exchange swaps and the majority of our bunker fuel swaps. (5) As part of the Hurtigruten Acquisition Transactions, the Former Facilities, including NOK 100.0 million of borrowings drawn under the former revolving credit facility during the three months ended December 31, 2014, plus break costs and accrued interest, were repaid in full and such Former Facilities were terminated and we also redeemed and discharged the Former Notes in full.

9 (6) Reflects fees and expenses associated with the Hurtigruten Acquisition Transactions, including advisory and other professional fees and transaction costs, financing fees with respect to the Bridge Facility and the costs related to the cash settlement of our share option plan, which was terminated in December 2014 and will be paid following the issuance of the Notes. (7) As part of the Hurtigruten Acquisition Transactions, we terminated our former interest rate swaps at a cost of NOK 82.0 million, foreign currency exchange swaps at a cost of NOK 134.0 million and the majority of our bunker fuel swaps at a cost of NOK 95.1 million. (8) Reflects the effects of the NOK/euro foreign currency swap entered into by the Company in connection with the Bridge Facility.

Following the Hurtigruten Acquisition, TDR Capital, Periscopus and Home Capital indirectly own 90%, 5% and 5% of the shares of the Company, respectively. See “—Our Shareholders” and “Principal Shareholders.”

Following the issuance of the Notes, Hurtigruten will be delisted from the Oslo Stock Exchange and will cease to be a publicly traded company.

Trading Update Currently, we expect that revenues for the year ended December 31, 2014 will be higher than revenues for the year ended December 31, 2013. In addition, on a preliminary basis, we expect Normalized Adjusted EBITDA for the year ended December 31, 2014, to be slightly higher than Normalized Adjusted EBITDA for the twelve months ended September 30, 2014.

Financial statements for the year ended December 31, 2014 are not yet finalized. The information above is based on certain preliminary financial data. Our actual consolidated financial results for the year ended December 31, 2014 may differ from the foregoing preliminary estimates and expectations and remain subject to change. During the course of our audit and review process for the year ended December 31, 2014, we could identify items that would require us to make adjustments and which could affect our final results of operations. See “Forward-Looking Statements” and “Risk Factors” for a more complete discussion of certain factors that could affect our financial results and future performance. See also “Presentation of Financial and Other Information.”

Guest Pre-bookings A significant amount of our revenues is attributable to pre-bookings by customers in advance of their trips and such pre-bookings are generally secured by a non-refundable cash deposit ranging from 10% to 30% of the total amount owed. We estimate that 51% of our total bookings for our Hurtigruten Norwegian Coast and MS Fram segments for the year ended December 31, 2014 had already been pre-booked as of December 31, 2013.

Given the propensity of customers to pre-book and the deterrent to subsequent cancellation as a result of the non-refundable deposit, we believe that we have a high degree of visibility of our revenues for the following twelve months.

We had bookings for the three months ended December 31, 2014 that were 5.0% above the corresponding period in 2013 and as of December 31, 2014, we had pre-bookings for the following nine months that were 5.1% higher than pre-bookings for the same period in the previous year (at December 31, 2014 Constant Exchange Rates, as defined below). Taken together, the increase in actual bookings from September 30, 2014 to December 31, 2014 and the increase in pre-bookings as of December 31, 2014 for the next nine month period to September 30, 2015 would have generated an additional NOK 92.4 million in revenues compared to the amount of bookings and pre-bookings for the same periods in 2013.

We estimate that this NOK 92.4 million in additional revenues would convert into EBITDA at a margin of 59.5% and therefore would account for an increase of NOK 55.0 million in EBITDA in the twelve months ending September 30, 2015.

10 We continue to observe a positive booking trend and as of December 31, 2014, our year-on-year customer pre-bookings for the next twelve months increased by 6.4% (at December 31, 2014 Constant Exchange Rates).

The above analysis has been prepared on the basis of the following assumptions: • we have translated bookings and pre-bookings in foreign currencies into Norwegian kroner using the spot exchange rates for each of the euro, pound sterling and U.S. dollar as of December 31, 2014, as published by Bloomberg Generic Rate (€1.00 = NOK 9.0162, £1.00 = NOK 11.6095 and $1.00 = NOK 7.4520) (“December 31, 2014 Constant Exchange Rates”). • in estimating the expected increase in revenue and EBITDA, we have not assumed any increase in bookings for the relevant future period to which the pre-bookings relate, compared to the prior corresponding period; and • in estimating the expected increase in revenue, the percentage increase in bookings and pre-bookings is applied to our variable revenues for the prior corresponding period, which excludes fixed revenues, such as revenues under the Coastal Service Contract. Similarly, we have adjusted our variable costs in order to estimate the increase in EBITDA but have made no adjustments to our fixed costs.

We may experience an increase in cancellations or lower bookings during, and relating to, the nine month period to September 30, 2015 in comparison to the same period last year, and as a result we may not ultimately realize increased revenues or EBITDA as a result of our increased pre-bookings or any such increase may be significantly lower than the one indicated above. The figures presented above were derived from a calculation of our results of operations and exchange rates for a specific period of time; they are not intended to be representative of our actual operating results for any future period and any such results may vary widely from the calculations set forth above. The assumptions outlined above are not intended to be representative of currency exchange rates at any date other than the date indicated or of our results of operations at any time. In addition, the margin at which additional revenues attributable to increased pre-bookings are converted into EBITDA in the applicable period may vary significantly from the margin indicated above as a result of various factors, many of which are outside our control. As such, you should not place undue reliance on this pre-booking data. See “Forward Looking Statements” and “Risk Factors” for a more complete discussion of certain of the factors that could affect our future performance and results of operation.

Other Market Updates Foreign Exchange Fluctuations The euro, pound sterling and U.S. dollar each strengthened against the Norwegian kroner during the course of 2014, including during the three months ended December 31, 2014, with the euro exchange rate increasing from €1.00 = NOK 8.1162 as of September 30, 2014 to €1.00 = NOK 9.0162 as of December 31, 2014, the pound sterling increasing from £1.00 = NOK 10.4181 as of September 30, 2014 to £1.00 = NOK 11.6095 as of December 31, 2014 and the U.S. dollar increasing from $1.00 = NOK 6.4261 as of September 30, 2014 to $1.00 = NOK 7.4520 as of December 31, 2014.

As we typically generate a significant proportion of our revenues in non-NOK currencies, particularly euros, and we incur a significant portion of our costs in Norwegian kroner, a decline in the value of the Norwegian kroner (which is our reporting currency), against the euro, pound sterling and U.S. dollar would generally have a positive translation effect with respect to our revenues and results of operations, including EBITDA.

The table below provides a breakdown of the following measures for the twelve months ended September 30, 2014, by the currency in which they are generated or incurred as a percentage of Operational Revenues (as defined below): • revenues, excluding losses with respect to our former foreign currency exchange swaps that were realized in the twelve months ended September 30, 2014, as well as unrealized effects with respect to foreign currency exchange swaps and foreign currency effects with respect to trade receivables during the same period (“Operational Revenues”); and • payroll costs and other operating costs excluding bunker fuel costs (together, the “Operating Costs”).

11 NOK Euro Pound Sterling U.S. Dollar Other(1) (% of Operational Revenues) Operational Revenues ...... 46 36 11 5 2 Operating Costs ...... (50) (13) (4) (1) —

(1) Other consists of Danish krone and Swedish krona.

All other things remaining constant, assuming constant bunker fuel costs in Norwegian kroner and without giving effect to our foreign currency exchange swaps that were terminated as part of the Hurtigruten Acquisition Transactions, Normalized Adjusted EBITDA for the twelve months ended September 30, 2014 would have increased by an aggregate of approximately NOK 158.9 million using the spot exchange rates for each of the euro, pound sterling and U.S. dollar as of December 31, 2014, as published by Bloomberg Generic Rate (€1.00 = NOK 9.0162, £1.00 = NOK 11.6095 and $1.00 = NOK 7.4520), instead of the rates at which those currencies were translated into Norwegian kroner in our financial statements during the applicable period.

Bunker Fuel Fluctuations Bunker fuel prices declined during the course of 2014, including during the three months ended December 31, 2014. A decrease in the price of bunker fuel, which represents one of our largest operating costs, would have a positive impact in reducing our costs.

According to Bloomberg’s listing of futures contracts for Generic ICE Brent 1st Future crude oil, the price of Brent Crude Oil has decreased to $57.33 per barrel as of December 31, 2014 (NOK 427.2 per barrel), from an average price of $107.58 per barrel for the twelve months ended September 30, 2014 (NOK 655.8 per barrel). Such prices are based on the daily closing price for Brent Crude Oil. The Company uses bunker fuel consisting of marine special distillate and marine gas oil for the operation of its ships and the price of these fuels is correlated to the price of Brent Crude Oil.

Historically, we have hedged a portion of our expected fuel usage in line with our quarterly rolling hedging policy. As part of the Hurtigruten Acquisition Transactions, we terminated the majority of our bunker fuel swaps on January 14, 2015 and we rolled over our remaining bunker fuel swaps covering approximately 4% of our expected bunker fuel consumption for 2015.

In the twelve months ended September 30, 2014, we incurred bunker fuel costs of NOK 478.2 million, including NOx tax and costs related to our bunker fuel hedges. For every incremental decrease of $10 per barrel for crude oil (using an exchange rate of $1.00 = NOK 7.4520, which represents the spot exchange rate as of December 31, 2014, as published by Bloomberg Generic Rate), we would have saved approximately NOK 33.1 million in total bunker fuel costs for the twelve months ended September 30, 2014, which would have resulted in an increase of NOK 33.1 million in Normalized Adjusted EBITDA for this period. Assuming the bunker fuel price as of December 31, 2014 had been the price of bunker fuel throughout the twelve months ended September 30, 2014, our bunker fuel costs would have decreased by approximately NOK 101.2 million for the twelve months ended September 30, 2014, which would have resulted in an increase of NOK 101.2 million in Normalized Adjusted EBITDA for this period.

Both foreign exchange rates and bunker fuel prices are volatile, and, accordingly, the depreciation in the Norwegian kroner and the decline in bunker fuel prices, may not continue in the future or may reverse, with both the Norwegian kroner and bunker fuel prices increasing in the future. In addition, our results of operations for any particular period will be affected by currency exchange rates and bunker fuel prices over the entire period and not the exchange rate or bunker fuel price on any particular date. Any reversal in these trends, leading to an appreciation of the Norwegian kroner against our other operating currencies or an increase in bunker fuel prices, could have a negative impact on our results of operations, and such negative effect could be significant. The exchange rate of the Norwegian kroner and the price of bunker fuel may move in tandem, such that an increase in the price of bunker fuel is accompanied by an increase in the Norwegian kroner; as a result, the effect of fluctuations in those two factors on our results of operations could, accordingly, be particularly pronounced. See “Management’s Discussion and Analysis of Our Financial Condition and Results of

12 Operations—Currency Effect” and “Management’s Discussion and Analysis of Our Financial Condition and Results of Operations—Price of Bunker Fuel.”

Cost Saving Initiatives In December 2013, we commenced the implementation of several new cost saving measures as part of phase four of our Efficiency Improvement Program. These initiatives include improved procurement processes as well as measures designed to enhance our bunker fuel efficiency. The new procurement processes involve the introduction of a purchasing framework designed to align procurement contract pricing with prevalent, competitive market pricing for various procurement inputs. The bunker fuel efficiency measures primarily consist of cleaning the exterior of each of our ships to remove debris annually, which will reduce drag, as well as operating our ships at a more fuel efficient speed. In addition to the cost saving measures discussed above, we have also implemented a number of revenue generating measures including offering a wider selection of dining options including an à la carte menu in our restaurants, increasing the number of points of sale and suggesting room upgrades to passengers at the time of booking. Phase four of our Efficiency Improvement Program is expected to be fully implemented by mid-2015. We expect that the preliminary results of these initiatives will be reflected in our operating results for 2015 and the full effect will be reflected in our operating results for 2016.

Our Shareholders TDR Capital, Periscopus and Home Capital indirectly own 90%, 5% and 5%, respectively, of our issued and outstanding share capital. For further information relating to our shareholders, see “Principal Shareholders.”

13 Summary Structure

The following diagram summarizes certain aspects of our corporate and financing structure, on an as adjusted basis after giving effect to the Refinancing Transactions.

Guarantors

Shareholders(1)

Silk Midco AS Represents the Restricted Group(2)

Revolving Credit Silk Bidco AS Notes offered Facility(3) (The “Company”) hereby(4)

Proceeds Loan(5) 100%

Hurtigruten ASA (“Hurtigruten”)

100%

Guarantors(6) Non-Guarantors(7)

(1) TDR Capital, Periscopus and Home Capital indirectly own 90%, 5% and 5%, respectively, of our issued and outstanding share capital. (2) The entities in the Restricted Group will be subject to the covenants in the Revolving Credit Facility Agreement and the Indenture. The Restricted Group comprises of the Company and its wholly-owned subsidiaries and does not include (i) Green Dog Svalbard AS, in which we have a 50% ownership interest, (ii) the SPEs and (iii) Silk Midco AS. Green Dog Svalbard AS, the SPEs and Silk Midco AS will accordingly not be subject to the covenants in the Revolving Credit Facility Agreement and the Indenture that apply to the Restricted Group. (3) As part of the Hurtigruten Acquisition Transactions, the Company entered into the Revolving Credit Facility Agreement, which provides for the Revolving Credit Facility in the amount of €65,000,000, of which NOK 250.0 million was drawn on January 22, 2015 to be used in connection with the Hurtigruten Acquisition Transactions. The initial borrower under the Revolving Credit Facility is the Company. Subject to certain limitations, subsidiaries of the Company which guarantee the Revolving Credit Facility may become borrowers under the Revolving Credit Facility in the future. Within 70 days of the Hurtigruten Tender Offer Settlement Date, the same subsidiaries that initially guarantee the Notes will also guarantee our Revolving Credit Facility and the same assets that will initially secure Notes will also secure our Revolving Credit Facility on an equal and ratable first priority basis subject to the operation of the Agreed Security Principles and certain perfection requirements. See “Description of Other Indebtedness—Revolving Credit Facility Agreement” for further information. (4) The Company will issue €455 million aggregate principal amount of Notes. The Notes will be senior obligations of the Company and will, within 70 days of the Hurtigruten Tender Offer Settlement Date, be guaranteed on a senior secured basis by Hurtigruten and certain of its subsidiaries. The Notes Guarantees will be subject to certain limitations under applicable law, as described under “Risk Factors—Risks Related to the Notes and Our Structure—Each Notes Guarantee and the Notes Collateral will be subject to certain limitations on enforcement and may be limited by applicable laws or subject to certain defenses that may limit its validity and enforceability.” On the Issue Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, the Company will grant in favor of the Security Agent on behalf of the Noteholders, security on a first-ranking basis, over substantially all of the assets of the Company, including: shares of capital stock of Hurtigruten; certain bank accounts, certain intra-group receivables (including the rights of the Company under the Proceeds Loan); the VPS Account; and an assignment of claims under the settlement agreement in connection with the Hurtigruten Acquisition, and Silk Midco AS will grant in favor of the Security Agent on behalf of the Noteholders,

14 security on a first-ranking basis, over substantially all of the assets of Silk Midco AS, including: shares of capital stock of the Company and certain intra-group receivables (together, the “Issue Date Notes Collateral”). In addition, within 70 days of the Hurtigruten Tender Offer Settlement Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, each of the Guarantors will grant in favor of the Security Agent on behalf of the Noteholders, security on a first-ranking basis over its material assets, including: shares of capital stock of the Guarantors; certain bank accounts; intra- group receivables; an assignment of insurance claims in respect of certain ships and any other insurance claims the Guarantors may have (if applicable); claims under the Coastal Service Contract; a pledge of customer receivables (factoring), inventory and machinery and plant (including intellectual property); and mortgages over certain ships owned by the Guarantors (together, the “Post-Issue Date Notes Collateral”). See “Description of the Notes—Security.” Under the terms of the Intercreditor Agreement, lenders under the Revolving Credit Facility, counterparties to certain hedging obligations and holders of certain other future indebtedness will receive proceeds from the enforcement of the security in priority to holders of the Notes. See “Description of Other Indebtedness—Intercreditor Agreement.” (5) A Proceeds Loan of amounts to be used to repay the Former Financing Arrangements in connection with the Hurtigruten Acquisition was made on January 14, 2015 by the Company, as lender, to Hurtigruten, as borrower. The Company’s rights under the Proceeds Loan will be pledged in favor of the Security Agent on behalf of the Noteholders and comprise part of the Notes Collateral. See “Description of Notes—Security.” (6) As of and for the twelve months ended September 30, 2014, the Guarantors generated 113% and 101% of the consolidated revenues and EBITDA of the Restricted Group, respectively, and represented 104% of the consolidated total assets of the Restricted Group. (7) As of and for the twelve months ended September 30, 2014, our subsidiaries that form part of the Restricted Group that will not guarantee the Notes generated (13)% and (1)% of the consolidated revenues and EBITDA of the Restricted Group, respectively, and represented (4)% of the consolidated total assets of the Restricted Group. As at September 30, 2014, our subsidiaries that form part of the Restricted Group that will not guarantee the Notes did not have any outstanding debt.

15 THE OFFERING

The following is a brief summary of certain terms of the Offering of the Notes. It may not contain all the information that is important to you. For additional information regarding the Notes and the Notes Guarantees, see “Description of the Notes” and “Description of Other Indebtedness— Intercreditor Agreement.”

Company ...... Silk Bidco AS (the “Company”).

Notes Offered ...... €455 million aggregate principal amount of 7.50% Senior Secured Notes due 2022 (the “Notes”).

Issue Date ...... OnFebruary 6, 2015 (the “Issue Date”).

Issue Price ...... 100%plus accrued and unpaid interest from the Issue Date.

Maturity Date ...... February 1, 2022.

Interest ...... 7.50% per annum.

Interest Payment Dates ...... Semi-annually in arrears on each February 1 and August 1, commencing on August 1, 2015. Interest will accrue from the Issue Date.

Minimum Denomination ...... Each Note was issued in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof.

Ranking of the Notes ...... TheNotes are: • general, senior obligations of the Company; • secured, subject to the operation of the Agreed Security Principles, by first-ranking liens over the Notes Collateral, but under the terms of the Intercreditor Agreement will receive proceeds from enforcement of security over the Notes Collateral only after any obligations secured on a super priority basis, including obligations owed to lenders under the Revolving Credit Facility, counterparties to certain hedging obligations and holders of certain other future indebtedness, have been paid in full, as described under “Description of the Notes— Security” and “Description of Other Indebtedness—Intercreditor Agreement;” • pari passu in right of payment with all existing and future indebtedness of the Company that is not subordinated in right of payment to the Notes, including borrowings under the Revolving Credit Facility; • senior in right of payment to all existing and future indebtedness of the Company that is subordinated in right of payment to the Notes; • effectively subordinated to any existing and future indebtedness of the Company that is

16 secured by property or assets of the Company that do not secure the Notes, to the extent of the value of the property or assets securing such indebtedness; • structurally subordinated to any existing and future indebtedness of Company’s subsidiaries that do not guarantee the Notes; and • unconditionally guaranteed on a senior secured basis by the Guarantors, subject to certain guarantee limitations.

Notes Guarantees ...... Within 70 days of the Hurtigruten Tender Offer Settlement Date, the Notes were guaranteed on a senior secured basis in the full amount of the principal and interest by certain of the Company’s subsidiaries (collectively, the “Guarantors”).

As of and for the twelve months ended September 30, 2014, the Guarantors generated 113% and 101% of the consolidated revenues and EBITDA of the Restricted Group, respectively, and represented 104% of the consolidated total assets of the Restricted Group.

The Notes Guarantees will be subject to the terms of the Intercreditor Agreement. See “Description of Other Indebtedness— Intercreditor Agreement.”

The Notes Guarantees will be subject to contractual and legal limitations and may be released under certain circumstances. See “Description of the Notes—Security—Release of Liens,”“Risk Factors—Risks related to the Notes and Our Structure—There are circumstances other than repayment or discharge of the Notes under which the Notes Collateral securing the Notes and the Notes Guarantees will be released automatically, without your consent or the consent of the Trustee,”“Description of Other Indebtedness—Intercreditor Agreement” and “Certain Limitations on Validity and Enforceability.”

Ranking of the Notes Guarantees ...... Each Notes Guarantee will be a general senior obligation of the relevant Guarantor and will be: • secured by first priority liens over the Notes Collateral, but will receive proceeds from enforcement of security over the Notes Collateral only after any obligations secured on a super priority basis, including obligations owed to lenders under the Revolving Credit Facility, counterparties to certain hedging obligations and holders of certain other future indebtedness, have been paid in full;

17 • pari passu in right of payment with all of the Guarantors’ existing and future senior indebtedness, including any guarantees with respect to, or indebtedness under the Revolving Credit Facility, ancillary facilities and certain hedging obligations; • senior in right of payment to all existing and future subordinated indebtedness of the Guarantors; • effectively subordinated to any existing and future indebtedness of the Guarantors that is secured by property or assets of such Guarantor or its subsidiaries that do not secure the Guarantors’ guarantees of the Notes on an equal basis, to the extent of the value of the property or assets securing such indebtedness; and • structurally subordinated to any existing and future indebtedness of subsidiaries of the Company that do not guarantee the Notes.

Security ...... On the Issue Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, the Company will grant in favor of the Security Agent on behalf of the Noteholders, security on a first-ranking basis, over substantially all of the assets of the Company, including: shares of capital stock of Hurtigruten; certain bank accounts, certain intra-group receivables (including the rights of the Company under the Proceeds Loan); the VPS Account; and an assignment of claims under the settlement agreement in connection with the Hurtigruten Acquisition, and Silk Midco AS will grant in favor of the Security Agent on behalf of the Noteholders, security on a first-ranking basis, over substantially all of the assets of Silk Midco AS, including: shares of capital stock of the Company and certain intra-group receivables (together, the “Issue Date Notes Collateral”). In addition, within 70 days of the Hurtigruten Tender Offer Settlement Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, each of the Guarantors will grant in favor of the Security Agent on behalf of the Noteholders, security on a first-ranking basis over its material assets, including: shares of capital stock of the Guarantors; certain bank accounts; intra- group receivables; an assignment of insurance claims in respect of certain ships and any other insurance claims the Guarantors may have (if applicable); claims under the Coastal Service

18 Contract; a pledge of customer receivables (factoring), inventory and machinery and plant (including intellectual property); and mortgages over certain ships owned by the Guarantors (together, the “Post-Issue Date Notes Collateral”). See “Description of the Notes—Security.”

The security granted by the Guarantors will, in each case, be limited and subject to certain statutory preferences under the laws of Norway, as described under “Risk Factors—Risks Related to the Notes and Our Structure—Each Notes Guarantee and the Notes Collateral will be subject to certain limitations on enforcement and may be limited by applicable laws or subject to certain defenses that may limit its validity and enforceability” and “Certain Limitations on Validity and Enforceability.”

Additional Amounts ...... Any payments made by the Company or any Guarantor with respect to the Notes will be made without withholding or deduction for taxes in any relevant taxing jurisdiction unless required by law. If any of the Company or Guarantors are required by law to withhold or deduct for such taxes with respect to a payment to the holders of Notes, the Company or Guarantor will pay the additional amounts necessary so that the net amount received by the Noteholders after the withholding is not less than the amount that they would have received in the absence of the withholding, subject to certain exceptions. See “Description of the Notes—Withholding Taxes.”

Optional Redemption ...... Prior to February 1, 2018, the Company may redeem at its option all or a portion of the Notes at a redemption price equal to 100% of the principal amount of the Notes plus the applicable “make-whole” premium described in this offering memorandum and accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

On or after February 1, 2018, the Company may redeem at its option all or a portion of the Notes at the applicable redemption prices set forth under the caption “Description of the Notes—Optional Redemption” plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date.

Prior to February 1, 2018, the Company may redeem at its option on one or more occasions the Notes in an aggregate principal amount not to exceed 40% of the aggregate principal amount

19 of the Notes with the net cash proceeds from certain equity offerings at a redemption price equal to 107.50% of the principal amount outstanding in respect of the Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the Notes remains outstanding immediately after each such redemption and each such redemption occurs within 120 days after the closing date of the relevant equity offering.

Optional Redemption for Tax Reasons ...... Intheeventofcertaindevelopmentsaffectingtaxation or certain other circumstances, the Company may redeem the Notes in whole, but not in part, at any time, at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, and additional amounts, if any, to the date of redemption. See “Description of the Notes—Redemption for Taxation Reasons.”

On December 2, 2014, an expert group appointed by the Norwegian Ministry of Finance presented a report to the Ministry of Finance proposing the introduction of a withholding tax on the payment of interest to recipients who are tax residents outside of Norway. See “Risk Factors—Risks Related to the Notes and Our Structure—If certain changes to tax law were to occur, including changes recently proposed in Norway, we may have the option to redeem the Notes.”

In the event such a withholding were to apply to the Notes, a redemption at the option of the Company would be permitted provided the Company could not lawfully and without incurring any material unreimbursed cost either redomicile in, or have the obligations under the Notes assumed by an entity domiciled in, a jurisdiction which does not (as of the date of the redomiciliation or assumption) impose withholding tax on payments under the Notes.

Change of Control ...... Upon the occurrence of certain events defined as constituting a change of control, the Company will be required to offer to repurchase all outstanding Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest to the date of purchase. See “Description of the Notes—Change of Control.”

Certain Covenants ...... The Indenture, among other things, will restrict the ability of the Company and its restricted subsidiaries to: • incur or guarantee additional indebtedness and issue certain preferred stock;

20 • create or incur certain liens; • make certain payments, including dividends or other distributions, with respect to the shares of the Company; • prepay or redeem subordinated debt or equity; • make certain investments; • create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to and on the transfer of assets to the Company or its restricted subsidiaries; • sell, lease or transfer certain assets including stock of restricted subsidiaries; • engage in certain transactions with affiliates; • enter into unrelated businesses or engage in prohibited activities; • consolidate or merge with other entities; • impair the security interests for the benefit of the holders of the Notes; and • amend certain documents.

Each of these covenants is subject to significant exceptions and qualifications. See “Description of the Notes—Certain Covenants.”

Transfer Restrictions ...... TheNotes and the Notes Guarantees have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any other jurisdiction and are subject to restrictions on transferability and resale. See “Transfer Restrictions.” We have not agreed to, or otherwise undertaken to, register the Notes (including by way of an exchange offer).

No Prior Market ...... TheNotes are new securities for which there is currently no established trading market. Although the Initial Purchaser has advised us that it intends to make a market in the Notes, it is not obligated to do so and it may discontinue market-making at any time without notice. Accordingly, there is no assurance that an active trading market will develop for the Notes.

Listing ...... Application was made to list the Notes on the Official List of the Luxembourg Stock Exchange and have the Notes admitted for trading on the Euro MTF market.

Governing Law for the Notes, Notes Guarantees and the Indenture ...... NewYork law.

Governing Law for the Intercreditor Agreement ...... English law.

Governing Law for the Security Documents .... Norwegian law.

21 Trustee ...... U.S. Bank Trustees Limited.

Paying Agent and Transfer Agent ...... Elavon Financial Services Limited, UK Branch.

Registrar ...... Elavon Financial Services Limited.

Luxembourg Listing Agent ...... Société Générale Bank & Trust.

Security Agent ...... U.S. Bank Trustees Limited.

ISINs ...... Reg S: XS1180324037; Rule 144A: XS1180325430.

Common Codes ...... Reg S: 118032403; Rule 144A: 118032543.

RISK FACTORS

Investing in the Notes involves substantial risks. Investors should carefully consider all the information in this offering memorandum. In particular, investors should consider the factors set forth under “Risk Factors” before making a decision to invest in the Notes.

22 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The Company was incorporated on September 1, 2014 for the purposes of facilitating the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including issuing the Notes offered hereby. Consequently, no historical financial information relating to the Company is available. All historical financial information presented in this offering memorandum is of Hurtigruten and its subsidiaries; accordingly, all references to “we,” “us,” “our” or the “Group” in respect of historical financial information in this offering memorandum are to Hurtigruten and its subsidiaries on a consolidated basis. In particular, this offering memorandum includes audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the years ended December 31, 2011, 2012 and 2013, prepared in accordance with IFRS, and accompanying notes; and the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 and 2014, prepared in accordance with IAS 34, and accompanying notes. Hurtigruten’s unaudited condensed consolidated interim financial statements as of and for the nine months ended September 30, 2013 and 2014 are unaudited and all information contained in this offering memorandum with respect to those periods is also unaudited.

Due to the changing nature of our continuing and discontinued operations in each of the years ended December 31, 2011, 2012 and 2013, the discontinued operations in our audited consolidated financial statements for each of these years include different discontinued operations and therefore are not presented on the same basis. In the years ended December 31, 2012 and 2013 and in our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2014, the comparative period financial information was changed in order to make it comparable with the current period presented. The financial information of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2011 disclosed in this offering memorandum have been derived from the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 and the financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 disclosed in this offering memorandum have been derived from the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The financial information of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 disclosed in this offering memorandum have been derived from the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2014. As a result, the following businesses were classified as discontinued operations in the financial statements for the periods indicated with comparative balances revised to present the same discontinued operations as in the subsequent period: • Consolidated financial statements as of and for the nine months ended September 30, 2014: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2013: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2012: Charter Business. • Consolidated financial statements as of and for the year ended December 31, 2011: Fast Ferries Business. The Fast Ferries Business was reclassified as a continuing operation in the 2012 financial statements and the 2011 comparative balance was restated. The Fast Ferries Business no longer met the criteria to be classified as a discontinued operation even though we still intended to sell the Fast Ferries Business.

The financial information presented herein for the twelve months ended September 30, 2014 is derived by adding the unaudited condensed consolidated interim financial information of Hurtigruten and its subsidiaries for the nine months ended September 30, 2014 to the audited consolidated financial statements of Hurtigruten and its subsidiaries for the year ended December 31, 2013 and subtracting the unaudited condensed consolidated interim financial information of Hurtigruten and its subsidiaries for the nine months ended September 30, 2013. The summary financial information of Hurtigruten and its subsidiaries for the twelve months ended September 30, 2014 presented herein is not required by or presented in accordance with IFRS or generally accepted accounting principles. It has been prepared for illustrative purposes only and is not necessarily representative of our results for any future period or our financial condition at any such date.

23 The financial statements of Hurtigruten and its subsidiaries included in this offering memorandum have not been adjusted to reflect the impact of any changes to the income statements, balance sheet or cash flow statements that might occur as a result of purchase accounting adjustments to be applied as a result of the Hurtigruten Acquisition. The Company will account for the Hurtigruten Acquisition using the acquisition method of accounting under IFRS, which will affect the comparability of the Company’s audited consolidated financial statements with the financial information contained in this offering memorandum. Under IFRS 3 (Business Combinations) the cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred and the equity interests issued by the acquirer, including the fair value of any contingent consideration. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair market values at the Hurtigruten Tender Offer Settlement Date. The excess of the consideration transferred over the fair value of the acquirer’s share of the identifiable net assets acquired is recorded as goodwill. In accordance with IFRS, we have up to twelve months from the Hurtigruten Tender Offer Settlement Date to finalize the allocation of the purchase price.

Also presented below is unaudited pro forma financial information, which has been prepared to give pro forma effect to the Refinancing Transactions. The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results of operations and financial condition would have been had the Refinancing Transactions or the other pro forma adjustments actually occurred on these dates, nor does it project our results of operations for any future period or our financial condition at any future date. While the unaudited pro forma financial information has been derived from historical financial information prepared in accordance with IFRS, such financial information contains non-IFRS financial measures and should not be considered in isolation from or as a substitute for our historical financial information. For more information, please see “Presentation of Financial and Other Information—Other Financial Measures.” The unaudited pro forma adjustments and the unaudited pro forma financial information set out in this offering memorandum are based on available information and certain assumptions and estimates that we believe are reasonable but may differ materially from the actual amounts.

Our financial statements included elsewhere in this offering memorandum cover periods before our divestment or closure (as applicable) of our Bus Business, our Charter Business and our Fast Ferries Business. We present below certain financial data on a normalized basis to allow investors to compare our historical results of operations attributable to our continuing operations. Normalized total revenues, Normalized EBITDA, Normalized capital expenditure and Normalized change in net working capital have been adjusted for each period presented to exclude in each period all Normalized Discontinued Operations; Normalized total revenues is calculated as total revenues for the relevant period as adjusted to exclude revenues for the relevant period relating to all Normalized Discontinued Operations; Normalized EBITDA is calculated as EBITDA for the relevant period as adjusted to exclude EBITDA for the relevant period relating to all Normalized Discontinued Operations; Normalized capital expenditure is calculated as capital expenditure for the relevant period as adjusted to exclude capital expenditure for the relevant period relating to all Normalized Discontinued Operations and insurance proceeds received in connection with the fire in 2011 on MS Nordlys; and Normalized change in net working capital is calculated as change in net working capital for the relevant period as adjusted to exclude change in net working capital for the relevant period relating to all Normalized Discontinued Operations and the reversal of a receivable amount due to a ruling by the ESA which required us to pay back to the Norwegian government certain revenues recorded under the Former Coastal Service Contract. Normalized Adjusted EBITDA is calculated as Normalized EBITDA for the relevant period adjusted for certain extraordinary charges, costs and non-cash items; Pro forma Normalized Adjusted EBITDA is calculated as Normalized Adjusted EBITDA for the relevant period as adjusted to exclude the impact of foreign exchange and bunker price fluctuations and the impact of cost savings implemented by Hurtigruten. For more information on the results of operations that have been excluded from our normalized figures for each period, see “Presentation of Financial and Other Information—Other Financial Measures.”

For purposes of the tables below, certain NOK amounts have been translated to euro amounts for convenience only. Balance sheet amounts as of September 30, 2014 have been translated at a rate of €1.00 = NOK 8.1162, which represents the rate of exchange as of September 30, 2014, as published by Bloomberg Generic Rate. Income and cash flow statement and other amounts for the twelve months

24 ended September 30, 2014 have been translated at a rate of €1.00 = NOK 8.2700, which represents the average rate of exchange for the twelve months ended September 30, 2014, as published by Bloomberg Generic Rate.

The following tables should be read in conjunction with, and are qualified in their entirety by reference to, our financial statements and the accompanying notes included elsewhere in this offering memorandum. The tables below should also be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of operations for prior years or the interim periods are not necessarily indicative of the results to be expected for the full year or any future period.

For more information on the basis of preparation of this financial information, see “Presentation of Financial and Other Information” and the notes to the financial statements included elsewhere in this offering memorandum. The following tables show selected financial data for Hurtigruten and its subsidiaries on a consolidated basis for the periods indicated.

Consolidated Income Statement

Nine Nine Twelve Twelve Months Months Months Months Year Ended Year Ended Year Ended Ended Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands) (€ thousands)(1) Continuing Operations(2): Total revenues ...... 3,268,966 3,262,596 3,305,614 2,748,365 3,018,360 3,575,609 432,359 Payroll costs ...... (941,483) (828,933) (806,272) (624,003) (668,555) (850,824) (102,881) Depreciation, amortization and impairment losses ...... (422,821) (378,668) (308,899) (282,058) (291,157) (317,998) (38,452) Other operating costs ...... (2,029,216) (2,002,106) (1,938,648) (1,513,518) (1,637,097) (2,062,227) (249,362) Other gains/(losses—net ...... 83,320 3,493 9,387 7,326 520 2,581 312 Operating profit/(loss) ...... (41,234) 56,382 261,182 336,113 422,070 347,139 41,976 Finance income ...... 71,772 130,102 89,540 67,346 49,934 72,128 8,722 Finance expense ...... (238,694) (350,695) (320,632) (243,354) (205,977) (283,255) (34,251) Finance expenses—net ...... (166,922) (220,593) (231,092) (176,008) (156,043) (211,127) (25,529) Share of profit/(loss) of associates ..... 2,352 (2,130) 10,837 646 352 10,543 1,275 Profit/(loss) before income tax from continuing operations ...... (205,804) (166,341) 40,926 160,751 266,379 146,554 17,721 Income tax expense from continuing operations ...... 109,085 (23,729) (3,915) (23,112) (29,735) (10,538) (1,274) Profit/(Loss) for the Period ...... (96,719) (190,071) 37,011 137,638 236,644 136,017 16,447 Discontinued Operations(2): Profit/(Loss) for the Period ...... 26,752 (140,742) (11,589) 1,555 10,132 (3,012) (364) Profit/(Loss) for the Period ...... (69,968) (330,813) 25,422 139,194 246,776 133,004 16,083

25 Consolidated Balance Sheet

As of As of As of As of As of December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2014 2014 (NOK thousands) (€ thousands) ASSETS Non-current assets: Property, plant and equipment ...... 3,851,087 3,748,690 3,539,306 3,331,467 410,471 Intangible assets ...... 272,311 359,130 373,911 379,870 46,804 Investment in associates ...... 38,895 36,552 26,758 2,245 277 Deferred income tax assets ...... 172,234 169,926 166,576 166,432 20,506 Trade and other receivables ...... 34,003 30,520 12,874 56,049 6,906 Total non-current assets ...... 4,368,531 4,344,817 4,119,426 3,936,062 484,964 Current assets: Inventories ...... 74,696 77,048 85,477 92,469 11,393 Trade and other receivables ...... 920,176 293,762 128,020 115,306 14,207 Derivative financial instrument ...... 28,639 5,717 12,932 21,247 2,618 Cash and cash equivalents ...... 574,511 548,847 404,442 442,273 54,493 1,598,022 925,374 630,871 671,295 82,711 Assets of disposal group classified as held-for-sale ...... 60,384 — 214,444 — — Total current assets ...... 1,658,406 925,374 845,315 671,295 82,711 Total assets ...... 6,026,936 5,270,191 4,964,741 4,607,357 567,674 Total equity ...... 1,564,114 1,166,555 1,118,551 1,294,534 159,500 LIABILITIES Non-current liabilities: Borrowings ...... 2,455,508 2,864,983 2,493,060 2,267,428 279,371 Other non-current liabilities ...... — — — 34,837 4,292 Derivative financial instruments ...... 17,776 60,778 59,752 57,948 7,140 Deferred income tax liabilities ...... 9,643 8,105 1,180 1,179 145 Retirement benefit obligations ...... 101,693 46,303 28,038 24,665 3,039 Provisions for other liabilities and charges ...... 5,450 5,283 5,117 4,992 615 Total non-current liabilities ...... 2,590,070 2,985,454 2,587,148 2,391,049 294,602 Current liabilities: Trade and other payables ...... 755,597 730,981 636,276 572,375 70,523 Current income tax liabilities ...... 11,932 10,264 4,984 30,543 3,763 Borrowings ...... 1,026,252 344,552 474,526 281,572 34,693 Derivative financial instruments ...... 152 21,049 52,000 28,276 3,484 Provisions for other liabilities and charges ...... 8,819 11,335 1,302 9,008 1,110 Total current liabilities ...... 1,802,752 1,118,182 1,169,088 921,774 113,572 Liabilities of disposal group classified as held-for-sale ...... 70,000 — 89,954 — — Total current liabilities ...... 1,872,752 1,118,182 1,259,042 921,774 113,572 Total liabilities: ...... 4,462,822 4,103,636 3,846,190 3,312,823 408,174 Total equity and liabilities ...... 6,026,936 5,270,191 4,964,741 4,607,357 567,674

26 Consolidated Cash Flow Statement

Nine Nine Twelve Twelve Months Months Months Months Year Ended Year Ended Year Ended Ended Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands) (€ thousands) Net cash flows from/(used in) operating activities ...... 38,467 574,287 463,814 445,363 534,678 553,129 66,884 Net cash flows from/(used in) investing activities ...... 101,851 (118,717) (233,569) (133,384) (62,815) (163,000) (19,710) Net cash flows (used in)/ from financing activities ...... (213,581) (408,943) (312,559) (318,909) (467,235) (460,885) (55,730) Cash, cash equivalents and bank overdrafts ...... 426,461 465,794 383,216 467,178 390,578 390,578 47,228

Segment and Operating Data

Nine Nine Twelve Twelve Months Months Months Months Year Ended Year Ended Year Ended Ended Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands, except as otherwise indicated) (€ thousands) Continuing Operations(2): Total revenues: Hurtigruten Norwegian Coast ...... 2,448,563 2,833,342 2,847,360 2,385,058 2,574,197 3,036,499 367,170 MS Fram ...... 279,435 275,193 294,879 220,797 272,560 346,642 41,916 Spitsbergen Travel ...... 137,760 165,529 172,538 154,894 178,142 195,786 23,674 Other Business ...... 414,060 11,577 7,905 1,313 933 7,525 910 Eliminations ...... (10,852) (23,045) (17,068) (13,697) (7,473) (10,844) (1,311) Total revenue from continuing operations ...... 3,268,966 3,262,596 3,305,614 2,748,365 3,018,360 3,575,609 432,359 Discontinued Operations(2): ...... (666,617) (222,322) (186,534) 143,134 133,054 176,454 21,337 Total revenues ...... 3,935,583 3,484,918 3,492,148 2,891,499 3,151,414 3,752,063 453,696 Operating profit/(loss) for the Period: Hurtigruten Norwegian Coast ...... (83,588) 73,638 144,397 294,170 338,789 189,016 22,856 MS Fram ...... 26,494 20,412 132,527 40,702 77,167 168,991 20,434 Spitsbergen Travel ...... (6,670) 5,707 13,903 24,119 30,069 19,854 2,401 Other Business ...... 22,530 (43,374) (29,647) (22,878) (23,954) (30,723) (3,715) Total operating profit/(loss) from continuing operations(2) ...... (41,234) 56,382 261,181 336,113 422,070 347,138 41,976 Discontinued Operations(2) ...... (82,735) (151,840) (10,017) 2,494 19,140 6,629 802 Total operating profit/(loss) ...... (123,969) (95,458) 251,164 338,607 441,210 353,767 42,777 Continuing Operations: EBITDA(3) Hurtigruten Norwegian Coast ...... 204,102 373,845 457,635 523,713 577,826 511,748 61,880 MS Fram ...... 45,650 40,800 76,378 57,116 96,428 115,690 13,989 Spitsbergen Travel ...... 4,417 17,125 24,510 32,815 38,043 29,738 3,596 Other Business ...... 127,418 3,279 11,557 4,526 930 7,961 963 Total EBITDA from continuing operations ...... 381,587 435,049 570,080 618,170 713,227 665,137 80,428 Normalized Discontinued Operations: Bus Business EBITDA ...... (124,042) — — — — — — Fast Ferries Business EBITDA ...... (2,812) 1,049 766 2,621 (458) (2,313) (280) Charter Business EBITDA ...... — — 254 (192) 151 597 72 Total Normalized EBITDA ...... 254,733 436,098 571,100 620,599 712,920 663,421 80,220 Total Normalized Adjusted EBITDA ... 209,979 524,552 564,999 620,845 725,303 669,457 80,950

27 Key Operating Metrics The following tables present, for the periods indicated, certain key performance measures with respect to our Hurtigruten Norwegian Coast and MS Fram segments:

Hurtigruten Norwegian Coast

For the Twelve Months For the Year Ended For the Nine Months Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 (NOK thousands, except as otherwise indicated) Hurtigruten Norwegian Coast: Passenger cruise nights (“PCNs”)(4) ...... 1,101,620 1,090,067 1,038,403 870,297 907,145 1,075,251 Available passenger cruise nights (“APCNs”)(5) ...... 1,496,404 1,702,736 1,723,914 1,303,918 1,306,074 1,726,070 Occupancy rate(6) ...... 73.6% 64.0% 60.2% 66.7% 69.5% 62.3% Gross ticket revenues(7) ...... 1,969,198 2,107,621 2,001,539 1,748,246 1,963,182 2,216,475 Less: Commissions, costs of goods for flights, hotels, transportation ...... 373,043 403,757 340,672 288,837 351,071 402,907 Food, beverage, shop, excursions and other passenger services ...... 250,527 249,431 249,380 212,434 227,451 264,397 Net ticket revenues(8) ...... 1,345,628 1,454,434 1,411,485 1,246,975 1,384,661 1,549,171

Gross ticket revenues per PCN (NOK)(9) ..... 1,788 1,933 1,928 2,009 2,164 2,061 Net ticket revenues per PCN (NOK)(10) ...... 1,221 1,334 1,359 1,433 1,526 1,441 Ship operating costs ...... 1,816,438 1,997,566 1,961,582 1,551,462 1,643,313 2,053,433 Selling, general and administrative expenses ...... 428,062 460,160 428,518 309,883 353,061 471,696 Gross cruise costs(11) ...... 2,244,501 2,457,725 2,390,100 1,861,346 1,996,374 2,525,128 Less: Commissions, costs of goods for flights, hotels, transportation ...... 373,043 403,757 340,672 288,837 351,071 402,907 Food, beverage, shop, excursions and other passenger services ...... 250,527 249,431 249,380 212,434 227,451 264,397 Net cruise costs(12) ...... 1,620,930 1,804,538 1,800,047 1,360,075 1,417,853 1,857,825

Net cruise costs per APCN (NOK)(13) ...... 1,083 1,060 1,044 1,043 1,086 1,076 Fuel consumption (liter/nautical mile) ...... 76.9 81.4 81.8 80.9 81.0 81.9 Fuel cost per liter ...... 4.69 5.57 5.72 5.67 5.84 5.84

28 MS Fram

For the Twelve Months For the Year Ended For the Nine Months Ended Ended December 31, December 31, December 31, September September 30, September 2011 2012 2013 30, 2013 2014 30, 2014 (NOK thousands, except as otherwise indicated) MS Fram: PCNs(4) ...... 69,018 63,278 62,950 46,983 51,554 67,521 APCNs(5) ...... 91,948 88,900 89,297 67,183 65,413 87,527 Occupancy rate(6) ...... 75.1% 71.2% 70.5% 69.9% 78.8% 77.1% Gross ticket revenues(7) ...... 279,435 275,193 294,879 220,797 272,560 346,642 Less: Commissions, costs of goods for flights, hotels, transportation . . 75,233 72,357 68,227 50,306 57,222 75,143 Food, beverage, shop, excursions and other passenger services . . 20,817 18,711 16,375 10,945 11,347 16,777 Net ticket revenues(8) ...... 183,386 184,125 210,278 159,545 203,991 254,724 Gross ticket revenues per PCN (NOK)(9) ...... 4,049 4,349 4,684 4,700 5,287 5,134 Net ticket revenues per PCN (NOK)(10) ...... 2,657 2,910 3,340 3,396 3,957 3,773 Ship operating costs ...... 190,374 188,385 175,878 132,840 141,169 184,207 Selling, general and administrative expenses ...... 43,411 45,865 42,624 30,840 34,964 46,748 Gross cruise costs(11) ...... 233,785 234,250 218,502 163,680 176,133 230,955 Less: Commissions, costs of goods for flights, hotels, transportation . . 75,233 72,357 68,227 50,306 57,222 75,143 Food, beverage, shop, excursions and other passenger services . . 20,817 18,711 16,375 10,945 11,347 16,777 Net cruise costs(12) ...... 137,736 143,181 133,900 102,429 107,564 139,035 Net cruise costs per APCN (NOK)(13) ...... 1,498 1,611 1,499 1,525 1,644 1,588 Fuel consumption (liter/nautical mile) ...... 80.5 81.4 78.6 79.8 80.7 79.2 Fuel cost per liter ...... 5.08 5.72 5.69 5.74 5.80 5.74

29 Other Financial Data and Pro Forma Financial Data

As of and As of and for the for the Twelve Twelve As of and for the As of and for the Months Months Year Ended Nine Months Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands, except as otherwise indicated) (€ thousands) Other Financial Data: Normalized total revenues(14) ...... 2,859,485 3,262,596 3,303,696 2,749,035 3,018,178 3,572,839 432,024 Normalized profit margin(15) ...... (2.4%) (10.1%) 0.8% 5.1% 8.2% 3.7% 3.7% EBITDA(3) ...... 381,587 435,049 570,080 618,170 713,227 665,137 80,428 Normalized EBITDA(14) ...... 254,733 436,098 571,100 620,599 712,920 663,420 80,220 Normalized Adjusted EBITDA(3) ...... 209,979 524,552 564,999 620,845 725,303 669,457 80,950 Normalized Adjusted EBITDA margin(16) ...... 7.3% 16.1% 17.1% 22.6% 24.0% 18.7% 18.7% Capital expenditure(17) ...... 244,144 375,679 296,913 193,280 151,905 255,538 30,899 Normalized capital expenditure(14) ...... 220,814 231,916 254,520 181,596 132,456 205,380 24,834 Normalized change in net working capital(14) ...... 96,859 111,544 68,956 (125,055) (58,374) 66,681 8,063 Pro forma Normalized Adjusted EBITDA(4) ...... 714,527 86,400 Pro Forma Financial Data(18): Pro forma cash and cash equivalents for the Restricted Group(19) ...... 317,727 39,147 Pro forma debt for the Restricted Group(20) ...... 3,968,441 488,953 Pro forma net debt for the Restricted Group(21) ...... 3,650,714 449,806 Pro forma cash interest expense(22) ..... 299,202 36,179 Ratio of pro forma net debt to pro forma Normalized Adjusted EBITDA ...... 5.1x Ratio of pro forma Normalized Adjusted EBITDA to pro forma cash interest expense ...... 2.4x

(1) Financial data for the twelve months ended September 30, 2014 has been translated for convenience only at the rate of €1.00 = NOK 8.2700, which represents the average rate of exchange for the twelve months ended September 30, 2014, as published by Bloomberg Generic Rate. Financial data as of September 30, 2014 has been translated for convenience only at the rate of €1.00 = NOK 8.1162, which represents the rate of exchange as of September 30, 2014, as published by Bloomberg Generic Rate. (2) Our discontinued operations relate to assets for which management at the relevant level has made a commitment to complete the sale, and the transaction is expected to be completed within one year of the classification date. Results from the previous periods for discontinued operations have been reclassified in order to obtain comparable figures. Therefore, the results relating to the years ended December 31, 2011 and 2012 presented in this offering memorandum are derived from the restated numbers which appear in the audited financial statements for the years ended December 31, 2012 and 2013, respectively. For further information regarding our discontinued operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Discontinued Operations.” (3) EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA and Pro forma Normalized Adjusted EBITDA are non-IFRS measure. EBITDA is calculated as our profit/(loss) from continuing operations for the period presented before income tax expense from continuing operations, share of profit/(loss) of associates, finance expense, finance income, depreciation, amortization and impairment (loss)/ reversal for such period. See note (14) for an explanation of Normalized EBITDA. Normalized Adjusted EBITDA is calculated as Normalized EBITDA for the relevant period adjusted for certain extraordinary charges, costs and non-cash items. Pro forma Normalized Adjusted EBITDA is calculated as Normalized Adjusted EBITDA for the relevant period as adjusted to exclude the impact of foreign exchange fluctuations, the impact of cost savings implemented by Hurtigruten and to include the impact of certain additional costs. We believe that EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA and Pro forma Normalized Adjusted EBITDA assist in understanding our trading performance as it gives an indication of our ability to service our indebtedness. An investor should not consider EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA or Pro forma Normalized Adjusted EBITDA (a) as an alternative to

30 operating results (as determined in accordance with IFRS) as a measure of our operating performance, (b) as an alternative to cash flow from or used in operating, investing and financing activities (as determined in accordance with IFRS) as a measure of our ability to meet cash needs, or (c) as an alternative to any other measure of performance under IFRS. Because companies do not calculate EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA and Pro forma Normalized Adjusted EBITDA identically, our presentation of EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA and Pro forma Normalized Adjusted EBITDA may not be comparable to other companies. The following is a reconciliation of profit/(loss) for the period from continuing operations to EBITDA, Normalized EBITDA, Normalized Adjusted EBITDA and Pro forma Normalized Adjusted EBITDA for the periods indicated:

Nine Nine Twelve Twelve Months Months Months Months Year Ended Year Ended Year Ended Ended Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands) (€ thousands) Profit/(Loss) for the Period from continuing operations ...... (96,719) (190,071) 37,011 137,638 236,644 136,017 16,447 Income tax expense from continuing operations ...... 109,085 (23,729) (3,915) (23,112) (29,735) (10,538) (1,274) Share of profit/(loss) of associates .... 2,352 (2,130) 10,837 646 352 10,543 1,275 Finance expense ...... (238,694) (350,695) (320,632) (243,354) (205,977) (283,255) (34,251) Finance income ...... 71,772 130,102 89,540 67,346 49,934 72,128 8,722 Depreciation, amortization and impairment losses ...... (422,821) (378,668) (308,899) (282,058) (291,157) (317,998) (38,452) EBITDA ...... 381,587 435,049 570,080 618,170 713,227 665,137 80,428 Bus Business EBITDA ...... (124,042) — — — — — — Fast Ferries Business EBITDA ...... (2,812) 1,049 766 2,621 (458) (2,313) (280) Charter Business EBITDA ...... — — 254 (192) 151 597 72 Normalized EBITDA ...... 254,733 436,098 571,100 620,599 712,920 663,421 80,220 Restructuring costs(a) ...... — 10,300 2,430 937 1,103 2,595 314 Duplicate rental expense(b) ...... — — 695 — — 695 84 Interim positions(c) ...... 2,411 1,560 3,610 2,140 3,172 4,642 561 Other losses/(gains) net(d) ...... 1,889 (3,493) (9,387) (7,326) (46) (2,107) (255) Share options(e) ...... 253 216 267 (917) 5,440 6,624 801 Other non-recurring(f) ...... (49,307) 79,872 (3,715) 5,411 (89) (9,216) (1,114) Phase four restructuring costs(g) ..... ————2,803 2,803 339 Normalized Adjusted EBITDA .... 209,979 524,552 564,999 620,845 725,303 669,457 80,950 Foreign exchange effects adjustment(h) ...... 17,122 2,070 Phase four run rate effect(i) ...... 55,063 6,658 Additional costs(j) ...... (27,115) (3,279) Pro forma Normalized Adjusted EBITDA ...... 714,527 86,400

(a) Represents costs incurred to restructure and reorganize the Group, including through phase one of the Efficiency Improvement Plan implemented in 2013. Costs included in restructuring reflect moving costs associated with relocating our head office to new leased premises in Tromsø as well as base salary expenses of certain employees, who were made redundant as part of our Efficiency Improvement Program. (b) Represents duplicate costs incurred to run multiple locations during the move from our existing office in Tromsø to our new leased corporate center in Tromsø. This relates to costs for rent paid on two leased offices in Tromsø during the period in which we relocated our head office.

31 (c) Represents exceptional consultancy costs incurred to cover certain positions on a temporary basis, as a result of the death of the former CFO, maternity leave cover for the current CFO and changes in other senior management personnel as part of a reorganization of Hurtigruten following the appointment of our current CEO, including changes to the Senior Vice President of Maritime Operations and certain human resources and IT positions, while permanent replacements were found. This adjustment reflects the additional cost of hiring consultants to fill these positions net of the salary paid to the predecessors in such positions. (d) Represents net gains and losses on sale of property, plant and equipment. In 2012 and 2013, the gain was primarily related to the sale of our office building in Narvik. (e) Represents non-cash share option costs incurred in connection with our share option plan, which we terminated in December 2014. The costs related to the cash settlement of such terminated share option plan will be paid following the issuance of the Notes and are not included in the amount being adjusted. We do not expect to offer share option plans to our employees in the future, or to make any further payments with respect to the terminated share option plans. (f) Represents significant extraordinary income and expense items classified as non-recurring. “Other non-recurring” items consist of the following items for the periods reported:

Nine Nine Twelve Twelve Months Months Months Months Year Ended Year Ended Year Ended Ended Ended Ended Ended December 31, December 31, December 31, September 30, September 30, September 30, September 30, 2011 2012 2013 2013 2014 2014 2014 (NOK thousands) (€ thousands) VAT(i) ...... — — — — (2,803) (2,803) (339) Legal fees(ii) ...... 1,023 557 — — 1,864 1,864 225 Final settlement(iii) ...... — — 6,245 3,291 850 3,804 460 Insurance proceeds(iv) ...... (86,000) (33,000) (14,200) — — (14,200) (1,717) O2 project(v) ...... 1,456 5,242 — — — — — ESA(vi) ...... 37,978 112,680 — — — — — Pension(vii) ...... (23,383) (5,607) — — — — — Other(viii) ...... 11,740 — — — — — — “Passenger ship” adjustment(ix) .... — — 4,240 2,120 — 2,120 256 Costs associated with MS Nordlys fire(x) ...... 7,879 — — — — — — Total ...... (49,307) 79,872 (3,715) 5,411 (89) (9,216) (1,114)

(i) Represents the net adjustment with respect to VAT refunds received following an independent review of our VAT payments initiated by Hurtigruten. (ii) Represents legal fees incurred in connection with (a) advice in relation to the disposal of our Bus Business and Charter Business in the nine months ended September 30, 2014, (b) advice in relation to a dispute with a customer of our Charter Business in 2011 and 2012, (c) advice in relation to cooperating with inquiries made by ESA regarding the Coastal Service Contract in the nine months ended September 30, 2014 and (d) advice in relation to a dispute with Stranda Hamnevesen KF regarding an increase in port taxes and fees charged by Stranda Hamnevesen KF in relation to the port in Geiranger in the nine months ended September 30, 2014. (iii) Represents redundancy payments with respect to the termination of certain former senior executives upon their departure from the Group as part of our changes in senior management personnel as part of a reorganization of Hurtigruten following the appointment of our current CEO. (iv) Represents insurance proceeds received in connection with the claim relating to the fire in 2011 on MS Nordlys, which proceeds were used to refurbish the damaged ship. (v) Represents consultancy fees incurred in connection with a review of our operational processes to identify potential efficiency initiatives and measures. (vi) Represents revenue reversals due to a ruling by the ESA which required us to pay back to the Norwegian government certain revenues recorded under the Former Coastal Service Contract during prior periods. (vii) Represents gains due to changes in our pension scheme from a defined benefit to a defined contribution pension scheme with respect to our Norwegian administrative staff. (viii)Represents losses incurred by Spitsbergen Travel as a result of commissions paid to external agents in connection with the cancelled sailing of MV Polar Star (a ship that we chartered) for the entire Spitsbergen season, as well as a one-time bonus of NOK 7.3 million paid to the former CEO of the Group. (ix) Represents revenue reversals under the Coastal Service Contract as a result of two ships, MS Richard With and MS Kong Harald, being out of service in 2013 for a period of 11 days in excess of the permitted allowance pursuant to the Coastal Service Contract due to unanticipated dry-docking. Such dry-docking was in relation to certain design modifications pursuant to the 305 Classification. See “Business—Legal and Regulatory—Registration of Our Ships.” (x) Represents costs in an amount NOK 7.9 million that were paid to passengers for cancelled bookings and off-hire costs for the period MS Nordlys was under repair following a fire in 2011 that damaged the ship, as well as an additional insurance payment following such fire. (g) Represents restructuring costs incurred in relation to the implementation of phase four of our Efficiency Improvement Program that relate to the nine months ended September 30, 2014.

32 (h) Represents the effect on Normalized Adjusted EBITDA of foreign currency exchange movements between the Norwegian kroner and each of the euro, pound sterling and U.S. dollar at September 30, 2014. The exchange rates as of September 30, 2014 used for the purposes of this adjustment were as follows: €1.00 = NOK 8.1162, £1.00 = NOK 10.4181 and $1.00 = NOK 6.4261 and excluding a loss of NOK 17.9 million in respect of foreign currency exchange swaps that were realized in the twelve months ended September 30, 2014, as well as unrealized effects with respect to foreign currency exchange swaps and foreign currency effects with respect to trade receivables during the same period. Following the issuance of the Notes, which are denominated in euros, we intend to use the euros we generate to service payments with respect to the Notes and the Revolving Credit Facility, to the extent it is drawn, and therefore we do not currently intend to hedge foreign exchange risks relating to such currency. This foreign currency adjustment may not be indicative of our future results of operations. An appreciation of the Norwegian kroner against the pound sterling, euro or U.S. dollar could have a negative impact on our results of operations. Foreign exchange rates are volatile, and the depreciation in the Norwegian kroner may not continue in the future or may reverse, with the relative value of the Norwegian kroner increasing in the future. In addition, our results of operations for any particular period will be affected by currency exchange rates over the entire period and not on any particular date. An appreciation of the Norwegian kroner against the pound sterling, euro or U.S. dollar could have a negative impact on our results of operations, and such negative effect could be significant. The exchange rate of the Norwegian kroner and the price of bunker fuel, one of our largest expenses, may move together, such that an increase in the price of bunker fuel would likely correspond to an increase in the Norwegian kroner; fluctuations in the price of bunker fuel could, accordingly, have particularly pronounced effects on our results of operations and the currency exchange rates that drive our results. See “Management’s Discussion and Analysis of Our Financial Condition and Results of Operations— Currency Effect.” (i) Represents revenue generating and cost saving initiatives which we have commenced but which have not been fully implemented and for which we have not yet fully realized the related impact as part of phase four of our Efficiency Improvement Program. These costs are shown net of additional expenditures incurred to implement such measures. We have implemented a number of revenue generating measures including offering a wider selection of dining options including an à la carte menu in our restaurants, increasing the number of points of sale and suggesting room upgrades to passengers at the time of booking. Costs saving initiatives include the introduction of a purchasing framework designed to align procurement contract pricing with prevalent, competitive market pricing for various procurement inputs as well as measures designed to enhance our bunker fuel efficiency, including by cleaning the exterior of each of our ships to remove debris annually, which will reduce drag, as well as operating our ships at a more fuel efficient speed. While we have implemented certain of these revenue generating and cost saving initiatives already and have achieved some results, there is no guarantee that we will be able to successfully implement all of our initiatives or that the expected results will be achieved. (j) Represents additional operational costs we expect to incur on an ongoing basis. This includes an increase in payroll tax following a change in Norwegian tax legislation in July 2014, the introduction of more extensive medical insurance, which gives employees access to private medical care in an effort to reduce absenteeism, and measures to introduce equal pay for crew onboard all ships. (4) Passenger cruise nights (“PCNs”) is our measurement of guests volume and represents the number of guests onboard our ships and the length of their stay. (5) Available passenger cruise nights (“APCNs”) is our measurement of capacity and represents the aggregate number of available berths on each of our ships (assuming double occupancy per cabin), multiplied by the number of operated days for each the relevant ship for the period. (6) Occupancy rate represents our PCNs for the relevant period as a percentage of our APCNs for the period. (7) Gross ticket revenues represents ticket revenues, revenues from flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger revenues, including car transportation, travel insurance and retained deposits in cases of cancellations. (8) Net ticket revenues represents Gross ticket revenues less Commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. (9) Gross ticket revenues per PCN represents Gross ticket revenues divided by PCNs. (10) Net ticket revenues per PCN represents Net ticket revenues divided by PCNs. (11) Gross cruise costs represents ship operating costs and selling, general and administrative expenses. (12) Net cruise costs represents Gross cruise costs less Commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. (13) Net cruise costs per APCN represents Net cruise costs divided by APCNs. (14) Normalized total revenues, Normalized EBITDA, Normalized capital expenditure and Normalized change in net working capital have been adjusted for each period presented to exclude in each period all Normalized Discontinued Operations. Normalized total revenues is calculated as total revenues for the relevant period as adjusted to exclude revenues for the relevant period relating to all Normalized Discontinued Operations, Normalized EBITDA is calculated as EBITDA for the relevant period as adjusted to exclude EBITDA for the relevant period relating to all Normalized Discontinued Operations, Normalized capital expenditure is calculated as capital expenditure for the relevant period as adjusted to exclude capital expenditure for the relevant period relating to all Normalized Discontinued Operations, and Normalized change in net working capital is calculated as change in net working capital for the relevant period as adjusted to exclude change in net working capital for the relevant period relating to all Normalized Discontinued Operations. (15) Normalized profit margin represents profit/(loss) for the period divided by Normalized total revenues. (16) Normalized Adjusted EBITDA margin is calculated as Normalized Adjusted EBITDA divided by Normalized total revenues for the period. (17) Capital expenditure is calculated as the sum of the purchases in relation of property, plant and equipment and intangible assets.

33 (18) The unaudited pro forma financial information presented herein has been derived from or developed by applying pro forma adjustments to our historical net bank debt as of September 30, 2014, to give effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including the use of proceeds from the Offering, as described in “Use of Proceeds.” The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma financial information is presented for informational purposes only. The unaudited pro forma financial information does not purport to represent what our results of operations or financial condition would have been had the Refinancing Transactions actually occurred on the date indicated, and they do not purport to project the results of operations or financial condition for any future period or as of any future date. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the information contained in “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto appearing elsewhere in this offering memorandum. The unaudited pro forma financial information is not intended to represent pro forma financial information prepared in accordance with the requirements of Regulation S-X promulgated under the U.S. Securities Act or other SEC requirements or IFRS or any other generally accepted accounting principles. (19) Pro forma cash and cash equivalents for the Restricted Group represents total cash and cash equivalents for the Restricted Group as of September 30, 2014, adjusted to give effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions as described in “Use of Proceeds.” This amount excludes cash and cash equivalents of NOK 33.9 million of the SPEs as of September 30, 2014. See also “Capitalization.” (20) Pro forma debt for the Restricted Group as of September 30, 2014, represents total debt of the Restricted Group as adjusted to give effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including the Offering and the use of proceeds as contemplated under the “Use of Proceeds,” as if they had occurred on September 30, 2014. This amount excludes indebtedness of Kystruten KS, which is one of the SPEs, in an amount of NOK 36.8 million under its credit facility as of September 30, 2014. The indebtedness of Kystruten KS is consolidated in the financial results of Hurtigruten and its subsidiaries but is non-recourse to the Restricted Group. See also “Capitalization.” (21) Pro forma net debt for the Restricted Group represents Pro forma debt less Pro forma cash and cash equivalents. (22) Pro forma cash interest expense represents interest payable for the twelve months ended September 30, 2014, adjusted to give effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including (i) the Offering of the Notes and the use of proceeds as contemplated under “Use of Proceeds,” as if they had occurred on October 1, 2013, (ii) interest payable with respect to the drawings of NOK 250.0 million under the Revolving Credit Facility, assuming that this amount had been drawn during the twelve months ended September 30, 2014 and (iii) commitment fees payable on the Revolving Credit Facility, assuming a committed amount of NOK 287.6 million had been available and undrawn during the twelve months ended September 30, 2014. Pro forma cash interest expense excludes the non-cash interest expense relating to the amortization of the debt issuance costs in connection with the Hurtigruten Acquisition Transactions and the Refinancing Transactions. Pro forma cash interest expense has been presented for illustrative purposes only and does not purport to represent what our cash interest expense would have actually been had the foregoing events occurred on the dates assumed, nor does it purport to project our cash interest expense for any future period or our financial condition at any future date. Pro forma cash interest expense with respect to our euro-denominated indebtedness under the Notes and the Revolving Credit Facility for the twelve months ended September 30, 2014 has been calculated using the rate of €1.00 = NOK 8.2700, which represents the average rate of exchange for the twelve months ended September 30, 2014, as published by Bloomberg Generic Rate.

34 RISK FACTORS

An investment in the Notes involves risk. You should carefully consider the following risks, together with other information provided to you in this offering memorandum, in deciding whether to invest in the Notes. The occurrence of any of the events discussed below could be detrimental to our financial performance. If these events occur, the trading price of the Notes could decline, we may not be able to pay all or part of the interest or principal on the Notes, and you may lose all or part of your investment. Additional risks not currently known to us or that are presently deemed immaterial may also harm us and affect your investment.

This offering memorandum contains “forward looking” statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward looking statements. Factors that might cause such differences are discussed below and elsewhere in this offering memorandum. See “Forward Looking Statements.”

Risks Relating to Our Business and Operations Adverse impact of general economic conditions and natural conditions could reduce the demand for our product offerings, particularly cruises, and could adversely impact our operations. The demand for our product offerings is affected by international, national and local economic conditions, and a decrease in demand for our product offerings would adversely affect our sales, profitability, cash flow, ability to borrow funds to finance our operations, future growth and demand for cruises and transport. Adverse changes in the perceived or actual economic climate, such as higher bunker fuel prices, higher interest rates, stock and real estate market declines and volatility, more restrictive consumer credit markets or higher taxes, could reduce the level of discretionary income and our customers’ ability or willingness to spend in the countries from which we source our guests, including Norway, Germany, the United States and the United Kingdom. The recent global economic downturn has had an adverse effect on consumer confidence and discretionary income, which resulted in decreased demand for vacation services as well as price discounting in order to attract customers. Consumer purchases of discretionary items, including products from our offer, often decline during periods when disposable income is adversely affected or there is economic uncertainty. In such circumstances, we may increase the number of promotional sales, or may experience a loss of market share as consumers trade down to cheaper products offered by some of our competitors or non-cruise alternatives, which could have a material adverse effect on our business, including in particular on our margins and profitability, as well as our financial condition, results of operations and prospects.

Adverse changes in the global economy, such as the recent global economic downturn, or in any of the regions in which we sell our products, could reduce consumer confidence, and thereby could negatively affect our business, financial condition, results of operations and prospects. If unfavorable economic conditions return, our business, results of operations, financial condition and prospects may be materially and adversely affected, in particular if customers reduce discretionary spending.

There can be no assurance that in the future the number of tourists traveling on our voyages or visiting our hotels will match current levels or that any decline in the number of such guests will be wholly or partly offset by any increased traffic by local residents on holiday or taking advantage of our local transportation services. A significant reduction in the number of tourists traveling on our voyages or visiting our hotels could have a material adverse effect on our business, financial condition and results of operations.

In a challenging and uncertain economic environment, we cannot predict whether or when circumstances may improve or worsen, or what impact if any such circumstances could have on our business, financial condition, results of operations and prospects. Also, we cannot predict the timing or strength of any economic recovery. Although we offer a year-round service that combines local transportation, cargo and tourism voyages, if we were to experience a sustained economic downturn for an extended period of time we could experience a prolonged period of decreased demand and price discounting.

Severe or unseasonal weather conditions, natural disasters, health hazards or other major events or the prospect of these events could also impact consumer spending and confidence levels and could

35 affect our ability to operate our normal itineraries. For example, in 2010, due to the ash cloud over Iceland, we had to accept some cancellations and re-bookings due to flight cancellations, which resulted in our guests not being able to get to and from the turnaround ports from which we operate. As a result, we incurred some losses with respect to these cancellations and re-bookings, including lost revenue which was not covered by insurance. We may be subject to other circumstances beyond our control that adversely affect our operations.

Moreover, interest rates, currency exchange rate fluctuations and our ability to obtain debt or equity financing are dependent on many economic, market and political factors. Increases in operating or financing costs could adversely affect our results because we may not be able to recover these increased costs through price increases charged to our guests and such increases may adversely impact our liquidity and credit ratings.

The recent global economic downturn has in the past and may in the future adversely impact our suppliers or travel agents, which can result in disruptions in service and financial losses.

We face competition from cruise and transportation companies as well as vacation alternatives and we may not be able to compete effectively.

International cruise operators have had an increasing presence in Norway over the past few years and, as a result, pressure from international competitors on the Norwegian coast is growing. The cruise component of our Hurtigruten Norwegian Coast segment and our MS Fram segment face significant competition from other cruise providers based on various factors including price, brand proposition, relationships with travel agencies and the types and sizes of ships and cabins, services and destinations offered. Although we are the only port-to-port passenger and cargo transportation provider covering the full journey between Bergen and Kirkenes, we face competition from other land and sea-based transportation companies such as bus companies, the Norwegian State Railways, domestic airlines, local ferries and trucking companies.

We face different competitors with respect to our Hurtigruten Norwegian Coast products, MS Fram products and Spitsbergen Travel products. While our Hurtigruten Norwegian Coast product offers a distinct voyage experience and provides local transportation services under the Coastal Service Contract, we still compete with large cruise operators, particularly in the summer months. MS Fram faces competition in the expedition segment, including from smaller ships primarily operating in Antarctica and Spitsbergen/Greenland, larger competitors and specialty expedition brands. Smaller luxury brands are also growing in prominence as demand in the expedition segment increases. Our Spitsbergen Travel segment competes with other hotels and vacation service providers in Svalbard and elsewhere. We could face an increase in competition in the future if new players enter the market, including if international cruise operators use existing ships that currently serve other markets to provide additional offerings in Norway and Polar regions.

We face a variety of competitive challenges, including: • anticipating and responding to changing travel and holiday trends and consumer demands; • developing a distinct and innovative portfolio of products including cruises and excursions to different destinations and with different onboard and off-board activities that appeal to consumers of varying age groups and tastes; • developing a strong brand image with a consistent product offering across our reservation centers, our website and our geographies; • offering a high and consistent quality of services; • successfully operating a diversified range of tourist and local transport products; • outsourcing certain services efficiently; • relying on travel agents that also offer competing vacation packages and tourist products; • competitively pricing our products, achieving customer perception of value and providing quality services; • undertaking effective and appropriate promotional activities and responding to promotional activities of our competitors;

36 • effectively and efficiently operating our reservation centers, online and third-party booking systems; • website design, mobile application and online presence; • advertising and branding; and • attracting and retaining talented people.

We seek to differentiate our brand proposition by offering an experience focused on local culture and heritage and close proximity to nature to our guests; however, such offering may not be conducive to achieving high levels of repeat visits since it may be perceived as a “once in a lifetime” experience. Our programs to motivate previous guests to travel with us again may not be successful and our guests may elect not to travel with us again. Moreover, our nature-based offering may not appeal to a wide range of vacationers who may be looking for a different type of experience. We operate in the wider vacation industry and our product offerings are only a few of many alternatives for people choosing a vacation. We therefore face competition not only from direct competitors, but also from vacation operators that provide other travel and leisure options, including, but not limited to, hotels, resorts, theme parks, packaged holidays and tours, casino operators and vacation ownership properties in the areas we operate or elsewhere.

In the event that we are unable to compete effectively with other cruise companies, transportation companies or vacation service providers, our business, financial condition and results of operations and prospects could be adversely affected.

A significant portion of our revenue comes from passenger and cargo transportation services governed by the Coastal Service Contract, which expires in 2019. Our operation of the coastal passenger and cargo transportation service between Bergen and Kirkenes is governed by our current Coastal Service Contract with the Norwegian government represented by the Ministry of Transport, which was entered into in April 2011 and expires on December 31, 2019, and which may be extended for an additional year at the option of the Ministry of Transport. A significant portion of our annual revenue is attributable to the Coastal Services Contract and for the twelve months ended September 30, 2014, the Coastal Services Contract accounted for 20.8% of our Normalized total revenues.

Both the duration of and the fee pursuant to the Coastal Service Contract are conditional upon the Norwegian parliament making the necessary funds available each year in the annual state budget. The Norwegian government as a whole is only able to make spending commitments for one year at a time given that its budget requires parliamentary approval each year. The Coastal Service Contract is subject to the same approvals as other government contracts in Norway and necessary funds have been made available in all previous years as part of the budgetary process. In the event that the funds required to pay our fees under the Coastal Service Contract are not made available in the annual state budget, we may experience difficulty in receiving our contractual fees for the relevant period.

We may also be unable to renew the Coastal Service Contract when it expires at the end of 2019. The Ministry of Transport could choose not to enter into a new contract after 2019. If the Ministry of Transport does choose to enter into a new coastal service contract, it could do so on substantially different terms, including a different fee structure, any of which could make the contract less profitable. Any new coastal service contract would likely be subject to a public tender process, in which case we could face intense competition for the award of the contract, and we may not be awarded the new contract on commercially favorable terms, or at all.

If we lose the benefits of the Coastal Service Contract or the benefits of the license to operate the route along the Norwegian coast between Bergen and Kirkenes, whether following its expiration or as a result of the Norwegian parliament not providing the necessary funds for the program, it could have an adverse impact on our business, financial condition, results of operations and prospects. In addition to losing a significant portion of our revenues, we would be forced to reposition our business and re-adjust our cost base, which we may not be able to do efficiently because of the specialized nature of our product offering and our ships. Our fleet is currently purpose-built to provide numerous port calls along the coast from Bergen and Kirkenes each day, including at many remote ports, and we may

37 experience difficulty in finding suitable alternative routes for our vessels and effecting the related changes to our operations in the event we do not operate along the same route, including quickly adjusting our fixed costs base to reflect reduced operating levels for our vessels. Moreover, due to the configuration and size of our ships, we may not be able to successfully compete with large cruise operators and would, accordingly, be limited in the ways we could reposition our business following the loss of the Coastal Service Contract or the license to operate the route along the Norwegian coast between Bergen and Kirkenes. The loss of the Coastal Service Contract could also adversely affect our brand recognition. Finally, if a competitor is awarded the new coastal service contract, we could experience increased competition from that company, in both our local transportation and cargo transportation businesses, if we continue to provide these services, and in our cruise business. For more information, see “Business—Our Segments—Hurtigruten Norwegian Coast—Coastal Service Contract.”

The fees under the Coastal Service Contract are subject to downward adjustments and increased operating costs could render the Coastal Service Contract unprofitable. Our fee under the Coastal Service Contract is subject to downward adjustments if we do not fulfill the agreed service requirements. If for example, one of our Hurtigruten Norwegian Coast ships was to fall out of service for a period in excess of that permitted under the Coastal Service Contract and we as a consequence were unable to ensure 34 northbound and 33 southbound daily departures from ports, the fee could be reduced by 1/6 of the daily fee for each cancelled port. We have certain exceptions that permit us to cancel a certain number of port departures per year without penalty under the Coastal Service Contract. For example, we have an allowance of 10 operating days per ship per year due to planned maintenance and unforeseen operational disturbances, two operating days per ship per year are permitted for using the ships for cultural events and cancellations due to bad weather conditions and other documented force majeure events as well as safety reasons and strikes are accepted. However, in 2012 and 2013 we cancelled a number of port departures in excess of the amount permitted under the Coastal Service Contract, which resulted in reductions in our fee of NOK 11.8 million and NOK 15.5 million, respectively. The Ministry of Transport is, furthermore, entitled to demand cancellation of the contract in the event of a significant default, including repeated failures to meet obligations and repeated unfulfilled requests for remediation.

We are also required to comply with various contractual terms and additional requirements under the Coastal Service Contract, and we may be required to incur additional costs of compliance in connection therewith. Our fee under the Coastal Service Contract is subject to adjustment for an increase in certain of our operating costs due to inflation, as measured by Statistics Norway’s cost index for coastal and interior travel sub- index for ferry operations. However, because cost increases are measured based on the previous twelve months as of February 15 of the prior year, our recovery of increased costs could be delayed by almost two years. Moreover, increases in certain costs, including port fees and taxes, do not entitle us to an adjustment of our fee under the Coastal Service Contract, and the adjustments made under the inflation indexation for other operating costs, such as bunker fuel, may not be sufficient to cover the full extent of such increases; thus we cannot assure that the inflation indexation will accurately reflect, and compensate us for, all of our increased operating costs. In particular, in recent years, we have experienced significant increases in port fees and taxes at some of the ports where we are required to stop under the Coastal Service Contract and we have not been able to claim an adjustment of our fee under the Coastal Service Contract for those increases. See “—The Coastal Service Contract requires us to provide certain services and, accordingly, restricts our ability to offer other services that may be more profitable.” and “—An increase in port taxes or fees or other adverse change of our terms of business with the authorities operating the ports in which we call could increase our operating costs and adversely affect our business, financial condition, results of operations and prospects.”

The Coastal Service Contract requires us to provide certain services and, accordingly, restricts our ability to offer other services that may be more profitable. Our operation of the coastal passenger and cargo transportation service between Bergen and Kirkenes is governed by our current Coastal Service Contract. Pursuant to our Coastal Service Contract, we are required to ensure 34 northbound and 33 southbound daily departures from ports throughout the year. We are required to provide local passenger transport on the entire route between Bergen and Kirkenes. In addition, we are required to offer cargo transport on the Tromsø-Kirkenes

38 round-trip route. Under the Coastal Service Contract, our ships are required to have minimum capacity for 320 guests, berth capacity for 120 guests and cargo capacity of 150 euro pallets (in the cargo hold at standard cargo height). Our ships must also have certain passenger facilities, including food service. Because we are required to make a high number of port departures at specific ports each day, we are unable to adjust our itineraries or relocate our Hurtigruten Norwegian Coast ships to take advantage of more profitable opportunities during our peak periods or to reduce our number of voyages and costs during periods of low utilization. In particular, we are unable to relocate our Hurtigruten Norwegian Coast ships to more profitable areas during winter months and continue to incur certain fixed costs, particularly payroll and bunker fuel costs, year-round. Moreover, because we are required to provide certain services and facilities on all of our ships servicing the Coastal Service Contract, we have a limited ability to adjust our product offerings and available facilities to meet changing customer demands.

Our cost base largely comprises fixed costs and, because the Coastal Service Contract requires us to make a certain number of port calls each day, we have a limited ability to vary our itineraries to meet changing consumer demand trends. Therefore, our operating profits are more sensitive to potential declines in consumer demand compared to commercial cruise operators. Because we are required to operate a full schedule regardless of consumer demand, we have a limited ability to reduce fuel costs, port costs and staffing costs by cutting down on services during periods of lower occupancy.

We are currently involved in discussions with the Ministry of Transport regarding the interpretation of certain terms of the Coastal Service Contract, including our obligations to offer minimum berth capacity. According to the Coastal Service Contract, our Hurtigruten Norwegian Coast ships must have a minimum of berth capacity for 120 guests; the issue relates to whether or not these 120 berths must be reserved for certain categories of short distance guests. See “Business—Legal and Regulatory—Legal Proceedings.” If we cannot resolve this matter or if we are found to be in material breach of the contract, we may be required to reserve additional berths for our port-to-port guests or the Ministry of Transport could have a right to terminate the Coastal Service Contract, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Increases in bunker fuel prices or other operating costs may adversely affect our operations, financial condition and liquidity. We are exposed to price volatility with respect to bunker fuel, which is used to operate our ships. Economic, market and political conditions around the world, such as bunker fuel and oil demand, regulatory requirements, supply disruptions and related infrastructure needs, make it difficult to predict the future price and availability of bunker fuel and oil. Bunker fuel expenses accounted for 16.4%, 17.3%, 16.5% and 12.4% of our total payroll costs and other operating costs in the twelve months ended September 30, 2014 and in the years ended December 31, 2013, 2012 and 2011, respectively. The price of oil is internationally traded in U.S. dollars, and the price of bunker fuel, which we purchase in Norwegian kroner, is correlated to the U.S. dollar denominated price of oil; our need to purchase bunker fuel, accordingly, increases our exposure both to oil price fluctuations and foreign exchange rate fluctuations. Although we hedge a portion of our exposure to changes in bunker fuel prices through quarterly rolling hedges of 0–100% of estimated future consumption as well as foreign currency exposure, there can be no assurance that our hedging arrangements will provide a sufficient level of protection against increases in bunker fuel prices or that our counterparties will be able to perform, such as in the case of a counterparty bankruptcy. A significant or continued increase in bunker fuel prices or the U.S. dollar could have a material adverse effect on our business, financial condition, results of operations and prospects, to the extent that such increase exceeds our swaps to manage such exposures. Conversely, since we enter into bunker fuel hedging arrangements in advance, we may incur losses with respect to such hedges to the extent that bunker fuel prices decrease compared to the hedged price. See “Management’s Discussion and Analysis of Our Financial Condition and Results of Operation—Factors Affecting Our Results of Operations—Price of Bunker Fuel.”

Furthermore, as our operations have a direct influence on the natural environment, we have opted to use marine gas oil for MS Fram and marine special distillate on the ships serving the Norwegian coast. These are among the most environment-friendly fuel grades in the business and fulfill the requirements set for voyages in the most vulnerable areas. However, these environmental fuels cost more than their regular alternatives and their prices are subject to fluctuations. In case prices

39 of such fuels increase significantly in comparison to regular fuels, we could be forced to use less environment- friendly fuel grades, which could limit our operations in certain areas and prevent us from fulfilling our NOx emissions reduction target pursuant to our agreement with the Confederation of Norwegian Enterprise’s NOx fund or otherwise impede our corporate social responsibility strategies. See “Business—Legal and Regulatory— Environment.” If we do not meet our targets under the NOx fund, we may be required to pay increased taxes in respect of the increased emissions.

Furthermore, we believe that our land-based vacation competitors’ operating costs are less affected by bunker fuel price increases than cruise companies. Accordingly, bunker fuel price increases may adversely impact us more than our land-based competitors.

Future increases in the global price of bunker fuel could also increase our other expenses, such as crew travel, cargo and commodity prices. We may be unable to increase ticket prices or introduce bunker fuel supplements, which would help to fully or partially offset these bunker fuel price increases.

Moreover, we could experience increases in other operating costs, due to market forces and economic or political instability beyond our control. For example, in July 2014, payroll tax with respect to our crew increased following a change in Norwegian tax legislation in July 2014. As a result, our crew costs have increased. Our other operating costs include, but are not limited to, food, payroll, repairs and maintenance, security and other commodity-based items.

Our business may be adversely affected by fluctuations in currency exchange rates. We are exposed on a transactional and translational basis to movements in the exchange rate of NOK principally against the euro, and to a lesser extent against the U.S. dollar and pound sterling. This is primarily due to the fact that we typically have more operating costs than revenues in Norwegian kroner. For example, in the twelve months ended September 30, 2014, we generated 46% of our Operational Revenues in Norwegian kroner and Operating Costs incurred in Norwegian kroner accounted for 50% of our Operational Revenues. In addition, a portion of our fuel costs relating to NOx tax, fuel taxes and retailers’ margin are also denominated in NOK. If the Norwegian kroner had strengthened by 5% against the euro during the twelve months ended September 30, 2014 with all other variables held constant, our EBITDA would have been NOK 40.5 million lower for the twelve months ended September 30, 2014.

We terminated our former foreign currency exchange swaps as part of the Hurtigruten Acquisition Transactions at a cost of NOK 134.0 million, resulting in an impairment charge of NOK 82.5 million. Following the issuance of the Notes, which will be denominated in euros, we intend to use the euros we generate to service our obligations under the Notes and the Revolving Credit Facility, to the extent it is drawn, and therefore we do not currently intend to hedge foreign exchange risks relating to such currency.

If the Norwegian kroner appreciates relative to the euro, U.S. dollars or pound sterling, certain of our sourcing costs may rise. If we are unable to pass on increases to our cost base, we may incur higher cost of sales and lower margins.

Our revenues are seasonal owing to occupancy levels and variations in prices at different times of the year. Demand for our services is seasonal, with greatest demand generally occurring during the second and third calendar quarters of each year. See “Business—Seasonality.” This seasonality in demand results in fluctuations in our revenues and results of operations with 65.0% of our Hurtigruten Norwegian Coast segment revenues for the twelve months ended September 30, 2014 generated during the second and third calendar quarters of 2014. Although we typically schedule our dry-docking during our non-peak periods in order to maximize our revenue during peak seasons, we may be required to dry-dock ships requiring necessary repairs or essential maintenance, particularly with respect to our older ships, during our peak season.

As a result of seasonality in demand, our results of operations are not evenly distributed over the course of the year. However, a significant proportion of our expenses is incurred more evenly throughout the year. Therefore, our profitability fluctuates during the year and we record less revenues during the first and fourth quarter compared to the remainder of the year. In addition, as a result of the

40 seasonal nature of our business, we experience significant fluctuations in our quarterly working capital requirements. Fluctuations in our quarterly working capital are driven by revenue levels, operating costs, dry- dockings and the collection of deposits on pre-booked trips, especially during September and October as well as January and February, which constitute our peak booking periods and the periods when capital expenditures are at their highest, in line with our dry-docking schedule. Accordingly, our liquidity is typically at its highest during our peak season from June through August, and at its lowest during March and April depending on our dry- docking schedule. Thus, there is a risk that we may not be able to generate sufficient revenues to cover expenses, particularly during certain periods of the year.

Our results of operations are susceptible to unseasonable changes in weather and we may be affected by adverse weather conditions. Extreme weather events, adverse weather and climate conditions may disrupt or require us to alter or cancel our cruise or hotel operations. Extreme weather events, adverse weather and climate conditions could also disrupt commercial airline flights that transport our guests to the geographies in which we operate. Our insurance does not cover additional cost related to delays or cancellations of ports due to weather conditions. In addition, we may incur costs in providing alternative transportation to those guests onboard our ships that need to get to the next port, and we may lose revenue from commissions paid to us by our excursion partners at ports where we cancel calls. We are not obliged to cover costs for transporting guests on their way to a ship if such ship service is cancelled unless the guest has booked a travel package including ancillary transportation such as flights through us. If the guest has booked such package and started their journey, we have to refund the purchase price for such package and in certain instances have to cover their costs associated with transporting such guests back to the point where they initiated their journey. In most cases with respect to our Hurtigruten Norwegian Coast product, where we have ships departing every day, we try to re-book such guests to a ship that is departing either the day before or the day after, however, if we are unable to re-book the guests, we would refund the cost of their tickets (including their deposit). In addition, inclement weather conditions may prevent or discourage our guests from electing our services altogether. In addition, extreme weather conditions could result in increased wave and wind activity, which would make it more challenging to sail and dock our ships and could cause sea/motion sickness among guests and crew. The risk of adverse weather is in particular high with respect to our MS Fram segment, which operates in Polar waters and our Spitsbergen Travel segment, which operates in Spitsbergen, where weather conditions are extreme. Weather events could have an adverse impact on the safety of, and our customers’ satisfaction with, our services and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Extreme weather events or other adverse weather may also disrupt the supply chain from or to the impacted region and could disrupt our bunker fuel, food and shore power supplies. Finally, extreme weather conditions could cause property damage to our ships, port and related commercial facilities and other assets and impact our ability to obtain insurance coverage for operations in such areas at reasonable rates.

Our success depends upon the continued strength of our brand and our ability to distinguish ourselves from our competitors. We believe that maintaining and enhancing our brand is critical to expanding our customer base. We aim to distinguish ourselves from our competitors by branding our services as a distinct, authentic and active experience. Some of our competitors have greater market presence and name recognition and stronger brands than we have or are perceived to offer premium or luxury cruises and therefore greater value than we offer. In addition, some of our competitors may be perceived to offer better quality services or more easily accessible or adventurous routes than we offer. To the extent that we are unable to maintain or enhance consumers’ confidence in our brand or to successfully distinguish our offering from other cruise providers, our business, financial condition, results of operations and prospects could be adversely affected.

Certain competitors have greater financial resources, greater purchasing economies of scale and lower cost bases than us. Consequently they may be able to afford to spend more on marketing and advertising campaigns thereby attracting market share. Some of our competitors may be able to react more swiftly to changes in market conditions and may have a material competitive advantage allowing

41 them to utilize their greater market presence, stronger brand or other advantages when navigating new or changing markets. Certain of our competitors may also be able to accept lower prices than we can offer or withstand higher costs for longer than we can withstand. The adoption by competitors of aggressive pricing, intensive promotional activities and discounts, as well as our actions to seek to maintain our competitiveness and reputation, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our operations may be subject to incidents involving safety and security of our guests and employees. The operation of our ships, shore excursions and other land-based activities involves the risk of serious incidents, including those caused by fire on-board our ships, improper operation of our ships, groundings, snowmobiles and Polar circle boat trips; accidents involving dog sledding; attacks by polar bears; guest and employee illnesses, collisions and navigational errors; as well as other incidents. For example, on February 15, 2014 we were forced to end an Antarctica cruise earlier than scheduled due to a medical emergency involving one of our passengers. As a higher proportion of our guests tend to be older, we may face a higher incidence of guest illness. As a result, we may be required to deviate from our route in order to seek medical attention for guests suffering from serious illnesses. Such incidents may result in a disruption to our scheduled service, which may result in complaints by other guests. In addition, accidents or attacks on our guests could damage our reputation or lead to litigation, which in turn, could have an adverse effect on our results of operations.

The operation of ships also involves the risk of other incidents at sea or while in port, including missing guests, inappropriate crew or guest behavior and onboard crimes, which may bring into question the safety of our guests, may adversely affect future industry performance and may lead to litigation against us. Any such event may result in loss of life or property, loss of revenue or increased costs, guest and crew discomfort and the alteration of itineraries or cancellation of a journey.

We have from time to time experienced serious accidents, including loss of lives, and other incidents involving our ships and land-based activities in the past, and there can be no assurance that similar events will not occur in the future. For example, on September 15, 2011, the MS Nordlys experienced a fire following a breakdown in the engine room. Two members of our crew died and two other members of our crew sustained injuries. To the extent that we encounter a serious accident or other safety related event, we may be required to delay or cancel a trip, face civil or criminal liability or incur significant costs. Any such event involving our ships or land-based activities may bring into question guest and employee health, safety and security and may adversely affect our brand reputation, guest satisfaction and demand for our services in general, as well as our sales and profitability and may result in additional costs to our business and increasing government or other regulatory oversight. An adverse judgment or settlement in respect of any claim against us may also lead to negative publicity about us. In addition, such events involving our Group or our industry may affect customer confidence in using our service or choosing to participate in cruise activities. A decline in customer appetite for the products we offer could have a material adverse effect on our business, financial condition, results of operations and prospects. Anything that damages our reputation (whether or not justified), including adverse publicity about guest safety, could have an adverse impact on demand, which could lead to price discounting and a reduction in our sales. Finally, some of the same factors that impact our guests’ decisions to purchase our product offerings may also impact our ability to employ qualified employees.

Our business and results of operations are dependent on our fleet of ships. A prolonged breakdown or loss of any ship could have a significant adverse impact on our operations and financial position. In addition, prolonged or repeated disruptions in our scheduled service under the Coastal Service Contract could result in material breach under such contract. Our fleet consists of 12 ships, of which 11 are utilized to fulfill our contractual obligations under the Coastal Service Contract to ensure 34 northbound and 33 southbound daily departures from ports along the coast from Bergen and Kirkenes throughout the year. See “—The Coastal Service Contract requires us to provide certain services and, accordingly, restricts our ability to offer other services that may be more profitable.” Accordingly, we are more dependent on the successful operation of our individual cruise ships compared to some of our competitors with larger fleets. If any one of our 12 cruise ships were to cease operations for an extended period of time, for example due to

42 mechanical failure, an extended dry-dock or maintenance needs, our business, brand, financial condition, results of operations and prospects could be negatively impacted. For example, MS Nordlys was out of service for approximately seven months while we conducted repairs resulting from the fire onboard such ship in 2011. In addition, four of our ships were out of service for longer than scheduled due to prolonged dry-docking between January 1, 2012 and September 30, 2014. In the event of a cancellation of a voyage or part of a voyage, we aim to re-book our guests to other ships. However, this may not be possible, particularly in our peak season when utilization rates on our ships are highest. In addition, if prolonged dry-docking results in canceled port calls in excess of the amount permitted by the Coastal Service Contract, our fee under the contract will be reduced, which could make the contract unprofitable. Furthermore, we carry loss of hire insurance for our Hurtigruten Norwegian Coast ships in the period from April 15 through September 30 each year and for MS Fram throughout the year; however, the insurance may not be sufficient to cover all losses or may not cover losses that occur during periods of the year during which we do not carry such insurance. Our ships are purpose-built and specialized for our operations and the total loss of any of our ships could result in a significant disruption to our business. In particular, except for MS Lofoten and MS Vesterålen, we maintain hull and machinery insurance on all of our ships, based on market value and the replacement value of our ships may be significantly higher. In the case of MS Lofoten and MS Vesterålen, due to the age of these ships, we maintain hull and machinery insurance for an amount less than their market value. In addition, the replacement of any of our ships may involve significant delays and expense. The total loss of a ship could also negatively affect our reputation, which could, in turn, negatively affect our business, results of operations and prospects.

In addition, any prolonged disruption in our Hurtigruten Norwegian Coast segment’s ability to provide the daily port departures required by the Coastal Service Contract could result in a breach of the contract. If we were to materially breach the Coastal Service Contract, the Ministry of Transport could impose a significant reduction in the payment under the contract, make a claim for compensation or terminate the contract, any of which could have an adverse effect on our business or results of operations. See “—A significant portion of our revenue comes from passenger and cargo transportation services governed by the Coastal Service Contract, which expires in 2019” and “—The fees under the Coastal Service Contract are subject to downward adjustments and increased operating costs could render the Coastal Service Contract unprofitable.”

Our inability to implement our ship repairs, maintenance and refurbishments on terms and within timeframes that are favorable or consistent with our expectations could reduce our profitability. The repair, maintenance and refurbishment of our ships are complex processes and involve risks similar to those encountered in other large and sophisticated construction, repair, maintenance and refurbishment projects. We could experience delays and cost overruns in completing such work. For example, we experienced prolonged delays with respect to completing scheduled dry-docking work in relation to MS Polarlys and MS Richard With in 2013. The work required for these ships took longer than expected to complete, and our fee under the Coastal Service Contract was reduced in line with the terms of the agreement, which provides for a penalty to be imposed in the event that the number of cancelled port calls exceeds a certain threshold. As our fleet ages, our repair and maintenance expenses have increased due to additional repair and maintenance work to be performed. For example, our two oldest ships, MS Lofoten and MS Vesterålen, were constructed in 1964 and 1983, respectively, and require a significantly higher amount of maintenance and repair work compared to our other ships. Such additional maintenance works typically include replacement of obsolete equipment, including electrical, automation, communication and navigation systems.

In addition, other events, such as work stoppages and other labor actions, insolvencies, “force majeure” events or other financial difficulties experienced at the shipyards and among the subcontractors and suppliers that build, repair, maintain or refurbish our ships could prevent or delay the completion of the refurbishment, repair and maintenance of our ships. These events could adversely affect our operations, including causing delays or cancellations of our trips or unscheduled or prolonged dry-docks and repairs. Any termination or breach of contract on our part following such an event may result in, among other things, the forfeiture of prior deposits or payments made by us as well as potential claims by our guests against us if our ships are out of service and we cannot provide alternative services. A significant delay in the refurbishment or repair of one or more of our ships, or a significant performance deficiency or mechanical failure of a ship, particularly in light of decreasing

43 availability of dry-dock facilities, could have an adverse effect on our business, financial condition, results of operations and prospects.

In addition, the consolidation of the control of certain cruise shipyards, capacity reductions at shipyards or insolvencies could result in less shipyard availability thus reducing competition and increasing prices. We typically use shipyards in close proximity to our routes, in particular for our Hurtigruten Norwegian Coast segment, which limits our options for choosing shipyards and could exacerbate the impact on our business from any consolidations, capacity reductions or insolvencies. Finally, the lack of qualified shipyard repair facilities could result in the inability to repair and maintain our ships on a timely basis, which could also result in reduced profitability.

Overcapacity in the cruise ship and vacation industry could have a negative impact on our net revenue, which, in turn, could adversely affect profitability. According to Cruise Industry News, cruise fleet capacity in Europe has increased at a CAGR of 6.4% between the years ended December 31, 2008 and December 31, 2013 and is forecast to increase at a CAGR of 4.3% between the years ended December 31, 2013 and December 31, 2017 based on existing ship orders, known ship withdrawals and deployment changes. Cruise capacity in Norway and the Polar regions could grow faster than the rest of Europe if a greater proportion of the cruise fleet in Europe were to target these destinations.

In order to profitably utilize its increased capacity, the European cruise industry would need to grow at a rate equivalent to or in excess of capacity growth. In recent years, demand has grown at a faster rate than capacity for Europe as a whole. However, a change in this trend could negatively affect our business and results of operation.

Our business and results of operation could also be negatively impacted by overcapacity in the wider vacation industry. Our services compete not only with other cruise competitors but also with other vacation and adventure expedition alternatives, which may be cheaper and/or provide the same explorer element as we offer our guests. If there were an industry-wide increase in capacity in the cruise industry or the wider vacation industry without a corresponding increase in public demand, we could experience reduced occupancy rates and be forced to discount our prices, which could negatively impact our business, financial condition (including the impairment of the value of our ships, goodwill and trademark assets), results of operations and prospects.

We cannot assure you that the projections or assumptions used, estimates made or procedures followed in the Valuation Report of our ships are correct, accurate or complete. This offering memorandum refers to a valuation report (the “Valuation Report”) prepared by V.Ships with respect to certain of our ships. V.Ships has carried out its valuation based upon information supplied by us, which it has assumed to be correct and comprehensive. In particular, V.Ships: • has relied on a broker valuation provided by Octagon Shipping (the “Broker Valuation”), an independent ship broker, which is based on a desktop valuation; • has relied on market data with respect to building ships of a similar size and purpose compared to our ships; • has not undertaken a full survey of the relevant ships but has relied upon the information provided by us; and • has relied on information we have provided in relation to the amount of capital expenditures required for dry-docking, routine repair and maintenance and other expenses in relation to compliance with relevant regulatory requirements, including expenses in connection with the 305 Classification, that are expected to be required over the next five years for each ship.

Any opinions or conclusions reached in the Valuation Report are dependent upon a number of assumptions and economic conditions that may or may not occur and a number of forward-looking estimates that may not be correct. In addition, the Valuation Report is based, in part, on information provided by third parties in relation to market values and estimated shipbuilding costs. Accordingly, you should not place undue reliance upon the valuation taken from the Valuation Report and reported herein.

44 Other appraisers may reach different valuations of our ships. Moreover, the value determined in the Valuation Report could be significantly higher than the amount that would be obtained from the actual sale of the relevant ships, especially in a distressed or liquidation scenario. Accordingly, the Valuation Report should not be considered a representation of the actual present or future value of such ships. The realizable value of our ships at any given time will depend on various factors, including: • market, economic and industry conditions, including demand and capacity for our services; • the intended use of the relevant ships by the buyer; • the availability of buyers; • the availability of financing; • the time period in which the ships are to be sold; • the availability of similar ships; • the condition of the ships; and • other operational risks.

In addition, we anticipate that the appraised value of our ships will change over time, and it may change materially. After the issuance of the Notes, neither third parties nor we will provide the holders of Notes with revised valuations and we expressly disclaim any duty to update such valuations under any circumstances.

A failure to successfully implement our business strategy and the final phase of our Efficiency Improvement Program may adversely affect our business. In addition, management’s attention may be diverted from existing operations to the process of taking the company private following the Hurtigruten Acquisition. Our strategies prioritize increasing our revenues and achieving cost effective operations through the continued implementation of our efficiency improvement program (“Efficiency Improvement Program”). Our strategy is subject to a number of risks, some of which are beyond our control. For example, if we are not successful in negotiating favorable terms under our supply agreements for future periods, we may not realize the cost savings we expect to achieve on an ongoing basis. The success of our Efficiency Improvement Program is subject to our ability to monitor our costs and implement and continue ongoing efficiency management, including, for example, introducing increased onboard services and sales, reduced crew costs, optimizing bunker fuel consumption and procurement synergies. Our projected cost efficiencies and savings may not be realized or we may incur other unanticipated costs.

We cannot be certain that we will be able to implement our strategies on a timely basis or at all, or that any or all of our strategy will be successful or profitable. Failure to effectively implement or achieve any or all of our strategies or our Efficiency Improvement Program may have an adverse effect on our business, financial condition, results of operations and prospects. In addition, prior to the Hurtigruten Acquisition, we were a publicly traded company in Norway and the process of taking Hurtigruten private may require the reorganization of certain management and operational roles, which may divert the attention of our management team. If management is not focused on implementing our business strategy, it could have an adverse effect on our business, financial condition, results of operations and prospects.

We lease two of our 12 ships and our business is subject to the risks and costs associated with such leases. In December 2002 and June 2003, we sold two of our ships to Kystruten KS and Kirberg Shipping KS, respectively, under sale and leaseback transactions. Since such time, we have leased MS Richard With and MS Nordlys under 15 year bareboat leases with Kystruten KS and Kirberg Shipping KS, respectively. Each of MS Richard With and MS Nordlys is used to service our Coastal Service Contract.

Each bareboat lease agreement contains a financial covenant that requires us to maintain minimum liquidity at all times, and non-compliance with the covenant is a default under the contract

45 and could result in the relevant agreement being terminated by the vessel owner. See “Business—Our Fleet.” Accordingly, any failure to meet our minimum liquidity obligations under the leases could adversely affect our Hurtigruten Norwegian Coast segment’s ability to carry out its cruise operations or fulfill its obligations under the Coastal Service Contract, either of which could have an adverse effect on our business and results of operations.

The lease agreements expire in February 2018 for MS Richard With and August 2018 for MS Nordlys, respectively, in each case with an option to extend for up to an additional five years on market terms. We require approval from the owner before we can make any alterations to the physical structure of either leased ship. The owners have the right to have the ships returned in the same condition as the ships were delivered to us, with customary exceptions for normal wear and tear. Following the expiration of these leases, we cannot assure you that we will be able to renew these leases on commercially favorable terms, or at all. If we do not extend or renew the leases, we may need to lease other ships or alternatively, purchase ships so that our Hurtigruten Norwegian Coast segment can continue to provide its product offering without disruption. There may be unforeseen costs involved with returning the ships to their original condition or the Company may experience difficulty in renewing the leases after they expire. As a result, we may not be able to renew the leases on favorable terms, or at all. Such risks related to our leased ships could have a material adverse effect on our business, results of operations, financial condition and prospects.

An increase in port taxes or fees or other adverse change of our terms of business with the authorities operating the ports in which we call could increase our operating costs and adversely affect our business, financial condition, results of operations and prospects.

In recent years, port authorities operating ports-of-call that we regularly visit have assessed new taxes, introduced new fees or raised existing taxes or fees charged for the use of such ports, including, but not limited to, value added taxes on tickets and onboard revenues and changes in the scope of income included in tonnage based tax regimes. Our port costs for the Hurtigruten Norwegian Coast segment have increased from NOK 77.9 million in the year ended December 31, 2011 to NOK 88.1 million in the twelve months ended September 30, 2014. This amount includes a reversal of an accrual of NOK 3.7 million related to a dispute with Stranda Hamnevesen KF regarding an increase in port taxes and fees charged by Stranda Hamnevesen KF in relation to the port in Geiranger. Such increases are beyond the scope of the inflationary index covered under the Coastal Service Contract and to the extent that we are not able to pass on such additional costs to our customers, our operating costs will increase. In addition, an increase in the prices we charge our guests as a result of such increased operating costs could decrease the demand for our services, which could adversely affect our revenues. Pursuant to the Coastal Service Contract we are obliged to ensure 34 northbound and 33 southbound daily departures from ports along the coast from Bergen to Kirkenes throughout the year. See “—The Coastal Service Contract requires us to provide certain services and, accordingly, restricts our ability to offer other services that may be more profitable.” Accordingly, we are more dependent on the ports along the coast from Bergen to Kirkenes compared to our competitors. Some of the operators of these ports have recently increased certain passenger handling and harbor-related fees. We are currently involved in a dispute with Stranda Hamnevesen regarding an increase in port taxes and fees charged by Stranda Hamnevesen KF in relation to the port in Geiranger. We successfully challenged the increase in port taxes and fees in both the District Court and the Court of Appeal. In December 2014, Stranda Hamnevesen KF appealed parts of the Court of Appeal’s decision to the Supreme Court of Norway. If the appeal is accepted and the Supreme Court ultimately decides in favor of Stranda Hamnevesen KF, we could be liable for an amount of approximately NOK 2 million for outstanding fees for the period from 2012 to 2014 as well as legal costs. The final outcome of the dispute is also likely to impact the amount of port fees we will be charged in future periods at the port in Geiranger and elsewhere.

We are dependent on our IT systems and any failure to maintain reliable and effective IT systems may materially and adversely affect our business and results of operations.

Our business requires the use of sophisticated equipment and technology systems. We use various IT platforms to operate our business to business online reservation systems (“B2B Reservation Systems”), our other e-commerce platforms as well as operational systems used in our offices. Our equipment and technology systems may require maintenance, refinement, updating and replacement with more advanced equipment or systems in the future, which is further complicated due to our multiple IT platforms. If we are unable to maintain or upgrade our IT systems regularly, we may experience difficulties with the adaptation of new technology and systems into our existing operations.

46 We also may not achieve the benefits that we anticipate from any new equipment or technology, and a failure to do so could result in materially higher than anticipated costs and could have a material adverse effect on our business, financial condition, results of operations and prospects. Furthermore, future development of infrastructure IT systems and technology may be further complicated by the nature of our business, which includes ships as well as land-based operations, and the difference in technology and systems we use.

Damage to or malfunction of our equipment or technology systems may require capital expenditure to rectify and cause delays in our operations. Any material disruption or slowdown of our equipment or technology systems, including those caused by our failure to successfully upgrade our equipment or systems, could cause disruption in our operations or delay our services or even force us to cancel scheduled voyages or land-based activities. Such delays or cancellations could (particularly if the disruption occurred during our peak season) have a material adverse effect on our business, financial condition, results of operations and prospects.

We sell our cruise packages over the internet, both domestically and internationally using multiple platforms. Our B2B Reservation Systems and other e-commerce channels are subject to numerous risks, including:

• reliance on third parties for computer hardware/software, the need to keep up with rapid technological change and the implementation of new systems and platforms, including our B2B Reservation systems;

• the risk that our IT systems may become unstable or unavailable due to necessary upgrades or the failure of our computer systems or the related IT support systems as a result of computer viruses, telecommunication failures, electronic break-ins and similar disruptions, or disruption of internet service, whether for technical or other reasons;

• customers or travel agents finding our B2B Reservation Systems or other e-commerce channels difficult to use; and

• liability for online credit card fraud and problems adequately securing our payment systems.

Our failure to respond appropriately to these risks and uncertainties could reduce our revenue through third- party agent bookings, which could negatively affect our business, financial condition, results of operations and prospects.

We engage third-parties to maintain and develop IT systems for our use. If such private providers were to terminate their agreements with us or stop providing services to us for any reason, or if such private providers were to considerably raise the price of their services, our business would be materially and adversely affected. Some of these providers are small companies and their long-term financial viability cannot be assured. We cannot assure you that we will be able to find and retain alternative providers or acquire the rights to intellectual property important to our operations if our current or future providers become financially unstable. To the extent any of these systems, technologies or programs do not function properly and we cannot find and retain a suitable IT provider to help remedy the fault, we may experience material adverse effects on our business that require substantial additional investments to remedy, or which we may not be able to remedy at all.

Breaches in data security or other disturbances to our information technology and other networks could adversely affect our reputation and operations and have an adverse impact on our business, financial condition, results of operations and prospects.

Our ability to increase revenues and control costs, as well as our ability to serve guests most effectively depends in part on the reliability of our sophisticated technologies and system networks. We use communications, information technology and other systems to manage our inventory of available cabins and to set pricing in order to maximize our revenue yields and optimize the effectiveness and efficiency of our operations. Gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, causing operational disruptions and other cyber-related risks could adversely impact our guest services and satisfaction, employee relationships, business plans and our reputation and we could experience lost revenues, fines or lawsuits. Also, customers may be unwilling to provide us with their data, which may adversely affect our direct marketing efforts. In addition, the operation and maintenance of these systems is in some

47 cases dependent on third-party technologies and service providers for which there is no certainty of uninterrupted availability. While we have invested and continue to invest in technologies and other security initiatives and disaster recovery plans to mitigate these risks, these measures cannot completely insulate us from disruptions that could result in adverse effects on our operations and results of operations. These potential disruptions and cyber- attacks could have a material adverse effect on our business, in particular on customer demand and pricing for our services, as well as our financial condition, results of operations and prospects.

Our principal office is located in Tromsø, Norway. Although we have developed disaster recovery and similar contingency plans, actual or threatened natural disasters or similar events in Norway may cause disturbances to our information technology and have a material impact on our business continuity, reputation, financial condition, results of operations and prospects.

Amendments to the collective bargaining agreements for crew members of our fleet and land-based employees and other employee relation issues may adversely affect our financial results. A large number of our employees are represented by labor unions under various collective bargaining agreements with varying durations and expiration dates. As of September 30, 2014, we were subject to five collective bargain agreements, including three collective bargain agreements for maritime crew and two collective bargaining agreements for land-based employees. One agreement was renegotiated in the end of 2013 and is scheduled to expire in the end of December 2017. The other four agreements were renegotiated in 2014 and are scheduled to expire in April 2016. Such collective bargaining agreements cannot be renegotiated prior to their expiry.

In addition, pursuant to our Coastal Service Contract, all our employees who are directly engaged in fulfilling our obligations under our Coastal Service Contract must have employment terms equal to or better than the terms set out in national collective bargaining agreements for the relevant type of employee and common market practice. We may not be able to satisfactorily renegotiate these collective bargaining agreements when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage on our ships. We may also be subject to or affected by work stoppages unrelated to our business or collective bargaining agreements. Any such work stoppages or potential work stoppages could have a material adverse effect on our business, financial condition, results of operations and prospects.

The loss of key personnel or our inability to recruit or retain qualified personnel could adversely affect our results of operations. We rely upon the ability, expertise, judgment, discretion, integrity and good faith of our senior management team and other key personnel, who have extensive experience and knowledge of the cruise, transportation and travel industry. In addition, in crewing our ships, we require technically skilled employees with specialized training who can perform physically demanding work. Our success and ability to anticipate and effectively respond to changing customer preferences and tastes depends, in part, on our attracting and retaining high quality employees in our management, and other key functions. We must continue to recruit, retain and motivate management and other key employees sufficient to maintain our current business and support our business strategy. Competition for such personnel is intense, and we may not be able to attract and retain a sufficient number of qualified personnel in the future. For example, sea officers and other key onboard personnel have been difficult to source in recent years as the industry has been experiencing a shortage due to increased ship capacity and a trend away from maritime education in some countries. Increased cruise capacity could impact our ability to retain and attract qualified crew, including officers, at competitive rates and, therefore increase our shipboard employee costs.

The members of our senior management team have substantial experience and expertise in our business and have made significant contributions to our growth and success. See “Management” for additional information about our management. The unexpected loss of services of one or more of these individuals could also adversely affect us. We are not protected by key man or similar life insurance covering members of our senior management. We have employment agreements with our executive officers, but these agreements do not guarantee that any given executive will remain with us. The loss of services of any of the key members of our management team or other personnel could have a material adverse effect on our business, financial condition, results of operations and prospects.

48 We are subject to complex laws and regulations, including environmental, health and safety laws and regulations, which could adversely affect our operations and any changes in the current laws and regulations could lead to increased costs or decreased revenue. We are directly and indirectly subject to various international and national laws, regulations, treaties and employee union agreements related to, among other things, the environment, health, safety, security and employment. Failure to comply with these laws and regulations could lead to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages.

Many aspects of the cruise, sea transportation and vacation industries are regulated by national legislators and authorities (like the Norwegian Maritime Directorate (“NMD”)), the European Union and international treaties, such as: • the International Convention for the Safety of Life at Sea (“SOLAS”), an international safety regulation; • the International Convention for the Prevention of Pollution from Ships (“MARPOL”), an international environmental regulation; • the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“SWTC”), an international treaty providing qualifications for seagoing personnel; • the International Convention on Maritime Search and Rescue (“SAR”), an international convention covering search and rescue operations, rescue co-ordination and operating procedures to be followed in the event of emergencies or alerts during search and rescue operations; • the International Safety Management Code (“ISM”), an international standard for the safe management and operation of ships and for prevention of pollution; • the International Ship and Port Facility Security Code (“ISPS”), an international standard for enhancing the security onboard ships and in port facilities; and • the International Convention for the Control and Management of Ships’ Ballast Water and Sediments (“BWM”), an international convention intended to prevent the spread of harmful aquatic organisms from one region to another.

Compliance with such laws and regulations may entail significant expenses for ship modification and changes in operating procedures, which could adversely impact our operations and financial results. In addition, we may incur costs, such as cleanup costs, fines and other sanctions, and third-party claims for property damage or personal injury, as a result of violations of or liabilities under such laws and regulations, including in connection with any release or disposal of or exposure to hazardous substances or wastes.

We also have to comply with complex ship registration requirements. For example, for the past 10 years, we have been involved in ongoing discussions with the NMD regarding whether our ships should be classified as “car ferries” or “passenger ships” pursuant to the 305 Classification. The two classifications are subject to different regulatory requirements regarding safety and have separate minimum capacity requirements. The discussion concerns the classification of our single compartment ships built prior to the time the current requirements came into effect and we have sought to have our ships re-classified as “passenger ships.” If a reclassification of these ships as “passenger ships” is not approved, we may be required to reduce the passenger and crew count permitted to be transported on these ships. Alternatively, if the ships are classified as “car ferries,” we could be required to redesign our ships, with estimated future rebuild costs of NOK 2.0 million to NOK 20.0 million per ship. The ongoing discussions with the NMD are related to the technical design solutions for these design modifications.

One of our ships, MS Richard With, has already been redesigned at a cost of NOK 18.7 million in 2013 and NOK 3.2 million in 2014 and approved by the NMD. For our other single compartment ships: MS Polarlys, MS Nordlys, MS Nordkapp, MS Kong Harald, MS Nordnorge and MS Vesterålen, we have proposed alternative modifications to improve safety levels and cargo utilization that can be undertaken at a lower cost compared to the modifications we have made to MS Richard With. If we carry out our proposed modifications while our ships are in service, as we intend to, we could experience a decrease in our cargo revenues while the work is continuing. We currently expect capital expenditure in 2015 in relation to the modification of MS Polarlys, MS Nordlys, MS Nordkapp, MS Kong

49 Harald, MS Nordnorge and MS Vesterålen in an aggregate amount in the range of approximately NOK 80 million to NOK 90 million, depending on the agreement we reach with the NMD. However, we expect that such capital expenditure would increase to an aggregate amount of approximately NOK 118 million and could require extended dry-docking times for each ship, possibly during our peak season, if the NMD does not agree to our alternative modifications and we are required to undertake modifications on all our single compartment ships that are similar in scope to the modifications we made to MS Richard With.

Our single compartment ships are required to be reclassified as “passenger ships” under the 305 Classification before October 2015, which, among other things, requires compliance with SOLAS requirements for such vessels. See “Business—Legal and Regulatory—Registration of Our Ships.”

Environmental, health, safety, security and employment issues within the cruise, sea transportation and vacation industries are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. Accordingly, new legislation, regulations or treaties, or changes thereto, could impact our operations and would likely subject us to increased compliance costs in the future. We are required to invest financial and managerial resources to comply with these laws and regulations. In addition, training of our crew and land-based employees may become more time consuming and may increase our operating costs due to increasing regulatory and other requirements. Further, failure to comply with applicable laws and regulations may subject us to criminal sanctions or civil remedies, including fines, injunctions or seizures of assets.

Our sea based operations depend on our ability to renew our annual ISM compliance certificates for our ships and compliance with the annual audit by the NMD. In order to continue our ship operations, and to evidence our compliance with the IMO International Safety Management Code (“ISM Code”), our ships are required to undergo an annual inspection in order to obtain a renewed passenger ship safety certificate issued by the NMD. Our passenger ship safety certificate is subject to annual review of compliance conducted by the NMD, during which the NMD may identify items which need to be improved or addressed for us to operate in compliance with the ISM Code. Furthermore our business related to ship operations are subject to an annual review by NMD in order to obtain a document of compliance. During such audits the NMD may identify items which need to be improved or addressed for us to operate in compliance with the ISM Code.

To the extent that our ships or our operations do not comply with the required standards, we may be required to incur additional expenses in order to conduct work required to obtain the passenger ship safety certificate and the document of compliance, or we may not receive such certificates or document of compliance at all. For example in 2013, we were required to improve and make changes to our safety, accident and incident reporting procedures, and to address concerns with respect to some of our life boats on our ships, which were discovered to be prone to water intrusion. While carrying out the necessary actions, we received an interim document of compliance covering the period until we completed the required improvements to the satisfaction of the NMD. As a result, we experienced a two-month delay in renewing such document of compliance and we had to incur additional costs with respect to implementing the improvements specified by the NMD. We did not experience a similar delay in renewing our document of compliance in 2014. A significant delay in receiving such certification or loss of the certification could result in a suspension of our ship operations until we receive the necessary certificates, which, in turn, would have an adverse impact on our business, financial condition, results of operations and prospects.

Terrorist acts, acts of piracy, armed conflict and threats thereof, and other international events impacting the security of travel could adversely affect the demand for our services. Demand for our service options has been and is expected to continue to be affected by the public’s attitude towards the safety and security of travel. Factors including, but not limited to, past acts of terrorism and threats of additional terrorist attacks, acts of piracy, threat or possibility of hostilities, the issuance of travel advisories by national governments, other geo-political uncertainties and general concerns over the safety and security aspects of traveling have had and may have in the future an adverse effect on tourism, travel, pricing in the travel and vacation industry and the availability of air service and other forms of transition. Decreases in demand and reduced pricing in response to such

50 decreased demand would adversely affect our business, financial condition, results of operations and prospects by reducing our profitability.

These types of events could also impact our ability to source qualified employees at competitive costs and, therefore, increase our shipboard crew costs.

Adverse incidents affecting the health of our guests and crew, including spread of contagious diseases and viral outbreaks, could have an adverse effect on our sales and profitability. Public perception about the safety of travel and adverse publicity related to guests or crew illness, such as incidents of H1N1, Ebola virus, stomach flu, or other contagious diseases, may impact demand for our services. If any wide-ranging health scare should occur, our business, financial condition, results of operations and prospects would likely be adversely affected.

In particular, our ability to effectively and efficiently operate shipboard and shore side activities may be impacted by widespread public health issues/illnesses or health warnings resulting in, among other things, reduced demand for our services and cancellations and employee absenteeism that could have an adverse effect on our sales and profitability. We have implemented training and ship cleaning protocols to limit the spread of contagious diseases, but such actions may not be sufficient to fully mitigate this risk. For example, in July 2014 we became aware that a guest sailing on one of our ships had been diagnosed with Legionnaires’ disease. In response, we implemented a testing and sanitation program on all of our ships in close cooperation with Norwegian government experts in order to determine if there was a presence of Legionnaires’ disease onboard our ships. In this process we detected the presence of bacteria in the fresh water system onboard four of our ships. We subsequently installed water treatment equipment on such ships in order to prevent a reoccurrence of this and certain other diseases, and we intend to install water treatment equipment onboard all our ships to prevent any future outbreaks of Legionnaires’ disease. Such outbreaks of disease could, among other things, disrupt our ability to embark and disembark guests and crew from our ships or conduct our land-based services, disrupt air travel to and from ports, increase costs for prevention and treatment and adversely affect our supply chain. This could also adversely impact demand for our services in areas unaffected by such an outbreak.

Litigation, enforcement actions, fines or penalties could adversely impact our financial condition or results of operations and damage our reputation. As a result of any ship related or other incidents resulting from our operations, litigation claims, enforcement actions and regulatory actions and investigations may be asserted or brought against us, including, but not limited to, those arising from personal injury, loss of life, loss of or damage to personal property, business interruption losses or environmental damage to any affected coastal waters and the surrounding area. Such claims, enforcement actions and regulatory actions and investigations could lead to litigation or legal proceedings that could result in significant awards or settlements to plaintiffs and civil or criminal penalties, including substantial monetary fines, which could have a significant adverse effect on our results of operation and financial position. For example, guests falling ill or sustaining injury while travelling with us may feel mistreated or not appropriately taken care of and guests impacted by expedition cancellations or port cancellations may seek compensation from us. See “Business—Legal and Regulatory—Litigation.” We may also incur costs both in defending against any claims, actions and investigations and the time and attention of our management may also be consumed in defending such claims, actions and investigations. For example, in 2011, the EFTA Surveillance Authority (“ESA”) found that the Norwegian government had provided us with unlawful state aid under the Former Coastal Service Contract, and we, accordingly, were ordered to repay an amount of NOK 143.4 million (comprising of NOK 35.0 million in 2011 and NOK 108.4 million in 2012) to the Norwegian government. ESA has recently made several inquiries about our current Coastal Service Contract on the basis of third-party complaints alleging that we have received unlawful state aid in connection with the contract. We have, and may in the future, incur costs in cooperating with ESA’s requests for information and otherwise defending our position in connection with the ongoing ESA state aid investigation. In addition if the ESA commences an official proceeding and finds that unlawful state aid has been granted to Hurtigruten, we may be required to modify our current practices, to agree to new terms and conditions or to pay a settlement amount, fee or penalty, in an amount representing the amount, which could be significant, of the illegal state aid received as determined by the ESA, plus interest, any of which may adversely impact our operations and financial position. In

51 addition, such claims, enforcement actions and regulatory actions and investigations resulting from our operations could damage our reputation and brand.

Our insurance may be insufficient and, due to factors beyond our control or a claim by us, our insurance premiums may increase significantly, which may adversely affect our financial results. Also, our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at reasonable rates could result in higher expenses or lower revenues.

Insurance of our ships and our cruise and transportation activities is an important element of our business. We seek to maintain comprehensive insurance coverage at commercially reasonable rates. We believe that our current coverage is adequate to protect us against most of the significant risks involved in the conduct of our business. See “Business—Insurance.” However, certain risks, such as risks associated with the threat of terrorism, are not insurable and we self-insure against such risks. In addition, we may choose higher deductibles to insure against risks we consider more remote in order to minimize the cost of our insurance policies. We do not maintain separate funds or otherwise set aside reserves to cover losses or claims by third parties. Therefore, if an uninsured loss were to occur, we could experience significant disruption to our operations, suffer significant losses and be required to make significant payments for which we would not be compensated, any of which in turn could have a material adverse effect on our business, results of operations, financial condition and prospects.

Even when insured, there can be no assurance that all risks are fully insured against or that any particular claim will be fully paid. In addition, the carriers with which we hold our policies may go out of business, or may be otherwise unable to fulfill their contractual obligations.

Insurance costs may increase substantially in the future. Significant incidents followed by significant insurance claims could result in higher insurance premiums commencing on the policy renewal dates or the inability to obtain coverage. Insurance costs may also be affected by natural catastrophes, fear of terrorism, and intervention by the government or a decrease in the number of insurance carriers. In addition, we have been and continue to be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity coverage for tort liability. Our payment of these calls and increased premiums could result in significant expenses to us which could reduce our cash flows. If we were to sustain significant losses in the future, our ability to obtain insurance coverage or coverage at commercially reasonable rates could be materially adversely affected which could have a negative impact on our business, financial condition, results of operations and prospects.

We rely on scheduled commercial airline services for guest connections, and increases in the price of, or major changes or reductions in, commercial airline services could undermine our customer base and have an adverse effect on our profitability.

Many of our guests and crew members depend on scheduled or chartered commercial airline services to transport them to or from airports near the ports where our cruises embark and disembark. Increases in the price of airfare, due to increases in aviation fuel prices or other factors, would increase the overall vacation cost to our customers and may adversely affect demand for our services. Changes in commercial airline services as a result of strikes, labor unrest, adverse weather conditions, consolidation of carriers, or other events or the lack of availability due to schedule changes, such as Lufthansa’s decision in 2014 to discontinue its flight service from Frankfurt to Bergen, or a high level of airline bookings, could adversely affect our ability to deliver guests and crew to or from our ships and Spitsbergen and increase our costs which would, in turn, have an adverse effect on our business, financial condition, results of operations and prospects.

If the amount of sales made through third-party internet travel intermediaries increases significantly, we may experience difficulty in maintaining consumer loyalty to our brand.

We have seen a shift in booking our services from traditional to online channels. Accordingly, we derive a portion of our business from internet travel intermediaries, most of which devote equal space and attention to all the service operators listed on their websites. These parties generally sell and market our services on a non- exclusive basis. Our competitors may offer such agents higher commissions and incentives to encourage them to recommend other vacations and services over ours.

52 In addition, various websites publish user reviews based upon personal testimonies, including photos that have not been vetted or verified. Although we monitor online reviews of our services through a number of sites such as Cruisecritic and TripAdvisor, we have little control over the way in which our services are portrayed through these third-party sites. Our services may be categorized according to the search criteria deemed appropriate by the travel intermediaries and may be grouped together with other services that are made to look more desirable. Some internet travel intermediaries may emphasize factors such as price or general indicators of quality for example, “four-star high-end cruise” at the expense of brand identification. Such measures are aimed at developing customer loyalty with respect to the reservation system used rather than to our brand. If sales made through internet travel intermediaries increase significantly and consumers develop stronger loyalties to these intermediaries rather than to our brand, we may experience a decline in customer loyalty and repeat business and consequently, our business, financial condition, results of operations and prospects could be harmed.

Conducting business internationally may result in increased costs and risks. We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks. Examples include political risks and risks of increase in duties and taxes, changes in laws and policies affecting the cruise, transportation or vacation industries, or governing the operations of foreign-based companies. Demand for our services is also influenced by geopolitical events. Unfavorable conditions, such as cross-border conflicts, civil unrest and governmental changes, especially in regions with popular ports of call, can undermine consumer demand and/or pricing for itineraries featuring these ports.

Additional risks include imposition of trade barriers, restrictions on repatriation of earnings, withholding and other taxes on remittances and other payments by subsidiaries, and changes in and application of foreign taxation structures, including value added taxes. If we are unable to address these risks adequately, our business, financial condition, results of operations and prospects could be adversely affected.

Finally, we are exposed to risks related to anti-bribery laws. We have implemented safeguards and policies to prevent violations of various anti-corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business by our employees and agents. However, our existing safeguards and any future improvements may prove to be less than effective and our employees or agents may engage in conduct for which we might be held responsible. If employees violate our policies or we fail to maintain adequate record-keeping and internal accounting practices to accurately record our transactions, we may be subject to regulatory sanctions, or severe criminal or civil sanctions and penalties.

We rely on third-party providers of various services integral to the operations of our businesses. These third parties may act in ways that could harm our business. In order to achieve cost and operational efficiencies, we outsource to third-party vendors certain services that are integral to the operations of our global businesses, such as operation of a large part of our information technology systems including all hosting services and technical services for our B2B Reservation System. Certain of our IT functions, such as our onboard internal helpdesk, are operated by third-party service providers and we are subject to the risk and that a failure to adequately monitor such providers’ compliance with a service agreement or regulatory or legal requirements could result in significant economic and reputational harm to us. There is also a risk the confidentiality, privacy and/or security of data held by third parties or communicated over third-party networks or platforms could become compromised.

If our services are delayed or cancelled, we may need to re-route our guests to other ports of call or cancel their bookings. As a result, we may face difficulty in maintaining consumer loyalty to our brand and our business, financial condition, results of operations and prospects may be adversely affected. Our services may be delayed, cancelled or disrupted due to conditions that are beyond our control. For example, if there are delays in the operations of the ports of call or if other ships staying in the port are delayed, we may not be able to moor alongside the pier and, as a result, our scheduled service may be delayed or we may be required to cancel stops or re-route our services. In addition, a

53 delay at one port may result in ongoing delays to the remainder of our route and scheduled stops at other ports. Furthermore, as our MS Fram segment offers activities and voyages to remote Polar areas, where medical assistance is not immediately available, we are exposed to the risk of re-routing our itineraries due to medical emergencies onboard.

As a result of re-routing or delays in our services, we may need to direct our guests to our other ports of call or cancel their bookings. In addition, such incidents may prevent or discourage our guests from selecting our services altogether and our business, financial condition, results of operations and prospects may be adversely affected.

From time to time, we may provide assistance to other ships in distress, which may result in delays, deviations and disruptions to our service. Pursuant to the applicable statutory requirements of SOLAS, the master of a ship at sea, which is in a position to be able to provide assistance, on receiving a signal from any source that persons are in distress at sea, is bound to proceed with all speed to their assistance. Thus, in case of an emergency, to the extent possible, we are bound to provide immediate assistance to other ships in distress at sea. In such case, we may need to re-route or substantially deviate from our itinerary, which may result in delays, deviations and disruptions to our service. As a result, we would also have to cancel or re-book transportation to or from the ports of call for our guests, which may cause disruption to our service and result in dissatisfaction among our guests.

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings. As of September 30, 2014, our fleet of 12 ships had an average age of 20 years and included one ship, MS Lofoten that was over 50 years old. In general, the cost of maintaining a ship in good operating condition increases with the age of the ship. As our fleet ages, we will incur increased costs. Older ships, such as the MS Lofoten, may require longer and more expensive dry-dockings, resulting in more off-hire days and reduced revenue. Older ships are typically less fuel efficient and more costly to maintain than more recently constructed ships due to improvements in engine technology. Governmental regulations and safety or other equipment standards related to the age of a ship may also require expenditures for alterations or the addition of new equipment to our ships and may restrict the type of activities in which our ships may engage. We cannot assure you that, as our ships age, market conditions will justify such expenditures or will enable us to profitably operate our older ships.

Governments could requisition our ships during a period of war or emergency, resulting in loss of earnings. A government of the jurisdiction where one or more of our ships are registered could requisition for title or seize our ships for a period of war or emergency. Requisition for title occurs when a government takes control of a ship and becomes its owner. Also, a government could requisition our ships for hire. Requisition for hire occurs when a government takes control of a ship and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency, although governments may elect to requisition ships in other circumstances. Although we would expect to be entitled to compensation in the event of a requisition of one or more of our ships, the amount and timing of payment, if any, would be uncertain. Government requisition of one or more of our ships may cause us to breach covenants in certain of our credit facilities, and could have a material adverse effect on our business, results of operations and financial condition.

Maritime claimants could arrest our ships, which could interrupt our cash flows. Crew members, suppliers of goods and services to a ship, shippers and receivers of cargo, labor unions or other parties may be entitled to a maritime lien against a ship for unsatisfied debts, claims or damages, including, in some jurisdictions, for debts incurred by previous owners. In many jurisdictions, a maritime lien-holder may enforce its lien by arresting a ship. The arrest or attachment of one or more of our ships, if such arrest or attachment is not timely discharged, could cause us to breach covenants in certain of our credit facilities, could interrupt our cash flows and could require us to pay large sums of money to have the arrest or attachment lifted.

54 Risks Related to our Financial Profile

Our substantial leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Notes Guarantees.

We have a significant amount of outstanding debt with substantial debt service requirements. As of September 30, 2014, on an as adjusted basis after giving effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including the issuance of the Notes and the application of the proceeds thereof as described in “Use of Proceeds,” we would have had total debt of NOK 4,005.2 million and €34.2 million available under the Revolving Credit Facility. See “Capitalization.”

Our significant leverage could have important consequences for our business and operations and for holders of the Notes, including, but not limited to:

• making it difficult for us to satisfy our obligations with respect to the Notes and our other debts and liabilities;

• increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;

• requiring the dedication of a substantial portion of our free cash flow to the payment of principal of, and interest on, indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions or other general corporate purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business and the competitive environment and the industry in which we operate;

• placing us at a disadvantage to our competitors, to the extent that they are not as highly leveraged;

• restricting us from pursuing strategic acquisitions or pursuing certain business opportunities; and

• limiting our ability to borrow additional funds and increasing the cost of any such borrowing.

Any of the foregoing or other consequences or events could have a material adverse effect on our ability to satisfy our debt obligations, including under the Notes.

Despite our significant leverage, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future, including secured indebtedness and additional indebtedness drawn under our Revolving Credit Facility. Although the Indenture and the Revolving Credit Facility Agreement contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our and our subsidiaries’ existing debt levels, the related risks that we now face would increase. Increases in our total indebtedness could also lead to a downgrade of the ratings assigned to the Group or the Notes, which could negatively affect their trading price. In addition, the Indenture and the Revolving Credit Facility Agreement do not prevent us from incurring obligations that do not constitute “indebtedness” as defined under those respective agreements.

We may not be able to generate sufficient cash to meet our debt service obligations.

Our ability to make scheduled interest payments when due on our indebtedness and to meet our other debt service obligations, including under the Notes and the Revolving Credit Facility, or to refinance our debt, depends on our future operating and financial performance, which will be affected by our ability to successfully implement our business strategy as well as general economic, financial, competitive, regulatory and other factors, many of which are beyond our control, as well as those factors discussed in these “Risk Factors” and elsewhere in this offering memorandum. If we cannot generate sufficient cash to meet our debt service requirements, pay our obligations as they mature or fund our liquidity needs, we may, among other things, need to refinance all or a portion of our debt,

55 including the Notes and the Revolving Credit Facility, obtain additional financing, delay planned capital expenditures or investments or sell material assets. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our debt obligations, including under the Notes and the Revolving Credit Facility. In addition, the terms of our Revolving Credit Facility and the Indenture and any future debt may limit our ability to pursue any of the foregoing measures.

The type, timing and terms of any future financing, restructuring, asset sales or other capital raising transactions will depend on our cash needs and the prevailing conditions in the financial markets. We may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, or at all. In such an event, we may not have sufficient assets to repay all of our debt.

Any failure to make payments on the Notes on a timely basis would likely result in a reduction of our credit rating, which could also harm our ability to incur additional indebtedness. In addition, the terms of our debt, including the Notes, the Indenture and the Revolving Credit Facility Agreement may limit, and any future debt may limit, our ability to pursue any of these alternatives. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business, financial condition and results of operations. There can be no assurance that any assets that we could be required to dispose of could be sold or that, if sold, the timing of such sale and the amount of proceeds realized from such sale would be acceptable. If we are unsuccessful in any of these efforts, we may not have sufficient cash to meet our obligations.

We are subject to restrictive debt covenants that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities. The Indenture restricts, among other things, our ability to: • incur or guarantee additional indebtedness and issue certain preferred stock of our restricted subsidiaries; • create or incur certain liens; • make certain payments, including dividends or other distributions, with respect to the shares of the Company; • prepay or redeem subordinated debt or equity; • make certain investments; • create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to and on the transfer of assets to the Company; • sell, lease or transfer certain assets, including stock of restricted subsidiaries; • engage in certain transactions with affiliates; • enter into unrelated businesses or engage in prohibited activities; • consolidate or merge with other entities; • impair the security interests for the benefit of the holders of the Notes; and • amend certain documents.

All of these limitations are subject to significant exceptions and qualifications. See “Description of the Notes—Certain Covenants.” The covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest.

In addition, we are subject to the affirmative and negative covenants, including financial maintenance covenants, contained in the Revolving Credit Facility Agreement. Our failure to comply with these covenants could affect our ability to borrow under the Revolving Credit Facility to fund our operations, service our debt obligations or for other general corporate purposes. A breach of any of those covenants or other restrictions could also result in an “event of default” under the Revolving Credit Facility Agreement. Upon the occurrence of any event of default under the Revolving Credit

56 Facility Agreement, subject to applicable cure periods and other limitations on acceleration or enforcement, the relevant creditors could cancel the availability of the Revolving Credit Facility and elect to declare all amounts outstanding under the Revolving Credit Facility Agreement, together with accrued interest, immediately due and payable.

In addition, any default under the Revolving Credit Facility Agreement could lead to an event of default and acceleration under other debt instruments that contain cross-default or cross-acceleration provisions, including the Indenture. If our creditors, including the creditors under the Revolving Credit Facility, accelerate the payment of those amounts, our assets and the assets of our subsidiaries may not be sufficient to repay in full those amounts, to satisfy all other liabilities of our subsidiaries which would be due and payable and to make payments to enable us to repay the Notes, in full or in part. In addition, if we are unable to repay those amounts, our creditors could proceed against any collateral granted to them to secure repayment of those amounts.

We are exposed to interest rate risk and shifts in such rates may adversely affect our debt service obligations. The loans under our Revolving Credit Facility bear interest at variable rates, generally linked to market benchmarks such as EURIBOR, LIBOR and NIBOR, as applicable. To the extent that the interest rates were to increase significantly on such indebtedness, the related interest expense would correspondingly increase, reducing our cash flow. Although we may enter into certain hedging arrangements designed to fix a portion of these interest rates, there can be no assurance that any such current or future hedging arrangements will adequately protect our operating results from the effects of interest rate fluctuations or will not result in losses or that our risk management practices and procedures will operate successfully.

Risks Related to the Notes and Our Structure The Company is a holding company and conducts no business operations of its own and will depend on cash flows from its subsidiaries to make payments on the Notes. The Company is a holding company that conducts no business operations of its own and has no significant assets other than the shares it holds in its direct subsidiary, Hurtigruten, and the Proceeds Loan. Repayment of the Company’s indebtedness, including under the Notes, is dependent on the ability of our subsidiaries to make such cash available to us, by dividend distributions, intercompany loans, including the Proceeds Loan, or otherwise. Our subsidiaries may not be able to, or may be restricted by the terms of their existing or future indebtedness, or by law, in their ability to make distributions, advance upstream loans or payments under the Proceeds Loan to enable us to make payments in respect of our indebtedness, including the Notes. Each subsidiary of ours is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.

While the Indenture and the Revolving Credit Facility Agreement, respectively, limit the ability of our subsidiaries to incur contractual restrictions on their ability to pay dividends or make other intercompany payments to us, such limitations are subject to certain significant qualifications and exceptions. In the event that we do not receive distributions or other payments from our subsidiaries, we may be unable to make required principal and interest payments on the Notes. We do not expect to have any other sources of funds that would allow us to make payments to holders of the Notes.

The Notes will be structurally subordinated to the liabilities of the Company’s existing or future subsidiaries that are not, or do not become, Guarantors. Not all of the Company’s subsidiaries will guarantee the Notes. As of and for the twelve months ended September 30, 2014, the Guarantors generated 113% and 101% of the consolidated revenue and EBITDA of the Restricted Group, respectively, and represented 104% of the consolidated total assets of the Restricted Group. Unless a member of the Group is a Guarantor, such member will not have any obligation to pay amounts due under the Notes or to make funds available for that purpose. The Indenture, subject to some limitations, permits our non-Guarantor restricted subsidiaries to incur substantial amounts of additional indebtedness and does not restrict the amount of other liabilities that may be incurred by these subsidiaries.

57 Generally, holders of indebtedness of, and trade creditors of, a non-Guarantor subsidiary of the Company, including lenders under bank financing agreements, are entitled to payments of their claims from the assets of such subsidiary before these assets are made available for distribution to the Company or any Guarantor, as a direct or indirect shareholder. Accordingly, in the event that any non-Guarantor subsidiary of the Company becomes insolvent, is liquidated, reorganized or dissolved or is otherwise wound up other than as part of a solvent transaction: • the creditors of the Company (including the holders of the Notes) and the Guarantors will have no right to proceed against the assets of such subsidiary; and • creditors of such non-Guarantor subsidiary, including trade creditors, will generally be entitled to payment in full from the sale or other disposal of the assets of such subsidiary before the Company or any Guarantor, as a direct or indirect shareholder, will be entitled to receive any distributions from such subsidiary.

As such, the Notes and each Notes Guarantee will be structurally subordinated to the creditors (including trade creditors) and any preferred stockholders of the non-Guarantor subsidiaries of the Company.

Lenders under the Revolving Credit Facility, counterparties to certain hedging obligations and holders of certain other future indebtedness that we incur in the future are entitled to be repaid with the proceeds of the Notes Collateral in priority to the Notes. The Notes Collateral also secures the Revolving Credit Facility, certain hedging obligations and certain future indebtedness. Under the terms of the Intercreditor Agreement and the Security Documents, proceeds from enforcement of the Notes Collateral must first be applied in satisfaction in full of obligations under the Revolving Credit Facility and under “super priority” hedging obligations and other indebtedness and only thereafter to repay pro rata the obligations of the Company and the Guarantors under the Notes, the Notes Guarantees, certain non- super-senior hedging obligations and other pari passu indebtedness.

The Indenture, the Revolving Credit Facility Agreement and the Intercreditor Agreement permit, under certain conditions, additional “super priority” debt and additional “super priority” hedging obligations to be incurred. Any such “super priority” debt or “super priority” hedging obligations may be secured by the same rights, property and assets that secure the Notes, on a “super priority” basis. See “Description of Other Indebtedness—Intercreditor Agreement.”

As such, in the event of enforcement of the Notes Collateral, you may not be able to recover on the Notes Collateral if the then-outstanding liabilities under such “super priority” debt, including the Revolving Credit Facility, and certain “super priority” hedging obligations and other indebtedness, are greater than the proceeds realized in the event of enforcement of the Notes Collateral.

Holders of the Notes may not control certain decisions regarding the Notes Collateral. To the extent permitted under applicable law, and subject to the Agreed Security Principles, the Notes will be secured on a first-priority basis by substantially the same rights, property and assets securing the obligations under the Revolving Credit Facility and certain hedging obligations. In addition, under the terms of the Indenture, we are permitted to incur significant additional indebtedness and other obligations that may be secured by the Notes Collateral.

The Security Agent may act upon the instructions of an “instructing group,” which may constitute either, more than 50% of a combined class of the holders of the aggregate principal amount of the Notes then outstanding, certain hedging obligations which do not have “super-priority” and other pari passu indebtedness, or creditors of 66 2⁄3% of the aggregate principal amount of “super senior” indebtedness (which includes drawn and undrawn commitments under the Revolving Credit Facility, certain other future indebtedness and certain hedging obligations). The Intercreditor Agreement does not require a consultation period prior to the issuance of enforcement instructions. If a creditor group considers that the Security Agent is enforcing the security in a manner inconsistent with the security enforcement principles, it can serve notice on the other creditor groups, which will trigger a consultation period for up to 10 days. To the extent there are conflicting instructions, those instructions given on behalf of the requisite majority of a combined class of holders of the Notes, certain non- super-senior

58 hedging obligations and other pari passu indebtedness will prevail. However, in certain circumstances the creditors under the Revolving Credit Facility and counterparties to certain hedging arrangements and certain other future indebtedness secured by the Notes Collateral will have control over enforcement of the Notes Collateral, including if (i) such creditors have not been fully repaid within six months of the initial enforcement notice, (ii) the Security Agent has not commenced any enforcement action within three months of the initial enforcement notice or (iii) an insolvency event has occurred and the Security Agent has not commenced any enforcement action. See “Description of Other Indebtedness—Intercreditor Agreement.”

The foregoing arrangements could result in the enforcement of the Notes Collateral in a manner that results in lower recoveries by holders of the Notes.

Disputes may occur between the holders of the Notes and creditors under our Revolving Credit Facility, the counterparties to certain super senior hedging arrangements and creditors of certain other “super priority” indebtedness as to the appropriate manner of pursuing enforcement remedies and strategies with respect to the Notes Collateral securing such obligations. In such an event, the holders of the Notes will be bound by any decisions of the relevant instructing group, which may result in enforcement action in respect of the relevant Notes Collateral, whether or not such action is approved by the holders of the Notes or may be adverse to such Noteholders. The creditors under the Revolving Credit Facility, the counterparties to certain super senior hedging arrangements or the holders of certain other future “super priority” indebtedness secured by the Notes Collateral may have interests that are different from the interest of holders of the Notes and they may elect to pursue their remedies under the relevant Security Documents at a time when it would otherwise be disadvantageous for the holders of the Notes to do so.

The holders of the Notes will also have no separate right to enforce the Notes Collateral. In addition, the holders of the Notes will not be able to instruct the Security Agent, force a sale of the Notes Collateral or otherwise independently pursue the remedies of a secured creditor under the relevant Security Documents, unless they comprise an “instructing group” which is entitled to give such instructions, which, in turn, will depend on certain conditions and circumstances including those described above.

Furthermore, other creditors not subject to the Intercreditor Agreement could commence enforcement action against the Company or any of its subsidiaries during such period, and the Company or one or more of its subsidiaries could seek protection under applicable bankruptcy laws, or the value of certain Notes Collateral could otherwise be impaired or reduced in value.

In addition, if the Security Agent sells Notes Collateral comprising the shares of any of our subsidiaries as a result of an enforcement action in accordance with the Intercreditor Agreement, claims under the Notes and the Notes Guarantees and the liens over any other assets securing the Notes and the Notes Guarantees may be released. See “Description of Other Indebtedness—Intercreditor Agreement,”“Description of the Notes— Security—Release of Liens” and “Description of the Notes—Notes Guarantees.”

No appraisals of any of the Notes Collateral have been prepared by us or on our behalf in connection with the issuance of the Notes. The Notes will be secured only to the extent of the value of the Notes Collateral that has been granted as security for the Notes and the Notes Guarantees, and the Notes Collateral may not be sufficient to secure the obligations under the Notes and the Notes Guarantee. The Notes and the Notes Guarantees will be secured, subject to the operation of the Agreed Security Principles, by first-ranking security interests in the Notes Collateral described in this offering memorandum, which Notes Collateral also secures the obligations under the Revolving Credit Facility Agreement, certain hedging obligations and certain other indebtedness. The Notes Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Indenture. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Notes Collateral, as well as the ability of the Security Agent to realize or foreclose on such Notes Collateral.

59 Our obligations under the Notes will be secured only by the Notes Collateral, which will include the capital stock and substantially all the assets of the Company and the Guarantors. No appraisals of any of the Notes Collateral have been prepared by us or on our behalf in connection with the issuance of the Notes. If there is an event of default under the Notes, the holders of the Notes will be secured only by the Notes Collateral. There is no guarantee that the value of the Notes Collateral will be sufficient to enable the Company to satisfy its obligations under the Notes. The proceeds of any sale of the Notes Collateral following an event of default with respect to the Notes may not be sufficient to satisfy, and may be substantially less than, amounts due on the Notes.

Not all of our assets will secure the Notes. The value of the Notes Collateral and the amount to be received upon an enforcement of the Notes Collateral will depend upon many factors, including, among others, the ability to sell the Notes Collateral in an orderly sale, whether or not the business is sold as a going concern, economic conditions where operations are located, the availability of buyers for the relevant Notes Collateral and any fees, taxes or duties required to be paid under applicable law in connection with the enforcement of the Notes Collateral. The book value of the Notes Collateral should not be relied on as a measure of realizable value for such assets. All or a portion of the Notes Collateral may be illiquid and may have no readily ascertainable market value. Likewise, there may not be a market for the sale of the Notes Collateral, or, if such a market exists, there may be a substantial delay in its liquidation. In addition, the pledges, shares and ownership interests of an entity may be of no value if that entity is subject to an insolvency or bankruptcy proceeding because all or part of the obligations of the entity must first be satisfied, leaving little or no remaining assets in the entity.

It may be difficult to realize the value of the Notes Collateral. The Notes Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Indenture and the Intercreditor Agreement and accepted by other creditors that have the benefit of a priority security interest in the relevant Notes Collateral from time to time, whether on or after the date the Notes are first issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Notes Collateral, as well as the ability of the Security Agent to realize or foreclose on such Notes Collateral. Furthermore, the ranking of security interests in the Notes Collateral can be affected by a variety of factors, including, among others, the timely satisfaction of perfection requirements, statutory liens or re-characterization under the laws of certain jurisdictions.

If the proceeds of any sale of the Notes Collateral are not sufficient to repay all amounts due on the Notes and the Notes Guarantees, investors in the Notes (to the extent not repaid from the proceeds of the sale of the Notes Collateral) would have only an unsecured claim against the Company’s and the Guarantors’ remaining assets (if the relevant Notes Guarantee has not been released). Each of these factors or any challenge to the validity of the Notes Collateral or any intercreditor arrangement governing our creditors’ rights could reduce the proceeds realized upon enforcement of the Notes Collateral.

In addition, the Notes Collateral may not be liquid, and its value to other parties may be less than its value to us. For example, due to the specialized nature of our ships, which have both passenger and cargo capacity and therefore may not be suitable to serve as solely a cruise ship or solely a cargo ship, the sale price of our ships may be relatively low compared to other ships of the same age. Likewise, there may not be a market for the pledged shares or other Notes Collateral or, if such market does exist, there may also be substantial delays in liquidating the assets that comprise the Notes Collateral. In addition, the value of this Notes Collateral may fluctuate over time.

The security interests will be subject to practical problems generally associated with the realization of security interests in collateral. For example, the Security Agent may need to obtain the consent of a third-party to enforce a security interest. The Security Agent may not be able to obtain any such consent or promptly satisfy such requirements. The consent of any third-party may not be given when required to facilitate a foreclosure on such asset. Accordingly, the Security Agent may not have the ability to foreclose upon that asset, and the value of the Notes Collateral may, as a consequence, significantly decrease.

60 The providers of the security interests securing the Notes will have control over the Notes Collateral, and the sale of particular assets could reduce the pool of assets securing the Notes. The Security Documents will allow the relevant provider of the security interest securing the Notes to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the relevant Notes Collateral. So long as no “acceleration event” under the Indenture has occurred, the relevant security provider, may, among other things, and subject to the terms of the applicable Security Document, without any release or consent by the Security Agent or the Trustee, conduct ordinary course activities with respect to certain of the Notes Collateral such as selling, factoring, abandoning or otherwise disposing of such Notes Collateral and making ordinary course cash payments, including repayments of indebtedness. Any of these activities could reduce the value of the Notes Collateral, which could reduce the amounts payable to you from the proceeds of any sale of the Notes Collateral in the case of an enforcement of the liens on the Notes Collateral.

There are circumstances other than repayment or discharge of the Notes under which the Notes Collateral will be released automatically, without the consent of holders of the Notes or the consent of the Trustee. Under various circumstances, the Notes Collateral may be released automatically without the consent of the holders of the Notes or the Trustee, including: • as described under the caption “Description of the Notes—Amendments and Waivers;” • upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided under the captions “Description of the Notes—Defeasance” and “Description of the Notes— Satisfaction and Discharge;” • in connection with certain asset disposals, if such asset disposal is permitted under the terms of the Indenture and the Revolving Credit Facility Agreement and is not a “distressed disposal,” as described under “Description of Other Indebtedness—Intercreditor Agreement;” • in connection with certain enforcement actions taken by certain of our creditors in accordance with the Intercreditor Agreement, as further described under “Description of Other Indebtedness—Intercreditor Agreement;” • as may be permitted by the covenant described under “Description of the Notes—Certain Covenants— Impairment of security interest;” and • in order to effectuate a merger, consolidation, conveyance or transfer conducted in compliance with the covenant described under “Description of the Notes—Certain Covenants—Merger and consolidation.”

The Intercreditor Agreement also provides that the Notes Collateral may be released and retaken in connection with the refinancing of certain indebtedness, including the Notes, if the Company has provided the Security Agent with such certificates, opinions and/or other documentation as required by the Intercreditor Agreement, confirming the solvency of the Restricted Group (as defined in the Intercreditor Agreement) and/or the person granting the collateral, in each case, after giving effect to the release and retaking of the Notes Collateral or certifying that the Notes Collateral will not be subject to any new limitation, imperfection or hardening periods as a result of the release and retaking. In certain jurisdictions, such a release and retaking of Notes Collateral may give rise to the start of a new “hardening period” in respect of such Notes Collateral. Under certain circumstances, other creditors, insolvency administrators or representatives or courts could challenge the validity and enforceability of the grant of such Notes Collateral. Any such challenge, if successful, could potentially limit your recovery in respect of such Notes Collateral and thus reduce your recovery under the Notes. See “Description of Other Indebtedness—Intercreditor Agreement.”

Certain Notes Collateral and the Notes Guarantees will not be in place as of the Issue Date and in accordance with the Agreed Security Principles we may not be required to guarantee the Notes or to grant security over certain assets in favor of the Security Agent on behalf of the Noteholders. The Notes Guarantees and the Post-Issue Date Collateral will not be taken as of the Issue Date of the Notes. Subject to the Agreed Security Principles, certain perfection requirements and Permitted Collateral Liens (as defined in “Description of the Notes—Certain Definitions”), the Notes Guarantors will grant the Notes Guarantees and the Post-Issue Date Collateral within 70 days of the Hurtigruten Tender Offer Settlement Date. In addition, the Notes Collateral may be subject to certain perfection

61 requirements that may affect the priority of the Noteholders’ claim. The Company shall not be obligated to guarantee the Notes or provide security to the extent such guarantee or the grant of such security would be inconsistent with the Intercreditor Agreement or the Agreed Security Principles. See “—The rights of holders of the Notes in the Notes Collateral may be adversely affected by the failure to perfect the security interests in the Notes Collateral.” and “Description of the Notes—Security—The Collateral.”

The rights of holders of the Notes in the Notes Collateral may be adversely affected by the failure to perfect the security interests in the Notes Collateral. Under applicable law, a security interest in certain tangible and intangible assets can only be properly perfected, and its priority retained, through certain actions undertaken by the secured party or the grantor of the security. The liens in the Notes Collateral may not be perfected with respect to the claims of such Notes if we fail or are unable to take, or are not required under the Agreed Security Principles to take, the actions required to be taken in order to perfect any of these liens. Such failure may result in the invalidity of the relevant security interest in the Notes Collateral or adversely affect the priority of such security interest in favor of the Notes against third parties, including a trustee in bankruptcy and other creditors who claim a security interest in the same collateral. Furthermore, it should be noted that neither the Trustee nor the Security Agent has any obligation to take any steps or action to perfect any of the liens in the Notes Collateral to secure the Notes.

The security interests in the Notes Collateral will be granted to the Security Agent rather than directly to the holders of the Notes. The security interests in the Notes Collateral that will secure the obligations of the Company under the Notes and the obligations of the Guarantors under the Notes Guarantees will not be granted directly to the holders of the Notes but will rather be granted in favor of the Security Agent on behalf of the Noteholders. The Indenture and the Intercreditor Agreement each provide that only the Security Agent shall have the right to enforce on the relevant Notes Collateral. As a consequence, holders of the Notes will not have direct security interests and will not be entitled to take enforcement action in respect of the Notes Collateral, except through the Trustee who will (subject to the provisions of the Indenture and the Intercreditor Agreement) provide instructions to the Security Agent in respect of the Notes Collateral.

The ability of the Trustee to enforce the Indenture and the Intercreditor Agreement may be restricted under the laws of Norway. The concept of a security trustee, as it is understood under U.S. law, does not exist under Norwegian law. In Norway a security trustee would be considered to be acting as a security agent. In practice in Norway, in an arrangement with a security agent acting on behalf of the secured parties, as these exist from time to time, it is generally recognized under Norwegian law that the security agent will be able to enforce the security on behalf of the secured parties and apply any proceeds to the secured parties. In order to commence any legal action regarding a claim (for enforcement purposes or otherwise) against the debtor, the security agent may be required to disclose to the court the identity of the creditors and have the creditors join in or participate as claimants in the proceedings. It has been established by the Norwegian Supreme Court that a bond trustee for an undisclosed number of noteholders can, based on the provisions in the relevant bond agreement or indenture, take legal action against the issuer on behalf of and in lieu of the noteholders without having to disclose the identity of the noteholders. However the relevant Norwegian court would have to examine the relevant indenture together with the other relevant agreements relating to the Notes and this Offering to determine whether the Trustee would be able to act in such capacity.

The Notes Guarantees and the Notes Collateral will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defenses that may adversely affect their validity and enforceability. Each Notes Guarantee provides the holders of the Notes with a direct claim against the relevant Guarantor. The Indenture provides that each Notes Guarantee will be limited to the maximum amount

62 that can be guaranteed by the relevant Guarantor, which limitations will also apply to any security created by the Guarantors under the Notes Collateral. For example, under Norwegian law a Norwegian private or public limited liability company is prohibited from providing financial assistance (including placing funds at disposal, granting loans or providing security or guarantees) in connection with the acquisition of its shares or in connection with the acquisition of shares in a parent company (including any intermediate parent company) unless the value of such financial assistance is within the company’s distributable reserves and then, further provided, that satisfactory security for repayment has been established, the financial assistance is provided on ordinary business terms and principles and for fully paid shares. The Notes Guarantees given by Guarantors organized under the laws of Norway will be limited to the principal amount of the Notes less an amount of €133.7 million, reflecting the Notes proceeds which will be used to refinance acquisition debt drawn under the Bridge Facility in order to finance the Hurtigruten Acquisition. See “Description of the Notes—Notes Guarantees” and “Certain Limitations on Validity and Enforceability.”

The Notes Guarantees and the enforcement thereof are subject to certain generally available defenses. Defenses generally include those that relate to corporate purpose or benefit, fraudulent conveyance or transfer, voidable preference, insolvency or bankruptcy challenges, financial assistance, preservation of share capital, thin capitalization, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally.

If one or more of the foregoing laws and defenses are applicable, a Guarantor may have no liability or decreased liability under its Notes Guarantee depending on the amounts of its other obligations and applicable law.

Although laws differ among various jurisdictions, in general, under bankruptcy or insolvency law and other laws, a court could (i) avoid or invalidate all or a portion of a Guarantor’s obligations under its Notes Guarantee, (ii) direct that the holders of the Notes return any amounts paid under a Notes Guarantee to the relevant Guarantor or to a fund for the benefit of that Guarantor’s creditors or (iii) take other action that is detrimental to you, typically if the court found that: • the relevant Notes Guarantee was incurred with actual intent to give preference to one creditor over another, hinder, delay or defraud creditors or shareholders of the relevant Guarantor or, in certain jurisdictions, when the granting of the relevant Notes Guarantee has the effect of giving a creditor a preference or the creditor was aware that the relevant Guarantor was insolvent when the relevant Notes Guarantee was given; • the relevant Guarantor did not receive fair consideration or reasonably equivalent value or corporate benefit for the relevant Notes Guarantee or the relevant Guarantor was: (i) insolvent or rendered insolvent because of the relevant Notes Guarantee; (ii) undercapitalized or became undercapitalized because of the relevant Notes Guarantee; or (iii) intended to incur, or believed that it would incur, indebtedness beyond its ability to pay at maturity; • the relevant Notes Guarantee was held to exceed the corporate objects of the relevant Guarantor or not to be in the best interests or for the corporate benefit of the relevant Guarantor; or • the amount paid or payable under the relevant Notes Guarantee was in excess of the maximum amount permitted under applicable law.

We cannot predict which standard a court would apply in determining whether any Guarantor was “insolvent” at the relevant time or that, regardless of method of valuation, a court would not determine that a Guarantor was insolvent on that date, or that a court would not determine, regardless of whether or not a Guarantor was insolvent on the date a Notes Guarantee was issued, that payments to holders of the Notes constituted preferences, fraudulent transfers or conveyances or on other grounds.

The liability of each Guarantor under its Notes Guarantee or other security will be limited to the amount that will result in such Notes Guarantee not constituting a preference, fraudulent conveyance or improper corporate distribution or otherwise being set aside. However, there can be no assurance as to what standard a court will apply in making a determination of the maximum liability of each Guarantor. There is a possibility that the entire Notes Guarantee or other security may be set aside, in which case the entire liability may be extinguished.

63 If a court decided that a Notes Guarantee was a preference, fraudulent transfer or conveyance and voided such Notes Guarantee, or held it unenforceable for any other reason, you may cease to have any claim in respect of the relevant Guarantor and would be a creditor solely of the Company and, if applicable, of any other Guarantor under the relevant Notes Guarantee that has not been declared void. In the event that any Notes Guarantee is invalid or unenforceable, in whole or in part, or to the extent the agreed limitation of the Notes Guarantee obligations apply, the Notes would be effectively subordinated to all liabilities of the applicable Guarantor, and if we cannot satisfy our obligations under the Notes or any Notes Guarantee is found to be a preference, fraudulent transfer or conveyance or is otherwise set aside, we may not ever repay in full any amounts outstanding under the Notes.

The grant of the Notes Collateral to secure the Notes may be challenged or voided in an insolvency proceeding. The grant of the Notes Collateral to secure the Notes may be voidable by the grantor or by an insolvency trustee, liquidator, receiver or administrator or by other creditors, or may be otherwise set aside by a court, or be unenforceable if certain events or circumstances exist or occur, including, among others, if the grantor is deemed to be insolvent at the time of the grant, or if the grant permits the secured parties to receive a greater recovery than if the grant had not been given and an insolvency proceeding in respect of the grantor is commenced within a legally specified “claw back” period following the grant. To the extent that the grant of any security interest is voided, holders of the Notes would lose the benefit of the relevant security interest. See “Certain Limitations on Validity and Enforceability.”

The granting of the security interests in the Notes Collateral in connection with the issuance of the Notes may create hardening periods for such security interests in accordance with the law applicable in certain jurisdictions. The granting of new security interests in the Notes Collateral in connection with the issuance of the Notes may create hardening periods for such security interests in certain jurisdictions. The applicable hardening period for these new security interests will run from the moment each such security interest has been granted, perfected, extended or recreated. At each time, if the security interest granted, perfected, extended or recreated were to be enforced before the end of the respective applicable hardening period, it may be declared void or it may not be possible to enforce it. In addition, the granting of a shared security interest to secure existing and new indebtedness (such as the Notes and any additional notes) or other indebtedness, as the case may be, may restart or reopen hardening periods in certain jurisdictions. If the grantor of such security interest were to become subject to a bankruptcy or winding up proceeding after the Issue Date, any mortgage or security interest in Notes Collateral delivered after the Issue Date would face a greater risk than security interests in place on the Issue Date of being avoided by the grantor or by its trustee, receiver, liquidator, administrator or similar authority, or otherwise set aside by a court, as a preference under insolvency law. See “Certain Limitations on Validity and Enforceability.”

The insolvency laws of Norway may not be as favorable to holders of Notes as United States insolvency laws or those of another jurisdiction with which you may be familiar. The Company and other members of the Group, including the Guarantors, are incorporated under the laws of Norway. Accordingly, insolvency proceedings with respect to any of those entities would be likely to proceed under, and be governed by, Norwegian insolvency law (assuming the centers of main interests of those companies are in Norway and this remains the case, and the companies have no establishments elsewhere). The Norwegian insolvency law may be less favorable to your interests as a creditor than the bankruptcy laws of the United States or any other jurisdiction you may be familiar with, including in respect of priority of creditors, the ability to obtain post-petition interest and the ability to influence proceedings and the duration thereof, and this may limit your ability to receive payments due on the Notes. In the event that any one or more of the Company or the Guarantors experiences financial difficulty, it is not possible to predict with certainty the outcome of insolvency or similar proceedings. See “Certain Limitations on Validity and Enforceability.”

As stated above, provided the centers of main interests of the Company and the Guarantors remain in Norway, and those companies do not have business establishments in other jurisdictions, insolvency proceedings relating to those countries are likely to be commenced in Norway. However, it

64 should be noted that the concepts of a company’s center of main interests and its other establishments are fluid and factual concepts that may change. To the extent any of these companies have a center of main interests or an establishment that is outside of Norway, other jurisdictions’ insolvency laws may become relevant.

The key features of the Norwegian bankruptcy proceedings are (i) the seizure and subsequent disposal of the debtor’s assets, (ii) the assessment and ranking of claims, (iii) the testing and revocation of transactions (including the securing of existing claims) made prior to bankruptcy, (iv) the handling of the debtor’s contractual relationships and (v) the distribution of funds (if any) in accordance with the priority rules. If the business operations of the bankrupt company are continued, they are in practice continued at the risk of, and only to the extent guaranteed by, the creditors.

Bankruptcy proceedings may be opened provided that the debtor is insolvent. Both the debtor (by the representation of the board of directors) and a creditor (holding or alleging to hold a claim) can petition for bankruptcy.

There are two requirements for a debtor to be deemed to be insolvent. The debtor must (i) be unable to service its debt as it becomes due (the “cash flow test”), and (ii) the debtor must be in “deficit” (the company’s debts must exceed the sum of its assets and revenue, based on real, not book, values) (the “balance sheet test”).

During bankruptcy proceedings the debtor’s assets are controlled by the court-appointed liquidator (usually a lawyer), on behalf of the bankruptcy estate. The main task of the liquidator is to turn all the debtor’s assets into cash in the manner assumed to be most profitable for the estate (the creditors), and then distribute the available cash to the rightful creditors.

All of the debtor’s assets will in practice be seized by the bankruptcy estate, and the debtor may not dispose of the seized assets in any way while the bankruptcy proceedings are ongoing. The bankruptcy estate may also seize assets held by third parties, if these assets are acquired from the debtor in an unlawful manner, or if the acquisition lacks legal protection, or if the transaction can be reversed according to the Norwegian recovery act (dekningsloven). The bankruptcy estate is a separate legal entity, which is authorized to exercise all ownership interests and rights with respect to the seized assets, including but not limited to the realization of assets.

Secured creditors are, in principle, not deemed to be part of the bankruptcy proceedings to the extent the value of the security is sufficient to cover the underlying obligations of the debtor. The secured creditors may, in principle, realize the security, and cover their claims; however, the realization of a number of categories of security during the first six months after the opening of a bankruptcy will be subject to the approval of the bankruptcy estate (the same principles apply to official debt negotiations). The bankruptcy estate has the right, subject to certain conditions being fulfilled, to realize the security and divide the proceeds between the secured creditors and other holding legal rights in the assets.

Furthermore, the bankruptcy estate has a statutory first lien of up to 5% of the estimated value or sales value of all assets secured by the debtor for its own debt or by a third-party for the debtor’s indebtedness, but limited to NOK 602,000 (which is 700 times the ordinary Norwegian court fee of NOK 860). Such statutory lien is not applicable to financial security (cash deposits and financial instruments) established pursuant to the Norwegian Financial Collateral Act no. 17/2004 (the “Financial Collateral Act”) or the Norwegian Liens Act no. 2/1980 section 6-4 (9).

Any under-secured amount (any amount exceeding the value of the secured assets) will be deemed as an ordinary (unsecured) trade claim.

In a Norwegian bankruptcy, the creditors will be paid according to the following priority: • secured claims (valid and perfected security covered up to the value of the secured asset—either after the realization by the secured creditor itself or after realization undertaken by the bankruptcy estate); • super priority claims (claims that arise during the bankruptcy proceedings, liquidator’s costs and obligations of the estate); • salary claims (within certain limitations);

65 • tax claims (such as withholding tax and value-added tax within certain limitations); • ordinary unsecured claims (all other claims unless subordinated, including unsecured debt, trade creditors and indemnity claims); and • subordinated claims (including interest on salary, tax and unsecured claims incurred after the opening of bankruptcy proceedings, claims subordinated by agreement, liquidated damages and penalty claims).

Pursuant to Norwegian law, the bankruptcy estate may be entitled to set aside or reverse transactions carried out in the three to twelve-month period (and, in respect of transactions in favor of related parties, up to two years) before the opening of the bankruptcy, such as extraordinary payments of certain creditors, security established for existing debt and transactions at an under-value. The bankruptcy estate may also, under certain circumstances, be entitled to set aside or reverse transactions made in bad faith or negligently which in an improper manner increase the debtor’s debt, favor one or more creditors at the expense of others or deprive the debtor of assets which may otherwise have served to cover the creditors’ claims, in which case the time limit for challenges by the estate is increased to ten years.

You may face foreign exchange risks by investing in the Notes, which risk may be increased if the euro no longer exists or if the Notes are otherwise redenominated as a result of member states leaving the Eurozone. The Notes will be denominated and payable in euro. If investors measure their investment returns by reference to a currency other than euro an investment in the Notes will entail foreign exchange- related risks due to, among other factors, possible significant changes in the value of the euro relative to the currency by reference to which the investor measures the return on his or her investments because of economic, political and other factors over which we have no control. Depreciation of the euro against the currency by reference to which an investor measures the return on his or her investments could cause a decrease in the effective yield of the Notes below their stated coupon rates and could result in a loss to the investor when the return on the Notes are translated into the currency by reference to which such investor measures the return on their investments. Investments in the Notes denominated in a currency other that U.S. dollars by United States investors may also have important tax consequences as a result of foreign exchange gains. See “Tax Considerations—Certain United States Federal Income Tax Consequences.”

Despite the measures taken by countries in the Eurozone to alleviate credit risk, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone member states. For example, an anti-austerity party won the parliamentary elections in Greece on January 25, 2015 and subsequently formed a government with another anti-austerity party. The formation of this new Greek government could lead to the renegotiation of bailout terms or terms relating to the repayment of Greek national debt and concerns about Greece’s exit from the Eurozone, which could, in turn, undermine confidence in the overall stability of the euro. These and other concerns could lead to the reintroduction of individual currencies in one or more Eurozone member states, or, in more extreme circumstances, the possible dissolution of the euro entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. The official exchange rate at which the Notes may be redenominated may not accurately reflect their value in euro. These potential developments, or market perceptions concerning these developments and related issues, could adversely affect the value of the Notes.

The Notes may not remain listed on the Official List of the Luxembourg Stock Exchange. Although an application will be made for the Notes to be listed on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF, the Notes may not remain listed on the Luxembourg Stock Exchange or any other stock exchange.

If the Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF market and the Company can no longer maintain such listing or if it becomes unduly burdensome to make or maintain such listing, the Company may cease to make or maintain

66 such listing on the Official List of the Luxembourg Stock Exchange or to make or maintain a listing on any other recognized stock exchange.

In addition, although no assurance is made as to the liquidity of any of the Notes as a result of the admission to trading on the Euro MTF, failure to delist the Notes from the Official List of the Luxembourg Stock Exchange or another recognized stock exchange, as applicable, may have a material adverse effect on a holder’s ability to resell Notes in the secondary market.

There may not be an active trading market for the Notes, in which case your ability to sell the Notes may be limited. We cannot assure you as to: • the liquidity of any market in the Notes; • your ability to sell your Notes; or • the prices at which you would be able to sell your Notes.

Future trading prices for the Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Historically, the market for non-investment grade securities has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. The liquidity of a trading market for the Notes may be adversely affected by a general decline in the market for similar securities and is subject to disruptions that may cause volatility in prices. The trading market for the Notes may attract different investors and this may affect the extent to which such Notes may trade. It is possible that the market for the Notes will be subject to disruptions. Any such disruption may have a negative effect on you, as a holder of the Notes, regardless of our prospects and financial performance. As a result, there is no assurance that there will be an active trading market for the Notes. If no active trading market develops, you may not be able to resell your holding of the Notes at a fair value, or at all.

In addition, the Indenture allows us to issue additional Notes in the future, which could adversely impact the liquidity of the Notes.

We may not be able to obtain the funds required to repurchase the Notes upon a “change of control.” The Indenture contains provisions relating to certain events constituting a “change of control.” Upon the occurrence of a change of control, the Company will be required to offer to repurchase all of the outstanding Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest and additional amounts, if any, to the date of repurchase. If a change of control were to occur, we cannot assure you that we would have sufficient funds available at such time, or that we would have sufficient funds to provide to the Company to pay the purchase price of the outstanding Notes or that the restrictions in the Indenture, the Revolving Credit Facility Agreement, the Intercreditor Agreement or our other than existing contractual obligations would allow the Company to make such required repurchases. A change of control would result in a mandatory prepayment of the Revolving Credit Facility and certain other indebtedness or trigger a similar obligation to offer to repurchase loans or notes thereunder (as the case may be). The repurchase of the Notes pursuant to such an offer could cause a default under such indebtedness, even if the change of control itself does not.

The ability of the Company to receive cash from its subsidiaries to make cash payments to the relevant holders of the Notes following the occurrence of a change of control, may be limited by our then existing financial resources. If an event constituting a “change of control” (as defined in the Indenture) occurs at a time when its subsidiaries are prohibited from providing funds to the Company for the purpose of repurchasing the Notes, we may seek the consent of the lenders under the indebtedness prohibiting such payments or repurchases to allow the purchase of the Notes, or we may attempt to refinance such indebtedness. If such consent is not obtained or we are unable to effect such refinancing, the Company will remain prohibited from repurchasing any tendered Notes. In addition, we expect that we would require third-party financing to make an offer to repurchase the Notes upon a change of control. We may not be able to obtain such financing.

67 Any failure by the Company to offer to purchase the Notes would constitute a default under the relevant Indenture, which would, in turn, constitute a default under the Revolving Credit Facility and certain other indebtedness. See “Description of the Notes—Change of Control.”

The change of control provision contained in the Indenture may not necessarily afford you protection in the event of certain important corporate events, including a reorganization, restructuring, merger or other similar transaction involving us that may adversely affect you, because such corporate events may not involve a shift in voting power or beneficial ownership or, even if they do, may not constitute a “change of control” as defined in the Indenture. Except as described under “Description of the Notes—Change of Control,” the Indenture does not contain provisions that would require the Company to offer to repurchase or redeem the Notes in the event of a reorganization, restructuring, merger, recapitalization or similar transaction.

The definition of “change of control” contained in the Indenture includes a disposition of all or substantially all of the assets of the Company and its restricted subsidiaries (if any), taken as a whole, to any person. Although there is a limited body of case law interpreting the phrase “all or substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances, there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Company and its restricted subsidiaries taken as a whole. As a result, it may be unclear as to whether a change of control has occurred and whether the Company is required to make an offer to repurchase the Notes.

If certain changes to tax law were to occur, including changes recently proposed in Norway, we may have the option to redeem the Notes. If certain changes in the law of any relevant tax jurisdiction, as defined under “Description of the Notes— Additional Amounts,” become effective that would impose withholding taxes or other deductions on the payments on the Notes or the Notes Guarantees, we may redeem the Notes in whole, but not in part, at any time, at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, and additional amounts, if any, to the date of redemption. On December 2, 2014, an expert group appointed by the Norwegian Ministry of Finance presented a report to the Ministry of Finance proposing the introduction of a withholding tax on the payment of interest to recipients who are tax residents of countries other than Norway. On January 5, 2015, the Ministry of Finance opened a public hearing with regard to the report that is expected to last until April 5, 2015. The report does not provide any detail about the proposed parameters of, or exceptions to, such withholding (for example, it does not include any exception for publicly traded debt), and it is not known if the proposal will result in new tax legislation being enacted. We are, accordingly, unable to determine if such a change in tax law will occur or if the proposed withholding tax would ultimately apply to the Notes or to any holders of the Notes. If the tax law is changed and the resulting withholding tax applies to interest payments on the Notes or any holders of the Notes, and if we are unable to avoid the withholding obligation through reasonable measures (including by changing the domicile of the Company or having the obligations under the Notes assumed by an entity domiciled in a jurisdiction which does not impose withholding tax on payments under the Notes), the Notes will be redeemable at our option. See “Description of the Notes—Redemption for Taxation Reasons” and “Taxation—Certain Norwegian Tax Considerations.”

You may not be able to recover in civil proceedings for United States securities law violations. The Company, the Guarantors and substantially all of their respective subsidiaries are organized outside the United States, and substantially all of our business is conducted outside the United States. Almost all of the directors and executive officers of the Company and the Guarantors are non-residents of the United States, and substantially all of their assets are located outside of the United States. Although the Company and the Guarantors will submit to the jurisdiction of certain New York courts in connection with any action under United States securities laws, you may be unable to effect service of process within the United States on these directors and executive officers. In addition, as substantially all of the assets of the Company, the Guarantors and their respective subsidiaries and those of their respective directors and executive officers are located outside of the United States, you may be unable to enforce judgments obtained in the United States courts against them. Moreover, in light of recent decisions of the United States Supreme Court, actions of the Company and the Guarantors may not be

68 subject to the civil liability provisions of the federal securities laws of the United States. See “Enforceability of Civil Liabilities.”

The Notes will initially be held in book-entry form, and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies. Owners of the book-entry interests will not be considered owners or holders of Notes unless and until “definitive” Notes are issued in exchange for book-entry interests. Instead, the common depositary (or its nominee) for Euroclear and Clearstream will be the sole registered holder of the Notes in global form.

Payments of principal, interest and other amounts owing on or in respect of the Notes in global form will be made to the Paying Agent, which will make payments to Euroclear and Clearstream. Thereafter, such payments will be credited to Euroclear and Clearstream participants’ accounts that hold book-entry interests in the Notes in global form and credited by such participants to indirect participants. After payment to Euroclear and Clearstream, as described above, none of the Company, the Trustee, the Registrar, the Paying Agent or the Transfer Agent will have any responsibility or liability for any aspect of the records relating to or payments of interest, principal or other amounts to Euroclear and Clearstream, or to owners of book-entry interests. Accordingly, if you own a book-entry interest in the Notes, you must rely on the procedures of Euroclear and Clearstream and, if you are not a participant in Euroclear or Clearstream, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of the Notes under the Indenture.

Owners of book-entry interests will not have the direct right to act upon any solicitations for consents or requests for waivers or other actions from holders of the Notes. Instead, if you own a book-entry interest, you will be reliant on the common depositary (or its nominee) (as registered holder of the Notes) to act on your instructions and will be permitted to act directly only to the extent you have received appropriate proxies to do so from Euroclear or Clearstream or, if applicable, from a participant. The procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on any requested actions or to take any other action on a timely basis.

Similarly, upon the occurrence of an “event of default” under and as defined in the Indenture governing the Notes, unless and until the Definitive Registered Notes are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through Euroclear and Clearstream. The procedures to be implemented through Euroclear and Clearstream may not be adequate to ensure the timely exercise of rights under the Notes.

Credit ratings may not reflect all risks, are not recommendations to buy or hold securities and may be subject to revision, suspension or withdrawal at any time. One or more independent credit rating agencies may assign credit ratings to the Notes. The credit ratings address our ability to perform our obligations under the terms of the Notes and credit risks in determining the likelihood that payments will be made when due under the Notes. The ratings may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed above and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal by the rating agency at any time. No assurance can be given that a credit rating will remain constant for any given period of time or that a credit rating will not be lowered or withdrawn entirely by the credit rating agency if, in its judgment, circumstances in the future so warrant. A suspension, reduction or withdrawal at any time of the credit rating assigned to the Notes by one or more of the credit rating agencies may adversely affect the cost and terms and conditions of our financings and could adversely affect the value and trading of the Notes.

Transfers of the Notes are restricted, which may adversely affect the value of the Notes. The Notes are being offered and sold pursuant to an exemption from registration under the U.S. Securities Act and applicable state securities laws of the United States. The Notes have not been and will not be registered under the U.S. Securities Act or any United States state securities laws. Therefore you may not transfer or sell the Notes in the United States except pursuant to an exemption from, or as part of a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws, or pursuant to an effective registration statement, and you may be

69 required to bear the risk of your investment in the Notes for an indefinite period of time. The Notes and the Indenture contain provisions that restrict the Notes from being offered, sold or otherwise transferred except pursuant to the exemptions available pursuant to Rule 144A and Regulation S under the U.S. Securities Act, or other exemptions under the U.S. Securities Act. In addition, by acceptance of delivery of any Notes, the holder thereof agrees on its own behalf and on behalf of any investor accounts for which it has purchased the Notes that it shall not transfer the Notes in an aggregate principal amount of less than €100,000. Furthermore, we have not registered the Notes under any other country’s securities laws. It is your obligation to ensure that your offers and sales of the Notes within the United States and other countries comply with applicable securities laws. See “Transfer Restrictions.”

Payments under the Notes may be subject to withholding tax under the EU Directive on the taxation of savings income. EC Council Directive 2003/48/EC on the taxation of savings income (the “Savings Directive”) requires EU Member States to provide to the tax authorities of other EU Member States details of payments of interest and other similar income paid by a person established within its jurisdiction to (or for the benefit of) an individual resident, or certain other types of entity established, in that other EU Member State, except that Austria will instead impose a withholding system in relation to such payments, deducting tax at a rate of 35% for a transitional period (subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld) unless during such period it elects otherwise.

The Council of the European Union has adopted a Directive (the “Amending Directive”) which will, when implemented, amend and broaden the scope of the requirements of the Savings Directive described above. The Amending Directive will expand the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or for the benefit of) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the Savings Directive) which indirectly benefit an individual resident in an EU Member State, may fall within the scope of the Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by January 1, 2016, which legislation must apply from January 1, 2017.

If a payment were to be made or collected through an EU Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the Savings Directive or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26- 27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, the Savings Directive or such other Directive, neither the Company, nor any successor company, nor any Guarantor, nor the Paying Agent, nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Furthermore, once the Amending Directive is implemented and takes effect in EU Member States, such withholding may occur in a wider range of circumstances than at present, as explained above.

The Company is required to maintain a paying agent with a specified office in an EU Member State that is not obliged to withhold or deduct tax pursuant to the Savings Directive or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, the Savings Directive or such other Directive. However, investors should be aware that any custodians or intermediaries through which they hold their interest in the Notes may nonetheless be obliged to withhold or deduct tax pursuant to such laws unless the investor meets certain conditions, including providing any information that may be necessary to enable such persons to make payments free from withholding and in compliance with the Savings Directive, as amended. Investors who are in any doubt as to their position should consult their professional advisers.

70 Risks Related to our Ownership The interests of our principal shareholders may conflict with your interests. The interests of our principal shareholders, in certain circumstances, may conflict with your interests as holders of the Notes. TDR Capital, Periscopus and Home Capital control us. See “Principal Shareholders.” Our shareholders are able to appoint a majority of our board of directors and to determine our corporate strategy, management and policies. In addition, our shareholders have control over our decisions to enter into any corporate transaction and have the ability to prevent any transaction that requires the approval of shareholders regardless of whether holders of the Notes believe that any such transactions are in their own best interests. For example, the shareholders could vote to cause us to incur additional indebtedness, to sell certain material assets or make dividends, in each case, so long as the Indenture, the Revolving Credit Facility and the Intercreditor Agreement so permit. The incurrence of additional indebtedness would increase our debt service obligations and the sale of certain assets could reduce our ability to generate revenue or, if the assets sold are Notes Collateral, could reduce the amount of the asset sale proceeds available to repay the Notes, each of which could adversely affect holders of the Notes.

Additionally, certain of our shareholders are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Certain of our shareholders may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as TDR Capital continues to own a significant amount of our capital stock, even if such amount is less than 50%, TDR Capital will continue to be able to strongly influence or effectively control our decisions. The interests of TDR Capital, Periscopus and Home Capital may not coincide with your interests.

71 USE OF PROCEEDS

The gross proceeds from the Offering are €455.0 million, and are primarily used to: • repay all outstanding borrowings under Bridge Facility; and • pay fees and expenses in connection with the transactions contemplated hereby, including the Offering.

The net proceeds from the Offering are €453,862,500.00, as full and complete payment of the Notes. Such amount represents an issue price equal 100%, net of certain fees and expenses payable to the Initial Purchaser.

The estimated sources and uses of the proceeds from this Offering are shown in the table below. Actual amounts are subject to adjustments and may vary from estimated amounts depending on several factors, including cash on hand, currency exchange rates, the amount of outstanding indebtedness on the Issue Date and actual fees and expenses.

Sources of Funds Uses of Funds (NOK millions) (€ millions) (1) (NOK millions) (€ millions) (1) Repayment of Notes offered Bridge hereby ...... 4,032.4 455.0 Facility(2) ...... 4,052.4 457.3 Estimated commissions fees and other Cash on hand ...... 68.0 7.7 expenses(3) ..... 48.0 5.4 Total sources ...... 4,100.4 462.7 Total uses ...... 4,100.4 462.7

(1) For purposes of this table, the euro and NOK amounts, as applicable have been translated for convenience only at the rate of €1.00 = NOK 8.8625, which represents the rate of exchange as of January 29, 2015, as published by Bloomberg Generic Rate. (2) Represents the aggregate outstanding principal amount of indebtedness under the Bridge Facility, plus estimated accrued and unpaid interest through the Issue Date. As part of the Refinancing Transactions, the outstanding borrowings comprising of €455.0 million in principal amount, together with accrued and unpaid interest under the Bridge Facility will be repaid in full on the Issue Date with the proceeds of the Offering. The Bridge Facility Agreement will be terminated as part of the Refinancing Transactions. The Bridge Facility accrues interest at a rate based on EURIBOR plus an applicable margin plus certain mandatory costs and matures on December 19, 2021. (3) Reflects our estimate of fees and expenses associated with the Refinancing Transactions, including discounts and other commissions, advisory and other professional fees and transaction costs.

For a description of the sources and uses relating to the Hurtigruten Acquisition Transactions, see “Summary—Recent Developments—The Hurtigruten Acquisition and the Hurtigruten Acquisition Transactions.”

All outstanding amounts under the Bridge Facility Agreement are owed to the Initial Purchaser.

72 CAPITALIZATION

The following table sets forth the consolidated cash and cash equivalents and consolidated capitalization of: • Hurtigruten, on an actual basis as of September 30, 2014, derived from Hurtigruten’s unaudited consolidated balance sheet as of September 30, 2014, which was prepared in accordance with IAS 34 and are included elsewhere in this offering memorandum; • the Company, as adjusted to give effect to the Hurtigruten Acquisition Transactions as if they had occurred on September 30, 2014; and • the Company, as further adjusted to give effect to the Refinancing Transactions (including the issuance of the Notes and the use of proceeds thereof) as if they had occurred on September 30, 2014. You should read this table together with the sections of this offering memorandum entitled “Use of Proceeds,”“Selected Historical Financial Data,”“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Other Indebtedness” and our consolidated financial statements and related notes included elsewhere in this offering memorandum.

As of September 30, 2014 Hurtigruten Company(1) As Adjusted for the Hurtigruten As further Adjusted for Acquisition the Refinancing Actual Transactions Transactions (NOK millions) (€ millions)(2) Total cash and cash equivalents(3) ...... 442.3 394.7 351.6 43.3 Former Facilities(4) ...... 2,011.1 — — — Former Notes(5) ...... 500.0 — — — Bridge Facility(6) ...... — 3,692.9 — — Notes offered hereby ...... — — 3,692.9 455.0 Revolving Credit Facility(7) ...... — 250.0 250.0 30.8 Other debt(8) ...... 62.4 62.4 62.4 7.7 Total debt(9) ...... 2,573.5 4,005.2 4,005.2 493.5 Total equity(10) ...... 1,294.5 2,028.1(11) 2,028.1 249.9 Capitalization ...... 3,868.0 6,033.3 6,033.3 743.4

(1) The Company was established on September 1, 2014 with a share capital of NOK 30,000. (2) For purposes of this table, the euro and NOK amounts, as applicable, have been translated for convenience only at the rate of €1.00 = NOK 8.1162, which represents the rate of exchange as of September 30, 2014, as published by Bloomberg Generic Rate. The amount of the Former Facilities presented in the table represents principal amounts excluding amortized debt issuance costs. (3) This presentation includes cash and cash equivalents, of NOK 33.9 million of the SPEs as of September 30, 2014, which cash is not available for use by the Group. The as adjusted amount for the Hurtigruten Acquisition Transactions reflects our cash, as adjusted to give effect to the Hurtigruten Acquisition Transactions. The as adjusted amount for the Refinancing Transaction reflects our cash, as further adjusted to give effect to the Refinancing Transactions. Our estimated fees and expenses associated with the Refinancing Transactions, including discounts and other commissions, advisory and other professional fees and transaction costs, are NOK 43.1 million. As of December 31, 2014, we had cash and cash equivalents of NOK 336.1 million on an actual basis, which includes NOK 34.1 million of cash and cash equivalents of the SPEs. (4) On January 14, 2015, the outstanding borrowings under the Former Facilities, together with accrued and unpaid interest and break cost were repaid in full using drawings under the Bridge Facility. The Former Facilities were terminated as part of the Hurtigruten Acquisition Transactions. The outstanding principal amount of indebtedness under the Former Facilities as of September 30, 2014 was NOK 2,011.1 million. (5) We redeemed NOK 500 million in aggregate principal amount of Former Notes on January 26, 2015. The redemption price for the Former Notes consisted of NOK 500 million, plus accrued and unpaid interest and the applicable redemption premium, and the Former Notes were discharged upon such redemption. (6) As part of the Refinancing Transactions, the outstanding borrowings, together with accrued and unpaid interest, under the Bridge Facility will berepaidinfullontheIssue Date with the proceeds of the Offering, plus cash on hand. The outstanding principal amount of indebtedness under the Bridge Facility Agreement as of theIssueDateis expected to be €455.0 million, which amount excludes accrued and unpaid interest. The Bridge Facility Agreement will be terminated as part of the Refinancing Transactions. The Bridge Facility accrues interest at a rate based on EURIBOR plus an applicable margin plus certain mandatory costs and matures on December 19, 2021. (7) On January 22, 2015 we borrowed NOK 250.0 million under the Revolving Credit Facility for general working capital purposes, as the first calendar quarter is typically a low point in our cash cycle. Borrowings under the Revolving Credit Facility replaced borrowings under our former revolving credit facility, which was repaid and will provide additional funds to cover the cash payments made in connection with the termination of our former interest rate swaps, foreign currency exchange swaps and the majority of our bunker fuel swaps. (8) As of September 30, 2014 other debt comprised indebtedness of NOK 25.6 million outstanding under the Local Line Facilities and outstanding indebtedness of Kystruten KS, which is one of the SPEs, in an amount of NOK 36.8 million under its credit facility. The indebtedness of Kystruten KS is consolidated in the financial results of Hurtigruten and its subsidiaries but is non-recourse to the Restricted Group. (9) Total debt excludes unamortized debt issuance costs as of September 30, 2014 of NOK 24.5 million. This amount is expected to be written off in connection with the repayment and termination of the Former Financing Arrangements. We expect to have unamortized debt issuance costs of €11.4 million in connection with the Bridge Facility, €1.3 million in connection with the Revolving Credit Facility and €12.5 million in connection with the Notes. (10) This includes non-controlling interests of NOK 201.3 million in relation to the SPEs as of September 30, 2014. (11) The as adjusted amount for the Hurtigruten Acquisition Transactions reflects the NOK 1,826.8 million equity contribution to the Company, comprised of (i) an indirect cash equity contribution of NOK 1,639.5 million made by TDR Capital to the Company and (ii) a contribution of NOK 187.3 million by Home Capital and Periscopus.

73 SELECTED HISTORICAL FINANCIAL DATA

The Company was incorporated on September 1, 2014 for the purposes of facilitating the Hurtigruten Acquisition Transactions and Refinancing Transactions, including issuing the Notes offered hereby. Consequently, no historical financial information relating to the Company is available. All historical financial information presented in this offering memorandum is of Hurtigruten and its subsidiaries; accordingly, all references to “we,” “us,” “our” or the “Group” in respect of historical financial information in this offering memorandum are to Hurtigruten and its subsidiaries on a consolidated basis. In particular, this offering memorandum includes audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the years ended December 31, 2011, 2012 and 2013, prepared in accordance with IFRS, and accompanying notes; and the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 and 2014, prepared in accordance with IAS 34, and accompanying notes. Hurtigruten’s unaudited condensed consolidated interim financial statements as of and for the nine months ended September 30, 2013 and 2014 are unaudited and all information contained in this offering memorandum with respect to those periods is also unaudited.

Due to the changing nature of our continuing and discontinued operations in each of the years ended December 31, 2011, 2012 and 2013, the discontinued operations in our audited consolidated financial statements for each of these years include different discontinued operations and therefore are not presented on the same basis. In the years ended December 31, 2012 and 2013 and in our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2014, the comparative period financial information was changed in order to make it comparable with the current period presented. The financial information of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2011 disclosed in this offering memorandum have been derived from the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 and the financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 disclosed in this offering memorandum have been derived from the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The financial information of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 disclosed in this offering memorandum have been derived from the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2014. As a result, the following businesses were classified as discontinued operations in the financial statements for the periods indicated with comparative balances revised to present the same discontinued operations as in the subsequent period: • Consolidated financial statements as of and for the nine months ended September 30, 2014: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2013: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2012: Charter Business. • Consolidated financial statements as of and for the year ended December 31, 2011: Fast Ferries Business. The Fast Ferries Business was reclassified as a continuing operation in the 2012 financial statements and the 2011 comparative balance was restated. The Fast Ferries Business no longer met the criteria to be classified as a discontinued operation even though we still intended to sell the Fast Ferries Business.

The financial statements of Hurtigruten and its subsidiaries included in this offering memorandum have not been adjusted to reflect the impact of any changes to the income statements, balance sheet or cash flow statements that might occur as a result of purchase accounting adjustments to be applied as a result of the Hurtigruten Acquisition. The Company will account for the Hurtigruten Acquisition using the acquisition method of accounting under IFRS, which will affect the comparability of the Company’s audited consolidated financial statements with the financial information contained in this offering memorandum. Under IFRS 3 (Business Combinations) the cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred and the equity interests issued by the acquirer, including the fair value of any contingent consideration. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a

74 business combination are measured initially at their fair market values at the Hurtigruten Tender Offer Settlement Date. The excess of the consideration transferred over the fair value of the acquirer’s share of the identifiable net assets acquired is recorded as goodwill. In accordance with IFRS, we have up to twelve months from the Hurtigruten Tender Offer Settlement Date to finalize the allocation of the purchase price.

The following tables should be read in conjunction with, and are qualified in their entirety by reference to, our financial statements and the accompanying notes included elsewhere in this offering memorandum. The tables below should also be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of operations for prior years or the interim periods are not necessarily indicative of the results to be expected for the full year or any future period.

For more information on the basis of preparation of this financial information, see “Presentation of Financial and Other Information” and the notes to the financial statements included elsewhere in this offering memorandum. The following tables show selected financial data for Hurtigruten and its subsidiaries on a consolidated basis for the periods indicated.

Consolidated Income Statement

Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Continuing Operations(1): Total revenues ...... 3,268,966 3,262,596 3,305,614 2,748,365 3,018,360 Payroll costs ...... (941,483) (828,933) (806,272) (624,003) (668,555) Depreciation, amortization and impairment losses ...... (422,821) (378,668) (308,899) (282,058) (291,157) Other operating costs ...... (2,029,216) (2,002,106) (1,938,648) (1,513,518) (1,637,097) Other gains/(losses—net ...... 83,320 3,493 9,387 7,326 520 Operating profit/(loss) ...... (41,234) 56,382 261,182 336,113 422,070 Finance income ...... 71,772 130,102 89,540 67,346 49,934 Finance expense ...... (238,694) (350,695) (320,632) (243,354) (205,977) Finance expenses—net ...... (166,922) (220,593) (231,092) (176,008) (156,043) Share of profit/(loss) of associates ...... 2,352 (2,130) 10,837 646 352 Profit/(loss) before income tax from continuing operations ...... (205,804) (166,341) 40,926 160,751 266,379 Income tax expense from continuing operations ...... 109,085 (23,729) (3,915) (23,112) (29,735) Profit/(Loss) for the Period ...... (96,719) (190,071) 37,011 137,638 236,644 Discontinued Operations(1): Profit/(Loss) for the Period ...... 26,752 (140,742) (11,589) 1,555 10,132 Profit/(Loss) for the Period ...... (69,968) (330,813) 25,422 139,194 246,776

75 Consolidated Balance Sheet

As of As of As of As of December 31, December 31, December 31, September 30, 2011 2012 2013 2014 (NOK thousands) ASSETS Non-current assets: Property, plant and equipment ...... 3,851,087 3,748,690 3,539,306 3,331,467 Intangible assets ...... 272,311 359,130 373,911 379,870 Investment in associates ...... 38,895 36,552 26,758 2,245 Deferred income tax assets ...... 172,234 169,926 166,576 166,432 Trade and other receivables ...... 34,003 30,520 12,874 56,049 Total non-current assets ...... 4,368,531 4,344,817 4,119,426 3,936,062 Current assets: Inventories ...... 74,696 77,048 85,477 92,469 Trade and other receivables ...... 920,176 293,762 128,020 115,306 Derivative financial instrument ...... 28,639 5,717 12,932 21,247 Cash and cash equivalents ...... 574,511 548,847 404,442 442,273 1,598,022 925,374 630,871 671,295 Assets of disposal group classified as held-for-sale .... 60,384 — 214,444 — Total current assets ...... 1,658,406 925,374 845,315 671,295 Total assets ...... 6,026,936 5,270,191 4,964,741 4,607,357 Total equity ...... 1,564,114 1,166,555 1,118,551 1,294,534 LIABILITIES Non-current liabilities: Borrowings ...... 2,455,508 2,864,983 2,493,060 2,267,428 Other non-current liabilities ...... — — — 34,837 Derivative financial instruments ...... 17,776 60,778 59,752 57,948 Deferred income tax liabilities ...... 9,643 8,105 1,180 1,179 Retirement benefit obligations ...... 101,693 46,303 28,038 24,665 Provisions for other liabilities and charges ...... 5,450 5,283 5,117 4,992 Total non-current liabilities ...... 2,590,070 2,985,454 2,587,148 2,391,049 Current liabilities: Trade and other payables ...... 755,597 730,981 636,276 572,375 Current income tax liabilities ...... 11,932 10,264 4,984 30,543 Borrowings ...... 1,026,252 344,552 474,526 281,572 Derivative financial instruments ...... 152 21,049 52,000 28,276 Provisions for other liabilities and charges ...... 8,819 11,335 1,302 9,008 Total current liabilities ...... 1,802,752 1,118,182 1,169,088 921,774 Liabilities of disposal group classified as held-for-sale ...... 70,000 — 89,954 — Total current liabilities ...... 1,872,752 1,118,182 1,259,042 921,774 Total liabilities: ...... 4,462,822 4,103,636 3,846,190 3,312,823 Total equity and liabilities ...... 6,026,936 5,270,191 4,964,741 4,607,357

76 Consolidated Cash Flow Statement

Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Net cash flows from/(used in) operating activities ...... 38,467 574,287 463,814 445,363 534,678 Net cash flows from/(used in) investing activities ...... 101,851 (118,717) (233,569) (133,384) (62,815) Net cash flows (used in)/ from financing activities ...... (213,581) (408,943) (312,559) (318,909) (467,235) Cash, cash equivalents and bank overdrafts ... 426,461 465,794 383,216 467,178 390,578

(1) Our discontinued operations relate to assets for which management at the relevant level has made a commitment to complete the sale, and the transaction is expected to be completed within one year of the classification date. Results from the previous periods for discontinued operations have been reclassified in order to obtain comparable figures. Therefore, the results relating to the years ended December 31, 2011 and 2012 presented in this offering memorandum are derived from the restated numbers which appear in the audited financial statements for the years ended December 31, 2012 and 2013, respectively. For further information regarding our discontinued operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Discontinued Operations.”

77 MANAGEMENT’S DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the consolidated financial condition and results of operations of Hurtigruten and its subsidiaries in the periods set forth below. Accordingly, all references to “we,” “us” or “our” in respect of historical consolidated financial information in this discussion are to Hurtigruten and its subsidiaries on a consolidated basis. See “Presentation of Financial and Other Information.”

You should read this discussion in conjunction with our historical consolidated financial statements included elsewhere in this offering memorandum as well as the “Selected Historical Financial Data.” The following presentation and analysis contains forward looking statements that involve risks and uncertainties. For the reasons explained under “Forward Looking Statements”, “Risk Factors” and elsewhere in this offering memorandum, our future results may differ materially from those expected or implied in these forward looking statements.

Due to the changing nature of our continuing and discontinued operations in each of the years ended December 31, 2011, 2012 and 2013, the discontinued operations in our audited consolidated financial statements for each of these years include different discontinued operations and therefore are not presented on the same basis. In the years ended December 31, 2012 and 2013 and in our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2014, the comparative period financial information was changed in order to make it comparable with the current period presented. The financial information of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2011 disclosed in this offering memorandum have been derived from the comparative prior period information for the year ended December 31, 2011 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012; and the financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 disclosed in this offering memorandum have been derived from the comparative prior period information for the year ended December 31, 2012 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The financial information of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2013 disclosed in this offering memorandum have been derived from the comparative period information for the nine months ended September 30, 2013 included in the unaudited condensed consolidated interim financial statements of Hurtigruten and its subsidiaries as of and for the nine months ended September 30, 2014.

The financial information for Green Dog Svalbard AS and the SPEs is included in the consolidated financial statements of Hurtigruten and its subsidiaries for the years ended December 31, 2011, 2012 and 2013 and the nine months ended September 30, 2014.

For further information regarding the presentation of the financial information included in this “Management’s Discussion and Analysis of Our Financial Condition and Results of Operations,” see “— Factors Affecting Our Results of Operations—Discontinued Operations.”

Overview We are a cruise line, local transport, cargo shipment and exploration tourism operator centered around the Norwegian coast as well as Polar waters. We have been providing our services along the Norwegian coast since 1893. Originally established to provide transportation services linking the south of Norway to the inaccessible parts of the north, the earliest Hurtigruten ships transported cargo and local passengers between ports. As a result of our long-established presence, public service origins and association with a long and naturally distinct coast line, we believe that we are one of Norway’s most recognized brands.

Today, our business operations are divided into three product segments: Hurtigruten Norwegian Coast, MS Fram and Spitsbergen Travel.

Our Hurtigruten Norwegian Coast segment is our largest segment, accounting for 84.9% of our total revenues from continuing operations in the twelve months ended September 30, 2014. 11 of our 12 ships provide services along the Norwegian coast under this segment, making 34 northbound and 33 southbound daily departures from ports located between Bergen in the south and Kirkenes in the

78 north. Freight and passenger transport remain an important part of our offering, which includes basic transport infrastructure, carrying cargo and local residents across shorter distances, and for which we receive a fixed fee from the Norwegian government each year under the Coastal Service Contract. We leverage this vessel schedule and infrastructure to offer distinct expedition based services and activities to leisure seekers through our cruise voyage products. The ships that we use to provide local transport services and cargo shipments are also used to offer exploration based voyages for leisure travelers, including a high proportion of international guests. Unlike the traditional cruise ships of the Mediterranean or the Caribbean, our ships operate as both “working” ships and “cruise” ships, all while showcasing Norwegian nature and local culture, which we believe is a differentiated offering compared to traditional cruise operators. For the twelve months ended September 30, 2014, we generated NOK 744.5 million, or 20.8% of our total revenues, under the Coastal Service Contract.

Our second largest segment, the MS Fram segment, accounted for 9.7% of our total revenues from continuing operations in the twelve months ended September 30, 2014 and consists of our MS Fram explorer ship, which takes our guests on distinct Polar voyages year-round in Antarctic, Spitsbergen and Greenland waters.

Our Spitsbergen Travel segment comprises our activities in Spitsbergen, where we operate three hotels as well as an equipment store and a host of tourist activities. This segment accounted for 5.5% of our total revenues from continuing operations in the twelve months ended September 30, 2014.

Our Other segment comprises a number of non-core operations which have been discontinued. Therefore, we do not describe our Other segment in this offering memorandum; however, unless otherwise indicated, our historical financial data includes the results of our Other segment for the periods presented in this offering memorandum before such non-core operations were discontinued.

Factors Affecting Our Results of Operations

General Economic Conditions and Competitive Environment

In recent years, the key economies from which we draw most of our customers have demonstrated modest macroeconomic growth. In the twelve months ended September 30, 2014, 32% of our PCNs were generated from Germany, 22% from Norway, 14% from the United Kingdom and 6% from the United States. According to the IMF, Germany experienced real GDP growth of 3.4%, 0.9% and 0.5% in the years ended December 31, 2011, 2012 and 2013, respectively. Norway experienced real GDP growth 1.3%, 2.9% and 0.6%, respectively, in the same years. Meanwhile the United Kingdom experienced real GDP growth of 1.1%, 0.3% and 1.7%, respectively, and the United States experienced real GDP growth of 1.6%, 2.3% and 2.2%, respectively, over the same years.

In addition, passenger cruise volumes in the European cruise industry increased at a CAGR of 4.1% between the years ended December 31, 2010 and December 31, 2013 according to data from CLIA. The macroeconomic stability in the economies from which we draw the majority of our guests, together with the increase in demand for European cruises, have been key drivers of our results of operations since 2011.

In recent years there has been an increase in the number of competitor cruises operating in Norway; we believe the increase was driven partly by growth in the Norwegian cruise market. According to Cruise Norway, the number of cruise port calls in Norway increased by 11.2%, 28.7% and 5.5% in the years ended December 31, 2011, 2012 and 2013, respectively.

Pre-Bookings

We typically commence our marketing activities for our Hurtigruten Norwegian Coast and MS Fram voyages and our Spitsbergen hotels in the first quarter of the year before the voyage. We typically require our guests to pay a non-refundable deposit ranging from 10% to 30% of the total amount payable at the time the booking is made. Our advanced customer bookings provide us with visibility into near term revenue across our business segments. Moreover, the payment of the non-refundable deposits reduces the risk of cancellation. As a result, in the nine months ended September 30, 2014, 36.9% of our reservations in terms of PCNs were made at least six months in

79 advance and 37.0% of our reservations in terms of PCNs were made at least six months in advance in the year ended December 31, 2013. As of September 30, 2014, our pre-bookings for the next twelve months in terms of PCNs for the Hurtigruten Norwegian Coast segment were 13.7% higher than our pre-bookings for the next twelve months for the Hurtigruten Norwegian Coast segment were as of September 30, 2013.

Depending on the level of our pre-bookings, we adjust prices in order to maximize ticket sales as we approach the relevant travel date.

Seasonality Our business is seasonal in nature based on demand for our services. Demand is strongest for our Hurtigruten Norwegian Coast product during the northern hemisphere’s summer months and holidays. As Hurtigruten Norwegian Coast is our largest segment, this seasonality in demand results in fluctuations in our revenues and results of operations, with 65.0% our Hurtigruten Norwegian Coast revenues and 113.1% of our Hurtigruten Norwegian Coast EBITDA for the twelve months ended September 30, 2014 generated in the second and third calendar quarters of 2014. In addition, we generated 69.5%, 64.1% and 62.7% of our Hurtigruten Norwegian Coast revenues and 206.3%, 130.5% and 113.3% of our Hurtigruten Norwegian Coast EBITDA for the years ended December 31, 2011, 2012 and 2013, respectively, in the second and third calendar quarters of the applicable year. The first and fourth calendar quarters are weaker periods in terms of revenues and EBITDA. Our “Hunting the Light” product in the winter season was particularly popular with our guests from the United Kingdom, resulted in an increased percentage of revenues generated in the first calendar quarter in the periods under review. The development of this newly introduced product in winter was effective in reducing the seasonality we typically experience in the first quarter of the calendar year.

We also experience seasonality with respect to our MS Fram and Spitsbergen Travel segments. In the case of MS Fram, the first and fourth calendar quarters are strong periods in terms of revenues, and in the case of Spitsbergen Travel, the second quarter is strong in terms of revenue, due to the weather conditions, which are suitable for the outdoor activities we offer, including dog sledding and the use of snowmobiles. However, our MS Fram and Spitsbergen Travel segments account for a smaller proportion of our revenues and therefore the seasonality effects of our MS Fram and Spitsbergen Travel segments do not have as significant impact on our overall results.

High Fixed Cost Base A number of our largest operating costs, including payroll and bunker fuel, are largely fixed. This is predominantly due to costs involved in fulfilling our obligations to run a year-round service under the Coastal Service Contract and the fact that we have minimum crew requirements driven by safety reasons regardless of how many guests are on board. Although our Hurtigruten Norwegian Coast product is seasonal, certain of our costs are fixed and therefore cannot be eliminated in our off-peak season. Although we have introduced various initiatives to better manage and reduce such costs under our Efficiency Improvement Program, a number of our fixed costs are necessary for the operation of our services under the Coastal Service Contract and such costs are not linked to the amount of ticket revenues we generate.

Currency Effect Our annual financial statements and unaudited interim financial statements are presented in Norwegian kroner. Items reflected in the financial statements of each of our subsidiaries are initially recorded using the currency of the primary economic location in which the entity operates. Transactions in currencies other than a subsidiary’s functional currency are recorded at the exchange rate prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities at year-end exchange rates are recognized as financial items in our income statement. Subsequently, upon consolidation, the accounts of our subsidiaries that are presented in the currencies other than Norwegian kroner are translated into Norwegian kroner at Norges Bank’s official rates prevailing on our balance sheet date. Income and expense items are translated into Norwegian kroner at the average

80 exchange rates for each month, as reported by Norges Bank. Any exchange differences arising are recognized as comprehensive income and presented in other equity reserves. Foreign exchange gains and losses on loans, cash and cash equivalents are presented in the income statement as financial income or expense.

Our results of operations are subject to both translation risk and transaction risks as a result of fluctuations in exchange rates. Fluctuating foreign exchange rates, in particular as between the Norwegian kroner and the euro, the U.S. dollar and the pound sterling, can have a material effect on the results of our operations.

Our consolidated group results and the results of our non-NOK reporting businesses are affected by exchange rate fluctuations on the translation of the non-NOK revenues to NOK. Over half of our sales from our Customer Reservation Call Center in Tallinn are denominated in euros, as are our sales from our sales and marketing offices in Hamburg and Paris, and our sales from our Seattle sales and marketing office are denominated U.S. dollars. Our London sales and marketing office, which currently services the rest of the world, primarily receives pound sterling. For the twelve months ended September 30, 2014, we generated 46% of our operational revenues, which excludes losses with respect to our former foreign currency exchange swaps that were realized in the twelve months ended September 30, 2014, as well as unrealized effects with respect to foreign currency exchange swaps and foreign currency effects with respect to trade receivables during the same period (“Operational Revenues”), in Norwegian kroner, 36% of our Operational Revenues in euros, 11% of our Operational Revenues in pound sterling, 5% of our Operational Revenues in U.S. dollars and 2% of our Operational Revenues in other currencies, and payroll and other operating costs, excluding bunker fuel costs (together, our “Operating Costs”) incurred in Norwegian kroner accounted for 50% of our Operational Revenues, Operating Costs incurred in euros accounted for 13% of our Operational Revenues, Operating Costs incurred in pound sterling accounted for 4% of our Operational Revenues, Operating Costs incurred in U.S. dollars accounted for 1% of our Operational Revenues. We did not incur Operating Costs in other currencies.

In the twelve months ended September 30, 2014, we incurred more operating costs in Norwegian kroner compared to the amount of revenues we generated in Norwegian kroner during this period. Our results are also affected by the denomination of our liabilities in currencies other than NOK and by our bunker fuel costs, which are quoted in U.S. dollars. Certain of our operating costs are denominated in non-NOK currencies, including sales commissions to travel agents and costs of goods for flights and hotels that we on-sell as optional extras to our guests.

Depreciation in the value of the Norwegian kroner would generally have a positive impact on our revenues and EBITDA, the majority of which are generated in non-NOK currencies. However, such positive impact has historically been partially offset by the effect of our former foreign currency exchange swaps or by unrealized losses with respect to the currency swaps we have already entered into. For example, the Norwegian kroner generally weakened in the fourth quarter of 2014; we may incur unrealized losses with respect to the currency swaps we had already entered into for this period and we may incur further losses if the Norwegian kroner continues to weaken in future periods.

We terminated our former foreign currency exchange swaps as part of the Hurtigruten Acquisition Transactions at a cost of NOK 134.0 million, resulting in an impairment charge of NOK 82.5 million. Following the issuance of the Notes, which will be denominated in euros, we intend to use the euros we generate to service our obligations under the Notes and the Revolving Credit Facility, to the extent it is drawn, and therefore we do not currently intend to hedge foreign exchange risks relating to such currency.

81 Price of Bunker Fuel We are exposed to fluctuations in the price of bunker fuel, which is used to operate our ships. Historically, we hedged this exposure from time to time through quarterly rolling hedges that range as set forth below:

Percentage of Estimated Future Relevant Hedging Period Consumption Hedged Six quarters prior to relevant period ...... 0-80% Five quarters prior to relevant period ...... 0-80% Four quarters prior to relevant period ...... 20-80% Three quarters prior to relevant period ...... 30-80% Two quarters prior to relevant period ...... 50-100% One quarter prior to relevant period ...... 50-100%

We have also adopted a stop-loss strategy whereby we attempted to hedge the unhedged amount if the price of oil rose above a predetermined threshold. Our hedging strategy for bunker fuel has been aimed at hedging a larger share of our bunker fuel consumption in the near future and a smaller share of our bunker fuel consumption further ahead. As a result, in the past, we have hedged at least 50% of our bunker fuel costs for the coming two quarters. Therefore, to the extent oil prices have declined compared to the spot price in our bunker fuel swaps, any cost savings have been partially offset by unrealized losses with respect to our bunker fuel swaps. Unrealized losses on our bunker fuel swaps that are subject to hedge accounting will result in a decrease in equity and unrealized losses on our bunker fuel swaps that are not accounted for under hedge accounting will result in a decrease in equity and an unrealized impairment charge.

In 2013, we entered into hedges in the forward market on 86.7% of our expected bunker fuel consumption for 2014, distributed with a higher proportion in the earlier calendar quarters of 2014, and a lower proportion in the later calendar quarters of 2014. As part of the Hurtigruten Acquisition Transactions, we terminated the majority of our bunker fuel swaps at a cost of NOK 95.1 million, resulting in an impairment charge of NOK 78.0 million, and rolled over our remaining bunker fuel swaps. As a result, following the termination of the majority of our bunker fuel swaps, our remaining hedges cover approximately 4% of our expected bunker fuel consumption for 2015. We are currently re-evaluating our bunker fuel hedging policy and may change our policy going forward.

We use U.S. dollar denominated revenues to settle these hedges. Our bunker fuel costs also include taxes and retailers’ margins, which apply to the volume purchased and are not affected by our hedging. The taxes with respect to our bunker fuel purchases are a fixed cost component, apply regardless of the bunker fuel price and cannot be hedged.

The price of oil is internationally traded in U.S. dollars, while we purchase bunker fuel in Norwegian kroner. Our fuel bunker costs are therefore subject to movements in the exchange rate for U.S. dollar. Fluctuations in the U.S. dollar/Norwegian Kroner exchange rate has an accounting impact with respect to our income statement since we account for bunker fuel costs in Norwegian kroner and such costs are based on a commodity that is quoted in U.S. dollars. Our U.S. dollar denominated revenues provide us with a natural hedge with respect to bunker fuel costs. A decrease in the value of the Norwegian kroner compared to the U.S. dollar would result in higher bunker fuel costs in Norwegian kroner but also higher revenues when U.S. dollar denominated revenues are converted to Norwegian kroner.

Despite our hedging activities, we are still exposed to volatility in the price of bunker fuel. We experienced a significant increase in our bunker fuel costs in 2012 compared to 2011 as a result of an increase in bunker fuel costs. Although we had hedged a portion of our bunker fuel costs, we incurred additional bunker fuel costs of NOK 99.0 million in 2012 compared to 2011. This increase was due to increased fuel consumption, which was partly driven by the fact that we replaced one of our existing ships with MS Finnmarken, which was a larger ship compared to the one it replaced and, accordingly, had a higher bunker fuel consumption.

82 Discontinued Operations From time to time, we identify assets that we intend to dispose. A “discontinued operation” is a material activity which has either been divested or is in the process of being divested. Our discontinued operations relate to assets for which management at the relevant level has made a commitment to complete the sale and the transaction is expected to be completed within one year of the classification date.

Net profits or losses after tax for discontinued operations are reported separately from income from continuing operations. Results from the previous periods for discontinued operations have been reclassified in order to obtain comparable figures. Therefore, the restated results relating to discontinued operations for the years ended December 31, 2011 and 2012 presented in this offering memorandum are derived from the audited financial statements for the years ended December 31, 2012 and 2013, respectively.

For the purposes of the financial data presented in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following businesses were classified as discontinued operations in the financial statements for the periods indicated with the comparative periods revised to present the same discontinued operations as in the subsequent period: • Consolidated financial statements as of and for the nine months ended September 30, 2014: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2013: Bus Business. • Consolidated financial statements as of and for the year ended December 31, 2012: Charter Business.

In addition, we sold our Fast Ferries Business in March 2014.

Efficiency Improvement Program In December 2012, we initiated our four phase Efficiency Improvement Program at both the Group level and at our global sales and marketing offices. Our Efficiency Improvement Program is aimed at optimizing our organizational structure, on land and at sea, reducing operational and administrative costs, refining and standardizing our hotel and maritime operations, increasing onboard revenues and revitalizing our voyage offerings by improving the customer experience in order to attract more guests and to further differentiate our offering from our competitors’ offerings. The changes we have implemented relate to our overall organizational structure, with the main focus on our global sales organization, our 12-strong fleet of ships and capturing synergies through consolidation of our corporate headquarters.

We completed the implementation of phases one, two and three of our Efficiency Improvement Program by July 2014. We have commenced the implementation of phase four of our Efficiency Improvement Program and expect to complete that phase by mid-2015.

Phase one of our Efficiency Improvement Program commenced in December 2012 and was completed by July 2014.

The key initiatives under phase one included: • A new cost-effective organizational structure, including: • Establishing our new corporate center in Tromsø. • Centralization and downsizing of our land-based central functions and organization. • Divestment of non-strategic assets. • Optimizing the commercial hotel and maritime operations. • Crew center established with a focus on development and crew planning.

83 Phase two of our Efficiency Improvement Program commenced in May 2013 and was completed in November 2013. The key initiatives under phase two included: • Optimizing our global sales and marketing offices and marketing functions and aligning our call center organization with our new corporate structure, including: • A reorganized global sales organization, with Nordic sales conducted through our new sales and marketing office in Oslo. • Reallocation of resources in line with our new corporate structure.

Phase three of our Efficiency Improvement Program commenced in mid-2013 and was completed by the end of 2013. The key initiatives under phase three included: • Centralization and rebuilding our IT platforms and our central reservation infrastructure, including: • Reorganization of our Customer Reservation Call Center in Tallinn. • Reorganization our IT operating platforms. • Taking control of (in-sourcing) key functions. • Upsizing number of IT personnel.

Phase four of our Efficiency Improvement Program was launched in December 2013, and is expected to be fully implemented by mid-2015. The key initiatives under phase four include: • Measures related to ship operation, including: • Reductions in bunker oil consumption. • Training of crew. • Increased effects from purchasing. • Increased onboard sales.

As a result of our Efficiency Improvement Program, our operational costs have declined substantially since 2012, and for the twelve months ended September 30, 2014, we achieved total efficiency improvements of NOK 96.5 million in connection with the Efficiency Improvement Program. We believe that our Efficiency Improvement Program has positioned us for the implementation of our strategic initiatives and the next phase of development of our operations.

Coastal Service Contracts The commencement of our Coastal Service Contract on January 1, 2012 has had a significant impact on our total revenues. As a result of entering into the Coastal Service Contract, our contractual revenues increased to NOK 619.0 million in the year ended December 31, 2012 from NOK 325.0 million in the year ended December 31, 2011, which amount was payable under our former contract with the Norwegian government regarding coastal services, which expired on December 31, 2011 (the “Former Coastal Service Contract”).

In addition, in the years ended December 31, 2011 and 2012, we recorded revenue reversals of NOK 35.0 million and NOK 108.4 million, respectively, due to a ruling by the ESA which ordered us to pay back to the Norwegian government certain revenues recorded under the Former Coastal Service Contract during prior periods.

Key Performance Measures In evaluating our results of operations, we refer to key financial and non-financial measures relating to the performance of our business. In addition to the key line items of our consolidated income statement, the principal measures that we use to evaluate the performance of our Hurtigruten Norwegian Coast and MS Fram segments include: • Passenger cruise nights (“PCNs”), which is our measurement of guest volume and represents the number of guests onboard our ships and the length of their stay.

84 • Available passenger cruise nights (“APCNs”), which is our measurement of capacity and represents the aggregate number of available berths on each of our ships (assuming double occupancy per cabin), multiplied by the number of operated days for the relevant ship for the period. • Occupancy rate, which represents our PCNs for the relevant period as a percentage of our APCNs for the period. • Gross ticket revenues, which represents ticket revenues, revenues from flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger revenues, including car transportation, travel insurance and retained deposits in cases of cancellations. • Net ticket revenues, which represents Gross ticket revenues less commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. • Gross ticket revenues per PCN, which represents Gross ticket revenues divided by PCNs. • Net ticket revenues per PCN, which represents Net ticket revenues divided by PCNs. • Gross cruise costs, which represents ship operating costs and selling, general and administrative expenses. • Net cruise costs, which represents Gross cruise costs less commissions and costs of goods for flights, hotels, transportation, food, beverage, shop and excursions as well as other passenger services, including travel insurance. • Net cruise costs per APCN, which represents Net cruise costs divided by APCNs.

We also measure fuel consumption in liters per nautical mile and fuel costs per liter.

Our key performance indicators are not measurements of performance under IFRS. We have presented these non-IFRS financial measures (i) as they are used by our management to monitor and report to our board members on our financial performance and (ii) to represent similar measures that may be used by certain investors, securities analysts and other interested parties as supplemental measures of financial performance. We believe these measures enhance the investor’s understanding of our financial performance and our ability to fund our ongoing operations, make capital expenditures and meet and service our obligations.

However, these non-IFRS financial measures are not measures determined based on IFRS, or other accepted accounting principles, and you should not consider such items as an alternative to the historical financial performance or other indicators of our cash flow and forward position based on IFRS measures. The non-IFRS financial measures, as defined by us, may not be comparable to similarly titled measures as presented by other companies due to differences in the way our non-IFRS financial measures are calculated. The non-IFRS financial information contained in this offering memorandum is not intended to comply with the reporting requirements of the SEC or any other regulatory authority and will not be subject to review by the SEC or any other regulatory authority. Even though the non-IFRS financial measures are used by management to assess our financial performance and these types of measures are commonly used by investors, they have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our position or results as reported under IFRS.

85 The following table presents, for the periods indicated, certain key performance measures with respect to our Hurtigruten Norwegian Coast and MS Fram segments:

Key Operating Metrics for Hurtigruten Norwegian Coast

For the Year Ended For the Nine Months Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands except for PCNs, APCNs, occupancy rate, fuel consumption and fuel cost per liter) Hurtigruten Norwegian Coast: PCNs ...... 1,101,620 1,090,067 1,038,403 870,297 907,145 APCNs ...... 1,496,404 1,702,736 1,723,914 1,303,918 1,306,074 Occupancy rate ...... 73.6% 64.0% 60.2% 66.7% 69.5% Gross ticket revenues ...... 1,969,198 2,107,621 2,001,539 1,748,246 1,963,182 Less: Commissions, costs of goods for flights, hotels, transportation ...... 373,043 403,757 340,672 288,837 351,071 Food, beverage, shop, excursions and other passenger services ...... 250,527 249,431 249,380 212,434 227,451 Net ticket revenues ...... 1,345,628 1,454,434 1,411,485 1,246,975 1,384,661 Gross ticket revenues per PCN (NOK) . . 1,788 1,933 1,928 2,009 2,164 Net ticket revenues per PCN (NOK) .... 1,221 1,334 1,359 1,433 1,526 Ship operating costs ...... 1,816,438 1,997,566 1,961,582 1,551,462 1,643,313 Selling, general and administrative expenses ...... 428,062 460,160 428,518 309,883 353,061 Gross cruise costs ...... 2,244,501 2,457,725 2,390,100 1,861,346 1,996,374 Less: Commissions, costs of goods for flights, hotels, transportation ...... 373,043 403,757 340,672 288,837 351,071 Food, beverage, shop, excursions and other passenger services ...... 250,527 249,431 249,380 212,434 227,451 Net cruise costs ...... 1,620,930 1,804,538 1,800,047 1,360,075 1,417,853 Net cruise costs per APCN (NOK) ..... 1,083 1,060 1,044 1,043 1,086 Fuel consumption (liter/nautical mile) . . . 76.9 81.4 81.8 80.9 81.9 Fuel cost per liter ...... 4.69 5.57 5.72 5.67 5.84

86 Key Operating Metrics for MS Fram

For the Year Ended For the Nine Months Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands except for PCNs, APCNs, occupancy rate, fuel consumption and fuel cost per liter) MS Fram: PCNs ...... 69,018 63,278 62,950 46,983 51,554 APCNs ...... 91,948 88,900 89,297 67,183 65,413 Occupancy rate ...... 75.1% 71.2% 70.5% 69.9% 78.8% Gross ticket revenues ...... 279,435 275,193 294,879 220,797 272,560 Less: Commissions, costs of goods for flights, hotels, transportation ...... 75,233 72,357 68,227 50,306 57,222 Food, beverage, shop, excursions and other passenger services ...... 20,817 18,711 16,375 10,945 11,347 Net ticket revenues ...... 183,386 184,125 210,278 159,545 203,991 Gross ticket revenues per PCN (NOK) . . 4,049 4,349 4,684 4,700 5,287 Net ticket revenues per PCN (NOK) .... 2,657 2,910 3,340 3,396 3,957 Ship operating costs ...... 190,374 188,385 175,878 132,840 141,169 Selling, general and administrative expenses ...... 43,411 45,865 42,624 30,840 34,964 Gross cruise costs ...... 233,785 234,250 218,502 163,680 176,133 Less: Commissions, costs of goods for flights, hotels, transportation ...... 75,233 72,357 68,227 50,306 57,222 Food, beverage, shop, excursions and other passenger services ...... 20,817 18,711 16,375 10,945 11,347 Net cruise costs ...... 137,736 143,181 133,900 102,429 107,564 Net cruise costs per APCN (NOK) ..... 1,498 1,611 1,499 1,525 1,644 Fuel consumption (liter/nautical mile) . . . 80.5 81.4 78.6 79.8 80.7 Fuel cost per liter ...... 5.08 5.72 5.69 5.74 5.80

Key Line Items The following describes those line items presented in our consolidated income statement and other measures that we consider key to understanding our results of operations:

Total Revenues We record our revenues when we deliver the relevant goods and services. Total revenues comprise of the following:

Operating Revenues We record certain operating revenues relating to sales of services and travel, sales of goods and other revenues. Such operating revenues include all revenues with respect to our Hurtigruten Norwegian Coast segment and our MS Fram segment and are recognized in the accounting period

87 when the service is rendered or delivered. For ship voyages, this is based on the days when the passenger is on board. Revenues related to ship voyages are accrued on the basis of the number of days the voyage lasts before and after the end of the accounting period. Cash deposits from customers are accounted for as trade and other payables, and if the departure of travel is over twelve months in the future, then the deposit is classified as a long-term liability. Our other operating revenues include revenues for our Spitsbergen Travel segment as well as, in 2011, revenues from our now discontinued Bus Business. From time to time, we also have certain non- operational revenues, including proceeds received from insurance settlements such as those relating to the fire on MS Nordlys in 2011.

We record certain operating revenues relating to sales of goods, which primarily relate to sales of food, souvenirs and other kiosk products onboard our ships and at our hotels. Revenues from such sales are recognized in our income statement when the customer has received and paid for the goods.

Contractual Revenues Revenues received as part of our fee from the Norwegian government under our Coastal Service Contract and our Former Coastal Service Contract for our Hurtigruten Norwegian Coast segment are recognized in the income statement on a continuous basis over the year on the basis of such contracts. In 2011 this also included contractual revenues from our now discontinued Bus Business received under our then existing contracts with certain Norwegian local authorities. Such government contracts are primarily based on a tender, where the company has a fixed contract sum for planned (annual) production. There are specific conditions and calculation methods for the indexation of the contract sum. Any changes beyond the planned production are compensated or deducted, as appropriate, utilizing agreed-upon rates set out in the agreements, and the fees recognized as revenue in the periods in which the services are provided.

Payroll Costs Payroll costs consist of wages and salaries, payroll tax, pension costs and other benefits, as offset by certain tax credits we receive with respect to a number of Norwegian employees.

Other Operating Costs Other operating costs primarily comprises cost of goods sold, operating costs, including bunker fuel costs, port related fees, repair and maintenance expenses, as well as commission paid to travel agents and other sales and administrative costs.

Depreciation, Amortization and Impairment Losses Depreciation, amortization and impairment provides for the use of intangible assets and property, plant and equipment as these are employed over their useful economic lives, taking into account estimated residual values. Estimated residual values and useful lives are reviewed annually or more frequently if there are indications of impairment or where the book value may not be recoverable.

Other (Losses)/Gains—Net Other Losses/(gains)—net primarily comprises gains or losses on the sale of property, plant and equipment.

EBITDA EBITDA represents profit/(loss) from continuing operations for the relevant period before the share of profit/(loss) of associates, net finance expense, depreciation and amortization, impairment (loss)/reversal and income tax expense from continuing operations.

EBITDA Margin EBITDA margin represents EBITDA divided by total revenue for the period.

Finance Expenses—Net Finance expenses—net represents finance expense offset by finance income. Finance expense principally comprises interest expenses on borrowings, foreign exchange losses on borrowings and

88 cash balances, losses on sale of financial assets and impairments of financial non-current assets. Finance income comprises mainly interest income, foreign exchange gains on borrowings and cash balances as well as gains on the sale of financial assets and dividends.

Share of Profit/(Loss) of Associates Our share of profit/(loss) from associates comprises mainly our portion of the profit/(loss) from (i) Green Dog Svalbard AS, in which we have a 50% ownership interest and which offers dog sledding-related tourist experiences on Spitsbergen, (ii) ANS Havnebygningen, in which we had a 50% ownership interest and which owned the office building we previously leased in Tromsø that was subsequently sold in December 2013 and (iii) Funn IT AS, which provided IT services to us and in which we had a 50% ownership interest and that was subsequently sold in February 2013. Associates are entities, other than subsidiaries, over which we exert significant influence, but over which we do not have control and are accounted for under the equity method.

Income Tax Expense from Continuing Operations Income tax expense from continuing operations represents the sum of tax currently payable and deferred tax from continuing operations. Tax is recognized in the income statement unless it relates to an item recognized directly in equity, in which case the associated tax is also recognized directly in equity.

Profit/(Loss) for the Period Profit/(loss) for the period reflects profit/(loss) for the period from continuing operations and discontinued operations.

Profit/(Loss) for the Period Attributable to Owners of the Parent Profit/(loss) for the period attributable to owners of the parent reflects profit/(loss) for the period attributable to our shareholders.

Results of Operations The following table presents, for the periods indicated, our operating results:

Year Year Year Nine Nine Ended Ended Ended Months Ended Months Ended December 31, December 31, December 31, September 30, September 30, 2011 % Change 2012 % Change 2013 2013 % Change 2014 (NOK thousands, except as otherwise indicated) Continuing Operations(1): Operating revenues ...... 2,730,640 (3.2) 2,643,812 (3.7) 2,546,998 2,167,950 13.1 2,452,054 Contractual revenues ..... 538,326 14.9 618,784 22.5 758,616 580,415 (2.4) 566,306 Total revenues ...... 3,268,966 (0.2) 3,262,596 1.3 3,305,614 2,748,365 9.8 3,018,360 Payroll costs ...... (941,483) (12.0) (828,933) (2.7) (806,272) (624,003) 7.1 (668,555) Other operating costs ..... (2,029,216) (1.3) (2,002,106) (3.2) (1,938,648) (1,513,518) 8.2 (1,637,097) Depreciation, amortization and impairment losses . . (422,821) (10.4) (378,668) (18.4) (308,899) (282,058) 3.2 (291,157) Other gains/(losses)—net ..... 83,320 (95.8) 3,493 168.7 9,387 7,326 (92.9) 520 Operating profit/(loss) ... (41,234) NM 56,382 NM 261,182 336,113 25.6 422,070 Finance income ...... 71,772 81.3 130,102 (31.2) 89,540 67,346 (25.9) 49,934 Finance expense ...... (238,694) 46.9 (350,695) (8.6) (320,632) (243,354) (15.4) (205,977) Finance expenses—net ... (166,922) 32.2 (220,593) 4.8 (231,092) (176,008) (11.3) (156,043)

89 Year Year Year Nine Nine Ended Ended Ended Months Ended Months Ended December 31, December 31, December 31, September 30, September 30, 2011 % Change 2012 % Change 2013 2013 % Change 2014 (NOK thousands, except as otherwise indicated) Share of profit/(loss) of associates ...... 2,352 (190.6) (2,130) NM 10,837 646 (45.5) 352 Profit/(loss) before income tax from continuing operations ...... (205,804) (19.2) (166,341) (124.6) 40,926 160,751 65.7 266,379 Income tax expense from continuing operations . . . 109,085 (121.8) (23,729) (83.5) (3,915) 23,112 28.7 29,735 Profit/(Loss) for the period from continuing operations ...... (96,719) 96.5 (190,071) (119.5) 37,011 137,638 71.9 236,644 Discontinued Operations(1): Profit/(Loss) for the period from discontinued operations ...... 26,752 NM (140,742) (91.8) (11,589) 1,555 NM 10,132 Profit/(Loss) for the Period ...... (69,968) NM (330,813) (107.7) 25,422 139,194 77.3 246,776

(1) Our discontinued operations relate to assets for which management at the relevant level has made a commitment to complete the sale and the transaction is expected to be completed within one year of the classification date. Results from the previous periods for discontinued operations have been reclassified in order to obtain comparable figures. Therefore. the results relating to discontinued operations for the years ended December 31, 2012 and 2011 presented in this offering memorandum are derived from the restated numbers which appear in the audited financial statements for the years ended December 31, 2013 and 2012. For further information regarding our discontinued operations, see “Factors Affecting Our Results of Operations—Discontinued Operations.”

The following table presents, for the periods indicated, the revenue, operating profit, EBITDA and EBITDA margin by reporting segment and for the Group as a whole:

Year Year Year Nine Nine Ended Ended Ended Months Ended Months Ended December 31, December 31, December 31, September 30, September 30, 2011 % Change 2012 % Change 2013 2013 % Change 2014 (NOK thousands, except as otherwise indicated) Continuing Operations:(1) Total revenues: Hurtigruten Norwegian Coast ...... 2,448,563 15.7 2,833,342 0.5 2,847,360 2,385,058 7.9 2,574,197 MS Fram ...... 279,435 (1.5) 275,193 7.2 294,879 220,797 23.4 272,560 Spitsbergen Travel .... 137,760 20.2 165,529 4.2 172,538 154,894 15.0 178,142 Other Business ...... 414,060 (97.2) 11,577 (31.7) 7,905 1,313 (28.9) 933 Eliminations ...... (10,852) 112.4 (23,045) (25.9) (17,068) (13,697) (45.4) (7,473) Total revenue from continuing operations ...... 3,268,966 (0.2) 3,262,596 1.3 3,305,614 2,748,365 9.8 3,018,360 Discontinued Operations:(1) ..... 666,617 (66.6) 222,322 (16.1) 186,534 143,134 (7.0) 133,054 Total revenues ...... 3,935,583 (11.5) 3,484,918 0.2 3,492,148 2,891,499 9.0 3,151,414

90 Year Year Year Nine Nine Ended Ended Ended Months Ended Months Ended December 31, December 31, December 31, September 30, September 30, 2011 % Change 2012 % Change 2013 2013 % Change 2014 (NOK thousands, except as otherwise indicated) Operating profit/(loss) for the period: Hurtigruten Norwegian Coast ...... (83,588) (188.1) 73,638 96 144,397 294,170 15.2 338,789 MS Fram ...... 26,494 (23.0) 20,412 NM 132,527 40,702 89.6 77,167 Spitsbergen Travel .... (6,670) (185.6) 5,707 143.6 13,903 24,119 24.7 30,069 Other Business ...... 22,530 NM (43,374) (31.6) (29,647) (22,878) 4.7 (23,954) Total operating profit/ (loss) from continuing operations(1) ...... (41,234) NM 56,382 NM 261,181 336,113 25.6 422,070 Discontinued Operations(1) ...... (82,736) 83.5 (151,840) 93.4 (10,017) 2,494 667,4 19,140 Total operating profit/ (loss) ...... (123,970) (23.0) (95,458) (363.1) 251,164 338,607 30.3 441,210 EBITDA: Hurtigruten Norwegian Coast ...... 204,102 83.2 373,845 22.4 457,635 523,713 10.3 577,826 MS Fram ...... 45,650 (10.6) 40,800 87.2 76,378 57,116 68.8 96,428 Spitsbergen Travel .... 4,417 287.7 17,125 43.1 24,510 32,815 15.9 38,043 Other Business ...... 127,418 (97.4) 3,279 252.5 11,557 4,526 (79.5) 930 Total continuing operations(1) ...... 381,587 14.0 435,049 31.0 570,080 618,170 15.4 713,227 Discontinued Operations(1) ...... (126,854) (100.8) 1,049 (2.8) 1,020 2,429 (112.6) (307)

EBITDA margin: Hurtigruten Norwegian Coast ...... 8.3% 4.9 13.2% 2.9 16.1% 22.0% 0.4 22.4% MS Fram ...... 16.3% (1.5) 14.8% 11.1 25.9% 25.9% 9.5 35.4% Spitsbergen Travel .... 3.2% 7.1 10.3% 3.9 14.2% 21.2% 0.2 21.4% Other Business ...... 30.8% (2.5) 28.3% NM 146.2% 344.7% NM 99.7% Total continuing operations(1) ...... 11.7% 1.6 13.3% 3.9 17.2% 22.5% 1.1 23.6% Discontinued Operations(1) ...... (19.0%) 19.0 0.0% 0.0 0.0% 0.1% (0.1) 0.0%

(1) Our discontinued operations relate to assets for which management at the relevant level has made a commitment to complete the sale and the transaction is expected to be completed within one year of the classification date. Results from the previous periods for discontinued operations have been reclassified in order to obtain comparable figures. Therefore, the results relating to discontinued operations for the years ended December 31, 2012 and 2011 presented in this offering memorandum are derived from the restated numbers which appear in the audited financial statements for the years ended December 31, 2013 and 2012. For further information regarding our discontinued operations, see “Factors Affecting Our Results of Operations—Discontinued Operations.”

Comparison of the Nine Months Ended September 30, 2014 with the Nine Months Ended September 30, 2013

Total Revenues Our total revenues from continuing operations for the nine months ended September 30, 2014 increased by NOK 270.0 million, or 9.8%, to NOK 3,018.4 million from NOK 2,748.4 million in the nine months ended September 30, 2013, primarily due to our Hurtigruten Norwegian Coast and MS Fram segments, which achieved higher PCNs and Gross ticket revenues per PCN.

91 Hurtigruten Norwegian Coast total revenues for the nine months ended September 30, 2014 increased by NOK 189.1 million, or 7.9%, to NOK 2,574.2 million from NOK 2,385.1 million in the nine months ended September 30, 2013. The overall increase in our Hurtigruten Norwegian Coast revenues was primarily driven by an increase of 4.2% in PCNs and an increase of 7.7% in Gross ticket revenues per PCN. The increase in Gross ticket revenues per PCN was principally driven by the decrease in the value of the Norwegian kroner in relation to the euro, pound sterling and U.S. dollar, among others, compared to the prior corresponding period, as well as an increase in onboard spending. The increase in our revenues was partially offset by lower contractual revenues, which decreased by NOK 14.1 million, or 2.4%, to NOK 566.3 million for the nine months ended September 30, 2014 from NOK 580.4 million in the nine months ended September 30, 2013. The decrease in our contractual revenues was primarily attributable to a provision for the amount expected to be repaid to the government under the Coastal Service Contract, based on the number of days our Hurtigruten Norwegian Coast ships were out of service in excess of the permitted allowance of days out of service under the Coastal Service Contract, which resulted from unplanned technical and operating issues.

MS Fram total revenues for the nine months ended September 30, 2014 increased by NOK 51.8 million, or 23.4%, to NOK 272.6 million from NOK 220.8 million in the nine months ended September 30, 2013, primarily attributable to an increase of 9.7% in PCNs and an increase of 12.5% in Gross ticket revenues per PCN. The increase in PCNs was mainly attributable to the Antarctica season in the first calendar quarter together with increased utilization with respect to our sailings in Europe and Greenland during the second calendar quarter. The increase in Gross ticket revenues per PCN was principally driven by an increase in ticket prices, in the first quarter of 2014 in particular, and a decrease of the relative value of the Norwegian kroner compared to the prior corresponding period.

Spitsbergen Travel total revenues for the nine months ended September 30, 2014 increased by NOK 23.2 million, or 15.0%, to NOK 178.1 million from NOK 154.9 million in the nine months ended September 30, 2013, principally due to increased RevPAR and increased sales of activities, expeditions, food and beverages. The increase in RevPAR is primarily due to a reduction in available capacity in the nine months ended September 30, 2014 due to the temporary closure of one of the buildings in the Spitsbergen Guest House for remodeling, together with higher average room rate achieved for the available number of rooms.

Other business total revenues for the nine months ended September 30, 2014 decreased by NOK 0.4 million, or 28.9%, to NOK 0.9 million from NOK 1.3 million in the nine months ended September 30, 2013, primarily due to a decline in rental revenue resulting from the disposal of one of our properties in Narvik as part of our Efficiency Improvement Program.

Payroll Costs Payroll costs from continuing operations for the nine months ended September 30, 2014 increased by NOK 44.6 million, or 7.1%, to NOK 668.6 million from NOK 624.0 million in the nine months ended September 30, 2013, primarily due to an increase in payroll tax with respect to our crew following a change in Norwegian tax legislation in July 2014 and an increase in the number of crew members on our Hurtigruten Norwegian Coast ships, corresponding to the increase in PCNs for the same period. We also incurred certain non-recurring payroll costs in connection with the implementation of the fourth phase of our Efficiency Improvement Program.

Other Operating Costs Our other operating costs from continuing operations for the nine months ended September 30, 2013 and 2014 are set forth below:

Nine Months Nine Months Ended September 30, Ended September 30, 2013 % Change 2014 (NOK thousands, except as otherwise indicated) Other Operating Costs: Cost of goods sold ...... 427,009 15.5 493,281 Operating costs ...... 871,624 3.4 901,190 Sales and administrative costs ...... 214,885 12.9 242,626 Total ...... 1,513,517 8.2 1,637,097

92 Other operating costs from continuing operations for the nine months ended September 30, 2014 increased by NOK 123.6 million, or 8.2%, to NOK 1,637.1 million from NOK 1,513.5 million in the nine months ended September 30, 2013. Such increase was mainly due to an increase in cost of goods sold associated with higher revenues and an increase in expenses related to sales and marketing activities, which were primarily related to launching new products and increased marketing activities, particularly in the United States. We also recognized restructuring costs in connection with the reorganization of our management team and our Group in the nine months ended September 30, 2014, which included costs for consultants used to temporarily fill positions on an interim basis. The overall increase in our operating costs was partially offset by cost savings in the nine months ended September 30, 2014, as a result of certain initiatives we had implemented in connection with our Efficiency Improvement Program. Such initiatives included standardizing our procurement and purchasing processes and implementing our bunker fuel saving initiatives.

Depreciation, Amortization and Impairment Losses Depreciation, amortization and impairment losses from continuing operations for the nine months ended September 30, 2014 increased by NOK 9.1 million, or 3.2%, to NOK 291.2 million from NOK 282.1 million in the nine months ended September 30, 2013, principally as a result of higher amortization expenses in connection with the introduction of the Fidelio cruise management system used in relation to inventory management, onboard bookings and sales. Depreciation with respect to MS Fram also increased following the reversal of an impairment loss in December 2013, due to better than expected results and higher advance bookings.

Other (Losses)/Gains—Net Other gains—net from continuing operations for the nine months ended September 30, 2014 decreased by NOK 6.8 million, or 92.9%, to NOK 0.5 million from NOK 7.3 million in the nine months ended September 30, 2013. The gain in the nine months ended September 30, 2014, was primarily due to the disposal of our Fast Ferries Business in March 2014. The gain in the nine months ended September 30, 2013, was primarily due to the disposal of two properties in Narvik as part of our Efficiency Improvement Program.

EBITDA Our EBITDA from continuing operations for the nine months ended September 30, 2014 increased by NOK 95.1 million, or 15.4%, to NOK 713.2 million from NOK 618.2 million in the nine months ended September 30, 2013, primarily due to higher PCNs and Gross ticket revenues per PCN with respect to our Hurtigruten Norwegian Coast and MS Fram segments.

Hurtigruten Norwegian Coast EBITDA for the nine months ended September 30, 2014 increased by NOK 54.1 million, or 10.3% to NOK 577.8 million from NOK 523.7 million in the nine months ended September 30, 2013, primarily driven by an increase in revenue including onboard sales, which was partially offset by an increase in costs including cost of goods sold, payroll costs, sales and administrative costs.

MS Fram EBITDA for the nine months ended September 30, 2014 increased by NOK 39.3 million, or 68.8% to NOK 96.4 million from NOK 57.1 million in the nine months ended September 30, 2013, primarily attributable to an increase in revenue, which was partially offset by an increase in costs including sales commissions, and sales and administrative costs.

Spitsbergen Travel EBITDA for the nine months ended September 30, 2014 increased by NOK 5.2 million, or 15.9% to NOK 38.0 million from NOK 32.8 million in the nine months ended September 30, 2013, principally due to an increase in revenues from accommodation, food and beverage and excursions, which was partially offset by an increase in costs, including payroll costs and other operating costs.

Other business EBITDA for the nine months ended September 30, 2014 decreased by NOK 3.6 million, or 79.5% to NOK 0.9 million from NOK 4.5 million in the nine months ended September 30, 2013, primarily due to the non-recurring gain on the disposal of two properties in Narvik in the nine

93 months ended September 30, 2013, as partially offset by a decrease in the nine months ended September 30, 2014 of costs with respect to our Fast Ferries Business, which was sold in March 2014.

EBITDA Margin Our EBITDA margin from continuing operations for the nine months ended September 30, 2014 increased by 1.1 percentage points, to 23.6% from 22.5% in the nine months ended September 30, 2013.

Hurtigruten Norwegian Coast EBITDA margin for the nine months ended September 30, 2014 increased by 0.4 percentage points, to 22.4% from 22.0% in the nine months ended September 30, 2013.

MS Fram EBITDA margin for the nine months ended September 30, 2014 increased by 9.5 percentage points, to 35.4% from 25.9% in the nine months ended September 30, 2013.

Spitsbergen Travel EBITDA margin for the nine months ended September 30, 2014 increased by 0.2 percentage points, to 21.4% from 21.2% in the nine months ended September 30, 2013.

Other business EBITDA margin for the nine months ended September 30, 2014 decreased by 245.0 percentage points, to 99.7% from 344.7% in the nine months ended September 30, 2013.

Operating Profit Operating profit from continuing operations for the nine months ended September 30, 2014 increased by NOK 86.0 million, or 25.6%, to NOK 422.1 million from NOK 336.1 million in the nine months ended September 30, 2013, primarily due to the reasons stated above with respect to EBITDA.

Hurtigruten Norwegian Coast operating profit for the nine months ended September 30, 2014 increased by NOK 44.6 million, or 15.2%, to NOK 338.8 million from NOK 294.2 million in the nine months ended September 30, 2013, primarily driven by the reasons stated above with respect to EBITDA, as well as amortization and depreciation.

MS Fram operating profit for the nine months ended September 30, 2014 increased by NOK 36.5 million, or 89.6%, to NOK 77.2 million from NOK 40.7 million in the nine months ended September 30, 2013, primarily attributable to the reasons stated above with respect to EBITDA, as well as depreciation.

Spitsbergen Travel operating profit for the nine months ended September 30, 2014 increased by NOK 6.0 million, or 24.7%, to NOK 30.1 million from NOK 24.1 million in the nine months ended September 30, 2013, principally due to the reasons stated above with respect to EBITDA.

Other business operating loss for the nine months ended September 30, 2014 increased by NOK 1.1 million, or 4.7%, to NOK 24.0 million from NOK 22.9 million in the nine months ended September 30, 2013, primarily due to the reasons stated above with respect to EBITDA.

Finance Expenses—Net Finance expenses—net from continuing operations for the nine months ended September 30, 2014 decreased by NOK 20.0 million, or 11.3%, to NOK 156.0 million from NOK 176.0 million in the nine months ended September 30, 2013.

Finance expense for the nine months ended September 30, 2014 decreased by NOK 37.4 million, or 15.4%, to NOK 206.0 million from NOK 243.4 million in the nine months ended September 30, 2013, principally as a result of a decrease in our interest expense due to the repayment of NOK 422.6 million of existing indebtedness on bank borrowings, including the repayment of loans under our former revolving credit facility, drawings under our short-term seasonal credit facility, repayments of the facility in connection with our Fast Ferries Business that we sold in March 2014 and repayments of our Local Line Facilities, in the nine months ended September 30, 2014. We also experienced a decrease in

94 realized and unrealized gross losses of NOK 16.9 million, related to the translation of monetary assets and liabilities in foreign currency to our functional currency, which is the Norwegian kroner.

The finance expense was partially offset by finance income of NOK 67.3 million in the nine months ended September 30, 2013 and NOK 49.9 million in the nine months ended September 30, 2014, representing a decrease of NOK 17.4 million, or 25.9%. Such decrease in finance income was primarily due to a decrease in realized and unrealized gross gains of NOK 20.2 million, related to the translation of monetary assets and liabilities in foreign currency to our functional currency, which is the Norwegian kroner, in the nine months ended September 30, 2014.

Share of Profit/(Loss) of Associates Share of profit of associates from continuing operations for the nine months ended September 30, 2014 decreased by NOK 0.2 million, to NOK 0.4 million from NOK 0.6 million in the nine months ended September 30, 2013.

Income Tax Expense from Continuing Operations Income tax expense from continuing operations for the nine months ended September 30, 2014 increased by NOK 6.6 million, or 28.7%, to NOK 29.7 million from NOK 23.1 million in the nine months ended September 30, 2013, which was mainly driven by an increase in our profits before income tax.

Profit/(Loss) for the Period from Continuing Operations As a result of the factors discussed above, profit from continuing operations for the nine months ended September 30, 2014 increased by NOK 99.0 million, or 71.9%, to NOK 236.6 million from NOK 137.6 million in the nine months ended September 30, 2013.

Comparison of the Year Ended December 31, 2013 with the Year Ended December 31, 2012 The financial information for the year ended December 31, 2012 discussed below has been derived from the comparative information for 2012 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The Bus Business was classified as a discontinued operation in the financial statements for the year ended December 31, 2013 with comparative information for 2012 restated.

Total Revenues Our total revenues from continuing operations for the year ended December 31, 2013 increased by NOK 43.0 million, or 1.3% to NOK 3,305.6 million from NOK 3,262.6 million in year ended December 31, 2012, as a result of a slight increase in our Hurtigruten Norwegian Coast revenues and a more significant increase in our MS Fram and Spitsbergen Travel revenues.

Hurtigruten Norwegian Coast total revenues for the year ended December 31, 2013 increased by NOK 14.0 million, or 0.5% to NOK 2,847.4 million from NOK 2,833.3 million in year ended December 31, 2012, primarily driven by higher revenues resulting from an increase of NOK 139.8 million or 22.6% in our contractual revenues to NOK 758.6 million in 2013 from NOK 618.8 million in 2012. This was mainly due to a one-off reversal of a revenue charge of NOK 108.4 million, which was recognized in connection with the Former Coastal Service Contract in September 2012, and which did not recur in 2013. This overall increase in revenue was partially offset by a decline in operating revenues, which decreased by NOK 125.8 million or 5.7% to NOK 2,088.7 million in 2013 from NOK 2,214.6 million in 2012. This decrease in operating revenues was principally a result of a decline in Gross ticket revenues of NOK 106.1 million due to a 4.7% decrease in PCNs. Gross ticket revenues decreased in 2013 compared to 2012, principally as a result of a decrease in the value of the Norwegian kroner relative to the U.S. dollar and pound sterling. The decrease in PCNs was mainly due to releasing marketing materials later than scheduled in the season, which had an adverse impact on our revenues in the second calendar quarter. Although we subsequently recovered some of the lost PCNs by launching several campaigns for late bookings in the third and fourth calendar quarter, the recovery was not sufficient to offset the overall decrease in 2013.

95 MS Fram total revenues for the year ended December 31, 2013 increased by NOK 19.7 million, or 7.2%, to NOK 294.9 million from NOK 275.2 million in year ended December 31, 2012, primarily attributable to higher Gross ticket revenues per PCN. PCNs remained relatively stable in 2013 compared to 2012. The increase in Gross ticket revenues was partially attributable to the receipt of additional charter revenue as a result of chartering MS Fram to conduct select voyages to Antarctica during the fourth quarter of 2013, which generated higher revenues compared to the revenues otherwise generated by our sale of individual tickets during this season.

Spitsbergen Travel total revenues for the year ended December 31, 2013 increased by NOK 7.0 million, or 4.2%, to NOK 172.5 million from NOK 165.5 million in year ended December 31, 2012, principally due to increased occupancy and increased RevPAR, as well as increased sales of activities, expeditions, food and beverages as a result of increased traffic for both group travel and individual visitors. Expanded flight capacity to Svalbard was also a key driver underlying the increase in visitors to the archipelago in 2013 compared to 2012.

Other business total revenues for the year ended December 31, 2013 decreased by NOK 3.7 million, or 31.7%, to NOK 7.9 million from NOK 11.6 million in year ended December 31, 2012, primarily due to charter revenue received in 2012 but not 2013, from leasing MS Nordstjernen under a short-term contract in 2012. We subsequently sold MS Nordstjernen in October 2012 and therefore such revenues did not recur in 2013.

Payroll Costs Payroll costs from continuing operations for the year ended December 31, 2013 decreased by NOK 22.6 million, or 2.7%, to NOK 806.3 million from NOK 828.9 million in year ended December 31, 2012, primarily due to a decrease in personnel costs with respect to our Hurtigruten Norwegian Coast segment as a result of establishing a crewing company in Kirkenes, which resulted in lower payroll taxes, as well as the introduction of measures to more efficiently manage staffing of onboard crew and personnel during non-peak seasons, and the resulting decrease in our payroll costs was also driven by a reduction in headcount as part of the implementation of our Efficiency Improvement Program. The decrease in our payroll costs was also due to the decrease in costs related to our short-term charter contract for MS Nordstjernen in 2012, which we subsequently sold in October 2012. In addition, we incurred certain one-off crew costs while MS Nordlys was out of operation for a period during 2012, which did not recur in 2013.

Other Operating Costs Our other operating costs from continuing operations for the year ended December 31, 2012 and 2013 are set forth below:

Year Ended Year Ended December 31, 2012 % Change December 31, 2013 (NOK thousands, except as otherwise indicated) Other Operating Costs: Cost of goods sold ...... 572,363 (12.7) 499,684 Operating costs ...... 1,100,009 3.1 1,134,313 Sales and administrative costs ...... 329,735 (7.6) 304,651 Total ...... 2,002,106 (3.2) 1,938,648

Other operating costs from continuing operations for the year ended December 31, 2013 decreased by NOK 63.5 million, or 3.2%, to NOK 1,938.6 million from NOK 2,002.1 million in year ended December 31, 2012. Such decrease was mainly driven by lower cost of goods and other variable operating costs due to a decrease in PCNs for our Hurtigruten Norwegian Coast segment, as well as costs savings resulting from our Efficiency Improvement Program.

Depreciation, Amortization and Impairment Losses Depreciation, amortization and impairment losses from continuing operations for the year ended December 31, 2013 decreased by NOK 69.8 million, or 18.4%, to NOK 308.9 million from NOK 378.7 million in the year ended December 31, 2012. Such decrease is principally due to the

96 reversal of an impairment loss of NOK 78.1 million with respect to MS Fram to reflect its expected fair value as of December 31, 2013. The reversal was based on a value-in-use calculation for MS Fram and reflected improved earnings and an increase in pre-bookings in 2013 compared to 2012. This decrease was also due to a reversal of an impairment charge in 2013 with respect to the disposal of our Fast Ferries Business.

Other Gains—Net Other gains—net from continuing operations for the year ended December 31, 2013 increased by NOK 5.9 million, or 168.7%, to NOK 9.4 million from NOK 3.5 million in year ended December 31, 2012, primarily due to the disposal of two properties in Narvik as part of our Efficiency Improvement Program in 2013 compared to the disposal of one property in Stokmarknes in 2012.

EBITDA Our EBITDA from continuing operations for the year ended December 31, 2013 increased by NOK 135.0 million, or 31.0%, to NOK 570.1 million from NOK 435.0 million in the year ended December 31, 2012, primarily due to increased revenues from our Hurtigruten Norwegian Coast, MS Fram and Spitsbergen Travel segments in combination with costs savings resulting from our Efficiency Improvement Program, as well as lower variable costs due to a decrease in PCNs for our Hurtigruten Norwegian Coast segment.

Hurtigruten Norwegian Coast EBITDA for the year ended December 31, 2013 increased by NOK 83.8 million, or 22.4%, to NOK 457.6 million from NOK 373.8 million in the year ended December 31, 2012, primarily due to lower variable costs due to a decrease in PCNs and costs savings resulting from our Efficiency Improvement Program, as well as an increase in contractual revenues under our Coastal Service Contract.

MS Fram EBITDA for the year ended December 31, 2013 increased by NOK 35.6 million, or 87.2%, to NOK 76.4 million from NOK 40.8 million in the year ended December 31, 2012, primarily due to higher Gross ticket revenues per PCN, mainly attributable to the receipt of additional charter revenue as a result of chartering MS Fram to conduct select voyages to Antarctica during the fourth quarter of 2013, which generated higher revenues compared to the revenues otherwise generated by our sale of individual tickets during this season.

Spitsbergen Travel EBITDA for the year ended December 31, 2013 increased by NOK 7.4 million, or 43.1%, to NOK 24.5 million from NOK 17.1 million in the year ended December 31, 2012, primarily due to increased volumes with respect to both group travel and individual visitors, as well as with higher sales from excursions and activities as well as food and beverages.

Other business EBITDA for the year ended December 31, 2013 increased by NOK 8.3 million, or 252.5%, to NOK 11.6 million from NOK 3.2 million in the year ended December 31, 2012, primarily due to a gain on the disposal of two properties in Narvik.

EBITDA Margin Our EBITDA margin from continuing operations for the year ended December 31, 2013 increased by 3.9 percentage points to 17.2% from 13.3% in year ended December 31, 2012.

Hurtigruten Norwegian Coast EBITDA margin for the year ended December 31, 2013 increased by 2.9 percentage points to 16.1% from 13.2% in year ended December 31, 2012.

MS Fram EBITDA margin for the year ended December 31, 2013 increased by 11.1 percentage points to 25.9% from 14.8% in year ended December 31, 2012.

Spitsbergen Travel EBITDA margin for the year ended December 31, 2013 increased by 3.9 percentage points to 14.2% from 10.3% in year ended December 31, 2012.

Other business EBITDA margin for the year ended December 31, 2013 increased by 117.9 percentage points to 146.2% from 28.3% in year ended December 31, 2012.

Operating Profit Operating profit from continuing operations for the year ended December 31, 2013 increased by NOK 204.8 million to NOK 261.2 million from NOK 56.4 million in year ended December 31, 2012, primarily due to the reasons stated above with respect to EBITDA.

97 Hurtigruten Norwegian Coast operating profit for the year ended December 31, 2013 increased by NOK 70.8 million, or 96.1%, to NOK 144.4 million from NOK 73.6 million in year ended December 31, 2012, primarily driven by the reasons stated above with respect to EBITDA.

MS Fram operating profit for the year ended December 31, 2013 increased by NOK 112.1 million to NOK 132.5 million from NOK 20.4 million in year ended December 31, 2012, primarily attributable to the reasons stated above with respect to EBITDA. The increase was also due to the reversal of an impairment loss of NOK 78.1 million with respect to MS Fram to reflect its expected fair value as of December 31, 2013.

Spitsbergen Travel operating profit for the year ended December 31, 2013 increased by NOK 8.2 million, or 143.6%, to NOK 13.9 million from NOK 5.7 million in year ended December 31, 2012, principally due to the reasons stated above with respect to EBITDA.

Other business operating loss for the year ended December 31, 2013 was NOK 29.6 million compared to NOK 43.4 million in year ended December 31, 2012, primarily due to the reasons stated above with respect to EBITDA.

Finance Expenses—Net Finance expenses—net from continuing operations for the year ended December 31, 2013 increased by NOK 10.5 million, or 4.8%, to NOK 231.1 million from NOK 220.6 million in year ended December 31, 2012.

Finance expense for the year ended December 31, 2013 decreased by NOK 30.1 million, or 8.6%, to NOK 320.6 million from NOK 350.7 million in year ended December 31, 2012, principally as a result of a decrease in our interest expense due to the repayment of NOK 389.2 million of existing indebtedness on bank borrowings and additional repayments with respect to indebtedness of the SPEs in the year ended December 31, 2013. Our finance expense also decreased due to a decrease in realized and unrealized gross losses of NOK 12.9 million, related to the translation of monetary assets and liabilities in foreign currency to our functional currency, which is the Norwegian kroner.

Finance income for the year ended December 31, 2013 decreased by NOK 40.6 million, or 31.2% to NOK 89.5 million from NOK 130.1 million for year ended December 31, 2012. Such decrease in finance income was mainly driven by a one-off gain of NOK 18.4 million in 2012 as a result of the sale of shares in Aurland Ressursutvikling AS, which did not recur in 2013. In addition, the decrease was a result of a decrease in realized and unrealized gross gains of NOK 24.7 million, related to the translation of monetary assets and liabilities in foreign currency to our functional currency, which is the Norwegian kroner.

Share of Profit/(Loss) of Associates Share of profit of associates from continuing operations for the year ended December 31, 2013 was NOK 10.8 million compared to a loss of NOK 2.1 million in year ended December 31, 2012, primarily as a result of the sale of our office building in Tromsø that was sold in December 2013 and was owned by ANS Havnebygningen, in which we had a 50% ownership interest.

Income Tax Expense from Continuing Operations Income tax expense from continuing operations for the year ended December 31, 2013 decreased by NOK 19.8 million, or 83.5%, to NOK 3.9 million from NOK 23.7 million in year ended December 31, 2012, which was driven by a combination of factors, including the provision of various intercompany services by our Norwegian subsidiaries to our German and United Kingdom subsidiaries, which reduced our overall income tax expense.

Profit/(Loss) for the Period from Continuing Operations As a result of the factors discussed above, profit for the year was NOK 37.0 million in the year ended December 31, 2013 compared to a loss of NOK 190.1 million in year ended December 31, 2012.

98 Comparison of the Year Ended December 31, 2012 with the Year Ended December 31, 2011 The financial information for the year ended December 31, 2012 discussed below has been derived from the comparative information for 2012 included in the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2013. The Bus Business was classified as a discontinued operation in the financial statements for the year ended December 31, 2013 with comparative information for 2012 restated. However, the Bus Business was accounted for as a continuing operation in the 2011 financial information set forth in the comparison below since the financial information for the year ended December 31, 2011 discussed below has been derived from the audited consolidated financial statements of Hurtigruten and its subsidiaries as of and for the year ended December 31, 2012 and was never restated to exclude the Bus Business. In addition, the Charter Business was classified as a discontinued operation in the financial statements for the year ended December 31, 2012 with comparative information for 2011 restated.

Total Revenues Our total revenues from continuing operations for the year ended December 31, 2012 decreased by NOK 6.4 million, or 0.2%, to NOK 3,262.6 million from NOK 3,269.0 million in year ended December 31, 2011, primarily due to the reclassification of our Bus Business from a continuing operation in 2011 to a discontinued operation in 2012, which was partially offset by increased revenues from the Coastal Service Contract in comparison to our Former Coastal Service Contract.

Hurtigruten Norwegian Coast total revenues for the year ended December 31, 2012 increased by NOK 384.7 million, or 15.7%, to NOK 2,833.3 million from NOK 2,448.6 million in year ended December 31, 2011, which was primarily driven by an increase in our contractual revenues. Our contractual revenues increased by NOK 80.4 million, or 14.9% to NOK 618.8 million in 2012 from NOK 538.3 million in 2011, primarily as a result of the increase in fees payable under our Coastal Service Contract in 2012 compared to the fees payable under the Former Coastal Service Contract in 2011. In addition, our operating revenues also increased in the year ended December 31, 2012, primarily as a result of higher Gross ticket revenues per PCN.

MS Fram total revenues for the year ended December 31, 2012 decreased by NOK 4.2 million, or 1.5%, to NOK 275.2 million from NOK 279.4 million in year ended December 31, 2011, primarily attributable to a decline in PCNs from our voyages in Greenland and our Antarctic voyages in the first quarter of 2013.

Spitsbergen Travel total revenues for the year ended December 31, 2012 increased by NOK 27.7 million, or 20.1%, to NOK 165.5 million from NOK 137.8 million in year ended December 31, 2011, primarily due to the receipt of charter revenue as a result of leasing MS Nordstjernen under a short-term contract in 2012.

Other business total revenues for the year ended December 31, 2012 decreased by NOK 402.5 million, or 97.2%, to NOK 11.6 million from NOK 414.1 million in year ended December 31, 2011, primarily due to reduced revenue from our Bus Business, which was reclassified from a continued operation in 2011 to a discontinued operation in 2012.

Payroll Costs Payroll costs for the year ended December 31, 2012 decreased by NOK 112.6 million, or 11.9%, to NOK 828.9 million from NOK 941.5 million in year ended December 31, 2011, primarily due to reduced costs from our Bus Business, which was reclassified from a continued operation in 2011 to a discontinued operation in 2012, partially offset by increased crew costs onboard our ships and increased payroll costs with respect to our onshore employees due to switching our pension scheme from a defined benefit scheme to a defined contribution scheme in 2011.

99 Other Operating Costs Our other operating costs from continuing operations for the year ended December 31, 2011 and 2012 are set forth below:

Year Ended Year Ended December 31, 2011 % Change December 31, 2012 (NOK thousands, except as otherwise indicated) Other Operating Costs: Cost of goods sold ...... 553,970 3.3 572,363 Operating costs ...... 1,143,601 (3.8) 1,100,009 Sales and administrative costs ...... 331,645 (0.1) 329,735 Total ...... 2,029,216 (1.3) 2,002,106

Other operating costs from continuing operations for the year ended December 31, 2012 decreased by NOK 27.1 million, or 1.3%, to NOK 2,002.1 million from NOK 2,029.2 million in year ended December 31, 2011. Such decrease was mainly driven by reduced costs from our Bus Business, which we reclassified from a continued operation in 2011 to a discontinued operation in 2012. Such decrease in operating costs was partially offset by a significant increase in bunker fuel costs following increased oil prices, which were partially hedged at such time.

Depreciation, Amortization and Impairment Losses Depreciation, amortization and impairment losses from continuing operations for the year ended December 31, 2012 decreased by NOK 44.1 million, or 10.4%, to NOK 378.7 million from NOK 422.8 million in year ended December 31, 2011, primarily as a result of reduced depreciation and an impairment loss with respect to our Bus Business, which was reclassified from a continuing operation in 2011 to a discontinued operation in 2012, partly offset by a significantly higher impairment loss with respect to MS Nordlys recorded in 2011, as compared to 2012.

We had impairment losses of NOK 31.9 million in the year ended December 31, 2012 compared to NOK 89.2 million in the year ended December 31, 2011. In 2012, we incurred an impairment loss in an aggregate amount of NOK 17.7 million in connection with our Fast Ferries Business, which was held for sale. In addition, in 2012 we recorded a further impairment loss of NOK 4.6 million with respect to damage to MS Nordlys as a result of a fire in 2011. In 2011, we recorded a goodwill impairment of NOK 49.6 million with respect to our Bus Business and an impairment loss of NOK 38.6 million with respect to MS Nordlys.

Other Gains—Net Other gains—net from continuing operations for the year ended December 31, 2012 decreased by NOK 79.8 million, or 95.8%, to NOK 3.5 million from NOK 83.3 million in year ended December 31, 2011, primarily due to a gain from the sale of a property with respect to our Bus Business in July 2011, which did not recur in 2012.

EBITDA Our EBITDA from continuing operations for the year ended December 31, 2012 increased by NOK 53.5 million, or 14.0%, to NOK 435.0 million from NOK 381.6 million in the year ended December 31, 2011, primarily due to increased contractual revenues from our fees under the new Coastal Service Contract compared to our fees under the Former Coastal Service Contract, which was partially offset by an increase in bunker fuel costs due to increased oil prices, and a general increase in operating cruise costs. In addition, we recorded a gain from the sale of our former subsidiary AS TIRB, which operated our Bus Business, in July 2011, which did not recur in 2012.

Hurtigruten Norwegian Coast EBITDA for the year ended December 31, 2012 increased by NOK 169.7 million, or 83.2%, to NOK 373.8 million from NOK 204.1 million in the year ended December 31, 2011, primarily due to increased contractual revenues from our fees under the new Coastal Service Contract compared to our fees under the Former Coastal Service Contract, which

100 was partly offset by an increase in bunker fuel costs due to increased oil prices, and a general increase in operating cruise costs.

MS Fram EBITDA for the year ended December 31, 2012 decreased by NOK 4.6 million, or 10.6%, to NOK 40.8 million from NOK 45.6 million in the year ended December 31, 2011, primarily attributable to a decline in PCNs from our voyages in Greenland and our Antarctic voyages in the first quarter of 2013.

Spitsbergen Travel EBITDA for the year ended December 31, 2012 increased by NOK 12.7 million, or 287.7%, to NOK 17.1 million from NOK 4.4 million in the year ended December 31, 2011, primarily due to the receipt of charter revenue as a result of leasing MS Nordstjernen under a short-term contract in 2012 together with a reduction in operating costs for this segment.

Other business EBITDA for the year ended December 31, 2012 decreased by NOK 124.1 million, or 97.4%, to NOK 3.2 million from NOK 127.4 million in the year ended December 31, 2011, primarily due to reduced profit from our Bus Business, which was reclassified from a continuing operation in 2011 to a discontinued operation in 2012.

EBITDA Margin Our EBITDA margin from continuing operations for the year ended December 31, 2012 increased by 1.7 percentage points, to 13.3% from 11.7% in year ended December 31, 2011.

Hurtigruten Norwegian Coast EBITDA margin for the year ended December 31, 2012 increased by 4.9 percentage points, to 13.2% from 8.3% in year ended December 31, 2011.

MS Fram EBITDA margin for the year ended December 31, 2012 decreased by 1.5 percentage points, to 14.8% from 16.3% in year ended December 31, 2011.

Spitsbergen Travel EBITDA margin for the year ended December 31, 2012 increased by 7.1 percentage points, to 10.3% from 3.2% in year ended December 31, 2011.

Other business EBITDA margin for the year ended December 31, 2012 decreased by 2.4 percentage points, to 28.3% from 30.8% in year ended December 31, 2011.

Operating Profit/(Loss) Operating profit/(loss) from continuing operations for the year ended December 31, 2012 increased by NOK 97.6 million to a gain of NOK 56.4 million from a loss of NOK 41.2 million in year ended December 31, 2011, primarily due to the reasons stated above with respect to EBITDA.

Hurtigruten Norwegian Coast operating profit for the year ended December 31, 2012 increased by NOK 157.2 million to a gain of NOK 73.6 million from a loss of NOK 83.6 million in year ended December 31, 2011, primarily driven by the reasons stated above with respect to EBITDA.

MS Fram operating profit for the year ended December 31, 2012 decreased by NOK 6.1 million, or 23.0%, to NOK 20.4 million from NOK 26.5 million in year ended December 31, 2011, primarily attributable to the reasons stated above with respect to EBITDA.

Spitsbergen Travel operating profit for the year ended December 31, 2012 increased by NOK 12.4 million to a gain of NOK 5.7 million from a loss of NOK 6.7 million in year ended December 31, 2011, principally due to the reasons stated above with respect to EBITDA.

Other business operating profit for the year ended December 31, 2012 decreased by NOK 65.9 million to a loss of NOK 43.4 million from a gain of NOK 22.5 million in year ended December 31, 2011 primarily due to the reasons stated above with respect to EBITDA, together with higher impairment losses on the Fast Ferries Business in the year ended December 31, 2012.

Finance Expenses—Net Finance expenses—net from continuing operations for the year ended December 31, 2012 increased by NOK 53.7 million, or 32.2%, to NOK 220.6 million from NOK 166.9 million in year ended December 31, 2011.

101 Finance expense for the year ended December 31, 2012 increased by NOK 112.0 million, or 46.9%, to NOK 350.7 million from NOK 238.7 million in year ended December 31, 2011, principally as a result of refinancing our then existing debt in 2012 with a revolving credit facility and the Former Notes, which resulted in higher interest expense. Such finance expense was partially offset by finance income of NOK 71.8 million in year ended December 31, 2011 and NOK 130.1 million in the year ended December 31, 2012, representing an increase of NOK 58.3 million, or 81.3%, which increase was primarily due to gain on the sale of our shares in Aurland Ressursutvikling AS and an increase in realized and unrealized gross gains related to the translation of monetary assets and liabilities in foreign currency to our functional currency, which is the Norwegian kroner.

Share of Profit/(Loss) of Associates

Share of profit/(loss) of associates from continuing operations for the year ended December 31, 2012 decreased by NOK 4.5 million to a loss of NOK 2.1 million from a gain of NOK 2.4 million in year ended December 31, 2011, primarily as a result of reduced earnings at Funn IT AS, in which we had a 50% ownership interest.

Income Tax Expense/(Income) from Continuing Operations

Income tax expense from continuing operations for the year ended December 31, 2012 was NOK 23.7 million compared to income of NOK 109.1 million in year ended December 31, 2011, which change was mainly driven by certain deferred income tax assets relating to a tax loss carry forwards we had in the year ended December 31, 2011 and which did not recur in the year ended December 31, 2012.

Profit/(Loss) for the Period from Continuing Operations

As a result of the factors discussed above, loss for the year ended December 31, 2012 increased by NOK 94.4 million or 96.5% to NOK 190.1 million from NOK 96.7 million in year ended December 31, 2011.

Liquidity and Capital Resources

Our primary source of liquidity is cash flows from operating activities. Our primary cash needs relate to capital expenditures for dry-dockings, maintenance and refurbishment of our ships, meeting debt service requirements and funding our working capital requirements. The most significant components of our working capital are cash and short-term deposits, trade and other receivables, trade and other payables and other current liabilities. We believe that, based on our current level of operations, as reflected in our results of operations for the nine months ended September 30, 2014, these sources of liquidity, together with existing available borrowings under our Revolving Credit Facility, will be sufficient to fund our operations, capital expenditures and debt service obligations for at least the next twelve months.

The following table summarizes our consolidated statements of cash flows for the periods indicated. Please refer to the relevant statements of cash flows included elsewhere in this offering memorandum for more detailed information.

Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Net cash flows from/(used in) operating activities ...... 38,467 574,287 463,814 445,363 534,678 Net cash flows from/(used in) investing activities ...... 101,851 (118,717) (233,569) (133,384) (62,815) Net cash flows from/(used in) financing activities ...... (213,581) (408,943) (312,559) (318,909) (467,235) Cash, cash equivalents and bank overdrafts ...... 426,461 465,794 383,216 467,178 390,578

102 Net Cash Flows from Operating Activities The following table reconciles our profit/loss to net cash flows from/(used in) operating activities for the periods indicated:

Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Profit/(loss) before income tax from continuing and discontinued operations ...... (152,692) (312,470) 26,092 162,306 281,319 Adjustments for: Depreciation, amortization and impairment from continuing and discontinued business ...... 457,992 415,805 341,223 302,598 307,844 Other (losses)/gains—net ...... (83,320) (28,164) (9,484) (7,423) (12,368) Unrealized foreign exchange (losses)/ gains ...... (258) (9,124) 7,246 5,769 (674) Unrealized (losses)/gains on derivatives held for trading purposes ...... — — 16,959 19,954 (8,671) Dividends received ...... (1,378) (259) (1,416) (617) (724) Interest expenses ...... 206,001 252,787 231,178 175,822 153,703 Share of profit/(loss) of associates from continuing and discontinued operations ...... (2,352) 2,343 (7,847) (646) (352) Impairment of non-current shares ...... — — 627 225 — Difference between expensed pension and payments ...... (67,897) 24,549(a) 26,146 25,404 (1,706) Change in working capital: Inventories ...... (1,778) (2,352) (9,338) 2,644 (6,993) Trade and other receivables ...... (127,183) 509,041 152,898 35,053 25,457 Financial assets at fair value through profit or loss ...... (7,538) 7,293 (4,428) (8,111) 5,096 Trade and other payables ...... 34,464 (48,563) (65,592) (85,432) (48,317) Interest paid ...... (208,883) (229,218) (230,187) (174,431) (154,761) Income tax paid ...... (6,712) (7,382) (10,264) (7,751) (4,177) Net cash flows from/(used in) operating activities ...... 38,467 574,287 463,814 445,363 534,678

(a) A restatement in the amount of NOK 2.1 million occurred in 2013 in respect of 2012 figures due to the implementation of the amendments to IAS 19, Employee Benefits.

The principal factors affecting our net cash flows from operating activities in the periods presented are the change in our operating profit, the impact of changes in our working capital, the amount of interest paid and the movement with respect to our income taxes.

A number of our operating costs are fixed; however certain of our costs, such as costs of goods, vary on a seasonal basis in line with our peak season, which typically occurs in the second and third calendar quarters of each year. We also collect a portion of pre-booked revenues at the time of booking and our peak booking periods are from September to October and January to February. However, the amount of revenues collected in advance is relatively small as the amount payable generally accounts for approximately 10 to 30% of the total cost of the trip booked. Therefore, due to the seasonal nature of our business, we tend to have positive working capital during our peak season in the second and third calendar quarters, and negative working capital during the first and fourth calendar quarters (our non-peak period) when we collect less revenues. Our operating costs are

103 generally lower during our non-peak season. However, in addition to our fixed costs, the phasing of certain of our expenses do not track the seasonality of our revenues. For example, we typically schedule dry-docking of our ships during the winter season, and this has a negative effect on our working capital during our non-peak period.

Net cash flows from operating activities increased by NOK 89.3 million, or 20.1%, to NOK 534.7 million in the nine months ended September 30, 2014 compared to NOK 445.4 million in the nine months ended September 30, 2013 reflecting higher operating results in the period, mainly driven by higher PCNs and Gross ticket revenues per PCN in our Hurtigruten Norwegian Coast and MS Fram segments, as well as a decrease in the outflow for working capital and a decrease in interest paid. The decrease in the outflow for working capital was in part due to reduced trade and other payables.

Net cash flows from operating activities decreased by NOK 110.5 million, or 19.2%, to NOK 463.8 million in the year ended December 31, 2013 compared to NOK 574.3 million in the year ended December 31, 2012. This decrease was primarily attributable to a decrease in the change in trade and other receivables due to the receipt of cash in an amount of NOK 221.0 million in 2012 in connection with the settlement of a dispute in connection with our Charter Business regarding the payment of our fees by our counterparty and a payment of NOK 87.6 million that we received under the Former Coastal Service Contract. Such payment was non-recurring and partially offset by increased operating profit in the year ended December 31, 2013 compared to the prior year.

Net cash flows from operating activities increased by NOK 535.8 million to NOK 574.3 million in the year ended December 31, 2012 compared to NOK 38.5 million in the year ended December 31, 2011. This increase is primarily attributable to the non-recurring payment received in 2012 related to the settlement of the dispute in connection with our Charter Business, partially offset by the reversal of certain contractual revenues following the ruling by ESA in relation to the Former Coastal Service Contract.

Net Cash Flows from/(used in) Investing Activities

The following table summarizes the principal components of our net cash flows from investing activities for the period indicated:

Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Purchases of property, plant and equipment (“PPE”) ...... (188,140) (271,222) (252,920) (160,015) (116,869) Proceeds from insurance settlement ...... — 119,000 14,162 — — Net proceeds from sale of PPE ...... 164,740 48,897 27,701 24,487 66,710 Purchases of intangible assets ...... (56,004) (104,457) (43,993) (33,265) (35,036) Loans to associates ...... — — (1,500) — 225 Purchase of shares and shareholdings Net proceeds from sale of shares and sale of business ...... 89,005 23,910 15,504 15,450 (28,097) Dividends received ...... 1,378 259 1,416 617 24,956 Change in restricted funds ...... 90,871 64,997 6,063 19,343 25,295 Net cash flows from / (used in) investing activities ...... 101,851 (118,717) (233,569) (133,384) (62,815)

Cash flows from investing activities principally relates to capital expenditures on property, plant and equipment and intangible assets, less any proceeds from the sale or disposal of property, plant and equipment and shares and shareholdings.

Net cash flows used in investing activities decreased by NOK 70.6 million, or 52.9%, to NOK 62.8 million in the nine months ended September 30, 2014 compared to NOK 133.4 million in the nine months ended September 30, 2013, mainly as a result of proceeds we received from the sale of

104 our Fast Ferries Business in March 2014 and the sale of a property used by our Bus Business in May 2014, as well as a decrease in our capital expenditures. Our capital expenditures decreased by NOK 41.4 million, or 21.4% from NOK 193.3 million in the nine months ended September 30, 2013 to NOK 151.9 million in the nine months ended September 30, 2014 due to a decline in expenses with respect to scheduled dry-docking of our ships during this period.

Net cash flows used in investing activities increased by NOK 114.9 million, or 96.8%, to NOK 233.6 million in the year ended December 31, 2013 compared to NOK 118.7 million in the year ended December 31, 2012, principally as a result of an increase in our capital expenditures (excluding insurance proceeds discussed below), primarily related to upgrading our IT systems supporting the management of capacity inventory and pricing. In addition, in 2012, we released the cash collateral relating to the Former Coastal Service Contract and replaced this security with insurance sureties under the Coastal Service Contract. The resulting increase in net cash flow from investing activities in 2012 was not repeated in 2013. Our capital expenditures (including proceeds received in 2012 from the insurance settlement with respect to damage to MS Nordlys as a result of a fire in 2011) decreased by NOK 78.8 million from NOK 375.7 million in the year ended December 31, 2012 to NOK 296.9 million in the year ended December 31, 2013.

Net cash flows used in investing activities was NOK 118.7 million in the year ended December 31, 2012 compared to net cash flows from investing activities of NOK 101.9 million in the year ended December 31, 2011, primarily due to amounts received for the sale of the shares in Nor Lines AS and real properties in relation to the operation of our Bus Business during 2011. Our capital expenditures increased by NOK 131.5 million, or 53.9%, from NOK 244.1 million in the year ended December 31, 2011 to NOK 375.7 million in the year ended December 31, 2012. The increase in 2012 was primarily due to an increase in refurbishment costs relating to the damage to MS Nordlys as a result of the fire and project costs related to the implementation of the Fidelio cruise management system used in relation to inventory management, onboard bookings and sales.

We expect our capital expenditures in 2015 and 2016 to be in the range of NOK 180 million to NOK 200 million per year. Such capital expenditure will be incurred primarily in relation to ongoing maintenance of our fleet including minor upgrades to public areas; work on the engines with respect to MS Finnmarken and MS Trollfjord and the propulsion systems with respect to MS Nordnorge and MS Kong Harald as part of our NOx saving projects in 2015; further development of our IT infrastructure, including our e-commerce channel; and the upgrade of our Spitsbergen hotels. In addition to this amount, in 2015 we expect to incur capital expenditures in the range of approximately NOK 80 million to NOK 90 million with respect to the 305 Classification rebuild, depending on the agreement we reach with the NMD. However, we expect that such capital expenditures would increase to an aggregate amount of approximately NOK 118 million and could require extended dry-docking times for each ship, possibly during our peak season, if the NMD does not agree to our alternative modifications and we are required to undertake modifications on all our single compartment ships that are similar in scope to the modifications we made to MS Richard With.

Net Cash Flows (used in) Financing Activities

The following table summarizes the principal components of our net cash flows used in financing activities for the periods indicated:

Nine Nine Year Ended Year Ended Year Ended Months Ended Months Ended December 31, December 31, December 31, September 30, September 30, 2011 2012 2013 2013 2014 (NOK thousands) Proceeds from borrowings ...... 5,000 3,040,525 150,000 — — Repayments of borrowings ...... (218,581) (3,403,573) (389,159) (318,909) (422,613) Dividends paid to non-controlling interests ...... — (45,895) (73,400) — (44,622) Net cash flows from/(used in) financing activities ...... (213,581) (408,943) (312,559) (318,909) (467,235)

Cash used in financing activities reflects the interest paid on, and repayment of, our previously outstanding debt, including our senior facility, convertible notes and revolving credit facility, as well as

105 the indebtedness of the limited partners in the SPEs in 2011 and 2012 and our Former Financing Agreements in 2012 and 2013 and the nine months ended September 30, 2013 and 2014. Dividends paid to non-controlling interests relates to dividends payable to the minority shareholder of our former subsidiary AS TIRB and to the limited partners in the SPEs. The increase of NOK 148.3 million in net cash flow used in financing activities in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 was due to NOK 44.6 million of dividends paid to non-controlling interests and the increase of NOK 103.7 million in repayments of borrowings. Net cash flow used in financing activities in the year ended December 31, 2013, decreased by NOK 96.3 million compared to the year ended December 31, 2012, due to a number of factors, including borrowings under a short- term seasonal credit in the fourth quarter of 2013, which were subsequently repaid in June 2014 and an increase in dividends paid to non-controlling interests in 2013 compared to 2012. We repaid a total of NOK 389.2 million in loans during the year ended December 31, 2013. Proceeds from borrowings for this period reflects our drawings under a short-term seasonal credit facility in the fourth quarter of 2013. Dividends paid to non-controlling interests relates to dividends payable to the limited partners in the SPEs in the year ended December 31, 2013. Net cash flow used in financing activities in the year ended December 31, 2012 increased by NOK 195.4 million compared to the year ended December 31, 2011. In 2011, there were no scheduled repayments due under our former senior facility and revolving credit facility or under the debt agreements of the limited partners in the SPEs. The increase in net cash flow used in financing activities in the year ended December 31, 2012 was primarily driven by the increase in repayments under our debt agreements following our refinancing in March 2012, under which we were required to pay installments on a regular amortization schedule. Dividends paid to non-controlling interests relates to dividends payable to the minority shareholder of our former subsidiary AS TIRB and to the limited partners in Kirberg Shipping KS in the year ended December 31, 2012.

Off-balance Sheet Arrangements We do not have any material off-balance sheet arrangements.

Contractual Obligations The following table summarizes certain categories of our contractual obligations owed to third-parties by period as at September 30, 2014, on an as adjusted basis after giving effect to the Hurtigruten Acquisition Transaction and the Refinancing Transactions: Payments Due By Period Less than 1-5 After Total 1 Year Years 5 Years (NOK equivalent in millions) Notes offered hereby(1) ...... 3,692.9 — — 3,692.9 Local Line Facilities ...... 25.6 2.8 10.3 12.5 Bareboat charter obligations(2) ...... 150.2 69.7 80.5 — Capital expenditure commitments(3) ...... 81.2 31.7 49.5 — Total ...... 3,949.9 104.2 140.3 3,705.4

(1) Represents €455.0 million in aggregate principal amount of Notes offered hereby. (2) Bareboat charter obligations consist of charter hire agreements relating to our bareboat charter lease agreements with Kirberg Shipping KS and Kystruten KS for the MS Richard With and MS Nordlys, respectively. (3) Capital expenditure commitments are contractual commitments for dry-dockings, work on the engines with respect to MS Finnmarken and MS Trollfjord and the propulsion systems with respect to MS Nordnorge and MS Kong Harald as part of our NOx saving projects in 2015 and capital expenditures with respect to the development of our IT infrastructure. A portion of the capital expenditure commitments related to our NOx saving projects in 2015 may be reimbursed by the Confederation of Norwegian Enterprise’s NOx fund. See “—Net Cash Flows from Investing Activities.”

Other contractual obligations not included in the table above include outstanding purchase contracts with product suppliers and payments due to trade creditors.

Capital Resources We are highly leveraged and have significant debt service obligations. As of September 30, 2014, on an as adjusted basis after giving effect to the Hurtigruten Acquisition Transactions and the Refinancing Transactions, we would have had total debt of NOK 4,005.2 million and €34.2 million available under our Revolving Credit Facility.

106 The Indenture governing the Notes and the Revolving Credit Facility Agreement contain covenants significantly restricting our ability to, among other things: • incur or guarantee additional indebtedness and issue certain preferred stock of the Company’s restricted subsidiaries; • create or incur certain liens; • make certain payments, including dividends or other distributions, with respect to the shares of the Company or its restricted subsidiaries; • prepay or redeem subordinated debt or equity; • make certain investments; • create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to and on the transfer of assets to the Company or its restricted subsidiaries; • sell, lease or transfer certain assets including stock of restricted subsidiaries; • engage in certain transactions with affiliates; • enter into unrelated businesses or engage in prohibited activities; • consolidate or merge with other entities; • impair the security interests granted for the benefit of the holders of the Notes; and • amend certain documents.

Each of the covenants is subject to a number of important exceptions and qualifications. These covenants could limit our ability to finance our future operations and capital needs. The Revolving Credit Facility also contains a covenant, that is tested quarterly, on a rolling twelve months basis, requiring us to maintain EBITDA of not less than NOK 400 million in respect of each relevant period ending on or after June 30, 2015.

Our principal source of liquidity on an ongoing basis is our operating cash flow. Our ability to generate cash depends on our future operating performance, which in turn depends to some extent on general economic, financial, industry and other factors, many of which are beyond our control, as well as the other factors discussed in “Risk Factors.”

In addition, we have access to a Revolving Credit Facility to service our working capital and general corporate needs. The availability of this facility is dependent upon conditions, including ongoing compliance with a maintenance covenant tested quarterly, as mentioned above and as described further under “Description of Certain Indebtedness—Revolving Credit Facility Agreement.”

Although we believe that our expected cash flows from operations, together with available borrowings under the Revolving Credit Facility, will be adequate to meet our anticipated liquidity and debt service needs, we cannot assure you that our business will generate sufficient cash flows from operations or that future debt and equity financing will be available to us in an amount sufficient to enable us to pay our debts, including the Notes, when due or to fund our other liquidity needs.

We believe that the potential risks relating to our liquidity include: • a reduction in operating cash flows due to a lowering of net income from our operations, which could be due to a deterioration in our performance or a downturn in our industry as a whole; • adverse working capital developments; and • exposure to increased interest rates in relation to our borrowings which bear interest at a variable rate, including our Revolving Credit Facility and the Local Line Facilities.

If our future cash flows from operations and other capital resources (including borrowings under the Revolving Credit Facility) are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to: • reduce or delay our business activities and capital expenditure; • sell assets;

107 • reduce or delay any planned acquisitions;

• obtain additional debt or equity capital; or

• restructure or refinance all or a portion of our debt, including the Notes, on or before maturity.

We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of our existing debt, including the Notes and the Revolving Credit Facility limit our ability to pursue any of these alternatives, as may the terms of any future debt.

We anticipate that our high leverage will continue for the foreseeable future. Our high level of debt may have important negative consequences for you. For more information, see the section entitled “Risk Factors— Risks Related to Our Financial Profile—Our substantial leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Notes Guarantees.” See also “Description of Other Indebtedness” and “Description of the Notes.”

Quantitative and Qualitative Disclosure of Market Risks

We are exposed to various market risks as part of our business activities, which are intrinsically linked to our business dealings. See “Risk Factors.” We handle these risks using a risk management system, which forms an integral part of our business process and is a key factor in business decisions. It aims to identify potential risks in connection with our business activities at an early stage, to monitor them and to take suitable measures to limit them. The key elements of the risk management system include the planning system, internal reporting and integrated risk reporting.

The main risk areas that may have a material influence on our business performance as well as our financial position and results of operations are set out below. In addition, we also have exposure to bunker fuel price fluctuations, see “Risk Factors—Risks Relating to Our Business and Operations— Increases in bunker fuel prices or other operating costs may adversely affect our operations, financial condition and liquidity.”

Currency Risks

Currency risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency which is not the entity’s functional currency. We operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro, the U.S. dollar and the pound sterling. Our principal foreign currency exposures arise from the sale of tickets in foreign currencies and from our capitalized assets and liabilities that are denominated in foreign currencies. In addition, our fuel costs are quoted in U.S. dollars.

We have some investments in foreign subsidiaries whose net assets are exposed to currency translation risk.

We terminated our former foreign currency exchange swaps as part of the Hurtigruten Acquisition Transactions at a cost of NOK 134.0 million, resulting in an impairment charge of NOK 82.5 million. Following the issuance of the Notes, which will be denominated in euros, we intend to use the euros we generate to service our obligations under the Notes and the Revolving Credit Facility, to the extent it is drawn, and therefore we do not currently intend to hedge foreign exchange risks relating to such currency.

Interest Rate Risks

Our interest rate risk relates to non-current loans and borrowings issued at variable rates, which expose us to cash flow interest rate risk. In connection with the refinancing of our long-term debt in March 2012, we adopted a new strategy for hedging interest rates, whereby 40-60% of our total floating rate debt was hedged. We entered into non-amortizing interest rate swaps corresponding to 58% of our interest bearing debt as of the date of refinancing of such indebtedness in March 2012. We terminated our former interest rate swaps as part of the Hurtigruten Acquisition Transactions at a cost of NOK 82.0 million, resulting in an impairment charge of NOK 73.7 million. Since our interest expense

108 with respect to the Notes will be fixed, we do not intend to enter into any interest rate swaps with respect to the Notes.

Liquidity risk Our business is seasonal in nature, with 63.3% of total revenues for the twelve months ended September 30, 2014 earned in the second and third calendar quarters of 2014. The first and fourth calendar quarters are weaker periods in revenue and working capital terms. We have a cash pool arrangement that ensures that part of the Group’s liquidity is available to Hurtigruten and also optimizes our availability of cash for the Group and flexibility in cash management.

Credit Risk Our credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to end users and agents, including outstanding receivables and committed transactions. To assess this risk, we conduct diligence to assess the credit quality of our new agents, taking into account their financial position, past experience and other factors.

Sales to our end users are settled in cash or with recognized credit cards. Sales to external agents are made either through prepayment/credit cards or through invoicing. We have procedures to ensure that credit is only extended to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The credit ratings of banks with which we have investments of cash surpluses, borrowings or derivative financial instruments are reviewed by management. Each bank is assessed individually with reference to the credit it holds and deposit limits are set, which are approved by the board and reconsidered if the Fitch, Moody’s or S&P credit rating falls below an “A” rating.

In addition, receivable balances are monitored on an ongoing basis and a provision is made for estimated irrecoverable amounts.

Selected Critical Accounting Policies The preparation of the consolidated financial statements requires management to make estimates and assumptions, based on historical experience and various other factors, including expectations of future events that are believed to be reasonable under the circumstances, and that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Our consolidated financial statements included elsewhere in this offering memorandum comply with IFRS as at the date of such financial statements. In the future, the adoption of new or revised standards or interpretations relating to the presentation of net assets, our financial position or results of operations may have a material effect on our future consolidated financial statements. For example, new standards relating to the accounting for leases may result in significant shifts between “administrative expenses,” “depreciation and amortization expenses” and “financial expenses” in our consolidated income statement as well as between “property, plant and equipment” and “financial liabilities” in our consolidated balance sheet.

We make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within our consolidated financial statements are discussed below.

Estimated Impairment of Goodwill We perform annual tests to assess potential impairment of goodwill. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. These calculations require the use of estimates to establish the required rate of return for the period, cash flows and the growth factor of the cash flows.

We do not apply a general growth factor beyond expected inflation for cash flows when testing goodwill for impairment. The required rate of return used to discount cash flows is calculated as a weighted average of the return on equity and the required rate of return on interest-bearing debt. This calculation utilizes an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

109 Ships Useful Economic Lifetime

The level of depreciation depends on the estimated economic lifetime of the ships. These estimates are based on history and experience relating to our ships. The estimates are reviewed at regular intervals. A change in the estimate will affect depreciation in future periods.

Estimated Impairment of Ships Where there are indications of such, we test whether ships have suffered any impairment. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. Ships are considered within their segment as a collective cash-generating unit. These calculations require the use of estimates for the required rate of return for the period, cash flows and the growth factor of the cash flows.

We do not use a general growth factor beyond expected inflation for cash flows when testing ships for impairment. The required rate of return used to discount cash flows is calculated as a weighted average return on equity and the required rate of return on interest-bearing debt. This calculation utilizes an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

Fair Value of Derivatives and Other Financial Instruments The fair value of financial instruments not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques and information from the contract counterparty. We use our judgment to select a variety of methods and to make assumptions based mainly on market conditions existing at each balance sheet date.

Pension Assumptions We operate both defined contribution and defined benefit pension schemes. Measurement of pension costs and pension obligations for defined benefit plans involves the application of a number of assumptions and estimates, including relating to the discount rate, future salary levels, expected employee turnover rate, the return on plan assets, annual pension increases, expected adjustments to Grunnbeløpet (the National Insurance Scheme “basis amount”) and demographic factors.

We have pension obligations in Norway and Germany. The discount rate used to calculate pension obligations in Norway is based on 15-year corporate covered bonds, with an additional provision taking into account relevant terms to maturity for the pension obligations. Covered bonds are primarily issued by credit institutions to listed Norwegian commercial and savings banks and are secured against loans directly owned by the credit institution. The discount rate we applied for our pension obligations in Norway as of December 31, 2013 was 4.1%. For obligations in Germany, the discount rate is determined based on the interest rates on high- quality corporate bonds denominated in the currency in which the benefits will be paid, with terms to maturity approximating to the term of the related pension obligation. The discount rate applied in Germany as of December 31, 2013 was 3.1%.

Changes in pension assumptions will affect the pension obligations and pension cost for the period. Pension obligations are significantly affected by changes in the discount rate, life expectancy and expected salary and pension adjustments.

Income Tax Income tax is calculated based on results in the individual Group companies. We are subject to income taxes in several jurisdictions. Calculation of the period’s tax expense and distribution of tax payable and deferred income tax for the period requires a discretionary assessment of complex tax regulations in several countries. Consequently, there is uncertainty as to the final tax liability for many transactions and calculations. Where there is a discrepancy between the final tax outcome and the amounts that were initially recognized, this discrepancy will impact the recognized tax expense and provision for deferred income tax assets and liabilities in the period in which such determination is

110 made. Please refer to note 18 in the financial statements for the year ended December 31, 2013 for more information about income tax.

Deferred Income Tax Assets The basis for recognizing deferred income tax assets is based mainly on the utilization of tax loss carry forwards against our future taxable income. The assessment is made based on management’s estimates of our future profits and includes an assessment of our future strategy, economic developments in the markets in which we operate and future tax regimes and our ability to deliver in line with our expectations. In preparing our consolidated financial statements, management has found the future taxable income to be sufficient to utilize the recognized deferred income tax assets. Please refer to note 18 the year ended December 31, 2013 for more information on deferred income tax assets recognized in the balance sheet.

Disputes, Claims and Regulatory Requirements We are a party to, or affected by, disputes, claims and regulatory requirements the outcome of which is to a large extent unknown. Management considers the probability of negative outcomes and opportunities for estimating any loss in the event of such negative outcomes. Unexpected events or changes to factors taken into consideration that have an impact on specific conditions, may result in increases or reductions to provisions. Such changes may also necessitate the recognition of provisions for conditions that were previously assessed as an unlikely outcome or for which it was previously not possible to make reliable estimates.

Changes in Accounting Policies For information regarding recent and pending changes to our accounting policies, see note 2.4 to our financial statements as of and for the year ended December 31, 2013 as well as note 1 to our condensed consolidated interim financial statements as of and for the nine months ended September 30, 2014 included elsewhere in this offering memorandum.

111 INDUSTRY

In this offering memorandum, we rely on and refer to information regarding our business and the markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this offering memorandum were obtained from internal data, market research, governmental and other publicly available information sources, independent industry publications and reports prepared by industry consultants. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts, to the extent quoted or referred to herein, are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness. See “Industry and Market Data.”

In addition, certain statements below are based on our own information, insights, subjective opinions or internal estimates, and not on any third party or independent source; these statements contain words such as “we estimate,” “we expect,” “we believe” or “in our view, “and as such do not purport to cite to or summarize any third party or independent source and should not be so read. See “Industry and Market Data.”

This “Industry” section contains projections and forward-looking information. Such projections and forward-looking information are not guarantees of future performance, and actual events, facts and circumstances could differ materially from the projections and forward-looking information contained herein. Numerous factors could cause or contribute to such differences. See “Forward-looking Statements” and “Risk factors.”

Our Markets We provide travel related services in both the market for tourism to Norway and Polar regions of the Arctic and Antarctic oceans and the market for local transportation in Norway.

Tourism accounted for 75% of our revenues in the twelve months ended September 30, 2014, primarily in the form of cruise-based tourism. This included total revenues from our Hurtigruten Norwegian Coast segment that were generated from travelers taking trips on our regular daily service along the Norwegian coast from Bergen to Kirkenes. Through our MS Fram segment, we also offer expedition-based cruises to Polar regions in both the Arctic and Antarctic Oceans. Our Spitsbergen Travel segment provides land-based tourism services (including operation of hotels, restaurants and organization of tourist activities) in Spitsbergen, located on the Svalbard archipelago in the Arctic Ocean, situated north of the Norwegian mainland.

Port-to-port transportation also represents an important part of the business conducted through our Hurtigruten Norwegian Coast segment, with our regular northbound and southbound service along the Norwegian coast from Bergen to Kirkenes, constituting a key piece of local transportation infrastructure, especially for remote areas of northern Norway. The public service element of our Hurtigruten Norwegian Coast segment is supported by the fixed fees we receive under the Coastal Service Contract as well as additional revenues from the transportation of local travelers and goods.

Tourism Market Dynamics We believe that the cruise tourism market and the Polar tourism market demonstrate the following attractive characteristics, especially in the sub-segments of the markets on which we focus:

Structural global growth in the cruise market reflecting growing penetration with continued scope for upside The cruise tourism market is experiencing growth due to increased demand for cruise vacations. According to CLIA, passenger volumes in the global cruise market grew at a CAGR of 5.5% from the year ended December 31, 2008 to the year ended December 31, 2013, compared to a CAGR of 3.2% for the tourism industry as a whole during the same period, according to tourist arrivals data from the World Tourism Organization.

112 Europe, which accounted for over 89% of our coastal voyage guests in the twelve months ended September 30, 2014, is seeing stronger rates of growth. CLIA has estimated that the number of cruise passengers originating from Europe grew at a CAGR of 7.4% from the year ended December 31, 2008 to the year ended December 31, 2013.

Growth in the cruise market reflects the increasing penetration of cruises in the tourism market, especially in Europe. Based on cruise passenger data from CLIA and population data from the United Nations, the proportion of the European population taking a cruise holiday more than doubled between the year ended December 31, 2003 and the year ended December 31, 2013, from 0.4% to 0.9%. We believe the potential for future growth can be illustrated by comparison to the North American market, where the proportion of the population taking a cruise holiday increased by approximately 30% from 1.9% to 2.5% between the year ended December 31, 2003 and the year ended December 31, 2013, according to the same sources.

Activity-based tourism increasing in popularity globally According to the Adventure Travel Trade Association, the tourism industry has experienced a growing demand for “adventure travel,” including nature-based tourism and authentic local experiences. The Adventure Travel Trade Association estimates that the market for adventure travel generated approximately $263 billion in the Americas and Europe during the year ended December 31, 2012, with an average annual growth rate of 65% between the years end December 31, 2009 and December 31, 2012. Natural beauty was the most important factor (followed by available activities) for adventure travelers in choosing their latest destination, according to a study by the Adventure Travel Trade Association. We believe that demand for activity-based tourism will increase as the cruise industry matures and travelers seek new and differentiated experiences.

Growing awareness of Norway and Polar regions as holiday destinations Passenger volumes for Norway as reported by Cruise Norway, have outgrown passenger volumes for the overall cruise market as reported by CLIA. Cruise Norway has reported growth in foreign cruise passengers to Norway at a CAGR of 10.2% between the years ended December 31, 2008 and December 31, 2013. We believe that recent growth in our MS Fram and Spitsbergen Travel segments reflects a similar trend for travel to Polar regions. We believe that, increasing access to these regions is also a key factor in increasing demand; for instance, an increase in the number of flights to the Svalbard archipelago in recent years has driven growth in our Spitsbergen Travel segment.

Slowing industry capacity growth creating reduced pricing pressure According to Cruise Industry News, cruise fleet capacity in Europe has increased at a CAGR of 6.4% between the years ended December 31, 2008 and December 31, 2013 and is forecast to increase at a CAGR of 4.3% between the years ended December 31, 2013 and December 31, 2017 based on existing ship orders, known ship withdrawals and known deployment changes. This trend of lower capacity growth could help create a more favorable demand-supply balance for cruise operators and result in upward pricing pressure.

In recent years, demand has grown at a faster rate than capacity for Europe as a whole, with passenger cruise volumes in Europe increasing at a CAGR of 7.4% between the years ended December 31, 2008 and December 31, 2013, according to CLIA.

Resilient demand reflecting the nature of the customer base We believe that demand in our industry is relatively resilient during economic downturns. CLIA estimated that, following the recent global economic downturn, the number of passengers going on European cruises increased by 12.8%, 12.5%, 8.5%, 1.3% and 2.7% in the years ended December 31, 2009, 2010, 2011, 2012, 2013, respectively. We believe that this trend demonstrates the effects of improving penetration in stimulating demand, even during periods of adverse economic conditions.

Competitive Positioning There is no publicly available data measuring the market share of individual operators in the cruise industry in Norway. We have, accordingly, estimated our market share of the cruise industry

113 along the Western Coast of Norway on the basis of publicly available information regarding port arrivals in Norway, and our internal data relating to PCNs for our own operations. We have used information relating to port arrivals for 2013 prepared by Norwegian local port authorities and Cruise Norway to estimate the total number of cruise nights and have indicated our approximate market share based on our actual PCNs for the year ended December 31, 2013, as a percentage of total estimated passenger cruise nights for all cruise ships in 2013. Our calculation of total estimated passenger cruise nights for all cruise ships is based on the port arrivals data for ports in Norway in 2013, assuming that each ship arriving at a port had an occupancy rate of 100%. The berth data used to calculate the occupancy rate of each ship is based on publicly available information with respect to each relevant cruise operator. We also assumed that each ship made one port stop per day, which therefore corresponds to one cruise night. Our calculation of passenger cruise nights for our own ships is based on internal data.

We believe we are the leading cruise brand in Norway, with an estimated 18.2% share of passenger cruise nights for cruises visiting Norway in the year ended December 31, 2013 and an estimated 24.2% share of passenger cruise nights for cruises visiting the west coast of Norway above Bergen in the same period, according to our internal estimates. Our market share is particularly strong during the winter season, when the majority of our competitors reallocate ships to other regions or dry-docking, while we continue to operate under our regular daily schedule with our Northern lights themed winter offering.

Other leading cruise brands in the Norwegian coastal region include Costa Crociere, AIDA, P&O, MSC and Royal Caribbean Cruises. Several of these brands are owned by the same operators. For instance, Costa Crociere, AIDA and P&O are all owned by Carnival. While we believe we are the largest individual cruise brand in Norway based on our estimated share of passenger cruise nights, we believe we are the second largest cruise operator in Norway, after Carnival, when the market shares of all brands affiliated with each operator are aggregated.

We believe that we have a highly differentiated offering based on providing a trip to distinct locations of natural beauty with the feel of an authentic expedition that allows our guests to get close to nature. We believe that we target a niche set of customers, many of whom would be unlikely to go on a competitor cruise, even if we were not an option. Cruise Industry News categorizes us as part of the “niche” cruise market and estimates we had a 81.6% share of that segment of the cruise market in Europe in 2014. The majority of other players in the “niche” cruise segment operate outside of Norway.

We believe our distinct fleet of smaller ships differentiates us from our competitors (many of whom use large cruise ships with significantly more berths than our ships), by providing a more intimate feel to the voyage and by allowing us to maneuver closer to the coast. We believe our offering is further stimulated by our distinct heritage, our continued role as a local transportation provider, which creates opportunities for our cruise guests to interact with local culture, and our itinerary, which allows guests to visit remote regions in the far north of Norway. We believe it would be challenging for other operators to replicate these features, given the cost and lead time required for investment in a new fleet of smaller ships and the importance of Hurtigruten’ s distinct brand and heritage to its offering.

Within our MS Fram segment, we face a different competitive environment, consisting mostly of smaller, specialized operators with a limited number of ships such as Companie du Ponant, G-Adventure, Hapag Lloyd, Lindblad Expeditions, Quark Expeditions and Silver Sea Expeditions. Large cruise operators tend not to operate in these regions due to the need for smaller specialized ships to accommodate landings. In practice, we believe that there is significant variety in the style of cruise offered by us compared to our competitors. We believe that we offer adventure travel at a premium price point, which gives us a differentiated positioning from competitors.

We believe we are also a leading provider of tourist services in Spitsbergen, as we own three hotels on the Svalbard archipelago.

114 Local Transportation Market Dynamics We believe that the local transportation market offers the following attractive characteristic:

Essential service for remote regions of Norway with few alternative transportation options We believe, our Hurtigruten Norwegian Coast segment offers transportation services that are often the only convenient, public transportation link between southern Norway and the remote regions in the far north. As such, we believe we are an essential transportation infrastructure provider for a number of communities.

Competitive Positioning We are currently the only operator providing local maritime transportation services both northbound and southbound along the Norwegian coast all the way from Kirkenes to Bergen, and we are the exclusive provider of services under the Coastal Service Contract with the Norwegian government. We believe that local maritime transportation services along our entire route would be less practicable without compensation from the government, and we accordingly do not anticipate material competition from any new market entrants providing comparable services for the duration of the Coastal Service Contact.

After expiration of the Coastal Service Contract, we expect that the government will organize a public tender for a new transportation services provider along the Norwegian coast. Based on the current terms of our Coastal Service Contract, we believe a full fleet of 11 ships would be required to continue to provide the services stipulated by the current contract, and few industry players would have such a fleet, or our long established history and brand recognition.

115 BUSINESS

Overview We are a cruise line, local transport, cargo shipment and exploration tourism operator centered around the Norwegian coast as well as Polar waters. We have been providing our services along the Norwegian coast since 1893. Originally established to provide transportation services linking the south of Norway to the inaccessible parts of the north, the earliest Hurtigruten ships transported cargo and local passengers between ports. As a result of our long-established presence, public service origins and association with a long and naturally distinct coast line, we believe that we are one of Norway’s most recognized brands.

Today, our business operations are divided into three product segments: Hurtigruten Norwegian Coast, MS Fram and Spitsbergen Travel.

Our Hurtigruten Norwegian Coast segment is our largest segment, accounting for 84.9% of our total revenues from continuing operations in the twelve months ended September 30, 2014. 11 of our 12 ships provide services along the Norwegian coast under this segment, making 34 northbound and 33 southbound daily departures from ports located between Bergen in the south and Kirkenes in the north. Freight and passenger transport remain an important part of our offering, which includes basic transport infrastructure, carrying cargo and local residents across shorter distances, and for which we receive a fixed fee from the Norwegian government each year under the Coastal Service Contract. We leverage this vessel schedule and infrastructure to offer distinct expedition based services and activities to leisure seekers through our cruise voyage products. The ships that we use to provide local transport services and cargo shipments are also used to offer exploration based voyages for leisure travelers, including a high proportion of international guests. Unlike the traditional cruise ships of the Mediterranean or the Caribbean, our ships operate as both “working” ships and “cruise” ships, all while showcasing Norwegian nature and local culture, which we believe is a differentiated offering compared to traditional cruise operators. For the twelve months ended September 30, 2014, we generated NOK 744.5 million, or 20.8% of our total revenues, under the Coastal Service Contract.

Our second largest segment, the MS Fram segment, accounted for 9.7% of our total revenues from continuing operations in the twelve months ended September 30, 2014 and consists of our MS Fram explorer ship, which takes our guests on distinct Polar voyages year-round in Antarctic, Spitsbergen and Greenland waters.

Our Spitsbergen Travel segment comprises our activities in Spitsbergen, where we operate three hotels as well as an equipment store and a host of tourist activities. This segment accounted for 5.5% of our total revenues from continuing operations in the twelve months ended September 30, 2014.

Our Other segment comprises a number of non-core operations which have been discontinued. Therefore, we do not describe our Other segment in this offering memorandum; however, unless otherwise indicated, our historical financial data includes the results of our Other segment for the periods presented in this offering memorandum before such non-core operations were discontinued.

Our Strengths Positive industry fundamentals in a growing market Our business benefits from favorable underlying market drivers, including growth in the tourism market and the increased proportion of cruises in the overall tourism market, particularly in Europe, as well as the increased popularity of Norway as a cruise destination. According to CLIA, passenger volumes in the global cruise market grew at a CAGR of 5.5% per year from the year ended December 31, 2008 to the year ended December 31, 2013, compared to a CAGR of 3.2% for the tourism industry as a whole during the same period, according to tourist arrivals data from the World Tourism Organization. The number of cruise passengers originating from Europe grew at a CAGR of 7.4% from the year ended December 31, 2008 to the year ended December 31, 2013, according to CLIA. The higher growth in the cruise market reflects the increasing proportion of cruises in the tourism market, especially in Europe. Based on cruise passenger data from CLIA and population data from the

116 United Nations, the proportion of the European population taking a cruise holiday more than doubled between the year ended December 31, 2003 and the year ended December 31, 2013, from 0.4% to 0.9%. We believe the potential for future growth can be illustrated by comparison to the North American market, where the proportion of the population taking a cruise holiday is higher than in Europe and is continuing to grow. In North America, the proportion of the population taking a cruise holiday increased by approximately 30% from 1.9% to 2.5% between the year ended December 31, 2003 and the year ended December 31, 2013, based on cruise passenger data from CLIA and population data from the United Nations.

The increased popularity of Norway as a cruise destination is evidenced by the increased number of foreign cruise passengers visiting Norway, which grew at a CAGR of 10.2% from the year ended December 31, 2008 to the year ended December 31, 2013, according to Cruise Norway. We believe that this growth has been stimulated by the increased awareness of the Norwegian coast as a place of natural beauty, and therefore as an attractive destination for nature-based tourism and exploration.

As a long-established Norwegian transport infrastructure provider, we have been able to leverage our operating model to offer a distinct expedition experience and a wide range of land-based excursions and activities. We have maintained the public service component of our offering, while developing our offering of exploration based voyages on our smaller ships that offer more direct access to nature and interaction with local culture.

We believe that the nature of our offering differentiates us from conventional cruise operators and attracts travelers seeking adventure nature-based vacations and local cultural experiences, which we believe is an attractive segment of the market.

In addition, over 70% of our guests in the twelve months ended September 30, 2014, were 50 years of age or older. As a result, we are positioned to benefit from the demographic trend of aging populations, particularly in Western Europe, which is a key customer market for us in terms of our existing client base.

Differentiated competitive positioning and high barriers to entry We believe that our product offering is distinct from the offering provided by large cruise operators and is designed to target a customer segment not fully served by other operators. Rather than offering cruises to classic tourist spots on a “floating hotel” style cruise liner, we aim to provide our guests with an opportunity to visit areas of natural beauty and to experience local culture through “expedition” style voyages to more remote, natural Polar regions. Our main Hurtigruten Norwegian Coast offerings attempt to appeal to guests who prefer to be “closer to nature” and who value “authentic” Norwegian experiences over the experiences provided by conventional cruises. Our smaller ships can be more easily maneuvered and therefore allow us to get closer to the coast and the sites of natural beauty that our guests seek, and our itinerary of 34 port calls throughout Norway provides guests with an opportunity to interact with local culture and enjoy a wide range of land-based excursions and activities, including in remote parts of northern Norway.

In addition to our Norwegian coastal voyage offerings, our MS Fram segment offers the opportunity to travel on our purpose-built ship and participate in expeditions in remote Polar waters around Svalbard (an archipelago on the border of the Arctic Ocean and the Norwegian Sea), Greenland and Antarctica year-round. Our hotel operations in Svalbard offer guests opportunities to go dog-sledding, cross-country skiing, kayaking, snowmobiling, sample local foods and observe the Svalbard flora and fauna (including polar bears, walruses, seals and arctic birds). We believe these offerings appeal to our more adventurous guests, who are seeking to try new, exciting activities and experiences.

Our Hurtigruten brand, which the New York Times called “one of Norway’s treasured national symbols,” has been cultivated over our 120-year history and draws upon our Norwegian heritage, enhancing our credentials with customers seeking authentic Norwegian cruise experiences. We believe that our brand has high recognition in our key markets, such as the Nordic countries and Germany. We believe that, based on our strong brand recognition and authentic, adventurous product offering, a large proportion of our guests would not view a cruise with a large cruise operator as an alternative to our voyages.

117 Our competitive position is supported by high barriers to entry in the exploration and nature-based tourism markets, especially for cruises. We have invested a significant amount in our fleet of 12 small cruise ships, which are specially designed to serve our distinctive product offering. Any new entrant into our market, seeking to provide expedition and nature-based tourism services, would need to make substantial investments in similar small ships before it could compete with our product offering. Based on the current terms of our Coastal Service Contract, we believe a full fleet of 11 ships would be required to provide the services stipulated by the contract, and few industry players would have such a fleet, or our long established history and brand recognition.

Resilient revenues, EBITDA and cash flow generation Our Normalized total revenues and Normalized Adjusted EBITDA have increased over recent years, and we had Normalized total revenues of NOK 2,859.5 million, NOK 3,262.6 million and NOK 3,303.7 million in the years ended December 31, 2011, 2012 and 2013, respectively. In addition, we had Normalized Adjusted EBITDA of NOK 210.0 million, NOK 524.6 million and NOK 565.0 million in the years ended December 31, 2011, 2012 and 2013, respectively. In addition to benefiting from the underlying growth in the European and Norwegian cruise markets during this period, we believe that this resilience can be attributed to a number of factors, including the relative economic stability of the countries from which we draw most of our guests and the infrastructure-like qualities of the local transportation service provided under our Coastal Service Contract, under which we receive a fixed fee, regardless of passenger volumes, and which accounted for 20.8% of our Normalized total revenues for the twelve months ended September 30, 2014 and 11.4%, 19.0% and 23.0% of our Normalized total revenues for the years ended December 31, 2011, 2012 and 2013, respectively.

The following charts show the nationality of our guests per PCN and the age range of our guests per PCN in the twelve months ended September 30, 2014:

Nationality of our guests per PCN Age of our guests per PCN

Other, 9% > 80 yrs Netherlands, 6% < 40 yrs 3% 18%

France, 4% Germany, 32% 70-79 yrs Switzerland, 20% 4%

Swed/Den/Fin, 5% 40-49 yrs 10%

US, 6%

UK, 14% 50-59 yrs 60-69 yrs 19% Norway, 22% 27%

As illustrated above, the majority of our guests are 50 years of age or older and are based in a number of countries with generally strong economies, including Germany, Norway, the United Kingdom and the United States. As a result, we draw guests from a variety of countries and economies, and we are not reliant on any single economy to drive our business. In addition, the older demographic profile of our guests, who tend to be retired or semi-retired and have more stable spending power because of their fixed pensions and accumulated savings, means that our guests should tend to be less affected by periods of economic downturn.

We believe that our Hurtigruten Norwegian Coast segment was more resilient during the recent economic downturn compared to select large cruise operators with operations in Norway, based on publicly available information of such competitors. During the period from 2007 to 2010, this segment only experienced a decline in revenues excluding revenues from the Former Coastal Service Contract (“non-contractual revenues”) in one year. Specifically, non-contractual revenues generated by our Hurtigruten Norwegian Coast segment increased by 3.2% in 2008 compared to 2007, decreased by 8.0% in 2009 compared to 2008 and increased by 4.2% in 2010 compared to 2009. The decline in non-contractual revenues for our Hurtigruten Norwegian Coast segment in 2009 compared to 2008 is

118 attributable to a number of factors, including a 5% decrease in PCNs for our coastal voyage guests and a 10% decrease in PCNs for our port-to-port guests.

Our Hurtigruten Norwegian Coast operating profit before depreciation for the years ended December 31, 2008, 2009 and 2010 was NOK 227.7 million (resulting in a margin of 9.1% of Hurtigruten Norwegian Coast segment revenues), NOK 247.6 million (resulting in a margin of 10.8% of Hurtigruten Norwegian Coast segment revenues) and NOK 258.6 million (resulting in a margin of 10.9% of Hurtigruten Norwegian Coast segment revenues), respectively. Operating profit before depreciation for our Hurtigruten Norwegian Coast segment increased in the year ended December 31, 2009, despite a decline in revenue in that year, demonstrating resilience in this segment. Among other things, this was due to a significant reduction in certain operating costs in 2009, including a 5.1% decrease in payroll costs and an 11.7% decrease in certain other operating costs, including bunker fuel costs, which decreased during the recent economic downturn.

Since December 2012, we have been implementing a number of administrative and operational cost saving initiatives in connection with our Efficiency Improvement Program. Many of the measures we have implemented as part of the Efficiency Improvement Program have sought to streamline our operations and central functions in order to enhance our operational efficiency and profitability and to position us to achieve our growth strategies in the future. As a result, our Normalized total revenues and Normalized Adjusted EBITDA have consistently increased each year since 2011.

Revenue visibility

We accept bookings for our Hurtigruten Norwegian Coast and MS Fram segments up to 27 months in advance, and our Spitsbergen hotels accept reservations up to 30 months in advance. We typically require our guests to pay a non-refundable deposit ranging from 10% to 30% of the total amount payable at the time the booking is made. Our advanced customer bookings provide us with visibility into near term revenue across our business segments. Moreover, the payment of the non-refundable deposit reduces the risk of cancellation. The balance is typically payable 30 to 60 days in advance of the commencement of our product offering. In the twelve months ended September 30, 2014, 34.7% and 76.4% of our reservations for our Hurtigruten Norwegian Coast products and MS Fram products, respectively, were made six months or more in advance of the month of the departure date. As of December 31, 2014, our pre-bookings for the next twelve months in terms of PCNs for the Hurtigruten Norwegian Coast segment were 9.2% higher than our pre-bookings for the next twelve months for the Hurtigruten Norwegian Coast segment were as of December 31, 2013.

The following charts show, for each of our Hurtigruten Norwegian Coast and MS Fram segments, pre- bookings in terms of value for the next twelve months as of December 31, 2013 and December 31, 2014:

Hurtigruten Norwegian Coast MS Fram

1,200 1,169 300 290 +18.9% +16.6% Using exchange rates 1,150 Using exchange rates 275 as of December 31, 2014 1,100 as of December 31, 2014 1,050 250

1,000 +9.0% At constant currency +6.3% At constant currency 225 950 versus prior year versus prior year 244 900 1,003 1,067 200 265 850 800 175 Pre-bookings for the next Pre-bookings for the next Pre-bookings for the next Pre-bookings for the next twelve months as of twelve months as of twelve months as of twelve months as of December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014

Well invested and fit for purpose asset base

We own 10 of the 12 ships we operate. The ships in our fleet were primarily built from the 1990s onwards and according to the Valuation Report prepared by V.Ships, our 10 owned ships have a combined estimated market value of approximately €292 million to €311 million and a total estimated replacement value of €750 million to €820 million as of August 2014. See “Presentation of Financial and Other Information—Ship Valuation Data.” Our ships have between 10 and 35 years of working life

119 remaining, except for our smallest ship, MS Lofoten, which we expect to continue to operate for the duration of the Coastal Service Contract. Our fleet is suitable for Polar waters and our expedition-based activities and the number, size and range of capabilities of our purpose-built ships operating along the Norwegian coast are well- suited to our business objectives and distinct offering, including delivering the services we provide under the Coastal Service Contract, thus strengthening our position as the incumbent operator under such government contract. Our ship, MS Fram, is purpose-built, specially designed and fitted for expedition voyages. Furthermore, based on our occupancy rate of 62.3% for our Hurtigruten Norwegian Coast segment for the twelve months ended September 30, 2014, we have the potential to increase PCNs without incurring significant development capital expenditures. We also own the buildings and leasehold interests in the land with respect to our three hotels in Spitsbergen.

Qualified and experienced management team Our CEO, Daniel Skjeldam, and his team successfully began a transformation of our business in 2012, which has since continued. Mr. Skjeldam was recently recognized for his efforts and was awarded Best leader in the travel industry in the Norwegian Grand Travel Awards 2015. Amongst other initiatives, members of our current management team have devised and implemented our Efficiency Improvement Program, which we introduced in December 2012. Since his appointment in October 2012, Mr. Skjeldam has continued to develop our management team with the appointment of, among others, Magnus Wrahme, our Senior Vice President Global Sales, in April 2013, who was subsequently appointed as our Chief Commercial Officer in April 2014 and Svein Taklo, our Chief Operational Officer and Senior Vice President of Maritime Operations, who was appointed in May 2014. In addition, during 2013, a number of new divisional managers were appointed to drive implementation of our new strategy and Efficiency Improvement Program. Our seven-person senior management team has a combined experience of 106 years in the tourism and maritime transportation sector industries and has a well-balanced mix of strategic leadership and organizational development expertise, industry experience and financial management skills. Our senior management team is supported by a strong team of operational managers. Drawing upon substantial operational and managerial expertise from within the cruise sector and other leisure sectors, our management team has realigned our strategy to focus on cost discipline and brand differentiation, positioning us for growth in the expedition market going forward.

Our Strategy Our primary strategy is the profitable organic growth of our business, which we intend to achieve by focusing on the following strategic objectives:

Operational initiatives capturing substantial margin benefits Our Normalized Adjusted EBITDA has increased by 27.6% from NOK 524.6 million in the year ended December 31, 2012 to NOK 669.5 million in twelve months ended September 30, 2014. The ongoing implementation of our four-phase Efficiency Improvement Program since December 2012 has been a key driver underlying such increase. We have established a strong operational focus on cost control and have introduced a number of administrative and operational cost saving initiatives, which sought to streamline our operations and central functions in order to enhance our operational efficiency and profitability and to position us to be able to achieve our growth strategies in the future. For example, in order to reduce costs and drive margins in our key markets and regions, we have introduced a new cost-effective infrastructure by relocating our headquarters, centralizing various administrative functions, reorganizing our global sales and marketing offices and our Customer Reservation Call Center in Tallinn, divesting certain non-strategic assets and developing and upgrading our IT operating platforms. As a result of our Efficiency Improvement Program, our operational costs have declined substantially since 2012, and for the twelve months ended September 30, 2014, we achieved total efficiency improvements of NOK 96.5 million in connection with the Efficiency Improvement Program.

In December 2013, we commenced the implementation of several new cost saving measures as part of phase four of our Efficiency Improvement Program. These initiatives include improved procurement processes, as well as measures designed to enhance our bunker fuel efficiency. The new procurement processes involve the introduction of a purchasing framework designed to align

120 procurement contract pricing with prevalent, competitive market pricing for various procurement inputs. The bunker fuel efficiency measures primarily consist of cleaning the exterior of each of our ships to remove debris annually, which will reduce drag, as well as operating our ships at a more fuel efficient speed. In addition to the cost saving measures discussed above, we have also implemented a number of revenue generating measures including offering a wider selection of dining options including an à la carte menu in our restaurants, increasing the number of points of sale and suggesting room upgrades to passengers at the time of booking. Phase four of our Efficiency Improvement Program is expected to be fully implemented by mid-2015. We expect that the preliminary results of these initiatives will be reflected in our operating results for 2015 and the full effect will be reflected in our operating results for 2016.

Expand our customer base to drive revenue growth We carried approximately 84,765 coastal voyage guests (guests travelling more than five nights) in the twelve months ended September 30, 2014. We seek to increase occupancy rates by using our flexible pricing model to attract guests year round. A high proportion of our operating costs, particularly those which relate to the operation of our ships, are fixed. As a result, we are positioned to leverage our fixed cost base to increase profitability by increasing our utilization rates without a corresponding increase in our cost base. By optimizing excess capacity on board our ships, we can maximize our net revenues without substantial new investments. In recent years we have developed various seasonal concepts to complement our peak season theme, including, “Autumn Gold” in the fall, “Hunting the Light” in the winter and “Arctic Awakening” in the spring. We use such seasonal concepts to attract customers seeking a distinct travel and expedition experience that is only available during specific times of the year. Such specialty marketing campaigns and seasonal itineraries seek to expand our existing offering and to increase demand during non-peak seasons without incurring additional costs.

We also seek to expand the number of our guests through our marketing activities and to increase awareness of our distinct explorer based brand proposition. We are taking steps to achieve this by: • continuing to seek new guests in non-European geographies, where there is demand for exploration style activities, such as through our new sales and marketing office in Seattle, Washington, which services North America and which we opened in January 2014; • improving our marketing materials to appeal to customers, through emphasizing our explorer based brand proposition, the vast range of activities we offer and the distinct geographies in which we operate; and • strengthening our position as a key player in the Norwegian tourism market by working with local travel, trade and government agencies to develop Norwegian tourism and market the country internationally. We plan to continue working with local travel, trade and government agencies to increase the number of direct international flights to coastal destinations in Norway in order to encourage growth in the short-break market and to make our products along the Norwegian coast more easily accessible.

Enhance our product offering One of the key goals of our Efficiency Improvement Program has been to drive operational efficiencies in order to rationalize our expense base and also to prepare for future growth. We seek to enhance and expand our product offering and increase our number of guests through the following key initiatives: • continuing to use our explorer brand proposition and mindset, particularly with respect to our Hurtigruten Norwegian Coast business segment, in order to position our offerings in the niche Norwegian explorer leisure service industry. By marketing all of our voyages as explorer services, we intend to further distinguish ourselves from traditional cruise and hotel operators. We plan to achieve this by increasing the range of exploration and nature-based activities we offer; • continuing to use our longstanding Norwegian heritage and brand to align our offerings to reflect our Norwegian identity. For example, we intend to continue to serve local food and provide nature and history based lectures onboard our ships;

121 • adding new voyage and expedition itineraries to expand our product offering and encourage repeat business; • extending our existing operations to offer an extended range of expedition activities in new areas on an opportunistic basis. For example, we plan to introduce an expedition voyage exploring the area around Spitsbergen from June to August 2015, which combines a sea voyage with our existing hotel operations in order to expand our product offering and to attract customers through these new offerings; • further developing our land-based activities such as local food tours, bird watching, Lapland (Sami) cultural tours and visits to land-based sights, including glaciers, the North Cape and city tours, and experience and activity-based products in Spitsbergen by focusing on year-round activities and experiences; and • securing incremental revenue through add-on services and improving products and services offered onboard our ships to increase onboard revenues.

Further expansion of our e-commerce channels We aim to reach our customers through our various e-commerce channels, including our websites, mobile platforms, search engine marketing, social media accounts and email communications. We operate seven country-specific versions and one global version of our website, and we have become increasingly focused on digital sales and marketing in recent years. We use our website to update customers and potential customers on our latest product offerings and promotions, and we have significantly increased our traffic to our website through search engine optimization and search engine marketing.

Over the course of 2015, we intend to launch a program for digitizing and streamlining our commercial processes in order to increase sales as well as to reduce our sales and distribution costs. Our aim is to increase our overall online sales through self-service solutions, both for travel agents and guests that book directly with us. The first stage of this e-commerce upgrade is expected to become operational during the second half of 2015 and will include a new website designed to increase interaction with users as well as more inspirational content to attract guests, and more effective booking functions. The second stage will introduce other improvements, including personal user profiles for every guest linked with our customer relation management system, which will enable us to directly provide our customers with targeted marketing materials, and enhanced functionality for offering various supplemental packages and additional services before, during and after a voyage. We intend to introduce mobile and tablet applications as part of our digital offering and a function allowing our port-to-port guests to book more quickly.

History and Development The coastline between Bergen and Kirkenes is over 2,400 kilometers long, and prior to the 1890’s the communication between the south and north of Norway was limited, both on land and at sea. Maritime maps were unreliable, and there were only a few lighthouses established, especially in the north. It was essential for the Norwegian government to establish a safe trade and passenger route to link the southern and northern regions of Norway.

Established by Richard With, what is now known as Hurtigruten commenced its operations in 1893 by transporting mail, cargo, local passengers and international tourists along the Norwegian coast. To this day, our ships continue to carry cargo, but the proportion of passengers has steadily increased. We believe that for many locals, as well as being a means of transport, the ships are part of Norwegian tradition and culture. Historically, we established our operations based on public services through the transportation of cargo and provision of public transport. We have continued to provide such public services under our Coastal Service Contract and have used our geographic operations, ships and operating model to create what we believe is a distinct coastal voyage offering, by offering explorer and nature-based voyages to a largely international customer base. We continue to be a transport infrastructure provider, and we have expanded our operations to offer vacation and tourist services through our coastal voyage offering as part of our increasing focus on growing and developing our tourist based business.

122 A few years after commencing the Hurtigruten Norwegian Coast service in 1893, Richard With established an additional route from the North Cape to Spitsbergen, with the steam ship DS Lofoten. In 1896, he built Spitsbergen’s first hotel in the Advent Fjord, thus taking the first steps towards introducing tourism to the mining and hunting population of Spitsbergen. We now provide these tourism services through our Spitsbergen Travel segment, established in 1988.

In 2002, we entered the expedition segment by offering trips to Antarctica. In 2007, our new purpose-built expedition ship, MS Fram, was completed and embarked on its maiden voyage to Greenland.

In 2006, two shipping companies operating under the Hurtigruten brand, Ofotens og Vesterålens Dampskipsselskab and Troms Fylkes Dampskipsselskab, merged to become Hurtigruten ASA.

In 2008 and 2009, we implemented some initial measures aimed at reducing our operating costs. We integrated our sales office and commenced the process of corporate reorganization. We also divested most of our ferry and fast ferry operations, including a fleet of 45 smaller fast ferries in order to re-focus on our core business of exploration travel and coastal voyages.

In 2009, our shareholder Periscopus initially invested in Hurtigruten. This was followed by an investment by our shareholder Home Capital in 2011.

In 2012 and 2013, our new CEO, Daniel Skjeldam and his team implemented new cost efficiency measures through the introduction of our Efficiency Improvement Program. The program involved the continued disposition of non-core assets, including our Fast Ferries Business and Bus Business.

In December 2014, Hurtigruten and its subsidiaries were acquired by our current shareholders as part of the Hurtigruten Acquisition Transactions. Following the issuance of the Notes, Hurtigruten will be delisted from the Oslo Stock Exchange and will cease to be a publicly traded company. See “Summary—Recent Developments— The Hurtigruten Acquisition and the Hurtigruten Acquisition Transactions.”

Efficiency Improvement Program In December 2012, we initiated our four phase Efficiency Improvement Program at both the Group level and at our global sales and marketing offices. Our Efficiency Improvement Program is aimed at optimizing our organizational structure, on land and at sea, reducing operational and administrative costs, refining and standardizing our hotel and maritime operations, increasing onboard revenues and revitalizing our voyage offerings by improving the customer experience in order to attract more guests and to further differentiate our offering from our competitors’ offerings. The changes we have implemented relate to our overall organizational structure, with the main focus on our global sales organization, our 12-strong fleet of ships and capturing synergies through consolidation of our corporate headquarters.

We completed the implementation of phases one, two and three of our Efficiency Improvement Program by July 2014. We have commenced the implementation of phase four of our Efficiency Improvement Program and expect to complete that phase by mid-2015.

Phase one of our Efficiency Improvement Program commenced in December 2012 and was completed by July 2014.

The key initiatives under phase one included: • A new cost-effective organizational structure, including: • Establishing our new corporate center in Tromsø: In order to consolidate our corporate headquarters and centralize administrative functions, we closed our former head office in Narvik, which involved the termination or relocation of a total of 65 administrative employees. We sold our office in Narvik in March 2013 and closed our leased office in Tromsø in December 2013, which was sold by its owner, ANS Havnebygningen, in which we had a 50% ownership interest. We also entered into a new lease for our new corporate headquarters in Tromsø in September 2013.

123 • Centralization and downsizing of our land-based central functions and organization: As part of our goal to centralize administrative functions and introduce more streamlined processes, we reduced headcount and integrated certain administrative roles and functions between December 2012 and April 2013. • Divestment of non-strategic assets: We sold several non-strategic assets in 2013 and 2014. In addition to the sale of our former corporate offices in Narvik and Tromsø, we also sold a residential property we owned in Narvik in May 2013, our Fast Ferries Business in March 2014 and our Bus Business, in which we had a 71.3% ownership interest, in July 2014. • Optimizing the commercial hotel and maritime operations: We have optimized our hotel and maritime operations with a focus on increased onboard revenues, and by offering a more personal and professional standard of service. For example, we offer local food in our restaurants together with storytelling, in order to provide an authentic Norwegian experience. • Crew center established with a focus on development and crew planning: In August 2013, we established a crew center in Kirkenes and transferred all of our 1,600 crew employees to this center. Furthermore, we introduced measures to standardize procedures, protocols and service levels on all of our ships. We introduced initiatives aimed at improving our crew planning and staffing efficiency and also implemented crew rotation programs to ensure breadth of experience to enable our crew to develop professionally. Phase two of our Efficiency Improvement Program commenced in May 2013 and was completed in November 2013. The key initiatives under phase two included: • Optimizing our global sales and marketing offices and marketing functions and aligning our call center organization with our new corporate structure, including: • A reorganized global sales organization, with Nordic sales conducted through our new sales and marketing office in Oslo: In mid-2013, we opened a new sales and marketing office in Oslo in order to centralize sales staff that were previously based in local branch offices. As a result, we sought to achieve more efficient operations through a results-driven organization, with a focus both on our local transport services and our commercial services. • Reallocation of resources in line with our new corporate structure: We also reallocated certain resources between our corporate headquarters and global sales and our marketing offices to streamline certain functions by further centralizing land-based roles. For example, in connection with the elimination of certain local marketing roles, we reallocated certain people in these functions to new roles. Phase three of our Efficiency Improvement Program commenced in mid-2013 and was completed by the end of 2013. The key initiatives under phase three included: • Centralization and rebuilding our IT platforms and our central reservation infrastructure: We rebuilt and centralized our IT infrastructure systems and Customer Reservation Call Centers, including: • Reorganization of our Customer Reservation Call Center in Tallinn: In the fall of 2013, we reorganized our Customer Reservation Call Center in order to reduce the number of staff and to better align our central reservation infrastructure with our new organization. We downsized our Customer Reservation Call Center in Tallinn by approximately 25% and focused on integrating our central reservation systems with our sales organization in order to increase the familiarity of our sales staff with our product offering, streamline processes and to optimize our revenues. • Reorganization our IT operating platforms: Historically, we had multiple IT platforms for our administrative, accounting and finance and other operational functions. We introduced new software programs to maximize the functionality of these systems and reduce the number of operating systems. • Taking control of (in-sourcing) key functions: We previously outsourced the majority of our IT functions. As part of phase three, we gradually in-sourced the day-to-day operations of our IT systems, thereby reducing our reliance on third parties. Such functions include management of our internal help desk and e-commerce platform. Our in-house IT team also took over primary responsibility for developing software for our needs and our strategic objectives, including developing our new e-commerce platforms. • Upsizing number of IT personnel: In connection with in-sourcing key IT functions and our central reservation infrastructure, we increased the number of employees in our IT department, allowing us to decrease our use of external consultants at the same time.

124 Phase four of our Efficiency Improvement Program was launched in December 2013, and is expected to be fully implemented by mid-2015. The key initiatives under phase four include: • Measures related to ship operation, including: • Reductions in bunker oil consumption: We have introduced measures intended to increase bunker fuel efficiency, mainly through annual hull cleaning. Furthermore, we are currently renegotiating the terms of our agreements with third-party excursion providers to incentivize them to return guests to our ships on time, thereby reducing delays and the need to increase the speed of travel, which consumes extra bunker fuel. • Training of crew: We have focused on the development of our crew by implementing performance measures, sales training and increased rotation of crew between ships to enhance experience and career progression prospects for our crew. • Increased effects from purchasing: We have also introduced measures to standardize our procurement processes by implementing stricter purchase policies, including reducing the number of suppliers from whom we purchase goods and services. We have also negotiated more competitive terms with respect to the procurement of certain goods and services, including insurance and food and beverage. • Increased onboard sales: We have introduced a number of revenue generating measures including offering a wider selection of dining options including an à la carte menu in our restaurants, increasing the number of points of sales and suggesting room upgrades to passengers at the time of booking.

As a result of our Efficiency Improvement Program, our operational costs have declined substantially since 2012, and for the twelve months ended September 30, 2014, we achieved total efficiency improvements of NOK 96.5 million in connection with the Efficiency Improvement Program. We believe that our Efficiency Improvement Program has positioned us for the implementation of our strategic initiatives and the next phase of development of our operations.

Our Segments Our business is currently divided into three product segments: Hurtigruten Norwegian Coast, MS Fram and Spitsbergen Travel.

Hurtigruten Norwegian Coast Our Hurtigruten Norwegian Coast segment is a cruise voyage, local passenger ferry and cargo transportation business that operates between Bergen and Kirkenes along the Norwegian coast. The Hurtigruten Norwegian Coast segment is our largest segment and accounted for 84.9% of our revenues from continuing operations in the twelve months ended September 30, 2014.

Our route between Bergen and Kirkenes is operated by 11 ships, which make 34 northbound and 33 southbound daily departures from ports year-round. Ships leave Bergen (northbound) and Kirkenes (southbound) every day to cover the distance to Kirkenes (northbound) or Bergen (southbound) and back at an average speed of 15 knots, and a round trip is typically completed by each vessel every 12 days. We sold 1,075,251 PCNs within our Hurtigruten Norwegian Coast segment in the twelve months ended September 30, 2014.

We are the exclusive coastal sea transport provider covering the full distance between Bergen and Kirkenes. We face limited transport competition from a domestic airline, as well as local bus and ferry services and the Norwegian State Railways. However, the trains operated by the Norwegian State Railways do not travel beyond Bodø and therefore cannot provide local transport and cargo transportation in the region north of Bodø.

In the twelve months ended September 30, 2014, the 11 ships in our Hurtigruten Norwegian Coast segment had an occupancy rate of 62.3%.

We service two main guest groups along the Norwegian coast: coastal voyage guests and port-to-port guests. We offer a distinct and flexible operating model, which allows our guest to choose their itinerary, length of stay and type of transportation facilities.

125 The following map indicates our route along the Norwegian coast:

Coastal Voyage Guests Coastal voyage guests are holiday travelers that book a coastal voyage service for five or more nights, which includes accommodation on board the ship, meals, a wide range of exciting shore excursions and a number of stops in up to 34 ports of call northbound and in up to 33 ports of call southbound along the coast from Bergen to Kirkenes. We offer coastal voyages ranging from 5 to 11 nights. Our onboard facilities and activities include various dining options, panorama lounges, fully licensed bars and cafeterias where our guests can purchase hot and cold drinks and snacks, concession shops offering various gift items, including expedition clothing and souvenirs, as well as libraries. We also offer lectures by our expedition team. Meals on our ships are served at the restaurant where our chefs prepare either a three-course dinner or a buffet. In addition, many of our voyages provide our guests with the opportunity to try local specialties, such as reindeer meat and cloudberries, fresh fish, king crabs and local shrimp. Unlike most of our competitors, our onboard entertainment does not include commercial entertainment, such as casinos. Instead we focus on the distinct natural and cultural environment through which we travel and offer our guests lectures on the history, culture and biology relevant to the specific region. In addition, we also offer musical entertainment in the bar area on some stretches of certain voyages during peak seasons. Our onboard offerings cater to both our coastal voyage guests and our port-to-port guests, which allows us to offer flexible packages to both groups. For example, we operate a cafeteria primarily for our port-to-port ships guests but it is also open to our coastal voyage guests. Guests can also buy various supplemental packages either in advance or onboard the ship, such as wine packages.

126 When docking in one of the many ports in which we call during the cruise, we offer our guests the opportunity to participate in hikes and visits to local cultural or natural attractions arranged and led by our own expedition leaders. Tickets to these activities can be purchased either before boarding our ships or while onboard through our expedition leader. In addition, we work with many local excursion organizers along the Norwegian coast to offer more than 50 distinct shore excursions for our coastal voyage guests in order to differentiate ourselves from our competitors and to enhance the overall customer experience we offer. For example, we can arrange for our guests to participate in activities such as driving snowmobiles in Kjøllefjord, dog sledding in mid- Troms and Kirkenes, mountain hikes in Lofoten, Tromsø and Hammerfest and visiting a fish farm in Brønnøysund. Continuing to develop our distinctive character is important in order to differentiate our products from those offered by competitors. An experience based on natural wonders, close contact with Norway’s coastal culture and ordinary life, and distinct travel experiences are the key elements we focus on. Both our employees on our ships and in support functions ashore are familiar with the Norwegian coast and what it can offer our guests.

We sold 713,319 PCNs, representing 66.3% of our total PCNs within our Hurtigruten Norwegian Coast segment in the twelve months ended September 30, 2014 to coastal voyage guests.

Port-to-Port Guests Port-to-port guests are guests travelling less than five nights on our ships and are mostly composed of Norwegian leisure travelers and some international leisure travelers. The provision of our services to local guests is governed under our Coastal Service Contract. See “—Coastal Service Contract.”

Our port-to-port service is used as a means of transport over a shorter distance, often as an alternative form of local transport, for weekend outings with friends and family or for short-break vacations. As a result of our flexible operating model, which allows guests to choose their itinerary and length of stay, we attract both international and local guests.

Our port-to-port guests can enjoy the same services and facilities on board our ships. Guests traveling shorter distances tend to purchase a ticket for travel and to pay for other services as they go. In addition, such guests often purchase a ticket for the transportation of their vehicle. Our port-to-port guests also have the option to purchase services and packages similar to those we offer our coastal voyage guests in advance.

We sold 361,932 PCNs, representing 33.7% of our total PCNs within our Hurtigruten Norwegian Coast segment in the twelve months ended September 30, 2014 to port-to-port guests.

Transportation of Cargo In addition to passengers, we also transport a wide variety of cargo on the route between Bergen and Kirkenes, ranging from cars and fish to mail. The provision of our cargo transportation services to local guests is governed by our Coastal Service Contract. See “—Coastal Service Contract.”

We carry cargo over long distances, and we believe we are often the only cargo carrier serving the coastal population in many of the remote areas we service for regular transport of fresh produce and products. We transported approximately 96,760 tons of goods, 95,942 tons of goods, and 97,773 tons of goods, in the year ended December 31, 2012, the year ended December 31, 2013 and the twelve months ended September 30, 2014, respectively. Almost half the cargo we carry is transported to Finnmark, and we have extended the time we spend in Havøysund in order to deliver fish which must reach the markets as quickly as possible.

Coastal Service Contract Our operation of the coastal passenger and cargo transportation service between Bergen and Kirkenes is governed by our current coastal service contract with the Norwegian government represented by the Ministry of Transport and which was entered into in April 2011 and expires on December 31, 2019 (the “Coastal Service Contract”), and which may be extended for an additional year at the option of the Ministry of Transport. Pursuant to our Coastal Service Contract, we are

127 required to ensure 34 northbound and 33 southbound daily departures from ports throughout the year. We are required to provide local passenger transport on the entire route between Bergen and Kirkenes. In addition, we are required to offer cargo transport on the Tromsø-Kirkenes round-trip route. Under the Coastal Service Contract, our ships are required to have minimum capacity for 320 guests, berth capacity for 120 guests and cargo capacity of 150 euro pallets (in the cargo hold at standard cargo height). Our ships must also have passenger facilities, including food service.

Our fee under the Coastal Service Contract is based on an annual payment plan in an aggregate amount of NOK 5.1 billion over the term of the agreement. Both the duration of and the fee pursuant to the Coastal Service Contract are conditional upon the Norwegian parliament making the necessary funds available in the annual state budget. The agreed fee is subject to adjustment for increases in certain of our operating costs due to inflation as measured by Statistics Norway’s cost index for coastal and interior travel sub-index for ferry operations. The price adjustments for each year are based on changes during the last twelve months measured as of February 15 of the prior year, which means that our recovery of increased costs could be delayed by almost two years. If the cited cost index is unavailable, Statistics Norway’s consumer price index is used. In addition, under certain circumstances, the terms of the Coastal Service Contract may be subject to renegotiation. For example, in the event of unforeseeable changes in legislation that result in significant additional costs or savings under the Coastal Service Contract, either party may require extraordinary adjustments to be made to the terms of the Contract. Under the Coastal Service Contract a significant change includes any change that would result in an increase or decrease of more than 5% of the agreed annual remuneration for the current year. The fee under the Coastal Service Contract is payable by the Ministry of Transport in monthly installments on the first day of each month. If we do not fulfill the agreed service requirements the fee is also subject to downward adjustments. If for example, one of our Hurtigruten Norwegian Coast ships was to fall out of service for an extended period of time and we as a consequence were unable to ensure 34 northbound and 33 southbound daily departures from the required ports, the fee could be reduced by 1/6 of the daily fee attributable to that vessel for each cancelled port. In addition, we are obliged to pay liquidated damages equivalent to the fee per ship for the time out of service, unless the relevant off-hire period is due to documentable technical conditions or unforeseen repairs or maintenance. We are however entitled to cancel port departures without fee reduction or liability under the Coastal Service Contract for a period of up to 10 operating days per ship per year due to planned maintenance and unforeseen operational disturbances and two operating days per ship per year for use for cultural events. In addition, in instances of force majeure events (including adverse weather) we are entitled to suspend our performance without liability. However, we are not entitled to any fee for the period during which one of our ships is off-hire due to a force majeure event other than in the case of extraordinary weather conditions. The Ministry of Transport is entitled to demand liquidated damages for any breach of the contract which has not been remedied and may cancel the contract in the event of a material default, including repeated failures to meet obligations or repeated unfulfilled requests for remediation.

In connection with entering into the Coastal Service Contract, we have been issued a license from the Ministry of Transport to operate the entire route along the Norwegian coast between Bergen and Kirkenes. This license is valid for the same term as the Coastal Service Contract.

It is a requirement under the Coastal Service Contract that we provide an on-demand guarantee in an amount equal to at least 15% of the annual fee under the contract, at all times. In order to comply with such requirements, we have procured two guarantees in the aggregate amount of NOK 130 million from the insurance companies Tryg Garanti and Atradius (each of which has provided a guarantee for a sum of up to NOK 65 million). Such guarantees expire June 30, 2021 but may be terminated by the Tryg Garanti and Atradius, as applicable, at any time, subject to six months’ prior written notice.

We are currently involved in discussions with the Ministry of Transport regarding the interpretation of certain terms of the Coastal Service Contract, including our obligations to offer minimum berth capacity. According to the Coastal Service Contract, our Hurtigruten Norwegian Coast ships must have a minimum berth capacity for 120 guests. We are currently involved in discussions as to whether it is sufficient to have a minimum berth capacity for 120 guests on our ships or if these 120 berths are required to be reserved for certain categories of short distance guests. We have only experienced shortages of berths with respect to our short distance guests a few times a year, typically during our peak season, when all berths on board our ships are sold out and as a consequence, we cannot offer a

128 berth to all our short distance guests. We have proposed a “space guarantee” solution to the Ministry of Transport, which under certain conditions would entitle short distance guests, who we cannot offer a berth, the choice between travelling on the originally scheduled voyage free of charge with the promise that if a berth becomes available during such voyage, it will be offered free of charge, or travelling on the next voyage free of charge, including a free of charge berth. We have implemented this proposal but it has not yet been formally approved by the Ministry of Transport. See also “Risk Factors—Risks Relating to Our Business and Operations—The Coastal Service Contract requires us to provide certain services and, accordingly, restricts our ability to offer other services that may be more profitable.”

In the event of unforeseeable changes in legislation, regulations or governmentally imposed supplements, which impose additional significant costs or savings under the Coastal Service Contract, either party may require extraordinary remuneration adjustments, production changes or any other suitable measures.

Upon the expiration of the Coastal Service Contract, we expect any new coastal service contract to be subject to a public tender offer process. There may be competitive bids and we may not be awarded the new contract or license to operate the route along the Norwegian coast on commercially favorable terms, or at all. See also “Risk Factors—Risks Relating to Our Business and Operations—A significant portion of our revenue comes from passenger and cargo transportation services governed by the Coastal Services Contract, which expires in 2019.”

MS Fram

Our MS Fram segment comprises the MS Fram explorer ship, which takes our guests on Polar expeditions year-round in Antarctic, Spitsbergen and Greenland waters. The MS Fram commenced its operations in 2007, is our newest ship, was purpose-built for this type of operation in cold weather conditions and can be adapted for use in our Norwegian coastal operations. It has a total of 276 berths and is designed for an optimum balance between comfort and Polar experience, with large panorama windows to allow our guests to observe their surroundings. The cabins on MS Fram tend to be more spacious and comfortable compared to many of the cabins operated under our Hurtigruten Norwegian Coast segment.

We sold 67,521 PCNs onboard MS Fram in the twelve months ended September 30, 2014. MS Fram is our second largest segment and accounted for 9.7% of our revenues from continuing operations in the twelve months ended September 30, 2014.

We offer expedition itineraries ranging from nine days to three weeks, calling on multiple ports in four major Polar destinations, including Antarctica, Greenland, Iceland and Spitsbergen, and from April 2015, we will add Norway as a destination. MS Fram sails in the Antarctic waters of the southern hemisphere November through March and during this time, our customers primarily comprise German and United States guests. During the summer and fall months, MS Fram heads north to the Arctic seas around Greenland and Spitsbergen, where we have a more global customer mix. We change our itineraries every year to allow for variation and to appeal to our guests, including repeat customers. For the 2015 season, we have introduced a “Deeper into the Fjord” itinerary.

The package we offer for our MS Fram service is more inclusive compared to our Hurtigruten Norwegian Coast segment and includes board and meals. We also offer optional extras, including flights and supplemental packages, such as wine packages. In addition to standard onboard facilities and activities, such as a restaurant, a panorama lounge, a fully licensed bar and observation and sun decks, MS Fram is equipped with a fitness room, on-deck open air jacuzzis and facilities where our expedition team host lectures. Meals on MS Fram are served at the restaurant or in the bistro where our chefs prepare either a three course dinner or a buffet. Unlike most of our competitors, our onboard entertainment does not include commercial entertainment, such as casinos. Instead, we focus on the distinct natural and cultural environment through which we journey and offer our guests lectures on the history, culture and biology relevant for the specific area visited. In addition, we also offer musical entertainment in the bar area on some stretches of certain voyages during peak seasons.

We offer our guests the opportunity to participate in hikes, small boat expeditions, kayaking and other maritime and land-based activities, as well as visits to local cultural or natural attractions arranged and lead by our expedition leaders. We also offer distinct expedition style adventures

129 including an overnight camping experience on Antarctic glaciers. MS Fram has been specially designed for Polar expeditions and we have a number of Polar circle landing boats, which offer a safer and more comfortable means of transporting guests from MS Fram to glaciers and other landings. Tickets to these activities can be purchased either before boarding our ships or while onboard.

Explorer cruises in Polar waters have become an important strategic focus for us.

Spitsbergen Travel Our Spitsbergen Travel segment was established in 1988 and relates to our operations in Spitsbergen, including the operation of three hotels, as well as an equipment store and a host of tourist activities. Our Spitsbergen Travel segment accounted for 5.5% of our revenues from continuing operations in the twelve months ended September 30, 2014.

We operate three hotels in Longyearbyen, including onsite restaurants and retail stores. We have a license to operate one of these hotels under the Radisson Blu brand and another hotel under the Rica brand, which will become a Scandic brand company from February 2015. We operate the third hotel under our own brand, Spitsbergen Guest House, which we intend to rebrand as Coal Miners Cabins (“CMC”) from March 2015. The Radison Blu hotel is open year-round, while the Rica hotel and the CMC are closed from four to six months during the winter season in Spitsbergen.

We operate the Radisson Blu hotel under a license agreement with Radisson Blu, under which we pay a monthly license fee based on revenues in exchange for the use of the Radisson Blu brand name. Our guests may use Radisson Blu’s e-commerce channel and booking systems to make reservations at this hotel. Radisson Blu is obligated to list our Spitsbergen hotel in their directories and publications. The license agreement expires on December 31, 2021 and may not be terminated in the absence of a default. We hold the leasehold interest in the Radisson Blu hotel.

We operate the Rica hotel under a partner agreement with Rica, which allows us to use the Rica brand name and participate in marketing and promotional activities arranged by Rica. No fee is payable for the use of the Rica brand name, but, we pay for certain services, including booking fees for any bookings made through Rica’s system. Such booking fees are based on commissions and transaction fees. The agreement may be terminated by either party with twelve months’ notice. We hold the leasehold interest in the Rica hotel.

We also operate Spitsbergen Guest House and we intend to rebrand this under our own CMC brand in March 2015. CMC consists of four properties. We ground lease three of these four properties, each of which has 25 double hotel rooms. We lease the building on the fourth property, which houses our reception, bar and dining area, under a long-term lease agreement, which expires in 2022. See “—Property and Equipment.”

We also ground lease a property called Camp Barentz, which we use as a destination for our guests to visit. The camp comprises a collection of camp buildings, including facilities for entertaining and dining in natural surroundings. The camp offers an opportunity for our guests to experience Spitsbergen’s wilderness and features a dog yard with huskies, Barentz House and a large “gamme,” a traditional northern Norwegian style of building, which can seat up to 70 guests. Barentz House accommodates up to 40 guests and offers traditional dining options and a wide range of lectures on Polar heritage.

We are responsible for all our Spitsbergen hotel operations, including the hiring and managing of personnel and the maintaining and repairing each of the properties. We employ all hotel employees through one corporate entity in order to maximize the use of our employees by staffing our personnel to work various shifts in each of our three hotels. We also typically employ additional staff on a seasonal basis between March and September to cover our peak season.

We offer a variety of tourist activities in Spitsbergen through our hotels and also through our equipment store, Ingeniør G. Paulsen. We also offer a wide range of arctic experiences on snow-covered and snow-free terrain, including short day trips on skis, dog sledding, snowmobile hire, boat or hiking excursions, and longer expeditions in the archipelago. In addition, Ingeniør G. Paulsen sells leisure clothing and offers equipment hire, including snowmobiles and boats. Ingeniør G. Paulsen

130 operates as an agent for different weapons manufacturers and several major snow equipment and snow transportation brands, such as Yamaha, Polaris Snowmobiles and Polar Circle Boats. These products are mainly sold to local residents and businesses, expedition members and local government entities.

We intend to offer an expedition voyage exploring the area around Spitsbergen from June to August 2015. We have entered into a charter agreement dated August 22, 2014 to charter MS Nordstjernen, a ship we previously owned, on a short-term basis to operate this service, and we have the option to extend this charter agreement for up to four additional terms for 2016 through 2019. By offering this service during summer months, we hope to expand the range of activities offered by our Spitsbergen Travel segment.

Our Fleet

Our fleet comprises of 12 purpose-built ships that sail along the Norwegian coast or in Polar waters. We seek to differentiate our offering through authentic Norwegian dining options based on local food, lounges with large panorama windows, observation decks and a wide range of comfortable cabins and suites with private balconies on some of our ships.

The table below provides a brief description of our ships and areas of operation based on itineraries as of September 30, 2014:

Year Gross Primary Areas of Ships built Berths Tons Operation Ownership Hurtigruten Norwegian Coast MS Lofoten ...... 1964 153 2,621 Norway Owned MS Vesterålen ...... 1983 294 6,261 Norway Owned MS Kong Harald ...... 1993 470 11,204 Norway Owned MS Richard With ...... 1993 470 11,205 Norway Leased MS Nordlys ...... 1994 470 11,204 Norway Leased MS Nordkapp ...... 1996 455 11,386 Norway Owned MS Polarlys ...... 1996 455 11,341 Norway Owned MS Nordnorge ...... 1997 455 11,384 Norway Owned MS Finnmarken ...... 2002 635 15,690 Norway Owned MS Trollfjord ...... 2002 635 16,140 Norway Owned MS Midnatsol ...... 2003 635 16,151 Norway Owned MS Fram MS Fram ...... 2007 276 11,647 Norway, Spitsbergen, Owned Greenland and Antarctica

We are the registered owner of 10 of the 12 ships in our fleet. We lease MS Richard With and MS Nordlys under 15-year bareboat leases with Kystruten KS and Kirberg Shipping KS, respectively, to whom we sold these ships in December 2002 and June 2003, respectively. The lease agreements expire in February 2018 for MS Richard With and August 2018 for MS Nordlys, in each case, with options to extend for up to an additional five years on market terms. Any redesign or physical changes to our two leased ships, except for changes to fulfil statutory requirements, are required to be approved by the owners before work commences. If the owners do not accept our proposed changes, we have a right to effect such changes, provided that we restore the ships to their former condition before redelivery upon the expiry of the lease. We are not liable for ordinary wear and tear. We are required to maintain these leased ships in operation as passenger ships in compliance with relevant regulation, including maintenance of all certificates and performing any upgrades required to obtain such certificates.

Each bareboat lease agreement contains a financial covenant that requires us to maintain a minimum amount of liquidity at all times, and non-compliance with the covenant is a default under the contract and could result in the relevant agreement being terminated. Accordingly, any failure to meet our minimum liquidity obligations under the leases could adversely affect our Hurtigruten Norwegian Coast segment’s ability to carry out its cruise operations or fulfill its obligations under the Coastal Service Contract, either of which could have an adverse effect on our business and results of operations.

131 Ship Operations Maintenance Pursuant to the requirements based on SOLAS and to some extent the International Load Lines Convention, we are required to dry-dock our ships twice every five years and the maximum duration between each dry-dock cannot exceed three years. We do not earn revenue while ships are dry-docked. Accordingly, we typically schedule such dry-dock work during non-peak seasons in our first and fourth calendar quarters in order to minimize the impact on our revenues. For MS Fram, such dry-dockings are scheduled between our Northern hemisphere and Southern hemisphere seasonal services.

Hurtigruten Norwegian Coast ships are generally taken out of service approximately every second or third year, for a period typically ranging between 11 and 22 days for scheduled maintenance work, repairs and improvements. Due to the age of the ship, MS Lofoten is required to undergo dry-docking every year, typically for the same period as our other Hurtigruten Norwegian Coast ships. On average, we dry-dock four to five ships each year.

MS Fram is required to dry-dock twice every five years and is typically out of service for a period of seven to 14 days each time. Capacity for MS Fram will be reduced in 2015 as a result of planned maintenance and changes to the sailing plan. Because MS Fram is the only ship servicing our MS Fram segment, the financial performance of the segment is weaker during years when we take the ship out of service for planned dry-docking.

In addition to the required dry-docking of our ships, we conduct ongoing, routine repairs and maintenance as necessary. Such ongoing maintenance is performed both while our ships are in operation, to the extent possible, and when our ships are in dry-dock. Certain maintenance work, such as maintenance on the propulsion systems, automations systems, main electrical systems and steam systems, as well as all underwater equipment on the ship’s hull, is required to be completed during dry-docking due to limitations on the accessibility of equipment and certain parts of the ship that can only be accessed during dry-docking. In addition, we typically undertake maintenance work that may inconvenience our guests while our ships are in dry-dock.

Suppliers and Service Providers Our largest suppliers supply us with bunker fuel, food and beverage, shipyard and maintenance services, port services, IT services, travel agent services, office services and advertising and marketing. Certain of our suppliers also provide us with office space and call center staffing, especially in our Seattle office. Most of the supplies and services that we require are available from numerous sources at competitive prices. In addition, owing to the large quantities that we purchase, we can negotiate favorable terms and prices for many of our supplies. Our purchases are denominated primarily in U.S. dollars, Norwegian kroner and euros. Payment terms granted by the suppliers are generally customary terms for the cruise industry.

Our ships are serviced by certain key service providers and require specific parts and technical capabilities. There is a limited number of shipyards and maintenance service providers that can provide the services we require to maintain our ships, especially given the fact that we typically seek to dry-dock our ships in proximity to their routes.

In addition, we depend on local port owners and operators in order to operate our services. Under the Coastal Service Contract, we are required to stop in the 34 ports along the coast from Bergen to Kirkenes. We are required to pay a fee for use of the port, as well as terminal services offered by larger ports such as Bergen. Such fees are typically based on the size of the ship and we may be subject to additional fees that are calculated based on the number of guests we carry. See “Risk Factors—Lack of continuing availability of attractive, convenient and safe port destinations on terms that are favorable or consistent with our expectations could increase our operating costs and adversely affect our business, financial condition, results of operations and prospects.”

132 Revenue Management Practices Coastal Voyage Guests and MS Fram Guests Our base package includes accommodation and full board on the coastal voyage selected. Prices vary depending on the particular coastal voyage itinerary, cabin category selected, the time of year that the coastal voyage takes place and the utilization rate of the ship at the point of booking. We also offer a range of supplemental packages that may be purchased in advance or on board our ships. Depending on the product and the location, excursions, flights, hotels and transfers are sold as extras or part of a package. For example, our packages often include transport to remote areas where our ships depart. In addition, guests traveling on our Hurtigruten Norwegian Coast ships can also transport their own vehicles on board our ships for an extra charge. The prices for our MS Fram products are higher compared to our Hurtigruten Norwegian Coast products due to the remote and exotic voyages offered and higher demand for adventure-style expedition trips.

We operate a flexible pricing model, which seeks to maximize bookings at optimal prices and allows our guests to choose among various itinerary options. We monitor our booking developments and adjust our price matrix accordingly, depending on rates of utilization, season and time to departure. We encourage travelers to book early, and we look to build significant volume well before our sail dates so we can manage our occupancy rate. We perform extensive analyses of our databases in order to determine booking history and trends, cabin category, travel partner, market segment, and itinerary and distribution channel. In addition, we establish a set of cabin categories throughout each ship and price our fares on the basis of these cabin categories. In 2014, using our flexible pricing model, we sought to maximize occupancy by introducing additional promotions for shorter voyage bookings made within 30 days of the departure date and we have experienced an increase in last minute bookings as a result.

Typically, the initial published fares are established at least 15 months in advance of the commencement of a season. For example, our initial published fares for the season commencing in January 2016 were set in October 2014. If the booking trend at which cabin inventory is sold differs from expectations, we retain the flexibility to update our offers accordingly. These adjustments are implemented through various marketing activities including promotions, special rate codes, opening and closing cabin categories, or price changes.

We measure our available cabin inventory against predetermined milestones in order to determine when to increase our price matrix to the next level in our flexible pricing model. By regularly monitoring our bookings, we are positioned to optimize our booking curve and shorten the time required to implement pricing decisions.

Port-to-Port Guests Port-to-port tickets are either sold as deck space (travel ticket only), or with a cabin including breakfast. Our port-to-port guests can also transport their own vehicles on board our ships for an extra charge. The maximum fares that we may charge for deck space tickets are regulated under the Coastal Service Contract and tend to increase each year. Under the Coastal Service Contract, we collect and retain revenues from deck space ticket sales and also receive a monthly fee from the Ministry of Transport. We are also required to offer public discounts such as military, senior and child discounts, which are based on the deck space price only. See “— Coastal Service Contract.”

Deck space tickets are sold based on a fixed price model, while itineraries with cabins are based on a flexible price model, which is adjusted depending on cabin category, rates of utilization, season and time to departure. Such adjustments are implemented through various marketing activities including promotions.

We also offer a range of add-on products that may be purchased in advance or on board our ships. Excursions, flights, hotels and transfers are sold as extras.

Cargo Under our Coastal Service Contract, we are required to maintain minimum cargo capacity on each of our Hurtigruten Norwegian Coast ships; and we have entered into a space charter agreement

133 with Nor Lines regarding utilization of our cargo holds. Under our agreement with Nor Lines, they have purchased and agreed to operate the cargo space in each of our 11 Hurtigruten Norwegian Coast ships. Nor Lines was previously a subsidiary of the Group and was sold in December 2010. Nor Lines continues to operate our cargo holds under the terms of the original agreement. Nor Lines contracts directly with its cargo customers to pack and transport cargo including cars, fish, mail and other cargo. However, we are responsible for transporting cargo and are liable for any damage which is sustained from the time such cargo is loaded on our ships to the time such cargo is unloaded. Nor Lines will, according to the agreement, indemnify us for any third-party claims related to damage that occurs before or after loading or unloading cargo. However, should the time of the damage be impossible to prove, Nor Lines may hold us accountable for damages that are discovered before delivery, or in relation to delivery to Nor Lines customers.

Under this agreement, Nor Lines is required to pay a fixed annual fee to us, which is subject to adjustments based on our operating schedule. Our fees depend on the number of service days of our Hurtigruten Norwegian Coast ships. Dry-docks and the number of days each ship is out of service impacts this number. In addition, we are entitled to an additional bonus fee under certain circumstances where Nor Lines revenues from the agreement exceed certain thresholds. To the extent that we reduce the cargo-carrying capacity on our ships as a result of modifications to comply with the 305 Classification, Nor Lines may seek to amend the terms of the space charter agreement to reduce our charter hire fees in line with such reductions in capacity. Our space charter agreement with Nor Lines specifies the amount of cargo-carrying capacity for each of our ships and a reduction in capacity may result in a reduction of the fees payable to us under such agreement.

Our space charter agreement with Nor Lines expires in December 2019, in line with the expiration of our Coastal Service Contract.

Onboard and Other Revenue

We generate additional onboard revenue on our ships principally from beverage sales, specialty dining, shore excursions, gift shop purchases, cafeteria sales and other similar items. Onboard and other revenue is an important component of our revenue base representing 9.3% of our revenues from continuing operations for the nine months ended September 30, 2014. To maximize onboard revenue, we use various cross-marketing and promotional tools and are supported by point-of-sale systems that permit “cashless” transactions for the sale of these onboard products and services.

Spitsbergen Revenue Practices

Our Spitsbergen Travel segment derives revenues from the operation of our three hotels and our equipment store, Ingeniør G. Paulsen. Our hotel operations generate revenues primarily from room sales and food and beverage sales from restaurants at our hotels as well as sales of various adventure activities. We price our hotel rooms based on a flexible model, which allows us to adjust prices based on room category, season and utilization rates. These adjustments are implemented through various marketing programs including promotions and activities. Food and beverages are sold at fixed rates. We offer complete packages including meals and activities and also offer additional supplements for these products and services on site in order to optimize our sales.

Through our equipment store, we derive revenues from sale of unguided adventure activities, equipment rental and sale and repair of gear. Products and prices at our equipment store are based on products and services offered and season and can be adjusted through promotions or seasonal sales.

Seasonality

Our business is seasonal in line with weather conditions, the holiday period in Europe and demand for coastal voyages. In the twelve months ended September 30, 2014, we generated 65.0% of our Hurtigruten Norwegian Coast revenues during the second and third calendar quarters of 2014, which we promote as our “Midnight sun” season. Demand is strongest for cruises during Norway’s summer months and holidays. Due to colder weather, we tend to generate comparatively lower revenues in the first and fourth quarters of each calendar year. Despite the seasonal nature of our Hurtigruten Norwegian Coast business, we are required by the Coastal Service Contract to operate daily between Bergen and Kirkenes throughout the year.

134 In recent years we have developed other seasonal concepts to complement our peak season theme, including, “Autumn Gold” in the fall, “Hunting the Light” in the winter and “Arctic Awakening” in spring. We use such seasonal concepts to attract customers seeking a travel and expedition experience that is only available during specific times of the year. For example, the number of PCNs we sold in January through March has increased by 9.3% in 2014 compared to 2011 and we believe this is largely due to the introduction of our seasonal concepts.

Our cruises through our MS Fram segment are operated on a seasonal basis. MS Fram sails in the Antarctic waters of the southern hemisphere November through March and during this time, our customers primarily comprise of German and United States guests. During the summer and fall months, MS Fram heads north to the Arctic seas around Greenland and Spitsbergen, where we have a more global customer mix. We change our itineraries every year to allow for variation and to appeal to our guests, including repeat customers. For the 2015 season, we have introduced a “Deeper into the Fjord” itinerary to strengthen our differentiation.

The main season for our three hotels in Spitsbergen under our Spitsbergen Travel segment is from March through August due to long sunlight hours during these months in this region and the European summer vacation period.

Our Guests For marketing and sales purposes and to develop the right products, we divide our guests (other than those using our services for local transportation) into four categories, based on their main motivation for travelling as well as the activity levels they seek: • Nature observers: “Nature observers” are mainly motivated to go on a Hurtigruten voyage or travel to Spitsbergen to observe the nature, scenery and wildlife in a relaxed atmosphere. • Culture seekers: “Culture seekers” are mainly motivated to go on a Hurtigruten voyage or travel to Spitsbergen to experience and learn about the history, society and culture of a new and exotic destination. • Activity engagers: “Activity engagers” are mainly motivated to go on a Hurtigruten voyage or travel to Spitsbergen to experience exciting activities. • Expedition heroes: “Expedition heroes” are mainly motivated to go on a Hurtigruten voyage or travel to Spitsbergen to go on hikes, dog sledding, snowmobile and skiing expeditions over several days.

Despite differences between our main four guest categories, we believe that all our guests have similar traits, desire similar experiences on their vacation, and have similar interests. We aim to offer voyages and experiences that cater to these common interests, while utilizing our knowledge of their differences in our marketing campaigns to reach each segment through various channels of communication and messages.

Sales and Marketing Product Distribution Channels and Sales We sell our product through our Norwegian and international travel agents as well as our own three customer reservation call centers (“Customer Reservation Call Centers”) and, to a lesser extent, through our website. Travel agents can make bookings directly, either through our Customer Reservation Call Center or via our business online reservation systems (“B2B Reservation Systems”), which are exclusively available to our partnering travel agents. Our B2B Reservation Systems are used for bookings relating to coastal voyage guests, port-to-port guests, MS Fram guests, Spitsbergen Travel guests, group travels and excursions. Sales made by travel agents represent the majority of our ticket sales. In the twelve months ended September 30, 2014, bookings for our products were made through over 7,000 third parties, and therefore we are not dependent on any individual travel agent for a significant portion of our business. Our travel agents sell our itineraries on a non- exclusive, commission-based basis.

135 Our main Customer Reservation Call Center is based in Tallinn, Estonia. As part of our Efficiency Improvement Program, we established two smaller Customer Reservation Call Centers in order to better serve customers in specific regions. One of these two Customer Reservation Call Centers is based in Kirkenes, Norway, and serves our customers in Norway, and the other is based in Seattle, United States, as part of our sales and marketing office located there, and serves our customers in North America. In addition to travel agents, our Customer Reservation Call Center and sales and marketing offices are also used by our guests that would like to book directly with us. Bookings made through our Customer Reservation Call Centers account for the largest proportion of our overall bookings. The main function of our Customer Reservation Call Centers is to provide a phone booking service for our coastal voyages and MS Fram expeditions, as well as travel arrangements, including flights to the destinations from which we operate.

In the twelve months ended September 30, 2014, we generated 70% of our pre-sold ticket revenues through third parties and 30% directly from end customers. Out of the 70% presold tickets through third parties, 73% were sold through our Customer Reservation Call Centers and the remaining 27% were made through our B2B Reservation Systems. Out of the 30% pre-sold tickets sold directly to end consumers, 66% were sold through our Customer Reservation Call Centers and the remaining 34% were sold through our B2B Reservation Systems.

In addition, we also operate five sales and marketing offices globally. Our sales and marketing offices are based in Hamburg, Oslo, London, Paris and Seattle. The prime focus for these sales offices is to develop and implement sales and marketing activities to enhance brand awareness and stimulate booking demand. Each sales and marketing office executes our global marketing plans on a local basis, by selecting activities and promotional materials in accordance with our global brand guidelines.

Marketing, Brand Communications and Advertising

We believe that we have a distinct tourist product and customer experience, which is based on a more extensive itinerary that offers a higher number of ports of call (including to some less-visited local ports), a cultural experience and a wide offering of nature-based and adventurous activities. Our advertising and communication strategy plays an important role in the promotion of our products and latest offers and in maintaining a distinct image for our brand.

Our global marketing department is based in Oslo and is responsible for working together with third-party advertising agencies to develop a global marketing and communications strategy, which strives to capture our brand proposition and to strengthen our global brand awareness. We adopt various marketing and communications strategies, which are tailored to appeal to each of our four categories of guests, as well as the geographies in which our guests are located. See “—Our Guests.” Our global marketing and communications strategy is rolled out by each of our local sales and marketing offices using a selection of activities that appeal to their local markets.

Our global marketing department works to enhance our brand awareness and the appeal of our product offerings among guests, trade and travel partners. Core functions in our global marketing department include brand strategy, advertising and media, marketing communications, direct marketing, customer loyalty, e- commerce development and market research. Our marketing efforts seek to support our brand proposition of offering distinct, active and authentic exploration based voyages and experiences. We use various forms of media for our press and marketing activities and promotional offers including television, print, internet, social networking, radio, digital, e-mail and direct mail. In addition, our services are often reviewed by journalists and travel publications.

We customize our promotional activities for each of our product segments by producing individual marketing materials. We market each of our product segments according to its strengths and tailor our marketing campaigns to the preferences of the type of guests most likely to participate in that product segment. We create a specific marketing message for each of our segments and products; for example, Hurtigruten Norwegian Coast’s products are named based on the season and what our guests will experience during the particular season, such as “Spring—Arctic Awakening,” “Summer—Midnight Sun,” “Autumn Gold” and “Winter—Hunting the Light.”

Our e-commerce channel is operated through our websites, email communications and social media pages and accounts. We operate seven country-specific versions of our website, as well as one

136 global version. We are increasingly focused on digital sales and marketing communications. We provide updates regarding our latest product offerings and promotions and aim to increase traffic to our website. During 2015, we plan to launch a new e-commerce channel, including updated websites, a new booking platform, more information and content and increased functionality. We intend to introduce a more interactive and user friendly e-commerce platform that will facilitate the booking process for individuals and for the groups. Our new e- commerce channel will allow us to communicate with our guests before they sail on our ships as well as during and after their voyage with us. As part of this project, we will also establish digital channels for mobile devices such as tablets and smartphones. We are establishing a direct dialog with our guests through email and chat communications, as well as maintaining social media communications through our own blogs, Facebook, Twitter and Instagram. We believe that our social media presence facilitates interaction with our crew and explorer team members and improves brand awareness. We aim to make our e-commerce channel the primary sales and distribution channel and the primary source of information and marketing materials for our guests.

We believe we are one of Norway’s longest established tourism providers and we work together with other travel and trade players as well as government agencies in Norway to develop Norwegian tourism internationally in order to attract more customers. We work with various airlines to try to increase the number of direct flights from abroad to coastal destinations in Norway in order to make the Norwegian coast more easily accessible. We seek to base our activities on sustainable and responsible behavior, which is important in maintaining the environmental stability of the geographies in which we operate.

Our Hurtigruten Norwegian Coast product has won international recognition, including such accolades as the best specialist cruise company in the Travel Weekly Globe Awards of 2007, 2009, 2010, 2011 and 2012. We were named in the best niche cruise category of the British Travel Awards in 2008 (winner), 2009 (bronze medal), 2010 (silver medal) and in 2011 (bronze medal). In 2014, we received the Spa Travel Award for the Best Specialist Cruise Company, and in 2012, 2013 and 2014 we were named the Star Specialist Cruise Company in the Travel Bulletin Star Awards. In 2011, we received Hidden Gems and Best Shore Excursions Awards from Cruise International. In 2012, we won the Specialist Cruise Line of the Year award in the TTG Travel Awards and were recognized as the Best Specialist Cruise Line Operator for Groups in the Group Travel Awards. We were named Travel Product of the Year for 2013 and Best Ferry Operator in Norway in 2013 and 2014 in Norway’s Grand Travel Awards. In 2014, we were recognized as the Best Specialist Cruise Operator of the Year by The Advantage Travel Partnership, named Best for Adventure in the Cruise Critic 2014, U.K. Editors’ Picks Awards.

Insurance Except for MS Lofoten and MS Vesterålen, we maintain hull and machinery insurance on all of our ships, based on market value. In the case of MS Lofoten and MS Vesterålen, due to the age of these ships, we maintain hull and machinery insurance for an amount less than their market value.

In addition to the insurance coverage on the hull and machinery of our ships, we seek to maintain comprehensive, industry-standard insurance coverage at commercially reasonable rates and believe that our current coverage is at appropriate levels to protect against most of the accident-related risks involved in the conduct of our business. The coverage includes: • protection and indemnity insurance covering legal or contractual third-party liability arising from the operation of our ships, including insurance against liability for oil spills, cargo claims, collision, wreck removal as well as liability against personal injury and death (including of passengers and crew); • war risk insurance on each ship in an amount equal to the total insured hull value, subject to certain coverage limits, deductibles and exclusions. The terms of our war risk policies include provisions whereby underwriters can give seven days’ notice to the insured that the policies will be cancelled in the event of a change of risk or automatically in the event of any use of nuclear arms for war purposes or war between certain countries, which is standard for war risk policies in the maritime industry. Upon any proposed cancellation the insurer shall, before expiry of the seven day period, submit new proposed terms; • off-hire insurance for our Hurtigruten Norwegian Coast ships covering the period from April 15 through September 30 each year and for MS Fram throughout the year, covering lost income

137 up to certain maximum amounts resulting from a loss of income as a consequence of damage to a ship that prevents us from operating such ship;

• tour operator insurance; and

• insurance for our shore side property and general liability risks.

All of our insurance coverage is subject to market-standard limitations, exclusions and deductible levels.

We comply with Norwegian legislation implementing the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1974) (the “Athens Convention”), the Protocol to the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1976) (the “1976 Protocol”), the Protocol to the Athens Convention on November 1, 2002 (the “2002 Protocol”), which establishes a level of compulsory insurance which must be maintained by passenger ship operators with a right of direct action against the insurer, and the EU Passenger Liability Regulation, which requires us to carry a minimum level of financial responsibility per passenger per incident.

Employees

As of September 30, 2014 we employed 1,756 full time equivalent employees (“FTEs”), of which 824 were permanent employees in Norway, 695 temporary employees including apprentices and cadets accounted and the remaining 237 FTEs were employees of our sales organization outside Norway. The figures for Norway include Spitsbergen Travel and our Customer Reservation Call Center in Kirkenes, and the figures for our sales organization outside Norway include our Customer Reservation Call Centers in Tallinn and our sales and marketing offices in Hamburg, Oslo, London, Seattle (including the Customer Reservation Call Center) and Paris.

As of September 30, 2014, our 1,756 FTEs consisted of:

Full time equivalent employees Crew ...... 1,297 Land-based employees (Oslo, Tromsø) ...... 108 Tallinn Customer Reservation Call Center ...... 133 Spitsbergen Travel ...... 101 Hamburg sales and marketing office ...... 63 London sales and marketing office ...... 21 Seattle sales and marketing office and Customer Reservation Call Center ...... 10 Paris sales and marketing office ...... 10 Kirkenes Customer Reservation Call Center ...... 13 Total ...... 1,756

A large number of our employees are represented by labor unions under various collective bargaining agreements with varying durations and expiration dates. As of September 30, 2014, we were subject to five collective bargaining agreements, including three collective bargaining agreements for maritime crew and two collective bargaining agreements for land-based employees. One agreement was renegotiated at the end of 2013 and is scheduled to expire at the end of 2017. The other four agreements were renegotiated in 2014 and are scheduled to expire in April 2016. Such collective bargaining agreements cannot be renegotiated prior to their expiry.

In addition, pursuant to our Coastal Service Contract, all our employees who are directly engaged in fulfilling our obligations under our Coastal Service Contract are required to have employment terms equal to or better than the terms set out in national collective bargaining agreements for the relevant type of employee and common market practice.

We have not experienced any significant work stoppages in recent years. Certain of our employees are members of trade unions and we meet with certain union leaders on a quarterly basis. We believe we generally have good relationships with our employees and unions.

138 Property and Equipment

Information about our cruise ships, including their size and primary areas of operation, as well as information regarding our ship maintenance and estimated expenditures may be found under “—Our Fleet,” “— Ship Operations—Maintenance” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Net Cash Flows From Investing Activities.” Information about environmental regulations may be found under “—Legal and Regulatory—Environment.”

In addition to the properties we ground lease in Spitsbergen, we own three properties in Norway. Two of these properties were previously used as accommodations for our employees between voyages but since 2009 have been leased to an independent third party and are no longer used in our operations. The third property is used as a warehouse for spare parts for our ships.

We own all of the buildings used for our Spitsbergen Travel hotel and guest house operations in Longyearbyen, Svalbard, except for one of the four buildings used for the Spitsbergen Guest House, which we lease under a long-term contract, which expires in 2022. The buildings are located on land leased from the Norwegian government under long-term contracts.

As part of the Efficiency Improvement Program, we established a corporate center, including our head office, in new leased premises in the city center in Tromsø. We also lease sales and marketing offices and Customer Reservation Centers in Oslo, Kirkenes, Hamburg, Tallinn, Paris and London, and we receive office space in Seattle as part of a sales and marketing services agreement with one of our suppliers. Our lease agreements have varying payment terms, price adjustment clauses and renewal rights.

The following table provides an overview of real estate holdings and leases that are material to our operations:

Number of Lease/Leasehold Property Rooms Operating Structure Terminates Radisson Blu hotel, Spitsbergen ...... 95 Owned buildings on leased land December 2074 Rica hotel (will become Scandic hotel as of February 2015), Spitsbergen ...... 88 Owned buildings on leased land December 2043 Spitsbergen Guest House (will become Two owned buildings on leased land December 2045 CMC from March 2015), One owned building on leased land January 2075 Spitsbergen ...... 75 One leased building on leased land January 2022 Camp Barentz, Spitsbergen ...... N/A Owned buildings on leased land January 2049 Ingeniør G. Paulsen, Spitsbergen ...... N/A Owned buildings on leased land December 2044 Head Office, Tromsø ...... N/A Leased August 2018 Office, Oslo ...... N/A Leased March 2018 Office, Kirkenes ...... N/A Leased August 2018(1)

(1) Unless terminated at least six months prior thereto, the lease will automatically be renewed for a five-year renewal term, commencing on August 1, 2018.

As part of our ongoing initiatives in connection with the Efficiency Improvement Program, we constantly evaluate our property portfolio to determine whether certain leased offices meet our needs. As a result of such evaluation, we may relocate certain sale offices to more suitable properties over the course of 2015.

We believe that our facilities are adequate for our current needs, and that we are capable of obtaining additional facilities as necessary.

Intellectual Property

We own a number of registered trademarks and logos relating to, among other things, our brand name, corporate logo and domain name. We believe that such trademarks and logos are widely recognized and have considerable value. In particular, we own the trademark of Hurtigruten; we have not licensed this core trademark to any third parties and do not intend to do so in the future.

139 Legal and Regulatory

Registration of Our Ships

The Norwegian ship registries consist of the Norwegian Ordinary Ship Register (“NOR”) and the Norwegian International Ship Register (“NIS”). Ships registered in NIS are not permitted to carry cargo or passengers between Norwegian ports or to engage in regular scheduled passenger transport between Norway and foreign ports.

Our Hurtigruten Norwegian Coast ships are registered in NOR and are inspected at least annually pursuant to NOR requirements. MS Fram is registered in NIS and is inspected at least annually pursuant to NIS requirements. In addition, we hold a license to operate as a passenger transporter on the coastal route between Bergen and Kirkenes and all our ships are classified as “car ferries,” which together allow us to offer our guests to bring their car with them when travelling on our ships.

For the past 10 years, we have been involved in ongoing discussions with the NMD regarding whether our single compartment ships are to be classified as “car ferries” or “passenger ships.” The two classifications are subject to different regulatory requirements regarding safety and have separate minimum capacity requirements. The ships in question were built prior to the time the current requirements came into effect and we have sought to have our ships classified as “passenger ships”, which, among other things, requires compliance with SOLAS requirements for such ships. If a reclassification of these ships as “passenger ships” is not approved, we may be required to reduce the passenger and crew count permitted to be transported on these ships. Alternatively, if the ships are classified as “car ferries,” we could be required to redesign our ships, with estimated future rebuild costs of NOK 2.0 million to NOK 20.0 million per ship. The ongoing discussions with the NMD are related to the technical design solutions for these design modifications.

One of our ships, MS Richard With, has already been redesigned and approved by the NMD. For our other single compartment ships; MS Polarlys, MS Nordlys, MS Nordkapp, MS Kong Harald, MS Nordnorge and MS Vesterålen, we have proposed alternative modifications to improve safety levels and cargo utilization that can be undertaken at a lower cost compared to the modifications we have made to MS Richard With. In addition, any reduction of cargo-carrying capacity on our ships as a result of modifications to comply with the 305 Classification may result in an amendment to the terms of our space charter agreement with Nor Lines. Our space charter agreement with Nor Lines specifies the amount of cargo-carrying capacity for each of our ships and a reduction in capacity may result in a reduction of the fees payable to us under such agreement.

Our single compartment ships are required to be reclassified before October 2015 in order to comply with the requirements under the 305 Classification. We expect that the capital expenditures in 2015 related to the redesign of these five ships with respect to the 305 Classification rebuild be in the range of approximately NOK 80 million to NOK 90 million, depending on the agreement we reach with the NMD. However, we expect that such capital expenditure would increase to an aggregate amount of approximately NOK 118 million and could require extended dry-docking times for each ship, possibly during our peak season, if the NMD does not agree to our alternative modifications and we are required to undertake modifications on all our single compartment ships that are similar in scope to the modifications we made to MS Richard With. See “Management’s Discussion and Analysis of Our Financial Condition and Results of Operations—Net Cash Flows From Investing Activities.”

Crew and Passenger Safety

Our entire fleet is subject to the health and safety laws and regulations of the various port locales where the ships dock. Norway is a member of the International Maritime Organization (“IMO”) and has ratified and implemented the IMO conventions relating to ocean-going passenger ships.

We place the utmost importance on the safety of our guests and crew. We prepare monthly health, safety and environment reports that are presented to our corporate leadership team comprising of our CEO and six members of our senior management team. Furthermore, through our quality assurance system, deviations from established protocols, accidents and other safety incidents or concerns are reported and monitored. Our quality management system is an approved ISM Code (as defined below) safety management system. We review safety incident reports in order to detect any issues or concerns, to review safety recommendations, as well as to implement preventative

140 measures. We conduct internal and external audits, both onboard and in our headquarters, focusing on the safety and wellbeing of our guests and employees to monitor the effectiveness of our quality management system.

We operate all of our ships to comply with all applicable requirements for the safe operation at sea, including requirements of the SOLAS convention and the IMO International Safety Management Code (“ISM Code”) as well as the International Convention for the Prevention of Oil Pollution from Ships (MARPOL), all as implemented in Norway. Our ships are required to comply with the ISM Code. In order to continue our ship operations, and to evidence our compliance with the ISM Code, our ships are required to undergo an annual inspection in order to obtain a renewed passenger ship safety certificate issued by the NMD. Our passenger ship safety certificate is subject to annual review of compliance conducted by the NMD, during which the NMD may identify items which need to be improved or addressed for us to operate in compliance with the ISM Code.

Furthermore our business operations are subject to an annual review by NMD in order to obtain a document of compliance. During such audits the NMD may identify items which need to be improved or addressed for us to operate in compliance with the ISM Code.

Every crew member undertakes safety training, participating in regular safety drills onboard every one of our ships. Pursuant to the rules of the ISM Code, we are required to have a “Designated Person Ashore,” who has direct access to the highest level of management and whom any employee can contact regarding any material safety related issues on board the ship.

Pursuant to provisions adopted by the IMO and enacted in Norway, all passenger ships operating in Norwegian waters are required to comply with the requirements of the ISM Code. We have obtained certificates certifying that our ship safety management system is in compliance with the ISM Code. Each such certificate is granted for a five-year period and is subject to periodic verification.

We believe that our ships currently comply with all requirements of NOR, in the case of our Hurtigruten Norwegian Coast ships, and NIS, in the case of MS Fram, including but not limited to legislation based on SOLAS. The international requirements are amended and extended by the IMO from time to time. For example, the International Ship and Port Facility Code (“ISPS Code”), which applies to our operation of MS Fram but not our Hurtigruten Norwegian Coast ships, was adopted by the IMO in December 2002, and subsequently enacted in Norway. It provides new requirements for governments, port authorities and shipping companies in relation to security issues on ships and in ports. We comply with the ISPS Code for MS Fram.

IMO has also adopted an amendment to SOLAS which requires partial bulkheads on cabin balconies to be made of non-combustible construction. Existing ships are required to comply with this SOLAS amendment by the first statutory survey after July 1, 2008; all of our ships are in compliance with the SOLAS amendment.

Another new SOLAS regulation, on Long-Range Identification and Tracking (“LRIT”), applies to ships trading internationally and is therefore relevant to our operation of MS Fram but not our Hurtigruten Norwegian Coast ships. It came into effect on January 1, 2008, and allows SOLAS contracting governments, including Norway, one year to set up and test the LRIT system, and ship operators one year to start fitting the necessary equipment or upgrading so that their ships can transmit LRIT information. MS Fram is fitted with this equipment and we are therefore in compliance with these requirements.

Our Captains are experienced and certified seafarers. To assist our Captains and Officers while at sea, we have extensive navigation protocols in place. Our bridge operations are based on a two-person team approach. Accordingly, there are always two officers present on the bridge, mandating strict adherence to operating procedures. Furthermore, our bridge teams follow pre-set voyage plans, which are thoroughly reviewed by the Captain and bridge team prior to port departures and arrivals.

For MS Fram, prior to every cruise setting sail, we hold a mandatory safety drill for all guests during which important safety information is reviewed and demonstrated. For the coastal fleet, we show an extensive safety video, which runs on television screens located in public areas. Our fleet is equipped with modern navigational control and fire prevention and control systems.

141 Environment Like all other transport and tourist activities, our operations have a direct influence on the natural environment. We are conscious of our responsibility for safe operation and environmental protection, and work continuously to improve our environmental performance. Our Hurtigruten Norwegian Coast ships are subject to requirements set out in SOLAS and Norwegian laws, and MS Fram is subject to international requirements, including under SOLAS. We are subject to review on a regular basis by both the NMD and the classification society, Det Norske Veritas Germanischer Lloyd, and we strive to comply with all such requirements in addition to environmental requirements on account of public opinion.

The scope of our business, and thereby our consumption of fossil fuel, is governed to a great extent by the public procurement contract for transport services with the Ministry of Transport for the Bergen-Kirkenes coastal service. Daily departures year-round and 11 ships in constant operation mean substantial fuel consumption and consequent discharges of greenhouse gases such as carbon dioxide and nitrogen oxide (“NOx”). On the other hand, our substantial cargo business helps to reduce the burden on the Norwegian road network by carrying the equivalent of approximately 10,000 lorry-loads of goods in the year ended December 31, 2013. Increased cargo transport by sea is a national goal, and we work systematically together with Nor Lines to increase the volume of goods carried on our ships.

Pollution at sea from ships, including air pollution, is regulated by the IMO through the International Convention for the Prevention of Pollution from Ships (“MARPOL”), and particularly Annex VI of MARPOL (“Annex VI”). Annex VI limits the permissible emissions of certain major air pollutants that originate from ships’ exhaust gases, including SOx and NOx. It also prohibits deliberate emission of ozone depleting substances, including refrigerants such as Freon. MARPOL has been ratified by Norway and, by way of an EU/ EEA Directive, given the force of law in Norway. Compliance with the requirements of Annex VI is the responsibility of the ship owner and non-compliance could have significant legal and financial consequences for the owner.

We carefully monitor fuel consumption and emissions, and report on defined indicators at executive management meetings and board meetings. Choice of fuel is an important element in reducing emission risk. In compliance with the latest amendment to Annex VI, which came into effect on January 1, 2015, we are required to use fuel that does not exceed a sulphur content of 0.10% on the part of our route along the Norwegian coast which is located south of latitude 62 degrees north. The prior regulation under Annex VI allowed exhaust gas emissions up to a maximum of 1.5% sulphur for passenger ships. This recent amendment to Annex VI is expected to have little impact on our bunker fuel costs since we had previously used marine gas oil, which complies with the latest amendment, for all of our voyages.

We are a member of the Confederation of Norwegian Enterprise’s (“NHO”) NOx fund, which has an overall goal of achieving a reduction in such emissions from Norwegian industry and commerce. Through this fund, we have applied for support for more than 20 NOx-related projects. A number of measures have been implemented and completed. The estimated annual gain in terms of emissions from these measures is about 330 tons of NOx. As a member of the NHO NOx fund and signatory to an environmental agreement covering the period 2011– 2017, we and the other signatories have undertaken to reduce our overall NOx emissions by 16,000 tons and to maintain the emission reductions achieved for the entire period. The NHO NOx fund has also reported that the targets for 2011 and 2012 were satisfied and that the achieved reductions to meet the 2013 and 2014 commitments are on track.

The Norwegian Environment Agency monitors whether individual reduction targets have been achieved. Deviations of more than 10.0% from reduction targets trigger a collective fine, under which businesses must pay the nitrogen oxide tax for their pro rata share of the target that has not been satisfied. However, the businesses will never pay more than the official government rate for nitrogen oxide tax.

Our explorer activities off Greenland, Spitsbergen and Antarctica are subject to guidelines from the International Association of Antarctica Tour Operators (“IAATO”) and the Association of Arctic Expedition Cruise Operators (“AECO”). We play an active role in both these organizations to champion a safe and environmentally conscious tourism industry in these distinct and vulnerable areas.

142 Legal Proceedings We currently are, and from time to time we may become, involved in various claims and lawsuits arising in the ordinary course of our business, such as employee claims and disputes with port authorities. We are currently involved in a dispute with Stranda Hamnevesen KF regarding an increase in port taxes and fees charged by Stranda Hamnevesen KF in relation to the port in Geiranger. We successfully challenged the increase in port taxes and fees in both the District Court and the Court of Appeal. In December 2014, Stranda Hamnevesen KF appealed parts of the Court of Appeal’s decision to the Supreme Court of Norway. If the appeal is accepted and the Supreme Court ultimately decides in favor of Stranda Hamnevesen KF, we could be liable for an amount of approximately NOK 2 million for outstanding fees for the period from 2012 to 2014 as well as legal costs. The final outcome of the dispute is also likely to impact the amount of port fees we will be charged in future periods at the port in Geiranger and elsewhere.

ESA State Aid Investigation In June and July 2014, the EFTA Surveillance Authority (the “ESA”) contacted the Norwegian Ministry of Trade, Industry and Fisheries (the “Ministry of Trade”) regarding anonymous complaints the ESA had received regarding Hurtigruten. All the complaints relate to the provision of state aid to Hurtigruten under the Coastal Service Contract. In particular, such complaints alleged that Hurtigruten had not reserved the minimum number of berths required for the port-to-port guests, that Hurtigruten has reduced the service on a number of harbors in Finnmark without a corresponding reduction in fees payable to us under the Coastal Service Contract and that Hurtigruten has been overcompensated for the services we provide to the port-to-port guests under the Coastal Service Contract.

To date, we have cooperated with the Norwegian government’s requests for information in relation to the ESA inquiry; however no formal proceeding or investigation has been initiated. Any inquiry or proceeding would be made against the Ministry of Trade. However, to the extent that a formal proceeding or investigation is launched and the ESA finds that unlawful state aid has been granted to Hurtigruten, we may be required to modify our current practices, to agree to new terms and conditions or to pay a settlement amount, fee or penalty, in an amount representing the amount, which could be significant, of the illegal state aid received as determined by the ESA, plus interest, any of which may adversely impact our operations and financial position.

143 MANAGEMENT

Board of Directors of the Company The Company was incorporated on September 1, 2014 for the purposes of facilitating the Hurtigruten Acquisition Transactions and the Refinancing Transactions, including issuing the Notes. Set forth below are the names, ages and positions of the members of the board of directors of the Company. The business address of each of the directors of the Company is c/o Advokatfirmaet BA-HR DA, Tjuvholmen allé 16, 0252 Oslo, Norway.

Name Age Title Trygve Hegnar ...... 71 Chairman Petter Stordalen ...... 52 Director Jonathan Rosen ...... 44 Director Matthew Lenczner ...... 35 Director

Below is a brief description of the experience of each individual who serves as a member of the board of directors of the Company:

Trygve Hegnar. Mr. Hegnar became chairman of the board in January 2015. Mr. Hegnar is the owner and the Chief Executive Officer of Hegnar Media AS and editor of both Finansavisen and Kapital. He is also chairman of the board and one of the owners of Periscopus AS. He is currently a member of the board of directors of Windy Boats, Hotel Vic and Hegnar Hotel (Holmen Fjordhotell). From 1988 to 1992, Mr. Hegnar was Chief Executive Officer at Kloster Cruise/Norwegian Cruise Line. From 1990 to 1992, he was chairman of the board at Ullevål Hospital and for seven years he was also chairman of the board of Larvik Line ferry operator. Larvik Line was incorporated in Vard Group AS at the time when Mr. Hegnar served as a board member of NCL Holding AS (formerly Vard AS). Over the course of his career, in addition to the aforementioned directorships, Mr. Hegnar has also served as chairman of the board of the Bennet Travel Agency Chain. He holds a degree in Business Administration from Mannheim University in Germany.

Petter Stordalen. Mr. Stordalen became a member of the board in January 2015. Mr. Stordalen is the owner and CEO of Home Invest AS, which controls such companies as Nordic Choice Hotels, Home Properties and Home Capital. Home Invest AS is the Group’s operating parent company, and Mr. Stordalen is the sole owner through Anker Holding AS. Mr. Stordalen has been the Owner and Chairman of Nordic Choice Hotels since 1996. In addition to the aforementioned directorships, Mr. Stordalen is also the Founder of Stordalen Foundation.

Jonathan Rosen. Mr. Rosen was appointed member of the board in September 2014. Mr. Rosen has worked in private equity for over 20 years and joined TDR Capital in 2006. Prior to TDR Capital, Mr. Rosen was a Partner at Hampshire Equity Partners for nine years, and prior to that he worked at BT Capital Partners for five years. Over the course of his career, Mr. Rosen has sourced, managed and sat on the board of directors of many private equity investments. Mr. Rosen graduated from Duke University with degree in Economics and Public Policy.

Matthew Lenczner. Mr. Lenczner was appointed member of the board in January 2015. Mr. Lenczner is an investment director at TDR Capital. Prior to joining TDR Capital in 2008, Mr. Lenczner worked at Och Ziff Capital in the special investments team and previously at Lehman Brothers in leveraged finance. Mr. Lenczner graduated from Oxford University with a masters in Modern History and Modern Languages.

Directors and Managers of Hurtigruten Board of Directors The Group’s operations are conducted through Hurtigruten and its subsidiaries.

Set forth below are the names, ages and positions of the members of the board of directors of Hurtigruten. The business address of each of the directors of Hurtigruten is Frederik Langesgate 14, 9008 Tromsø, Norway.

144 Name Age Title Trygve Hegnar ...... 71 Chairman Helene Jebsen Anker ...... 55 Director Petter Stordalen ...... 52 Director Per-Helge Isaksen ...... 59 Director Regina Mari Aasli Paulsen ...... 44 Director Jonathan Rosen ...... 44 Director Anastasia Ezhova ...... 27 Director

Below is a brief description of the experience of each individual who serves as a member of the board of directors of Hurtigruten.

Helene Jebsen Anker. Mrs. Anker became a member of the board of Hurtigruten ASA in May 2009. In 2012, she was appointed as the Deputy Chair of the board of Hurtigruten. She currently serves as a director of Eitzen Chemical ASA, BN Bank ASA, Fishpool ASA, SIVA SF and Nasjonalmuseet. From 2000 to 2008, Mrs. Anker worked as Credit Manager at Nordea Bank. From 1990 to 2000, she worked at Christiania Bank, where she held various positions and became a Senior Vice President within the Central Credit Department and a member of the bank`s Central Credit Committee in 1994. From 1986 to 1990, Mrs. Anker worked at Bergen Bank. Mrs. Anker graduated from the Norwegian School of Economics and Business Administration (NHH) in Bergen with a Master of Science in Business Administration in 1982.

Per-Helge Isaksen. Mr. Isaksen works as a Boatswain on MS Polarlys. He joined Hurtigruten as a Deckhand in May 1982, and became a member of the board in the spring of 2010. From 2005 to 2009, he served as the Chief Steward for the Norwegian Seamens’ Union on MS Finnmarken and later on MS Polarlys. From 2004 to 2010, Mr. Isaksen was a member of the corporate assembly at Hurtigruten.

Regina Mari Aasli Paulsen. Mrs. Paulsen joined Hurtigruten as Head Housekeeper in 2002 and became a member of the board in September 2014. From September 2010 to November 2012 Mrs. Paulsen was a member of the corporate assembly at Hurtigruten. Since 2000, she has been a representative of the Norwegian Seamens’ Union, both as board member and employee representative. She graduated from the Handelsskolen in Nordreisa in 1993.

Anastasia Ezhova. Ms. Ezhova was appointed Director of Hurtigruten in December 2014. Ms. Ezhova joined TDR Capital in 2014 as an investment professional. Prior to TDR Capital, Ms. Ezhova worked at Nomura in the mergers and acquisitions team and previously at A.T. Kearney in strategy consulting. In 2009, Ms. Ezhova graduated from Cass Business School with a masters in Finance and in July 2009 completed a course in Alternative Investments at the London School of Economics.

Senior Management Team In addition to the board of directors, set forth below are the names, ages and positions of members of the senior management team of Hurtigruten:

Name Age Title Daniel Skjeldam ...... 39 Chief Executive Officer Asta Lassesen ...... 33 Chief Financial Officer Oscar Engeli ...... 45 Senior Vice President Corporate Services Svein Taklo ...... 49 Senior Vice President Maritime Operations Magnus Wrahme ...... 52 Chief Commercial Officer Thomas Westergaard ...... 50 Senior Vice President Hotel Operations Anne Marit Bjørnflaten ...... 45 Senior Vice President Communications

Summarized below is a brief description of the experience of the individuals who serve as members of the senior management team of Hurtigruten.

Daniel Skjeldam. Mr. Skjeldam joined Hurtigruten in October 2012 when he was appointed Chief Executive Officer. He has since then led Hurtigruten through a major turnaround including a

145 change in strategy and the implementation of the Efficiency Improvement Program. From 2007 to 2012, Mr. Skjeldam worked as Chief Commercial Officer of Norwegian Air Shuttle ASA. He was a part of Norwegian’s start up team in 2002 and from 2002 to 2007 he held the positions of Director of Station Services and Director of Network and Revenue Management. He is currently a board member of Norwegian Finans Holding ASA (Bank Norwegian) and has previous board experience in the aviation, public transport and shipping industries. Mr. Skjeldam holds a MSc. (Econ) degree from the Norwegian School of Economics and Business Administration (NHH) in Bergen.

Asta Lassesen. Mrs. Lassesen joined Hurtigruten in April 2007 as Accounting Manager. From July 2010 to December 2011, Mrs. Lassesen worked as Treasurer. Mrs. Lassesen became Chief Financial Officer in January 2012. From 2004 to 2007, Mrs. Lassesen worked as an auditor at Ernst & Young in Tromsø. She holds a Masters of Business Administration from Bodø Graduate School of Business.

Oscar Engeli. Mr. Engeli joined Hurtigruten as Senior Vice President Corporate Services in September 2013. From 2009 to 2013, Mr. Engeli was Senior Vice President for Shared Services, Nordic Choice Hotels. From 2006 to 2009, Mr. Engeli worked as Vice President of Information Systems & Technology at Choice Hotels Scandinavia. Mr. Engeli was also a member of several boards for a number of companies in the Choice Hotels Group. From 2003 to 2006 Mr. Engeli worked at Flytoget AS and, from 2002 to 2003, Mr. Engeli worked at Fujitsu Siemens Norway AS. He holds a masters degree in Economics from the Norwegian Business School and a bachelor’s degree from the Norwegian School of Information Technology.

Svein Taklo. Mr. Taklo joined Hurtigruten as Chief Operational Officer and Senior Vice President of Maritime Operations in May 2014. From 2012 to 2013, Mr. Taklo was Vice President, Marine Operations, at Royal Caribbean International and from 2007 to 2010; he held the position of Associate Vice President of Marine Operations. From 2010 to 2011, he was Vice President, Marine Operations at RCL Cruises Ltd.; a start-up with multi-branded UK based operations for 13 cruise ships. Prior to this, Mr. Taklo held various engineering and other positions, including Fleet Manager and Fleet Director with Royal Caribbean International. He holds a bachelor’s degree in Safety and Maintenance from Høgskolesenteret i Vestfold in Norway.

Magnus Wrahme. Mr. Wrahme joined Hurtigruten as Senior Vice President Global Sales in April 2013 and became Chief Commercial Officer in April 2014. Prior to Hurtigruten, from 2012 to 2013 Mr. Wrahme managed his own consulting company, Nautica Consulting International AS, advising companies on global expansion and business strategy. Prior to that, Mr. Wrahme worked with Royal Caribbean Cruises Ltd, where, from 2008 to 2011, he held the position of Associate Vice President of International Market Development at the headquarters in Miami, from 2005 to 2007, he worked as Regional Director of Southern Europe in Barcelona; and from 1998 to 2004, he was Managing Director of Nordic Countries in Oslo. Prior to this, Mr. Wrahme held various other positions. He holds a Master of Business Administration degree from Heriot-Watt University.

Thomas Westergaard. Mr. Westergaard joined Hurtigruten as Senior Vice President Hotel Operations and Product Development in March 2014. From 2012 to 2014, Mr. Westergaard was Managing Partner and owner of Stay Tuned Hospitality, a privately held consultancy company advising on hotel development projects in Scandinavia. From 2005 to 2012, he was Senior Vice President at Comfort Hotels, Nordic Choice Hotels. From 2003 to 2005, he held a position as Managing Director of Choice Hotels Denmark. Mr. Westergaard has worked in management positions in the hotel industry for the last 20 years and has served as General Manager at Scandic and Thon Hotels. From 2002 to 2003, Mr. Westergaard managed the Clarion Hotel Royal Christiania in Oslo. Mr. Westergaard holds an associate of science degree in Hotel and Restaurant Management from Johnson & Wales University.

Anne Marit Bjørnflaten. Ms. Bjørnflaten joined Hurtigruten as Senior Vice President of Corporate Communications in September 2013. From 2005 to 2013, Ms. Bjørnflaten was a member of the Norwegian Parliament. From 2005 to 2013, she served as Chair of the Standing Committee on Justice, and from 2009 to 2013 as Deputy Chair of the Standing Committee on Transport. Ms. Bjørnflaten also was the Labor Party spokesperson on transportation and communications matters. From 2002 to 2003, she was Head of Communication at the Norwegian Centre for Integrated Care and Telemedicine. From 2000 to 2001, Ms. Bjørnflaten worked as political adviser to the Minister

146 of Foreign Affairs at the Norwegian Ministry of Foreign Affairs. From 1999 to 2000, Ms. Bjørnflaten was a political adviser to the parliamentary leader and the Labor Party leader. From 1998 to 1999, she was a journalist at NRK Troms. Ms. Bjørnflaten has graduated with an undergraduate degree in History from Tromsø University, an undergraduate degree in Political Science from the University of Oslo and an undergraduate degree in Media and Communications from the University of Bergen.

Committees The board of directors of Hurtigruten has established an audit committee and a nomination committee.

The audit committee meets with the auditors at least annually to discuss the draft statutory accounts and recommends them, if appropriate, to the board for approval. It also checks that internal information collection and inspection procedures are complied with and examines the procedure for selecting the auditors. On the date of this offering memorandum, the members of the audit committee were Helene Jebsen Anker and Regina Mari Aasli Paulsen.

The nomination committee comprises three members, including a chair and two other members elected by the general meeting of shareholders. Members serve for two-year terms. On the date of this offering memorandum, the members of the nomination committee were Jon Tenden, Westye Høegh and Richard Sandnes.

The nomination committee passes recommendations on shareholder-elected directors, alternate directors and remuneration for directors. All nomination committee members are independent of the board and the senior management team of Hurtigruten.

Following the delisting of Hurtigruten from the Oslo stock exchange, we will no longer be required to maintain an audit committee or a nomination committee and we may chose not to continue such committees or otherwise amend the process with respect to the matters currently delegated to such committees.

Compensation The aggregate compensation paid by us to our then-existing directors and senior management team for the year ended December 31, 2013 was NOK 35.3 million.

147 PRINCIPAL SHAREHOLDERS

TDR Capital, Periscopus and Home Capital indirectly own 90%, 5% and 5%, respectively, of our issued and outstanding share capital.

TDR Capital was founded in 2002 by Manjit Dale and Stephen Robertson. Across its three European buyout funds it has over €4.8 billion of committed capital. TDR Capital has a proven value-based and operationally focused investment strategy, which is delivered by a dedicated team of 22 investing and operating professionals from its single office in London. TDR Capital focuses on mid-market buyout investments headquartered in or with significant operations in Europe, generally with an enterprise value of €300 million to €1.5 billion.

Home Capital AS is an investment holding company incorporated in Norway, wholly owned by Home Invest AS, a company fully controlled by Petter A. Stordalen, one of our directors. Home Capital AS invests in listed Nordic stocks, derivatives and bonds. A minor portion of its capital is also invested in unlisted companies.

Periscopus AS was incorporated in 1970 and is based in Oslo, Norway. It is an investment holding company controlled by the chairman of the board of directors of the Company, Trygve Hegnar. Periscopus AS operates in various sectors, including publishing, media, hotels and property.

148 RELATED PARTY TRANSACTIONS

In addition to the management arrangements described in “Management,” we are a party to the following transactions with related parties.

Investment Agreement The Investment Agreement governs various rights of TDR Capital, Periscopus and Home Capital with regard to the Group, including voting rights and appointment rights. Pursuant to the Investment Agreement, TDR Capital is entitled to appoint the majority of the directors of the companies in the Group, including the Company and Hurtigruten. The Investment Agreement requires Home Capital and Periscopus to consent to certain actions including, among others, the making of any material change to the nature or scope the Group’s business, the winding up of any company in the Group and any distributions of the Group profits other than on a pro rata basis. The Investment Agreement governs the transfer of Group securities, requires each party to consent to any new issuance of securities and gives each party the right to subscribe to such securities on a pro rata basis.

Management Transactions Certain members of management and certain of their affiliates received a portion of the proceeds paid under the Hurtigruten Tender Offer. In addition, we intend to pay a cash settlement in connection with the termination of our existing option plan. Following the receipt of such cash payments, the relevant members of management are expected to invest in the capital of the Company.

Sponsor Fee Agreements The Group may enter into customary monitoring and other fee arrangements with the Company pursuant to which affiliates of TDR Capital may receive fees in connection with the ongoing monitoring of the business.

Lease Agreement with Affiliate of Shareholder The Group leases its offices in Oslo, Norway from Home Invest AS, which is an affiliate of our shareholder, Home Capital. The agreement, which commenced in mid-2013, is on arms’ length terms. The amount of our lease payments to Home Capital was NOK 0.6 million in the year ended December 31, 2013 and NOK 0.7 million in the nine months ended September 30, 2014.

149 DESCRIPTION OF OTHER INDEBTEDNESS

The following contains a summary of the terms of the Revolving Credit Facility Agreement and the Intercreditor Agreement. Terms not otherwise defined in this section shall, unless the context otherwise requires, have the same meanings set out in the Revolving Credit Facility Agreement, the Indenture or the Intercreditor Agreement.

Revolving Credit Facility Agreement We are party to the Revolving Credit Facility Agreement which provides for a committed €65 million multicurrency senior revolving credit facility (the “Revolving Credit Facility”), of which NOK 250.0 million was drawn on January 22, 2015 to be used in connection with the Hurtigruten Acquisition Transactions. The Revolving Credit Facility is available for utilization by way of revolving loans and letters of credit, subject to satisfaction of certain conditions under the Revolving Credit Facility Agreement. Borrowings under the Revolving Credit Facility are used to finance or refinance the general corporate and working capital purposes of the “Restricted Group” (as defined in the Revolving Credit Facility Agreement) subject to certain prohibitions, such as on repayment of certain of our other indebtedness and payments of dividends.

The original borrower under the Revolving Credit Facility is the Company. The facility agent (the “Agent”) under the Revolving Credit Facility is Goldman Sachs Lending Partners LLC.

Ancillary Facilities Subject to an aggregate limit of 50% of the total commitments (as defined in the Revolving Credit Facility Agreement) for the use of ancillary facilities under the Revolving Credit Facility, a lender may make available to a borrower under the Revolving Credit Facility all or part of that lender’s undrawn commitment in the Revolving Credit Facility by way of ancillary facilities such as overdrafts, guarantees, short term loan facilities, derivatives and foreign exchange facilities, subject to the satisfaction of certain conditions precedent.

Repayments and Prepayments The Revolving Credit Facility will terminate on the six year anniversary of the Closing Date. Any amount still outstanding at that time will be immediately due and payable.

Subject to certain conditions, we may voluntarily prepay our utilizations and/or permanently cancel all or part of the available commitments under the Revolving Credit Facility by giving five business days’ prior notice to the Agent. Amounts repaid may (subject to the terms of the Revolving Credit Facility Agreement) be re- borrowed.

In addition to voluntary prepayments, the Revolving Credit Facility Agreement requires mandatory cancellation and, if applicable, prepayment in full or in part in certain circumstances, including: (1) with respect to any lender or any issuer of a letter of credit, if it becomes unlawful for such lender or issuer to perform any of its obligations under the Revolving Credit Facility Agreement; (2) upon the sale of all or substantially all of the assets of the “Restricted Group” (as defined in the Revolving Credit Facility Agreement) whether in a single transaction or a series of related transactions; (3) upon the occurrence of a change of control. “Change of Control” means: (a) prior to an initial public offering, either: (i) the Investors (as defined in the Revolving Credit Facility Agreement) together cease to control or own, legally and beneficially, directly or indirectly, more than 50% of the issued share capital and voting rights of the Company or the ability to determine the composition of the majority of the board of directors or equivalent body of the Company; or

150 (ii) TDR Capital LLP and its affiliates or any trust, fund, company or partnership owned, managed or advised by TDR Capital LLP or any of its affiliates ceases to be, legally and beneficially, directly or indirectly, the largest holder of issued share capital in the Company; (b) following an initial public offering, either: (i) the Investors cease to control or own, legally and beneficially, directly or indirectly, more than 30% of the issued share capital and voting rights of the Company; or (ii) a person or group of persons acting in concert acquires, directly or indirectly, more issued shares and voting rights in the Company than are held (directly or indirectly) by the Investors; or (c) the Company ceases to be a direct wholly-owned subsidiary of Silk Midco AS; (d) on and from the Trigger Date (as defined in the Revolving Credit Facility Agreement), Hurtigruten ceases to be a direct wholly-owned subsidiary of the Company other than as a result of the issue of shares in Hurtigruten after the Trigger Date pursuant to the exercise of any CEO Stock Option (as defined in the Revolving Credit Facility Agreement) or Management Stock Option (as defined in the Revolving Credit Facility Agreement), provided that the Company complies with its obligations under the offer-related undertakings set out in the Revolving Credit Facility Agreement in respect of such shares, which require the Company to cancel the Management Stock Options within 5 business days of the Trigger Date and squeeze out any shares issued pursuant to the exercise of any CEO Stock Options. For the purposes of this definition “acting in concert” means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition directly or indirectly of shares in the Company by any of them, either directly or indirectly, to obtain or consolidate control of the Company. “Investors” mean: (a) TDR Capital LLP and its affiliates or any trust, fund, company or partnership owned, managed or advised by TDR Capital LLP or any of its affiliates; (b) Home Capital AS and its affiliates or any trust, fund, company or partnership owned, managed or advised by Home Capital AS or any of its affiliates; and/or (c) Periscopus AS and its affiliates or any trust, fund, company or partnership owned, managed or advised by Periscopus AS or any of its affiliates. (4) Subject to certain exceptions, upon the receipt of certain disposal proceeds and insurance proceeds.

Interest and Fees The Revolving Credit Facility bears interest at a rate per annum equal to EURIBOR/NIBOR/LIBOR (as applicable) plus a margin of 3.75% per annum, subject to a margin ratchet based on the “Consolidated Net Leverage Ratio” at each quarter end. We are also required to pay a commitment fee, in arrears on the last day of each financial quarter during the availability period, on available but unused commitments under the Revolving Credit Facility at a rate of 40% of the applicable margin applicable to borrowings in euros under the Revolving Credit Facility Agreement.

We are also required to pay fees related to the issuance of ancillary facilities, letters of credit, and certain fees to the Agent and the Security Agent in connection with the Revolving Credit Facility.

Security and Guarantees Within 70 days of the Hurtigruten Tender Offer Settlement Date, the Revolving Credit Facility will be guaranteed subject to certain customary limitations and agreed security principles, on a joint and several basis, by each of our subsidiaries that is a guarantor of the Notes.

151 The Revolving Credit Facility Agreement also provides that that as soon as practicable and in any event within 45 days of the date of delivery of a compliance certificate relating to the annual financial statements, the earnings before interest, tax, depreciation and amortization (“EBITDA”) of the guarantors is required to represent not less than 80% of the consolidated EBITDA of the “Restricted Group” (as defined in the Revolving Credit Facility Agreement), and the consolidated gross assets of the guarantors are required to represent not less than 80% of the consolidated gross assets of the “Restricted Group” (as defined in the Revolving Credit Facility Agreement).

On the Issue Date, the Revolving Credit Facility will be secured by the Issue Date Collateral and within 70 days of the Hurtigruten Tender Offer Settlement Date, the Revolving Credit Facility will be secured by the Post- Issue Date Collateral (see “Intercreditor Agreement—Collateral”).

Covenants The Revolving Credit Facility Agreement contains customary information and negative covenants (including restrictive covenants that largely replicate those contained in the Indenture), subject to certain agreed exceptions. The Revolving Credit Facility Agreement also requires the Company, each other Borrower (as defined in the Revolving Credit Facility Agreement) and each guarantor under the Revolving Credit Facility Agreement to observe certain customary affirmative covenants and certain specific covenants in relation to the Hurtigruten Tender Offer.

The Revolving Credit Facility Agreement contains a minimum EBITDA financial maintenance covenant.

The Revolving Credit Facility Agreement allows members of the Restricted Group to prepay, purchase, defease or redeem (or otherwise retire for value) (each a “Repurchase”) any of the Notes, any part of the Bridge Facility, Replacement Debt (as defined in the Revolving Credit Facility Agreement) or Term Debt (as defined in the Revolving Credit Facility Agreement) provided that (i) the aggregate value of all Repurchases does not exceed 35% of the total aggregate amount of the Notes, the Bridge Facility, the Replacement Debt and the Term Debt issued by the Restricted Group; and (ii) any prepayment, purchase, defeasement or redemption (or other retirement) of any part of the Bridge Facility, any Notes, Replacement Debt or Term Debt made solely with the proceeds of Additional Indebtedness (as defined in the Intercreditor Agreement) permitted to be incurred under the Intercreditor Agreement shall not be treated as a Repurchase. In the event that the 35% threshold is exceeded (and only to the extent that that threshold is exceeded), the Restricted Group is obliged to match the Repurchase by a simultaneous cancellation and, if necessary, prepayment of an equal amount under the Revolving Credit Facility Agreement. No Repurchase may be made while an event of default is continuing or would result from such Repurchase.

Events of Default The Revolving Credit Facility Agreement contains customary events of default (subject in certain cases to agreed grace periods, thresholds and other qualifications), including a cross default with respect to an event of default under, and as defined in, the Notes Indenture, the occurrence of which would allow the lenders to accelerate all or part of the outstanding utilizations, terminate their commitments, declare all or part of their utilizations payable on demand and declare that cash cover in respect of letters of credit and ancillary facilities is immediately due and payable.

Governing Law The Revolving Credit Facility Agreement and any non-contractual obligation arising out of or in connection with it will be governed by and construed and enforced in accordance with English law, although the restrictive covenants, which are included in the Revolving Credit Facility Agreement and largely replicate those contained in the Indenture, will be interpreted in accordance with New York law (without prejudice to the fact that the Revolving Credit Facility Agreement is governed by English law).

Intercreditor Agreement The following summary of the Intercreditor Agreement refers to the Notes and the Indenture as they are defined in this offering memorandum.

152 In connection with entering into the Revolving Credit Facility Agreement, and the Indenture, the Company and Silk Midco AS, among others, entered into an Intercreditor Agreement on October 6, 2014, as amended by an amendment agreement on January 9, 2015.

The Intercreditor Agreement governs the relationships and relative priorities among (i) the creditors of the Revolving Credit Facility (the “Lenders”) and the creditors of the Bridge Facility; (ii) upon execution of an Intercreditor Accession Deed, the Trustee on behalf of itself and the holders of the Notes; (iii) future hedge counterparties under certain hedging agreements (the “Hedge Counterparties”); (iv) certain future creditors of the Restricted Group; (v) certain intra group creditors and debtors; (vi) various creditor representatives; and (vii) U.S. Bank Trustees Limited as the original Security Agent.

The Company and each of its subsidiaries that incur any liability or provide any guarantee under the Revolving Credit Facility, the Indenture or the Pari Passu Debt (as defined below) documentation are referred to in this description as “Debtors.”

The Intercreditor Agreement sets out: 1. the relative ranking of certain indebtedness of the Debtors; 2. the relative ranking of certain security granted by the Debtors; 3. when payments can be made in respect of certain indebtedness of the Debtors; 4. when enforcement actions can be taken in respect of certain indebtedness; 5. when enforcement action can be taken in respect of Notes Collateral; 6. the terms pursuant to which certain indebtedness will be subordinated upon the occurrence of certain insolvency events; 7. turnover provisions; and 8. when security and guarantees will be released to permit a sale of the Notes Collateral.

The Intercreditor Agreement contains provisions relating to future indebtedness that may be incurred by the Debtors, provided that it is permitted by the terms of the Revolving Credit Facility Agreement and the Indenture, which may rank pari passu to the Notes and be secured by the Notes Collateral (the “Pari Passu Debt”), subject to the terms of the Intercreditor Agreement. The Creditors of the Pari Passu Debt (the “Pari Passu Creditors”) have rights under the Intercreditor Agreement, which are summarized below.

The Intercreditor Agreement also allows (after all Credit Facility Liabilities (as defined below) have been fully and finally discharged) for the Debtors to enter into a new super senior credit facility, provided that the total amount outstanding under such facility is permitted under the Indenture. For the purposes of this description, any references to the Revolving Credit Facility or Lenders or Credit Facility Liabilities should be read as including any such other super senior credit facility.

By accepting a Note, the relevant holder thereof shall be deemed to have agreed to and accepted the terms and conditions of the Intercreditor Agreement.

The following description is a summary of certain provisions contained in the Intercreditor Agreement. It does not restate the Intercreditor Agreement in its entirety nor does it describe provisions relating to the rights and obligations of holders of other classes of our debt. As such, we urge you to read the Intercreditor Agreement because it, and not the discussion that follows, defines the rights of the holders of the Notes. Copies of the Intercreditor Agreement are available to holders of the Notes upon request. See “Listing and General Information.”

Ranking and Priority The Intercreditor Agreement provides, subject to the provisions regarding permitted payments and application of proceeds below, that the right and priority of payment of all present and future liabilities and obligations under the Revolving Credit Facility (the “Credit Facility Liability”), the hedging agreements entered into by the Hedge Counterparties (the “Hedging Liabilities”), the Notes (the “Notes Liabilities”) and the Pari Passu Debt (the “Pari Passu Liabilities”) rank pari passu in right and priority of payment without any preference or payment between them.

153 These liabilities rank ahead of any liabilities of the Debtors to the Company and its subsidiaries (the “Intra Group Liabilities”) or any debt to a holding company, including Silk Midco AS (the “Structural Liabilities” and together with the Intra Group Liabilities, the “Subordinated Liabilities”). The Intercreditor Agreement does not rank the Subordinated Liabilities as between themselves.

Collateral

The Lenders, the Hedge Counterparties, the holders of the Notes and the Pari Passu Creditors will benefit from a common guarantee and security package and no such secured creditor may take the benefit of any guarantee or security from the Restricted Group, Silk Midco AS or the Company (other than any cash cover permitted under the terms of the Revolving Credit Facility Agreement or the Bridge Facility) unless such guarantee or security is also offered (to the extent legally possible and consistent with the Agreed Security Principles) for the benefit of the other secured creditors. The Notes Collateral shall rank and secure the liabilities owed to the Lenders, the Hedge Counterparties, the holders of the Notes and the Pari Passu Creditors pari passu and without any preference between them.

In addition, the Intercreditor Agreement provides that the guarantees and Notes Collateral will be released in certain circumstances described further below in “—Release of Security and Guarantees—Non-Distressed Disposals” and “—Release of Security and Guarantees—Distressed Disposals.”

Permitted Payments

Prior to an acceleration event or enforcement of the Collateral, the Intercreditor Agreement will permit payments to be made by the Debtors under the Revolving Credit Facility Agreement, the Indenture and any Pari Passu Debt documentation and certain payments in respect of the Hedging Liabilities (provided that such payments are permitted under such documents) and does not limit or restrict any payment by any Debtor in the ordinary course of business. The Intercreditor Agreement also permits payments to lenders of Intra Group Liabilities, provided that there has been no acceleration or enforcement of the Collateral. Payments may be made in respect of Structural Liabilities to the extent not expressly prohibited by the Revolving Credit Facility Agreement, the Indenture and the Pari Passu Debt documentation, provided that there has been no acceleration or enforcement of the collateral. There are also restrictions on payments to Hedge Counterparties except for certain specified permitted payments.

The Debtors may not make payments in respect of the Hedging Liabilities, the Notes Liabilities or the Pari Passu Debt after an acceleration event or enforcement of the Notes Collateral unless in accordance with the enforcement proceeds waterfall described below under “—Application of proceeds.”

The Intercreditor Agreement does not restrict the Debtors from making payments in respect of the Credit Facility Liabilities after an acceleration event or enforcement of the Notes Collateral.

An acceleration event includes the relevant creditor representative exercising any or all of its rights under the acceleration provisions of the Revolving Credit Facility Agreement (which includes placing on demand of liabilities thereunder), the Indenture or the Pari Passu Debt documentation.

Limitations on Enforcement

For the purposes of enforcement of the Notes Collateral, the Lenders, the Hedge Counterparties (to the extent they are owed Hedging Liabilities (i) in respect of the Bridge Facility or the Notes (the “Senior Notes/ Bridge Hedging Liabilities”) or (ii) (a) not exceeding an aggregate maximum amount of €30 million (excluding the Senior Notes/Bridge Hedging Liabilities) (the “Super Senior Hedging Amount”) and (b) in respect of each such Hedge Counterparty, not exceeding the portion of the Super Senior Hedging Amount as has been allocated to such Hedge Counterparty by the Company, each calculated by reference to the mark-to-market valuation of the Hedging Liabilities, as at the date the calculation is required to be made under the Intercreditor Agreement (together, the “Super Senior Hedging Liabilities”)) (the “Super Senior Hedge Counterparties”) and their creditor representatives are referred to as the “Super Senior Creditors.”

154 Subject to the Notes Collateral becoming enforceable in accordance with its terms, the Instructing Group (as set out in “—Conflicting Enforcement Instructions” below) may give instructions to the Security Agent as to the enforcement of the Notes Collateral provided they are consistent with the security enforcement principles. If a Creditor Group (as defined in the Intercreditor Agreement) wishes to enforce the Notes Collateral, either 2 (a) 66 /3% by commitment value of the Super Senior Creditors (the “Majority Super Senior Creditors”); or (b) the Senior Secured Required Holders (as set out below) must give notice of the proposed enforcement instructions to their respective creditor representatives; such creditor representatives are required to deliver a copy of such notice (the “Initial Enforcement Notice”) to the Security Agent and the Security Agent is required to forward such notice to the creditor representatives for the other creditor classes and the Hedge Counterparties.

If the Majority Super Senior Creditors or the Senior Required Holders (acting reasonably) consider that the Security Agent is not enforcing the Notes Collateral in a manner which is consistent with the security enforcement principles, notice of this shall be delivered by the relevant Creditor Group’s creditor representative to the other creditor representatives. The giving of this notice triggers a 10 day consultation period during which time the creditor representatives for each of the creditor classes shall discuss with a view to agreeing the manner of enforcement.

The “Senior Secured Required Holders” are determined as follows: (a) if there are no Pari Passu Creditors, it will be a simple majority of a combined class of holders of the Notes and the Non-Super Senior Hedge Counterparties (as defined below); or (b) in any other case, it will be a simple majority of a combined class of holders of the Notes, the Non-Super Senior Hedge Counterparties and Pari Passu Creditors (provided that any Pari Passu Creditors in respect of any tranche of Pari Passu Debt with aggregate Pari Passu Liabilities owed to them or undrawn commitments under that tranche of less than €25 million shall not be entitled to vote in such class).

“Non-Super Senior Hedge Counterparties” means each Hedge Counterparty to the extent it is owed Hedging Liabilities which are not Super Senior Hedging Liabilities.

Conflicting Enforcement Instructions The Security Agent must act on the instructions of the Instructing Group. The Instructing Group consists of (i) the Majority Super Senior Creditors and (ii) the Senior Secured Required Holders.

If there are conflicting enforcement instructions given to the Security Agent by the different classes of creditors who can constitute the Instructing Group, then provided such enforcement instructions are consistent with the security enforcement principles, the enforcement instructions from the Senior Secured Required Holders will prevail over those of the Super Senior Creditors and the Senior Secured Required Holders will constitute the Instructing Group. Failure by a class of creditors to give instructions will not be deemed to be an instruction that conflicts with any other enforcement instructions. After the Security Agent has commenced enforcement over the Collateral, it will not accept any subsequent instructions from anyone other than the Instructing Group that instructed it to take such action, except as described in the paragraph below.

If the relevant creditor group is the Senior Secured Required Holders and either: 1. within three months of the date of the Initial Enforcement Notice, the Senior Secured Required Holders have not either (i) made a determination as to the method of enforcement they wish to instruct the Security Agent to pursue (and in writing notified the Security Agent of that determination), or (ii) appointed a financial advisor to assist them in making such a determination; or 2. the Super Senior Creditors have not been repaid in full within six months of the date of the Initial Enforcement Notice; or 3. (a) the Senior Secured Required Holders have not either (i) made a determination as to the method of enforcement they wish to instruct the Security Agent to pursue (and in writing notified the Security Agent of that determination), or (ii) appointed a financial advisor to assist them in making such a determination; and (b) the Majority Super Senior Creditors (i) determine in good faith that a delay to issuing instructions as to enforcement could reasonably be expected to have a material adverse

155 effect on the ability to effect a distressed disposal or on the expected realization proceeds of any enforcement and (ii) deliver enforcement instructions which they reasonably believe to be consistent with the security enforcement principles, before the Security Agent has received any enforcement instructions from the Senior Secured Required Holders; or 4. an insolvency event (other than an insolvency event directly caused by any enforcement action taken by the Security Agent) is continuing with respect to a Debtor, then to the extent the Majority Super Senior Creditors elect to provide enforcement instructions,

any enforcement instructions given by the Majority Super Senior Creditors will then prevail, provided that they are consistent with the security enforcement principles.

Any enforcement instructions given must comply with certain security enforcement principles including the following: 1. the primary and overriding aim of any enforcement is to achieve the security enforcement objective, namely to maximize, so far as consistent with prompt and expeditious realization of value from enforcement of the Notes Collateral, the recovery of all of the secured parties (provided that the security enforcement objective shall cease to be operative six months after the date of the first enforcement instructions unless the Majority Super Senior Creditors agree); 2. all enforcement proceeds will be received in cash by the Security Agent or sufficient enforcement proceeds will be received in cash by the Security Agent to ensure that after distribution in accordance with the Intercreditor Agreement, the Credit Facility Liabilities will be repaid in full (unless the Majority Super Senior Creditors agree otherwise)); 3. to the extent that the enforcement is over Notes Collateral with an aggregate book value exceeding €2.5 million or over shares in any member of the Restricted Group, the Security Agent shall obtain an opinion from a recognized independent investment bank or other reputable independent third-party professional firm that is regularly engaged in providing valuations of the relevant type and size of assets, that the consideration from such enforcement is fair from a financial point of view taking into account all relevant circumstances (the “Financial Advisor Opinion”); 4. the Financial Advisor’s Opinion will be conclusive evidence that the Security Enforcement Principles have been met; and 5. if any enforcement action is conducted by way of public auction in any jurisdiction, no Financial Advisor needs to be appointed in respect of such enforcement action.

Turnover

Subject to certain exclusions, if any holders of the Notes, Lender, Pari Passu Creditor, Hedge Counterparty (or any of their respective creditor representatives) receives or recovers the proceeds of any enforcement of any Collateral except in accordance with “—Application of Proceeds” below, that person must: 1. in relation to amounts not received or recovered by way of set off, hold that amount on trust for the Security Agent and promptly pay an amount equal to that amount to the Security Agent for application in accordance with the terms of the Intercreditor Agreement; and 2. in relation to receipts and recoveries received or recovered by way of set off, promptly pay an amount equal to that recovery to the Security Agent for application in accordance with the terms of the Intercreditor Agreement.

The Trustee shall only have an obligation to turn over or repay amounts received or recovered by it as described above (a) (i) if it had actual knowledge that the receipt or recovery is an amount received in breach of a provision of the Intercreditor Agreement; and (ii) to the extent that, prior to receiving that knowledge, it has not distributed the amount of that receipt to the holders of the Notes in accordance with the Indenture or (b) if, prior to distribution of the relevant amount, it has received at least two Business Days’ prior notice that an acceleration event or insolvency event has occurred in relation to any Debtor or that the receipt or recovery is subject to the turnover obligations in the Intercreditor Agreement. A similar protection exists for any trustees of Pari Passu Debt.

156 There is also a general turnover obligation on the subordinated creditors to turnover all amounts not received in accordance with the Intercreditor Agreement.

Application of Proceeds All amounts from time to time recovered by the Security Agent in connection with the realization or enforcement of all or any part of the Notes Collateral or distressed disposal shall be held by the Security Agent on trust and applied in the following order: 1. first, pro rata and pari passu, in payment of all unpaid costs, expenses and liabilities owing to the Trustee, the creditor representative for the Pari Passu Creditors, the Security Agent, each other creditor representative and any receiver or delegate 2. second, pro rata and pari passu, in payment of all costs and expenses incurred by the Super Senior Creditors in connection with the enforcement of the Notes Collateral or any action taken at the request of the Security Agent; 3. third, pro rata and pari passu, in payment to the agent of the Lenders for its own behalf and on behalf of the arrangers of the Revolving Credit Facility and the Lenders for application towards the discharge of the Credit Facility Liabilities and to each Super Senior Hedge Counterparty for application toward the discharge of the Super Senior Hedging Liabilities; 4. fourth, pro rata and pari passu, in payment of all costs and expenses incurred by the holders of the Notes each Non-Super Senior Hedge Counterparty and the Pari Passu Creditors in connection with the enforcement of the Collateral or any action taken at the request of the Security Agent; 5. fifth, pro rata and pari passu, in payment to (i) the Trustee on behalf of the holders of the Notes for application towards the discharge of the Notes Liabilities in accordance with the Indenture ; (ii) each Super Senior Hedge Counterparty for application towards the discharge of any Hedging Liabilities in excess of the Super Senior Hedging Liabilities; (iii) each Non-Super Senior Hedge Counterparty for application of the discharge of the Hedge Liabilities which are not Super Senior Hedging Liabilities; and (iv) the creditor representatives of the Pari Passu Creditors for application towards the discharge of the Pari Passu Debt; and 6. sixth, after all the secured creditors have been repaid in full, in payment of the surplus (if any) to the relevant Debtor or other person entitled to it.

Option to Purchase The holders of the Notes and Pari Passu Creditors, which are holders of certain issued debt securities, may, after delivery of an Initial Enforcement Notice by any Lenders, and subject to various conditions set out in the Intercreditor Agreement (including the grant of an acceptable indemnity against claw back to the Lenders and Pari Passu Loan Creditors), exercise an option to purchase the Credit Facility Liabilities in full and at par.

Release of Security and Guarantees—Non-Distressed Disposals In circumstances where a disposal is not a distressed disposal (and is otherwise permitted by the terms of the Revolving Credit Facility Agreement, the Indenture and any Pari Passu Debt documentation), the Intercreditor Agreement will provide that the Security Agent is authorized: (a) to release the Notes Collateral or any other claim over the relevant asset; and (b) if the relevant asset consists of shares in the capital of a Debtor or a holding company of a Debtor, to release the Notes Collateral or any other claim over that holding company’s or Debtor’s assets and the assets of any of their subsidiaries,

provided that in the case of a disposal to another member of the Restricted Group, any required replacement security is granted by the transferee before or at the same time as the release.

If required by the terms of the Revolving Credit Facility Agreement, the Indenture or Pari Passu Documents, any proceeds from a disposal that does not constitute a distressed disposal shall be applied in mandatory prepayment of the relevant debt.

157 Release of Security and Guarantees—Distressed Disposals In circumstances where a distressed disposal is being effected, the Intercreditor Agreement provides that the Security Agent is authorized: (a) to release the Notes Collateral or any other claim over the relevant asset; (b) if the asset which is disposed of consists of shares in the capital of a Debtor, to release (a) that Debtor and any subsidiary of that Debtor from all or any part of its borrowing liabilities, guaranteeing liabilities (including in relation to the Notes) and certain other liabilities; (b) any Notes Collateral granted over that Debtor’s assets and the assets of any of its subsidiaries; and (c) any other claim of a Debtor or intra group lender over that Debtor’s assets or over the assets of any subsidiary of that Debtor; (c) if the asset which is disposed of consists of shares in the capital of any holding company of a Debtor, to release (a) that holding company and any subsidiary of that holding company from all or any part of its borrowing liabilities, guaranteeing liabilities (including in relation to the Notes) and certain other liabilities; (b) any Notes Collateral granted over the assets of any subsidiary of that holding company; and (c) any other claim of a Debtor or intra group lender over the assets of any subsidiary of that holding company; (d) if the asset which is disposed of consists of shares in the capital of a Debtor or any holding company of a Debtor, to dispose of all or any part of that Debtor’s or the holding company that Debtor’s borrowing liabilities, guaranteeing liabilities (including in relation to the Notes) and certain other liabilities; and (e) if the asset which is disposed of consists of shares in the capital of a Debtor or any holding company of a Debtor, to transfer Intra Group Liabilities and debtor liabilities owed by that Debtor or holding company of a Debtor to another Debtor.

Any net proceeds of the disposal must be applied in accordance with the enforcement proceeds waterfall described above under “—Application of Proceeds.”

Amendment The Intercreditor Agreement may be amended with the consent of only the Majority Super Senior Creditors, the required percentage of the combined class of the holders of the Notes and the Non-Super Senior Hedge Counterparties (as set out in the Intercreditor Agreement), the required percentage of Pari Passu Creditors (as set out in the relevant Pari Passu Debt documentation), the Company and the Security Agent unless the proposed amendment relates to certain specified matters such as ranking, priority, subordination, turnover, enforcement, disposal proceeds, amendments or the payment waterfall. Such amendments require consent from all Super Senior Creditors, the required percentage of holders of the Notes (as set out in the Indenture), the required percentage of Pari Passu Creditors (as set out in the relevant Pari Passu Debt documentation), and each Hedge Counterparty (to the extent such amendments adversely affect it or relate to the nature or scope of Collateral), the Company and the Security Agent.

No amendment or waiver of the Intercreditor Agreement may impose new or additional obligations on or withdraw or reduce the rights of any party (other than in a way which affects creditors of that party’s class generally) to the Intercreditor Agreement without the prior consent of that party.

The Intercreditor Agreement may be amended without the consent of the holders of the Notes in certain circumstances set out further in “Description of the Notes—Amendments to the Intercreditor Agreement and Additional Intercreditor Agreements” below.

To the extent the Debtors wish to enter into Pari Passu Debt or other additional or replacement indebtedness (“Additional Indebtedness”) which is permitted to share in the Notes Collateral pursuant to the Revolving Credit Facility Agreement, the Indenture and any other Pari Passu Debt documentation, then the parties to the Intercreditor Agreement may be required to enter into a replacement intercreditor agreement as set out further in “Description of the Notes—Amendments to the Intercreditor Agreement and Additional Intercreditor Agreements” below on substantially the same terms as the Intercreditor Agreement.

158 The Intercreditor Agreement also permits the Security Agent (subject to the terms of the Revolving Credit Facility Agreement) to enter into new or supplemental security and/or release and retake the Notes Collateral if certain conditions are met, set out further in “Description of the Notes—Certain Covenants—Impairment of Security Interest” below.

Bridge Facility Agreement A Bridge Facility Agreement in the committed amount of up to €455.0 million was entered into on October 6, 2014 between the Company as borrower, Silk Midco AS, as parent, Goldman Sachs International as mandated lead arranger, Goldman Sachs Lending Partners LLC as agent and U.S. Bank Trustees Limited as security agent. The Bridge Facility Agreement contains covenants that are similar to the Revolving Credit Facility. The borrowings under the Bridge Facility will be repaid with the proceeds of this Offering. See “Use of Proceeds.”

159 DESCRIPTION OF THE NOTES

The Company issued and the Guarantors guaranteed €455 million aggregate principal amount of 7.50% senior secured notes due 2022 (the “Notes”) in this Offering. The Notes were issued by Silk Bidco AS (the “Company”), a private limited company incorporated under the laws of Norway, which has no operations and no assets other than the shares of Hurtigruten ASA (“Hurtigruten”) and its rights under the on-loans of proceeds to Hurtigruten pursuant to the Proceeds Loan Agreement (as defined herein).

The proceeds of the Offering sold on the Issue Date are used by the Company to repay existing indebtedness under the Bridge Facility Agreement owed by the Company and to pay fees, costs and expenses incurred in connection with the Refinancing Transactions, as set forth in “Use of Proceeds.”

Upon the initial issuance of the Notes, the Notes are obligations of the Company. Within 70 days from the Hurtigruten Tender Offer Settlement Date (the “Backstop Date”), the Guarantors specified below under “—Notes Guarantees” became a party to the Indenture (as defined herein) and guaranteed the Notes on a senior secured basis.

The Company issued the Notes under an indenture dated as of the Issue Date (the “Indenture”) among, inter alios, the Company and the Trustee. The Guarantors will become parties to the Indenture upon their accession thereto. The Notes will be issued in private transactions that are not subject to the registration requirements of the Securities Act. See “Transfer Restrictions.” The terms of the Notes include those stated in the Indenture. The Indenture will not be qualified under, incorporate provisions by reference to or otherwise be subject to the Trust Indenture Act of 1939, as amended.

The Indenture, the Notes and the Notes Guarantees will be subject to the terms of the Intercreditor Agreement (as defined herein) and any Additional Intercreditor Agreement (as defined herein) entered into in the future pursuant to “—Amendments to the Intercreditor Agreement and Additional Intercreditor Agreements.” The terms of the Intercreditor Agreement are important to understanding the terms and ranking of the Liens on the Collateral securing the Notes and the Notes Guarantees. Please see “Description of Other Indebtedness—Intercreditor Agreement ” for a description of the material terms of the Intercreditor Agreement.

The following description is a summary of the material provisions of the Indenture, the Notes and the Notes Guarantees and refers to the Intercreditor Agreement. This description does not restate those agreements in their entirety. We urge you to read the Indenture, the Notes and the Intercreditor Agreement because they, and not this description, define your rights as holders of the Notes. Copies of the Indenture, the form of Notes and the Intercreditor Agreement will be available as set forth below under “Where You Can Find More Information.”

Certain defined terms used in this description but not defined below under “—Certain Definitions ” have the meanings assigned to them in the Indenture. You can find the definitions of certain terms used in this description under the subheading “—Certain Definitions.” In this “Description of the Notes,” the “Company” refers only to Silk Bidco AS and any successor obligor to Silk Bidco AS on the Notes and not to any of its subsidiaries and “Hurtigruten ” refers only to Hurtigruten ASA and any successor obligor to Hurtigruten ASA on its Notes Guarantee (as defined below) and not to any of its subsidiaries. Hurtigruten is a wholly owned subsidiary of the Company.

The registered holder of a Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the Indenture.

Summary Description of the Notes The Notes • are senior obligations of the Company and rank equal in right of payment with any existing or future Indebtedness of the Company that is not expressly subordinated to the Notes; • are secured by the Collateral described below, along with obligations under the Revolving Credit Facility Agreement (although any liabilities in respect of obligations under the

160 Revolving Credit Facility, certain Hedging Obligations and certain other future Indebtedness that are secured by the Collateral will receive priority over the Holders with respect to any proceeds received upon any enforcement action over the Collateral); • are senior in right of payment to any future Subordinated Indebtedness (as defined herein) of the Company; • are effectively senior in right of payment to any existing or future unsecured obligations of the Company to the extent of the value of the Collateral that is available to satisfy the obligations under the Notes; and • following the Backstop Date, will be unconditionally guaranteed on a senior secured basis by the Guarantors, which guarantees may be subject to the guarantee limitations described in this Offering Memorandum.

Principal and Maturity On the Issue Date, the Company will issue €455 million aggregate principal amount of Notes. The Notes will mature on February 1, 2022. The repayment price of the Notes is 100.000%. The Notes will be issued in minimum denominations of €100,000 and in integral multiples of €1,000 in excess thereof. The rights of holders of beneficial interests in the Notes to receive the payments on such Notes are subject to applicable procedures of Euroclear and/or Clearstream. If the due date for any payment in respect of any Notes is not a Business Day at the place at which such payment is due to be paid, the Holder thereof will not be entitled to payment of the amount due until the next succeeding Business Day at such place, and will not be entitled to any further interest or other payment as a result of any such delay.

Interest Interest on the Notes will accrue at the rate of 7.50% per annum. Interest on the Notes will be payable, in cash, semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2015 to holders of record on the immediately preceding January 15 and July 15, respectively. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. Each interest period shall end on (but not include) the relevant interest payment date.

Additional Notes The Indenture is unlimited in aggregate principal amount, but this issuance of Notes is limited to €455 million aggregate principal amount of Notes (the “Initial Notes”).

From time to time, subject to the Company’s compliance with the covenants contained in the Indenture, including the covenants restricting the incurrence of Indebtedness (as described below under the heading “—Certain Covenants—Limitation on Indebtedness ”), the Company is permitted to issue additional Notes, which shall have terms substantially identical to the Initial Notes except in respect of any of the following terms which shall be set forth in an Officer’s Certificate supplied to the Trustee (the “Additional Notes”): (1) the title of such Additional Notes; (2) the aggregate principal amount of such Additional Notes; (3) the date or dates on which such Additional Notes will be issued; (4) the rate or rates (which may be fixed or floating) at which such Additional Notes shall bear interest and, if applicable, the interest rate basis, formula or other method of determining such interest rate or rates, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable or the method by which such dates will be determined, the record dates for the determination of holders thereof to whom such interest is payable and the basis upon which such interest will be calculated; (5) the currency or currencies in which such Additional Notes shall be denominated and the currency in which cash or government obligations in connection with such series of Additional Notes may be payable;

161 (6) the date or dates and price or prices at which, the period or periods within which, and the terms and conditions upon which, such Additional Notes may be redeemed, in whole or in part; (7) if other than denominations of €100,000 and in integral multiples of €1,000 in excess thereof the denominations in which such Additional Notes shall be issued and redeemed; and (8) the ISIN, Common Code, CUSIP or other securities identification numbers with respect to such Additional Notes.

Such Additional Notes will be treated, along with all other series of Notes, as a single class for the purposes of the Indenture with respect to waivers, amendments and all other matters which are not specifically distinguished for such series. Unless the context otherwise requires, for all purposes of the Indenture and this “Description of the Notes,” references to “Notes ” shall be deemed to include references to the Initial Notes as well as any Additional Notes. For all purposes other than U.S. federal income tax purposes, the Initial Notes and any Additional Notes shall be deemed to form one series, and references to the “Notes ” shall be deemed to refer to the Initial Notes as well as any Additional Notes. In the event that any Additional Notes are not fungible with any Notes previously issued for U.S. federal income tax purposes, such non-fungible Additional Notes shall be issued with a separate ISIN, Common Code, CUSIP or other securities identification number, as applicable, so that they are distinguishable from such previously issued Notes.

Methods of Receiving Payments on the Notes

Principal, premium, if any, interest and Additional Amounts (as defined under “—Additional Amounts ”), if any, on the Global Notes (as defined under “—Transfer and Exchange”) will be payable at the specified office or agency of one or more Paying Agents (as defined under “—Paying Agent, Registrar and Transfer Agent for the Notes”); provided that all such payments with respect to Notes represented by one or more Global Notes registered in the name of or held by the common depositary for Euroclear or Clearstream or its nominee will be made by wire transfer of immediately available funds to the account specified by the Holder or Holders thereof.

Principal, premium, if any, interest and Additional Amounts, if any, on any certificated securities (“Definitive Registered Notes”) will be payable at the specified office or agency of one or more Paying Agents in the city of London maintained for such purposes. In addition, interest on the Definitive Registered Notes may be paid by check mailed to the Person entitled thereto as shown on the register for the Definitive Registered Notes. See “—Paying Agent, Registrar and Transfer Agent for the Notes.”

Paying Agent, Registrar and Transfer Agent for the Notes

The Company will maintain one or more paying agents (each, a “Paying Agent ”) for the Notes, including a Paying Agent in London, United Kingdom. The Company will also undertake to maintain a Paying Agent in a member state of the European Union that will not be obliged to withhold or deduct tax pursuant to the European Council Directive 2003/48/EC regarding the taxation of savings income or any other directive implementing the conclusions of the ECOFIN Council meetings of 26 and 27 November 2000 on the taxation of savings income (the “Taxation Directive”), or any law implementing, or complying with or introduced in order to conform to the Taxation Directive. The initial Paying Agent for the Notes will be Elavon Financial Services Limited, UK Branch.

The Company will also maintain (i) one or more registrars (each, a “Registrar”) with offices in Dublin, Ireland and (ii) a transfer agent in London, United Kingdom (the “Transfer Agent ”). The initial Registrar will be Elavon Financial Services Limited. The initial Transfer Agent will be Elavon Financial Services Limited, UK Branch. The Registrar, the Paying Agent and the Transfer Agent, as applicable, will maintain a register reflecting ownership of Definitive Registered Notes outstanding from time to time, if any, and will make payments on and facilitate transfers of Definitive Registered Notes on behalf of the Company. The Transfer Agent shall perform the functions of a transfer agent.

The Company may change any Paying Agent, Registrar or Transfer Agent for the Notes without prior notice to the Holders. However, for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange (the “LxSE”) and admitted for trading on the Euro MTF of the LxSE and the rules of such exchange so require, the Company will publish a notice of any change of Paying

162 Agent, Registrar or Transfer Agent in a daily newspaper having a general circulation in Luxembourg (which is expected to be Luxemburger Wort) or, to the extent and in the manner permitted by such rules, such notice on the official website of the Luxembourg Stock Exchange. The Company or any of its Subsidiaries may act as Paying Agent or Registrar in respect of the Notes.

Transfer and Exchange The Notes will be issued in the form of one or more registered notes in global form without interest coupons, as follows: • Each series of Notes sold within the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act will initially be represented by one or more global notes in registered form without interest coupons attached (the “144A Global Notes”). • The 144A Global Notes will, on the Issue Date, be deposited with and registered in the name of the nominee of the common depositary for the accounts of Euroclear and Clearstream. • Each series of Notes sold outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act will initially be represented by one or more global notes in registered form without interest coupons attached (the “Regulation S Global Notes” and, together with the 144A Global Notes, the “Global Notes”). • The Regulation S Global Notes will, on the Issue Date, be deposited with and registered in the name of the nominee of the common depositary for the accounts of Euroclear and Clearstream.

Ownership of interests in the Global Notes (“Book-Entry Interests”) will be limited to Persons that have accounts with Euroclear or Clearstream or Persons that may hold interests through such participants. Ownership of interests in the Book-Entry Interests and transfers thereof will be subject to the restrictions on transfer and certification requirements summarized below and described more fully under “Transfer Restrictions.” In addition, transfers of Book-Entry Interests between participants in Euroclear or participants in Clearstream will be effected by Euroclear or Clearstream, as applicable, pursuant to customary procedures and subject to the applicable rules and procedures established by Euroclear or Clearstream, as applicable, and their respective participants.

Book-Entry Interests in the 144A Global Notes may be transferred to a Person who takes delivery in the form of Book-Entry Interests in the Regulation S Global Notes only upon delivery by the transferor of a written certification (in the form provided in the Indenture) to the effect that such transfer is being made in accordance with Regulation S under the Securities Act.

Prior to 40 days after the date of initial issuance of the Notes, ownership of Book-Entry Interests in Regulation S Global Notes will be limited to Persons that have accounts with Euroclear or Clearstream or Persons who hold interests through Euroclear or Clearstream, and any sale or transfer of such interest to U.S. persons shall not be permitted during such period unless such resale or transfer is made pursuant to Rule 144A under the Securities Act. Subject to the foregoing, Regulation S Book-Entry Interests may be transferred to a Person who takes delivery in the form of 144A Book-Entry Interests only upon delivery by the transferor of a written certification (in the form provided in the Indenture) to the effect that such transfer is being made to a Person who the transferor reasonably believes is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or otherwise in accordance with the transfer restrictions described under “Transfer Restrictions” and in accordance with any applicable securities law of any other jurisdiction.

Any Book-Entry Interest that is transferred as described in the immediately preceding paragraphs will, upon transfer, cease to be a Book-Entry Interest in the Global Note from which it was transferred and will become a Book-Entry Interest in the Global Note to which it was transferred. Accordingly, from and after such transfer, it will become subject to all transfer restrictions, if any, and other procedures applicable to Book-Entry Interests in the Global Note to which it was transferred.

If Definitive Registered Notes are issued, they will be issued only in minimum denominations of €100,000 principal amount and integral multiples of €1,000 in excess thereof upon receipt by the Registrar of instructions relating thereto and any certificates, opinions and other documentation required by the Indenture. It is expected that such instructions will be based upon directions received by Euroclear or Clearstream, as applicable, from the participant that owns the relevant Book-Entry

163 Interests. Definitive Registered Notes issued in exchange for a Book-Entry Interest will, except as set forth in the Indenture or as otherwise determined by the Board of Directors or an Officer of the Company to be in compliance with applicable law, be subject to, and will have a legend with respect to, the restrictions on transfer summarized below and described more fully under “Transfer Restrictions.”

Subject to the restrictions on transfer referred to above, Notes issued as Definitive Registered Notes may be transferred or exchanged in whole or in part, in minimum denominations of €100,000 in principal amount and integral multiples of €1,000 in excess thereof. In connection with any such transfer or exchange, the Indenture will require the transferring or exchanging Holder to, among other things, furnish appropriate endorsements and transfer documents, to furnish information regarding the account of the transferee at Euroclear or Clearstream, as applicable, to furnish certain certificates and opinions, and to pay any Taxes in connection with such transfer or exchange. Any such transfer or exchange will be made without charge to the Holder, other than any Taxes payable in connection with such transfer.

Notwithstanding the foregoing, the Company is not required to register the transfer or exchange of any Notes: (1) for a period of 15 days prior to any date fixed for the redemption of such Notes; (2) for a period of 15 days immediately prior to the date fixed for selection of such Notes to be redeemed in part; (3) for a period of 15 days prior to the record date with respect to any interest payment date applicable to such Notes; or (4) which the Holder has tendered (and not withdrawn) for repurchase in connection with a Change of Control Offer (as defined under “—Change of Control”) or an Asset Disposition Offer (as defined under “— Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock”).

The Company, the Trustee, any Paying Agent, the Registrar and the Transfer Agent will be entitled to treat the Holder as the owner of it for all purposes.

Restricted Subsidiaries and Unrestricted Subsidiaries Immediately after the issuance of the Notes, all the Company’s Subsidiaries will be Restricted Subsidiaries. In the circumstances described below under the definition of “Unrestricted Subsidiary,” the Company will be permitted to designate Restricted Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants contained in the Indenture.

Notes Guarantees The obligations of the Company pursuant to the Notes will (subject to the Agreed Security Principles) be guaranteed, jointly and severally, on a senior basis by Hurtigruten and each subsidiary of Hurtigruten that is a guarantor under the Revolving Facility Agreement (each a “Guarantor” and such guarantee, a “Notes Guarantee”).

The initial Guarantors and their respective jurisdictions of incorporation will be as follows:

Company Jurisdiction Hurtigruten ASA ...... Norway Hurtigruten Pluss AS ...... Norway Hurtigruten Sjø AS ...... Norway Ingeniør G. Paulsen AS ...... Norway Spitsbergen Travel AS ...... Norway

Each of the initial Guarantors will guarantee the Notes on or prior to the Backstop Date. As of and for the twelve months ended September 30, 2014, the Guarantors generated 113% and 101% of the consolidated revenues and EBITDA of the Restricted Subsidiaries, respectively, and represented 104% of the consolidated total assets of the Restricted Subsidiaries.

164 In addition, subject to the Agreed Security Principles, if the Company or any of its Restricted Subsidiaries acquires or creates a Restricted Subsidiary (other than an Immaterial Subsidiary) after the Issue Date or any Restricted Subsidiary guarantees or becomes liable for certain Indebtedness, the Company will cause such new Subsidiary to provide a Subsidiary Notes Guarantee. The new Guarantor will also, subject to the Agreed Security Principles, be required to pledge its material assets that are of the same type as any of the Company’s or the Guarantors’ assets that are required to be part of the Notes Collateral as of the Issue Date or the Backstop Date, as applicable, in favor of the Notes Guarantees as described under “—Security.”

The Agreed Security Principles apply to the granting of guarantees and security in favor of obligations under the Notes. The Agreed Security Principles include restrictions on the granting of guarantees where, among other things, such grant would be restricted by general statutory limitations, financial assistance, corporate benefit, fraudulent preference, “thin capitalization” rules, retention of title claims and similar matters.

In particular, Norway has mandatory restrictions on financial assistance, which means the obligations of the Guarantors under the Notes Guarantees will not effectively secure any part of the Notes which has been (or will be) used to refinance any part of the existing indebtedness originally incurred and used to acquire the share capital of Hurtigruten. The Notes Guarantees are limited by mandatory provisions of law applicable to Guarantors formed in Norway limiting the legal capacity or ability of such Guarantors to provide Notes Guarantees pursuant to, inter alia, Sections 8-7 and 8-10, cf. 1-3 and 1-4, of the Norwegian Companies Acts of 1997. As a consequence of the above restrictions, the value of a Notes Guarantee and any security provided by a Norwegian guarantor may be reduced to zero to the extent it secures obligations relating to the acquisition of shares in itself or its parent company. By virtue of this limitation, a Guarantor’s obligation under its Notes Guarantee could be significantly less than amounts payable with respect to the Notes, or a Guarantor may have effectively no obligation under its Notes Guarantee. The Notes Guarantees to be granted by Guarantors organized under the laws of Norway will be limited by financial assistance, among other limitations, which may substantially limit their value. The Notes Guarantees given by the Guarantors organized under the laws of Norway will be limited to the principal amount of the Notes less an amount of €133.7 million, reflecting the Notes proceeds which will be used to refinance acquisition debt drawn under the Bridge Facility in order to finance the Hurtigruten Acquisition.

Each Notes Guarantee will be limited to the maximum amount that would not render the Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of foreign or state law, or as otherwise required under the Agreed Security Principles to comply with corporate benefit, financial assistance and other laws. By virtue of this limitation, a Guarantor’s obligation under its Notes Guarantee could be significantly less than amounts payable with respect to the Notes, or a Guarantor may have effectively no obligation under its Notes Guarantee. See “Risk Factors— Risks Related to the Notes and Our Structure—The Notes Guarantees will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defenses that may adversely affect their validity and enforceability.”

The Notes Guarantees of a Guarantor will terminate and release upon: (1) a sale or other disposition (including by way of consolidation or merger) of Capital Stock of the relevant Guarantor or of a Parent thereof, such that such Guarantor ceases to be a Restricted Subsidiary, or the sale or disposition of all or substantially all the assets of the relevant Guarantor (other than to the Company, a Successor Company or a Restricted Subsidiary), in each case in a transaction otherwise permitted by the Indenture; (2) the designation in accordance with the Indenture of the relevant Guarantor as an Unrestricted Subsidiary; (3) defeasance or discharge of the Notes, as provided in “—Defeasance” and “—Satisfaction and Discharge”; (4) to the extent that the relevant Guarantor is not an Immaterial Subsidiary solely due to the operation of clause (i) of the definition of “Immaterial Subsidiary,” upon the relevant release of the guarantee or discharge of Indebtedness referred to in such clause; (5) upon full payment of all obligations of the Company and the Guarantors under the Indenture and the Notes; or (6) in connection with certain enforcement actions taken by the creditors under certain of our Secured Indebtedness as provided under the Intercreditor Agreement.

165 Substantially all the operations of the Company are conducted through its Subsidiaries. Claims of creditors of non-Guarantor Subsidiaries, including trade creditors, secured creditors and creditors holding debt and guarantees issued by those Subsidiaries, and claims of preferred and minority stockholders (if any) of those Subsidiaries will have priority with respect to the assets and earnings of those Subsidiaries over the claims of creditors of the Company, including Holders or the claims made under the Proceeds Loan. The Notes, each Notes Guarantee and the Proceeds Loan therefore will be effectively subordinated to creditors (including trade creditors) and preferred and minority stockholders (if any) of any future Subsidiaries of the Company that do not become Guarantors.

Although the Indenture limits the incurrence of Indebtedness, Disqualified Stock and Preferred Stock of Restricted Subsidiaries, the limitation is subject to a number of significant exceptions. Moreover, the Indenture does not impose any limitation on the incurrence by the Company or Restricted Subsidiaries of liabilities that are not considered Indebtedness, Disqualified Stock or Preferred Stock under the Indenture and does not impose any limitation on the issuance by the Company of any Preferred Stock. See “—Certain Covenants—Limitation on Indebtedness.”

Security The Collateral On the Issue Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, the Company will grant in favor of the Security Agent for the benefit of the secured parties (which includes the Trustee on behalf of the Holders), security on a first ranking basis, over substantially all of the assets of the Company, including: shares of capital stock of Hurtigruten; certain bank accounts, certain intra-group receivables (including the rights of the Company under the Proceeds Loan); the securities register account of the Company opened with Verdipapirsentralen ASA; and an assignment of claims under the settlement agreement in connection with the Hurtigruten Acquisition, and Silk Midco AS will grant in favor of the Security Agent for the benefit of the secured parties (which includes the Trustee on behalf of the Holders), security on a first ranking basis, over substantially all of the assets of Silk Midco AS, including: shares of capital stock of the Company and certain intra-group receivables (together, the “Initial Collateral ”).

On or prior to the Backstop Date, subject to the operation of the Agreed Security Principles and certain perfection requirements, Hurtigruten, Spitsbergen Travel AS, Ingeniør G Paulsen AS, Hurtigruten Sjø AS and Hurtigruten Pluss AS will grant in favor of the Security Agent for the benefit of the secured parties (which includes the Trustee on behalf of the Holders), security on a first ranking basis over its material assets, including: shares of capital stock of the Guarantors; certain bank accounts; intra-group receivables; an assignment of insurance claims in respect of certain ships and any other insurance claims the Guarantors may have (if applicable); claims under the Coastal Service Contract; a pledge of customer receivables (factoring), inventory and machinery and plant (including intellectual property); and mortgages over certain ships owned by the Guarantors (collectively with the Initial Collateral, the “Collateral”).

Each of the Security Documents will be governed by Norwegian law. Notwithstanding the foregoing, certain assets may not be secured or such security may not be perfected in accordance with the Agreed Security Principles, including: • if the cost of providing security is not proportionate to the benefit accruing to the Holders and the other secured parties; • if the asset is subject to a third party arrangement, which is not prohibited by the Indenture or the Intercreditor Agreement, that prevents such security from being taken; provided that reasonable endeavors are taken to obtain consent for taking such security; • if providing such security would be prohibited by general statutory limitations, financial assistance, corporate benefit, capital maintenance rules, fraudulent preference, “thin capitalization” rules or similar matters or entering into the Security Documents would conflict with fiduciary duties of directors, contravene any legal or regulatory prohibition or result in a risk of personal or criminal liability on the part of directors or officers; • if perfecting such security would have an unreasonable adverse effect on the ability of such Subsidiary to conduct its operations and business in the ordinary course as otherwise permitted by the Indenture (in which case, security will not be perfected prior to an acceleration event);

166 • if in certain jurisdictions it may not be possible to create security over certain assets, security will not be taken over such assets; and • in the case of bank accounts, notices to the banks with whom the accounts are maintained will only be served after a “Relevant Acceleration Event ” (as defined in the Agreed Security Principles).

Norway has mandatory restrictions on financial assistance, which means the Collateral will not effectively secure any part of the Notes which has been (or will be) used to refinance any part of the existing indebtedness originally incurred and used to acquire the share capital of Hurtigruten. The Collateral will be limited by mandatory provisions of law applicable to Guarantors formed in Norway limiting the legal capacity or ability of such Guarantors to provide security pursuant to, inter alia, Sections 8-7 and 8-10, cf. 1-3 and 1-4, of the Norwegian Companies Acts of 1997. See “—Notes Guarantees”.

Administration and Enforcement of Security The Security Documents and the Collateral will be administered by a Security Agent (or in certain circumstances a receiver or delegate) pursuant to the Intercreditor Agreement for the benefit of all the secured parties. For a description of the Intercreditor Agreement, see “Description of Other Indebtedness—Intercreditor Agreement.”

The ability of Holders to realize the Collateral will be subject to various insolvency law limitations in the event of the Company’s insolvency and various contractual limitations set out in the Intercreditor Agreement. See “Risk Factors—Risks Related to the Notes and Our Structure—The insolvency laws of Norway may not be as favorable to holders of Notes as U.S. insolvency laws or those of another jurisdiction with which you may be familiar” and “Risk factors—Risks Related to the Notes and Our Structure—The Notes Guarantees will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defenses that may adversely affect their validity and enforceability.”

The Security Documents will provide that the rights of the Holders with respect to the Collateral must be exercised by the Security Agent. Since the Holders are not a party to the Security Documents, Holders may not, individually or collectively, take any direct action to enforce any rights in their favor under the Security Documents. Under the Note Documents, the Holders may only act through the Trustee or the Security Agent, as applicable. The Security Agent will agree to release a security interest created by the Security Documents that is in accordance with the Indenture and the Intercreditor Agreement without requiring any consent of the Holders. Subject to the terms of the Intercreditor Agreement and the Indenture, the Holders will, in certain circumstances, be entitled to direct the Trustee to direct the Security Agent to commence enforcement action under the Security Documents. Please see “Description of Other Indebtedness—Intercreditor Agreement.”

The concept of a security trustee, as it is understood under U.S. law, does not exist under Norwegian law. In Norway, a security trustee would be considered to be acting as a security agent. In practice in Norway, in an arrangement with a security agent acting on behalf of the secured parties, as these exist from time to time, it is generally recognized under Norwegian law that the security agent will be able to enforce the security on behalf of the secured parties and apply any proceeds to the secured parties. In order to commence any legal action regarding a claim (for enforcement purposes or otherwise) against the debtor, the security agent may be required to disclose to the court the identity of the creditors and have the creditors join in or participate as claimants in the proceedings. It has been established by the Norwegian Supreme Court that a bond trustee for an undisclosed number of noteholders can, based on the provisions in the relevant bond agreement or indenture, take legal action against the issuer on behalf of and in lieu of the noteholders without having to disclose the identity of the noteholders. However, the relevant Norwegian court would have to examine the relevant indenture together with the other relevant agreements relating to the Notes and this Offering to determine whether the Trustee would be able to act in such capacity.

Subject to the terms of the Security Documents, the Company and the Guarantors will have the right to remain in possession and retain control of the Collateral securing the Notes (other than as set

167 forth in the Security Documents), to freely operate the Collateral and to collect, invest and dispose of any income therefrom.

No appraisals of any of the Collateral have been prepared by or on behalf of the Company in connection with the issuance of the Notes. There can be no assurance that the proceeds from the sale of the Collateral remaining after the payment of obligations under the Revolving Credit Facility Agreement or other super priority obligations would be sufficient to satisfy the obligations owed to the Holders as well as any other obligations secured on a pari passu basis. By its nature, some or all the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral can be sold in a short period of time or at all. See “Risk factors—Risks Related to the Notes and Our Structure—No appraisals of any of the Notes Collateral have been prepared by us or on our behalf in connection with the issuance of the Notes. The Notes will be secured only to the extent of the value of the Notes Collateral that has been granted as security for the Notes and the Notes Guarantees, and the Notes Collateral may not be sufficient to secure the obligations under the Notes and the Notes Guarantee.”

The creditors under the Revolving Credit Facility Agreement and, by accepting a Note, each Holder will be deemed to have: • irrevocably appointed U.S. Bank Trustees Limited, as Security Agent, in each case to act as its security agent under the Intercreditor Agreement and the other relevant documents to which the security agent is a party (including, without limitation, the Security Documents); • irrevocably authorized the Security Agent and the Trustee to (i) perform the duties and exercise the rights, powers and discretions that are specifically given to each of them under the Intercreditor Agreement or other documents to which the Security Agent and/or the Trustee is a party, together with any other incidental rights, power and discretions; and (ii) execute each document expressed to be executed by the Security Agent and/or the Trustee on its behalf; and • accepted the terms and conditions of the Intercreditor Agreement and any Additional Intercreditor Agreement (as defined herein) and each Holder will also be deemed to have authorized the Security Agent and the Trustee to enter into any such Additional Intercreditor Agreement.

In addition, the terms of the Security Documents and/or the nature of the security interest granted may provide for (or result in) certain assets originally the subject of a security interest being released from that security without the need for a formal release. Further, assets which may not be validly secured or assets which are already subject to certain types of Permitted Liens may be excluded from the security created by certain Security Documents.

Release of Liens To the extent a release is required by a Security Document, the Security Agent shall release, and the Trustee (as applicable) shall release and if so requested direct the Security Agent to release, without the need for consent of the Holders, Liens on the Collateral securing the Notes: (1) upon payment in full of principal, interest and all other obligations on the Notes issued under the Indenture or discharge or defeasance thereof; (2) upon release of a Notes Guarantee (with respect to the Liens securing such Notes Guarantee granted by such Guarantor); (3) in connection with any disposition of Collateral to any Person (but excluding any transaction subject to “—Certain Covenants—Merger and Consolidation—The Company ”); provided that if the Collateral is disposed of to the Company or a Restricted Subsidiary, the relevant Collateral becomes immediately subject to a substantially equivalent Lien in favor of the Security Agent securing the Notes; provided, further, that, in each case, such disposition is permitted by the Indenture; (4) if the Company designates any Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the Indenture, the release of the property, assets and Capital Stock of such Unrestricted Subsidiary; (5) in connection with certain enforcement actions taken by the creditors under certain of our Secured Indebtedness as provided under the Intercreditor Agreement, or otherwise in compliance with the Intercreditor Agreement;

168 (6) as may be permitted by the covenant described under “—Certain Covenants—Impairment of Security Interest”; and (7) in order to effectuate a merger, consolidation, conveyance, transfer or other business combination conducted in compliance with the covenant described under “—Certain Covenants—Merger and Consolidation”.

Each of these releases shall be effected by the Security Agent without the consent of the Holders or any action on the part of the Trustee.

Intercreditor Agreement On the Issue Date, the Trustee shall accede to the Intercreditor Agreement. Pursuant to the terms of the Intercreditor Agreement, any liabilities in respect of obligations under the Revolving Credit Facility Agreement, certain Hedging Obligations and certain other future Indebtedness that are secured by Collateral that also secures our obligations under the Notes and the Notes Guarantees will receive priority with respect to any proceeds received upon any enforcement action over any such assets. Any remaining proceeds received upon any enforcement action over any Collateral, after all obligations under the Revolving Credit Facility Agreement, certain Hedging Obligations and certain other future Indebtedness have been repaid from such recoveries, will be applied pro rata in repayment of all obligations under the Indenture and the Notes and any other indebtedness of the Company and the Guarantors permitted to be Incurred and secured by the Collateral pursuant to the Indenture and the Intercreditor Agreement.

Amendments to the Intercreditor Agreement and Additional Intercreditor Agreements The Indenture will provide that, at the request of the Company, in connection with the Incurrence or refinancing by the Company or its Restricted Subsidiaries of any Indebtedness secured or permitted to be secured on the Collateral, the Company, the relevant Restricted Subsidiaries, the Trustee and the Security Agent, as applicable, shall enter into an intercreditor or similar agreement or a restatement, amendment or other modification of the existing Intercreditor Agreement (an “Additional Intercreditor Agreement ”) with the holders of such Indebtedness (or their duly authorized representatives) on substantially the same terms as the Intercreditor Agreement (or on terms that in the good faith judgment of the Board of Directors or an Officer of the Company are not materially less favorable to the Holders), including containing substantially the same terms with respect to the application of the proceeds of the collateral held thereunder and the means of enforcement, it being understood that an increase in the amount of Indebtedness being subject to the terms of the Intercreditor Agreement or Additional Intercreditor Agreement will not be deemed to be less favorable to the Holders and will be permitted by this covenant if the Incurrence of such Indebtedness and any Lien in its favor is permitted by the “—Certain Covenants—Limitation on Indebtedness” and “—Certain Covenants—Limitation on Liens” covenants; provided that such Additional Intercreditor Agreement will not impose any personal obligations on the Trustee or the Security Agent or, in the opinion of the Trustee or the Security Agent, adversely affect the rights, duties, liabilities or immunities of the Trustee or the Security Agent under the Indenture or the Intercreditor Agreement. As used herein, the term “Intercreditor Agreement ” shall include references to any Additional Intercreditor Agreement that supplements or replaces the Intercreditor Agreement.

The Indenture will provide that, at the written direction of the Company and without the consent of the Holders, the Trustee or the Security Agent shall from time to time enter into one or more amendments to any Intercreditor Agreement to: (i) cure any ambiguity, omission, defect or inconsistency of any such agreement, (ii) increase the amount or types of Indebtedness covered by any such agreement that may be Incurred by the Company that is subject to any such agreement (provided that such Indebtedness is Incurred in compliance with the Indenture), (iii) add Restricted Subsidiaries to the Intercreditor Agreement, (iv) further secure the Notes (including Additional Notes Incurred in compliance with the Indenture), (v) make provision for equal and ratable pledges of the Collateral to secure Additional Notes Incurred in compliance with the Indenture or to implement any Permitted Collateral Liens or (vi) make any other change to any such agreement that does not adversely affect the Holders in any material respect. The Company shall not otherwise direct the Trustee or the Security Agent to enter into any amendment to any Intercreditor Agreement without the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding,

169 except as otherwise permitted below under “—Amendments and Waivers” or as permitted by the terms of such Intercreditor Agreement, and the Company may only direct the Trustee or the Security Agent to enter into any amendment to the extent such amendment does not impose any personal obligations on the Trustee or the Security Agent or, in the opinion of the Trustee or the Security Agent, adversely affect the rights, duties, liabilities or immunities of the Trustee or the Security Agent under the Indenture relating to the Notes or any Intercreditor Agreement.

The Indenture will provide that each Holder, by accepting a Note, shall be deemed to have agreed to and accepted the terms and conditions of any Intercreditor Agreement (whether then entered into or entered into in the future pursuant to the provisions described herein), and to have authorized the Trustee and the Security Agent to enter into any one or more amendments to any Intercreditor Agreement as contemplated above.

The Proceeds Loan

On January 14, 2015 the Company, as lender, and Hurtigruten, as borrower, entered into the Proceeds Loan Agreement pursuant to which the Company loaned to Hurtigruten amounts used to repay the Former Financing Arrangements in connection with the Hurtigruten Acquisition.

After the Issue Date, the Proceeds Loan will bear interest at a rate equal to the interest rates of the Notes. Interest on the Proceeds Loan is payable semi-annually in arrears on or prior to the corresponding date for the payment of interest on the Notes.

The Proceeds Loan Agreement provides that Hurtigruten will pay the Company interest and principal due and payable on the Notes and any Additional Amounts due thereunder. All amounts payable under the Proceeds Loan will be payable to such account or accounts with such Person or Persons as the Company may designate. The maturity date of the Proceeds Loan will be at such times as will allow the Company to redeem, repay or repurchase the proportion of the Notes to be redeemed, repaid or repurchased by the Company, pursuant to the terms of the Indenture, up to the principal amount of the Proceeds Loan. Except as otherwise required by law, all payments under the Proceeds Loan Agreement will be made without deductions or withholding for, or on account of, any applicable tax. In the event that Hurtigruten is required to make any such deduction or withholding, Hurtigruten shall gross up each payment to the Company to ensure that the Company receives and retains a net payment equal to the payment which it would have received had no such deduction or withholding been made.

The Proceeds Loan Agreement provides that Hurtigruten will make all payments pursuant thereto, up to the principal amount of the Proceeds Loan on a timely basis in order to ensure that the Company can satisfy its payment obligations under the Notes and the Indenture, taking into account the administrative and timing requirements under the Indenture with respect to amounts payable on the Notes.

The Company’s rights under the Proceeds Loan Agreement will be assigned by way of security to the Security Agent and comprise part of the Collateral, as described above under “—Security—The Collateral.”

Optional Redemption

Except as set forth herein and under “—Redemption for Taxation Reasons,” the Notes are not redeemable at the option of the Company.

At any time and from time to time on or after February 1, 2018, the Company may redeem the Notes, in whole or in part, at its option, upon not less than 10 nor more than 60 days’ prior notice at a redemption price equal to the applicable percentage of principal amount set forth below plus accrued and unpaid interest to, but excluding, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Period commencing Percentage February 1, 2018 ...... 103.750% February 1, 2019 ...... 101.875% February 1, 2020 and thereafter ...... 100.000%

170 At any time and from time to time prior to February 1, 2018, upon not less than 10 nor more than 60 days’ prior notice, the Company may redeem up to 40% of the original aggregate principal amount of the Notes (including Additional Notes) at a redemption price equal to (i) 107.50% of the aggregate principal amount thereof, with an amount equal to or less than the net cash proceeds of one or more Equity Offerings, plus (ii) accrued and unpaid interest thereon, if any, to, but excluding, the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided that:

(1) in each case the redemption takes place not later than 120 days after the closing of the related Equity Offering, and

(2) not less than 60% of the original aggregate principal amount of the Notes (including the principal amount of any Additional Notes) remains outstanding immediately thereafter.

At any time prior to February 1, 2018, the Company may redeem the Notes in whole or in part, at its option, upon not less than 10 nor more than 60 days’ prior notice at a redemption price equal to 100% of the principal amount of such Notes plus the relevant Applicable Premium as of, and accrued and unpaid interest and Additional Amounts, if any, to, but excluding, the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

General

Notice of redemption will be provided as set forth under “—Selection and Notice” below. If the Company effects an optional redemption of Notes of a series, it will, for so long as the Notes are listed on the Euro MTF of the LxSE, inform the LxSE of such optional redemption and confirm the aggregate principal amount of the Notes of that series that will remain outstanding immediately after such redemption.

Any redemption and notice of redemption may, at the Company’s discretion, be subject to the satisfaction of one or more conditions precedent (including, in the case of a redemption related to an Equity Offering, the consummation of such Equity Offering).

If the optional redemption date is on or after an interest record date and on or before the related interest payment date, the accrued and unpaid interest will be paid to the Person in whose name the Note is registered at the close of business on such record date, and no additional interest will be payable to Holders whose Notes will be subject to redemption by the Company.

Sinking Fund

The Company is not required to make mandatory redemption payments or sinking fund payments with respect to the Notes.

Selection and Notice

If less than all the Notes are to be redeemed at any time, the Trustee or the Registrar will select the Notes for redemption in compliance with the requirements of the principal securities exchange, if any, on which the Notes are listed, as certified to the Trustee by the Company, and in compliance with the requirements of Euroclear and/ or Clearstream, or if the Notes are not so listed or such exchange prescribes no method of selection and the Notes are not held through Euroclear and/or Clearstream or Euroclear and/or Clearstream prescribes no method of selection, on a pro rata basis; provided, however, that no Note of €100,000 in aggregate principal amount or less shall be redeemed in part. Neither the Trustee nor the Registrar shall be liable for selections made under this paragraph.

For so long as the Notes are listed on the Euro MTF of the LxSE and the rules of such exchange so require, the Company shall publish notice of redemption on the official website of the LxSE or in a daily newspaper with general circulation in Luxembourg (which is expected to be the Luxemburger Wort) and in addition to such publication, not less than 10 nor more than 60 days prior to the

171 redemption date, mail such notice to Holders by first-class mail, postage prepaid, at their respective addresses as they appear on the registration books of the Registrar; provided that, for so long as any Notes are represented by Global Notes, notices of redemption to Holders will be delivered to Euroclear and Clearstream (and such delivery will be deemed to satisfy the requirements of this paragraph), each of which shall give notices to the holders of the Book-Entry Interests.

If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed, in which case a portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. In the case of a Global Note, an appropriate notation will be made on such Note to decrease the principal amount thereof to an amount equal to the unredeemed portion thereof. Subject to the terms of the applicable redemption notice (including any conditions contained therein), Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption, unless the redemption price is not paid on the redemption date.

Redemption for Taxation Reasons The Company or Successor Company (as defined herein) may redeem, and a Guarantor may cause the Company or Successor Company to redeem, the Notes in whole, but not in part, at any time upon giving not less than 10 nor more than 60 days’ notice to the Holders (which notice will be irrevocable) at a redemption price equal to 100% of the outstanding principal amount thereof, together with accrued and unpaid interest, if any, to, but excluding, the date fixed for redemption (a “Tax Redemption Date”) (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) and all Additional Amounts (see “—Additional Amounts”), if any, then due and which will become due on the Tax Redemption Date as a result of the redemption or otherwise, if any, if as a result of: (1) any change in, or amendment to, the laws or treaties (or any regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction (as defined under “—Additional Amounts”) affecting taxation; or (2) any change in, or amendment to, the application, administration or interpretation of such laws, treaties, regulations or rulings (including pursuant to a holding, judgment or order by a court of competent jurisdiction or a change in published practice) of a Relevant Taxing Jurisdiction (each of the foregoing in clauses (1) and (2), a “Change in Tax Law”); the Company, Successor Company or Guarantor are, or on the next interest payment date in respect of the Notes or any Notes Guarantee would be, required to pay any Additional Amounts, and such obligation cannot be avoided by taking reasonable measures available to the Company, Successor Company or Guarantor (including, for the avoidance of doubt, the appointment of a new Paying Agent where this would be reasonable and, in the case of a payment by a Guarantor, having the Company or another Guarantor make the payment, but not including assignment of the obligation to make payment with respect to the Notes). Notwithstanding the foregoing, in the event of a Change in Tax Law reflecting the proposals of the independent Tax Commission in their report, “Capital Taxation in an International Economy,” published on December 2, 2014, “reasonable measures” shall be deemed to include, where it would be lawful to do so and would not subject the Company to any material unreimbursed cost, changing the domicile of the Company to, or having the obligations under the Notes assumed by an entity (that will hold, immediately after the assumption, all or substantially all of the Company’s assets) domiciled in, a jurisdiction which does not, as of the date of the redomiciliation or assumption, impose withholding tax on payments under the Notes and, subject to the Agreed Security Principles, granting a first-ranking security interest over the shares of such entity to the Security Agent for the benefit of the holders of the Notes. In the case of redemption due to withholding as a result of a Change in Tax Law in a jurisdiction that is a Relevant Taxing Jurisdiction at the date of this Offering Memorandum, such Change in Tax Law must become effective on or after the date of this Offering Memorandum. In the case of redemption due to withholding as a result of a Change in Tax Law in a jurisdiction that becomes a Relevant Taxing Jurisdiction after the date of this Offering Memorandum, such Change in Tax Law must become effective on or after the date the jurisdiction becomes a Relevant Taxing Jurisdiction (or, in the case of a Successor Company, on or after the date of assumption by the Successor Company of the Company’s obligations hereunder). Notice of redemption for taxation reasons will be published in accordance with the procedures described under

172 “—Selection and Notice.” Notwithstanding the foregoing, no such notice of redemption will be given (a) earlier than 90 days prior to the earliest date on which the Payor (as defined under “—Additional Amounts”) would be obliged to make such payment of Additional Amounts and (b) unless at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. Prior to the publication or mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company, Successor Company or Guarantor will deliver to the Trustee (a) an Officer’s Certificate stating that it is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to its right so to redeem have been satisfied and that it would not be able to avoid the obligation to pay Additional Amounts by taking reasonable measures available to it and (b) an opinion of an independent tax counsel of recognized standing to the effect that the Company, Successor Company or Guarantor has or have been or will become obligated to pay Additional Amounts as a result of a Change in Tax Law. The Trustee will accept such Officer’s Certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, without further inquiry, in which event it will be conclusive and binding on the Holders.

The foregoing of this “Redemption for Taxation Reasons” section will apply mutatis mutandis to any jurisdiction in which any successor to the Company, Successor Company or any Guarantor is organized or any political subdivision or taxing authority or agency thereof or therein.

Additional Amounts All payments made by or on behalf of the Company or a Successor Company under or with respect to the Notes, or any Guarantor (each of the Company, Successor Company and Guarantor, a “Payor”) with respect to any Notes Guarantee, will be made free and clear of and without withholding or deduction for, or on account of, any Taxes unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of: (1) Norway or any political subdivision or Governmental Authority thereof or therein having power to tax; (2) any jurisdiction from or through which payment on any such Note or Notes Guarantee is made by the Company, Successor Company, Guarantor or their agents, or any political subdivision or Governmental Authority thereof or therein having the power to tax; or (3) any other jurisdiction in which the Payor is incorporated or organized, engaged in business for tax purposes, resident for tax purposes, or any political subdivision or Governmental Authority thereof or therein having the power to tax (each of clauses (1), (2) and (3), a “Relevant Taxing Jurisdiction”), will at any time be required from any payments made with respect to any Note or Notes Guarantee, including payments of principal, redemption price, premium, if any, or interest, the Payor will pay (together with such payments) such additional amounts (the “Additional Amounts”) as may be necessary in order that the net amounts received in respect of such payments by the Holders or the Trustee, as the case may be, after such withholding or deduction (including any such deduction or withholding from such Additional Amounts), will not be less than the amounts which would have been received in respect of such payments on any such Note or Notes Guarantee in the absence of such withholding or deduction; provided, however, that no such Additional Amounts will be payable for or on account of: (1) any Taxes that would not have been so imposed but for the existence of any present or former connection between the relevant Holder or the beneficial owner of a Note (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over the relevant Holder or beneficial owner, if the relevant Holder or beneficial owner is an estate, nominee, trust, partnership, limited liability company or corporation) and the Relevant Taxing Jurisdiction (including, but not limited to, being a citizen or resident or national or domiciliary of, or the existence of a business, a permanent establishment, a dependent agent, a place of business or a place of management present or deemed present in the Relevant Taxing Jurisdiction) but excluding, in each case, any connection arising solely from the acquisition, ownership or holding of such Note or Notes Guarantee, the enforcement of rights hereunder or under a Notes Guarantee or the receipt of any payment in respect thereof;

173 (2) any Taxes that are imposed, withheld or deducted by reason of the failure by the Holder or the beneficial owner of the Note to comply with a written request of the Payor addressed to the Holder or the beneficial owner, after reasonable notice, to provide certification, information, documents or other evidence concerning the nationality, residence, identity or connection with the Relevant Taxing Jurisdiction of the Holder or such beneficial owners or to make any declaration or similar claim or satisfy any certification, identification, information or other reporting requirement relating to such matters, required by applicable law, regulation, treaty or administrative practice of the Relevant Taxing Jurisdiction as a precondition to exemption from all or part of such Tax; provided in each case the Holder or beneficial owner is legally eligible to do so; (3) any Taxes that are payable otherwise than by deduction or withholding from a payment under or with respect to the Notes or any Notes Guarantee; (4) any estate, inheritance, gift, value added, sales, transfer, personal property or similar Taxes; (5) any Taxes that are required to be imposed, deducted or withheld pursuant to the Taxation Directive or any law implementing or complying with, or introduced in order to conform to the Taxation Directive; (6) any Taxes imposed in connection with a Note presented for payment (where presentation is permitted or required for payment) by or on behalf of a Holder or beneficial owner who would have been able to avoid such Tax by presenting the relevant Note to, or otherwise accepting payment from, another Paying Agent in a member state of the European Union; (7) any Taxes which would not have been imposed if the Holder had presented the Note for payment (where presentation is permitted or required for payment) within 30 days after the relevant payment was first made available for payment to the Holder (except for Additional Amounts with respect to Taxes that would have been imposed had the Holder presented the Note for payment within such 30-day period); (8) any Taxes imposed on or with respect to a payment to a Holder that is a fiduciary or partnership or any Person other than the sole beneficial owner of such payment or Note, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such partnership or the beneficial owner of such payment or Note would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note; (9) any Taxes imposed on or with respect to a Note pursuant to Sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), any successor law or regulation implementing or complying with, or introduced in order to conform to, such Sections or any intergovernmental agreement or any agreement entered into pursuant to Section 1471(b)(1) of the Code; or (10) any combination of the above.

The Payor will (i) make any required withholding or deduction and (ii) remit the full amount deducted or withheld to the Relevant Taxing Jurisdiction in accordance with applicable law. The Payor will use all reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any Taxes so deducted or withheld from each Relevant Taxing Jurisdiction imposing such Taxes, in such form as provided in the ordinary course by the Relevant Taxing Jurisdiction and as is reasonably available to the Company, and will provide such certified copies to the Trustee. Such copies shall be made available to the Holders upon request and will be made available at the offices of the Registrar if the Notes are then listed on the Euro MTF of the LxSE. The Payor will attach to each certified copy a certificate stating (x) that the amount of withholding Taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Notes then outstanding and (y) the amount of such withholding Taxes paid per €1,000 principal amount of the Notes.

If any Payor becomes aware that it will be obligated to pay Additional Amounts under or with respect to any payment made on any Note or Notes Guarantee, at least 30 days prior to the date of such payment, the Payor will deliver to the Trustee an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount so payable and such other information necessary to enable the Paying Agent to pay Additional Amounts to Holders on the relevant payment date (unless such obligation to pay Additional Amounts arises, or the Payor becomes aware of such obligation, less

174 than 45 days prior to the relevant payment date, in which case the Payor may deliver such Officer’s Certificate as promptly as practicable after the date that is 30 days prior to the payment date). The Trustee shall be entitled to rely solely on such Officer’s Certificate without further inquiry, as conclusive proof that such payments are necessary.

Wherever in the Indenture, the Notes Guarantees or this “Description of the Notes” there are mentioned, in any context: (1) the payment of principal; (2) purchase or redemption prices in connection with a purchase or redemption of Notes; (3) interest; or (4) any other amount payable on or with respect to any of the Notes or Notes Guarantee, such reference shall be deemed to include payment of Additional Amounts as described under this heading to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

The Payor will pay any present or future stamp, court or documentary Taxes, or any other excise, property or similar Taxes that arise in any jurisdiction from the execution, delivery, registration or enforcement of any Notes, any Notes Guarantee, the Indenture, the Security Documents or any other document or instrument in relation thereto (other than a transfer or exchange of the Notes) excluding any such Taxes, charges or similar levies imposed by any jurisdiction that is not a Relevant Taxing Jurisdiction.

The foregoing obligations of this “Additional Amounts” section will survive any termination, defeasance or discharge of the Indenture and will apply mutatis mutandis to any jurisdiction in which any successor to the Company or any Guarantor is organized or any political subdivision or taxing authority or agency thereof or therein.

Change of Control If a Change of Control occurs, subject to the terms hereof, each Holder will have the right to require the Company to repurchase all or part (equal to €100,000 principal amount, and integral multiples of €1,000 in excess thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that the Company shall not be obliged to repurchase Notes as described under this “Change of Control” section in the event and to the extent that it has unconditionally exercised its right to redeem all of the Notes as described under “—Optional Redemption” or all conditions to such redemption have been satisfied or waived.

Unless the Company has unconditionally exercised its right to redeem all of the Notes as described under “—Optional Redemption” or all conditions to such redemption have been satisfied or waived, no later than the date that is 60 days after any Change of Control, the Company will send a notice (the “Change of Control Offer”) to each Holder of any such Notes, by mail or otherwise in accordance with the procedures set forth in the Indenture, with a copy to the Trustee: (1) stating that a Change of Control has occurred or may occur and that such Holder has the right to require the Company to purchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest and Additional Amounts, if any, to, but not including, the date of purchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”); (2) stating the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is sent) (the “Change of Control Payment Date”); (3) describing the circumstances and relevant facts regarding the transaction or transactions that constitute the Change of Control; (4) describing the procedures determined by the Company, consistent with the Indenture, that a Holder must follow in order to have its Notes repurchased; and

175 (5) if such notice is mailed prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control.

On the Change of Control Payment Date, if the Change of Control shall have occurred, the Company will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes so tendered; (3) deliver or cause to be delivered to the Trustee an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company in the Change of Control Offer; (4) in the case of Global Notes, deliver, or cause to be delivered, to the Paying Agent the Global Notes in order to reflect thereon the portion of such Notes or portions thereof that have been tendered to and purchased by the Company; and (5) in the case of Definitive Registered Notes, deliver, or cause to be delivered, to the relevant Registrar for cancellation all Definitive Registered Notes accepted for purchase by the Company.

If any Definitive Registered Notes have been issued, the Paying Agent will promptly mail to each Holder of Definitive Registered Notes so tendered the Change of Control Payment for such Notes, and the Trustee or an authentication agent appointed by the Trustee will promptly authenticate (or cause to be authenticated) and mail (or cause to be transferred by book-entry) to each Holder of Definitive Registered Notes a new Definitive Registered Note equal in principal amount to the aggregate unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount that is at least €100,000 or an integral multiple of €1,000 in excess thereof.

For so long as the Notes are listed on the Official List of the LxSE and admitted for trading on the Euro MTF and the rules of such exchange so require, the Company will publish a public announcement with respect to the results of the Change of Control Offer as soon as practicable after the Change of Control Payment Date in a daily newspaper with general circulation in Luxembourg (which is expected to be the Luxemburger Wort), or, to the extent and in the manner permitted by such rules, post such notices on the official website of the LxSE.

Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control; provided that the purchase date will be no earlier than 30 days from the date a notice of such Change of Control Offer is mailed.

The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The existence of a Holder’s right to require the Company to repurchase such Holder’s Notes upon the occurrence of a Change of Control may deter a third party from seeking to acquire the Company or its Subsidiaries in a transaction that would constitute a Change of Control.

The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations (or rules of any exchange on which the Notes are then listed) in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations (or exchange rules) conflict with provisions of the Indenture, the Company will comply with the applicable securities laws and

176 regulations (or exchange rules) and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of the conflict.

A Change of Control will result in a mandatory prepayment under the Revolving Credit Facility Agreement. Future debt of the Company or its Subsidiaries, including the Company, may prohibit the Company from purchasing Notes in the event of a Change of Control or provide that a Change of Control is a default or may require repurchase upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to purchase the Notes could cause a default under, or require a repurchase of, other debt, even if the Change of Control itself does not, due to the financial effect of the purchase on the Company.

Finally, the Company’s ability to pay cash to the Holders following the occurrence of a Change of Control may be limited by the Company’s and the Company’s then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make the required purchase of the Notes. See “Risk factors—Risks Related to the Notes and Our Structure—We may not be able to obtain the funds required to repurchase the Notes upon a change of control.”

The definition of “Change of Control” includes a disposition of all or substantially all of the property and assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is limited case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the property or assets of a Person. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder may require the Company to make an offer to repurchase the Notes as described above.

The provisions of the Indenture relating to the Company’s obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of Holders of a majority in outstanding aggregate principal amount of the Notes under the Indenture.

Certain Covenants Limitation on Indebtedness The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (including Acquired Indebtedness); provided, however, that the Company and any Restricted Subsidiary may Incur Indebtedness if on the date of such Incurrence and after giving pro forma effect thereto (including pro forma application of the proceeds thereof), the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is Incurred would have been at least 2.0 to 1.0, provided that the amount of Indebtedness incurred pursuant to this paragraph by Restricted Subsidiaries that are not Guarantors shall not exceed €40.0 million.

The first paragraph of this covenant will not prohibit the Incurrence of the following Indebtedness: (1) Indebtedness Incurred by the Company and any Restricted Subsidiary pursuant to any Credit Facility (including in respect of letters of credit or bankers’ acceptances issued or created thereunder), and any Refinancing Indebtedness in respect thereof and Guarantees in respect of such Indebtedness in a maximum aggregate amount of Indebtedness then outstanding not exceeding (i) the greater of (x) €75.0 million and (y) 100% of Consolidated EBITDA, plus (ii) in the case of any refinancing of any Indebtedness permitted under this clause (1) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such refinancing; (2) (a) Guarantees by the Company or any Restricted Subsidiary of Indebtedness of the Company or any Restricted Subsidiary, in each case, so long as the Incurrence of such Indebtedness being guaranteed is permitted under the terms of the Indenture (other than pursuant to this clause (2)); provided that, if Indebtedness being guaranteed is subordinated to or pari passu with the Notes or a Notes Guarantee, then the guarantee must be subordinated to or

177 pari passu with the Notes or Notes Guarantees, as applicable, to the same extent as the Indebtedness guaranteed; or (b) without limiting the covenant described under “—Limitation on Liens,” Indebtedness arising by reason of any Lien granted by or applicable to such Person securing Indebtedness of the Company or any Restricted Subsidiary, in each case, so long as the Incurrence of such Indebtedness is permitted under the terms of the Indenture; (3) Indebtedness of the Company owing to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Restricted Subsidiary; provided, however, that: (a) other than in respect of intercompany current liabilities Incurred in connection with credit management, cash management, cash pooling, netting, setting off or similar arrangements in the ordinary course of business of the Company and the Restricted Subsidiaries, if the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all obligations then due (x) in the case of the Company, with respect to the Notes, or (y) in the case of a Guarantor, with respect to its Notes Guarantee, in each case in the manner and to the extent provided for in the Intercreditor Agreement; and (b) (i) any subsequent issuance or transfer of Capital Stock or any other event which results in any such Indebtedness being beneficially held by a Person other than the Company or a Restricted Subsidiary; and (ii) any sale or other transfer of any such Indebtedness to a Person other than the Company or a Restricted Subsidiary, shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (3) by the Company or such Restricted Subsidiary, as the case may be; (4) Indebtedness represented by (a) the Notes (other than any Additional Notes) and the Notes Guarantees, (b) any Indebtedness (other than Indebtedness described in clauses (1), (3), (4)(a) and (7) of this paragraph) of the Company or any Restricted Subsidiary entered into or outstanding on the Issue Date after giving effect to the Refinancing Transactions, (c) Refinancing Indebtedness that is Incurred in respect of any Indebtedness described in this clause (4) or clause (5) of this paragraph or Incurred pursuant to the first paragraph of this covenant, (d) Management Advances and (e) the Proceeds Loan; (5) Indebtedness (i) of any Person Incurred and outstanding on the date on which such Person becomes a Restricted Subsidiary or is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Company or any Restricted Subsidiary or (ii) Incurred to provide or refinance all or any portion of the funds utilized to consummate a transaction or series of related transactions pursuant to which a Person became a Restricted Subsidiary or was otherwise acquired by the Company or a Restricted Subsidiary or otherwise in connection with or contemplation of such acquisition; provided, however, with respect to this clause (5)(i) and (5)(ii), that at the time of such acquisition or other transaction (x) the Company and its Restricted Subsidiaries would have been permitted to Incur €1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving pro forma effect to the relevant acquisition and Incurrence of such Indebtedness pursuant to this clause (5) or (y) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would not be lower than it was immediately prior to giving effect to such acquisition or other transaction; (6) Indebtedness under Hedging Agreements entered into for bona fide hedging purposes of the Company or its Restricted Subsidiaries and not for speculative purposes (as determined in good faith by the Board of Directors or an Officer of the Company); (7) Indebtedness consisting of (A) Capitalized Lease Obligations, mortgage financings, Purchase Money Obligations or other financings, in each case, Incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in a Similar Business, (B) Indebtedness otherwise Incurred to finance the purchase, lease, rental or cost of design, construction, installation or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets, and (C) any Refinancing Indebtedness and Guarantees in respect of (A) or (B), in an aggregate outstanding

178 principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (7) then outstanding, will not exceed the greater of (x) €25.0 million and (y) 29.0% of Consolidated EBITDA; (8) Indebtedness in respect of (a) workers’ compensation claims, self-insurance obligations, performance, indemnity, surety, judgment, appeal, advance payment, customs, VAT or other tax or other guarantees or other similar bonds, instruments or obligations and completion guarantees and warranties provided by the Company or a Restricted Subsidiary or relating to liabilities, obligations, indemnities or guarantees Incurred in the ordinary course of business or for governmental or regulatory requirements, (b) letters of credit, bankers’ acceptances, guarantees or other similar instruments or obligations issued or relating to liabilities or obligations Incurred in the ordinary course of business, provided, however, that upon the drawing of such letters of credit or other instrument, such obligations are reimbursed within 30 days following such drawing, (c) the financing of insurance premiums in the ordinary course of business and (d) any credit management, cash management, cash pooling, netting, setting off or similar arrangements in the ordinary course of business of the Company and the Restricted Subsidiaries; (9) Indebtedness arising from agreements providing for customary guarantees, indemnification, obligations in respect of earn-outs or other adjustments of purchase price or, in each case, similar obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any business or assets or Person or any Capital Stock of a Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring or disposing of such business or assets or such Subsidiary for the purpose of financing such acquisition or disposition); provided that the maximum liability of the Company and its Restricted Subsidiaries in respect of all such Indebtedness shall at no time exceed the gross proceeds, including the fair market value of non-cash proceeds (measured at the time received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with any such disposition; (10) (A) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within 60 Business Days of Incurrence; (B) Indebtedness owed on a short-term basis of no longer than 60 days to banks and other financial institutions Incurred in the ordinary course of business of the Company and its Restricted Subsidiaries with such banks or financial institutions that arises in connection with ordinary banking arrangements to manage cash balances of the Company and its Restricted Subsidiaries; and (C) Indebtedness Incurred by a Restricted Subsidiary in connection with bankers’ acceptances, discounted bills of exchange or the discounting or factoring of receivables for credit management purposes, in each case, Incurred or undertaken in the ordinary course of business; (11) Indebtedness in an aggregate outstanding principal amount which, when taken together with any Refinancing Indebtedness and Guarantees in respect thereof and the aggregate principal amount of all other Indebtedness Incurred pursuant to this clause (11) then outstanding, will not exceed the greater of (x) €25.0 million and (y) 29.0% of Consolidated EBITDA; (12) Indebtedness (including any Refinancing Indebtedness and Guarantees in respect thereof) in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (12) and then outstanding, will not exceed 100% of the Net Cash Proceeds received by the Company from the issuance or sale (other than to a Restricted Subsidiary) of its Subordinated Shareholder Funding or its Capital Stock (other than Disqualified Stock, Designated Preference Shares, the Equity Contribution or an Excluded Contribution) or otherwise contributed to the equity (other than through the issuance of Disqualified Stock, Designated Preference Shares or an Excluded Contribution) of the Company, in each case, subsequent to the Issue Date; provided, however, that (i) any such Net Cash Proceeds that are so received or contributed shall be excluded for purposes of making Restricted Payments under the first paragraph and clauses (1), (6), (10) and (14) of the third paragraph of the covenant described below under “—Limitation on Restricted Payments” to the extent the Company and its Restricted Subsidiaries Incur Indebtedness in

179 reliance thereon and (ii) any Net Cash Proceeds that are so received or contributed shall be excluded for purposes of Incurring Indebtedness pursuant to this clause (12) to the extent the Company or any of its Restricted Subsidiaries makes a Restricted Payment under the first paragraph and/or clauses (1), (6), (10) or (14) of the third paragraph of the covenant described below under “—Limitation on Restricted Payments”in reliance thereon; and

(13) Indebtedness Incurred by a Receivables Subsidiary in a Qualified Receivables Financing.

For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in compliance with, this covenant:

(i) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in the first and second paragraphs of this covenant, the Company, in its sole discretion, will classify, and may from time to time reclassify, such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the clauses of the second paragraph or the first paragraph of this covenant; provided that (i) Indebtedness incurred pursuant to clause (1) of the second paragraph of this covenant may not be reclassified and (ii) Indebtedness under the Revolving Credit Facility Agreement incurred or outstanding on the Issue Date will be deemed to have been incurred on such date in reliance on the exception provided in clause (1) of the second paragraph of this covenant;

(ii) Guarantees of, or obligations in respect of, letters of credit, bankers’ acceptances or other similar instruments relating to, or Liens securing, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness shall not be included;

(iii) if obligations in respect of letters of credit, bankers’ acceptances or other similar instruments are Incurred pursuant to any Credit Facility and are being treated as Incurred pursuant to clause (1), (7) or (11) of the second paragraph or pursuant to the first paragraph, in each case, of this covenant, and the letters of credit, bankers’ acceptances or other similar instruments relate to other Indebtedness, then such other Indebtedness shall not be included;

(iv) the principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary, will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof;

(v) for the purposes of determining “Consolidated EBITDA” under clause (1)(i), (7) and (11) of the second paragraph of this covenant, (x) pro forma effect shall be given to Consolidated EBITDA on the same basis as for calculating the Consolidated Net Leverage Ratio for the Company and its Restricted Subsidiaries and (y) in relation to clause (1)(i) of the second paragraph of this covenant, Consolidated EBITDA shall be measured on the most recent date on which new commitments are obtained (in the case of revolving facilities) or the date on which new Indebtedness is Incurred (in the case of term facilities) and for the period of the most recent four consecutive fiscal quarters ending prior to such date for which such internal consolidated financial statements of the Company are available;

(vi) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness; and

(vii) the amount of any Indebtedness outstanding as of any date shall be calculated as described under the definition of “Indebtedness,” provided that the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined on the basis of IFRS.

Accrual of interest, accrual of dividends, the accretion of accreted value, the accretion or amortization of original issue discount, the payment of interest in the form of additional Indebtedness, the payment of dividends in the form of additional shares of Preferred Stock or Disqualified Stock or the reclassification of commitments or obligations not treated as Indebtedness due to a change in IFRS will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant.

If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be Incurred by a Restricted Subsidiary as of such date.

180 For purposes of determining compliance with any euro-denominated restriction on the Incurrence of Indebtedness, the Euro Equivalent of the aggregate principal amount of Indebtedness denominated in another currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or, at the option of the Company, first committed, in the case of Indebtedness Incurred under a revolving credit facility; provided that (a) if such Indebtedness is Incurred to refinance other Indebtedness denominated in a currency other than euro, and such refinancing would cause the applicable euro-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such euro-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the aggregate principal amount of such Indebtedness being refinanced; (b) the Euro Equivalent of the aggregate principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date; and (c) if and for so long as any such Indebtedness is subject to a Currency Agreement with respect to the currency in which such Indebtedness is denominated covering principal amounts payable on such Indebtedness, the amount of such Indebtedness, if denominated in euro, will be the amount of the principal payment required to be made under such Currency Agreement and, otherwise, the Euro Equivalent of such amount plus the Euro Equivalent of any premium which is at such time due and payable but is not covered by such Currency Agreement.

Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or a Restricted Subsidiary may Incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

Limitation on Restricted Payments The Company will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to: (1) declare or pay any dividend or make any other distribution on or in respect of the Company’s or any Restricted Subsidiary’s Capital Stock (including any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) except: (a) dividends or distributions payable in Capital Stock of the Company (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock of the Company or in Subordinated Shareholder Funding; and (b) dividends or distributions payable to the Company or a Restricted Subsidiary (and, in the case of any such Restricted Subsidiary making such dividend or distribution, to holders of its Capital Stock other than the Company or a Restricted Subsidiary on no more than a pro rata basis, measured by value); (2) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any direct or indirect Parent of the Company held by Persons other than the Company or a Restricted Subsidiary (other than in exchange for Capital Stock of the Company (other than Disqualified Stock)); (3) make any principal payment on, or purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness (other than (a) any such payment, purchase, repurchase, redemption, defeasance or other acquisition or retirement in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case, due within one year of the date of payment, purchase, repurchase, redemption, defeasance or other acquisition or retirement and (b) any Indebtedness Incurred pursuant to clause (3) of the second paragraph of the covenant described under “—Limitation on Indebtedness”); (4) make any payment (other than by capitalization of interest) on or with respect to, or purchase, repurchase, redeem, defease or otherwise acquire or retire for value any Subordinated Shareholder Funding; or

181 (5) make any Restricted Investment in any Person;

(any such dividend, distribution, payment, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Restricted Investment referred to in clauses (1) through (5) are referred to herein as a “Restricted Payment ”), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (a) a Default shall have occurred and be continuing (or would result immediately thereafter therefrom); (b) the Company and its Restricted Subsidiaries are not permitted to Incur an additional €1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness” after giving effect, on a pro forma basis, to such Restricted Payment; or (c) the aggregate amount of such Restricted Payment and all other Restricted Payments made subsequent to the Issue Date (and not returned or rescinded) (including Permitted Payments permitted below by clauses (5) (without duplication of amounts paid pursuant to any other clause of the second succeeding paragraph), (6), (10), (11) and (12) of the second succeeding paragraph, but excluding all other Restricted Payments permitted by the second succeeding paragraph) would exceed the sum of (without duplication): (i) 50% of Consolidated Net Income for the period (treated as one accounting period) from the first day of the last fiscal quarter commencing prior to the Issue Date to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which internal consolidated financial statements of the Company are available (or, in the case such Consolidated Net Income is a deficit, minus 100% of such deficit); (ii) 100% of the aggregate Net Cash Proceeds, and the fair market value (as determined in accordance with the next succeeding paragraph) of property or assets or marketable securities, received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock or Designated Preference Shares) or Subordinated Shareholder Funding subsequent to the Issue Date or otherwise contributed to the equity (other than through the issuance of Disqualified Stock or Designated Preference Shares) of the Company subsequent to the Issue Date (other than (x) Net Cash Proceeds or property or assets or marketable securities received from an issuance or sale of such Capital Stock to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary, (y) Net Cash Proceeds or property or assets or marketable securities to the extent that any Restricted Payment has been made from such proceeds in reliance on clause (6) of the second succeeding paragraph and (z) Excluded Contributions since the Issue Date); (iii) 100% of the aggregate Net Cash Proceeds, and the fair market value (as determined in accordance with the next succeeding paragraph) of property or assets or marketable securities, received by the Company or any Restricted Subsidiary from the issuance or sale (other than to the Company or a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary) by the Company or any Restricted Subsidiary subsequent to the Issue Date of any Indebtedness that has been converted into or exchanged for Capital Stock of the Company (other than Disqualified Stock or Designated Preference Shares) or Subordinated Shareholder Funding (plus the amount of any cash, and the fair market value (as determined in accordance with the next succeeding paragraph) of property or assets or marketable securities, received by the Company or any Restricted Subsidiary upon such conversion or exchange) but excluding (x) Net Cash Proceeds to the extent that any Restricted Payment has been made from such proceeds in reliance on clause (6) of the second succeeding paragraph and (y) Excluded Contributions; (iv) the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries resulting from: (A) repurchases, redemptions or other acquisitions or retirements of any such Restricted Investment, proceeds realized upon the sale or other disposition to a Person other than the Company or a Restricted Subsidiary of any such Restricted

182 Investment, repayments of loans or advances or other transfers of assets (including by way of dividend, distribution, interest payments or returns of capital) to the Company or any Restricted Subsidiary; or

(B) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued, in each case, as provided in the definition of “Investment ”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount, in each case under this clause (iv), was included in the calculation of the amount of Restricted Payments referred to in the first sentence of this clause (c),

provided, however, that no amount will be included in Consolidated Net Income for purposes of the preceding clause (i) to the extent that it is (at the Company’s option) included under this clause (iv); and

(v) the amount of the cash and the fair market value (as determined in accordance with the next succeeding paragraph) of property or assets or of marketable securities received by the Company or any of its Restricted Subsidiaries in connection with:

(A) the sale or other disposition (other than to the Company or a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary) of Capital Stock of an Unrestricted Subsidiary of the Company; and

(B) any dividend or distribution made by an Unrestricted Subsidiary or Affiliate to the Company or a Restricted Subsidiary,

provided, however, that no amount will be included in Consolidated Net Income for purposes of the preceding clause (i) to the extent that it is (at the Company’s option) included under this clause (v); provided further, however, that such amount under this clause (v) shall not exceed the amount included in the calculation of the amount of Restricted Payments referred to in the first sentence of this clause (c).

The fair market value of property or assets other than cash covered by the preceding sentence shall be the fair market value thereof as determined in good faith by the Board of Directors or an Officer of the Company.

The foregoing provisions will not prohibit any of the following (collectively, “Permitted Payments”):

(1) any Restricted Payment made in exchange (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares) for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock or Designated Preference Shares), Subordinated Shareholder Funding or a substantially concurrent contribution to the equity (other than through the issuance of Disqualified Stock or Designated Preference Shares, the Equity Contribution or through an Excluded Contribution) of the Company subsequent to the Issue Date; provided, however, that to the extent so applied, the Net Cash Proceeds, or fair market value (as determined in accordance with the immediately preceding paragraph) of property or assets or of marketable securities, from such sale of Capital Stock, Subordinated Shareholder Funding or such contribution will be excluded from clause (c)(ii) of the second preceding paragraph;

(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness made in exchange for, or out of the proceeds of the substantially concurrent Incurrence of Refinancing Indebtedness permitted to be Incurred pursuant to the covenant described under “—Limitation on Indebtedness”;

(3) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Preferred Stock of the Company or a Restricted Subsidiary made in exchange for or out of the proceeds of the substantially concurrent sale of Preferred Stock of the Company or a Restricted Subsidiary, as the case may be, that, in each case, is permitted to be Incurred pursuant to the covenant described under “—Limitation on Indebtedness,” and that in each case, constitutes Refinancing Indebtedness;

(4) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness:

183 (a) (i) from Net Available Cash to the extent permitted by the covenant described under “— Limitation on Sales of Assets and Subsidiary Stock”, but only if (i) the Company shall have first complied with the covenant described under “—Limitation on Sales of Assets and Subsidiary Stock” and purchased all Notes tendered pursuant to any offer to repurchase all the Notes required thereby, prior to purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring such Subordinated Indebtedness and (ii) at a purchase price not greater than 100% of the principal amount of such Subordinated Indebtedness plus accrued and unpaid interest; (b) to the extent required by the agreement governing such Subordinated Indebtedness, following the occurrence of a Change of Control (or other similar event described therein as a “change of control”), but only (i) if the Company shall have first complied with the terms of the covenant described under “—Change of Control,” if required, and purchased all Notes tendered pursuant to the offer to repurchase all the Notes required thereby, prior to purchasing, repurchasing, redeeming, defeasing or otherwise acquiring or retiring such Subordinated Indebtedness and (ii) at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness plus accrued and unpaid interest; or (c) (i) consisting of Acquired Indebtedness and (ii) at a purchase price not greater than 100% of the principal amount of such Subordinated Indebtedness plus accrued and unpaid interest and any premium required by the terms of such Acquired Indebtedness; (5) any dividends paid within 60 days after the date of declaration if at such date of declaration such dividend would have complied with this covenant; (6) the purchase, repurchase, redemption, defeasance or other acquisition, cancellation or retirement for value of Capital Stock of the Company, any Restricted Subsidiary or any Parent (including any options, warrants or other rights in respect thereof) and loans, advances, dividends or distributions by the Company to any Parent or any entity formed for the purpose of investing in Capital Stock of the Company or any Parent to permit any Parent or such entity to purchase, repurchase, redeem, defease or otherwise acquire, cancel or retire for value Capital Stock of the Company, any Restricted Subsidiary or any Parent (including any options, warrants or other rights in respect thereof), or payments to purchase, repurchase, redeem, defease or otherwise acquire, cancel or retire for value Capital Stock of the Company, any Restricted Subsidiary or any Parent (including any options, warrants or other rights in respect thereof), in each case from Management Investors; provided that such payments, loans, advances, dividends or distributions do not exceed an amount (net of repayments of any such loans or advances) equal to (A) €2.0 million plus (B) €1.0 million multiplied by the number of calendar years that have commenced subsequent to the Issue Date plus (C) the Net Cash Proceeds received by the Company or its Restricted Subsidiaries subsequent to the Issue Date (including through receipt of proceeds from the issuance or sale of its Capital Stock or Subordinated Shareholder Funding to a Parent) from, or as a contribution to the equity (in each case under this clause (C), other than through the issuance of Disqualified Stock or Designated Preference Shares) of the Company from, the issuance or sale to Management Investors of Capital Stock (including any options, warrants or other rights in respect thereof), to the extent such Net Cash Proceeds are not included in any calculation under clause (c)(ii) of the first paragraph describing this covenant; (7) the declaration and payment of dividends to holders of any class or series of Disqualified Stock, or of any Preferred Stock of a Restricted Subsidiary, Incurred in accordance with the terms of the covenant described under “—Limitation on Indebtedness”; (8) purchases, repurchases, redemptions, defeasances or other acquisitions or retirements of Capital Stock deemed to occur upon the exercise of stock options, warrants or other rights in respect thereof if such Capital Stock represents a portion of the exercise price thereof; (9) dividends, loans, advances or distributions to any Parent or any Affiliates or other payments by the Company or any Restricted Subsidiary in amounts equal to (without duplication): (a) the amounts required for any Parent to pay any Parent Expenses or any Related Taxes; or (b) amounts constituting or to be used for purposes of making payments (i) of fees, expenses and other payments in relation to the Hurtigruten Acquisition Transactions and the

184 Refinancing Transactions or (ii) to the extent described in clauses (2), (3), (5), (7), (11), (12) and (13) of the second paragraph of the covenant described under “—Limitation on Affiliate Transactions”; (10) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), the declaration and payment by the Company of, or loans, advances, dividends or distributions to any Parent to pay, dividends on the common stock or common equity interests of the Company or any Parent following a Public Offering of such common stock or common equity interests, in an amount not to exceed in any fiscal year the greater of (a) 6% of the Net Cash Proceeds received by the Company from such Public Offering or contributed to the equity (other than through the issuance of Disqualified Stock or Designated Preference Shares or through an Excluded Contribution) of the Company or loaned or contributed as Subordinated Shareholder Funding to the Company and (b) following the Initial Public Offering, an amount equal to the greater of (x) 6% of the Market Capitalization and (y) 6% of the IPO Market Capitalization; provided that in the case of clause (b) of this paragraph, after giving pro forma effect to such loans, advances, dividends or distributions, the Consolidated Net Leverage Ratio for the Company and its Restricted Subsidiaries shall be equal to or less than 3.75 to 1.00; (11) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom) (a) Restricted Payments (including loans or advances) in an aggregate amount outstanding at any time not to exceed the greater of (x) €15.0 million and (y) 17.0% of Consolidated EBITDA, (b) any Restricted Payment provided that the Consolidated Net Leverage Ratio on a pro forma basis after giving effect to any such Restricted Payment does not exceed 2.75 to 1.00 and (c) Restricted Payments consisting of the cash proceeds of the sale of Explorer and/or the shares of Explorer, provided that the Consolidated Net Leverage Ratio on a pro forma basis after giving effect to any such Restricted Payment and such disposal does not exceed 4.5 to 1.0; (12) payments by the Company, or loans, advances, dividends or distributions to any Parent to make payments, to holders of Capital Stock of the Company or any Parent in lieu of the issuance of fractional shares of such Capital Stock; provided, however, that any such payment, loan, advance, dividend or distribution shall not be for the purpose of evading any limitation of this covenant or otherwise to facilitate any dividend or other return of capital to the holders of such Capital Stock (as determined in good faith by the Board of Directors or an Officer of the Company); (13) Restricted Payments in an aggregate amount outstanding at any time not to exceed the aggregate cash amount of Excluded Contributions, or consisting of non-cash Excluded Contributions, or Investments to the extent made in exchange for or using as consideration Investments previously made under this clause (13); (14) (i) the declaration and payment of dividends to holders of any class or series of Designated Preference Shares of the Company issued after the Issue Date; and (ii) the declaration and payment of dividends to any Parent or any Affiliate thereof, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preference Shares of such Parent or Affiliate issued after the Issue Date; provided, however, that, in the case of clauses (i) and (ii), the amount of all dividends declared or paid pursuant to this clause (14) shall not exceed the Net Cash Proceeds received by the Company or the aggregate amount contributed in cash to the equity (other than through the issuance of Disqualified Stock or an Excluded Contribution or, in the case of Designated Preference Shares by a Parent or an Affiliate the issuance of Designated Preference Shares) of the Company or loaned or contributed as Subordinated Shareholder Funding to the Company, from the issuance or sale of such Designated Preference Shares; (15) dividends or other distributions of Capital Stock, Indebtedness or other securities of Unrestricted Subsidiaries; and (16) payment of any Receivables Fees and purchases of Receivables Assets pursuant to a Receivables Repurchase Obligation in connection with a Qualified Receivables Financing.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of such Restricted Payment of the asset(s) or securities proposed to be paid, transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted

185 Payment. The fair market value of any cash Restricted Payment shall be its face amount, and the fair market value of any non-cash Restricted Payment shall be determined conclusively by the Board of Directors or an Officer of the Company acting in good faith.

For the purposes of calculating “Consolidated EBITDA” under clause (11)(a) of the third paragraph of the covenant described under “—Limitation on Restricted Payments,” pro forma effect shall be given to Consolidated EBITDA on the same basis as for calculating the Consolidated Net Leverage Ratio for the Company and its Restricted Subsidiaries.

Limitation on Liens The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, Incur or suffer to exist any Lien upon any of its property or assets (including Capital Stock of a Restricted Subsidiary), whether owned on the Issue Date or acquired after that date, or any interest therein or any income or profits therefrom, which Lien is securing any Indebtedness (such Lien, the “Initial Lien”), except (a) in the case of any property or asset that does not constitute Collateral, (1) Permitted Liens or (2) Liens on property or assets that are not Permitted Liens if the Notes and the Indenture (or a Notes Guarantee in the case of Liens of a Guarantor) are secured equally and ratably with, or prior to, in the case of Liens with respect to Subordinated Indebtedness, the Indebtedness secured by such Initial Lien for so long as such Indebtedness is so secured (provided that a Lien to secure Indebtedness pursuant to clause (1) or (6) of the second paragraph of the covenant described under “— Limitation on Indebtedness” may have priority not materially less favorable to the Holders than that accorded to the Revolving Credit Facility Agreement pursuant to the Intercreditor Agreement as in effect on the Issue Date), and (b) in the case of any property or assets that constitute Collateral, Permitted Collateral Liens.

Any such Lien created in favor of the Notes pursuant to clause (a)(2) of the preceding paragraph will be automatically and unconditionally released and discharged (i) upon the release and discharge of the Initial Lien to which it relates and (ii) otherwise as set forth under “Security—Release of Liens.”

Limitation on Distributions from Restricted Subsidiaries The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (A) pay dividends or make any other distributions in cash or otherwise on its Capital Stock to the Company or pay any Indebtedness or other obligations owed to the Company; (B) make any loans or advances to the Company; or (C) sell, lease or transfer any of its property or assets to the Company, provided that (x) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock and (y) the subordination of (including the application of any standstill requirements to) loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary shall not be deemed to constitute such an encumbrance or restriction.

The provisions of the preceding paragraph will not prohibit: (1) any encumbrance or restriction pursuant to (a) the Revolving Credit Facility Agreement, (b) the Indenture, the Notes, the Notes Guarantees, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents or (c) any other agreement or instrument in effect at or entered into on the Issue Date, including, in each case, any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings, provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements referred to in clauses (a), (b) and (c) above, as applicable (as determined in good faith by the Board of Directors or an Officer of the Company); (2) any encumbrance or restriction pursuant to an agreement or instrument of a Person or relating to any Capital Stock or Indebtedness of a Person, entered into on or before the date on

186 which such Person was acquired by or merged, consolidated or otherwise combined with or into the Company or any Restricted Subsidiary, or was designated as a Restricted Subsidiary or on which such agreement or instrument is assumed by the Company or any Restricted Subsidiary in connection with an acquisition of assets (other than Capital Stock or Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary or was acquired by the Company or was merged, consolidated or otherwise combined with or into the Company or any Restricted Subsidiary entered into or in connection with such transaction) and outstanding on such date; provided that, for the purposes of this clause (2), if another Person is the Successor Company, any Subsidiary thereof or agreement or instrument of such Person or any such Subsidiary shall be deemed acquired or assumed by the Company or any Restricted Subsidiary when such Person becomes the Successor Company; (3) any encumbrance or restriction pursuant to an agreement or instrument effecting a refinancing of Indebtedness Incurred pursuant to, or that otherwise refinances, an agreement or instrument referred to in clause (1) or (2) of this paragraph or this clause (3) (an “Initial Agreement ”) or contained in any amendment, supplement or other modification to an agreement referred to in clause (1) or (2) of this paragraph or this clause (3); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such agreement or instrument are no less favorable in any material respect to the Holders than the encumbrances and restrictions contained in the Initial Agreement or Initial Agreements to which such refinancing or amendment, supplement or other modification relates (as determined in good faith by the Board of Directors or an Officer of the Company); (4) any encumbrance or restriction: (a) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any lease, license or other contract; (b) contained in mortgages, pledges, charges or other security agreements permitted under the Indenture or securing Indebtedness of the Company or a Restricted Subsidiary permitted under the Indenture to the extent such encumbrances or restrictions restrict the transfer of the property or assets subject to such mortgages, pledges, charges or other security agreements; or (c) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary; (5) any encumbrance or restriction pursuant to Purchase Money Obligations and Capitalized Lease Obligations permitted under the Indenture, in each case, that impose encumbrances or restrictions on the property so acquired or any encumbrance or restriction pursuant to a joint venture agreement that imposes restrictions on the transfer of the assets of the joint venture; (6) any encumbrance or restriction with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition to a Person of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition; (7) customary provisions in leases, licenses, joint venture agreements and other similar agreements and instruments entered into in the ordinary course of business; (8) encumbrances or restrictions arising or existing by reason of applicable law or any applicable rule, regulation or order (including encumbrances or restrictions on making distributions in cash or Cash Equivalents as a dividend or otherwise that arise or exist by reason of applicable law or any applicable rule, regulation or order) or encumbrances or restrictions required by any regulatory authority; (9) any encumbrance or restriction on cash or other deposits or net worth imposed by customers under agreements entered into in the ordinary course of business; (10) any encumbrance or restriction pursuant to Hedging Agreements; (11) any encumbrance or restriction arising pursuant to an agreement or instrument relating to any Indebtedness permitted to be Incurred subsequent to the Issue Date pursuant to the

187 provisions of the covenant described under “—Limitation on Indebtedness” if the encumbrances and restrictions contained in any such agreement or instrument taken as a whole are not materially less favorable to the Holders than (i) the encumbrances and restrictions contained in the Revolving Credit Facility Agreement, together with the security documents associated therewith as in effect on the Issue Date or (ii) in comparable financings (as determined in good faith by the Board of Directors or an Officer of the Company) and where, in the case of clause (ii), the Company determines at the time such Indebtedness is Incurred that such encumbrances or restrictions will not adversely affect, in any material respect, the Company’s ability to make principal or interest payments on the Notes; (12) any encumbrance or restriction existing by reason of any Lien permitted by the covenant described under “—Limitation on Liens”; or (13) restrictions effected in connection with a Qualified Receivables Financing that, in the good faith determination of the Board of Directors or an Officer of the Company, are necessary or advisable to effect such Qualified Receivables Financing.

Limitation on Sales of Assets and Subsidiary Stock The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless: (1) the Company or such Restricted Subsidiary, as the case may be, receives consideration (including by way of relief from, or by any other Person assuming responsibility for, any liabilities, contingent or otherwise) at least equal to the fair market value (such fair market value to be determined on the date of contractually agreeing to such Asset Disposition), as determined in good faith by the Board of Directors or an Officer of the Company, of the shares and assets subject to such Asset Disposition (including, for the avoidance of doubt, if such Asset Disposition is a Permitted Asset Swap); and (2) in any such Asset Disposition, or series of related Asset Dispositions (except to the extent the Asset Disposition is a Permitted Asset Swap), at least 75% of the consideration from such Asset Disposition (excluding any consideration by way of relief from, or by any other Person assuming responsibility for, any liabilities, contingent or otherwise, other than Indebtedness) received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash, Cash Equivalents or Temporary Cash Investments.

Within 365 days from the later of (A) the date of such Asset Disposition and (B) the receipt of such Net Available Cash from an Asset Disposition, the Company or such Restricted Subsidiary, as the case may be, may apply an amount equal to such Net Available Cash at the option of the Company or such Restricted Subsidiary: (a) (i) to prepay, repay, purchase or redeem any Indebtedness Incurred under clause (1) of the second paragraph of the covenant described under “—Limitation on Indebtedness,” or any Refinancing Indebtedness in respect thereof; provided, however, that in connection with any prepayment, repayment, purchase or redemption of Indebtedness pursuant to this clause (a) (except in the case of any revolving Indebtedness, including but not limited to the Revolving Credit Facility Agreement), the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related commitment to be permanently reduced in an amount equal to the principal amount so prepaid, repaid, purchased or redeemed; or (ii) to prepay, repay, purchase or redeem Pari Passu Indebtedness at a price of no more than 100% of the principal amount of such Pari Passu Indebtedness plus accrued and unpaid interest to the date of such prepayment, repayment, purchase or redemption; provided that the Company shall redeem, repay, repurchase or redeem Pari Passu Indebtedness that is Public Debt pursuant to this clause (ii) only if the Company makes (at such time or subsequently in compliance with this covenant) an offer to the Holders to purchase their Notes in accordance with the provisions set forth below for an Asset Disposition Offer for an aggregate principal amount of Notes at least equal to the proportion that (x) the total aggregate principal amount of Notes outstanding bears to (y) the sum of the total aggregate principal amount of Notes outstanding plus the total aggregate principal amount outstanding of such Pari Passu Indebtedness; or (iii) to prepay, repay, purchase or redeem any Indebtedness of a Restricted Subsidiary of the Company that is not a Guarantor or any Indebtedness that is secured on assets which do not constitute Collateral (in each case,

188 other than Subordinated Indebtedness of the Company or a Guarantor or Indebtedness owed to the Company or any Restricted Subsidiary); or (iv) to purchase the Notes pursuant to an offer to all Holders of Notes at a purchase price in cash equal to at least 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of repayment or purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); (b) to the extent the Company or such Restricted Subsidiary elects, to invest in or commit to invest in Additional Assets (including by means of an investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 365 days from the later of (i) the date of such Asset Disposition and (ii) the receipt of such Net Available Cash; provided, however, that any such reinvestment in Additional Assets made pursuant to a definitive binding agreement or a commitment approved by the Board of Directors or an Officer of the Company that is executed or approved within such time will satisfy this requirement, so long as such investment is consummated within 180 days of such 365th day; (c) to make a capital expenditure pursuant to a definitive binding agreement or a commitment approved by the Board of Directors or an Officer of the Company; provided, however, that any such capital expenditure made that is executed or approved within such time will only satisfy this requirement so long as such investment is consummated within 180 days of such 365th day; or (d) any combination of the foregoing; provided that, pending the final application of any such Net Available Cash in accordance with clause (a), (b), (c) or (d) above, the Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by the Indenture.

If an amount less than the Net Available Cash from Asset Dispositions is applied or invested or committed to be applied or invested, or offered to be applied or invested, as provided in the preceding paragraph, an amount equal to the difference will be deemed to constitute “Excess Proceeds” under the Indenture. On the 366th day (or the 546th day, in the case of any Net Available Cash committed to be used pursuant to a definitive binding agreement or commitment approved by the Board of Directors or an Officer of the Company pursuant to clause (b) or (c) of the second paragraph of this covenant) after the later of (A) the date of such Asset Disposition and (B) the receipt of such Net Available Cash from an Asset Disposition, or at such earlier date that the Company elects, if the aggregate amount of “Excess Proceeds” under the Indenture exceeds €10.0 million, the Company will be required to make an offer (or procure an offer is made) (“Asset Disposition Offer ”) to all Holders of Notes issued under the Indenture and, to the extent the Company so elects, to all holders of other outstanding Pari Passu Indebtedness, to purchase the maximum aggregate principal amount of Notes and any such Pari Passu Indebtedness to which the Asset Disposition Offer applies that may be purchased out of the “Excess Proceeds,” at an offer price in respect of the Notes in an amount equal to (and, in the case of any Pari Passu Indebtedness, an offer price of no more than) 100% of the principal amount of such Notes and 100% of the principal amount of such Pari Passu Indebtedness, in each case, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase, in accordance with the procedures set forth in the Indenture or the agreements governing the Pari Passu Indebtedness, as applicable.

To the extent that the aggregate principal amount of Notes and Pari Passu Indebtedness so validly tendered and not properly withdrawn pursuant to an Asset Disposition Offer is less than the “Excess Proceeds,” the Company may use any remaining “Excess Proceeds” for general corporate purposes, subject to the other covenants contained in the Indenture. If the aggregate principal amount of the Notes surrendered in any Asset Disposition Offer by Holders and other Pari Passu Indebtedness surrendered by holders or lenders, collectively, exceeds the amount of “Excess Proceeds,” the “Excess Proceeds” shall be allocated among the Notes and Pari Passu Indebtedness to be purchased on a pro rata basis or by use of a pool factor on the basis of the aggregate principal amount of tendered Notes and Pari Passu Indebtedness, or by such other method in compliance with applicable legal, depositary and exchange requirements. For the purposes of calculating the aggregate principal amount of any such Indebtedness not denominated in euro, such Indebtedness shall be calculated by converting any such aggregate principal amounts into their Euro Equivalent determined as of a date

189 selected by the Company that is within the Asset Disposition Offer Period (as defined herein). Upon completion of any Asset Disposition Offer, the amount of “Excess Proceeds” shall be reset at zero.

To the extent that any portion of Net Available Cash payable in respect of the Notes is denominated in a currency other than the currency in which the relevant Notes are denominated, the amount thereof payable in respect of such Notes shall not exceed the net amount of funds in the currency in which the relevant Notes are denominated that is actually received upon converting such portion of Net Available Cash into such currency.

The Asset Disposition Offer, insofar as it relates to the Notes, will remain open for a period of not less than 20 Business Days following its commencement (the “Asset Disposition Offer Period ”). No later than five Business Days after the termination of the Asset Disposition Offer Period (the “Asset Disposition Purchase Date”), the Company will purchase (or procure the purchase of) the aggregate principal amount of Notes and, to the extent they so elect, any Pari Passu Indebtedness required to be purchased pursuant to this covenant (the “Asset Disposition Offer Amount ”) or, if less than the Asset Disposition Offer Amount has been so validly tendered, all Notes and Pari Passu Indebtedness validly tendered in response to the Asset Disposition Offer.

On or before the Asset Disposition Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Disposition Offer Amount of Notes and Pari Passu Indebtedness or portions of Notes and Pari Passu Indebtedness so validly tendered and not properly withdrawn pursuant to the Asset Disposition Offer, or if less than the Asset Disposition Offer Amount has been validly tendered and not properly withdrawn, all Notes and Pari Passu Indebtedness so validly tendered and not properly withdrawn and, in the case of the Notes, in minimum denominations of €100,000 and in integral multiples of €1,000 in excess thereof. The Company will deliver to the Trustee an Officer’s Certificate stating that such Notes or portions thereof were accepted for payment in accordance with the terms of this covenant. The Company or the Paying Agent, as the case may be, will promptly (but in any case not later than five Business Days after termination of the Asset Disposition Offer Period) mail or deliver (or procure the mail or delivery) to each tendering Holder an amount equal to the purchase price of the Notes so validly tendered and not properly withdrawn by such Holder, and accepted for purchase, and the Company will promptly issue a new Note (or amend the Global Note), and the Trustee, upon delivery of an Officer’s Certificate from the Company, will (via an authenticating agent) authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder, in an aggregate principal amount equal to any unpurchased portion of the Note surrendered; provided that each such new Note will be in an aggregate principal amount with a minimum denomination of €100,000 or in integral multiples of €1,000 in excess thereof. Any Note not so accepted will be promptly mailed or delivered (or transferred by book-entry) by the Company to the Holder thereof.

For the purposes of clause (2) of the first paragraph of this covenant, the following will be deemed to be cash: (1) the assumption by the transferee of Indebtedness of the Company or a Restricted Subsidiary (other than Subordinated Indebtedness of the Company or a Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; (2) securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days following the closing of such Asset Disposition; (3) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Disposition, to the extent that the Company and each other Restricted Subsidiary are released from any Guarantee of payment of such Indebtedness in connection with such Asset Disposition; (4) consideration consisting of Indebtedness of the Company or any Restricted Subsidiary (other than Subordinated Indebtedness of the Company or a Guarantor) received after the Issue Date from Persons who are not the Company or any Restricted Subsidiary; and (5) any Designated Non-Cash Consideration received by the Company or any Restricted Subsidiary in such Asset Dispositions having an aggregate fair market value, taken together with

190 all other Designated Non-Cash Consideration received pursuant to this covenant that is at that time outstanding, not to exceed 4% of Total Assets (with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value).

The Company will comply (or procure compliance), to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to the Indenture. To the extent that the provisions of any securities laws or regulations (or exchange rules) conflict with provisions of this covenant, the Company will comply (or procure compliance) with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Indenture by virtue of any conflict.

Maintenance of Listing The Company will use its commercially reasonable efforts to maintain the listing of the Notes on the Official List of the LxSE for so long as such Notes are outstanding; provided that if the Company is unable to obtain admission to such listing or if at any time the Company determines that it will not maintain such listing, it will obtain (where the Notes are initially so listed, prior to the delisting of the Notes from the Official List of the LxSE), and thereafter use its best efforts to maintain a listing of such Notes on another recognized stock exchange.

Limitation on Affiliate Transactions The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or conduct any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with or for the benefit of any Affiliate of the Company (such transaction or series of related transactions being an “Affiliate Transaction”) involving aggregate value in excess of €3.0 million unless: (1) the terms of such Affiliate Transaction taken as a whole are not materially less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable transaction at the time of such transaction or the execution of the agreement providing for such transaction in arm’s length dealings with a Person who is not such an Affiliate; (2) in the event such Affiliate Transaction involves an aggregate value in excess of €12.0 million, the terms of such transaction or series of related transactions have been approved by a majority of the members of the Board of Directors of the Company resolving that such transaction complies with clause (1) above; and (3) in the event such Affiliate Transaction involves an aggregate consideration in excess of €25.0 million, the Company has received a written opinion from an Independent Financial Advisor that such Affiliate Transaction is fair, from a financial standpoint, to the Company and its Restricted Subsidiaries or that the terms are not materially less favorable than those that could reasonably have been obtained in a comparable transaction at such time on an arm’s length basis from a Person that is not an Affiliate.

The provisions of the preceding paragraph will not apply to: (1) any Restricted Payment permitted to be made pursuant to the covenant described under “—Limitation on Restricted Payments,” any Permitted Payments (other than pursuant to clause (9)(b)(ii) of the third paragraph of the covenant described under “—Limitation on Restricted Payments”) or any Permitted Investment (other than Permitted Investments as defined in clauses (1)(b), (2), (11), (15) and (17) of the definition thereof); (2) any issuance or sale of Capital Stock, options, other equity-related interests or other securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, or entering into, or maintenance of, any employment, consulting, collective bargaining or benefit plan, program, agreement or arrangement, related trust or other similar agreement and other compensation arrangements, options, warrants or other rights to purchase Capital Stock of the Company, any Restricted Subsidiary or any Parent, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee

191 benefits or consultants’ plans (including valuation, health, insurance, deferred compensation, severance, retirement, savings or similar plans, programs or arrangements) or indemnities provided on behalf of officers, employees, directors or consultants approved by the Board of Directors of the Company, in each case in the ordinary course of business;

(3) any Management Advances and any waiver or transaction with respect thereto;

(4) any transaction between or among the Company and any Restricted Subsidiary (or entity that becomes a Restricted Subsidiary as a result of such transaction), or between or among Restricted Subsidiaries or any Receivables Subsidiary;

(5) the payment of reasonable fees and reimbursement of expenses to, and customary indemnities (including under customary insurance policies) and employee benefit and pension expenses provided on behalf of, directors, officers, consultants or employees of the Company, any Restricted Subsidiary or any Parent (whether directly or indirectly and including through any Person owned or controlled by any of such directors, officers or employees);

(6) the Hurtigruten Acquisition Transactions, the Refinancing Transactions and the entry into and performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of any transaction arising out of, and any payments pursuant to or for purposes of funding, any agreement or instrument in effect as of or on the Issue Date, as these agreements and instruments may be amended, modified, supplemented, extended, renewed or refinanced from time to time in accordance with the other terms of this covenant or to the extent not more disadvantageous to the Holders in any material respect in the good faith judgment of the Board of Directors or an Officer of the Company and the entry into and performance of any registration rights or other listing agreement in connection with any Public Offering;

(7) the execution, delivery and performance of any Tax Sharing Agreement and the formation and maintenance of any consolidated group for tax, accounting or cash pooling or management purposes in the ordinary course of business;

(8) transactions with customers, clients, landlords, lessors and lessees of ships and suppliers or purchasers or sellers of goods or services, which, in each case, are in the ordinary course of business and are either fair to the Company or the relevant Restricted Subsidiary in the reasonable determination of the Board of Directors or an Officer of the Company or the relevant Restricted Subsidiary or are on terms no less favorable than those that could reasonably have been obtained at such time from an unaffiliated party;

(9) any transaction in the ordinary course of business between or among the Company or any Restricted Subsidiary and any Affiliate of the Company or an Associate or similar entity that would constitute an Affiliate Transaction solely because the Company or a Restricted Subsidiary or any Affiliate of the Company or a Restricted Subsidiary or any Affiliate of any Permitted Holder owns an equity interest in or otherwise controls such Affiliate, Associate or similar entity;

(10) (a) issuances or sales of Capital Stock (other than Disqualified Stock or Designated Preference Shares) of the Company or options, warrants or other rights to acquire such Capital Stock or Subordinated Shareholder Funding; provided that the interest rate and other financial terms of such Subordinated Shareholder Funding are approved by a majority of the members of the Board of Directors or an Officer of the Company in their reasonable determination and (b) any amendment, waiver or other transaction with respect to any Subordinated Shareholder Funding in compliance with the other provisions of the Indenture, the Intercreditor Agreement and any Additional Intercreditor Agreement, as applicable;

(11) without duplication in respect of payments made pursuant to clause (12) hereof, (a) payments by the Company or any Restricted Subsidiary to any Permitted Holder (whether directly or indirectly, including through any Parent) of annual management, consulting, monitoring or advisory fees and related expenses to an aggregate amount not to exceed €2.0 million in each twelve month period commencing on the Issue Date and (b) customary payments by the Company or any Restricted Subsidiary to any Permitted Holder (whether directly or indirectly, including through any Parent) for financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments in respect of this clause (b) are approved by a majority of the Board of Directors or an Officer of the Company in good faith;

(12) payment to any Permitted Holder of all reasonable out of pocket expenses Incurred by such Permitted Holder in connection with its direct or indirect investment in the Company and its Subsidiaries; and

192 (13) any transaction effected as part of a Qualified Receivables Financing.

Reports For so long as any Notes are outstanding, the Company will provide to the Trustee the following reports: (1) within 120 days after the end of the Company’s fiscal year beginning with the fiscal year ended December 31, 2014, annual reports containing, to the extent applicable, the following information: (a) audited consolidated balance sheets of the Company or its predecessor as of the end of the two most recent fiscal years and audited consolidated income statements and statements of cash flow of the Company or its predecessor for the two most recent fiscal years, including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; provided that in the event of any change in the Company’s fiscal year, the first annual report that is prepared in respect of such new fiscal year shall also include an unaudited consolidated balance sheet and an unaudited consolidated income statement and statement of cash flow of the Company as of and for the comparable prior period; (b) unaudited pro forma income statement information and balance sheet information of the Company (which, for the avoidance of doubt, shall not include the provision of a full income statement or balance sheet to the extent not reasonably available), together with explanatory footnotes, for any material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year; (c) an operating and financial review of the audited financial statements, including a discussion of the results of operations, financial condition, EBITDA and liquidity and capital resources of the Company, and a discussion of material commitments and contingencies and critical accounting policies; (d) a description of the business, management and shareholders of the Company, all material affiliate transactions and a description of all material contractual arrangements, including material debt instruments; and (e) a description of material risk factors and material recent developments; (2) within 75 days (or, in the case of the first two fiscal quarters ending after the Issue Date, beginning with the fiscal quarter ending March 31, 2015, 90 days) following the end of the first three fiscal quarters in each fiscal year of the Company beginning with the fiscal quarter ending March 31, 2015, all quarterly reports of the Company containing the following information: (a) an unaudited condensed consolidated balance sheet as of the end of such fiscal quarter and unaudited condensed statements of income and cash flow for the most recently completed fiscal quarter year-to-date period ending on the unaudited condensed balance sheet date, and the comparable prior year periods, together with condensed footnote disclosure; (b) unaudited pro forma income statement information and balance sheet information of the Company (which, for the avoidance of doubt, shall not include the provision of a full income statement or balance sheet to the extent not reasonably available), together with explanatory footnotes, for any material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the relevant fiscal quarter; (c) an operating and financial review of the unaudited year-to-date financial statements, including a discussion of the results of operations, financial condition, EBITDA and material changes in liquidity and capital resources of the Company, and a discussion of material changes not in the ordinary course of business in commitments and contingencies since the most recent report; and (d) material recent developments; and (3) promptly after the occurrence of any material acquisition, disposition, restructuring, merger or similar transaction, or any senior executive officer changes at the Company or change in auditors of the Company or any other material event that the Company or any of its Restricted Subsidiaries announces publicly, a report containing a description of such event.

All financial statements shall be prepared in accordance with IFRS as in effect on the date of such report or financial statement (or otherwise on the basis of IFRS as then in effect) and on a consistent basis for the periods presented; provided, however, that the reports set forth in clauses (1), (2) and (3) above may, in the event of a change in IFRS, present earlier periods on a basis that applied to such periods. Except as provided for below, no report needs to include separate financial statements for any Subsidiaries of the Company. At the Company’s election it may also include financial statements of a Parent or of Hurtigruten in lieu of those for the Company; provided that, if the financial statements of a Parent or of Hurtigruten are included in such report, a reasonably detailed description of the material differences between the financial statements of the Parent or of Hurtigruten, as the case

193 may be, and the Company shall be included for any such period. Following an Initial Public Offering of the Capital Stock of an IPO Entity and/or the listing of such Capital Stock on a recognized stock exchange, the requirements of clauses (1), (2) and (3) above shall be considered to have been fulfilled if the IPO Entity complies with the reporting requirements of such stock exchange; provided that (x) the IPO Entity shall, in any case, provide financial statements consistent with the requirements of clause (2)(a) above for any applicable quarterly period pursuant to clause (2) above after the Issue Date and (y) to the extent such IPO Entity relies on such stock exchange reporting requirements to fulfill the requirements of clauses (1), (2) and (3) above, a reasonably detailed description of material differences between the financial statements of such IPO Entity and the financial statements of the Company shall be included for any period after the Issue Date.

At any time that any of the Company’s Subsidiaries are Unrestricted Subsidiaries and any such Unrestricted Subsidiary or group of Unrestricted Subsidiaries, if taken together as one Subsidiary, constitutes a Significant Subsidiary of the Company, then the annual and quarterly financial information required by clauses (1) and (2) of the first paragraph of this covenant shall include either (i) a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company or (ii) stand-alone audited or unaudited financial statements, as the case may be, of such Unrestricted Subsidiary or Unrestricted Subsidiaries (as a group or otherwise) together with an unaudited reconciliation to the financial information of the Company and its Subsidiaries, which reconciliation shall include the following items: operating revenue, EBITDA, profit/(loss), cash, total assets, total debt, shareholders equity, capital expenditures and interest expense.

Substantially concurrently with the issuance to the Trustee of the reports specified in clauses (1), (2) and (3) of the first paragraph of this covenant, the Company shall also (a) use its commercially reasonable efforts (i) to post copies of such reports on such password protected website as may be then maintained by the Company and its Subsidiaries or (ii) otherwise to provide substantially comparable public availability of such reports (as determined by the Board of Directors or an Officer of the Company in good faith) or (b) to the extent the Board of Directors or an Officer of the Company determines in good faith that it cannot make such reports available in the manner described in the preceding clause (a) owing to applicable law or after the use of its commercially reasonable efforts, furnish such reports to the Holders and, upon their request, prospective purchasers of the Notes.

The Company will also make available copies of all reports required by clauses (1) through (3) of the first paragraph of this covenant, if and so long as the Notes are listed on the Official List of the LxSE and admitted for trading on the Euro MTF of the LxSE and the rules of such exchange so require, at the offices of the Registrar or, to the extent and in the manner permitted by such rules, post such reports on the official website of the LxSE.

In addition, so long as the Notes remain outstanding and during any period during which the Company is not subject to Section 13 or 15(d) of the Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b), the Company shall furnish to the Holders and, upon their request, prospective purchasers of the Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Merger and Consolidation The Company The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless (and subject to the other terms of the Indenture): (1) the Successor Company (if not the Company) will be a Person organized and existing under the laws of any Permissible Jurisdiction and the Successor Company (if not the Company) will expressly assume (a) by supplemental indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of the Company, under the Notes and the Indenture and (b) to the extent required by applicable law to effect such assumption, all obligations of the Company under the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents and all rights and claims under any Proceeds Loan, subject in each case to any limitation contemplated by the Agreed Security Principles; (2) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Company or any Subsidiary of the Successor Company as a

194 result of such transaction as having been Incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction, either (a) the Successor Company would be permitted to Incur at least an additional €1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness” or (b) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would not be lower than it was immediately prior to giving effect to such transaction; and (4) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture, and that all conditions precedent therein provided for relating to such transaction have been complied with and an Opinion of Counsel to the effect that such supplemental indenture (if any) has been duly authorized, executed and delivered and is a legal, valid and binding agreement enforceable against the Successor Company and the Notes constitute legal, valid and binding obligations of the Successor Company, enforceable in accordance with their terms (in each case, in form and substance reasonably satisfactory to the Trustee); provided that in giving an Opinion of Counsel, counsel may rely on an Officer’s Certificate as to any matters of fact, including as to satisfaction of clauses (2) and (3) above.

Any Indebtedness that becomes an obligation of the Company or any Restricted Subsidiary (or that is deemed to be Incurred by any Restricted Subsidiary that becomes a Restricted Subsidiary) as a result of any such transaction undertaken in compliance with this covenant, and any Refinancing Indebtedness with respect thereto, shall be deemed to have been Incurred in compliance with the covenant described under “—Limitation on Indebtedness.”

For purposes of this covenant, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company, as the case may be.

The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes but in the case of a lease of all or substantially all its assets, the predecessor company will not be released from its obligations under the Indenture or the Notes.

Notwithstanding the preceding clauses (2), (3) and (4) of the first paragraph of this covenant and the provisions described below under “—The Guarantors” (which do not apply to transactions referred to in this sentence), (a) any Restricted Subsidiary may consolidate or otherwise combine with, merge into or transfer all or part of its properties and assets to the Company and (b) any Restricted Subsidiary that is not a Guarantor may consolidate or otherwise combine with, merge into or transfer all or part of its properties and assets to any other Restricted Subsidiary.

Notwithstanding the preceding clauses (2) and (3) (which do not apply to the transactions referred to in this sentence), the Company may consolidate or otherwise combine with or merge into, or transfer all or substantially all of its assets to, an Affiliate incorporated or organized for the purpose of changing the legal domicile of the Company, reincorporating the Company in another jurisdiction, or changing the legal form of the Company.

The foregoing provisions (other than the requirements of clause (2) of the first paragraph of this covenant) will not apply to (i) any transactions which constitute an Asset Disposition if the Company has complied with the covenant described under “— Limitation on Sales of Assets and Subsidiary Stock” or (ii) the creation of a new subsidiary as a Restricted Subsidiary of the Company.

There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a Person.

The Guarantors No Guarantor (other than a Guarantor whose guarantee is to be released in accordance with the terms of the Indenture, the Intercreditor Agreement and any Additional Intercreditor Agreement) may:

195 (1) consolidate with or merge with or into any Person, or (2) sell, convey, transfer or dispose of, all or substantially all its assets as an entirety or substantially as an entirety, in one transaction or a series of related transactions, to any Person, or (3) permit any Person to merge with or into such Guarantor, unless: (A) the other Person is the Company or any Restricted Subsidiary that is a Guarantor or becomes a Guarantor; or (B) (1) either (x) a Guarantor is the continuing Person or (y) the resulting, surviving or transferee Person expressly assumes (a) all of the obligations of the Guarantor under its Notes Guarantee and (b), to the extent required by applicable law to effect such assumption, the obligations under the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents to which it is a party and, if applicable, any Proceeds Loan Agreement, in each case subject to any limitation contemplated by the Agreed Security Principles; and (2) immediately after giving effect to the transaction, no Default has occurred and is continuing; or (C) the transaction constitutes a sale or other disposition (including by way of consolidation or merger) of the Guarantor or the sale or disposition of all or substantially all the assets of the Guarantor (in each case other than to the Company or a Restricted Subsidiary) otherwise permitted by the Indenture.

Notwithstanding the preceding clause (B) and the provisions described under “—The Company” (which do not apply to transactions referred to in this sentence), (a) any Restricted Subsidiary may consolidate or otherwise combine with, merge into or transfer all or part of its properties and assets to any Guarantor and (b) any Guarantor may consolidate or otherwise combine with, merge into or transfer all or part of its properties and assets to any other Guarantor. Notwithstanding the preceding clause B(2) (which does not apply to the transactions referred to in this sentence), any Guarantor may consolidate or otherwise combine with or merge into an Affiliate incorporated or organized for the purpose of changing the legal domicile of such Guarantor, reincorporating such Guarantor in another jurisdiction, or changing the legal form of such Guarantor.

There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a Person.

Suspension of Covenants on Achievement of Investment Grade Status If on any date following the Issue Date, the Notes have achieved Investment Grade Status and no Default or Event of Default has occurred and is continuing (a “Suspension Event ”), then, beginning on that day and continuing until the Reversion Date, the provisions of the Indenture summarized under the following captions will not apply to such Notes: “—Limitation on Restricted Payments,” “—Limitation on Indebtedness,” “— Limitation on Distributions from Restricted Subsidiaries,” “—Limitation on Affiliate Transactions,” “— Limitation on Sales of Assets and Subsidiary Stock,” “—Additional Notes Guarantees and Collateral ” and the provisions of clause (3) of the first paragraph of the covenant described under “—Merger and Consolidation— The Company,” and, in each case, any related default provision of the Indenture will cease to be effective and will not be applicable to the Company and its Restricted Subsidiaries.

Such covenants and any related default provisions will again apply according to their terms from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Company or its Restricted Subsidiaries properly taken during the continuance of the Suspension Event, and the “—Limitation on Restricted Payments” covenant will be interpreted as if it has been in effect since the date of the Indenture except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was

196 suspended. On the Reversion Date, all Indebtedness Incurred during the continuance of the Suspension Event will be classified, at the Company’s option, as having been Incurred pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness” or one of the clauses set forth in the second paragraph of such covenant (to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred prior to the Suspension Event and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be Incurred under the first two paragraphs of the covenant described under “—Limitation on Indebtedness,” such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (4)(b) of the second paragraph of the covenant described under “—Limitation on Indebtedness.” The Company shall notify the Trustee that the conditions under this covenant have been satisfied, although such notification shall not be a condition for the suspension of the covenants set forth above to be effective. The Trustee shall not be obliged to notify Holders of such event.

Additional Notes Guarantees and Collateral Subject to the Agreed Security Principles, the Intercreditor Agreement and any Additional Intercreditor Agreement, the Company will not cause or permit any of its Restricted Subsidiaries that is not a Guarantor, directly or indirectly, to Guarantee or otherwise become liable for any Indebtedness under the Revolving Credit Facility Agreement (or other Indebtedness that is Incurred under clause (1) or (6) of the second paragraph of “— Limitation on Indebtedness”), any Public Debt and any Refinancing Indebtedness thereof or any other Indebtedness of the Company or a Guarantor exceeding €2.0 million in principal amount, in whole or in part unless, in each case, such Restricted Subsidiary becomes a Guarantor on the date on which such other Guarantee or obligation is Incurred and, if applicable, executes and delivers to the Trustee a supplemental indenture in the form attached to the Indenture or other appropriate agreement pursuant to which such Restricted Subsidiary will provide a Guarantee on the same terms and conditions as those set forth in the Indenture, which Guarantee will be senior to or pari passu with such Restricted Subsidiary’s Guarantee of such other Indebtedness; provided that if the Indebtedness Guaranteed by such other Guarantee is subordinated in right of payment to the Notes or a Notes Guarantee, then such other Guarantee must be subordinated to such Restricted Subsidiary’s Guarantee of the Notes to at least the same extent as such other Indebtedness is subordinated to the Notes or the Notes Guarantee, as the case may be.

A Restricted Subsidiary that is not a Guarantor may become a Guarantor if it executes and delivers to the Trustee a supplemental indenture in the form attached to the Indenture pursuant to which such Restricted Subsidiary will provide a Guarantee.

Following the provision of any additional Guarantees as described above, subject to the Agreed Security Principles, the Intercreditor Agreement and any Additional Intercreditor Agreement (if such security is being granted in respect of the other Indebtedness), any such Guarantor will provide security over its material assets that are of the same type as any of the Company’s or the Guarantors’ assets that are required to be part of the Collateral as of the Issue Date or the Backstop Date, as applicable (excluding any assets of such Guarantor which are subject to a Permitted Lien at the time of the execution of such supplemental indenture if providing such security interest would not be permitted by the terms of such Permitted Lien or by the terms of any obligations secured by such Permitted Lien) to secure its Guarantee on a first priority basis consistent with the Collateral.

Each additional Guarantee or security will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, thin capitalization, distributable reserves, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally) or other considerations under applicable law.

Notwithstanding the foregoing paragraphs, the Company shall not be obligated to cause such Restricted Subsidiary to Guarantee the Notes or provide security to the extent and for so long as the Incurrence of such Guarantee or the grant of such security would be inconsistent with the Intercreditor Agreement or the Agreed Security Principles.

197 Impairment of Security Interest Silk Midco shall not, the Company shall not, and the Company shall not permit any Restricted Subsidiary to, take or omit to take any action, which action or omission would have the result of materially impairing the security interest with respect to the Collateral (it being understood that the Incurrence of Permitted Collateral Liens shall under no circumstances be deemed to materially impair the security interest with respect to the Collateral) for the benefit of the Trustee and the Holders, and Silk Midco shall not, and the Company shall not, and the Company shall not permit any Restricted Subsidiary to, grant to any Person other than the Security Agent, for the benefit of the Trustee and the Holders and the other beneficiaries described in the Security Documents, the Intercreditor Agreement and any Additional Intercreditor Agreement, any Lien over any of the Collateral that is prohibited by the covenant described under “—Limitation on Liens”; provided, that Silk Midco, the Company and its Restricted Subsidiaries may Incur any Lien over any of the Collateral that is not prohibited by the covenant described under “—Limitation on Liens,” including Permitted Collateral Liens, and the Collateral may be discharged or released in accordance with the Indenture, the applicable Security Documents, the Intercreditor Agreement or any Additional Intercreditor Agreement.

Notwithstanding the above, nothing in this covenant shall restrict the discharge and release of any Lien in accordance with the Indenture, the applicable Security Documents, the Intercreditor Agreement or any Additional Intercreditor Agreement.

Subject to the foregoing, the Security Documents may be amended, extended, renewed, restated or otherwise modified or released to (i) cure any ambiguity, omission, defect or inconsistency therein; (ii) provide for Permitted Collateral Liens; (iii) add to the Collateral; or (iv) make any other change thereto that does not adversely affect the Holders in any material respect; provided, however, that (except where permitted by the Indenture or the Intercreditor Agreement or to effect or facilitate the creation of Permitted Collateral Liens for the benefit of the Security Agent and holders of other Indebtedness Incurred in accordance with the Indenture) no Security Document may be amended, extended, renewed, restated or otherwise modified or released, unless contemporaneously with such amendment, extension, renewal, restatement or modification or release (followed by an immediate retaking of a Lien of at least equivalent ranking over the same assets), the Company delivers to the Security Agent and the Trustee, either (1) a solvency opinion, in form and substance reasonably satisfactory to the Security Agent and the Trustee, from an Independent Financial Advisor or appraiser or investment bank which confirms the solvency of the Company and its Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, modification or release, (2) a certificate from an Officer of the relevant Person which confirms the solvency of the Person granting such Lien after giving effect to any transactions related to such amendment, extension, renewal, restatement, modification or release (followed by an immediate retaking of a Lien of at least equivalent ranking over the same assets), or (3) an Opinion of Counsel (subject to any qualifications customary for this type of opinion of counsel), in form and substance reasonably satisfactory to the Trustee, confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, modification or release (followed by an immediate retaking of a lien of at least equivalent ranking over the same assets), the Lien or Liens created under the Security Document, so amended, extended, renewed, restated, modified or released and retaken are valid and perfected Liens not otherwise subject to any limitation, imperfection or new hardening period, in equity or at law, that such Lien or Liens were not otherwise subject to immediately prior to such amendment, extension, renewal, restatement, modification or release and retake and to which the new Indebtedness secured by the Permitted Collateral Lien is not subject. In the event that Silk Midco, the Company and its Restricted Subsidiaries comply with the requirements of this covenant, the Trustee and the Security Agent shall (subject to customary protections and indemnifications) consent to such amendments without the need for instructions from the Holders.

Further Assurances Subject to the Agreed Security Principles, the Company and its Restricted Subsidiaries will, at their own expense, execute and do all such acts and things and provide such assurances as the Security Agent may reasonably require (i) for registering any Security Documents in any required register and for perfecting or protecting the security intended to be afforded by such Security Documents and (ii) if such Security Documents have become enforceable, for facilitating the realization of all or any part of the assets which are subject to such Security Documents and for facilitating the exercise of all powers, authorities and discretions vested in the Security Agent or in any receiver of all

198 or any part of those assets. Subject to the Agreed Security Principles, the Company and its Restricted Subsidiaries will execute all transfers, conveyances, assignments and releases of that property whether to the Security Agent or to its nominees and give all notices, orders and directions which the Security Agent may reasonably request.

Limitations on Amendments to the Proceeds Loan The Company will not, except as expressly permitted by the Indenture, (a) change the Stated Maturity of the principal of, or any installment of interest on any Proceeds Loan; (b) reduce the rate of interest on any Proceeds Loan; (c) change the currency for payment of any amount under any Proceeds Loan other than to euro or another currency in which Notes are denominated; (d) prepay or otherwise reduce or permit the prepayment or reduction of any Proceeds Loan (except to facilitate a payment of principal, premium or interest on the Notes); (e) assign or novate any Proceeds Loan or any rights or obligations under any Proceeds Loan Agreement (other than to grant any Permitted Collateral Lien or in connection with a transaction that is subject to the covenant described under “—Merger and Consolidation” and is completed in compliance therewith); or (f) amend, modify or alter any Proceeds Loan or any Proceeds Loan Agreement and the terms of the Intercreditor Agreement related to the Proceeds Loan in any manner materially adverse to the rights of the holders of the Notes.

Notwithstanding the foregoing, (i) the Proceeds Loan may be prepaid or reduced to facilitate or otherwise accommodate or reflect a repayment, redemption or repurchase of Indebtedness outstanding under the Notes and (ii) to the extent not having a materially adverse effect to holders of the Notes, the Proceeds Loan may be novated and/or assigned to any Guarantor or Successor Company.

Limitation on Company Activities The Company will not engage in any business or undertake any other activity, own any material assets or incur any material liabilities other than: (a) ownership of the Capital Stock of Hurtigruten, debit and credit balances with its Restricted Subsidiaries and other credit and cash balances in bank accounts and Investments in Cash Equivalents, Temporary Cash Investments or Investment Grade Securities; (b) the provision of administration services and management services to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries and the ownership of assets necessary to provide such services; (c) the entry into and performance of its obligations (and incurrence of liabilities) under the Indenture, the Notes, the Revolving Credit Facility Agreement, any Hedging Obligations, other Indebtedness (including any Additional Notes), any Public Debt or any other obligations, in each case as otherwise permitted by the Indenture, any Security Document to which it is a party and the Intercreditor Agreement; (d) the making of any payments or other distributions in compliance with the covenant described under “—Limitation on Restricted Payments” and the making of any Permitted Investments; (e) reorganizations for bona fide corporate purposes in compliance with the covenant described under “—Merger and Consolidation”; provided that any successor entity resulting from any such reorganization is subject to this covenant; (f) the granting of security interests, indemnities and overhead costs or taxes and the entry into of any Security Document to which it is a party, the Intercreditor Agreement or any proceeds loans relating to the foregoing, in each case as otherwise permitted by the Indenture; (g) professional fees and administration costs in the ordinary course of business as a holding company; (h) related or reasonably incidental to the establishment or maintenance of its or its Subsidiaries’ corporate existence; (i) any liabilities under any purchase agreement or any other document entered into in connection with the issuance of the Notes or any other Indebtedness as otherwise permitted under the Indenture; (j) pursuant to or in connection with the Hurtigruten Acquisition Transactions or the Refinancing Transactions, and under any management, advisory, monitoring or similar agreement, in each case as otherwise permitted by the Indenture; and (k) any other activities which are not specifically listed above and (x) which are ancillary to or related to those listed above or (y) which are de minimis in nature.

The Company will not undertake any transaction that will require the Company to register as an “investment company ” as defined in the U.S. Investment Company Act of 1940, as amended, and the rules and regulations thereunder.

199 Payments for Consent The Indenture will provide that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms of the provisions of the Indenture or the Notes unless such consideration is offered to all Holders and is paid to all Holders that so consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries shall be permitted, in any offer or payment of consideration for, or as an inducement to, any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes, to exclude Holders in any jurisdiction where (i) the solicitation of such consent, waiver or amendment, including in connection with an exchange offer or an offer to purchase for cash, or (ii) the payment of the consideration therefor would (A) require the Company or any of its Restricted Subsidiaries to file a registration statement, prospectus or similar document under any applicable securities laws (including, but not limited to, the United States federal securities laws and the laws of the European Union or its member states), which the Company in its sole discretion determines (acting in good faith) would be materially burdensome; or (B) otherwise not be permitted under applicable law in such jurisdiction.

Events of Default Each of the following is an “Event of Default ” under the Indenture: (1) default in any payment of interest or Additional Amounts, if any, on any Note when due and payable, continued for 30 days; (2) default in any payment of the principal amount of or premium, if any, on any Note issued under the Indenture when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise; (3) failure to comply for 30 days after written notice by the Trustee on behalf of the Holders or by the Holders of at least 30% in aggregate principal amount of the outstanding Notes with any of the Company’s obligations under the covenants described under “—Change of Control ” above or the obligations of the Company and the Restricted Subsidiaries under the covenants described under “—Certain Covenants” above (in each case, other than a failure to purchase Notes which will constitute an Event of Default under clause (2) above); (4) failure to comply by the Company or any of its Restricted Subsidiaries for 60 days after written notice by the Trustee on behalf of the Holders or by the Holders of at least 30% in aggregate principal amount of the outstanding Notes with the Company’s or the Guarantors’ other agreements contained in the Indenture; (5) default under any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness for money borrowed by Silk Midco, the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by Silk Midco, the Company or any of its Restricted Subsidiaries) other than Indebtedness owed to the Company or a Restricted Subsidiary whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, which default: (a) is caused by a failure to pay principal at Stated Maturity on such Indebtedness, immediately upon the expiration of the grace period provided in such Indebtedness (“payment default ”); or (b) results in the acceleration of such Indebtedness prior to its maturity (the “cross acceleration provision”); and, in each case, the aggregate principal amount of any such Indebtedness, together with the aggregate principal amount of any other such Indebtedness under which there has been a payment default or the maturity of which has been so accelerated, aggregates €15.0 million or more; (6) certain events of bankruptcy, insolvency or court protection of Silk Midco, the Company or a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary (the “bankruptcy provisions”);

200 (7) failure by the Company, a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary, to pay final judgments aggregating in excess of €15.0 million (exclusive of any amounts that a solvent insurance company has acknowledged liability for), which judgments are not paid, discharged or stayed for a period of 60 days after the judgment becomes final and due (the “judgment default provision”); (8) any security interest under the Security Documents on any Collateral having a fair market value in excess of €15.0 million shall, at any time, cease to be in full force and effect (other than in accordance with the terms of the relevant Security Document, the Intercreditor Agreement and the Indenture) for any reason other than the satisfaction in full of all obligations under the Indenture or the release or amendment of any such security interest in accordance with the terms of the Indenture, the Intercreditor Agreement or such Security Document or any such security interest created thereunder shall be declared invalid or unenforceable in a final non-appealable decision of a court of competent jurisdiction or the Company shall assert in writing that any such security interest is invalid or unenforceable and any such Default continues for 10 days (the “security default provisions”); and (9) any Notes Guarantee ceases to be in full force and effect (other than in accordance with the terms of the Intercreditor Agreement and the Indenture), or a Guarantor denies or disaffirms its obligations under its Notes Guarantee in writing, other than in accordance with the terms thereof or upon release of the Notes Guarantee in accordance with the Indenture.

However, a default under clause (3), (4), (5) or (7) of this paragraph will not constitute an Event of Default until the Trustee or the Holders of at least 30% in aggregate principal amount of the outstanding Notes notify the Company of the default and, with respect to clauses (3), (4), (5) and (7) the Company does not cure such default (or arranges that such Default has been cured) within the time specified in clause (3), (4), (5) or (7), as applicable, of this paragraph after receipt of such notice.

If an Event of Default (other than an Event of Default described in clause (6) above) occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 30% in aggregate principal amount of the outstanding Notes, may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued and unpaid interest, including Additional Amounts, if any, on all the Notes to be due and payable. Upon such a declaration, such principal, premium and accrued and unpaid interest, including Additional Amounts, if any, will be due and payable immediately. In the event of a declaration of acceleration of the Notes because an Event of Default described in clause (5) of this “Events of Default” section has occurred and is continuing, the declaration of acceleration of the Notes shall be automatically annulled if the event of default or payment default triggering such Event of Default pursuant to clause (5) shall be remedied or cured, or waived by the holders of the Indebtedness, or the Indebtedness that gave rise to such Event of Default shall have been discharged in full, within 30 days after the declaration of acceleration with respect thereto and if (1) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, except nonpayment of principal, premium or interest, including Additional Amounts, if any, on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived.

If an Event of Default described in clause (6) above occurs and is continuing, the principal of, premium, if any, and accrued and unpaid interest, including Additional Amounts, if any, on all the Notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

The Holders of a majority in aggregate principal amount of the outstanding Notes under the Indenture may waive all past or existing Defaults or Events of Default (except with respect to (i) nonpayment of principal, premium or interest, or Additional Amounts, if any and (ii) a covenant or provision which under the Indenture cannot be modified or amended without the consent of the Holders of at least 90% of the principal amount of the Notes then outstanding, each of which may only be waived with the consent of the Holders of at least 90% of the principal amount of the Notes then outstanding) and rescind any such acceleration with respect to such Notes and its consequences if rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

Subject to the provisions of the Indenture relating to the duties of the Trustee, if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or

201 powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security (including by way of prefunding) satisfactory to it in its sole discretion against any loss, liability or expense. Except to enforce the right to receive payment of principal or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless: (1) such Holder has previously given the Trustee written notice that an Event of Default is continuing; (2) Holders of at least 30% in aggregate principal amount of the outstanding Notes have requested in writing the Trustee to pursue the remedy; (3) such Holders have offered in writing the Trustee indemnity and/or security (including by way of prefunding) satisfactory to it in its sole discretion against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt of the written request and the offer of security and/or indemnity; and (5) the Holders of a majority in aggregate principal amount of the outstanding Notes have not given the Trustee a written direction that, in the opinion of the Trustee, is inconsistent with such request within such 60-day period.

Subject to certain restrictions, the Holders of a majority in aggregate principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Indenture will provide that, in the event an Event of Default, of which a responsible officer of the Trustee has received written notice, has occurred and is continuing, the Trustee will be required in the exercise of its powers to use the degree of care that a prudent person would use in the conduct of its own affairs. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification and/or security (including by way of prefunding) satisfactory to it in its sole discretion against all losses, liabilities and expenses caused by taking or not taking such action.

The Indenture will provide that if a Default occurs and a responsible officer of the Trustee is informed in writing of such occurrence by the Company, the Trustee must give notice of the Default to the Holders within 90 days after being notified by the Company. Except in the case of a Default in the payment of principal of, or premium, if any, or interest on any Note, the Trustee may withhold notice if and so long as a committee of trust officers of the Trustee in good faith determines that withholding notice is in the interests of the Holders. The Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year (and within 14 days upon request at any time after the 120 days), an Officer’s Certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any events of which it is aware which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof.

The Notes provide for the Trustee to take action on behalf of the Holders in certain circumstances, but only if the Trustee is indemnified and/or secured (including by way of pre-funding) to its satisfaction in its sole discretion. It may not be possible for the Trustee to take certain actions in relation to the Notes and, accordingly, in such circumstances the Trustee will be unable to take action, notwithstanding the provision of an indemnity to it, and it will be for Holders to take action directly.

Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture and may not enforce the Security Documents except as provided in such Security Documents and the Intercreditor Agreement or any Additional Intercreditor Agreement.

Amendments and Waivers Subject to certain exceptions, the Note Documents may be amended, supplemented or otherwise modified with the consent of the Holders of a majority in aggregate principal amount of the Notes then

202 outstanding (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Notes) and, subject to certain exceptions, any default or compliance with any provisions thereof may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Notes). However, without the consent of Holders holding not less than 90% of the then outstanding aggregate principal amount of Notes (including consents obtained in connection with a purchase of, or tender offer or exchange offer for the Notes), or if any amendment, waiver or other modification will only amend, waive or modify one series of the Notes, without the consent of Holders holding not less than 90% of the then outstanding aggregate principal amount of Notes of such series amended, waived or modified, an amendment or waiver may not, with respect to any Notes, held by a non-consenting Holder: (1) reduce the principal amount of such Notes whose Holders must consent to an amendment, waiver or modification; (2) reduce the stated rate of or extend the stated time for payment of interest on any such Note; (3) reduce the principal of or extend the Stated Maturity of any such Note; (4) reduce the premium payable upon the redemption of any such Note or change the time at which any such Note may be redeemed, in each case as described above under “—Optional Redemption”or“— Redemption for Taxation Reasons”; (5) make any such Note payable in money other than that stated in such Note; (6) impair the right of any Holder to receive payment of principal of and interest or Additional Amounts, if any, on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any such payment on or with respect to such Holder’s Notes; (7) make any change in the provision of the Indenture described under “—Additional Amounts” that adversely affects the right of any Holder of such Notes in any material respect or amends the terms of such Notes in a way that would result in a loss of an exemption from any of the Taxes described thereunder or an exemption from any obligation to withhold or deduct Taxes so described thereunder unless the Payor agrees to pay Additional Amounts, if any, in respect thereof; (8) release all or substantially all the Guarantors from their obligations under their respective Notes Guarantees or the Indenture, except otherwise in accordance with the terms of the Indenture, the Intercreditor Agreement or any Additional Intercreditor Agreement; (9) release the security interest granted for the benefit of the Holders in the material Collateral, other than pursuant to the terms of the Security Document or the Indenture, as applicable, except as permitted by the Intercreditor Agreement or any Additional Intercreditor Agreement; (10) waive a Default or Event of Default with respect to the nonpayment of principal, premium, interest or Additional Amounts, if any, on the Notes (except pursuant to a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of such Notes and a waiver of the payment default that resulted from such acceleration); or (11) make any change in the amendment or waiver provisions which require the Holders’ consent described in this sentence.

Notwithstanding the foregoing, without the consent of any Holder, the Company, the Guarantors, the Trustee and the other parties thereto, as applicable, may amend or supplement any Note Documents to: (1) cure any ambiguity, omission, defect, error or inconsistency or reduce the minimum denomination of the Notes; (2) provide for the assumption by a successor Person of the obligations of the Company or the Guarantors under any Note Document; (3) provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the

203 Code, or in a manner such that the uncertificated Notes are described in Section 4701(b)(1)(B) of the Code) or change the minimum denominations for the Notes;

(4) add to the covenants or provide for a Notes Guarantee for the benefit of the Holders or surrender any right or power conferred upon the Company or any Restricted Subsidiary;

(5) make any change that would provide additional rights or benefits to the Trustee or the Holders or does not adversely affect the rights of or benefits to the Trustee or any Holder in any material respect;

(6) make such provisions as necessary (as determined in good faith by the Board of Directors or an Officer of the Company) for the issuance of Additional Notes;

(7) provide for any Restricted Subsidiary to provide a Notes Guarantee in accordance with the covenant described under “—Certain Covenants—Limitation on Indebtedness” and “—Certain Covenants— Additional Notes Guarantees and Collateral” to add Notes Guarantees, to add security to or for the benefit of the Notes, or to confirm and evidence the release, termination, discharge or retaking of any Notes Guarantee or Lien (including the Collateral and the Security Documents) or any amendment in respect thereof with respect to or securing the Notes when such release, termination, discharge or retaking or amendment is permitted under the Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents;

(8) conform the text of the Indenture, the Notes Guarantees, the Security Documents or the Notes to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the Indenture, a Notes Guarantee, the Security Documents or the Notes;

(9) evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee pursuant to the requirements thereof or to provide for the accession by the Trustee to any Note Document; or

(10) in the case of the Security Documents, mortgage, pledge, hypothecate or grant a security interest in favor of the Security Agent for the benefit of parties to the Revolving Credit Facility Agreement, in any property which is required by the Revolving Credit Facility Agreement (as in effect on the Issue Date) to be mortgaged, pledged or hypothecated, or in which a security interest is required to be granted to the Security Agent, or to the extent necessary to grant a security interest for the benefit of any Person; provided that the granting of such security interest is not prohibited by the Indenture and the covenant described under “—Certain Covenants—Impairment of Security Interest” is complied with.

The Trustee shall be entitled to rely on such evidence as it deems appropriate, including Officer’s Certificates and Opinions of Counsel.

The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment of any Note Document. It is sufficient if such consent approves the substance of the proposed amendment. A consent to any amendment or waiver under the Indenture by any Holder given in connection with a tender of such Holder’s Notes will not be rendered invalid by such tender.

Notwithstanding anything to the contrary in the paragraphs above, in order to effect the amendments authorized by clauses (2), (4) and (7) of the second paragraph of this covenant in respect of providing a Notes Guarantee for the benefit of the Holders, it shall only be necessary for the supplemental indenture providing for the accession of such additional Guarantor to be duly authorized and executed by (i) the Company, (ii) such additional Guarantor and (iii) the Trustee.

For so long as the Notes are listed on the Euro MTF of the LxSE and the rules of such exchange so require, the Company will publish notice of any amendment, supplement and waiver on the official website of the LxSE or in a daily newspaper with general circulation in Luxembourg (which is expected to be the Luxemburger Wort).

Acts by Holders

In determining whether the Holders of the required aggregate principal amount of the Notes have concurred in any direction, waiver or consent, any Notes owned by the Company or by any Person

204 directly or indirectly controlled, or controlled by, or under direct or indirect common control with, the Company will be disregarded and deemed not to be outstanding.

Defeasance The Company at any time may terminate all its and each Guarantor’s obligations under the Notes and the Indenture (“legal defeasance”) and cure all then existing Defaults and Events of Default, except for certain obligations, including those respecting the defeasance trust, the rights, powers, trusts, duties, immunities and indemnities of the Trustee and the obligations of the Company in connection therewith and obligations concerning issuing temporary Notes, registrations of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust. Subject to the foregoing, if the Company exercises its legal defeasance option, the Security Documents in effect at such time will terminate (other than with respect to the defeasance trust).

The Company at any time may terminate all its and each Guarantor’s obligations under the covenants described under “—Certain Covenants” (other than with respect to clauses (1) and (2) of the covenant described under “—Merger and Consolidation—The Company ” and clauses (A), (B) and (C) of the covenant described under “—Certain Covenants—Merger and Consolidation—The Guarantors”) and “—Change of Control ” and the default provisions relating to such covenants described under “—Events of Default” above, the operation of the cross default upon a payment default, the cross acceleration provisions, the bankruptcy provisions, the judgment default provision, the guarantee default provision and the security default provision described under “—Events of Default ” above (“covenant defeasance”).

The Company at its option at any time may exercise its legal defeasance option notwithstanding its prior exercise of the covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect to the Notes. If the Company exercises its covenant defeasance option with respect to the Notes, payment of the Notes may not be accelerated because of an Event of Default specified in clause (3) (other than with respect to clauses (1) and (2) of the covenant described under “—Certain Covenants—Merger and Consolidation—The Company ”), (4), (5), (6) (other than with respect to the Company), (7), (8) or (9) under “—Events of Default ” above.

In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the “defeasance trust ”) with the Trustee (or such other entity designated or appointed as agent by the Trustee for this purpose) cash in euro, euro-denominated European Government Obligations or a combination of cash in euro and euro-denominated European Government Obligations in such amounts as will be sufficient, in the good faith determination of the Board of Directors or an Officer of the Company, for the payment of principal, premium, if any, and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of: (1) an Opinion of Counsel in the United States to the effect that Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and in the case of legal defeasance only, such Opinion of Counsel in the United States must be based on a ruling of the U.S. Internal Revenue Service or other change in applicable U.S. federal income tax law since the Issue Date); (2) an Officer’s Certificate stating that the deposit was not made by the Company with the intent of defeating, hindering, delaying, defrauding or preferring any creditors of the Company; (3) an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent provided for or relating to legal defeasance or covenant defeasance, as the case may be, have been complied with; (4) an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the U.S. Investment Company Act of 1940; and (5) all other documents or other information that the Trustee may reasonably require in connection with either defeasance option.

205 Satisfaction and Discharge

The Indenture, and the rights of the Trustee and the Holders under the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents will be discharged and cease to be of further effect (except as to surviving rights of conversion or transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (1) either (a) all the Notes previously authenticated and delivered (other than certain lost, stolen or destroyed Notes and certain Notes for which provision for payment was previously made and thereafter the funds have been released to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes not previously delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable at their Stated Maturity within one year or (iii) are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company; (2) the Company has deposited or caused to be deposited with the Trustee (or such other entity designated or appointed as agent by the Trustee for this purpose), cash in euro, euro-denominated European Government Obligations or a combination of cash in euro and euro-denominated European Government Obligations in an amount sufficient, in the good faith determination of the Board of Directors or an Officer of the Company, to pay and discharge the outstanding aggregate principal amount of indebtedness on the Notes not previously delivered to the Trustee for cancellation, for principal, premium, if any, and interest to the date of deposit (in the case of Notes that have become due and payable), or to the Stated Maturity or redemption date, as the case may be; (3) the Company has paid or caused to be paid all other sums payable under the Indenture; (4) the Company has delivered irrevocable instructions to the Trustee to apply the funds deposited towards the payment of the Notes at maturity or on the redemption date, as the case may be; and (5) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel each to the effect that all conditions precedent under the “—Satisfaction and Discharge” section of the Indenture relating to the satisfaction and discharge of the Indenture have been complied with; provided that any such counsel may rely on any Officer’s Certificate as to matters of fact (including as to compliance with the foregoing clauses (1), (2) and (3)).

No Personal Liability of Directors, Officers, Employees and Shareholders

No director, officer, employee, incorporator or shareholder of the Company, any of the Company’s Subsidiaries or any of their respective Affiliates, as such, shall have any liability for any obligations of the Company or the Guarantors under the Note Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the U.S. federal securities laws and it is the view of the SEC that such a waiver is against public policy.

Concerning the Trustee and Certain Agents

U.S. Bank Trustees Limited is to be appointed as Trustee under the Indenture. The Indenture will provide that, except during the continuance of an Event of Default of which a responsible officer of the Trustee has received written notice, the Trustee will perform only such duties as are set forth specifically in the Indenture. During the existence of an Event of Default of which a responsible officer of the Trustee has received written notice, the Trustee will exercise such of the rights and powers vested in it under the Indenture and use the same degree of care that a prudent Person would use in conducting its own affairs. The permissive rights of the Trustee to take or refrain from taking any action enumerated in the Indenture will not be construed as an obligation or duty.

The Trustee will be permitted to engage in other transactions with the Company and its Affiliates and Subsidiaries.

The Indenture will set out the terms under which the Trustee may retire or be removed, and replaced. Such terms will include, among others, (1) that the Trustee may be removed at any time by the Holders of a majority in principal amount of the then outstanding Notes, or may resign at any time by giving written notice to the Company and (2) that if the Trustee at any time (a) has or acquires a conflict of interest in its capacity as Trustee that is not eliminated, (b) fails to meet certain eligibility requirements or (c) becomes incapable of acting as Trustee or becomes insolvent or bankrupt, then the Company may remove the Trustee, or any Holder who has been a bona fide Holder for not less

206 than six months may petition any court for removal of the Trustee and appointment of a successor Trustee.

Any removal or resignation of the Trustee shall not become effective until the acceptance of appointment by the successor Trustee.

The Indenture will contain provisions for the indemnification of the Trustee for any loss, liability, taxes and expenses Incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Indenture.

Notices

All notices to Holders will be validly given if mailed to them at their respective addresses in the register of the Holders, if any, maintained by the Registrar. In addition, for so long as any of the Notes are listed on the LxSE and admitted for trading on the Euro MTF of the LxSE and the rules of the LxSE so require, notices with respect to the Notes listed on the Euro MTF will be published on the official website of the LxSE or in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, posted on the official website of the LxSE. For so long as any Notes are represented by Global Notes, all notices to Holders will be delivered to Euroclear and Clearstream, delivery of which shall be deemed to satisfy the requirements of this paragraph, each of which will give such notices to the holders of Book-Entry Interests.

Each such notice shall be deemed to have been given on the date of such publication or, if published more than once on different dates, on the first date on which publication is made; provided that, if notices are mailed, such notice shall be deemed to have been given on the later of such publication and the seventh day after being so mailed. Any notice or communication mailed to a Holder shall be mailed to such Person by first-class mail or other equivalent means and shall be sufficiently given to such Holder if so mailed within the time prescribed. Failure to mail, cause to be delivered or otherwise transmit a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

Prescription

Claims against the Company or any Guarantor for the payment of principal, or premium, if any, on the Notes or any Notes Guarantee will be prescribed ten years after the applicable due date for payment thereof. Claims against the Company or any Guarantor for the payment of interest on the Notes will be prescribed six years after the applicable due date for payment of interest.

Currency Indemnity

The euro is the sole currency of account and payment for all sums payable by the Company and the Guarantors under or in connection with the Notes and the relevant Notes Guarantees, as the case may be, including damages. Any amount received or recovered in a currency other than euro, whether as a result of, or the enforcement of, a judgment or order of a court of any jurisdiction, in the winding up or dissolution of the Company, any Guarantor or otherwise by any Holder or by the Trustee, in respect of any sum expressed to be due to it from the Company or a Guarantor will only constitute a discharge to the Company or such Guarantor, as applicable, to the extent of the euro amount, which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so).

If that euro amount is less than the euro amount expressed to be due to the recipient or the Trustee under any Note, the Company and the Guarantors will indemnify them against any loss sustained by such recipient or the Trustee as a result. In any event, the Company and the Guarantors will indemnify the recipient or the Trustee on a joint and several basis against the cost of making any such purchase. For the purposes of this currency indemnity provision, it will be prima facie evidence of the matter stated therein for the Holder or the Trustee to certify in a manner reasonably satisfactory to the Company (indicating the sources of information used) the loss it Incurred in making any such

207 purchase. These indemnities constitute a separate and independent obligation from the Company’s and the Guarantor’s other obligations, will give rise to a separate and independent cause of action, will apply irrespective of any waiver granted by any Holder or the Trustee (other than a waiver of the indemnities set out herein) and will continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Note or to the Trustee.

Except as otherwise specifically set forth herein, for purposes of determining compliance with any euro denominated restriction herein, the Euro Equivalent amount for purposes hereof that is denominated in a currency other than euro shall be calculated based on the relevant currency exchange rate in effect on the date such non-euro amount is Incurred or made, as the case may be.

Enforceability of Judgments Since substantially all the assets of the Company and the Guarantors are held or located outside the United States, any judgment obtained in the United States against the Company or any Guarantor, including judgments with respect to the payment of principal, premium, if any, interest, Additional Amounts, if any, and any redemption price and any purchase price with respect to the Notes or the Notes Guarantees, may not be collectable within the United States.

Consent to Jurisdiction and Service In relation to any legal action or proceedings arising out of or in connection with the Indenture and the Notes and the Notes Guarantees, the Company and each Guarantor will in the Indenture irrevocably submit to the jurisdiction of the federal and state courts in the Borough of Manhattan in the City of New York, County and State of New York, United States.

Governing Law The Indenture and the Notes, including any Notes Guarantees, and the rights and duties of the parties thereunder will be governed by and construed in accordance with the laws of the State of New York.

Certain Definitions Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.

“Acquired Indebtedness” means Indebtedness (1) of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary, or (2) assumed in connection with the acquisition of assets from such Person, in each case whether or not Incurred by such Person in connection with such Person becoming a Restricted Subsidiary or such acquisition or (3) of a Person at the time such Person merges with or into or consolidates or otherwise combines with the Company or any Restricted Subsidiary. Acquired Indebtedness shall be deemed to have been Incurred, with respect to clause (1) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary, with respect to clause (2) of the preceding sentence, on the date of consummation of such acquisition of assets and, with respect to clause (3) of the preceding sentence, on the date of the relevant merger, consolidation or other combination.

“Additional Assets” means: (1) any property or assets (other than Indebtedness and Capital Stock) used or to be used by the Company, a Restricted Subsidiary or otherwise useful in a Similar Business (it being understood that capital expenditures on property or assets already used in a Similar Business or to replace any property or assets that are the subject of such Asset Disposition shall be deemed an investment in Additional Assets); (2) the Capital Stock of a Person that is engaged in a Similar Business and becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or a Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary.

208 “Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled ” have meanings correlative to the foregoing.

“Agreed Security Principles” means the agreed security principles as set out in an annex to the Indenture as in effect on the Issue Date, as applied reasonably and in good faith by the Board of Directors or an Officer of the Company.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1) 1.0% of the principal amount of such Note; and

(2) the excess of:

(i) the present value at such redemption date of (x) the redemption price of such Note at February 1, 2018 (such redemption price being set forth in the table appearing under the caption “—Optional Redemption”), plus (y) all required interest payments due on such Note through February 1, 2018 (excluding accrued but unpaid interest), computed using a discount rate equal to the Bund Rate as of such redemption date plus 50 basis points; over

(ii) the outstanding principal amount of such Note; as calculated by the Company or on behalf of the Company by such Person as the Company shall designate. For the avoidance of doubt, the calculation of the Applicable Premium shall not be an obligation or duty of the Trustee, Registrar, Paying Agent or Transfer Agent.

“Asset Disposition” means any direct or indirect sale, lease (other than an operating lease entered into in the ordinary course of business), transfer, issuance or other disposition, or a series of related sales, leases (other than operating leases entered into in the ordinary course of business), transfers, issuances or dispositions that are part of a common plan, of shares of Capital Stock of a Subsidiary (other than directors’ qualifying shares), property or other assets (each referred to for the purposes of this definition as a “disposition”) by the Company or any of its Restricted Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction; provided that the sale, conveyance or other disposition of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption “—Change of Control ” and the provisions described above under the caption “—Certain Covenants—Merger and Consolidation” and not by the provisions of the covenant described above under the caption “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock.” Notwithstanding the preceding provisions of this definition, the following items shall not be deemed to be Asset Dispositions:

(1) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary;

(2) a disposition of cash, Cash Equivalents, Temporary Cash Investments or Investment Grade Securities;

(3) a disposition of inventory or other assets in the ordinary course of business;

(4) a disposition of obsolete, surplus or worn out equipment or other assets, or equipment or other property that is no longer useful in the conduct of the business of the Company and its Restricted Subsidiaries;

(5) transactions permitted under “—Certain Covenants—Merger and Consolidation—The Company” or a transaction that constitutes a Change of Control;

(6) an issuance of Capital Stock by a Restricted Subsidiary to the Company or to another Restricted Subsidiary or as part of or pursuant to an equity incentive or compensation plan approved by the Board of Directors of the Company;

(7) any dispositions of Capital Stock, properties or assets in a single transaction or series of related transactions with a fair market value (as determined in good faith by the Board of

209 Directors or an Officer of the Company) of less than the greater of (x) €7.5 million and (y) 1.5% of Total Assets; (8) any Restricted Payment that is permitted to be made, and is made, under the covenant described above under “—Certain Covenants—Limitation on Restricted Payments” and the making of any Permitted Payments or Permitted Investments or, solely for purposes of the second paragraph under “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock,” asset sales, in respect of which (and only to the extent that) the proceeds of which are used to make such Restricted Payments or Permitted Investments; (9) dispositions in connection with Permitted Liens; (10) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements; (11) the licensing or sub-licensing of intellectual property or other general intangibles and licenses, sub-licenses, leases or subleases of other property to the extent such leases or subleases are accounted for as operating leases; (12) foreclosure, condemnation or any similar action with respect to any property or other assets; (13) the sale or discount (with or without recourse, and on customary or commercially reasonable terms and for credit management purposes) of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable for notes receivable; (14) any disposition of Capital Stock, Indebtedness or other securities or assets of an Unrestricted Subsidiary; (15) any disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a Person (other than the Company or a Restricted Subsidiary) from whom such Restricted Subsidiary was acquired, or from whom such Restricted Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition; (16) any surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; (17) any disposition with respect to property built, owned or otherwise acquired by the Company or any Restricted Subsidiary pursuant to customary sale and lease-back transactions, asset securitizations and other similar financings permitted by the Indenture; provided that the fair market value of the assets disposed of when taken together with all other dispositions made pursuant to this clause (17) and clause (19) of this definition does not exceed €10.0 million; (18) sales or dispositions of receivables in connection with any Qualified Receivables Financing or any factoring transaction or in the ordinary course of business; and (19) subject to clause (17) above in relation to a sale and leaseback transaction, any dispositions in connection with the entry into a Capitalized Lease Obligation.

“Associate” means (i) any Person engaged in a Similar Business of which the Company or its Restricted Subsidiaries are the legal and beneficial owners of between 20% and 50% of all outstanding Voting Stock and (ii) any joint venture engaged in a Similar Business entered into by the Company or any Restricted Subsidiary.

“Board of Directors” means (1) with respect to the Company or any corporation, the board of directors or managers, as applicable, of the corporation, or any duly authorized committee thereof; (2) with respect to any partnership, the board of directors or other governing body of the general partner of the partnership or any duly authorized committee thereof; and (3) with respect to any other Person, the board or any duly authorized committee of such Person serving a similar function. Whenever any provision of the Indenture requires any action or determination to be made by, or any approval of, a Board of Directors, such action, determination or approval shall be deemed to have been taken or made if approved by a majority of the directors (excluding employee representatives, if any)

210 on any such Board of Directors (whether or not such action or approval is taken as part of a formal board meeting or as a formal board approval).

“Bridge Facility Agreement ” means the bridge facility agreement dated October 6, 2014, as amended from time to time, among, inter alios, the Company and Goldman Sachs International, as Mandated Lead Arranger, in connection with the Hurtigruten Acquisition.

“Bridge Loans” means the loans extended under the Bridge Facility Agreement.

“Bund Rate” means the yield to maturity at the time of computation of direct obligations of the Federal Republic of Germany (Bunds or Bundesanleihen) with a constant maturity (as officially compiled and published in the most recent financial statistics that has become publicly available at least two Business Days (but not more than five Business Days) prior to the redemption date (or, if such financial statistics are not so published or available, any publicly available source of similar market data selected by the Company in good faith)) most nearly equal to the period from the redemption date to February 1, 2018; provided, however, that if the period from the redemption date to February 1, 2018 is not equal to the constant maturity of a direct obligation of the Federal Republic of Germany for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of direct obligations of the Federal Republic of Germany for which such yields are given, except that if the period from such redemption date to February 1, 2018 is less than one year, the weekly average yield on actually traded direct obligations of the Federal Republic of Germany adjusted to a constant maturity of one year shall be used.

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in Oslo, Norway, London, United Kingdom, or New York, New York, United States are authorized or required by law to close; provided, however, that for any payments to be made under the Indenture, such day shall also be a day on which the TARGET2 payment system is open for the settlement of payments.

“Capital Stock” of any Person means any and all shares of, rights to purchase, warrants or options for, or other equivalents of or partnership or other interests in (however designated), equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Capitalized Lease Obligation” means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes on the basis of IFRS. The amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation at the time any determination thereof is to be made as determined on the basis of IFRS, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date such lease may be terminated without penalty.

“Cash Equivalents” means:

(1) securities issued or directly and fully Guaranteed or insured by a Permissible Jurisdiction or, in each case, any agency or instrumentality thereof (provided that the full faith and credit of such country or such member state is pledged in support thereof), having maturities of not more than two years from the date of acquisition;

(2) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers’ acceptances (in each case, including any such deposits made pursuant to any sinking fund established by the Company or any Restricted Subsidiary) having maturities of not more than one year from the date of acquisition thereof issued by any lender party to a Credit Facility or by any bank or trust company (a) whose commercial paper is rated at least “A-1” or the equivalent thereof by S&P or at least “P-1” or the equivalent thereof by Moody’s (or if at the time neither is issuing comparable ratings, then a comparable rating of another Nationally Recognized Statistical Rating Organization) or (b) (in the event that the bank or trust company does not have commercial paper which is rated) having combined capital and surplus in excess of €500 million;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (1) and (2) entered into with any bank meeting the qualifications specified in clause (2) above;

211 (4) commercial paper rated at the time of acquisition thereof at least “A-2” or the equivalent thereof by S&P or “P-2” or the equivalent thereof by Moody’s or carrying an equivalent rating by a Nationally Recognized Statistical Rating Organization, if both of the two named rating agencies cease publishing ratings of investments or, if no rating is available in respect of the commercial paper, the issuer of which has an equivalent rating in respect of its long-term debt, and in any case maturing within one year after the date of acquisition thereof; (5) readily marketable direct obligations issued by a Permissible Jurisdiction having one of the two highest rating categories obtainable from either Moody’s or S&P (or, if at the time, neither is issuing comparable ratings, then a comparable rating of another Nationally Recognized Statistical Rating Organization) with maturities of not more than two years from the date of acquisition; (6) Indebtedness or Preferred Stock issued by Persons with a rating of “BBB–” or higher from S&P or “Baa3” or higher from Moody’s (or, if at the time, neither is issuing comparable ratings, then a comparable rating of another Nationally Recognized Statistical Rating Organization) with maturities of 12 months or less from the date of acquisition; (7) bills of exchange issued in a Permissible Jurisdiction eligible for rediscount at the relevant central bank and accepted by a bank (or any dematerialized equivalent); and (8) interests in any investment company, money market or enhanced high yield fund which invests 95% or more of its assets in instruments of the type specified in clauses (1) through (7) above.

“Change of Control” means: (1) the Company becomes aware that (by way of a report or any other filing pursuant to any regulatory filing, proxy, vote, written notice or otherwise) any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Issue Date), other than one or more Permitted Holders, is or has become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issue Date), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company, provided that for the purposes of this clause, (x) any holding company whose only material assets relate to ownership of the Capital Stock of the Company will not itself be considered a “person” or “group”; and (y) any Voting Stock of which any Permitted Holder is the “beneficial owner” (as so defined) prior to giving effect to the formation of a group shall not be included in any Voting Stock of which any such person or group is the “beneficial owner” (as so defined), unless that person or group is not an affiliate of a Permitted Holder and has greater voting power with respect to that Voting Stock than any other Permitted Holder; or (2) the sale, lease, transfer, conveyance or other disposition (other than by way of merger, consolidation or other business combination transaction), in one or a series of related transactions, of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole to a Person, other than (i) a Restricted Subsidiary or (ii) one or more Permitted Holders.

“Clearstream” means Clearstream Banking, société anonyme, or any successor securities clearing agency.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Commodity Hedging Agreements” means, in respect of a Person, any commodity purchase contract, commodity futures or forward contract, commodities option contract or other similar contract (including commodities derivative agreements or arrangements), to which such Person is a party or a beneficiary.

“Consolidated EBITDA” for any period means, without duplication, the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income or consisting of the release of provisions specified in clause (8) hereof: (1) Consolidated Interest Expense and Receivables Fees; (2) Consolidated Income Taxes;

212 (3) consolidated depreciation expense; (4) consolidated amortization or impairment expense; (5) any expenses, charges or other costs related to any Equity Offering, Investment, acquisition (including amounts paid in connection with the acquisition or retention of one or more individuals comprising part of a management team retained to manage the acquired business; provided that such payments are made in connection with such acquisition and are consistent with the customary practice in the industry at the time of such acquisition), disposition, recapitalization or the Incurrence of any Indebtedness permitted by the Indenture (in each case whether or not successful) (including any such fees, expenses or charges related to the Hurtigruten Acquisition Transactions or the Refinancing Transactions), in each case, as determined in good faith by the Board of Directors or an Officer of the Company; (6) any minority interest expense (whether paid or not) consisting of income attributable to minority equity interests of third parties in such period or any prior period or any net earnings, income or share of profit of any Associates, associated company or undertaking; (7) the amount of management, monitoring, consulting, employment and advisory fees and related expenses paid in such period to the Permitted Holders to the extent permitted by the covenant described under “—Certain Covenants—Limitation on Affiliate Transactions”; and (8) other non-cash charges, write-downs or items reducing Consolidated Net Income (excluding any such non-cash charge, write-down or item to the extent it represents an accrual of or reserve for cash charges in any future period) or items classified by the Company as extraordinary, exceptional, unusual or nonrecurring items plus the release of provisions, less other non-cash items of income increasing Consolidated Net Income (excluding any such non-cash item of income to the extent it represents a receipt of cash in any future period).

“Consolidated Financial Interest Expense” means, for any period (in each case, determined on the basis of IFRS), the sum of: (1) consolidated net interest paid by the Company and its Restricted Subsidiaries related to Indebtedness in cash or in kind (including (a) amortization of debt discount or premium, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) the interest component of Capitalized Lease Obligations, and (d) net payments or receipts, if any, pursuant to interest rate Hedging Obligations with respect to Indebtedness) but not including any Pension Items, debt issuance costs and premiums, commissions, discounts and other fees and charges owed or paid with respect to financings, interest charges relating to revaluations or currency movements or costs associated with Hedging Obligations (other than those described in (d)); (2) dividends on other distributions in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary, to the extent held by Persons other than the Company or a subsidiary of the Company; and (3) any interest on Indebtedness of another Person that is guaranteed by the Company or any of its Restricted Subsidiaries or secured by a Lien on assets of the Company or any of its Restricted Subsidiaries, to the extent such interest is actually paid by the Company or any of its Restricted Subsidiaries.

“Consolidated Income Taxes” means Taxes or other payments, including deferred Taxes, based on income, profits or capital (including, without limitation, withholding Taxes) and corporation Tax and franchise Taxes of any of the Company and its Restricted Subsidiaries whether or not paid, estimated, accrued or required to be remitted to any Governmental Authority.

“Consolidated Interest Expense” means, for any period (in each case, determined on the basis of IFRS), the consolidated net interest income/expense of the Company and its Restricted Subsidiaries, whether paid or accrued, plus or including (without duplication) any interest, costs and charges consisting of: (1) interest expense attributable to Capitalized Lease Obligations, any payment made to SPEs representing the interest component of rental expense for ships under leases and the interest component of deferred payment obligations; (2) amortization of debt discount or premium, amortization of debt issuance costs, fees, premium and expenses and the expensing of any financing fees;

213 (3) non-cash interest expense; (4) the net payments (if any) of Hedging Agreements (excluding amortization of fees and discounts and unrealized gains and losses, costs associated with Hedging Obligations (including termination payments), foreign currency losses and any Receivables Fees); (5) dividends on other distributions in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary, to the extent held by Persons other than the Company or a subsidiary of the Company; (6) the consolidated interest expense that was capitalized during such period; (7) any interest on Indebtedness of another Person that is guaranteed by the Company or any of its Restricted Subsidiaries or secured by a Lien on assets of the Company or any of its Restricted Subsidiaries; and (8) Pension Items.

“Consolidated Net Income” means, for any period, the profit/(loss) for the financial period of the Company and its Restricted Subsidiaries determined on a consolidated basis on the basis of IFRS; provided, however, that there will not be included in such Consolidated Net Income: (1) subject to the limitations contained in clause (3) below, any profit/(loss) for the financial period of any Person if such Person is not a Restricted Subsidiary, except that the Company’s equity in the profit/ (loss) for the financial period of any such Person will be included in such Consolidated Net Income up to the aggregate amount of cash or Cash Equivalents (x) actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution or return on investment or (y) only for the purpose of determining the amount available for Restricted Payments under clause (c)(i) of the first paragraph of the covenant described under “—Certain Covenants—Limitation on Restricted Payments,” that could have been distributed, as reasonably determined by an Officer of the Company (subject, in the case of a dividend or other distribution or return on investment to a Restricted Subsidiary, to the limitations contained in clause (2) below); (2) solely for the purpose of determining the amount available for Restricted Payments under clause (c)(i) of the first paragraph of the covenant described under “—Certain Covenants—Limitation on Restricted Payments,” any profit/(loss) for the financial period of any Restricted Subsidiary (other than Guarantors) if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company or a Guarantor by operation of the terms of such Restricted Subsidiary’s charter or any agreement, instrument, judgment, decree, order, statute or governmental rule or regulation applicable to such Restricted Subsidiary or its shareholders (other than (a) restrictions that have been waived or otherwise released, (b) restrictions pursuant to or permitted under the Revolving Credit Facility Agreement, the Notes or the Indenture, and (c) restrictions not prohibited by the covenant described under “—Certain Covenants—Limitation on Distributions from Restricted Subsidiaries”), except that the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash or Cash Equivalents actually distributed or that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause) even if encumbrances or restrictions to make distributions in cash or Cash Equivalents arise or exist by reason of applicable law or applicable rules, regulation or order; (3) any net gain (or loss) realized upon the sale or other disposition of any asset or disposed operations of the Company or any Restricted Subsidiaries (including pursuant to any sale/leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business (as determined in good faith by the Board of Directors or an Officer of the Company); (4) any extraordinary, exceptional, unusual or nonrecurring gain, loss, charge or expense (as determined in good faith by the Board of Directors or an Officer of the Company), or any charges, expenses or reserves in respect of any restructuring, disposal, closing, redundancy or severance; (5) the cumulative effect of a change in accounting principles; (6) any non-cash compensation charge or expense arising from any grant of stock, stock options or other equity based awards and any non-cash deemed finance charges in respect of any Pension Items or other provisions;

214 (7) all deferred financing costs written off and premiums paid or other expenses Incurred directly in connection with any early extinguishment of Indebtedness and any net gain (loss) from any write-off or forgiveness of Indebtedness; (8) any unrealized gains or losses in respect of Hedging Obligations or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value of changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of Hedging Obligations; (9) any unrealized foreign currency transaction gains or losses in respect of Indebtedness of any Person denominated in a currency other than the functional currency of such Person and any unrealized foreign exchange gains or losses relating to translation of assets and liabilities denominated in foreign currencies; (10) any unrealized foreign currency translation or transaction gains or losses in respect of Indebtedness or other obligations of the Company or any Restricted Subsidiary owing to the Company or any Restricted Subsidiary; (11) any purchase accounting effects including, but not limited to, adjustments to inventory, stock, property and equipment, software and other intangible assets and deferred revenue in component amounts required or permitted by IFRS and related authoritative pronouncements (including the effects of such adjustments pushed down to the Company and the Restricted Subsidiaries), as a result of any consummated acquisition, or the amortization or write-off of any amounts thereof; (12) any goodwill or other intangible asset impairment, charge, amortization or write-off, including debt issuance costs (as determined in good faith by Senior Management); (13) the impact of capitalized, accrued or accreting or pay-in-kind interest or principal on Subordinated Shareholder Funding; (14) Consolidated Income Taxes to the extent in excess of cash payments made in respect of such Consolidated Income Taxes, and consolidated depreciation expense to the extent in excess of capital expenditures related to maintenance; and (15) to the extent covered by insurance and actually reimbursed, or, so long as the Company has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (a) not denied by the applicable insurer in writing within 180 days and (b) in fact reimbursed within 365 days of the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within 365 days), losses with respect to business interruption.

“Consolidated Net Leverage” means the sum of the aggregate outstanding Indebtedness of the Company and its Restricted Subsidiaries (excluding Hedging Obligations), less cash and Cash Equivalents of the Company and its Restricted Subsidiaries.

“Consolidated Net Leverage Ratio” means, as of any date of determination, the ratio of (x) Consolidated Net Leverage at such date to (y) the aggregate amount of Consolidated EBITDA for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination for which internal consolidated financial statements of the Company are available; provided, however, that for the purposes of calculating Consolidated EBITDA for such period, if, as of such date of determination: (1) since the beginning of such period, the Company or any Restricted Subsidiary has closed or disposed of any company, any business, any group of assets constituting an operating unit of a business or any ship (any such disposition, a “Sale”) or if the transaction giving rise to the need to calculate the Consolidated Net Leverage Ratio is such a Sale, Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the company, business, group of assets or ship which are the subject of such Sale for such period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto after giving pro forma effect to such Sale as if such Sale occurred on the first day of such period; provided that if any such Sale constitutes “discontinued operations” in accordance with IFRS, Consolidated Net Income shall be reduced by an amount equal to the Consolidated Net Income (if positive) attributable to the company, business, group of assets or

215 ship which are the subject of such Sale for such period or increased by an amount equal to the Consolidated Net Income (if negative) attributable thereto after giving pro forma effect to such Sale as if such Sale occurred on the first day of such period; (2) since the beginning of such period, the Company or any Restricted Subsidiary (by merger or otherwise) has made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise has acquired any company, any business, any group of assets constituting an operating unit of a business or any ship (any such Investment or acquisition, a “Purchase”), including any such Purchase occurring in connection with a transaction causing a calculation to be made hereunder, Consolidated EBITDA for such period will be calculated after giving pro forma effect thereto, including anticipated synergies and expenses and cost savings, as if such Purchase occurred on the first day of such period; and (3) since the beginning of such period, any Person (that became a Restricted Subsidiary or was merged or otherwise combined with or into the Company or any Restricted Subsidiary since the beginning of such period) will have made any Sale or any Purchase that would have required an adjustment pursuant to clause (1) or (2) above if made by the Company or a Restricted Subsidiary since the beginning of such period, Consolidated EBITDA for such period will be calculated after giving pro forma effect thereto, including anticipated synergies and expenses and cost savings, as if such Sale or Purchase occurred on the first day of such period.

For the purposes of this definition and the definitions of Consolidated EBITDA, Consolidated Income Taxes, Consolidated Interest Expense and Consolidated Net Income, (a) calculations will be as determined in good faith by a responsible financial or accounting officer of the Company, including in respect of synergies and expenses and cost savings, as though the full effect of such synergies and expenses and cost savings were realized on the first day of the relevant period and shall also include the reasonably anticipated full run rate costs savings effect (as calculated in good faith by a responsible financial or chief accounting officer of the Company) of cost savings programs that have been initiated by the Company or its Restricted Subsidiaries as though such cost savings programs had been fully implemented on the first day of the relevant period, and (b) in determining the amount of Indebtedness outstanding on any date of determination, pro forma effect shall be given to any Incurrence, repayment, repurchase, defeasance or other acquisition, retirement or discharge of Indebtedness as if such transaction had occurred on the first day of the relevant period. For the purpose of calculating pro forma effect pursuant to clause (2) above, the definition of Fixed Charge Coverage Ratio and for the first paragraph and clause (5) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness,” as well as clause (3) of the first paragraph of the covenant described under “—Certain Covenants—Merger and Consolidation—The Company,” pro forma effect may also be given to anticipated acquisitions where the Indebtedness to be Incurred is to finance such acquisitions in whole or in part, which have not yet occurred but which have become subject to a definitive purchase agreement or contract.

“Consolidated Senior Secured Leverage Ratio” means the Consolidated Net Leverage Ratio, but calculated by excluding all Indebtedness of the Company and its Restricted Subsidiaries other than Senior Secured Indebtedness of the Company and its Restricted Subsidiaries.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing in any manner, whether directly or indirectly, any operating lease, dividend or other obligation that does not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”), including any obligation of such Person, whether or not contingent: (1) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (2) to advance or supply funds: (a) for the purchase or payment of any such primary obligation; or (b) to maintain the working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or (3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

216 “Credit Facility” means, with respect to the Company or any of its Subsidiaries, one or more debt facilities, indentures or other arrangements (including the Revolving Credit Facility Agreement or commercial paper facilities and overdraft facilities) with banks, other institutions or investors providing for revolving credit loans, term loans, notes, receivables financing (including through the sale of receivables to such institutions or to special purpose entities formed to borrow from such institutions against such receivables), letters of credit or other Indebtedness, in each case, as amended, restated, modified, renewed, refunded, replaced, restructured, refinanced, repaid, increased or extended from time to time (whether in whole or in part and whether or not with the original administrative agent and lenders or another administrative agent or agents or banks, other institutions or investors and whether provided under the Revolving Credit Facility Agreement or one or more other credit or other agreements, indentures, financing agreements or otherwise) and in each case including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including any notes and letters of credit issued pursuant thereto and any Guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other Guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term “Credit Facility” shall include any agreement or instrument (1) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby, (2) adding Subsidiaries of the Company as additional borrowers or guarantors thereunder, (3) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder or (4) otherwise altering the terms and conditions thereof.

“Currency Agreement” means, in respect of a Person, any foreign exchange contract, currency swap agreement, currency futures contract, currency option contract, currency derivative or other similar agreement to which such Person is a party or beneficiary.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Designated Non-Cash Consideration” means the fair market value (as determined in good faith by the Board of Directors or an Officer of the Company) of non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as Designated Non-Cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, less the amount of cash, Cash Equivalents or Temporary Cash Investments received in connection with a subsequent payment, redemption, retirement, sale or other disposition of such Designated Non-Cash Consideration. A particular item of Designated Non-Cash Consideration will no longer be considered to be outstanding when and to the extent it has been paid, redeemed or otherwise retired or sold or otherwise disposed of in compliance with the covenant described under “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock.”

“Designated Preference Shares” means, with respect to the Company or any Parent, Preferred Stock (other than Disqualified Stock) (a) that is issued for cash (other than to the Company or a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any such Subsidiary for the benefit of their employees to the extent funded by the Company or such Subsidiary) and (b) that is designated as “Designated Preference Shares” pursuant to an Officer’s Certificate of the Company at or prior to the issuance thereof, the Net Cash Proceeds of which are excluded from the calculation set forth in clause (c)(ii) of the first paragraph of the covenant described under “—Certain Covenants—Limitation on Restricted Payments.”

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (1) matures or is mandatorily redeemable for cash or in exchange for Indebtedness pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock which is convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary); or (3) is or may become (in accordance with its terms) upon the occurrence of certain events or otherwise redeemable or repurchasable for cash or in exchange for Indebtedness at the option of the holder of the Capital Stock in whole or in part,

217 in each case on or prior to the earlier of (a) the Stated Maturity of the Notes or (b) the date on which there are no Notes outstanding; provided, however, that (i) only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock and (ii) any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or asset sale (howsoever defined or referred to) shall not constitute Disqualified Stock if any such redemption or repurchase obligation is subject to compliance by the relevant Person with the covenant described under “—Certain Covenants—Limitation on Restricted Payments.”

“Equity Contribution” means the contribution from the Equity Investors (via Silk Midco) to the Company of shareholder funds on or about the Hurtigruten Tender Offer Settlement Date as part of the Hurtigruten Acquisition Transactions.

“Equity Investors” means TDR Capital, funds managed by it or any of its Affiliates, or any co-investment vehicle managed by it or any of its Affiliates or any trust, fund, company or partnership owned, managed or advised by TDR Capital or any of its Affiliates and any of their successors and assigns and any other Investor.

“Equity Offering” means a sale by the IPO Entity of (x) Capital Stock (other than Disqualified Stock) other than offerings registered on Form S-8 (or any successor form) under the Securities Act or any similar offering in other jurisdictions, or (y) other securities, the proceeds of which are contributed to the equity (other than through the issuance of Disqualified Stock or Designated Preference Shares or through an Excluded Contribution) of, or as Subordinated Shareholder Funding to, the IPO Entity or any of its Restricted Subsidiaries.

“Euro Equivalent” means, with respect to any monetary amount in a currency other than euro, at any time of determination thereof by the Company, the amount of euro obtained by converting such currency other than euro involved in such computation into euro at the spot rate for the purchase of euro with the applicable currency other than euro as published in The Financial Times in the “Currency Rates” section (or, if The Financial Times is no longer published, or if such information is no longer available in The Financial Times, such source as may be selected in good faith by the Board of Directors or an Officer of the Company) on the date of such determination.

“Euroclear” means Euroclear Bank SA/NV or any successor securities clearing agency.

“European Government Obligations” means any security that is a direct obligation of, or obligations guaranteed by, a country that is a member of the European Monetary Union on the date of the Indenture (other than Greece, Portugal, Italy or Cyprus), and the payment for which such country pledges its full faith and credit.

“European Union” means all members of the European Union as of January 1, 2004 and the Czech Republic.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder, as amended.

“Excluded Contribution” means Net Cash Proceeds or property or assets received by the Company as capital contributions to the equity (other than through the issuance of Disqualified Stock or Designated Preference Shares) of the Company after the Issue Date or from the issuance or sale (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary) of Capital Stock (other than Disqualified Stock or Designated Preference Shares) of the Company (other than the Equity Contribution), in each case, to the extent designated as an Excluded Contribution pursuant to an Officer’s Certificate of the Company.

“Explorer” means the MS Fram business segment of the Hurtiguten Group, including the assets, personnel and support services related thereto.

“fair market value” may be conclusively established by means of an Officer’s Certificate or a resolution of the Board of Directors of the Company setting out such fair market value as determined by such Officer or the Board of Directors of the Company in good faith.

218 “Fixed Charge Coverage Ratio” means, for any period, the ratio of: (a) Consolidated EBITDA; to (b) Consolidated Financial Interest Expense; provided that in calculating the Fixed Charge Coverage Ratio or any element thereof for any period, pro forma calculations will be made in good faith by the Board of Directors or an Officer of the Company (including any pro forma synergies and expenses and cost savings that have occurred or are reasonably expected to occur within the next twelve months following the date of such calculation, including, without limitation, as a result of, or that would result from any actions taken by the Company or any of its Restricted Subsidiaries including, without limitation, in connection with any cost reduction or cost savings plan or program or in connection with any transaction, investment, acquisition, disposition, restructuring, corporate reorganization or otherwise, in the good faith judgment of the Board of Directors or an Officer of the Company (regardless of whether these synergies and expenses and cost savings could then be reflected in pro forma financial statements to the extent prepared)); provided, further, without limiting the application of the previous proviso, that for the purposes of calculating Consolidated EBITDA or Consolidated Financial Interest Expense for such period, if, as of such date of determination: (1) since the beginning of such period, the Company or any Restricted Subsidiary has made a Sale or if the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio is such a Sale, (a) Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the company, business, group of assets or ship which are the subject of such Sale for such period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto after giving pro forma effect to such Sale as if such Sale occurred on the first day of such period; provided that if any such Sale constitutes “discontinued operations” in accordance with IFRS, Consolidated Net Income shall be reduced by an amount equal to the Consolidated Net Income (if positive) attributable to the company, business, group of assets or ship which are the subject of such Sale for such period or increased by an amount equal to the Consolidated Net Income (if negative) attributable thereto after giving pro forma effect to such Sale as if such Sale occurred on the first day of such period; and (b) the Consolidated Financial Interest Expense for such period shall be reduced by an amount equal to the Consolidated Financial Interest Expense directly attributable to any Indebtedness of the Company or of any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and the continuing Restricted Subsidiaries in connection with such Sale for such same period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Financial Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and the continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such Sale); (2) since the beginning of such period, the Company or any Restricted Subsidiary (by merger or otherwise) has made a Purchase, including any such Purchase occurring in connection with a transaction causing a calculation to be made hereunder, Consolidated EBITDA and Consolidated Financial Interest Expense for such period will be calculated after giving pro forma effect thereto, including anticipated synergies and expenses and cost savings, as if such Purchase occurred on the first day of such period; and (3) since the beginning of such period, any Person (that became a Restricted Subsidiary or was merged or otherwise combined with or into the Company or any Restricted Subsidiary since the beginning of such period) will have made any Sale or any Purchase that would have required an adjustment pursuant to clause (1) or (2) above if made by the Company or a Restricted Subsidiary since the beginning of such period, Consolidated EBITDA and Consolidated Financial Interest Expense for such period will be calculated after giving pro forma effect thereto as if such Sale or Purchase occurred on the first day of such period.

If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness for a period equal to the remaining term of such Indebtedness).

219 For the purposes of this definition, (a) calculations will be as determined in good faith by a responsible financial or accounting officer of the Company (including in respect of anticipated expense and cost reductions and synergies, and as though the full effect of synergies and cost savings were realized on the first day of the relevant period) and (b) in determining the amount of Indebtedness outstanding on any date of determination, pro forma effect shall be given to any Incurrence, repayment, repurchase, defeasance or other acquisition, retirement or discharge of Indebtedness as if such transaction had occurred on the first day of the relevant period.

“Governmental Authority” means any nation, sovereign or government, any state, province, territory or other political subdivision thereof, and any entity or authority exercising executive, legislative, judicial, regulatory, self-regulatory or administrative functions of or pertaining to government, including a central bank or stock exchange.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person, including any such obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into primarily for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Guarantor ” means any Restricted Subsidiary that Guarantees the Notes.

“Hedging Agreement ” means any Interest Rate Agreement, Currency Agreement, Commodity Hedging Agreement or other agreement entered into by the Company or any of its Subsidiaries to offset, balance or manage risks related to any businesses, services or activities engaged in by the Company or any of its Subsidiaries or any Associates in the ordinary course.

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Hedging Agreement.

“Holder ” means each Person in whose name the Notes are registered on the Registrar’s books, which shall initially be the nominee of Euroclear or Clearstream.

“Hurtigruten Acquisition” means the acquisition by the Company of 100% of the share capital in Hurtigruten pursuant to the Hurtigruten Tender Offer and the subsequent squeeze out of any former shareholders.

“Hurtigruten Acquisition Transactions” means the Hurtigruten Acquisition and the financing thereof, the Equity Contribution, the entry into the Proceeds Loan made in connection therewith, the entry into the Bridge Facility Agreement and any issuance of intercompany debt in connection with the Hurtigruten Acquisition, the repayment of Hurtigruten’s former financing facilities and the redemption of Hurtigruten’s former notes, the termination of Hurtigruten’s former interest rate swaps, foreign currency exchange swaps and the majority of Hurtigruten’s bunker fuel swaps and the rollover of Hurtigruten’s remaining bunker fuel swaps, the entry into the Revolving Credit Facility Agreement and the payment or incurrence of any fees, expenses or charges associated with any of the foregoing.

“Hurtigruten Tender Offer ” means the voluntary offer by the Company to acquire all outstanding shares in Hurtigruten dated as of November 6, 2014.

“Hurtigruten Tender Offer Settlement Date” means December 19, 2014, which was the settlement date of the Hurtigruten Tender Offer.

“IFRS ” means the International Financial Reporting Standards (formerly, International Accounting Standards) endorsed from time to time by the European Union or any variation thereof with which the

220 Company or its Restricted Subsidiaries are, or may be, required to comply; provided that at any date after the Issue Date the Company may make an irrevocable election to establish that “IFRS” shall mean IFRS as in effect on a date that is on or prior to the date of such election. The Company shall give notice of any such election to the Trustee.

“Immaterial Subsidiary ” means any Restricted Subsidiary that (i) has not guaranteed, or is not a co-obligor under, any other Indebtedness of the Company or any Guarantor and (ii) (A) has Total Assets (as determined in accordance with IFRS) of less than 5% of the Company’s consolidated Total Assets and (B) has Consolidated EBITDA of less than 5% of the Company’s Consolidated EBITDA (in each case, measured (x) for the four fiscal quarters ended most recently for which internal financial statements are available, (y) on a pro forma basis giving effect to any acquisitions or dispositions of companies, divisions, ships or lines of business since such balance sheet date or the start of such four fiscal quarter period, as applicable and (z) on the basis of management accounts and excluding intercompany balances, investments in subsidiaries and joint ventures and intangible assets).

“Incur” means issue, create, assume, enter into any Guarantee of, incur, extend or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and the terms “Incurred ” and “Incurrence” have meanings correlative to the foregoing and any Indebtedness pursuant to any revolving credit or similar facility shall only be “Incurred” at the time any funds are borrowed thereunder.

“Indebtedness” means, with respect to any Person on any date of determination (without duplication): (1) the principal of indebtedness of such Person for borrowed money; (2) the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all reimbursement obligations of such Person in respect of letters of credit, bankers’ acceptances, performance, completion, surety or appeal bonds or similar instruments (the amount of such obligations being equal at any time to the aggregate then undrawn and unexpired amount of such letters of credit or other instruments plus the aggregate amount of drawings thereunder that have been reimbursed) (except to the extent such reimbursement obligations are Incurred in the ordinary course of business and such obligations are satisfied or reimbursed within 30 days of Incurrence), in each case only to the extent that the underlying obligation in respect of which the instrument was issued would be treated as Indebtedness; (4) the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property outside of the ordinary course of business, where the deferred payment is arranged primarily as a means of raising finance, which purchase price is due more than one year after the date of placing such property in service or taking final delivery and title thereto; (5) Capitalized Lease Obligations of such Person; (6) the principal component of all obligations, or liquidation preference, of such Person with respect to any Disqualified Stock or, with respect to any Restricted Subsidiary, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) the principal component of all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the fair market value of such asset at such date of determination (as determined in good faith by the Board of Directors or an Officer of the Company) and (b) the amount of such Indebtedness of such other Persons; (8) Guarantees by such Person of the principal component of Indebtedness of other Persons to the extent Guaranteed by such Person; and (9) to the extent not otherwise included in this definition, net obligations of such Person under Hedging Agreements (the amount of any such obligations to be equal at any time to the

221 termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time).

The term “Indebtedness” shall not include Subordinated Shareholder Funding or any lease, concession or license of property (or Guarantee thereof) which is a charter or lease of ships owned by an SPE or which would be considered an operating lease under IFRS as in effect on the Issue Date or any deposit made in relation thereto, any asset retirement obligations, prepayments or deposits or grants received from clients or customers or Authorities, in each case, in the ordinary course of business, any income tax or other payables, any social security or tax obligations, any obligations with regard to Pension Items or any bonds in relation thereto, or obligations under any profit sharing agreement, license, permit or other approval (or Guarantees given in respect of such obligations) Incurred prior to the Issue Date or in the ordinary course of business.

The amount of Indebtedness of any Person at any time in the case of a revolving credit or similar facility shall be the total amounts of funds borrowed and then outstanding. The amount of Indebtedness of any Person at any date shall be determined as set forth above or otherwise provided in the Indenture, and (other than with respect to letters of credit or Guarantees or Indebtedness specified in clause (6), (7) or (8) above) shall be (a) in the case of any Indebtedness issued with original issue discount, the amount in respect thereof that would appear on the balance sheet (excluding any notes thereto) of such Person in accordance with IFRS and (b) the principal amount of the Indebtedness, in the case of any other Indebtedness. Except as provided under clauses (7) and (8) above, “Indebtedness” of a Person shall not include any Indebtedness of any other Person, regardless of whether it would be deemed under IFRS to be consolidated with the Indebtedness of the first Person.

Notwithstanding the above provisions, in no event shall the following constitute Indebtedness: (i) Contingent Obligations Incurred in the ordinary course of business and obligations under or in respect of Qualified Receivables Financing or in relation to any credit support provided in favor of any SPE; (ii) in connection with the purchase by the Company or any Restricted Subsidiary of any business, any post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided, however, that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days thereafter; or (iii) for the avoidance of doubt, any obligations in respect of workers’ compensation claims, early retirement or termination obligations, Pension Items or similar claims, obligations or contributions or social security or wage Taxes.

“Independent Financial Advisor ” means an investment banking or accounting firm or any third party appraiser; provided, however, that such firm or appraiser is not an Affiliate of the Company.

“Initial Public Offering” means an Equity Offering of the Capital Stock of the IPO Entity following which there is a Public Market and, as a result of which, the Capital Stock of the IPO Entity in such offering are listed on an internationally recognized exchange or traded on an internationally recognized market.

“Intercreditor Agreement ” means the intercreditor agreement dated October 6, 2014 among, inter alios, the Security Agent, the agent for the Revolving Credit Facility Agreement, certain hedging counterparties and the other parties named therein, and to which the Trustee will accede on the Issue Date, as amended, restated or otherwise modified or varied from time to time.

“Interest Rate Agreement ” means, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement to which such Person is party or a beneficiary.

222 “Investment ” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of any direct or indirect advance, loan or other extensions of credit (other than advances or extensions of credit to customers, suppliers, directors, officers or employees of any Person in the ordinary course of business, and excluding any debt or extension of credit represented by a bank deposit other than a time deposit) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or the Incurrence of a Guarantee of any obligation of, or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by, such other Persons and all other items that are or would be classified as investments on a balance sheet prepared on the basis of IFRS; provided, however, that endorsements of negotiable instruments and documents in the ordinary course of business will not be deemed to be an Investment. If the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock of a Person that is a Restricted Subsidiary such that, after giving effect thereto, such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new Investment at such time equal to the fair market value of the Capital Stock of such Subsidiary not sold or disposed of in an amount determined as provided in the penultimate paragraph of the covenant described under “—Certain Covenants— Limitation on Restricted Payments.”

For purposes of the covenant described under “—Certain Covenants—Limitation on Restricted Payments”:

(1) “Investment” will include the portion (proportionate to the Company’s equity interest in a Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market value of the net assets of such Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (a) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (b) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets (as conclusively determined in good faith by the Board of Directors or an Officer of the Company) of such Subsidiary at the time that such Subsidiary is so re-designated a Restricted Subsidiary; and

(2) any property transferred to or from an Unrestricted Subsidiary will be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors or an Officer of the Company.

The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced (at the Company’s option) by any dividend, distribution, interest payment, return of capital, repayment or other amount or value received in respect of such Investment.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by a Permissible Jurisdiction (other than Cash Equivalents);

(2) debt securities or debt instruments with a rating of “A–” or higher from S&P or “A3” or higher by Moody’s or the equivalent of such rating by such rating organization or, if no rating of Moody’s or S&P then exists, the equivalent of such rating by any other Nationally Recognized Statistical Ratings Organization, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries; and

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) above which fund may also hold cash and Cash Equivalents pending investment or distribution.

“Investment Grade Status” shall occur when the Notes receive both of the following:

(1) a rating of “BBB–” or higher from S&P; and

(2) a rating of “Baa3” or higher from Moody’s; or the equivalent of such rating by either such rating organization or, if no rating of Moody’s or S&P then exists, the equivalent of such rating by any other Nationally Recognized Statistical Ratings Organization.

223 “Investors” means (a) Home Capital AS and its Affiliates or any trust, fund, company or partnership owned, managed or advised by Home Capital AS or any of its Affiliates and any of their successors and assigns; and/or (b) Periscopus AS and its Affiliates or any trust, fund, company or partnership owned, managed or advised by Periscopus AS or any of its Affiliates and any of their successors and assigns.

“IPO Entity” means the Company, any Parent or any Successor Company of the Company or any Parent.

“IPO Market Capitalization” means an amount equal to (i) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity at the time of closing of the Initial Public Offering multiplied by (ii) the price per share at which such shares of common stock or common equity interest are sold in such Initial Public Offering.

“Issue Date” means February 6, 2015.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

“Management Advances” means loans or advances made to, or Guarantees with respect to loans or advances made to any Management Investors: (1) in respect of travel, entertainment or moving related expenses Incurred in the ordinary course of business; (2) in respect of moving related expenses Incurred in connection with any closing or consolidation of any facility or office; or (3) not exceeding €1.0 million in the aggregate outstanding at any time.

“Management Investors” means the officers, directors, employees and other members of the management of or consultants to any Parent, the Company or any of their respective Subsidiaries, or spouses, family members or relatives thereof, or any trust, partnership or other entity for the benefit of or the beneficial owner of which (directly or indirectly) is any of the foregoing, or any of their heirs, executors, successors and legal representatives, who at any date beneficially own or have the right to acquire, directly or indirectly, Capital Stock of the Company, any Restricted Subsidiary or any Parent.

“Market Capitalization” means an amount equal to (i) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity on the date of the declaration of the relevant dividend multiplied by (ii) the arithmetic mean of the closing prices per share of such common stock or common equity interests for the 30 consecutive trading days immediately preceding the date of declaration of such dividend.

“Moody’s” means Moody’s Investors Service, Inc. or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization.

“Nationally Recognized Statistical Rating Organization” means a nationally recognized statistical rating organization within the meaning of Rule 15c3- 1(c)(2)(vi)(F) under the Exchange Act.

“Net Available Cash” from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and net proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses Incurred, and all Taxes paid or required to be paid or accrued as a liability under IFRS (after taking into account any available tax credits or deductions and any Tax Sharing Agreements), as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which are required by applicable law to be repaid out of the proceeds from such Asset Disposition;

224 (3) all distributions and other payments required to be made to minority interest holders (other than any Parent, the Company or any of their respective Subsidiaries) in Subsidiaries or joint ventures as a result of such Asset Disposition; and

(4) the deduction of appropriate amounts required to be provided by the seller as a reserve, on the basis of IFRS, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition.

“Net Cash Proceeds,” with respect to any issuance or sale of Capital Stock or Subordinated Shareholder Funding, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually Incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credit or deductions and any Tax Sharing Agreements).

“Note Documents” means the Notes (including Additional Notes), the Indenture, the Intercreditor Agreement and the Security Documents.

“Offering” means the offering of the Notes.

“Officer” means, with respect to any Person, (1) any member of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer or the Secretary (a) of such Person or (b) if such Person is owned or managed by a single entity, of such entity, or (2) any other individual designated as an “Officer” for the purposes of the Indenture by the Board of Directors of such Person.

“Officer’s Certificate” means, with respect to any Person, a certificate signed by one Officer of such Person.

“Opinion of Counsel ” means a written opinion from legal counsel, in form and substance reasonably satisfactory to the Trustee. The counsel may be an employee of or counsel to the Company or its Subsidiaries.

“Parent ” means any Person of which the Company at any time is or becomes a Subsidiary after the Issue Date and any holding companies established by any Permitted Holder for purposes of holding its investment in any Parent.

“Parent Expenses” means:

(1) costs (including all professional fees and expenses) Incurred by any Parent in connection with reporting obligations under or otherwise Incurred in connection with compliance with applicable laws, rules or regulations of any governmental, regulatory or self-regulatory body or stock exchange, the Indenture or any other agreement or instrument relating to Indebtedness of the Company or any Restricted Subsidiary, including in respect of any reports filed with respect to the Securities Act, Exchange Act or the respective rules and regulations promulgated thereunder;

(2) customary indemnification obligations of any Parent owing to directors, officers, employees or other Persons under its charter or by-laws or pursuant to written agreements with any such Person to the extent relating to the Company and its Subsidiaries;

(3) obligations of any Parent in respect of director and officer insurance (including premiums therefor) to the extent relating to the Company and its Subsidiaries;

(4) fees and expenses payable by any Parent;

(5) (a) general corporate overhead expenses, including professional fees and expenses and other operational expenses of any Parent or any Equity Investor or any of its Affiliates related to the ownership or operation of the business of the Company or any of its Restricted Subsidiaries and Equity Investor or any of its Affiliates (including, without limitation, accounting, legal, corporate reporting, and administrative expenses as well as payments made pursuant to operating partner arrangements or secondment, employment or similar agreements entered into

225 between the Company and/or any of its Restricted Subsidiaries and/or any Parent and any Equity Investor or any of its Affiliates or any employee thereof) or (b) costs and expenses with respect to any litigation or other dispute relating to the Hurtigruten Acquisition Transactions or the Refinancing Transactions or the ownership, directly or indirectly, of the Company by any Parent; (6) other fees, expenses and costs relating directly or indirectly to activities of the Company and its Subsidiaries in an amount not to exceed €2.0 million in any fiscal year; and (7) expenses Incurred by any Parent in connection with any Public Offering or other sale of Capital Stock or Indebtedness: (x) where the net proceeds of such offering or sale are intended to be received by or contributed to the Company or a Restricted Subsidiary, (y) in a pro-rated amount of such expenses in proportion to the amount of such net proceeds intended to be so received or contributed, or (z) otherwise on an interim basis prior to completion of such offering so long as any Parent shall cause the amount of such expenses to be repaid to the Company or the relevant Restricted Subsidiary out of the proceeds of such offering promptly if completed.

“Pari Passu Indebtedness” means Indebtedness of the Company (other than Indebtedness of the Company pursuant to the Revolving Credit Facility Agreement) or any Guarantor if such Indebtedness or Guarantee, as the case may be, ranks equally in right of payment to the Notes or the Notes Guarantees, as the case may be, and which, in each case, is secured by Liens on the Collateral.

“Paying Agent ” means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Note on behalf of the Company.

“Pension Items” means any costs, charges or liabilities, including contributions, made in respect of any pension funds or post-retirement benefit schemes, other than administration costs.

“Permissible Jurisdiction” means any state, commonwealth or territory of the United States or the District of Columbia, Canada or any province of Canada, Japan, any member state of the European Union (as of January 1, 2004), Switzerland or Norway or any political subdivision, taxing authority agency or instrumentality of any such state, commonwealth, territory, union, country or member state.

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of assets used or useful in a Similar Business or a combination of such assets and cash, Cash Equivalents or Temporary Cash Investments between the Company or any of its Restricted Subsidiaries and another Person; provided that any cash or Cash Equivalents received in excess of the value of any cash or Cash Equivalents sold or exchanged must be applied in accordance with the covenant described under “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock.”

“Permitted Collateral Liens” means (A) Liens on the Collateral described in one or more of clauses (2), (3), (4), (5), (6), (8), (9), (10), (11), (12), (13), (14), (18), (19), (20), (22), (23), (24) and (27) of the definition of “Permitted Liens”; (B) Liens on the Collateral to secure Indebtedness of the Company or a Restricted Subsidiary that is permitted to be Incurred under clauses (1), (2) (in the case of (2), to the extent such Guarantee is in respect of Indebtedness otherwise permitted to be secured and specified in this definition of Permitted Collateral Liens), (4)(a) and (c) (if the original Indebtedness was so secured), (5)(i) (covering only the shares and assets of the acquired Person the Indebtedness of which is so secured), (5)(ii), (6) or (11) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness”; provided, however that, in the case of Indebtedness of the Company or a Restricted Subsidiary that is permitted to be Incurred under clause (5)(i) or (5)(ii) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness,” after giving pro forma effect to such transaction and the use of proceeds thereof, the Consolidated Senior Secured Leverage Ratio of the Company would have been less than 5.0 to 1.0 or no higher than it was immediately prior to giving effect to the transaction; (C) Liens on the Collateral securing Indebtedness Incurred under the first paragraph of “—Certain Covenants—Limitation on Indebtedness,” provided that, in the case of this clause (C), after giving pro forma effect to such Incurrence and the use of proceeds therefrom, the Consolidated Senior Secured Leverage Ratio of the Company would have been less than 5.0 to 1.0; (D) Liens on Collateral securing Refinancing Indebtedness in respect of any Indebtedness

226 secured pursuant to the foregoing clauses (A), (B) and (C); and (E) Liens on the Collateral that secure Indebtedness on a basis junior to the Liens in favor of the Notes or the Notes Guarantees, provided that the holders of such Indebtedness (or their representative) enter into an intercreditor agreement or subordination agreement that ranks such Liens junior to the Liens securing the Notes and the Notes Guarantees regardless of the time such Liens are granted; provided, however that such Liens securing Indebtedness pursuant to the foregoing clauses (B), (C) and (D) rank equal (with respect to the application of proceeds from any realization or enforcement of the Collateral in accordance with the Intercreditor Agreement) or junior to the Liens on the Collateral securing the Notes or the Notes Guarantees (except that a Lien in favor of Indebtedness Incurred under clauses (1) or (6) of the second paragraph of “—Certain Covenants—Limitation on Indebtedness” may have super priority in respect of the application of proceeds from any realization or enforcement of the Collateral on terms not materially less favorable to the Holders than that accorded to the Revolving Credit Facility Agreement on the Issue Date as provided in the Intercreditor Agreement as in effect on the Issue Date).

“Permitted Holders” means, collectively, (1) the Equity Investors and any Affiliate or Related Person of any of them, (2) any one or more Persons whose beneficial ownership constitutes or results in a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Indenture, (3) Senior Management and (4) any Person who is acting as an underwriter in connection with a public or private offering of Capital Stock of any Parent or the Company, acting in such capacity. Any Person or group that includes a Permitted Holder shall also be deemed to be a Permitted Holder, provided that the Permitted Holders (before giving effect to this sentence) shall control at least 50% of the voting power of the Voting Stock of the Company owned by such Person or group.

“Permitted Investment ” means (in each case, by the Company or any of its Restricted Subsidiaries): (1) Investments in (a) a Restricted Subsidiary (including the Capital Stock of a Restricted Subsidiary) or the Company or (b) a Person (including the Capital Stock of any such Person) that is engaged in any Similar Business and such Person will, upon the making of such Investment, become a Restricted Subsidiary; (2) Investments in another Person if such Person is engaged in any Similar Business and as a result of such Investment such other Person is merged, consolidated or otherwise combined with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; (3) Investments in cash, Cash Equivalents, Temporary Cash Investments or Investment Grade Securities; (4) Investments in receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business, including without limitation deferred receivables representing work in progress created in the ordinary course of business; (5) Investments in payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) Management Advances; (7) Investments in Capital Stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement including upon the bankruptcy or insolvency of a debtor; (8) Investments made as a result of the receipt of non-cash consideration from a sale or other disposition of property or assets, including an Asset Disposition, in each case, that was made in compliance with “—Certain Covenants—Limitation on Sales of Assets and Subsidiary Stock”; (9) Investments in existence on, or made pursuant to legally binding commitments in existence on, the Issue Date; (10) Hedging Agreements and related Hedging Obligations, which transactions or obligations are Incurred in compliance with “—Certain Covenants—Limitation on Indebtedness”;

227 (11) Investments, taken together with all other Investments made pursuant to this clause (11) and then outstanding, in an aggregate amount at the time of such Investment not to exceed the greater of (x) €23.0 million and (y) 4.0% of Total Assets; provided that, if an Investment is made pursuant to this clause in a Person that is not a Restricted Subsidiary and such Person subsequently becomes a Restricted Subsidiary or is subsequently designated a Restricted Subsidiary pursuant to the covenant described under “—Certain Covenants—Limitation on Restricted Payments,” such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (2) of the definition of “Permitted Investment” and not this clause; (12) pledges or deposits with respect to leases or utilities provided to third parties in the ordinary course of business or Liens otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under the covenant described under “—Certain Covenants—Limitation on Liens”; (13) any Investment to the extent made using Capital Stock of the Company (other than Disqualified Stock) or Subordinated Shareholder Funding or Capital Stock of any Parent as consideration; (14) any transaction to the extent constituting an Investment that is permitted and made in accordance with the provisions of the second paragraph of the covenant described under “—Certain Covenants— Limitation on Affiliate Transactions” (except those described in clauses (1), (3), (6), (8), (9) and (12) of that paragraph), and Investments in Receivables Subsidiaries and in SPEs; (15) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or licenses or leases of intellectual property, in any case, in the ordinary course of business and in accordance with the Indenture; (16) Guarantees not prohibited by the covenant described under “—Certain Covenants—Limitation on Indebtedness” and (other than with respect to Indebtedness) guarantees, keepwells and similar arrangements in the ordinary course of business; (17) Investments in Associates or Unrestricted Subsidiaries in an aggregate amount when taken together with all other Investments made pursuant to this clause (17) that are at the time outstanding not to exceed the greater of (x) €23.0 million and (y) 4.0% of Total Assets; and (18) Investments in the Notes and any Additional Notes and Investments pursuant to the Proceeds Loan Agreement.

“Permitted Liens” means, with respect to any Person: (1) Liens on assets or property of a Restricted Subsidiary that is not a Guarantor securing Indebtedness of any Restricted Subsidiary that is not a Guarantor; (2) pledges, deposits or Liens under workmen’s compensation laws, unemployment insurance laws, social security laws or similar legislation, or insurance related obligations (including pledges or deposits securing liability to insurance carriers under insurance or self-insurance arrangements), or in connection with bids, tenders, completion guarantees, contracts (other than for borrowed money) or leases, or to secure utilities, licenses, public or statutory obligations, or to secure surety, indemnity, judgment, appeal or performance bonds, guarantees of government contracts (or other similar bonds, instruments or obligations), or as security for contested Taxes or import or customs duties or for the payment of rent, or other obligations of like nature, in each case Incurred in the ordinary course of business; (3) Liens imposed by law, including carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s and repairmen’s or other like Liens, in each case for sums not yet overdue for a period of more than 60 days or that are bonded or being contested in good faith by appropriate proceedings; (4) Liens for Taxes not yet delinquent or which are being contested in good faith by appropriate proceedings; provided that appropriate reserves required pursuant to IFRS have been made in respect thereof; (5) Liens in favor of issuers of surety, performance or other bonds, guarantees or letters of credit or bankers’ acceptances (not issued to support Indebtedness for borrowed money) issued

228 pursuant to the request of and for the account of the Company or any Restricted Subsidiary in the ordinary course of its business; (6) encumbrances, ground leases, easements (including reciprocal easement agreements), survey exceptions, or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning, building codes or other restrictions (including minor defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of the Company and its Restricted Subsidiaries or to the ownership of its properties which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of the Company and its Restricted Subsidiaries; (7) Liens on assets or property of the Company or any Restricted Subsidiary securing Hedging Obligations permitted under the Indenture; (8) leases, licenses, subleases and sublicenses of assets (including real property and intellectual property rights), in each case entered into in the ordinary course of business; (9) Liens arising out of judgments, decrees, orders or awards not giving rise to an Event of Default so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree, order or award have not been finally terminated or the period within which such proceedings may be initiated has not expired; (10) Liens on assets or property of the Company or any Restricted Subsidiary for the purpose of securing Capitalized Lease Obligations or Purchase Money Obligations, or securing the payment of all or a part of the purchase price of, or securing other Indebtedness Incurred to finance or refinance the acquisition, improvement or construction of, assets or property; provided that (a) the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be Incurred under the Indenture and (b) any such Lien may not extend to any assets or property of the Company or any Restricted Subsidiary other than assets or property acquired, improved, constructed or leased with the proceeds of such Indebtedness and any improvements or accessions to such assets and property or proceeds of such property (including rents); (11) Liens arising by virtue of any statutory or common law provisions or standard terms and procedures relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts, securities accounts or other funds maintained with a depositary or financial institution; (12) Liens arising from Uniform Commercial Code financing statement filings (or similar filings in other applicable jurisdictions) regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business; (13) Liens existing on, or provided for or required to be granted under written agreements existing on, the Issue Date; (14) Liens on property, other assets or shares of stock of a Person at the time such Person becomes a Restricted Subsidiary (or at the time the Company or a Restricted Subsidiary acquires such property, other assets or shares of stock, including any acquisition by means of a merger, consolidation or other business combination transaction with or into the Company or any Restricted Subsidiary); provided, however, that such Liens are not created, Incurred or assumed in anticipation of or in connection with such other Person becoming a Restricted Subsidiary (or such acquisition of such property, other assets or stock); provided, further, that such Liens do not extend to or cover any property, other assets or stock of the Company and its Restricted Subsidiaries other than (A) the property, other assets or stock acquired or (B) the property, other assets or stock (plus improvements, accessions, proceeds or dividends or distributions in connection with the original property, other assets or stock) of the Person acquired, merged with or into or consolidated or combined with the Company or a Restricted Subsidiary; (15) Liens on assets or property of the Company or any Restricted Subsidiary securing Indebtedness or other obligations of the Company or such Restricted Subsidiary owing to the Company or another Restricted Subsidiary, or Liens in favor of the Company or any Restricted Subsidiary; (16) Liens securing Refinancing Indebtedness Incurred to refinance Indebtedness that was previously so secured, and permitted to be secured under the Indenture; provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions,

229 proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of property that is or could be the security for or subject to a Permitted Lien hereunder; (17) any interest or title of a lessor under any Capitalized Lease Obligation or operating lease; (18) (a) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any government, statutory or regulatory authority, developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any leased property and subordination or similar arrangements relating thereto and (b) any condemnation or eminent domain proceedings affecting any real property; (19) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement; (20) Liens on property or assets under construction (and related rights) in favor of a contractor or developer or arising from progress or partial payments by a third party relating to such property or assets; (21) Liens on cash accounts securing Indebtedness Incurred under clause (10)(C) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness”; (22) Liens on cash set aside at the time of the Incurrence of any Indebtedness or government securities purchased with such cash, in either case to the extent such cash or government securities prefund the payment of interest on such Indebtedness and are held in an escrow account or similar arrangement to be applied for such purpose; (23) Liens securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking or other trading activities, or liens over cash accounts securing cash pooling arrangements; (24) Liens arising out of conditional sale, title retention, hire purchase, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business; (25) Liens Incurred with respect to obligations which do not exceed €10.0 million at any one time outstanding; (26) Liens on Capital Stock or other securities or assets of any Unrestricted Subsidiary that secure Indebtedness of such Unrestricted Subsidiary; (27) Liens on Receivables Assets Incurred in connection with a Qualified Receivables Financing; (28) Liens securing Indebtedness permitted to be Incurred pursuant to clause (1) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness”, only to the extent the assets subject to such Liens are restricted from constituting Collateral pursuant to the Agreed Security Principles; and (29) any cash collateral arrangement securing the obligations of an ancillary lender, landlord, hedging counterparty or regulator in respect of ancillary facilities, leases, Hedging Obligations or capital, surety or other guarantee requirements under applicable regulations of the Company or its Restricted Subsidiaries.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock,” as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

230 “Proceeds Loan” means the loan of a portion of the proceeds of the Notes pursuant to the Proceeds Loan Agreement, all loans directly or indirectly replacing or refinancing such loans or a portion thereof and the loan of a portion of the proceeds of Additional Notes pursuant to the Proceeds Loan Agreement.

“Proceeds Loan Agreement” means one or more loan agreements relating to a portion of the proceeds of the Notes and/or Bridge Loans or the proceeds of Additional Notes, by and among the Company, as lender and Hurtigruten or any of its successors or assigns, as borrower.

“Public Debt” means any Indebtedness consisting of bonds, debentures, notes or other similar debt securities issued in (1) a public offering registered under the Securities Act or (2) a private placement to institutional and other investors, in each case, that are not Affiliates of the Company, in accordance with Section 4(a)(2) of and/or Rule 144A or Regulation S under the Securities Act, whether or not it includes registration rights entitling the holders of such debt securities to registration thereof with the SEC for public resale.

“Public Market” means any time after: (1) an Equity Offering has been consummated; and (2) shares of common stock or other common equity interests of the IPO Entity having a market value in excess of €50.0 million on the date of such Equity Offering have been distributed pursuant to such Equity Offering.

“Public Offering” means any offering, including an Initial Public Offering, of shares of common stock or other common equity interests that are listed on an exchange or publicly offered (which shall include an offering pursuant to Rule 144A and/or Regulation S under the Securities Act to professional market investors or similar Persons).

“Purchase Money Obligations” means any Indebtedness Incurred to finance or refinance the acquisition, leasing, construction or improvement of property (real or personal) or assets (including Capital Stock), and whether acquired through the direct acquisition of such property or assets or the acquisition of the Capital Stock of any Person owning such property or assets, or otherwise.

“Qualified Receivables Financing” means any Receivables Financing of a Receivables Subsidiary that meets the following conditions: (1) the Board of Directors or an Officer of the Company shall have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Company and the Receivables Subsidiary, (2) all sales of accounts receivable and related assets to the Receivables Subsidiary are made at fair market value (as determined in good faith by the Board of Directors or an Officer of the Company), and (3) the financing terms, covenants, termination events and other provisions thereof shall be on market terms (as determined in good faith by the Board of Directors or an Officer of the Company) and may include Standard Securitization Undertakings.

The grant of a security interest in any accounts receivable of the Company or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) to secure Indebtedness under a Credit Facility or Indebtedness in respect of the Notes shall not be deemed a Qualified Receivables Financing.

“Receivables Assets” means any assets that are or will be the subject of a Qualified Receivables Financing.

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Financing.

“Receivables Financing” means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by the Company or any of its Subsidiaries), or (b) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or

231 arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto, including all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interest are customarily granted in connection with asset securitization transactions involving accounts receivable and any Hedging Obligations entered into by the Company or any such Subsidiary in connection with such accounts receivable.

“Receivables Repurchase Obligation” means any obligation of a seller of receivables in a Qualified Receivables Financing to repurchase receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.

“Receivables Subsidiary” means a Wholly Owned Subsidiary of the Company (or another Person formed for the purposes of engaging in a Qualified Receivables Financing with the Company in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Company and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary and: (1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any other Restricted Subsidiary of the Company (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is subject to terms that are substantially equivalent in effect to a guarantee of any losses on securitized or sold receivables by the Company or any other Restricted Subsidiary of the Company, (iii) is recourse to or obligates the Company or any other Restricted Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings, or (iv) subjects any property or asset of the Company or any of its Restricted Subsidiaries, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; (2) with which neither the Company nor any other Restricted Subsidiary of the Company has any contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company; and (3) to which neither the Company nor any other Restricted Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.

Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing conditions.

“refinance” means refinance, refund, replace, renew, repay, modify, restate, defer, substitute, supplement, reissue, resell, extend or increase (including pursuant to any defeasance or discharge mechanism) and the terms “refinances,” “refinanced ” and “refinancing” as used for any purpose in the Indenture shall have a correlative meaning.

“Refinancing Indebtedness” means Indebtedness that is Incurred to refund, refinance, replace, exchange, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) any Indebtedness existing on the date of the Indenture or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of the Company or another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; provided, however, that: (1) if the Indebtedness being refinanced constitutes Subordinated Indebtedness, the Refinancing Indebtedness has a final Stated Maturity at the time such Refinancing Indebtedness is Incurred that is the same as or later than the final Stated Maturity of the Indebtedness being refinanced or, if shorter, of the Notes;

232 (2) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced (plus, without duplication, any additional Indebtedness Incurred to pay interest or premiums required by the instruments governing such existing Indebtedness and costs, expenses and fees Incurred in connection therewith); and

(3) if the Indebtedness being refinanced is expressly subordinated to the Notes or the Notes Guarantees, such Refinancing Indebtedness is subordinated to the Notes or the Notes Guarantees on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being refinanced, provided, however, that Refinancing Indebtedness shall not include (i) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary, or (ii) Indebtedness of a Restricted Subsidiary that is not a Guarantor that refinances Indebtedness of the Company or a Guarantor, and provided, further, that the provisions of clause (3) above would not operate to preclude the refinancing of indebtedness with Indebtedness that is secured with a super priority status (or other preferential security status) if such security is otherwise permitted pursuant to the Indenture.

Refinancing Indebtedness in respect of any Credit Facility or any other Indebtedness may be Incurred within 180 days after the termination, discharge or repayment of any such Credit Facility or other Indebtedness.

“Refinancing Transactions” means the issuance of the Notes and the use of proceeds thereof to repay in full the Bridge Facility Agreement, as described in “Use of Proceeds” in this Offering Memorandum and the payment or incurrence of any fees, expenses or charges associated with any of the foregoing.

“Related Person” with respect to any Equity Investor, means:

(1) any controlling equity holder or Subsidiary of such Person;

(2) in the case of an individual, any spouse, family member or relative of such individual, any trust or partnership for the benefit of one or more of such individual and any such spouse, family member or relative, or the estate, executor, administrator, committee or beneficiaries of any thereof;

(3) any trust, corporation, partnership or other Person for which one or more of the Permitted Holders and other Related Persons of any thereof constitute the beneficiaries, stockholders, partners or owners thereof, or Persons beneficially holding in the aggregate a majority (or more) controlling interest therein; or

(4) in the case of the Equity Investors any investment fund or vehicle managed, sponsored or advised by such Person or any successor thereto, or by any Affiliate of such Person or any such successor.

“Related Taxes” means:

(1) any Taxes (other than (x) Taxes measured by gross or net income, receipts or profits and (y) withholding Taxes), required to be paid (provided such Taxes are in fact paid) by any Parent by virtue of its:

(a) being organized or having Capital Stock outstanding (but not by virtue of owning stock or other equity interests of any corporation or other entity other than, directly or indirectly, the Company or any of the Company’s Subsidiaries);

(b) issuing or holding Subordinated Shareholder Funding;

(c) being a Parent, directly or indirectly, of the Company or any of the Company’s Subsidiaries;

(d) receiving dividends from or other distributions in respect of the Capital Stock of, directly or indirectly, the Company or any of the Company’s Subsidiaries; or

(e) having made any payment in respect to any of the items for which the Company is permitted to make payments to any Parent pursuant to “—Certain Covenants—Limitation on Restricted Payments”; or

233 (2) if and for so long as the Company is a member of a group filing a consolidated or combined tax return with any Parent or party to a Tax Sharing Agreement, any consolidated or combined Taxes measured by income for which such Parent is liable up to an amount not to exceed the amount of any such Taxes that the Company and its Subsidiaries would have been required to pay on a separate company basis or on a consolidated basis if the Company and its Subsidiaries had paid Tax on a consolidated, combined, group, affiliated or unitary basis on behalf of an affiliated group consisting only of the Company and its Subsidiaries; provided that distributions shall be permitted in respect of the income of an Unrestricted Subsidiary only to the extent such Unrestricted Subsidiary distributed cash for such purpose to the Company or its Restricted Subsidiaries.

“Restricted Investment ” means any Investment other than a Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“Reversion Date” means, after the Notes have achieved Investment Grade Status, the date, if any, that such Notes shall cease to have such Investment Grade Status.

“Revolving Credit Facility Agreement ” means the senior secured revolving credit facility agreement dated October 6, 2014 by and among, inter alios, the Company, Goldman Sachs International, as Mandated Lead Arranger, Goldman Sachs Lending Partners LLC, as agent, and U.S. Bank Trustees Limited, as Security Agent, as amended, supplemented, refinanced, replaced or otherwise modified from time to time.

“S&P ” means Standard & Poor’s Investors Ratings Services or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization.

“SEC ” means the U.S. Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Securities Act ” means the U.S. Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder, as amended.

“Security Agent ” means U.S. Bank Trustees Limited acting as security agent pursuant to the Intercreditor Agreement or such successor Security Agent or any delegate thereof as may be appointed thereunder or any such security agent, delegate or successor thereof pursuant to an Additional Intercreditor Agreement.

“Security Documents” means the security agreements, pledge agreements, charge agreements, collateral assignments, and any other instrument and document executed and delivered pursuant to the Indenture or otherwise or any of the foregoing, as the same may be amended, supplemented or otherwise modified from time to time, creating the security interests in the Collateral as contemplated by the Indenture.

“Senior Management ” means the officers, directors, and other current or former members of senior management of the Company or any of its Subsidiaries, who at any date beneficially own or have the right to acquire, directly or indirectly, Capital Stock of the Company or any Parent.

“Senior Secured Indebtedness” means, with respect to any Person as of any date of determination, any Indebtedness that is Incurred under the first paragraph of the covenant described under “—Certain Covenants— Limitation on Indebtedness” or clauses (1), (4), (5), (6), (7), (11) or (12) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness” (in the case of clause (4), to the extent such Indebtedness constitutes Indebtedness under the Notes (excluding Additional Notes)) and any Refinancing Indebtedness in respect thereof, in each case secured by a Lien on any Collateral that is at least pari passu with the Liens securing the Notes.

“Significant Subsidiary” means any Restricted Subsidiary that meets any of the following conditions: (1) the Company’s and its Restricted Subsidiaries’ investments in and advances to the Restricted Subsidiary exceed 10% of the Total Assets of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the most recently completed fiscal year;

234 (2) the Company’s and its Restricted Subsidiaries’ proportionate share of the Total Assets (after intercompany eliminations) of the Restricted Subsidiary exceeds 10% of the Total Assets of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the most recently completed fiscal year; or (3) the Company’s and its Restricted Subsidiaries’ equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of the Restricted Subsidiary exceeds 10% of such income of the Company and its Restricted Subsidiaries on a consolidated basis for the most recently completed fiscal year.

“Silk Midco” means Silk Midco AS, a private limited company incorporated under the laws of Norway, and its successors and assigns.

“Similar Business” means (a) any businesses, services or activities engaged in by the Company, Hurtigruten or any of their respective Subsidiaries or Associates on the Issue Date and (b) any businesses, services and activities engaged in by the Company, Hurtigruten or any of their respective Subsidiaries or Associates that are related, complementary, incidental, ancillary or similar to any of the foregoing or are extensions or developments of any thereof.

“SPE ” means a special purpose entity that leases one or more ships to the Company or its Restricted Subsidiaries provided that such ships were leased by the Company or a Restricted Subsidiary from an SPE on the Issue Date.

“Standard Securitization Undertakings” means representations, warranties, covenants, indemnities and guarantees of performance entered into by the Company or any Subsidiary of the Company which the Board of Directors or an Officer of the Company has determined in good faith to be customary in a Receivables Financing, including those relating to the servicing of the assets of a Receivables Subsidiary, it being understood that any Receivables Repurchase Obligation shall be deemed to be a Standard Securitization Undertaking.

“Stated Maturity ” means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any Contingent Obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.

“Subordinated Indebtedness” means, with respect to any Person, any Indebtedness (whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinated in right of payment to the Notes and any Notes Guarantee pursuant to a written agreement (which, for the avoidance of doubt, will not include the Notes or any Pari Passu Indebtedness).

“Subordinated Shareholder Funding” means any funds provided to the Company by any Parent, any Affiliate of any Parent or any Permitted Holder or any Affiliate thereof, in exchange for or pursuant to any security, instrument or agreement other than Capital Stock, in each case issued to and held by a Parent or a Permitted Holder, together with any such security, instrument or agreement and any other security or instrument other than Capital Stock issued in payment of any obligation under any Subordinated Shareholder Funding; provided, however, that such Subordinated Shareholder Funding: (1) does not mature or require any amortization, redemption or other repayment of principal or any sinking fund payment prior to the first anniversary of the Stated Maturity of the Notes (other than through conversion or exchange of such funding into Capital Stock (other than Disqualified Stock) of the Company or any funding meeting the requirements of this definition) or the making of any such payment prior to the date that is six months following the Stated Maturity of the Notes is restricted by the provisions of the Indenture as a “Restricted Payment,” (2) does not require, prior to the first anniversary of the Stated Maturity of the Notes, payment of cash interest, cash withholding amounts or other cash gross-ups, or any similar cash amounts; (3) contains no change of control or similar provisions and does not accelerate and has no right to declare a default or event of default or take any enforcement action or otherwise require any cash payment, in each case, prior to the date that is six months following the Stated Maturity of the Notes;

235 (4) does not provide for or require any security interest or encumbrance over any asset of the Company or any of its Subsidiaries; and (5) pursuant to the Intercreditor Agreement, any Additional Intercreditor Agreement or any other intercreditor agreement is fully subordinated and junior in right of payment to the Notes pursuant to subordination, payment blockage and enforcement limitation terms which are customary in all material respects for similar funding, provided, further, however, that upon the occurrence of any event or circumstance that results in such Indebtedness ceasing to qualify as Subordinated Shareholder Funding, such Indebtedness shall constitute an Incurrence of such Indebtedness by the Company, and any and all Restricted Payments made through the use of the net proceeds from the Incurrence of such Indebtedness since the date of the original issuance of such Subordinated Shareholder Funding shall constitute new Restricted Payments that are deemed to have been made after the date of the original issuance of such Subordinated Shareholder Funding.

“Subsidiary” means, with respect to any Person: (1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; or (2) any partnership, joint venture, limited liability company or similar entity of which: (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership interests or otherwise; and (b) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Successor Company” means, with respect to any Person (other than a Parent), the resulting, surviving or transferee Person and, with respect to a Parent, means a Successor Parent.

“Successor Parent” means, with respect to a Parent, any other Person of which more than 50% of the total voting power of the Voting Stock, at the time such Parent becomes a Subsidiary of such other Person, is “beneficially owned” (as such term is defined in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date)) by one or more other Persons that, immediately prior to such Parent becoming a Subsidiary of such other Person, “beneficially owned” more than 50% of the total voting power of the Voting Stock of such Parent.

“TARGET2” means the second generation trans-European automated real time gross settlement express transfer payment system.

“Tax Sharing Agreement” means any tax sharing or profit and loss pooling or similar agreement with customary or arm’s length terms or any arrangement to purchase tax losses or share group relief entered into with any Parent or Unrestricted Subsidiary, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

“Taxes” means all present and future taxes, levies, imposts, deductions, charges, duties and withholdings and any charges of a similar nature (including interest, penalties and other liabilities with respect thereto) that are imposed by any government or other taxing authority.

“TDR Capital” means TDR Capital LLP and its successors and assigns.

“Temporary Cash Investments” means any of the following: (1) any investment in: (a) direct obligations of, or obligations Guaranteed by, (i) any Permissible Jurisdiction or (ii) any country in whose currency funds are being held specifically pending application in

236 the making of an investment or capital expenditure by the Company or a Restricted Subsidiary in that country with such funds, or

(b) direct obligations of any country recognized by the United States of America rated at least “A” by S&P or “A-1” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any Nationally Recognized Statistical Rating Organization);

(2) overnight bank deposits, and investments in time deposit accounts, certificates of deposit, bankers’ acceptances and money market deposits (or, with respect to foreign banks, similar instruments) maturing not more than one year after the date of acquisition thereof issued by:

(a) any lender under the Revolving Credit Facility Agreement,

(b) any institution authorized to operate as a bank in any of the countries or member states referred to in clause (1)(a) above, or

(c) any bank or trust company organized under the laws of any such country or member state or any political subdivision thereof,

in each case, having capital and surplus aggregating in excess of €250 million (or the foreign currency equivalent thereof) and whose long-term debt is rated at least “A” by S&P or “A-2” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any Nationally Recognized Statistical Rating Organization) at the time such Investment is made;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) or (2) above entered into with a Person meeting the qualifications described in clause (2) above;

(4) Investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a Person (other than the Company or any of its Subsidiaries), with a rating at the time as of which any Investment therein is made of “P-2” (or higher) according to Moody’s or “A-2” (or higher) according to S&P (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any Nationally Recognized Statistical Rating Organization);

(5) Investments in securities maturing not more than one year after the date of acquisition issued or fully Guaranteed by any Permissible Jurisdiction, and rated at least “BBB” by S&P or “Baa3” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any Nationally Recognized Statistical Rating Organization);

(6) bills of exchange issued in any Permissible Jurisdiction eligible for rediscount at the relevant central bank and accepted by a bank (or any dematerialized equivalent);

(7) any money market deposit accounts issued or offered by a commercial bank organized under the laws of a country that is a member of the Organization for Economic Co-operation and Development, in each case, having capital and surplus in excess of €250 million (or the foreign currency equivalent thereof) or whose long term debt is rated at least “A” by S&P or “A2” by Moody’s (or, in either case, the equivalent of such rating by such organization or, if no rating of S&P or Moody’s then exists, the equivalent of such rating by any Nationally Recognized Statistical Rating Organization) at the time such Investment is made;

(8) investment funds investing 95% of their assets in securities of the type described in clauses (1) through (7) above (which funds may also hold reasonable amounts of cash pending investment and/or distribution); and

(9) investments in money market funds complying with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the SEC under the U.S. Investment Company Act of 1940, as amended.

“Total Assets” means the consolidated total assets of the Company and its Restricted Subsidiaries in accordance with IFRS as shown on the most recent balance sheet of such Person. “Total Assets” of any Person shall not include any assets of any other Person, regardless of whether the assets of such Person would be deemed under IFRS to be consolidated with the assets of the first Person.

237 “Trustee” means U.S. Bank Trustees Limited, as trustee under the Indenture.

“Uniform Commercial Code” means the New York Uniform Commercial Code.

“Unrestricted Subsidiary” means: (1) any Subsidiary of the Company that at the time of determination is an Unrestricted Subsidiary (as designated by the Board of Directors of the Company in the manner provided below); and (2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger, consolidation or other business combination transaction, or Investment therein) to be an Unrestricted Subsidiary only if: (1) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary; and (2) such designation and the Investment of the Company in such Subsidiary complies with the covenant described under “—Certain Covenants—Limitation on Restricted Payments.”

Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a resolution of the Board of Directors of the Company giving effect to such designation and an Officer’s Certificate certifying that such designation complies with the foregoing conditions.

The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that immediately after giving effect to such designation (1) no Default or Event of Default would result therefrom and (2)(x) the Company could Incur at least €1.00 of additional Indebtedness under the first paragraph of “—Certain Covenants—Limitation on Indebtedness” or (y) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would not be less than it was immediately prior to giving effect to such designation, in each case, on a pro forma basis taking into account such designation. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation or an Officer’s Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled to vote in the election of directors.

“Wholly Owned Subsidiary” means a subsidiary of the Company, all the Voting Stock of which (other than directors’ qualifying shares or shares required by any applicable law or regulation to be held by a Person other than the Company or another Wholly Owned Subsidiary) is owned by the Company or another Wholly Owned Subsidiary.

238 TAXATION

If you are a prospective investor, you should consult your tax advisor as to the possible tax consequences of purchasing, holding or selling any Notes under the laws of your country of citizenship, residence or domicile, including the effect of any local taxes applicable to you. The discussions that follow do not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase, hold or sell Notes. In particular, these discussions do not consider any specific facts or circumstances that may apply to you. The discussions that follow for each jurisdiction are based upon the applicable laws and interpretations thereof as in effect as of the date of this offering memorandum. These tax laws and interpretations are subject to change, possibly with retroactive or retrospective effect.

Certain United States Federal Income Tax Consequences The following is a summary of certain United States federal income tax consequences of the purchase, ownership and disposition of Notes as of the date hereof. This summary deals only with Notes that are held as capital assets by a U.S. holder (as defined below) who acquires our Notes upon original issuance at their “issue price” (i.e. the first price at which a substantial amount of the Notes is sold to the public for cash, excluding to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers).

As used herein, a “U.S. holder” means a person that is for United States federal income tax purposes any of the following: • an individual citizen or resident of the United States; • a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to United States federal income taxation regardless of its source; or • a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury Regulations (“Treasury Regulations”) to be treated as a United States person.

This summary is based upon provisions of the United States Internal Revenue Code of 1986, as amended, and Treasury Regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income tax consequences different from those summarized below. This summary does not address all aspects of United States federal income taxes and does not address the effects of the Medicare contribution tax on net investment income or foreign, state, local or other tax considerations that may be relevant to U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws. For example, this summary does not address: • tax consequences to holders who may be subject to special tax treatment, such as dealers in securities or currencies, traders in securities that elect to use the mark-to-market method of accounting for their securities, financial institutions, regulated investment companies, real estate investment trusts, investors in partnerships or other pass-through entities for United States federal income tax purposes, tax-exempt entities or insurance companies; • tax consequences to persons holding the Notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle; • tax consequences to U.S. holders whose “functional currency” is not the U.S. dollar; or • alternative minimum tax consequences, if any.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) holds our Notes, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Notes, you should consult your tax advisors.

239 If you are considering the purchase of Notes, you should consult your own tax advisors concerning the particular United States federal income tax consequences to you of the purchase, ownership and disposition of the Notes, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

Payments of Interest

Subject to the discussion below, interest on a Note will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for United States federal income tax purposes. In addition to interest on the Notes (which includes any foreign tax withheld from the interest payments you receive), you will be required to include in income any Additional Amounts paid in respect of such tax withheld. You may be entitled to deduct or credit this tax, subject to certain limitations (including that the election to deduct or credit foreign taxes applies to all of your applicable foreign taxes for a particular tax year). Interest income (including any Additional Amounts) on a Note generally will be considered foreign source income and, for purposes of the United States foreign tax credit, generally will be considered passive category income. You will generally be denied a foreign tax credit for foreign taxes imposed with respect to the Notes where you do not meet a minimum holding period requirement during which you are not protected from risk of loss. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.

If you use the cash basis method of accounting for United States federal income tax purposes, you will be required to include in income the U.S. dollar value of the interest received, determined by translating the foreign currency received at the spot rate on the date such payment is received regardless of whether the payment is in fact converted into U.S. dollars. You will not recognize exchange gain or loss with respect to the receipt of such payment of interest.

If you use the accrual method of accounting for United States federal income tax purposes, you may determine the amount of income recognized with respect to such interest in accordance with either of two methods. Under the first method, you will be required to include in income for each taxable year the U.S. dollar value of the interest that has accrued during such year, determined by translating such interest at the average rate of exchange for the period or periods during which such interest accrued or, in the case of an accrual period that spans two taxable years of a U.S. holder, the part of the period within the taxable year. Under the second method, you may elect to translate interest income at the spot rate on:

• the last day of the accrual period,

• the last day of the taxable year if the accrual period straddles your taxable year, or

• the date the interest payment is received if such date is within five business days of the end of the accrual period.

This election will apply to all debt obligations you hold from year to year and cannot be changed without the consent of the Internal Revenue Service (the “IRS”). You should consult your own tax advisor as to the advisability of making the above election.

In addition, if you use the accrual method of accounting for United States federal income tax purposes, upon receipt of an interest payment on a Note (including amounts received upon the sale of a Note attributable to accrued interest previously included in income), you will recognize ordinary income or loss in an amount equal to the difference, if any, between the U.S. dollar value of such payment (determined by translating the foreign currency received at the spot rate on the date such payment is received) and the U.S. dollar value of the interest income you previously included in income with respect to such payment.

Sale, Exchange, Redemption, Retirement and Other Taxable Disposition of Notes

Upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, you will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, redemption, retirement or other taxable disposition (less an amount equal to any accrued but unpaid interest, which will be treated as interest income to the extent not previously included in income) and your tax basis in the Note. Your tax basis in a Note generally will be your U.S. dollar cost for that Note.

240 If you purchased your Note with foreign currency, your cost generally will be the U.S. dollar value of the foreign currency paid for such Note determined at the spot rate on the date of such purchase. If your Note is sold, exchanged, redeemed, retired or otherwise disposed of in a taxable transaction for foreign currency, the amount realized generally will be the U.S. dollar value of the foreign currency received on the date of sale, exchange, redemption, retirement or other taxable disposition. If you are a cash method taxpayer and the Notes are traded on an established securities market, foreign currency paid or received will be translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment with respect to the purchase and sale of Notes traded on an established securities market, provided that the election is applied consistently to all debt instruments from year to year. Such election cannot be changed without the consent of the IRS.

Subject to the foreign currency rules discussed below, your gain or loss will generally be capital gain or loss and will be long term capital gain or loss if at the time of sale, exchange, redemption, retirement or other taxable disposition, you have held the Note for more than one year. Capital gains of non-corporate U.S. holders, including individuals, derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Gain or loss realized by you on the sale, exchange, redemption, retirement or other taxable disposition of a Note would generally be treated as United States source gain or loss.

Gain or loss recognized upon the sale, exchange, redemption, retirement or other taxable disposition of a Note that is attributable to changes in currency exchange rates relating to the principal amount of such Note will be treated as exchange gain or loss. Exchange gain or loss will be treated as ordinary income or loss and generally will be United States source gain or loss. For these purposes, the principal amount of the Note is your purchase price for the Note calculated in foreign currency on the date of purchase, and the amount of exchange gain or loss recognized is equal to the difference between (i) the U.S. dollar value of the principal amount determined on the date of the sale, exchange, redemption, retirement or other taxable disposition of the Note and (ii) the U.S. dollar value of the principal amount determined on the date you purchased the Note. The amount of exchange gain or loss will be limited to the amount of overall gain or loss realized on the disposition of the Note.

Exchange Gain or Loss with Respect to Foreign Currency Your tax basis in any foreign currency received as interest on a Note or on the sale, exchange, redemption, retirement or other taxable disposition of a Note will be the U.S. dollar value thereof at the spot rate in effect on the date the foreign currency is received. Any gain or loss recognized by you on a sale, exchange or other taxable disposition of the foreign currency will be ordinary income or loss and generally will be United States source gain or loss.

Reportable Transactions Treasury Regulations meant to require the reporting of certain tax shelter transactions could be interpreted to cover transactions generally not regarded as tax shelters, including certain foreign currency transactions. Under the Treasury Regulations, certain transactions are required to be reported to the IRS including, in certain circumstances, a sale, exchange, redemption, retirement or other taxable disposition of a foreign currency note, or foreign currency received in respect of a foreign currency note to the extent that such sale, exchange, redemption, retirement or other taxable disposition results in a tax loss in excess of a threshold amount. Holders considering the purchase of Notes should consult with their own tax advisor to determine the tax return obligations, if any, with respect to an investment in the Notes, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement).

Backup Withholding and Information Reporting Generally, information reporting requirements will apply to all payments of principal and interest on a Note, or the proceeds from the sale or other disposition of a Note, unless you are an exempt recipient. Additionally, if you fail to provide your taxpayer identification number, or in the case of interest payments fail either to report in full dividend and interest income or to make certain certifications, you may be subject to backup withholding.

241 Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against your United States federal income tax liability provided the required information is timely furnished to the IRS. You are urged to consult your own tax advisors regarding backup withholding and information reporting requirements relating to your ownership and disposition of the Notes.

United States Return Disclosure Requirements for Individual U.S. Holders

Certain U.S. holders are required to report information relating to an interest in the Notes, subject to certain exceptions (including an exception for notes held in accounts maintained by certain financial institutions), by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold an interest in the Notes. You are urged to consult your own tax advisors regarding information reporting requirements relating to your ownership of the Notes.

EU Directive on the Taxation of Savings Income

EC Council Directive 2003/48/EC on the taxation of savings income (the “Savings Directive”) requires EU Member States to provide to the tax authorities of other EU Member States details of payments of interest and other similar income paid by a person established within its jurisdiction to (or for the benefit of) an individual resident, or certain other types of entity established, in that other EU Member State, except that Austria will instead impose a withholding system in relation to such payments, deducting tax at a rate of 35% for a transitional period (subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld) unless during such period it elects otherwise.

The Council of the European Union has adopted a Directive (the “Amending Directive”) which will, when implemented, amend and broaden the scope of the requirements of the Savings Directive described above. The Amending Directive will expand the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or for the benefit of) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the Savings Directive) which indirectly benefit an individual resident in an EU Member State, may fall within the scope of the Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by January 1, 2016, which legislation must apply from January 1, 2017. Investors who are in any doubt as to their position should consult their professional advisers.

The Proposed Financial Transactions Tax (“FTT”)

On February 14, 2013, the European Commission published a proposal (the “Commission’s Proposal”) for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”).

The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances.

Under the Commission’s Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

A joint statement issued in May 2014 by the participating Member States (other than Slovenia) indicated an intention to implement the FTT progressively, such that it would initially apply to transactions involving shares and certain derivatives, with this initial implementation occurring by January 1, 2016. However, full details are not available. The FTT, as initially implemented on this basis, may not apply to dealings in the Notes.

242 The proposed FTT remains subject to negotiation between the participating Member States and the timing remains unclear. Additional EU Member States may decide to participate. Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.

Certain United Kingdom Taxation Considerations The comments below are of a general nature based on current United Kingdom tax law as applied in England and Wales and HM Revenue & Customs (“HMRC”) practice (which may not be binding on HMRC), which may be subject to change, sometimes with retrospective effect, and are not intended to be exhaustive. They assume that there will be no further issues of securities that will form a single series with the Notes, and do not address the consequences of any such further issue (notwithstanding that such further issue may be permitted by the terms and conditions of the Notes). They assume that neither interest on the Notes nor payments in respect of the Notes Guarantees have or will have a United Kingdom source and, in particular, that neither the Company nor any successor company nor the Guarantors are or will be United Kingdom resident or act or will act through a permanent establishment in the United Kingdom in relation to the Notes. They do not necessarily apply where the income is deemed for tax purposes to be the income of any other person. They relate only to the position of persons who are the absolute beneficial owners of their Notes and any interest payable on their Notes. In particular, they only relate to persons holding the Notes as an investment. Certain classes of persons such as dealers, certain professional investors, or persons connected with the Company may be subject to special rules and this summary does not apply to such Noteholders.

This summary is a general guide for information purposes and should be treated with appropriate caution. It does not purport to be a complete analysis or listing of all the potential United Kingdom tax consequences of acquiring, holding or disposing of the Notes and is not intended to be, nor should it be considered legal or tax advice.

Any holders of Notes who are in doubt as to their own tax position, or who may be subject to tax in a jurisdiction other than the United Kingdom, should consult their professional advisers.

Withholding or Deduction of Tax on Payments of Interest by the Company or under the Notes Guarantees Payments of Interest by the Company Payments of interest on the Notes by the Company may be made without withholding or deduction for or on account of United Kingdom income tax.

Payments under the Notes Guarantees Any payments in respect of the Notes Guarantees may be made without withholding or deduction for or on account of United Kingdom income tax.

Exchange of Information HMRC has powers to obtain information relating to securities in certain circumstances. This may include details of the beneficial owners of the Notes (or the persons for whom the Notes are held), details of the persons to whom payments derived from the Notes are or may be paid and information and documents in connection with transactions relating to the Notes. Information may be required to be provided by, amongst others, the holders of the Notes, persons by (or via) whom payments derived from the Notes are made or who receive (or would be entitled to receive) such payments, persons who effect or are a party to transactions relating to the Notes on behalf of others and certain registrars or administrators. In certain circumstances, the information obtained by HMRC may be exchanged with tax authorities in other countries.

Taxation of Disposal (Including Redemption) and Return (Including Interest) Holders of Notes Subject to Corporation Tax Holders of the Notes within the charge to United Kingdom corporation tax (including non-resident Noteholders whose Notes are used, held or acquired for the purposes of a trade carried on in the United Kingdom through a permanent establishment) will be subject to United Kingdom tax as income

243 on all profits and gains from the Notes broadly in accordance with their statutory accounting treatment. Such holders of the Notes will generally be charged in each accounting period by reference to interest and other amounts which, in accordance with generally accepted accounting practice, are recognized in determining the Noteholder’s profit or loss for that period. Fluctuations in value relating to foreign exchange gains and losses in respect of the Notes will generally be brought into account as income.

Other Holders of Notes Taxation of Interest Holders of the Notes within the charge to United Kingdom income tax (including holders of the Notes who are either individuals or trustees and are resident for tax purposes in the United Kingdom or who carry on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable) will generally be liable to United Kingdom tax on the amount of any interest received in respect of the Notes.

Taxation of Disposal Dependent, among other things, on the discount (if any) at which the Notes are issued and the premium which is or may be payable upon redemption, the Notes may be deemed to constitute “deeply discounted securities” for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005. If the Notes are so categorized, any profit made on a disposal (including redemption) of a Note by an individual or trustee (i) who is resident for tax purposes in the United Kingdom or (ii) who is subject to United Kingdom income tax by virtue of carrying on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Notes are attributable, will be taxed as income. In calculating any gain or loss on disposal of a Note, sterling values may be compared at acquisition and transfer. Accordingly, a taxable profit may arise even where the foreign currency amount received on a disposal is less than or the same as the amount paid for the Note.

If the Notes are not deemed to constitute deeply discounted securities, (i) if the Notes are “qualifying corporate bonds” within the meaning of Section 117 of the Taxation of Chargeable Gains Act 1992 (“Qualifying Corporate Bonds”), on a disposal of the Notes neither chargeable gains nor allowable losses should arise for the purposes of taxation of capital gains, however (ii) if the Notes are not Qualifying Corporate Bonds, a disposal of a Note by a holder of the Note who is either an individual or a trustee and who is resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the Note is attributable may give rise to a chargeable gain or allowable loss for the purposes of taxation of capital gains. In calculating any gain or loss on disposal of a Note, sterling values are compared at acquisition and transfer. Accordingly, a taxable profit can arise even where the foreign currency amount received on a disposal is less than or the same as the amount paid for the Note. A transfer (within the meaning of Chapter 2 of Part 12 of the Income Tax Act 2007 (Accrued Income Profits and Losses)) of a Note by a Noteholder who is either an individual or a trustee and who is resident for tax purposes in the United Kingdom or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Note is attributable may however give rise to a charge to tax on income in respect of an amount representing interest on the Note which has accrued since the preceding interest payment date under the provisions of Chapter 2 of Part 12 of the Income Tax Act 2007 (Accrued Income Profits and Losses).

Taxation of Premium on Early Redemption It is possible that the Notes may be redeemed prior to maturity at a premium (including at the option of the Company). Payment of such premium may constitute a payment of interest. Payments of interest are subject to UK withholding tax and reporting requirements as outlined above.

HOLDERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN PROFESSIONAL ADVISERS IF THEY REQUIRE ANY ADVICE OR FURTHER INFORMATION RELATING TO DEEPLY DISCOUNTED SECURITIES.

Certain Norwegian Taxation Considerations The following section is a summary of certain Norwegian tax consequences resulting from the acquisition, ownership and disposition of the Notes. This discussion does not purport to be a

244 comprehensive description of all tax considerations that may be relevant to a decision to purchase the Notes. In particular, this discussion does not consider any specific facts or circumstances that may apply to a particular purchaser subject to special tax regimes, such as banks, insurance companies or tax-exempt organizations. The following summary is based on the laws currently in force and as applied on the date of this offering memorandum in the Kingdom of Norway which are subject to change, possibly with retroactive effect.

PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAXES UNDER THE TAX LAWS AND TAX TREATIES APPLICABLE IN THE KINGDOM OF NORWAY AND EACH COUNTRY OF WHICH THEY ARE RESIDENTS OR WHOSE TAX LAWS APPLY TO THEM FOR OTHER REASONS.

Please note that for the purpose of the summary below, a reference to a Norwegian or Non-Norwegian holder of Notes refers to the tax residency, and not the nationality, of the holder of the Notes.

Taxation of interest Norwegian holders of Notes Both corporate and individual holders of Notes who are residents of Norway are subject to Norwegian tax on interest received with a flat tax rate, currently at 27%. Interest income is taxable on an accrual basis, so that all interest paid or accrued during the income year is taxable. Where a Note is sold during the income year, the seller will be taxed for any unpaid accrued interest prior to the date of sale, and the buyer will be taxed for interest accrued from the date of acquisition of such Note.

When calculating the taxable interest income, interest in foreign currency under the Notes is calculated in Norwegian kroner based on the exchange rate at the date of payment, or at the exchange rate as of December 31 for interest that is accrued but not paid during the income year.

Non-Norwegian holders of Notes In general, payments of interest on Notes issued to holders of Notes who are not resident in Norway for tax purposes are, under present Norwegian law, not subject to Norwegian tax. Payments to Non-Norwegian holders of Notes may therefore be made without any withholding tax or deduction for any Norwegian taxes, duties, assessments or governmental charges.

However, if the Notes are held by an individual or by a company not resident in Norway but that carries out a business activity that is taxable in Norway, and the Notes are effectively connected with such business, interest received will be taxed in Norway with a tax rate of 27%, calculated as described above for Norwegian holders of Notes and assessed as part of the total taxable income of such business.

If Notes are held by a partnership, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partner of a partnership that holds Notes should consult its tax advisor.

Taxation of capital gains or losses on disposal of Notes Norwegian holders of Notes Capital gains realized by Norwegian holders of Notes upon the sale, exchange, redemption, retirement or other taxable realization of a Note will be subject to Norwegian taxation at the rate of 27%. Losses will be tax deductible.

The taxable gain/deductible loss is calculated per Note and is equal to the sales price less the Norwegian holders of Notes’ cost price of the Note, including costs incurred in relation to the acquisition or realization of the Note. Any amount of unpaid interest accrued at the time of a transfer of a Note is subtracted from the sales price, reducing the seller’s taxable gain/increasing the seller’s deductible loss, provided that the unpaid interest accrued is taxed as interest for the seller. The buyer’s cost price is reduced correspondingly.

245 Any gain received or loss incurred in foreign currency when realizing Notes shall be calculated in Norwegian kroner based on the exchange rate at the date of realization when calculating the taxable gain. The cost price shall be calculated in Norwegian kroner based on the exchange rate at the time of acquisition of the Notes, whereas the sales price is calculated in Norwegian kroner based on the exchange rate at the time of sale, exchange, redemption, retirement or other taxable realization.

Non-Norwegian holders of Notes Capital gains or profits realized on the sale, exchange, retirement or other realization of Notes by non- Norwegian holders of Notes are not subject to Norwegian taxes or duties.

However, if the Notes are held by an individual or by a company not resident in Norway but that carries out a business activity that is taxable in Norway, and the Notes are effectively connected with such business, gains will be taxed, and losses will be deductible, in Norway with a tax rate of 27%, calculated as described above for Norwegian holders of Notes and assessed as part of the total taxable income of such business.

If Notes are held by a partnership, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partner of a partnership that holds Notes should consult its tax advisor.

Net wealth tax Corporate holders of Notes who are resident of Norway are not subject to Norwegian net wealth tax.

Individual holders of Notes who are residents of Norway are subject to net wealth tax, taxable on an annual basis. The taxable value of a Note is the listed price on December 31 of the income year, calculated in Norwegian kroner, based on the exchange rate as of the same date, and is included in the basis for the computation of net wealth tax imposed on Norwegian individual Note holders. The marginal net wealth tax rate is 0.85% of the value assessed.

Non-resident holders of Notes are not liable to pay net wealth tax in Norway on the holding of Notes, unless the holder is an individual carrying out a business activity that is taxable in Norway and the Notes are effectively connected with such business.

246 CERTAIN LIMITATIONS ON VALIDITY AND ENFORCEABILITY

Set out below is a summary of certain limitations on the enforceability of the Notes Guarantees and the security interests relating to the Notes, and of certain insolvency law considerations in each of the jurisdictions in which the Company, the Guarantors and the providers of security (as of the date hereof) are organized or incorporated. It is a summary only. Bankruptcy or insolvency proceedings or a similar event could be initiated in any of these jurisdictions and/or in the jurisdiction of organization or incorporation of a future guarantor under the Notes. The application of these various laws in multiple jurisdictions could trigger disputes over which jurisdiction’s law should apply and could adversely affect your ability to enforce your rights and to collect payment in full under the Notes, the Notes Guarantees and any security securing the Notes.

European Union The Company and the Guarantors are organized or incorporated under the laws of EU Member States. Pursuant to Council Regulation (EC) no. 1346/2000 on insolvency proceedings (the “EU Insolvency Regulation”), the court which shall have jurisdiction to open insolvency proceedings in relation to a company is the court of the EU Member State (other than Denmark) where the company concerned has its “center of main interest” (as that term is used in Article 3(1) of the EU Insolvency Regulation). The determination of where any such company has its “center of main interest” is a question of fact on which the courts of the different EU Member States may have differing and even conflicting views.

The term “center of main interest” is not a static concept. Although there is a rebuttable presumption under Article 3(1) of the EU Insolvency Regulation that any such company has its “center of main interests” in the EU Member State in which it has its registered office, Preamble 13 of the EU Insolvency Regulation states that the “center of main interests” of a debtor should correspond to the place where the debtor conducts the administration of its interests on a regular basis and “is therefore ascertainable by third parties.” In that respect, factors such as where board meetings are held, the location where the company conducts the majority of its business and the perception of the company’s creditors as regards to the center of the company’s business operations may all be relevant in the determination of the place where the company has its “center of main interests.”

If the “center of main interest” of a company is and will remain located in the state in which it has its registered office, the main insolvency proceedings in respect of the company under the EU Insolvency Regulation would be commenced in such jurisdiction and accordingly a court in such jurisdiction would be entitled to commence the types of insolvency proceedings referred to in Annex A to the EU Insolvency Regulation with these proceedings being governed by the lex fori concursus (the local laws of the court opening such main insolvency proceedings). Insolvency proceedings opened in one EU Member State under the EU Insolvency Regulation are to be recognized automatically in the other EU Member States (other than Denmark). If the “center of main interests” of a debtor is in one EU Member State (other than Denmark), under Article 3(2) of the EU Insolvency Regulation, the courts of another EU Member State (other than Denmark) have jurisdiction to open “territorial proceedings” only in the event that such debtor has an “establishment” in the territory of such other EU Member State. If the main insolvency proceedings have been opened by the court of the EU Member State where the center of main interest of the debtor is situated, and are outstanding, then the territorial proceedings (entitled “secondary” proceedings) can only be winding-up proceedings. If no such main insolvency proceedings are outstanding, the territorial proceedings could still be opened in another EU Member State (except Denmark) under certain circumstances as set forth in Article 3(4) of the EU Insolvency Regulation. The effects of those territorial proceedings are restricted to the assets of the debtor situated in the territory of such other EU Member State. If the company does not have an establishment in any other EU Member State, no court of any other EU Member State has jurisdiction to open territorial proceedings in respect of such company under the EU Insolvency Regulation.

In the event that any one or more of the Company, the Guarantors or any of their subsidiaries experience financial difficulty, it is not possible to predict with certainty in which jurisdiction or jurisdictions insolvency or similar proceedings would be commenced, or the outcome of such proceedings. Applicable insolvency laws may affect the enforceability of the obligations and the security of the Company and the Guarantors.

247 Norway

Financial assistance

Pursuant to Section 8-7 of the Norwegian Private Limited Companies Act of 1997 No. 44 (Aksjeloven) and the Norwegian Public Limited Companies Act of 1997 No. 45 (Allmennaksjeloven) (together, the “Acts” and each an “Act”) a Norwegian private or public limited liability company is prohibited from providing financial assistance (including placing funds at disposal, granting loans or providing security or guarantees) to physical shareholders, shareholders outside the group of companies that the relevant company belongs to or shareholders that do not have a controlling interest in the company, (other than assistance on ordinary commercial terms in connection with commercial contracts of the Group (kreditt med vanlig løpetid i forbindelse med forretningsavtaler) unless the value of such financial assistance is within the company’s distributable reserves, satisfactory security for repayment of such financial assistance has been established and the financial assistance is provided on ordinary business terms and principles and for fully paid shares.

Pursuant to Section 8-10 of the Acts, a Norwegian private or public limited liability company is prohibited from providing financial assistance (including placing funds at disposal, granting loans or providing security or guarantees) in connection with the acquisition of its shares or in connection with the acquisition of shares in a parent company (including any intermediate parent company) unless the value of such financial assistance is within the company’s distributable reserves, satisfactory security for repayment of such financial assistance has been established and the financial assistance is provided on ordinary business terms and principles and for fully paid shares.

The practical restriction in respect of financial assistance referred to above applies irrespective of whether such parent company is a Norwegian or a foreign company, and there are no general exemptions available except for special cases of real property financing and employee share purchase programs.

The restriction applies not only to the granting of loans, guarantees and security, but also to making assets available and other transfers that are not lawful distributions in accordance with the Acts. The assistance is restricted if made “in connection with the acquisition of shares,” which may also cover financial assistance after completion of the acquisition (such as the refinancing of an acquisition loan facility or the subsequent merger of the target company and the acquiring entity).

This means that in practice a Norwegian guarantor cannot guarantee or provide security for any loans or notes, which have been used to finance the acquisition of the shares of that guarantor or a parent company (including any intermediate parent company) or the Norwegian guarantor.

As a consequence of the above restrictions, the value of a Notes Guarantee and any security provided by a Norwegian guarantor may be reduced to zero to the extent it secures obligations relating to the acquisition of shares in itself or its parent company. By virtue of this limitation, a Guarantor’s obligation under its Notes Guarantee could be significantly less than amounts payable with respect to the Notes, or a Guarantor may have effectively no obligation under its Notes Guarantee. The Notes Guarantees of the Notes to be granted by Guarantors organized under the laws of Norway will be limited by financial assistance, among other limitations, which may substantially limit their value. The Notes Guarantees given by the Guarantors organized under the laws of Norway will be limited to the principal amount of the Notes less an amount of €133.7 million, reflecting the Notes proceeds which will be used to refinance acquisition debt drawn under the Bridge Facility in order to finance the Hurtigruten Acquisition. In addition, a Notes Guarantee or security interest infringing on the limitations set forth in Section 8-10 of the Acts will be void, and any funds paid out will have to be repaid. Finally, an illegal arrangement of this kind may give rise to directors’ liability issues.

The Notes Guarantees and the security interests provided by Norwegian companies the Security Documents will be subject to the limitation language set forth in the Indenture.

Creation and Enforcement of Security

Norwegian law provides for effectively creating security over a range of closely defined asset types (a floating charge may be established over certain types of assets owned by a Norwegian company).

248 As a main rule, a secured creditor does not have a general step-in right to security assets in an enforcement situation and agreements on enforcement cannot validly be entered into prior to the occurrence of an event of default. Instead, enforcement must be sought through the Norwegian courts or the Norwegian enforcement authorities. However, this is different for shares in a Norwegian limited company. If the secured party is a financial institution, the shares are considered financial collateral, and the parties are free (within reasonable limits) to agree on the enforcement process in the share pledge agreement.

Also, for specific security assets, and under certain circumstances, a creditor may take possession or directly enforce its rights upon enforcement. This is the case for security established over receivables (such as trade receivables or bank account claims) whereby the secured party may instruct the relevant debtor to pay the outstanding amounts directly to the secured party instead of the chargor.

The concept of a security trustee, as it is understood under U.S. law, does not exist under Norwegian law. In Norway a security trustee would be considered to be acting as a security agent. In practice in Norway, in an arrangement with a security agent acting on behalf of the secured parties, as these exist from time to time, it is generally recognized under Norwegian law that the security agent will be able to enforce the security on behalf of the secured parties and apply any proceeds to the secured parties. In order to commence any legal action regarding a claim (for enforcement purposes or otherwise) against the debtor the security agent may be required to disclose to the court the identity of the creditors and have the creditors join in or participate as claimants in the proceedings. It has been established by the Norwegian Supreme Court that a bond trustee for an undisclosed number of noteholders can, based on the provisions in the relevant bond agreement or indenture, take legal action against the issuer on behalf of and in lieu of the noteholders without having to disclose the identity of the noteholders. However, the relevant Norwegian court would have to examine the relevant indenture together with the other relevant agreements relating to the Notes and this Offering to determine whether the trustee would be able to act in such capacity.

Insolvency

Norwegian insolvency legislation is regulated by the Norwegian Bankruptcy Act of June 8, 1984 No. 58 (Konkursloven) the “Bankruptcy Act”), which sets forth the various procedures to be followed both in the case of court-administered debt negotiations and bankruptcy proceedings, and the Creditors Recovery Act of June 8, 1984 No. 59 (Dekningsloven) (the “Recovery Act”) containing provisions on, among other things, the priority of claims.

The key features of the Norwegian bankruptcy proceedings are (i) the seizure and subsequent disposal of the debtor’s assets, (ii) the assessment and ranking of claims, (iii) the testing and revocation of transactions (including the securing of existing claims) made prior to bankruptcy, (iv) the handling of the debtor’s contractual relationships and (v) the distribution of funds (if any) in accordance with the priority rules. If the business operations of the bankrupt company are continued, they are in practice continued at the risk of, and only to the extent guaranteed by, the creditors.

Bankruptcy proceedings may be opened provided that the debtor is insolvent. Both the debtor and the creditors (holding or alleging to hold a claim) can petition for bankruptcy.

There are two requirements for a debtor to be deemed to be insolvent: (i) the debtor must be unable to service its debts as they becomes due (the “liquidity test”) and (ii) the debtor’s debts must exceed the sum of its assets and revenue, based on real, not book, values (the “balance sheet test”).

During bankruptcy proceedings the debtor’s assets are controlled by the court-appointed liquidator (usually a lawyer), on behalf of the bankruptcy estate. The main task of the liquidator is to turn all the debtor’s assets into cash in the manner assumed to be most profitable for the estate (the creditors), and then distribute the available cash to the rightful creditors.

In the case of bankruptcy, all of the debtor’s assets will be seized by the bankruptcy estate, and the debtor may not dispose of the seized assets in any way while the bankruptcy proceedings are ongoing. The bankruptcy estate may also seize assets held by third parties, if these assets are acquired from the debtor in an unlawful manner, if the acquisition lacks legal protection, or if the

249 transaction can be reversed according to the Recovery Act. The bankruptcy estate is a separate legal entity, which is authorized to exercise all ownership interests and rights with respect to the seized assets, including but not limited to the realization of assets.

Secured creditors are, in principle, not deemed to be part of the bankruptcy proceedings to the extent the value of the security is sufficient to cover the underlying obligations of the debtor. The secured creditors may, in principle, realize the security, and cover their claims; however, the realization of a number of categories of security during the first six months after the opening of a bankruptcy will be subject to the approval of the bankruptcy estate (the same principles apply to official debt negotiations). The bankruptcy estate has the right, subject to certain conditions being fulfilled, to realize the security and divide the proceeds between the secured creditors and other creditors holding legal rights in the assets.

Furthermore, the bankruptcy estate has a statutory first lien on up to 5% of the estimated value or sales value of all assets secured by the debtor for its own debt or by a third-party for the debtor’s indebtedness, but limited to NOK 602,000 (which is 700 times the ordinary Norwegian court fee of NOK 860). Such statutory lien is not applicable to financial security (cash deposits and financial instruments) established pursuant to the Norwegian Financial Collateral Act no. 17/2004 (the “Financial Collateral Act”) or the Norwegian Liens Act no. 2/1980 section 6-4 (9).

Any under-secured amount (any amount of debt exceeding the value of the assets securing it) will be deemed to be an ordinary (unsecured) trade claim.

In a Norwegian bankruptcy, the creditors will be paid according to the following priority: • secured claims (valid and perfected security covered up to the value of the secured asset, either after the realization by the secured creditor itself or after realization undertaken by the bankruptcy estate); • super priority claims (claims that arise during the bankruptcy proceedings, liquidator’s costs and obligations of the estate); • salary claims (within certain limitations); • tax claims (such as withholding tax and value-added tax within certain limitations); • ordinary unsecured claims (all other claims unless subordinated, including unsecured debt, trade creditor claims and indemnity claims); and • subordinated claims (including interest incurred after the opening of bankruptcy proceedings, claims subordinated by agreement, liquidated damages and penalty claims).

Pursuant to the Recovery Act, the bankruptcy estate may be entitled to set aside or reverse transactions carried out in the three to twelve-month period (and, in respect of transactions in favor of related parties, up to two years) before the opening of the bankruptcy, such as extraordinary payments of certain creditors, security established for existing debt and transactions at an under-value. The bankruptcy estate may also, under certain circumstances, be entitled to set aside or reverse transactions made in bad faith or negligently which in an improper manner increase the debtor’s debt, favor one or more creditors at the expense of others or deprive the debtor of assets which may otherwise have served to cover the creditors’ claims, in which case the time limit for challenges by the estate is increased to ten years.

Solvent Enforcement Enforcement of security normally requires that the pledgee or chargee files an application to the enforcement authorities for the enforcement of the security. Certain types of security may, however, be enforced without the involvement of the enforcement authority or a court, typically security established pursuant to the Financial Collateral Act and charges over monetary claims. A provision granting the secured party such right of enforcement is typically included in any security agreement between the pledgor/chargor and the secured party.

Enforcement of a guarantee claim against a solvent guarantor will in principal require a final, legally binding judgment by a court (unless the guarantee is made as an enforceable promissory note). Thereafter the creditor may apply to the enforcement authorities for enforcement of his or her claim.

250 BOOK-ENTRY, DELIVERY AND FORM

General On the Issue Date, the Notes will be deposited with, and registered in the name of, the nominee of a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”). The Notes sold within the United States to qualified institutional buyers in reliance on Rule 144A will initially be represented by one global note in registered form without interest coupons attached (the “144A Global Notes”). The Notes sold outside the United States in reliance on Regulation S will initially be represented by one global note in registered form without interest coupons attached (the “Regulation S Global Notes”). The 144A Global Notes together with the Regulation S Global Notes will be referred to herein as the “Global Notes.”

After the closing date, book-entry interests will be shown on, and transfers thereof will be effected only through records maintained in book-entry form by Euroclear and/or Clearstream or their respective participants. Ownership of interests in the Global Notes (“book-entry interests”, and each a “book-entry interest”) will be limited to persons that have accounts with Euroclear or Clearstream or persons that may hold interests through those participants. In addition, while the Notes are in global form, holders of book-entry interests will not be considered the owners or “holders” of Notes for any purpose.

So long as the Notes are held in global form, the nominee of the common depositary for Euroclear and/or Clearstream, as applicable, will be considered the sole holder of the Global Notes for all purposes under the Indenture governing the Notes. Accordingly, participants must rely on the procedures of Euroclear and Clearstream, and indirect participants must rely on the procedures of the participants through which they own book-entry interests, to transfer the interests or in order to exercise any rights of holders under the Indenture governing the Notes.

Neither we, the Trustee, the Paying Agent, the Transfer Agent, nor the Registrar, the nominee of the common depositary for Euroclear and Clearstream nor any of our or their respective agents will have any responsibility or be liable for any aspect of the records relating to the book-entry interests.

Issuance of Definitive Registered Notes The book-entry interests will not be held in definitive form. Instead, Euroclear or Clearstream will credit on their respective book-entry registration and transfer systems a participant’s account with the interest beneficially owned by that participant. The laws of some jurisdictions, including some states of the United States, may require that certain purchasers of securities take physical delivery of those securities in definitive form. The foregoing limitations may impair your ability to own, transfer or pledge book-entry interests. In addition, while the Notes are in global form, “holders” of book-entry interests will not be considered the owners or “holders” of Notes for any purpose.

Under the terms of the Indenture governing the Notes, to the extent permitted by Euroclear or Clearstream, owners of book-entry interests will receive definitive Notes in registered form (“Definitive Registered Notes”): • if Euroclear or Clearstream, as applicable, notifies us that it is unwilling or unable to continue to act and we do not appoint a successor within 90 days; or • if the owner of a book-entry interest requests such exchange in writing delivered through Euroclear or Clearstream, as applicable, following an event of default under the Indenture and enforcement action is being taken in respect thereof under the Indenture.

In such an event, the Registrar will issue Definitive Registered Notes, registered in the name or names and issued in any approved denominations, requested by or on behalf of Euroclear and Clearstream, in each case as applicable (in accordance with their respective customary procedures and based upon directions received from participants reflecting the beneficial ownership of the book-entry interests). Those Definitive Registered Notes will bear the restrictive legend described under “Transfer Restrictions” unless that legend is not required at the time by the Indenture governing the Notes or applicable law.

251 Redemption of Global Notes In the event any Global Note (or any portion thereof) is redeemed, Euroclear or Clearstream (or their respective nominees), as applicable, will redeem an equal amount of the book-entry interests in that Global Note from the amount received by it in respect of the redemption of the Global Note. The redemption price payable in connection with the redemption of the book-entry interests will be equal to the amount received by Euroclear or Clearstream, as applicable, in connection with the redemption of the Global Note (or any portion thereof). We understand that, under existing practices of Euroclear and Clearstream if fewer than all of the Notes are to be redeemed at any time, Euroclear and Clearstream will credit their respective participants’ accounts on a proportionate basis (with adjustments to prevent fractions) or by lot or on any other basis that they deem fair and appropriate (including the pool factor); provided, however, that no book-entry interest of less than €100,000 principal amount may be redeemed in part.

Payments on Global Notes Payments of any amounts owing in respect of the Global Notes will be made by us in euro to the Paying Agent. The Paying Agent will, in turn, make payments to Euroclear or Clearstream which will distribute those payments to participants in accordance with its procedures. Under the terms of the Indenture governing the Notes, we and the Trustee will treat the registered holder of the Global Notes as the owner of the Notes for the purpose of receiving payments and for all other purposes. Consequently, neither we nor the Trustee nor any of our or its agents has or will have any responsibility or liability for: • any aspect of the records of (or maintaining, supervising or reviewing the records of) Euroclear, Clearstream or any participant or indirect participant relating to or payments made on account of a book-entry interest; • any other matter relating to the actions and practices of Euroclear, Clearstream or any participants or indirect participants; or • the common depositary, Euroclear, Clearstream or any participant or indirect participant.

Payments by participants to owners of book-entry interests held through participants are the responsibility of those participants, as is the case with securities held for the accounts of customers registered in “street name.”

To the extent permitted by law, we, the Trustee, the Paying Agent, the Transfer Agent and the Registrar shall be entitled to treat the registered holder of any Global Notes as the absolute owner thereof and no person will be liable for treating the registered holder as such. Ownership of the Global Notes will be evidenced through registration from time to time at the registered office of the Company, and such registration is a means of evidencing title to the Notes.

We will not impose any fees or other charges in respect of the Notes; however, owners of the book-entry interests may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear and Clearstream.

Action by Owners of Book-Entry Interests Euroclear and Clearstream have advised us that they will take any action permitted to be taken by a Noteholder only at the direction of one or more participants to whose account the book-entry interests in the Global Notes are credited and only in respect of the portion of the aggregate principal amount of Notes for which the participant or participants has or have given direction. Euroclear and Clearstream will not exercise any discretion in the granting of consents, waivers or the taking of any other action in respect of the Global Notes. However, if there is an event of default under the Notes, each of Euroclear and Clearstream reserves the right to exchange the relevant Global Notes for Definitive Registered Notes in certificated form, and to distribute those Definitive Registered Notes to its participants.

252 Transfers The Global Notes will bear a legend as described under “Transfer Restrictions.” Book-entry interests in the Global Notes will be subject to restrictions on transfer described under “Transfer Restrictions.”

Book-entry interests in the Rule 144A Global Note (“restricted book-entry interests”) may be transferred to a person who takes delivery in the form of book-entry interests in the Regulation S Global Note (“unrestricted book-entry interests”) only upon delivery by the transferor of a written certification (in the form provided in the Indenture governing the Notes) to the effect that the transfer is made in accordance with Regulation S and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

Prior to 40 days after the date of initial issuance of the Notes, any sale or transfer of interests to U.S. persons will not be permitted unless the resale or transfer is made pursuant to Rule 144A.

Unrestricted book-entry interests may be transferred to a person who takes delivery in the form of restricted book-entry interests only upon delivery by the transferor of a written certification (in the form provided in the Indenture governing the Notes) to the effect that the transfer is being made to a person who the transferor reasonably believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

Any book-entry interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a book-entry interest in the other Global Note will, upon transfer, cease to be a book-entry interest in the former Global Note and become a book-entry interest in the other Global Note, and accordingly, will thereafter be subject to all Transfers, if any, and other procedures applicable to book-entry interest in that other Global Note for as long as that person retains the book-entry interest.

Definitive Registered Notes, if any, may be transferred and exchanged for book-entry interests in a Global Note only pursuant to the terms of the Indenture governing the Notes and, if required, only after the transferor first delivers to the trustee a written certificate (in the form provided in the Indenture governing the Notes) to the effect that the transfer will comply with the appropriate Transfers applicable to those Notes.

Global Clearance and Settlement under the Book-Entry System Initial Settlement Initial settlement for the Notes will be made in euro. Book-entry interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional bonds in registered form. Book-entry interests will be credited to the securities custody account of Euroclear and Clearstream holders on the business day following the settlement date against payment for value on the settlement date.

Secondary Market Trading The book-entry interests will trade through participants of Euroclear and Clearstream and will settle in same-day funds. Since the sale determines the place of delivery, it is important to establish at the time of trading of any book-entry interests where both the purchasers’ and seller’s accounts are located to ensure that settlement can be made on the desired value date.

Trustee’s Powers In considering the interests of the holders of Notes, while title to the Notes is registered in the name of a nominee of a clearing system, the Trustee may have regard to, and rely on, any information provided to it by that clearing system as to the identity (either individually or by category) of its accountholders with entitlements to Notes and may consider such interests as if such accountholders were the holders of the Notes.

253 Enforcement For the purposes of enforcement of the provisions of the Indenture against the Trustee, the persons named in a certificate of the holder of the Notes in respect of which a Global Note is issued shall be recognized as the beneficiaries of the trust set out in the Indenture to the extent of the principal amounts of their interests in the Notes set out in the certificate of the holder, as if they were themselves the Noteholders in such principal amounts.

Information Concerning Euroclear and Clearstream We understand the following with respect to Euroclear and Clearstream: • Euroclear and Clearstream hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book- entry changes in accounts of those participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream interface with domestic securities markets. • Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with a Euroclear and Clearstream participant, either directly or indirectly.

254 TRANSFER RESTRICTIONS

The following restrictions will apply to the Notes. You are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the Notes. See “Description of the Notes.”

None of the Notes have been registered under the U.S. Securities Act, and they may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. Accordingly, the Notes are being offered and sold only (A) to qualified institutional buyers in compliance with Rule 144A and (B) outside the United States to non-U.S. persons in accordance with Regulation S. A non-U.S. person shall include any dealer or other professional fiduciary in the United States which is acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or trust) in reliance upon Regulation S. As used in this section, the terms “United States” and “U.S. person” have the meanings given to them in Regulation S.

Each purchaser of Notes will be deemed to have acknowledged, represented and agreed with us, the Initial Purchaser as follows: 1. It is purchasing the Notes for its own account or for an account with respect to which it exercises sole investment discretion and that it and any such account is either (A) a qualified institutional buyer, and is aware that the sale to it is being made in reliance on Rule 144A or (B) at the time the buy order for the Notes is originated, a non-U.S. person that is outside the United States (or a non-U.S. person that is a dealer or other fiduciary as referred to above). 2. It acknowledges that the Notes are being offered for resale in a transaction not involving a public offering in the United States (within the meaning of the U.S. Securities Act) and have not been registered under the U.S. Securities Act or any other securities laws and may not be reoffered, resold, pledged or otherwise transferred within the United States or to, or for the account or benefit of, U.S. persons except as set forth below. 3. It shall not offer, resell, pledge or otherwise transfer the Notes except (A) to the Company or any of its subsidiaries, (B) inside the United States to a qualified institutional buyer in a transaction complying with Rule 144A or (C) outside the United States in an offshore transaction in compliance with Regulation S under the U.S. Securities Act. It acknowledges that the exemption provided by Rule 144 for resale of the Notes is not available. 4. It agrees that it will give to each person to whom it transfers the Notes notice of any restrictions on transfer of such Notes. 5. It is relying on the information contained in this offering memorandum in making its investment decision with respect to the Notes. It acknowledges that neither we nor the Initial Purchaser have made any representation to it with respect to us or the offering or sale of any Notes, other than the information contained in this offering memorandum which has been delivered to it and upon which it is relying in making its investment decision with respect to the Notes. It has had access to such financial and other information concerning us and the Notes as it has deemed necessary in connection with its decision to purchase the Notes, including an opportunity to ask questions of and request information from us and the Initial Purchaser. 6. It acknowledges that prior to any proposed transfer of Notes in certificated form or of beneficial interests in a Global Note (in each case other than pursuant to an effective registration statement), the Noteholder or the holder of beneficial interests in a Global Note, as the case may be, may be required to provide certifications and other documentation relating to the manner of such transfer and submit such certifications and other documentation as provided in the Indenture governing the Notes. 7. It understands that all of the Notes will bear a legend to the following effect unless otherwise agreed by us and the holder thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND, ACCORDINGLY, NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION

255 OR AN APPLICABLE EXEMPTION THEREFROM. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE U.S. SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT IS, IN THE CASE OF NOTES ISSUED IN RELIANCE ON RULE 144A, ONE YEAR, AND IN THE CASE OF NOTES ISSUED UNDER REGULATION S, 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR ANY OF ITS AFFILIATES WAS THE OWNER OF THIS SECURITY, OFFER, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY BUYER THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL AND TO COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND ANY APPLICABLE LOCAL LAWS AND REGULATIONS AND FURTHER SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES,” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE U.S. SECURITIES ACT. 8. It acknowledges that the Trustee will not be required to accept for registration of transfer any Notes acquired by it, except upon presentation of evidence satisfactory to us and the Trustee that the restrictions set forth above have been complied with. 9. It acknowledges that we, the Initial Purchaser and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of the acknowledgements, representations or agreements deemed to have been made by its purchase of the Notes is no longer accurate, it shall promptly notify us and the Initial Purchaser. If it is acquiring the Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole discretion with respect to each such account and it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each account.

Each purchaser and subsequent transferee of a Note will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to acquire and hold the Notes constitutes assets of any employee benefit plan subject to Title I of the U.S. Employee Retirement Income Security Act, as amended (“ERISA”), any plan, individual retirement account or other arrangement subject to Section 4975 of the Code or provisions under any federal, state, local non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Law”), or any entity whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement or (ii) the purchase and holding of the Notes by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation under any applicable Similar Law.

256 PLAN OF DISTRIBUTION

Subject to the terms and conditions set forth in a purchase agreement (the “Purchase Agreement”) to be dated as of the date of this offering memorandum, the Company has agreed to sell to the Initial Purchaser, and the Initial Purchaser has agreed to purchase the Notes from the Company. The Initial Purchaser is Goldman Sachs International.

The Purchase Agreement provides that the obligations of the Initial Purchaser to pay for and accept delivery of the Notes are subject to customary closing conditions.

During the period from the date of this offering memorandum through and including the date that is 90 days thereafter, neither the Company nor any of its subsidiaries or other controlled affiliates will, without the prior written consent of the Initial Purchaser, offer, sell, contract to sell, issue or otherwise dispose of any debt securities, issued or guaranteed by any of the Company or the Guarantors and having a tenor of more than one year (other than the Notes and the Notes Guarantees).

The Initial Purchaser proposes to offer the Notes initially at the offering price set forth on the cover page of this offering memorandum and may include selling group members who might be granted a selling concession. After the initial Offering, the offering price and other selling terms of the Notes may from time to time be changed by the Initial Purchaser without notice. The Initial Purchaser may make offers and sales in the United States through its U.S. broker dealer affiliates.

The Purchase Agreement provides that we have agreed, jointly and severally, to indemnify and hold harmless the Initial Purchaser against certain liabilities, including liabilities under the U.S. Securities Act, or to contribute to payments that they may be required to make in that respect.

The Notes and the Notes Guarantees have not been and will not be registered under the U.S. Securities Act and may not be offered or sold within the United States except to qualified institutional buyers in reliance on Rule 144A under the U.S. Securities Act and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the U.S. Securities Act. Terms used in this paragraph have the meanings given them by Regulation S under the U.S. Securities Act. Resale of the Notes is restricted as described under “Transfer Restrictions.” Each purchaser of the Notes will be deemed to have made acknowledgments, representations and agreements as described under “Transfer Restrictions.”

In addition, until 40 days after the commencement of the Offering, an offer or sale of the Notes within the United States by a broker dealer (whether or not it is participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than pursuant to Rule 144A under the U.S. Securities Act.

Persons who purchase Notes from the Initial Purchaser may be required to pay stamp duty, taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the offering price of the Notes set forth on the cover page of this offering memorandum.

No action has been taken in any jurisdiction, including the United States, by any of the Company, the Guarantors or the Initial Purchaser that would permit a public offering of the Notes or the possession, circulation or distribution of this offering memorandum or any other material relating to the Company, the Guarantors or the Notes in any jurisdiction where action for this purpose is required. This offering memorandum does not constitute an offer to sell or a solicitation of an offer to purchase in any jurisdiction where such offer or solicitation would be unlawful. Persons into whose possession this offering memorandum comes are advised to inform themselves about and to observe any restrictions relating to the Offering, the distribution of this offering memorandum and resale of Notes. See “Transfer Restrictions.”

The Company and each Guarantor have also agreed that they will not at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances in which such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(a)(2) of the U.S. Securities Act or the safe harbor of Rule 144A and Regulation S to cease to be applicable to the offer and sale of the Notes.

257 The Notes are a new issue of securities for which there currently is no market. The Company will make an application to list the Notes on the Official List of the Luxembourg Stock Exchange and to admit the Notes for trading on the Luxembourg Stock Exchange’s Euro MTF market. However, we cannot assure you that the Notes will be admitted to trading or that such admission to trading will be maintained. The Initial Purchaser has advised us that it intends to make a market in the Notes as permitted by applicable law. The Initial Purchaser is not obliged, however, to make a market in the Notes, and any market making activity may be discontinued at any time at the Initial Purchaser’s sole discretion without notice. In addition, any such market making activity will be subject to the limits imposed by the U.S. Securities Act and the U.S. Exchange Act. Accordingly, we cannot assure you that any market for the Notes will develop, or that it will be liquid if it does develop or that you will be able to sell any Notes at a particular time or at a price which will be favorable to you.

The Initial Purchaser may engage in over-allotment, stabilizing transactions, covering transactions and penalty bids in accordance with Regulation M under the U.S. Exchange Act.

Over-allotment involves sales in excess of the relevant Offering size, which creates a short position for the Initial Purchaser. Stabilizing transactions permit bidders to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Penalty bids permit the Initial Purchaser to reclaim a selling concession from a broker/dealer when the Notes originally sold by that broker dealer are purchased in a stabilizing or covering transaction to cover short positions.

These stabilizing transactions, covering transactions and penalty bids may cause the price of the Notes to be higher than it would otherwise be in the absence of these transactions. These transactions, if commenced, may be discontinued at any time.

The Initial Purchaser has represented and agreed that: • it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which section 21(1) of the FSMA does not apply to the Company or any Guarantor; and • it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes, in from or otherwise involving the United Kingdom.

The delivery of the Notes was made against payment on the Notes on February 6, 2015, which was the fifth business day (as such term is used for purposes of Rule 15c6-1 of the U.S. Exchange Act) following the date of pricing of the Notes (this settlement cycle is being referred to as “T + 5”). Under Rule 15c6-1 of the U.S. Exchange Act, trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of this offering memorandum or the next succeeding business day will be required to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to make such trades should consult their own advisors.

The Company has agreed to pay the Initial Purchaser certain customary fees for its services in connection with the Offering and to reimburse it for certain out-of-pocket expenses.

From time to time, the Initial Purchaser and its affiliates have provided, and may in the future provide, investment banking, commercial banking, financial advisory and other services to us and our affiliates for which they have received or may receive customary fees and commissions. The Initial Purchaser or its affiliates are arrangers and lenders under the Bridge Facility Agreement and the Revolving Credit Facility Agreement and have received customary fees in connection therewith. Pursuant to the Refinancing Transactions, the proceeds of the Offering will be used to, among other things, repay in full all outstanding amounts under the Bridge Facility Agreement, all of which are owed to the Initial Purchaser. The Initial Purchaser or its affiliates also may enter into hedging arrangements with the Group in connection with the Refinancing Transactions. See also “Use of Proceeds.”

258 In the ordinary course of their various business activities, the Initial Purchaser and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of any of the Company or the Guarantors, including the Notes.

259 LEGAL MATTERS

Various legal matters will be passed upon for us by Simpson Thacher & Bartlett LLP, as to matters of United States federal and New York state law, and by Advokatfirmaet BA-HR DA and Advokatfirmaet Wiersholm AS, as to the matters of Norwegian law. Certain legal matters will be passed upon for the Initial Purchaser by Cravath, Swaine & Moore LLP, as to matters of United States federal and New York state law, and by Arntzen de Besche Advokatfirma AS, as to the matters of Norwegian law.

260 INDEPENDENT AUDITORS

The consolidated financial statements of Hurtigruten for each of years ended December 31, 2011, 2012 and 2013 included in this offering memorandum have been audited by Ernst & Young AS, independent auditors, as stated in their reports appearing herein. Ernst & Young AS is a member of Den Norske Revisorforening (the Norwegian Institute of Public Accountants).

Our independent auditor is PricewaterhouseCoopers AS. PricewaterhouseCoopers AS has been our independent auditor since April 24, 2014. PricewaterhouseCoopers AS is a member of Den Norske Revisorforening (the Norwegian Institute of Public Accountants).

261 ENFORCEABILITY OF JUDGMENTS

Hurtigruten and the Company are incorporated under the laws of Norway. All our directors and executive officers live outside the United States. Substantially all our and their assets are located outside the United States. As a result, although we have appointed an agent for service of process under the Indenture governing the Notes, it may be difficult for you to serve process on those persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States.

Norway Norwegian courts will, as a general rule, not recognize or enforce judgments rendered by a foreign court unless Norway has entered into a bilateral or multilateral treaty with the relevant country or countries regarding the recognition and enforcement of judgments and subject to the provisions of section 19-16 of the Norwegian Dispute Act of 2005 No. 90 (Tvisteloven) (the “Dispute Act”). Due to the Lugano Conventions on the Recognition of Judgments in Civil and Commercial Matters (the “Lugano Convention”), Norwegian courts will recognize as a valid judgment, and enforce, any final civil judgment obtained in a foreign court in a state which is a party to the Lugano Convention, without a further reexamination of the merits of the case. The exceptions stated in the Lugano Convention itself will apply. The United States is not a party to the Lugano Convention. As of the date of this offering memorandum, there is no such treaty between the United States and Norway in place.

If there is no treaty between Norway and the relevant jurisdiction regarding the recognition and enforcement of judgments, or the relevant treaty is not applicable, a judgment rendered by a foreign court (e.g. the courts of United States) may nevertheless be recognized and enforced in Norway without further reexamination of the merits of the case if the foreign proceedings and the judgment itself fulfill the conditions stated in the Norwegian Enforcement Act of 1992 No. 86 (Tvangsfullbyrdelsesloven) and the Dispute Act. Such conditions can include (without limitation): • the respective parties thereto have submitted the matter in dispute in writing to a court or tribunal in the agreed jurisdiction, • there is no other mandatory venue for such dispute, • such judgment obtained is final and enforceable in and pursuant to the laws of the country where it was issued, and • the acceptance and enforcement of the judgment shall not be in conflict with Norwegian mandatory laws or public policy.

Where a Norwegian party has accepted the jurisdiction of a foreign court in a written agreement, any judgment rendered pursuant to that agreement will be enforceable in Norway in accordance with the provisions of sections 4-6 and 19-16 of the Dispute Act.

262 WHERE YOU CAN FIND MORE INFORMATION

Each purchaser of the Notes from the Initial Purchaser will be furnished with a copy of this offering memorandum and any related amendments or supplements to this offering memorandum. Each person receiving this offering memorandum and any related amendments or supplements to this offering memorandum acknowledges that: (1) such person has been afforded an opportunity to request from us, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein; (2) such person has not relied on the Initial Purchaser or any person affiliated with the Initial Purchaser in connection with its investigation of the accuracy of such information or its investment decision; and (3) except as provided pursuant to (1) above, no person has been authorized to give any information or to make any representation concerning the Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by us and the Initial Purchaser.

For so long as the Notes are “restricted securities” within the meaning of the Rule 144(a)(3) under the U.S. Securities Act, we will, during any period in which we are neither subject to the reporting requirements of Section 13 or 15(d) of the U.S. Exchange Act, nor exempt from the reporting requirements under Rule 12g3-2(b) of the U.S. Exchange Act, provide to the holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner, in each case upon the written request of such holder, beneficial owner or prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the U.S. Securities Act.

We are not currently subject to the periodic reporting and other information requirements of the U.S. Exchange Act. However, pursuant to the Indenture governing the Notes and for so long as the Notes are outstanding, we will furnish periodic information to Noteholders. See “Description of the Notes—Certain Covenants—Reports.”

For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF market and the rules of that exchange so require, copies of the Company’s organizational documents and the Indenture governing the Notes and our most recent consolidated financial statements published by us may be inspected and obtained at the office of the Registrar in Luxembourg. See “Listing and General Information.”

263 LISTING AND GENERAL INFORMATION Listing Application was to list the Notes sold pursuant to Regulation S and Rule 144A on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF market of the Luxembourg Stock Exchange (the “Euro MTF”). For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and are admitted to trading on the Euro MTF market of that exchange and the rules and regulations of the Luxembourg Stock Exchange so require, the Company will publish or make available any notices (including financial notices) to the public in written form at the places indicated by announcements to be published in a leading newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or on the website of the Luxembourg Stock Exchange (www.bourse.lu)or by any other means considered equivalent by the Luxembourg Stock Exchange. If and for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and are admitted to trading on the Euro MTF and the rules of the Luxembourg Stock Exchange so require, copies of the following documents may be obtained at the specified office of the listing agent in Luxembourg and the registered office of the Company during normal business hours on any weekday (Saturdays, Sundays and public holidays excluded): • the organizational documents of the Company and each of the Guarantors; • the financial statements included in this offering memorandum; • our most recent audited consolidated financial information, any interim financial information published by us and the most recent audited unconsolidated financial information published by the Company; • the Indenture (which include the Notes Guarantees and the form of the Notes); • the Intercreditor Agreement; and • the Security Documents, which create the security interests as will be contemplated by the Indenture. The Company has appointed Société Générale Securities Services Luxembourg S.A. as Luxembourg listing agent, Elavon Financial Services Limited, UK Branch as paying and transfer agent, and Elavon Financial Services Limited as registrar, inter alia, to make payments on and register transfers of the Notes. The Company reserves the right to change these appointments in accordance with the terms of the Indenture. Application may also be made to the Euro MTF market to have the Notes removed from listing on the Euro MTF market, including if necessary to avoid any new withholding taxes in connection with the listing. The Company accepts responsibility for the information contained in this offering memorandum. The Company declares that, having taken all reasonable care to ensure that such is the case, to the best of its knowledge, the information contained in this offering memorandum is in accordance with the facts and does not omit anything likely to affect its import. This offering memorandum may only be used for the purposes for which it has been published.

Clearing Information The Notes sold pursuant to Regulation S under the U.S. Securities Act and the Notes sold pursuant to Rule 144A under the U.S. Securities Act have been accepted for clearance through the facilities of Euroclear and Clearstream under common codes 118032403 and 118032543, respectively. The international securities identification number for the Notes sold pursuant to Regulation S under the U.S. Securities Act is XS1180324037 and the international securities identification number for the Notes sold pursuant to Rule 144A under the U.S. Securities Act is XS1180325430.

Legal Information Company The Company is a private limited company incorporated under the laws of Norway on September 1, 2014. The Company has a share capital of NOK 90,000 comprised of 30 ordinary shares with a par value of NOK 3,000 each, each being fully paid. The Company’s registered office is at Advokatfirmaet BA-HR DA, Tjuvholmen allé 16, NO-0252, Oslo, Norway. The Company is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) under business enterprise number 914 148 324.

264 The Company has obtained all necessary consents, approvals and authorizations in the jurisdiction of its incorporation in connection with the issuance and performance of the Notes. The creation and issuance of the Notes was authorized by the Company’s board of directors on January 9, 2014.

Guarantors The Guarantors have the following corporate information:

Hurtigruten ASA, incorporated pursuant to the Norwegian Public Limited Liability Companies Act, has an issued share capital of NOK 420,259,163 comprised of 420,259,163 ordinary shares of NOK 1.00 nominal value each. Hurtigruten was incorporated on July 24, 1912 and its registered office is at Fredrik Langes gate 14, 9008 Tromsø, Norway. Hurtigruten is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) with business enterprise number 914 904 633 and is an operating company operating in the cruise, transport and travel industry.

Hurtigruten Pluss AS is a private limited company with an issued share capital of NOK 200,000 comprised of 200 ordinary shares of NOK 1,000 nominal value each. Hurtigruten Pluss AS was incorporated on May 20, 1995 and its registered office is at Fredrik Langes gate 14, 9008 Tromsø, Norway. Hurtigruten Pluss AS is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) with business enterprise number 974 526 689 and is an operating company operating in the cruise, transport and travel industry.

Hurtigruten Sjø AS is a private limited company with an issued share capital of NOK 45,000,000 comprised of 100 ordinary shares of NOK 450,000 nominal value each. Hurtigruten Sjø AS was incorporated on August 25, 2003 and its registered office is at Havneveien 5, 9900 Kirkenes, Norway. Hurtigruten Sjø AS is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) with business enterprise number 985 979 456 and is an operating company operating in the cruise, transport and travel industry.

Ingeniør G. Paulsen AS is a private limited company with an issued share capital of NOK 5,000,000 comprised of 5,000 ordinary shares of NOK 1,000 nominal value each. Ingeniør G. Paulsen AS was incorporated on April 1, 1998 and its registered office is at Sjøområdet, 9170 Longyearbyen, Norway. Ingeniør G. Paulsen AS is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) with business enterprise number 979 759 614 and is an operating company operating in the travel industry.

Spitsbergen Travel AS is a private limited company with an issued share capital of NOK 17,600,000 comprised of 17,600 ordinary shares of NOK 1,000 nominal value each. Spitsbergen Travel AS was incorporated on December 2, 1988 and its registered office is at Polarsenteret, 9170 Longyearbyen, Norway. Spitsbergen Travel AS is registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) with business enterprise number 951 291 579 and an operating company operating in the travel industry.

General Information Other than as disclosed in this offering memorandum: • there has been no material adverse change in the prospects of Hurtigruten since September 30, 2014, the date of its last unaudited consolidated financial information; • there has been no material adverse change in the Company’s financial position since its date of incorporation other than in connection with the Refinancing Transactions and the Hurtigruten Acquisition; and • neither the Company, Hurtigruten, nor any of the Company’s other direct or indirect subsidiaries has been involved in any litigation, administrative proceeding or arbitration relating to claims or amounts which are material in the context of the issuance of the Notes, and, so far as we are aware, no such litigation, administrative proceeding or arbitration is pending or threatened.

265 For the avoidance of doubt, any website referred to in this offering memorandum and the information on the referenced website does not form part of this offering memorandum prepared in connection with the proposed offering of the Notes.

Material Contracts Contracts not entered into in the ordinary course of the Company’s business that could result in any member of the Group being under an obligation or entitlement that is material to the Company’s ability to meet its obligations to Noteholders in respect of the Notes are summarized in “Related Party Transactions,”“Description of the Notes” and “Description of Other Indebtedness.”

266 INDEX TO FINANCIAL STATEMENTS

Page Hurtigruten ASA unaudited condensed consolidated interim financial statements as of and for the nine months ended September 30, 2014 Consolidated income statement ...... F-3 Consolidated statement of comprehensive income ...... F-4 Consolidated balance sheet ...... F-5 Consolidated statement of changes in equity ...... F-6 Consolidated cash flow statement ...... F-7 Notes to the accounts ...... F-9 Year ended December 31, 2013: Independent auditors’ report ...... F-16 Hurtigruten ASA audited consolidated financial statements as of and for the year ended December 31, 2013 Consolidated income statement ...... F-18 Consolidated statement of comprehensive income ...... F-19 Consolidated balance sheet ...... F-20 Consolidated statement of changes in equity ...... F-22 Consolidated cash flow statement ...... F-24 Notes to the financial statements ...... F-25 Hurtigruten ASA audited stand-alone financial statements as of and for the year ended December 31, 2013 Income statement ...... F-90 Statement of comprehensive income ...... F-91 Balance sheet ...... F-92 Statement of changes in equity ...... F-93 Cash flow statement ...... F-94 Notes to the financial statements ...... F-95 Year ended December 31, 2012: Independent auditors’ report ...... F-125 Hurtigruten ASA audited consolidated financial statements as of and for the year ended December 31, 2012 Consolidated income statement ...... F-127 Consolidated statement of comprehensive income ...... F-128 Consolidated balance sheet ...... F-129 Consolidated statement of changes in equity ...... F-131 Consolidated cash flow statement ...... F-132 Notes to the financial statements ...... F-133 Hurtigruten ASA audited stand-alone financial statements as of and for the year ended December 31, 2012 Income statement ...... F-189 Statement of comprehensive income ...... F-190 Balance sheet ...... F-191 Statement of changes in equity ...... F-192 Cash flow statement ...... F-193 Notes to the financial statements ...... F-194 Year ended December 31, 2011: Independent auditors’ report ...... F-217 Hurtigruten ASA audited consolidated financial statements as of and for the year ended December 31, 2011 Consolidated income statement ...... F-219 Consolidated statement of comprehensive income ...... F-220 Consolidated balance sheet ...... F-221 Consolidated statement of changes in equity ...... F-223 Consolidated cash flow statement ...... F-224 Notes to the financial statements ...... F-225

F-1 Page Hurtigruten ASA audited stand-alone financial statements as of and for the year ended December 31, 2011 Income statement ...... F-284 Statement of comprehensive income ...... F-285 Balance sheet ...... F-286 Statement of changes in equity ...... F-287 Cash flow statement ...... F-288 Notes to the financial statements ...... F-289 Opening balance for Silk Bidco AS as of September 1, 2014 ...... F-315

F-2 HURTIGRUTEN GROUP

Consolidated income statement

Note Year to date 2014 Year to date 2013 Unaudited (NOK 1,000) Operating revenues ...... 2,452,054 2,167,950 Contractual revenues ...... 566,306 580,415 Total revenues ...... 3,018,360 2,748,365 Payroll costs ...... 668,555 624,003 Depreciation and impairment ...... 291,157 282,058 Other operating costs ...... 4 1,637,097 1,513,518 Other losses/(gains)—net ...... (520) (7,326) Operating profit/(loss) ...... 422,070 336,113 Operating profit/(loss) before depreciation and impairment (EBITDA) ...... 713,227 618,170 Finance income ...... 49,934 67,346 Finance expenses ...... (205,977) (243,354) Finance expenses—net ...... (156,043) (176,008) Share of profit/(loss) of associates ...... 352 646 Profit/(loss) before income tax from continuing operations ...... 266,379 160,751 Income tax expense from continuing operations ...... 29,735 23,112 Profit/(loss) from continuing operations ...... 236,644 137,638 Profit/(loss) from discontinued operations ...... 2,6 10,132 1,555 Profit/(loss) for the period ...... 246,776 139,194 Attributable to non-controlling interests ...... 24,369 (4,611) Earnings per share for profit attributable to the owners of the parent Earnings per share (NOK): Continuing operations ...... 0.51 0.34 Discontinued operations ...... 0.02 — Total ...... 0.53 0.34 Diluted earnings per share (NOK): ...... Continuing operations ...... 0.51 0.34 Discontinued operations ...... 0.02 — Total ...... 0.53 0.34

F-3 Consolidated statement of comprehensive income

Note Year to date 2014 Year to date 2013 Unaudited (NOK 1,000) Profit/(loss) for the period ...... 246,776 139,194 Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent periods Actuarial gain/loss on post employment benefit obligations ...... — 3,818 Total ...... — 3,818 Other comprehensive income to be reclassified to profit or loss in subsequent periods Cash flow hedges ...... 24,808 17,783 Currency translation differences ...... (8,737) 6,376 Total ...... 16,071 24,159 Other comprehensive income, net of tax ...... 16,071 27,977 Total comprehensive income, net of tax ...... 262,848 167,171 Attributable to: Owners of the parent ...... 238,479 171,690 Non-controlling interests ...... 24,369 (4,519) Total comprehensive income ...... 262,848 167,171

F-4 Consolidated balance sheet

Note 30.09.2014 01.01.2014 01.01.2013 Unaudited (NOK 1,000) Assets Property, plant and equipment ...... 3,331,467 3,539,306 3,748,690 Intangible assets ...... 379,870 373,911 359,130 Investments in associates ...... 2,245 26,758 36,552 Deferred income tax assets ...... 166,432 166,576 169,926 Derivative financial instruments ...... 8 — —— Trade and other receivables ...... 56,049 12,874 30,520 Total non-current assets ...... 3,936,062 4,119,426 4,344,817 Inventories ...... 92,469 85,477 77,048 Trade and other receivables ...... 115,306 128,020 293,762 Derivative financial instruments ...... 8 21,247 12,932 5,717 Cash and cash equivalents ...... 442,273 404,442 548,847 671,295 630,871 925,374 Assets of disposal group classified as held-for-sale ...... 2,6 — 214,444 — Total current assets ...... 671,295 845,315 925,374 Total assets ...... 4,607,357 4,964,741 5,270,191 Equity and liabilities Paid-in equity ...... 1,154,588 1,154,588 1,154,588 Other paid-in equity ...... 83,014 66,943 58,888 Retained earnings/(uncovered loss) ...... (144,357) (366,764) (393,250) Sum of capital and reserves attributable to owners of the parent ...... 1,093,246 854,767 820,228 Non-controlling interests ...... 201,288 263,784 346,327 Total equity ...... 1,294,534 1,118,552 1,166,555 Borrowings ...... 7 2,267,428 2,483,014 2,864,902 Other non-current liabilities ...... 34,837 10,046 81 Derivative financial instruments ...... 8 57,948 59,752 60,778 Deferred income tax liabilities ...... 1,179 1,180 8,105 Retirement benefit obligations ...... 24,665 28,038 46,303 Provisions for other liabilities and charges ...... 4,992 5,117 5,283 Total non-current liabilities ...... 2,391,049 2,587,148 2,985,454 Trade and other payables ...... 572,375 636,276 730,981 Current income tax liabilities ...... 30,543 4,984 10,264 Borrowings ...... 281,572 474,526 344,552 Derivative financial instruments ...... 8 28,276 52,000 21,049 Provisions for other liabilities and charges ...... 9,008 1,302 11,335 921,774 1,169,088 1,118,182 Liabilities of disposal group classified as held-for-sale ...... 2,6 — 89,954 — Total current liabilities ...... 921,774 1,259,042 1,118,182 Total liabilities ...... 3,312,823 3,846,190 4,103,636 Total equity and liabilities ...... 4,607,357 4,964,742 5,270,191

F-5 Consolidated statement of changes in equity

Other Share equity not capital recognised Total including in the paid-in and treasury Share income Retained retained Non-controlling Total Note shares premium statement earnings capital interests equity Unaudited (NOK 1,000) Balance at 1 January 2013 ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555 Profit/(loss) for the period ...... — — — 31,283 31,283 (5,861) 25,422 Other comprehensive income ...... Currency translation differences ...... — — 12,335 — 12,335 — 12,335 Cash flow hedges, net of tax ...... — — (4,281) — (4,281) 133 (4,148) Actuarial gain/loss on retirement benefit obligations, net of tax ...... — — — (4,797) (4,797) (3,416) (8,213) Other comprehensive income ...... — — 8,054 (4,797) 3,257 (3,283) (26) Total comprehensive income ...... — — 8,054 26,486 34,540 (9,144) 25,396 Transactions with owners ...... Distributions to owners ...... — — — — — (73,400) (73,400) Total transactions with owners ...... — — — — — (73,400) (73,400) Balance at 31 December 2013 ...... 419,966 734,622 66,943 (366,764) 854,767 263,784 1,118,551 Balance at 1 January 2014 ...... 419,966 734,622 66,943 (366,764) 854,767 263,784 1,118,551 Profit/(loss) for the period ...... — — — 222,407 222,407 24,369 246,776 Other comprehensive income ...... Currency translation differences ...... — — (8,737) — (8,737) — (8,737) Cash flow hedges, net of tax ...... — — 24,808 — 24,808 — 24,808 Other comprehensive income ...... — — 16,071 — 16,071 — 16,071 Total comprehensive income ...... — — 16,071 222,407 238,478 24,369 262,848 Transactions with owners ...... Disposal subsidiaries and non controlling interests ...... — — — — — (42,244) (42,244) Distributions to owners ...... — — — — — (44,622) (44,622) Total transactions with owners ...... — — — — — (86,866) (86,866) Balance at 30 September 2014 ...... 419,966 734,622 83,014 (144,357) 1,093,246 201,288 1,294,534

F-6 Consolidated cash flow statement

Year to date 2014 Year to date 2013 Unaudited (NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax from continuing and discontinued operations ...... 281,319 162,306 Adjusted for: Depreciation and impairment on continuing and discontinued operations ...... 307,844 302,598 Other losses/gains—net ...... (12,368) (7,423) Unrealised exchange losses/gains ...... (674) 5,769 Unrealised losses/gains on derivatives held for trading purposes ..... (8,671) 19,954 Dividends received ...... (724) (617) Interest expenses ...... 153,703 175,822 Share of profit/loss of associates ...... (352) (646) Depreciation on financial investments ...... — 225 Difference between expensed pension and payments ...... (1,706) 25,404 Change in working capital: ...... Inventories ...... (6,993) 2,644 Trade and other receivables ...... 25,457 35,053 Net adjustments on financial assets through income statement ...... 5,096 (8,111) Trade and other payables ...... (48,317) (85,432) Cash flows from operations ...... 693,615 627,544 Interest paid ...... (154,761) (174,431) Income tax paid ...... (4,177) (7,751) Net cash flows from operating activities ...... 534,678 445,363 Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... (116,869) (160,015) Net proceeds from sale of PPE ...... 66,710 24,487 Purchases of intangible assets ...... (35,036) (33,265) Loan to associates ...... 225 — Net proceeds from sale of shares and sale of business ...... (28,097) 15,450 Dividends received and payments from associates ...... 24,956 617 Change in restricted funds ...... 25,295 19,343 Net cash flows from (used in) investing activities ...... (62,815) (133,384) Cash flows from financing activities Repayment of borrowings ...... (422,613) (318,909) Dividend paid to non-controlling interests ...... (44,622) — Net cash flows used in financing activities ...... (467,235) (318,909) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ` Net (decrease)/increase in cash, cash equivalents and bank overdrafts .... 4,628 (6,929) Cash, cash equivalents and bank overdrafts at beginning of period ...... 383,216 465,794 Exchange gains/(losses) on cash and bank overdrafts ...... 2,733 8,313 Cash, cash equivalents and bank overdrafts at end of period ...... 390,578 467,178

F-7 HURTIGRUTEN NORWEGIAN SEGMENT INFORMATION COAST MS FRAM SPITSBERGEN Year to date Year to date Year to date Year to date Year to date Year to date 2014 2013 2014 2013 2014 2013 Unaudited (NOK 1,000) Operating revenues ...... 2,007,891 1,804,643 272,560 220,797 178,142 154,894 Contractual revenues ...... 566,306 580,415 — — — — Total revenues ...... 2,574,197 2,385,058 272,560 220,797 178,142 154,894 Payroll costs ...... 593,074 553,274 33,873 31,872 41,608 39,140 Depreciation and impairment ...... 239,038 229,542 19,261 16,414 7,974 8,697 Other operating costs ...... 1,403,300 1,308,072 142,260 131,808 98,534 83,164 Other losses/(gains)—net ...... (4) — — — (42) (225) Operating profit/(loss) ...... 338,789 294,170 77,167 40,702 30,069 24,119 Finance expenses—net ...... (122,205) (148,071) (22,837) (24,795) 485 531 Share of profit/(loss) of associates .... — — — — 500 — Profit/(loss) before income tax from continuing operations ...... 216,583 146,100 54,330 15,907 31,054 24,649 Profit/(loss) before income tax from discontinued operations ...... — — — — — — Profit/(loss) before income tax ..... 216,583 146,100 54,330 15,907 31,054 24,649 Segment profit/(loss) Operating profit/(loss) before depreciation and impairment (EBITDA) ...... 577,826 523,713 96,427 57,116 38,043 32,815

SEGMENT INFORMATION OTHER BUSINESS ELIMINATIONS HURTIGRUTEN GROUP Year to date Year to date Year to date Year to date Year to date Year to date 2014 2013 2014 2013 2014 2013 Unaudited (NOK 1,000) Operating revenues ...... 933 1,313 (7,473) (13,697) 2,452,054 2,167,950 Contractual revenues ...... — — — — 566,306 580,415 Total revenues ...... 933 1,313 (7,473) (13,697) 3,018,360 2,748,365 Payroll costs ...... — (284) — — 668,555 624,003 Depreciation and impairment ...... 24,884 27,405 — — 291,157 282,058 Other operating costs ...... 477 4,171 (7,473) (13,697) 1,637,097 1,513,518 Other losses/(gains)—net ...... (474) (7,101) — — (520) (7,326) Operating profit/(loss) ...... (23,954) (22,878) — — 422,070 336,113 Finance expenses—net ...... (11,486) (3,673) — — (156,043) (176,008) Share of profit/(loss) of associates .... (148) 646 — — 352 646 Profit/(loss) before income tax from continuing operations ...... (35,588) (25,906) — — 266,379 160,751 Profit/(loss) before income tax from discontinued operations ...... 14,940 1,555 — — 14,940 1,555 Profit/(loss) before income tax ..... (20,648) (24,351) — — 281,319 162,306 Segment profit/(loss) Operating profit/(loss) before depreciation and impairment (EBITDA) ...... 930 4,527 — — 713,227 618,170

F-8 Notes to the accounts

Unaudited

Note 1 Accounting policies The interim financial report for the group includes Hurtigruten ASA with subsidiaries and associated companies. The interim financial report does not include all information which will appear in the annual financial report which is prepared in accordance with all effective IFRS-standards, and should therefore be read in connection with the annual report for 2013.

The annual report 2013 for the company can be obtained through a request to the company’s main office or on the website www.hurtigruten.com. The accounting policies applied in the interim financial reporting are described in the note of accounting policies in the annual report for 2013.

In the preparation of the interim financial report, estimates and assumptions have been applied, which has affected assets, liabilities, revenues and costs. Actual figures can deviate from estimates applied.

Note 2 Restatement of earlier reported interim periods Discontinued operations As part of the company’s plan to divest non-strategic assets, the bus business was classified as held-for-sale and discontinued operations at 31 December 2013. Comparative figures in the income statement for 30 September 2013 have been restated.

Note 3 Financial risk management There are potential risks and uncertainties that can affect the operation of the companies in the group. This may lead to actual results deviating from expected and historical results. Information concerning the most important risks and uncertainties is disclosed in the latest annual report published on the company website www.hurtigruten.com. The group’s most important risks and uncertainties are described in the directors’ report and in note 4 to the consolidated accounts.

There have been no material changes in the financial risk management since the annual report for 2013 was published.

Note 4 Contingencies Membership in the industrial fund for nitrogen oxides Hurtigruten ASA is a member of the Confederation of Norwegian Enterprise‘s (NHO) nitrogen oxide (NOx) Fund. The main objective of the Environmental Agreement concerning reductions of NOx and the NHO‘s NOx Fund is to reduce emissions of nitrogen oxide. The Fund is a joint venture to which affiliated businesses can apply for support for emission-reducing measures. Payment to the Fund replaces the nitrogen oxide tax for affiliated businesses.

The Environmental Agreement concerning reductions in NOx for 2011–2017 was signed on 14 December 2010 by 15 business organisations and the Ministry of the Environment. The agreement is a prolongation of the Environmental Agreement concerning reductions in NOx for the period 2008–2010. The Environmental Agreement and the additional declaration form the basis for work performed by the NHO‘s NOx Fund. The signatories of the Environmental Agreement for the period 2011–2017 have undertaken to reduce their overall NOx emissions by 16 000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, which can be broken down into 3 000 tonnes in 2011, 2 000 tonnes in 2012, 4 000 tonnes in 2013 and 2014, 4 000 tonnes in 2015 and 2016 and 3 000 tonnes in 2017. The Environmental Agreement concerning reductions in NOx for 2008–2012 was satisfied through a total reduction of 18 000 tonnes of NOx each year. The Fund has also reported that the targets for 2011 and 2012 were satisfied and that the achieved NOx reduction to meet the 2013 and 2014 commitments are on track.

F-9 The Norwegian Environment Agency monitors whether individual reduction targets have been achieved. Deviations of more than 10 per cent of reduction targets trigger a collective fine, under which businesses must pay the nitrogen oxide tax for the pro rata share of the target that has not been satisfied. However, the businesses will never pay more than the official government rate for nitrogen oxide tax.

Both Environmental Agreements have been approved by the EFTA Surveillance Authority (ESA). The 2011–2017 Environmental Agreement was approved by the ESA on 19 May 2011, and the 2008–2010 Environmental Agreement was approved on 16 July 2008.

NOK 11,5 million in nitrogen dioxide tax was recognised in Hurtigruten‘s consolidated financial statements as of 30. September 2014 (as of 30 September 2013: NOK 11,6 million).

Dispute with Stranda Hamnevesen port authority In summer 2013 Stranda Hamnevesen instigated legal proceedings against Hurtigruten ASA concerning non-payment of passenger handling and harbour-related fees in the total amount of NOK 4 million. On 6 January 2014 Sunnmøre District Court ruled that Stranda could not claim either docking fees or passenger-handling fees from Hurtigruten for 2012 and 2013. The ruling is not legally binding as Stranda has appealed the case. However, the case is of significance in that it is the first case dealing with the application of the new Harbour Act, and will be of particular importance with regard to the establishment of legal principles. The appeal was heard in the High Court in mid-October, with expected ruling in November.

Note 5 Information about operating segments The group’s operating segments comprise the following three product areas: Hurtigruten Norwegian coast, MS Fram and Spitsbergen. Activities which do not naturally fall within these areas are combined in Other business.

The operating segments are reported in the same way as the internal reporting to the company’s board and executive management.

Note 6 Assets classified as held-for-sale and discontinued operations Assets and liabilities classified as held-for-sale are presented on separate lines on the balance sheet under current assets and current liabilities respectively. Previous periods are not reclassified on the balance sheet, according to the IFRSs.

Discontinued operations are a part of the business which is either sold or classified as held-for-sale. Profit or loss for discontinued operations is reported separately from income from continuing operations. Results from the previous period for discontinued operations are reclassified in order to get comparable numbers.

The group’s bus business is classified as held-for-sale and discontinued operations at 30 September 2014. Hurtigruten reported in a stock exchange announcement of 8 July that it had entered into an agreement with Boreal Transport Nord AS on the transfer of Hurtigruten ASA’s 71.3 per cent shareholding in AS TIRB. The transaction was completed on the 4 September with a loss of NOK 3 million that is included in result for discontinued operations. The divestment is a part of the company’s plan to divest non-strategic assets.

F-10 Assets held-for-sale Assets held-for-sale, and liabilities on assets held-for-sale appears as follows:

30.09.2014 31.12.2013 (NOK 1,000) Assets Property, plant and equipment ...... — 142,459 Investments in associates ...... — 2,640 Deferred income tax assets ...... — 467 Trade and other receivables ...... — 1,105 Inventories ...... — 909 Trade and other receivables ...... — 11,099 Cash and cash equivalents ...... — 55,765 Total assets ...... — 214,444 Borrowings ...... — 26,058 Other non-current liabilities ...... — 82 Derivative financial instruments ...... — 1,439 Retirement benefit obligations ...... — 24,375 Trade and other payables ...... — 29,099 Borrowings ...... — 8,901 Total liabilities ...... — 89,954

Discontinued operations Income statement for discontinued operations appears as follows:

Year to date Year to date 2014 2013 (NOK 1,000) Operating revenues ...... 133,054 143,134 Payroll costs ...... 60,618 69,157 Depreciation and impairment losses ...... 16,687 20,540 Other operating costs ...... 51,326 50,943 Other losses/(gains)—net ...... (14,717) — Operating profit/(loss) ...... 19,140 2,494 Finance income ...... 396 1,189 Finance expenses ...... (4,596) (2,128) Finance expenses—net ...... (4,200) (939) Profit/(loss) before income tax ...... 14,940 1,555 Income tax expense ...... 4,808 — Profit/(loss) for the period ...... 10,132 1,555

Net cash flow for discontinued operations appears as follows:

Year to date Year to date 2014 2013 (NOK 1,000) Net cash flow from (used in) operating activities ...... 12,886 5,572 Net cash flow from (used in) investing activities ...... (25,935) (7,827) Net cash flow from (used in) financing activities ...... (4,850) (6,076) Total net cash flow ...... (17,900) (8,331)

F-11 Note 7 Proceeds from and payments of borrowings In December 2013 the parent utilised a current credit facility of NOK 150 million. This credit facility has been repaid in full at 30 June 2014.

Note 8 Financial instruments by category and assessment of fair value The following principles have been applied for the subsequent measurement of financial assets and liabilities at 30 September 2014:

Held for Derivatives Other Loans and trading used for financial receivables Purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Derivative financial instruments ...... — — — — — Non-current receivables ...... 45,448 — — — 45,448 Shares in other companies ...... — 7,916 — — 7,916 Financial assets—current Trade and other receivables ...... 115,306 — — — 115,306 Derivative financial instruments ...... — 3,638 17,609 — 21,247 Cash and cash equivalents ...... 421,068 21,205 — — 442,273 Financial liabilities—non-current Borrowings ...... — — — 2,267,428 2,267,428 Derivative financial instruments ...... — — 57,948 — 57,948 Financial liabilities—current Trade and other payables ...... — — — 518,471 518,471 Borrowings ...... — — — 281,572 281,572 Derivative financial instruments ...... — 7,274 21,001 — 28,276

The following principles have been applied for the subsequent measurement of financial assets and liabilities at 31 December 2013:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Non-current receivables ...... 904 — — — 904 Shares in other companies ...... — 9,021 — — 9,021 Of which shares in other companies classified as held-for-sale (note 6) ...... — (1,105) — — (1,105) Financial assets—current Trade and other receivables ...... 139,119 — — — 139,119 Derivative financial instruments ...... — — 12,932 — 12,932 Cash and cash equivalents ...... 443,661 16,546 — — 460,207 Of which trade and other receivables classified as held-for-sale (note 6) ...... (11,099) — — — (11,099) Of which cash and cash equivalents classified as held-for-sale (note 6) . . (55,765) — — — (55,765) Financial liabilities—non-current Borrowings ...... — — — 2,509,072 2,509,072 Derivative financial instruments ...... — — 61,191 — 61,191 Of which borrowings classified as held-for-sale (note 6) ...... — — — (26,058) (26,058) Of which derivative financial instruments classified as held-for-sale (note 6)...... — — (1,439) — (1,439) Financial liabilities—current Trade and other payables ...... — — — 635,028 635,028 Borrowings ...... — — — — — Derivative financial instruments ...... — 12,671 39,329 — 52,000 Of which trade and other payables classified as held-for-sale ...... — — — (25,052) (25,052) Of which borrowings classified as held-for-sale (note 6) ...... — — — (8,901) (8,901)

F-12 Assessment of fair value The level hierarchy used for the measurement of fair value is based on the following categories: • Listed price in an active market for an identical asset or liability (Level 1) • Valuation based on observable factors, either directly (price) or indirectly (derived from prices), other than listed price (used in Level 1) for the asset or liability (Level 2) • Valuation based on factors not obtained from observable markets (unobservable assumptions) (Level 3)

The following table presents the group’s assets and liabilities measured at fair value at 30 September 2014:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... — 17,609 — 17,609 Derivatives held for trading purposes ...... — 3,638 — 3,638 Shares in other companies ...... — — 7,916 7,916 Other securities ...... 21,205 — — 21,205 Total assets ...... 21,205 21,247 7,916 50,367 Liabilities Derivatives used for hedging ...... — 78,949 — 78,949 Derivatives held for trading purposes ...... — 7,274 — 7,274 Total liabilities ...... — 86,224 — 86,224

The following table presents the group’s assets and liabilities measured at fair value at 31 December 2013:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... 1,815 11,117 — 12,932 Derivatives held for trading purposes ...... — — — — Shares in other companies ...... — — 9,021 9,021 Other securities ...... 16,546 — — 16,546 Total assets ...... 18,360 11,117 9,021 38,498 Liabilities Derivatives used for hedging ...... — 100,519 — 100,519 Derivatives held for trading purposes ...... — 12,671 — 12,671 Total liabilities ...... — 113,191 — 113,191

There were no transfers between Level 1 and 2 or between Level 2 and 3 from 31 December 2013 to 30 September 2014.

The fair value of financial instruments that are traded in active markets is based on the market prices on the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and these prices represent actual and regularly occurring market transactions on an arm’s length basis. The market price used for financial assets is the current bid price, and the price used for financial liabilities is the current asking price. These instruments are included in Level 1 and comprise the fair value of some forward bunker oil contracts and other securities.

The fair value of financial instruments that are not traded in an active market is determined by means of various valuation methods. The group uses various methods and makes assumptions based on the prevailing market conditions on the balance sheet date. If all the significant data inputs that are

F-13 required to determine the fair value of an instrument are observable data, then the instrument will be included in Level 2. This includes the fair value of forward foreign exchange contracts, foreign exchange options, interest rate swaps and some forward bunker oil contracts.

The nominal value less impairment for losses incurred on trade receivables and the nominal value of trade payables are assumed to approximate the fair value of the items.

If one or more of the significant data inputs are not based on observable market data, the instrument will be included in Level 3.

Particular valuation methods that are used to assess financial instruments include: • Quoted market or trading price for corresponding instruments. • Fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flow based on the observable yield curve. • Fair value of forward contracts in a foreign currency is calculated as the present value of the difference between the agreed forward price and the forward price on the balance sheet date multiplied by the contract volume in a foreign currency. The relevant interest rate on the balance sheet date is used for calculation of the present value. • Other methods, such as discounted cash flows, are used to determine the fair value of the remaining financial instruments.

The following table illustrates changes in the Level 3 category instruments at 30 September 2014 and at 31 December 2013:

30.09.2014 31.12.2013 (in NOK 1,000) Shares in other companies Opening balance ...... 9,021 9,868 Sales during the period ...... (1,105) (317) Gain in income statement (under “Finance income”) ...... — 112 Loss in income statement (under “Finance expenses) ...... — (15) Impairment losses during the period ...... — (627) Closing balance ...... 7,916 9,021

Note 9 Business influenced by seasonal factors The Hurtigruten coastal service is influenced by seasonal factors with the main season traditionally from May through August. In the recent years the company has developed seasonal concepts, “Hunting the light” for the winter season, “Arctic Awakening” in spring and “Autumn Gold” in the fall. This has increased the number of cruise nights in for instance the months of February and March. The itinerary and fleet of the company is according to the Hurtigruten public procurement contract, which involves daily departures from Bergen all year through.

Explorer cruises with MS Fram is cyclic because the cruises are concentrated around four geographic areas (different parts of the year); the Antarctic, Svalbard, Greenland and cruise between the Antarctic and the Arctic. The land based Svalbard operation has a main season reaching from March through August. This activity is operated by the subsidiary Spitsbergen Travel group.

Note 10 Events after balance sheet date On 29 October Silk Bidco AS made an offer for all shares in Hurtigruten ASA, at a price of NOK 7 per share. Offeror are controlled by TDR Capital by 90 percent, Periscopus five percent and Home Capital five percent stake. For further details of the transaction, refer to the offer document which is scheduled announced on 6 November.

F-14 The Board of Hurtigruten ASA has recommended the offer to the shareholders for two main reasons: • The owner coalitions expressed ambitions for the company at the continuation of the current growth strategy and operations, the substantial experience of the bidders in the holiday and leisure segment, investment opportunities and signals to build on the current organization and employees • It is an attractive offer, which represents a substantial gain for shareholders compared to the last traded share

For further information refer to the stock exchange announcement dated 29 October 2014.

F-15 Auditor’s report

Statsautoriserte revisorer Foretaksregisteret: NO 976 389 387 MVA Ernst & Young AS Tlf: +47 24 00 32 00 Fax: +47 77 64 14 63 Roald Amundsens Plass 1, NO-9008 Tromsø www.ey.no Postboks 1212, NO-9262 Tromsø Medlemmer av Den norske revisorforening

To the Annual Shareholders’ Meeting of Hurtigruten ASA

AUDITOR’S REPORT Report on the financial statements We have audited the accompanying financial statements of Hurtigruten ASA, comprising the financial statements for the Parent Company and the Group. The financial statements of the Parent Company and the Group comprise the statement of financial position as at 31 December 2013, the statements of income, comprehensive income, cash flows and changes in equity for the year then ended as well as a summary of significant accounting policies and other explanatory information.

The Board of Directors’ and Chief Executive Officer’s responsibility for the financial statements The Board of Directors and Chief Executive Officer are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the Parent Company and the International Financial Reporting Standards as adopted by the EU for the financial statements of the Group, and for such internal control as the Board of Directors and Chief Executive Officer determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements for the Parent Company and the Group.

Opinion on the financial statements of the Parent Company In our opinion, the financial statements of Hurtigruten ASA have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Company as at 31 December 2013 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.

A member firm of Ernst & Young Global Limited

F-16 Auditor’s report page 2

Opinion on the financial statements of the Group In our opinion, the financial statements of the Group have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Group as at 31 December 2013 and its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the EU.

Report on other legal and regulatory requirements Opinion on the Board of Directors’ report [and on the statements on corporate governance and corporate social responsibility] Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Directors’ report and in the statements on corporate governance and corporate social responsibility concerning the financial statements, the going concern assumption and the proposal for the allocation of the result is consistent with the financial statements and complies with the law and regulations.

Opinion on registration and documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that the Board of Directors and Chief Executive Officer have fulfilled their duty to ensure that the Company’s accounting information is properly recorded and documented as required by law and generally accepted bookkeeping practice in Norway.

Tromsø, 25. mars 2014 ERNST &YOUNG AS

John Giæver State Authorised Public Accountant (Norway)

(This translation from Norwegian has been made for information purposes only.)

A member firm of Ernst & Young Global Limited

F-17 Consolidated income statement

Note 2013 2012 (in NOK 1,000) Operating revenues ...... 23 3,305,614 3,262,596 Payroll costs ...... 24 (806,272) (828,933) Depreciation, amortisation and impairment losses ...... 7,8,9 (308,899) (378,668) Other operating costs ...... 26 (1,938,648) (2,002,106) Other (losses)/gains—net ...... 27 9,387 3,493 Operating profit/(loss) ...... 261,182 56,382 Finance income ...... 28 89,540 130,102 Finance expenses ...... 28 (320,632) (350,695) Finance expenses—net ...... (231,092) (220,593) Share of profit/(loss) of associates ...... 10,837 (2,130) Profit/(loss) before income tax from continuing operations ...... 40,926 (166,341) Income tax expense from continuing operations ...... 18 (3,915) (23,729) Profit/(loss) for the year from continuing operations ...... 37,011 (190,071) Profit/(loss) for the year from discontinued operations ...... 7 (11,589) (140,742) Profit/(loss) for the year ...... 25,422 (330,813) Profit/(loss) for the year attributable to Owners of the parent ...... 15 31,283 (375,381) Non-controlling interests ...... (5,861) 44,568 Earnings per share from continuing and discontinued operations attributable to the owners of the parent during the year (expressed in NOK per share) Basic earnings per share From continuing operations ...... 15 0.09 (0.56) From discontinued operations ...... 15 (0.02) (0.33) Total ...... 0.07 (0.89) Diluted earnings per share From continuing operations ...... 15 0.09 (0.56) From discontinued operations ...... 15 (0.02) (0.33) Total ...... 0.07 (0.89)

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-18 Consolidated statement of comprehensive income

Note 2013 2012 (in NOK 1,000) Profit/(loss) for the year ...... 25,422 (330,813) Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent periods Actuarial gain/(loss) on retirement benefit obligations ...... 19 (11,443) 57,468 Tax...... 18 3,230 (17,829) Total items not to be reclassified to profit or loss in subsequent periods ...... (8,213) 39,639 Other comprehensive income to be reclassified to profit or loss in subsequent periods Cash flow hedges ...... 16 (5,762) (92,690) Tax...... 18 1,614 25,953 Currency translation differences ...... 16 12,335 6,246 Total items to be reclassified to profit or loss in subsequent periods ...... 8,187 (60,491) Other comprehensive income for the year, net of tax ...... (26) (20,852) Total comprehensive income for the year ...... 25,396 (351,665) Attributable to: Owners of the parent ...... 34,540 (405,313) Non-controlling interests ...... (9,144) 53,648 Total comprehensive income for the year ...... 25,396 (351,665)

Notes 1 to 31 are an integral part of the consolidated financial statements

F-19 Consolidated balance sheet at 31 December

Note 2013 2012 (in NOK 1,000) ASSETS Non-current assets Property, plant and equipment ...... 8 3,539,306 3,748,690 Intangible assets ...... 9 373,911 359,130 Investments in associates ...... 10 26,758 36,552 Deferred income tax assets ...... 18 166,576 169,926 Trade and other receivables ...... 12 12,874 30,520 Total non-current assets ...... 4,119,426 4,344,817 Current assets Inventories ...... 13 85,477 77,048 Trade and other receivables ...... 12 128,020 293,762 Derivative financial instruments ...... 11 12,932 5,717 Cash and cash equivalents ...... 14 404,442 548,847 630,871 925,374 Assets of disposal group classified as held-for-sale ...... 7 214,444 — Total current assets ...... 845,315 925,374 Total assets ...... 4,964,741 5,270,191 EQUITY Equity attributable to owners of the parent Ordinary shares ...... 15 419,966 419,966 Share premium ...... 15 734,622 734,622 Other reserves ...... 16 66,943 58,888 Retained earnings ...... (366,764) (393,250) Total equity attributable to owners of the parent ...... 854,767 820,228 Non-controlling interests ...... 263,784 346,327 Total equity ...... 1,118,551 1,166,555 LIABILITIES Non-current liabilities Borrowings ...... 17 2,493,060 2,864,983 Derivative financial instruments ...... 11 59,752 60,778 Deferred income tax liabilities ...... 18 1,180 8,105 Retirement benefit obligations ...... 19 28,038 46,303 Provisions for other liabilities and charges ...... 20 5,117 5,283 Total non-current liabilities ...... 2,587,148 2,985,454 Current liabilities Trade and other payables ...... 22 636,276 730,981 Current income tax liabilities ...... 18 4,984 10,264 Borrowings ...... 17 474,526 344,552 Derivative financial instruments ...... 11 52,000 21,049 Provisions for other liabilities and charges ...... 20 1,302 11,335 1,169,088 1,118,182 Liabilities of disposal group classified as held-for-sale ...... 7 89,954 — Total current liabilities ...... 1,259,042 1,118,182 Total liabilities ...... 3,846,190 4,103,636 Total equity and liabilities ...... 4,964,741 5,270,191

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-20 Oslo, 25 March 2014

The board of directors of Hurtigruten ASA

Trygve Hegnar Helene Jebsen Anker Guri Mai Elmar Chair Deputy chair Director

Arve Giske Berit Kjøll Petter Stordalen Director Director Director

Per-Helge Isaksen Tone Mohn-Haukland Daniel A. Skjeldam Director Director CEO

F-21 Consolidated statement of changes in equity

Other Share equity not Total capital recognised paid-in including in the equity and treasury Share income Retained retained Non-controlling Note shares premium statement earnings earnings interests Total equity (in NOK 1,000) Balance at 1 January 2012 ...... 419,966 734,622 140,073 (69,123) 1,225,540 338,574 1,564,114 Net profit/(loss) for the year ...... — — — (375,381) (375,381) 44,568 (330,813) Redemption of convertible bond loan ...... — — (20,711) 20,711 — — — Other comprehensive income Currency translation differences ...... 16 — — 6,246 — 6,246 — 6,246 Cash flow hedges, net oftax...... 16,18 — — (66,721) — (66,721) (16) (66,737) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18,19 — — — 30,543 30,543 9,096 39,639 Total other comprehensive income, net of tax ...... — — (60,475) 30,543 (29,932) 9,080 (20,852) Total comprehensive income for the year ...... — — (60,475) (344,838) (405,313) 53,648 (351,665) Transactions with owners Distributions to owners ...... — — — — — (45,895) (45,895) Total transactions with owners ...... — — — — — (45,895) (45,895) Balance at 31 December 2012 ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555

F-22 Other Share equity not Total capital recognised paid-in including in the equity and treasury Share income Retained retained Non-controlling Note shares premium statement earnings earnings interests Total equity (in NOK 1,000) Balance at 1 January 2013 ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555 Net profit/(loss) for the year ...... — — — 31,283 31,283 (5,861) 25,422 Other comprehensive income Currency translation differences ...... 16 — — 12,335 — 12,335 — 12,335 Cash flow hedges, net oftax...... 16,18 — — (4,281) — (4,281) 133 (4,148) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18,19 — — — (4,797) (4,797) (3,416) (8,213) Total other comprehensive income, net of tax ...... — — 8,054 (4,797) 3,257 (3,283) (26) Total comprehensive income for the year ...... — — 8,054 26,486 34,540 (9,144) 25,396 Transactions with owners Payments to owners . . — — — — — (73,400) (73,400) Total transactions with owners ...... — — — — — (73,400) (73,400) Balance at 31 December 2013 ...... 419,966 734,622 66,943 (366,764) 854,767 263,784 1,118,551

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-23 Consolidated cash flow statement

Note 2013 2012 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax from continuing and discontinued business .... 7 26,092 (312,470) Adjustments for: Depreciation, amortisation and impairment for continuing and discontinued business ...... 7,8,9 341,223 415,805 Other (losses)/gains—net ...... 27,28 (9,484) (28,164) Unrealised foreign exchange (losses)/gains ...... 7,246 (9,124) Unrealised gains/losses on derivatives held for trading purposes ...... 16,959 — Dividends received ...... (1,416) (259) Interest expenses ...... 231,178 252,787 Share of profit/(loss) of associates for continuing and discontinued operations ...... 10 (7,847) 2,343 Impairment of non-current shares ...... 627 — Difference between expensed pension and payments ...... 26,146 24,549 Change in working capital: Inventories ...... (9,338) (2,352) Trade and other receivables ...... 152,898 509,041 Financial assets at fair value through profit or loss ...... (4,428) 7,293 Trade and other payables ...... (65,592) (48,563) Cash flows from operating activities ...... 704,266 810,886 Interests paid ...... (230,187) (229,218) Income tax paid ...... (10,264) (7,382) Net cash flows from (used in) operating activities ...... 463,814 574,287 Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... 8 (252,920) (271,222) Proceeds from insurance settlement ...... 14,162 119,000 Proceeds from sale of PPE ...... 27,701 48,897 Purchases of intangible assets ...... 9 (43,993) (104,457) Loans to associates ...... 30 (1,500) — Purchase of shares and shareholdings ...... 50 (750) Proceeds from sale of shares and shareholdings ...... 15,454 24,560 Dividends received ...... 1,416 259 Change in restricted funds ...... 14 6,063 64,997 Net cash flows from (used in) investing activities ...... (233,569) (118,717) Cash flows from financing activities Proceeds from borrowings ...... 150,000 3,040,525 Repayments of borrowings ...... (389,159) (3,403,573) Dividends paid to non-controlling interests ...... (73,400) (45,895) Net cash flows from (used in) financing activities ...... (312,559) (408,943) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... (82,313) 46,626 Cash, cash equivalents and bank overdrafts at 1 January ...... 465,794 426,461 Foreign exchange gains/(losses) on cash, cash equivalents and bank overdrafts ...... (264) (7,293) Cash, cash equivalents and bank overdrafts at 31 December ...... 14 383,216 465,794

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-24 Note 1 General information Hurtigruten ASA (the company) and its subsidiaries (together the Group) are engaged in tourism and transport activities in Norway and abroad. The company’s core business consists of the Hurtigruten service along the Norwegian coast, with daily calls in 34 ports between Bergen and Kirkenes, and explorer activity in the Polar regions, along with activities in Svalbard organised under the Spitsbergen Travel Group.

The Group’s operating segments are organised into the following three product areas: Hurtigruten Norwegian Coast, Explorer products/MS Fram and Spitsbergen. Activities that do not naturally fall within these three segments are bundled in Other business. These operating segments are reported in the same way as internal reporting to the board of directors and Group management.

The company is a public limited company incorporated and domiciled in Norway, and headquartered at Fredrik Langes gate 14, Tromsø. At the Annual General Meeting of 17 April 2013 the decision was taken to relocate Hurtigruten ASA’s head office from Narvik to Tromsø. The Group also has offices in Kirkenes and Oslo, wholly-owned foreign sales companies in Hamburg, London, Paris and Seattle, a reservations centre in Tallinn as well as activities in Longyearbyen and Finnsnes. The company is listed on the Oslo Stock Exchange.

The Group’s presentation currency is NOK.

The consolidated financial statements were approved by the board of directors on 25 March 2014.

The following companies included in the consolidation in the consolidated financial statements

Registered Ownership and office voting rights Owned by Hurtigruten ASA (parent company) HRG Eiendom AS ...... Tromsø, Norway 100.0% Hurtigruten Estonia OÜ ...... Tallinn, Estonia 100.0% Hurtigruten GmbH ...... Hamburg, Germany 100.0% Hurtigruten Inc...... NewYork, USA 100.0% Hurtigruten Ltd ...... London, UK 100.0% Hurtigruten Pluss AS ...... Tromsø, Norway 100.0% Hurtigruten Pty. Ltd ...... Sydney, Australia 100.0% Hurtigruten SAS ...... Paris, France 100.0% Hurtigruten Sjø AS ...... Kirkenes, Norway 100.0% Spitsbergen Travel AS ...... Longyearbyen, 100.0% Svalbard, Norway AS TIRB ...... Finnsnes, Norway 71.3% Kirberg Shipping KS(1) ...... Bergen, Norway 1.0% Kystruten KS(1) ...... Oslo, Norway 0.0% Owned by Spitsbergen Travel AS Ingeniør G. Paulsen AS ...... Longyearbyen, 100.0% Svalbard, Norway Spitsbergen Travel Hotel AS ...... Longyearbyen, 100.0% Svalbard, Norway Svalbard Polar Hotel AS ...... Longyearbyen, 100.0% Svalbard, Norway Owned by AS TIRB Cominor AS ...... Finnsnes, Norway 100.0% TIRB Eiendom AS ...... Finnsnes, Norway 100.0%

(1) SPE (Special Purpose Entity)

Hurtigruten Estonia OÜ and RezCenter OÜ were merged with effect from 1 January 2013. The company has continued operations under the name Hurtigruten Estonia OÜ.

Hurtigruten Verdens Vakreste Sjøreise AS changed its company name to Hurtigruten Sjø AS in August 2013.

F-25 Hurtigruten Greenland AS was wound up in 2013. The company was wholly owned by Hurtigruten ASA.

Note 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of the Group’s consolidated financial statements are described below. Unless otherwise stated in the description, these policies have been consistently applied to all periods presented.

2.1 Basic policies The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as established by the EU.

The consolidated financial statements have been prepared on a historical cost basis, with the following modifications: • financial assets and liabilities (including derivative instruments) at fair value through profit or loss

The preparation of financial statements in accordance with IFRSs requires the use of estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Areas that involve a high degree of such judgments, or are highly complex, and areas where assumptions and estimates are of material importance for the consolidated financial statements are described in more detail in note 3A.

The Group’s consolidated financial statements have been prepared according to uniform accounting policies for similar transactions and events under similar conditions.

2.2 Consolidation policies The consolidated financial statements include the financial statements of the parent company and its subsidiaries as of 31 December 2013. a) Subsidiaries and consolidation Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are exercisable or convertible as of the balance sheet date are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated from the time a controlling influence is established and until such time as the controlling influence ceases to exist.

Intragroup transactions, intercompany balances and unrealised intragroup profits and losses are eliminated. If necessary, the subsidiaries’ financial statements are restated to achieve consistency with the Group’s accounting policies. b) SPEs A sale-leaseback solution was carried into effect in 2002 with the Hurtigruten ship MS Richard With, whereby Kystruten KS acquired the ship and leased it back for a 15-year period. A similar sale-leaseback solution was carried into effect with the Hurtigruten ship MS Nordlys, whereby Kirberg Shipping KS acquired the ship and leased it back for a 15-year period. On the basis of established contracts and the Group’s assessments of the control principle, Kystruten KS and Kirberg Shipping KS are considered to be SPEs (special purpose entities) and thus consolidated in the Hurtigruten Group. This has been done by recognising the ship’s book value and external liabilities in the consolidated balance sheet. Previously recognised gains are corrected against equity. The KS’s financial statements have been restated to apply the same accounting policies as used by the Hurtigruten Group.

F-26 c) Associates Associates are all entities over which the Group has significant influence but not control. Significant influence normally exists for investments where the Group owns 20–50 per cent of the voting capital. Investments in associates are initially recognised at cost and subsequently using the equity method.

The Group’s share of associates’ profit or loss is recognised in the income statement, and is added to the book value of the investments. The Group’s share of associates’ other comprehensive income is recognised in the Group’s other comprehensive income and is also added to the book value of the investments. The Group does not recognise any share of an associate’s losses in its income statement if this results in the book value of the investment falling below zero (including unsecured receivables from the entity), unless the Group has assumed liabilities or made payments on behalf of the associate.

2.3 Summary of significant accounting policies a) Segment reporting An operating segment is a component of the business: i) that engages in business activities as a result of which the company receives operating revenues and incurs costs, ii) whose operating results are regularly reviewed by the company’s ultimate decision-maker with a view to determining which resources should be allocated to the segment and to assess its earnings, and iii) for which separate financial information exists.

The Group has three operating segments, called product areas: Hurtigruten Norwegian Coast, Explorer products/MS Fram and Spitsbergen. Activities that do not naturally fall within these segments are bundled in Other business. b) Translation of foreign currencies (i) Functional and presentation currency The financial statements of the individual entities in the Group are measured in the currency used in the economic area in which the entity primarily operates (the functional currency). The consolidated financial statements are presented in Norwegian kroner (NOK), which is both the parent company’s functional currency and the Group’s presentation currency.

(ii) Transactions and balance sheet items Foreign currency transactions are translated into the functional currency using the transaction rate. Realised foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of exchange rates of monetary assets and liabilities denominated in foreign currencies at the balance sheet date are recognised in the income statement. If the currency position is considered a cash flow hedge, gains and losses are recognised as other comprehensive income until the hedged transaction is implemented, after which the currency position is transferred to the result on ordinary activities.

Foreign exchange gains and losses on loans, cash and cash equivalents are presented (net) in the income statement as financial income or expenses.

(iii) Group companies The income statement and balance sheets of Group entities whose functional currency differs from the presentation currency are translated in the following manner: • The balance sheet is translated at the rate in force at the balance sheet date • The income statement is translated at the transaction rate. Average rates are used as an approximation of the transaction rate

F-27 • Translation differences are recognised in other comprehensive income and specified separately in equity as a separate item c) Revenue recognition Revenue from the sale of goods and services is recognised at the fair value, net of VAT, returns, discounts, and rejects.

Sales are recognised when revenue can be reliably measured, it is probable that the economic benefits associated with the transaction will flow to the Group and specific criteria related to the various forms of sale that are listed below are met. The Group bases its accounting estimates on historic income, an assessment of the type of customer and transaction concerned, as well as any specific conditions attached to the individual transaction.

Revenues are recognised in the income statement as follows:

(i) Sales of services and travel Sales of services are recognised in the accounting period when the service is rendered and/or delivered. For ship voyages, this is based on the days the passenger is on board. Revenues related to ship voyages are accrued on the basis of the number of days the voyage lasts before and after the end of the accounting period.

(ii) Sales of goods The Group’s sales of goods primarily relate to sales of food, souvenirs and other kiosk products onboard the ships. Sales are recognised in income when the customer has received and paid for the goods. Payment for retail transactions is usually made in the form of cash or by credit card. The revenue is recognised in the income statement including the credit card fees incurred for the transaction. The fees are recorded as costs to sell.

(iii) Public procurement The Group has an agreement with the Ministry of Transport and Communications to operate the Bergen— Kirkenes coastal route.

Revenues received from public procurement are recognised in the income statement on a continuous basis over the year on the basis of existing contracts. These contracts are primarily based on a tender, where the company has a fixed contract sum for planned (annual) production. There are specific conditions and calculation methods for the indexation of the contract sum. Any changes beyond the planned production are compensated/ deducted utilising agreed-upon rates set out in the agreements, and recognised in the periods in which they occur. d) Property, plant and equipment Property, plant and equipment consist primarily of ships (Hurtigruten ships), land and buildings (hotels, offices and workshops) as well as buses. Property, plant and equipment are recognised at cost less depreciation and any impairments. Cost includes costs directly associated with the acquisition of the asset.

Periodic maintenance is recognised in the balance sheet and expensed over the period until the next periodic maintenance. Ongoing maintenance for all ship types is expensed continuously during the period in which the work is performed.

F-28 Land is not depreciated. Other operating assets are depreciated on a straight-line basis, such that the cost is depreciated to residual value over the asset’s expected useful life. Expected useful life is determined on the basis of historical data, as well as the standard useful economic lifetimes in the industry. Residual value is calculated on the basis of estimated sales values for operating assets at the end of their expected useful life. Expected useful life is:

Ships 12–30 years Buildings 25–100 years Vehicles 5–12 years Other 3–10 years

The useful life and residual value of operating assets are assessed on every balance sheet date and amended as necessary. When material components of operating assets have different useful lives, these operating assets are recognised as their various components. These components are depreciated separately over each component’s useful life. At the end of each accounting period operating assets are assessed for indications of lasting impairment and, in the event of such impairment, the asset’s recoverable amount is estimated. When the book value of an operating asset is higher than the estimated recoverable amount, it is written down to the recoverable amount.

Gains and losses on disposals are recognised in the income statement under “Other (losses)/gains—net”, as the difference between the sales price and the book value. e) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill arising on the acquisition of subsidiaries is classified as an intangible asset.

Goodwill is allocated to the cash-generating units or groups of cash-generating units that are expected to benefit from the acquisition at the time of acquisition (point f).

Goodwill recognised in the balance sheet is tested annually for impairment.

(ii) Other intangible assets Other intangible assets are largely directly associated with development costs for computer systems recognised in the balance sheet at cost, if the criteria for recognition in the balance sheet are met. Expenses recognised in the balance sheet as custom developed computer systems largely comprise payroll costs and hired- in consultants in connection with the development.

The criteria for recognising custom developed intangible assets in the balance sheet are: • It is technically feasible to complete the development of the software so that it is available for use • Management intends to complete the development of the software and take it into use • It can be proved probable that the company will take the asset into use • Future economic benefits to the company associated with use of the asset can be calculated • Adequate technical, financial and other resources are available to complete the development and take the software into use • Development costs for the asset can be measured reliably

The intangible assets are considered to have a limited life span, and are amortised over their expected useful life. Assessments are made at the end of each accounting period to find any indications of impairment of intangible assets. If there are indications of impairment, the intangible assets are written down to their recoverable value when this is lower than the book value.

Other development expenditures that do not meet the criteria for recognition in the balance sheet are expensed as they are incurred.

F-29 f) Impairment of non-financial assets Intangible assets with indefinite useful life and goodwill are not amortised but are tested annually or more frequently if there are indications of impairment. Depreciated property, plant and equipment and amortised intangible assets are assessed for impairment when there is any indication that the book value may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s book value exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. In assessing impairments, non-current assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each reporting date the possibility of reversing previous impairment of non-financial assets (except goodwill) is assessed. g) Discontinued operations and non-current assets held-for-sale Non-current assets and disposal groups are classified as held-for-sale if their book values will be recovered through sale rather than continued use. This condition is deemed to be fulfilled if a sale is highly probable and the asset (or disposal group) is available for immediate sale in its current condition. Management at the relevant level must have made a commitment to complete the sale and the transaction must be expected to be completed within one year of the classification date.

Non-current assets (and disposal groups) that are classified as held-for-sale are measured at the lower of previous book value and net sales value, and are not depreciated.

A discontinued operation is a segment that has been classified as held-for-sale, and which represents a material business area.

Net profits or losses after tax for discontinued operations are reported separately in income from continuing operations. Results from the previous periods for discontinued operations are reclassified in order to obtain comparable figures. Assets and liabilities classified as held-for-sale are presented on separate lines in the balance sheet under current assets and current liabilities respectively. Previous periods are not restated in the balance sheet. h) Financial assets (i) Classification The Group classifies financial assets in the following categories: at fair value through profit or loss, as well as loans and receivables. The classification depends on the object of the asset. Management determines the classification of financial assets on initial recognition.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified in this category if it was acquired primarily to provide a profit from short-term price fluctuations. Derivatives are categorised as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed payments that are not traded in an active market. These are classified as current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as “trade and other receivables” in the balance sheet (point l).

(ii) Recognition and measurement Regular purchases and sales of investments are recognised on the trade-date, which is the day the Group commits to purchase or sell the asset. All financial assets that are not recognised at fair value through profit or loss are initially recognised at fair value plus transaction costs. Financial assets recognised at fair value through profit or loss are initially recognised at fair value and transaction costs

F-30 are expensed in the income statement. Investments are de-recognised when the rights to receive cash flows from the investment expire or when these rights have been transferred and the Group has substantially transferred all risks and rewards of ownership. Financial assets recognised at fair value in profit or loss are carried at fair value after initial recognition in the balance sheet. Loans and receivables are carried in successive periods at amortised cost, using the effective interest method.

Gains or losses from changes in fair value of assets classified as “financial assets at fair value through profit or loss”, including interest income and dividends, are included in the income statement under financial items in the period in which they arise. Dividends from financial assets at fair value through profit or loss are included in financial income when the Group’s right to receive payments is established. i) Offsetting of financial assets and liabilities Financial assets and liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. j) Impairment of financial assets Assets recognised at amortised cost At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets (a “loss event”) and the impact of that loss event (or events) on estimated future cash flows can be estimated reliably.

The amount of the loss is measured as the difference between the asset’s book value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s book value is reduced and the amount of the loss recognised in the consolidated income statement.

If the impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the fall in value was recognised (such as an improvement in the debtor’s credit rating), the previous loss is reversed in the consolidated income statement.

Impairment testing of trade receivables is described in point l. k) Derivatives and hedging Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value on an ongoing basis. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group classifies derivatives that are part of a hedging instrument as either: (i) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair-value hedge) or (ii) hedges of variable cash flows with a particular risk associated with a recognised asset, liability or a highly probable forecast transaction (cash flow hedge).

At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. Such assessments are documented both at hedge inception and on an ongoing basis.

The fair values of derivatives used for hedging purposes are presented in note 11C. Changes in the equity item hedging are presented in note 16. The fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining term of the hedging item is more than 12 months and as a current asset or current liability if the remaining term of the hedging item is less than 12 months. Derivatives held for trading purposes are classified as current assets or liabilities.

F-31 Cash flow hedging The effective portion of changes in the fair value of derivatives that are designated and qualify as hedging instruments in cash flow hedges is recognised directly in other comprehensive income. Losses and profits on the ineffective portion are recognised in the income statement.

Hedge gains or losses recognised in other comprehensive income and accumulated in equity are recognised as income or expense in the period during which the hedged item affects the income statement (for example, when the planned sale is taking place). Gains or losses relating to the effective portion of interest rate swaps hedging variable rate loans are recognised in the income statement under “financial expenses”. Gains or losses on the ineffective portion are recognised in the income statement. When the forecast hedged transaction results in the recognition of a non-financial asset (such as inventories or property, plant and equipment), the gains and losses previously recognised within other comprehensive income are transferred to the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold or in depreciation of property, plant and equipment.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is recognised in the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. l) Trade receivables Trade receivables are amounts due from customers for merchandise or services sold in the ordinary course of business. If settlement is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are classified as non-current assets.

Trade receivables are recognised and presented at the original invoice amount and written down following “loss events” which have an impact on the payment of the receivable that can be reliably estimated. Thus, trade receivables are recognised at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant. m) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank deposits and other short-term liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities in the balance sheet. Cash and cash equivalents are defined differently in the balance sheet and cash flow presentation. Restricted capital is included in the balance sheet presentation but not in the cash flow presentation. n) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are classified as non-current liabilities.

Trade payables are valued at fair value on first-time recognition in the balance sheet. Subsequently, trade payables are measured at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant. o) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are recognised at amortised cost using the effective interest method. The difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as part of the effective interest.

Borrowings are classified as current liabilities unless there is an unconditional right to defer payment of the liability for at least 12 months after the reporting date. Repayments due within one year are therefore classified as current liabilities.

F-32 p) Borrowing costs Borrowing costs directly attributable to the acquisition of operating assets are recognised in the balance sheet until the asset is ready for its intended use. Other borrowing costs are expensed on an ongoing basis. q) Current and deferred income taxes The income tax expense comprises income taxes payable and deferred income tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In such case, the tax is also recognised in other comprehensive income or directly in equity.

Current tax is calculated in accordance with the tax laws and regulations enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax laws are subject to interpretation. Based on management’s assessment, a provision is made for expected tax payments when necessary.

Deferred tax is calculated on all temporary differences between the tax-written-down and consolidated financial values of assets and liabilities.

Deferred income tax is determined using tax rates and tax laws which have been enacted or substantially enacted by the balance sheet date and which are expected to apply when the deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the tax-reducing temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences is controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and deferred income tax liabilities are recognised net to the extent that there is a desire and ability to settle the taxes within the same tax regime. r) Pension liabilities, bonus schemes and other employee remuneration schemes (i) Pension liabilities The Group’s companies operate various pension schemes. The schemes are generally funded through payments to life insurance companies. The Group operates both defined contribution and defined benefit plans. The liability recognised in the balance sheet connected with the defined benefit schemes is the present value of the defined benefits at the balance sheet date less the fair value of the pension assets. The pension liability is calculated annually by an independent actuary using the projected unit credit method.

Variances from estimates arising from experience adjustments or changes in actuarial assumptions are recognised in equity within other comprehensive income, in the period in which they arise.

Changes in benefits under the defined pension plans are expensed in/credited to the income statement.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as payroll costs when they are due. Prepaid contributions are recognised as a financial asset to the extent that a cash refund or a reduction in the future payments is available.

(ii) Profit-sharing and bonus schemes The Group recognises a liability and an expense for bonuses and profit-sharing plans at the time the specific criteria for allocation are fulfilled.

F-33 (iii) Share-value-based remuneration The Group has several share-based remuneration schemes where the company receives services from employees as consideration for share options in the Group. The fair value of options allocated during the period is calculated using the Black-Scholes option pricing model at the time of allocation. The fair value is expensed over the vesting period.

At each balance sheet date the company reviews its estimates for the number of options expected to be entered into as a result of any changes in the number of employees covered by the scheme. The company recognises any effects of changes to the original estimates in the income statement over the residual vesting period.

All share-based remuneration plans are settled by the allocation of shares.

(iii) Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. s) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of financial resources will be required to settle the obligation and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination benefits. Provisions are not recognised for future operating losses; however, provisions for unprofitable contracts are recognised. t) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

When the Group has substantially assumed all the risks and rewards of ownership of the underlying lease object, leases are classified as finance leases and the lease object and lease liability are recognised in the balance sheet. The Group has no material finance leases. u) Dividends Dividend distribution to owners of the parent is recognised as a liability in the Group’s financial statements when the dividends are approved by the general meeting. v) Government grants The Group receives material grants in the form of grants for trainee schemes and net salary subsidies. These grants are recognised net (as a cost reduction) together with the other payroll costs.

2.4 Changes in accounting policies and disclosures (i) New and amended standards adopted by the Group The Group made changes to its accounting policies in 2013. Below are new standards, amendments and interpretations, which were adopted as of the 2013 financial year. • IAS 1 Presentation of Financial Statements. Amendments affecting the presentation of other comprehensive income, differentiating between items that later will be reversed in profit or loss and items that will not be reversed in profit or loss.

F-34 • IAS 19 Employee Benefits was amended in June 2011. Interest expenses and the expected return on pension assets will be replaced with a net interest amount calculated by applying the discount rate to the net pension obligation (asset). The Group has implemented this amendment since 1 January 2013. Other amendments to IAS 19, including recognition of estimate variances in other comprehensive income and expensing of previous years’ entitlements on changes in the scheme, have already been applied by the Group through existing options already permitted by the standard. Please refer to point r on pension obligations for further information. • IFRS 13 Fair Value Measurement defines what is meant by the term “fair value” under IFRSs and provides a uniform definition of how fair value should be determined under IFRSs and defines which additional disclosures should be provided when fair value is used. The Group uses fair value as a measurement criterion for certain assets and liabilities. Application of the standard has increased the scope of disclosures; however, with no further material changes to the financial statements. • Other issued standards and interpretations that have entered into force do not affect the Group and will have no impact on the financial statements.

(ii) Standards, amendments and interpretations to existing standards that have not entered into force and which the Group has not early adopted: • IFRS 9 Financial Instruments regulates the classification, measurement and accounting treatment of financial assets and liabilities. The Group plans to apply IFRS 9 when the standard takes effect and has been approved by the EU. The Group has still not assessed whether IFRS 9 Financial Instruments will affect the financial statements. The date IFRS 9 enters into force is not yet known but this is not expected to be earlier than 1 January 2018. • IFRS 10 Consolidated Financial Statements is based on current principles which involve applying the control concept as the decisive criterion in determining whether a company should be included in the consolidated financial statements of a parent company. The implementation of the standard is not expected to result in any material changes to the financial statements. The Group is planning to apply the standard for accounting periods beginning on or after 1 January 2014. • IFRS 11 Joint Arrangements. The standard regulates the accounting treatment of arrangements where the Group has joint control together with other entities. The standard focuses more on the rights and obligations under the arrangement than on the legal structure. The implementation of the standard is not expected to result in any material changes to the financial statements. The Group is planning to apply the standard for accounting periods beginning on or after 1 January 2014. • IFRS 12 Disclosures of Interests in Other Entities contains disclosure requirements for financial interests in subsidiaries, joint ventures, associates, structured entities and other non-consolidated companies. Application of the standard will result in extra disclosures, but not in any further material changes to the financial statements. The Group is planning to apply the standard for accounting periods beginning on or after 1 January 2014.

Note 3A Important accounting estimates and judgments Estimates and judgments are reviewed on an ongoing basis and are based on past experience, consultation with experts, trend analyses and a number of other factors, including forecast future events that are deemed probable under current circumstances.

3.1 Key accounting estimates and assumptions The Group makes estimates and assumptions about the future. By their very nature, the accounting estimates that are made as a result of the above processes will therefore rarely fully correspond with the final outcome. Estimates and assumptions that have a significant risk of causing a material adjustment to the book values of assets and liabilities within the next financial year are outlined below.

F-35 (a) Estimated impairment of goodwill The Group performs annual tests to assess potential impairment of goodwill, cf. note 2.3 e) i). The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. These calculations require the use of estimates (note 9) to establish the required rate of return for the period, cash flows and the growth factor of the cash flows.

The Group does not apply a general growth factor beyond expected inflation for cash flows when testing goodwill for impairment. The required rate of return used to discount cash flows is calculated as a weighted average of the return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

(b) Ships Useful economic lifetime The level of depreciation depends on the estimated economic lifetime of the ships. These estimates are based on history and experience relating to the Group’s ships. The estimates are reviewed at regular intervals. A change in the estimate will affect depreciation in future periods.

Estimated impairment of ships Where there are indications of such, the Group tests whether ships have suffered any impairment, see note 2.3 d). The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. Ships are considered within their segment as a collective cash-generating unit. These calculations require the use of estimates (note 8) for the required rate of return for the period, cash flows and the growth factor of the cash flows.

The Group does not use a general growth factor beyond expected inflation for cash flows when testing ships for impairment. The required rate of return used to discount cash flows is calculated as a weighted average return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk- free interest rate, risk premium, beta and the liquidity premium.

(c) Fair value of derivatives and other financial instruments The fair value of financial instruments not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques and information from the contract counterparty. The Group uses its judgment to select a variety of methods and to make assumptions based mainly on market conditions existing at each balance sheet date. Please refer to note 11A for further information.

(d) Pension assumptions The Group operates both defined contribution and defined benefit pension schemes. Measurement of pension costs and pension obligations for defined benefit plans involves the application of a number of assumptions and estimates, including relating to the discount rate, future salary levels, expected employee turnover rate, the return on plan assets, annual pension increases, expected adjustments to G (the National Insurance Scheme basic amount) and demographic factors.

The Group has pension obligations in Norway and Germany. The discount rate used to calculate pension obligations in Norway is based on 15-year corporate covered bonds, with an additional provision taking into account relevant terms to maturity for the pension obligations. Covered bonds are primarily issued by credit institutions to listed Norwegian commercial and savings banks and are secured against loans directly owned by the credit institution. The discount rate applied in Norway as of 31 December 2013 was 4.1 per cent; in accordance with guidance from the Norwegian Accounting Standards Board on the determination of pension assumptions as of 31 December 2013 this rate was 4.0 per cent. For obligations in Germany, the discount rate is determined based on the interest rates on high-quality corporate bonds denominated in the currency in which the benefits will be paid, with terms to maturity approximating to the term of the related pension obligation. The discount rate applied in Germany as of 31 December 2013 was 3.1 per cent.

F-36 Changes in pension assumptions will affect the pension obligations and pension cost for the period. Pension obligations are significantly affected by changes in the discount rate, life expectancy and expected salary and pension adjustments.

Please refer to note 19 for more information about pensions.

(e) Income tax Income tax is calculated based on results in the individual Group companies. The Group is subject to income taxes in several jurisdictions. Calculation of the period’s tax expense and distribution of tax payable and deferred income tax for the period requires a discretionary assessment of complex tax regulations in several countries. Consequently, uncertainty attaches to the final tax liability for many transactions and calculations. Where there is a discrepancy between the final tax outcome and the amounts that were initially recognised, this discrepancy will impact the recognised tax expense and provision for deferred income tax assets and liabilities in the period in which such determination is made. Please refer to note 18 for more information about income tax.

(f) Deferred income tax assets The basis for recognising deferred income tax assets is based mainly on the utilisation of tax loss carryforwards against future taxable income in the Group. The assessment is made based on management’s estimates of future profits in the Group and includes an assessment of the Group’s future strategy, economic developments in the markets in which the Group operates, future tax regimes and the Group’s ability to deliver forecast synergies. In preparing the financial statements, management has found the future taxable income to be sufficient to utilise the recognised deferred income tax assets. Please refer to note 18 for more information on deferred income tax assets recognised in the balance sheet.

(g) Disputes, claims and regulatory requirements The Group is a party to, or affected by, disputes, claims and regulatory requirements the outcome of which is to a large extent unknown. Management considers the probability of negative outcomes and opportunities for estimating any loss in the event of such negative outcomes. Unexpected events or changes to factors taken into consideration that have an impact on specific conditions, may result in increases or reductions to provisions. Such changes may also necessitate the recognition of provisions for conditions that were previously assessed as an unlikely outcome or for which it was previously not possible to make reliable estimates.

3.2 Key judgments affecting the entity’s accounting policies (a) Discontinued operations The Group’s bus business is reported under Other business. This business has been approved for sale and due to the nature of the market, management deems it appropriate to classify the business as discontinued in the annual financial statements in accordance with IFRS 5. Please see note 7 to the consolidated financial statements for further information.

(b) Joint venture Spitsbergen Travel AS owns 50 per cent of the voting rights in a joint arrangement, where the agreement requires unanimity for all decisions on relevant activities. The joint arrangement is organised as a limited company (Green Dog Svalbard AS) and gives participants the right to the net assets of the limited company. The above is therefore classified as a joint venture and recognised in accordance with the equity method.

Note 3B Restatement of comparative figures In accordance with company’s planned sale of non-strategic shareholdings, the bus business was classified as a discontinued operation as of 31 December 2013. The comparative figures in the income statement for 2012 have been restated.

F-37 IAS 19, Employee Benefits, has been significantly amended in that the net interest expense is now calculated based on the net deficit measured applying the discount rate to the balance at the start of the year. The effect of this is that the expected return on plan assets in excess of the discount rate for 2012 has been set to zero in the comparative figures.

Effect of change in accounting policies on the consolidated income statement

Net profit/(loss) Net profit/(loss) for 2012, Bus business for 2012, before changes classified as after changes in policy discontinued New IAS 19 in policy (in NOK 1,000) Operating revenues ...... 3,485,752 (223,156) — 3,262,596 Payroll costs ...... (934,666) 107,864 (2,131) (828,933) Depreciation, amortisation and impairment losses ..... (411,350) 32,682 — (378,668) Other operating costs ...... (2,101,476) 99,370 — (2,002,106) Other (losses)/gains—net ...... 9,800 (6,307) — 3,493 Operating profit/(loss) ...... 48,060 10,453 (2,131) 56,382 Finance income ...... 131,535 (1,433) — 130,102 Finance expenses ...... (353,729) 3,034 — (350,695) Finance expenses—net ...... (222,194) 1,601 — (220,593) Share of profit/(loss) of associates ...... (2,343) 213 — (2,130) Profit/(loss) before tax from continuing operations ...... (176,477) 12,267 (2,131) (166,341) Income tax expense from continuing operations ...... (19,014) (5,386) 671 (23,729) Profit/(loss) for the year from continuing operations ...... (195,491) 6,881 (1,460) (190,071) Profit/(loss) for the year from discontinued operations ...... (133,861) (6,881) — (140,742) Profit/(loss) for the year ...... (329,353) — (1,460) (330,813)

F-38 Effect of change in accounting policies on statement of total comprehensive income

Total Total comprehensive comprehensive income for 2012, Bus business income for 2012, before changes classified as after changes in policy discontinued New IAS 19 in policy (in NOK 1,000) Net profit/(loss) for the year ...... (329,353) — (1,460) (330,813) Other comprehensive income Items not to be reclassified to income statement Actuarial gain/(loss) on retirement benefit obligations ...... 55,337 — 2,131 57,468 Income tax ...... (17,158) — (671) (17,829) Total items not to be reclassified to income statement ...... 38,179 — 1,460 39,639 Items to be reclassified to income statement Cash flow hedges ...... (92,690) — — (92,690) Income tax ...... 25,953 — — 25,953 Currency translation differences ...... 6,246 — — 6,246 Total items to be reclassified to income statement ...... (60,491) — — (60,491) Total other comprehensive income for the year, net of tax ...... (22,312) — 1,460 (20,852) Total comprehensive income for the year ...... (351,665) — — (351,665) Attributable to: Owners of the parent ...... (405,313) — — (405,313) Non-controlling interests ...... 53,648 — — 53,648 Total comprehensive income for the year ...... (351,665) — — (351,665)

The change in accounting policy does not affect the balance sheet figures for 2012

F-39 Effect of change in accounting policies on the consolidated statement of changes in equity

Other Share equity not Total capital recognised paid-in including in the equity and treasury Share income Retained retained Non-controlling Total shares premium statement earnings earnings interests equity (in NOK 1,000) Balance at 1 January 2012, before change in policy ...... 419,966 734,622 140,073 (69,123) 1,225,540 338,574 1,564,114 Net profit/(loss) for the year 2012, before change in policy ...... — — (373,921) (373,921) 44,568 (329,353) Effect of change in policy ...... (1,460) (1,460) — Net profit/loss for the year 2012, after changes in policy ...... (375,381) (375,381) 44,568 (330,813) Redemption of convertible bond loan ...... — — (20,711) 20,711 — — — Other comprehensive income, before changes in policy Currency translation differences ...... — — 6,246 — 6,246 — 6,246 Cash flow hedges, net of tax ...... — — (66,721) — (66,721) (16) (66,737) Actuarial gain/(loss) on retirement benefit obligations, netoftax...... — — — 29,083 29,083 9,096 38,179 Other comprehensive income, net of tax, before changes in policy ...... — — (60,475) 29,083 (31,392) 9,080 (22,312) Effect of policy change, estimate deviation pensions . . . — — — 1,460 1,460 — 1,460 Other comprehensive income, net of tax and changes in policy ...... — — (60,475) 30,543 (29,932) 9,080 (20,852) Total comprehensive income for the year after changes in policy ...... — — (60,475) (344,838) (405,313) 53,648 (351,665) Transactions with owners Payments to owners ...... — — — — — (45,895) (45,895) Total transactions with owners ...... — — — — — (45,895) (45,895) Balance at 31 December 2012, before change in policy ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555 Balance at 31 December 2012, after change in policy ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555

F-40 Effect of change in accounting policies on the consolidated statement of cash flow

Cash flow Cash flow for 2012, for 2012, before Bus business after changes classified as changes in policy discontinued New IAS 19 in policy (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax from continuing and discontinued operations ...... (310,339) — (2,131) (312,470) Adjustments for: Depreciation, amortisation and impairment losses for continuing and discontinued operations ...... 415,805 — — 415,805 Other (losses)/gains—net ...... (28,164) — — (28,164) Unrealised foreign exchange (losses)/gains ...... (9,124) — — (9,124) Dividends received ...... (259) — — (259) Interest expenses ...... 252,787 — — 252,787 Share of profit/(loss) of associates for continuing and discontinued operations ...... 2,343 — — 2,343 Impairment of non-current shares ...... — — — — Difference between expensed pension costs and receipts .... 22,418 — 2,131 24,549 Change in working capital: Inventories ...... (2,352) — — (2,352) Trade and other receivables ...... 509,041 — — 509,041 Financial assets at fair value through profit or loss ...... 7,293 — — 7,293 Trade and other payables ...... (48,563) — — (48,563) Cash flows from operating activities ...... 810,886 — — 810,886 Interests paid ...... (229,218) — — (229,218) Income tax paid ...... (7,382) — — (7,382) Net cash flows from (used in) operating activities ...... 574,287 — — 574,287 Cash flows from investing activities Purchase of property, plant and equipment (PPE) ...... (271,222) — — (271,222) Proceeds from insurance settlement ...... 119,000 — — 119,000 Proceeds from sale of PPE ...... 48,897 — — 48,897 Purchase of intangible assets ...... (104,457) — — (104,457) Purchase of shares and shareholdings ...... (750) — — (750) Proceeds from sale of shares and shareholdings ...... 24,560 — — 24,560 Dividends received ...... 259 — — 259 Change in restricted funds ...... 64,997 — — 64,997 Net cash flows from (used in) investing activities ...... (118,717) — — (118,717) Cash flows from financing activities Proceeds from borrowings ...... 3,040,525 — — 3,040,525 Repayments of borrowings ...... (3,403,573) — — (3,403,573) Dividends paid to non-controlling interests ...... (45,895) — — (45,895) Net cash flows from (used in) financing activities ...... (408,943) — — (408,943) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... 46,626 — — 46,626 Cash, cash equivalents and bank overdrafts at 1 January .... 426,461 — — 426,461 Foreign exchange gains/(losses) on cash, cash equivalents and bank overdrafts ...... (7,293) — — (7,293) Cash, cash equivalents and bank overdrafts at 31 December ...... 465,794 — — 465,794

F-41 Note 4 Financial risk management The Group uses financial instruments such as bank loans and bond loans. In addition, the Group utilises financial instruments such as trade receivables, trade payables, etc., that are directly related to day-to-day operations. The Group utilises certain financial derivatives for hedging purposes.

4.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including currency, price, fair- value interest rate and variable interest rate risk), credit risk and liquidity risk. The Group’s overarching risk management goal is to increase predictability for the Group’s operations and to minimise the impact of fluctuations in macro conditions on the Group’s results and financial position.

The Group has defined overarching principles for risk management which encompass guidelines for specific areas such as currency, interest rate and credit risk and the use of financial derivatives. The board of directors approves the Group’s risk management strategy and reviews this annually. The CFO function is responsible, in consultation with the CEO, for conducting ongoing tactical risk management in line with the approved strategy, including exposure analyses and reporting.

(a) Market risk (i) Currency risk The Group operates internationally and is exposed to currency risk in multiple currencies, in particular, EUR, USD and GBP. Currency risk arises from future ticket sales as well as recognised assets or liabilities. In addition, fuel cost is quoted in USD. Currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency which is not the entity’s functional currency.

The Group’s policy is to hedge up to 80 per cent of expected cash flows in EUR and GBP for up to the next 18 months, using transparent and liquid financial derivatives, normally futures contracts combined with options. Hedges have been made on around 75 per cent of expected cash flows in EUR for 2014 and on around 40 per cent for 2015. Hedges have also been made on just under 40 per cent of expected cash flows in GBP for 2014. The company refinanced its debt in March 2012, where portions of the loan can be converted from NOK to EUR to achieve a “natural hedge”. The conversion right applies for the entire term of the loan.

The price of oil, and thus bunker fuel, is internationally traded in USD, while the Group purchases bunker fuel in NOK. The risk can therefore be split into a currency element and a product element. The currency element is partially aligned with the Group’s cash flow exposure in USD, and the product risk is hedged separately.

Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12 Consolidation— Special Purpose Entities. Kystruten KS has portions of its debt in EUR and USD. The Group is therefore exposed to currency risk when paying interest and converting this debt to NOK. The debt in EUR and USD is partially hedged through the Group’s net revenues in these currencies. Kirberg Shipping KS redeemed all its bank loans in August 2013, in the process significantly reducing foreign currency risk on the translation of liabilities in the KSs.

The Group has some investments in foreign subsidiaries whose net assets are exposed to currency translation risk.

F-42 The table below shows the Group’s sensitivity to potential changes in the exchange rate for NOK against relevant currencies in relation to the exchange rate as of 31 December, with all other variables held constant. Changes mainly relate to foreign exchange gains/losses on translation of financial derivatives, borrowings, trade and other receivables, trade and other payables and cash and cash equivalents and other investments.

Effect on net profit/loss after tax Effect on equity 2013 2012 2013 2012 (in NOK million) Change EUR/NOK 5% ...... (5.3) 4.5 (6.5) 4.5 Change USD/NOK 5% ...... (2.6) (1.2) (2.2) (1.2) Change GBP/NOK 5% ...... 3.6 6.5 3.2 6.5 Change AUD/NOK 5% ...... 0.7 4.2 0.7 4.2

The calculations assume that the NOK depreciates by 5 per cent against the relevant currencies. With an equivalent appreciation of the NOK, the amounts would have an equal and opposite value. In 2013 the effect on equity was different to the effect on the income statement due to the fact that currency derivatives are recognised as hedges, and changes in value on these are recognised directly in equity. As of 31 December 2012 the Group only held currency options held for trading purposes, meaning that the effect on the income statement and equity of the above are the same.

(ii) Price risk The Group is exposed to bunker fuel price risk, and the board of directors has approved a strategy of quarterly rolling hedges of 0–100 per cent of estimated future consumption for one to six future quarters, where the Group hedges a larger share of consumption in the near future and a smaller share further ahead. In addition, the Group has a stop-loss strategy where it attempts to hedge the unhedged amount if the price of oil rises above a predefined threshold. Hedges are made in the forward market on 87 per cent of expected bunker consumption for 2014, distributed with a higher proportion in the coming quarters, and a lower proportion towards the end of the year.

The table below shows the Group’s sensitivity to potential price increases of bunker fuel, with all other variables held constant.

Effect on net profit/loss after tax Effect on equity 2013 2012 2013 2012 (in NOK million) Change bunker price 20% ...... (20.0) (43.8) 28.0 (45.7)

These calculations are based on the average unhedged bunker volume, and indicate how an increase of 20 per cent in bunker prices would have had an impact on the financial statements for 2012 and 2013. The effect on equity is different than the effect on the income statement because these forward hedges fulfil the requirements for hedge accounting, and unrealised changes in value are recognised directly in equity.

(iii) Cash flow and fair-value interest rate risk The Group’s interest rate risk is associated with current and non-current borrowings. Loans subject to a variable interest rate present a risk to the Group’s overall cash flow. Fixed interest rates expose the Group to fair- value interest rate risk. Over the course of 2012 and 2013, the Group’s loans at variable interest rates were mainly in NOK. A portion of the loans assumed by Kystruten KS (SPE) and Kirberg Shipping KS (SPE) are in EUR and USD.

The Group manages its variable interest rate risk through variable-to-fixed interest rate swaps. Interest rate swaps involve converting loans with variable interest rates to fixed-interest loans. Through interest rate swaps, the Group enters into contracts with other parties to swap the difference between the contract’s fixed interest rate and the amount of the variable interest rate calculated on the agreed principal. In connection with the refinancing of the company’s long-term debt in March 2012 a new strategy was adopted for hedging interest, under which 40–60 per cent of the Group’s total exposure is to be hedged. Non-amortising interest rate swaps have been entered into corresponding to 58 per cent of the Group’s total debt on refinancing. As of 31 December 2013 around 60 per cent of the company’s total debt was hedged.

F-43 The table below shows the Group’s sensitivity to potential changes in interest rate levels, with all other variables held constant. These calculations take all interest-bearing instruments and associated derivatives into consideration.

Effect on net profit/loss after tax Effect on equity 2013 2012 2013 2012 (in NOK million) Change in interest rate level with +50 basis points ...... (4.4) (4.1) 2.0 3.4

An increase of 0.5 per cent in the variable interest rate would increase the Group’s interest costs by approximately NOK 4.4 million (2012: NOK 4.1 million) after tax. Equity would have been NOK 2.0 million higher (2012: NOK 3.4 million higher) as a result of the change in the fair value of interest rate swaps.

(b) Credit risk The Group has no significant concentration of credit risk. Sales to end users are settled in cash or with recognised credit cards. Sales to external agents are made either through prepayment/credit cards or through invoicing. The Group has routines to ensure that credit is only extended to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The counterparties to the derivative contracts and cash transactions are limited to financial institutions with high credit ratings. The Group has routines that limit exposure to credit risk relating to individual financial institutions.

As of 31 December 2011 a larger share of trade receivables than normal was due but not impaired. This related to non-settled supplementary compensation from the government for the purchase of services under the former coast route agreement, and outstanding claims against the contracting party in connection with the winding down of the Group’s charter activities in Australia. The Group received just over NOK 300 million in liquidity in December 2012 in connection with these two cases, but at the same time had to recognise a loss for the charter business along with a further provision relating to the supplementary agreement with the government. Hurtigruten no longer has any balance sheet claims relating to the charter business, and the remaining receivable due from the government represented by the Ministry of Transport and Communications in connection with the supplementary agreement has been fully written down as a result of the provision. For further details please see Note 5 Contingencies and Note 12 Receivables and other investments.

(c) Liquidity risk Liquidity risk management includes maintaining a sufficient level of liquid assets geared to operational and investment plans, and ensuring the availability of sufficient funding from committed credit facilities. The Group has a group account that ensures that part of the Group’s unrestricted liquidity is available to the parent company, and which also optimises availability and flexibility in liquidity management. The Group’s finance function has overall responsibility for managing the Group’s liquidity risk. Rolling liquidity forecasts are prepared in order to ensure that the Group has sufficient liquidity reserves to satisfy the Group’s obligations and financial loan covenants.

Hurtigruten used 2013 to establish a framework for future profitability. In a transitional year, a NOK 83 million improvement in the result on underlying operations justifies the company’s change in direction and shows that the company is on the right track. The efficiency-improvement programme that was launched in December 2012 resulted in some far-reaching changes for the company in the year under review. The programme comprised four phases, the first three of which will reduce expenses by NOK 60 million compared with 2012, with full effect from 2014. The 2013 financial statements reveal that NOK 42 million in savings have already been achieved in 2013. The fourth phase of the efficiency-improvement programme is now underway targeting areas relating to the operation of the ships. The measures will reduce expenses by an estimated NOK 100 million, the full effect of which will be felt from 2015. In addition, revenues are expected to be boosted on the back of higher on-board sales.

As of 10 February 2014, after currency effects, gross revenues from advance bookings along the Norwegian coast were up 7 per cent against the previous year, while the corresponding increase for

F-44 MS Fram was even higher at 14 per cent. In isolation, currency effects generated a cash inflow of almost NOK 50 million due to the fact that around 75 per cent of the expected cash flow in EUR has been hedged for 2014.

Lower expenses and higher revenues from the extensive efficiency-improvement programme, encouraging advance bookings and the effects of currency hedging will all help to ensure that the company is able to service the financial obligations that mature over the next year.

The table below outlines the maturity of the Group’s financial liabilities.

Under one year One to three years Three to five years More than five years (in NOK 1,000) 31 December 2013 Bank loans ...... 606,956 766,953 1,476,358 17,151 Bond loan ...... 51,100 102,200 516,800 — Trade payables and other current liabilities ...... 635,028 — — — Total ...... 1,293,084 869,153 1,993,158 17,151 31 December 2012 Bank loans ...... 553,312 979,365 1,923,688 21,045 Bond loan ...... 35,486 70,972 547,153 — Trade payables and other current liabilities ...... 716,243 — — — Total ...... 1,305,041 1,050,337 2,470,841 21,045

Hurtigruten has financial covenants attached to its loan liabilities (Note 17). As of 31 December 2013 all these covenants had been met.

The following table specifies the Group’s derivatives classified according to maturity. Classification is based on contractual maturity. Forward exchange contracts are settled gross, while interest rate swaps and futures contracts for bunker fuel are settled net. The amounts in the table are undiscounted cash flows.

Under one year One to three years Three to five years More than five years (in NOK 1,000) 31 December 2013 Forward exchange contracts—hedges —outflow ...... (779,483) (377,213) — — —inflow ...... 745,583 377,607 — — Interest rate swaps—hedges —outflow ...... (23,816) (46,685) (6,710) — —inflow ...... — — — — Futures contracts bunker oil—hedges —outflow ...... — — — — —inflow ...... 12,932 — — — 31 December 2012 Forward exchange contracts—hedges —outflow ...... — — — — —inflow ...... — — — — Interest rate swaps—hedges —outflow ...... (30,965) (41,283) (25,741) — —inflow ...... — — — — Futures contracts bunker oil—hedges —outflow ...... (12,085) (980) — — —inflow ...... — — — —

F-45 4.2 Risk relating to asset management The Group’s long-term goal for asset management is to ensure continued operations, and thereby secure future dividends for shareholders. Furthermore, the object is to maintain an optimal capital structure, and thereby reduce the Group’s capital costs. There has been no significant change in the Group’s asset management from 2012 to 2013.

In order to maintain and improve the capital structure, the Group has no plans for declaring dividends or repaying capital to shareholders in the short term. In recent years the Group has prioritised divesting non-core activities. No additional share issues have been planned for the short and medium terms.

The Group monitors capital structure on the basis of, inter alia, the equity ratio. This ratio is calculated as equity divided by total assets and as of 31 December 2013 was 22.5 per cent (31 December 2012: 22.1 per cent). The company meets the requirements for equity in the loan agreements (Note 17).

Note 5 Contingencies As of 31 December 2013, the Group had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent outcomes in the course of regular operations. No significant liabilities are expected to arise with respect to contingent outcomes with the exception of the provisions that have already been provided for in the financial statements (note 20).

Membership of the NOx Fund Hurtigruten ASA is a member of the Confederation of Norwegian Enterprise’s (NHO) NOx Fund. The main objective of the Environmental Agreement concerning reductions of NOx and the NHO’s NOx Fund is to reduce emissions of nitrogen oxide. The Fund is a joint venture to which affiliated businesses can apply for support for emission-reducing measures. Payment to the Fund replaces the nitrogen oxide tax for affiliated businesses.

The Environmental Agreement concerning reductions in NOx for 2011–2017 was signed on 14 December 2010 by 15 business organisations and the Ministry of the Environment. The agreement is a prolongation of the Environmental Agreement concerning reductions in NOx for the period 2008–2010. The Environmental Agreement and the additional declaration form the basis for work performed by the NHO’s NOx Fund. The signatories of the Environmental Agreement for the period 2011–2017 have undertaken to reduce their overall NOx emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, which can be broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017. The Environmental Agreement concerning reductions in NOx for 2008–2012 was satisfied through a total reduction of 18,000 tonnes of NOx each year. The Fund has also reported that the targets for 2011 and 2012 were satisfied.

The Norwegian Environment Agency monitors whether individual reduction targets have been achieved. Deviations of more than 10 per cent of reduction targets trigger a collective fine, under which businesses must pay the nitrogen oxide tax for the pro rata share of the target that has not been satisfied. However, the businesses will never pay more than the official government rate for nitrogen oxide tax.

Both Environmental Agreements have been approved by the EFTA Surveillance Authority (ESA). The 2011–2017 Environmental Agreement was approved by the ESA on 19 May 2011, and the 2008–2010 Environmental Agreement was approved on 16 July 2008.

NOK 15.5 million in nitrogen dioxide tax was recognised in Hurtigruten’s consolidated financial statements for 2013 (2012: NOK 15.3 million).

F-46 Dispute with Stranda Hamnevesen port authority In summer 2013 Stranda Hamnevesen instigated legal proceedings against Hurtigruten ASA concerning non-payment of passenger handling and harbour-related fees in the total amount of NOK 4 million. On 6 January 2014 Sunnmøre District Court ruled that Stranda could not claim either docking fees or passenger-handling fees from Hurtigruten for 2012 and 2013. The ruling is not legally binding as Stranda has appealed the case. However, the case is of significance in that it is the first case dealing with the application of the new Harbour Act, and will be of particular importance with regard to the establishment of legal principles.

F-47 Note 6 Segment information (a) Primary reporting format—operating segments (product areas) The operating segments are identified based on the same reporting that Group management and the board apply to their evaluations of performance and profitability at a strategic level. The company’s ultimate decision-maker, which is responsible for allocation of resources to and assessment of earnings generated by the operating segments, is defined as the board and Group management. The classification is broken down into the product areas Hurtigruten Norwegian Coast, Explorer Products/MS Fram, and Spitsbergen. Activities that do not naturally fall within these three segments are bundled in Other business.

Hurtigruten Explorer products/ Norwegian Coast MS Fram Spitsbergen Other business Eliminations Hurtigruten Group 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 (in NOK 1,000) Operating revenues ...... 2,088,744 2,214,558 294,879 275,193 172,538 165,529 7,905 11,577 (17,068) (23,045) 2,546,998 2,643,812 Contractual revenues (note 23) ...... 758,616 618,784 — — — — — — — — 758,616 618,784 Total operating revenues ...... 2,847,360 2,833,342 294,879 275,193 172,538 165,529 7,905 11,577 (17,068) (23,045) 3,305,614 3,262,596 Payroll costs ...... (713,214) (722,664) (41,326) (41,693) (52,016) (58,573) 284 (6,002) — — (806,272) (828,932) Depreciation and impairment losses ...... (313,238) (300,207) 56,149 (20,388) (10,607) (11,418) (41,204) (46,655) — — (308,899) (378,668) Other operating costs ...... (1,676,887) (1,736,486) (177,176) (192,700) (96,237) (89,831) (5,417) (6,135) 17,068 23,045 (1,938,648) (2,002,106) Other (losses)/gains—net ...... 376 (347) — — 225 — 8,786 3,839 — — 9,387 3,493 F-48 Operating profit/(loss) ...... 144,397 73,638 132,527 20,412 13,903 5,707 (29,647) (43,374) — — 261,181 56,382 Finance expenses—net ...... (194,570) (220,469) (32,763) (31,694) 871 877 (4,629) 30,693 — — (231,092) (220,593) Share of profit/(loss) of associates ...... — — — — 473 — 10,364 (2,130) — — 10,837 (2,130) Profit/(loss) before tax from continuing operations ...... (50,173) (146,831) 99,764 (11,282) 15,247 6,584 (23,912) (14,812) — — 40,926 (166,341) Profit/(loss) before tax from discontinued operations (note 7) ...... — — — — — — (14,834) (146,128) — — (14,834) (146,128) Profit/(loss) before tax ...... (50,173) (146,831) 99,764 (11,282) 15,247 6,584 (38,746) (160,940) — — 26,092 (312,469) Segment profit/(loss) Operating profit/(loss) before depreciation, amortisation and impairment losses (EBITDA) ...... 457,635 373,845 76,378 40,800 24,510 17,125 11,557 3,281 — — 570,080 435,050 The reporting of segment assets and liabilities is not part of the internal management reporting in the Group. Material assets and liabilities are monitored at Group level, and certain key figures (such as trade receivables) are assessed based on the status of the individual legal entities. Segment assets and liabilities are therefore not presented per operating segment.

Hurtigruten Norwegian Coast This product area comprises the company’s operation of the Bergen to Kirkenes coastal service in accordance with the contract with the Norwegian government represented by the Ministry of Transport and Communications. This service is operated using 11 ships with daily calls to 34 ports between Bergen and Kirkenes. Although passenger transport represents the greatest portion of the service, the cargo service is also substantial.

Explorer products/MS Fram This product area includes the cruise activities in Polar waters—Antarctica, Svalbard, Greenland and cruises between Antarctica and the Arctic. The cruises are operated by MS Fram, which was custom-built to operate in Polar waters.

Spitsbergen The Spitsbergen product area includes Arctic experience tourism on Svalbard. Activities in Svalbard are organised under the Spitsbergen Travel Group, a wholly owned subsidiary of Hurtigruten ASA. The activities include overnight accommodation in the company’s two hotels and one guest house, catering business, and excursions and expeditions.

Other business Other business includes the company’s two remaining fast ferries, a minor portfolio of properties and less extensive activities that cannot naturally be classified in the other reporting segments

The Group’s activities that are classified as discontinued are included in Other business. Activities relating to buses managed by AS TIRB and the subsidiary Cominor AS are classified as discontinued operations as of 31 December 2013. The comparative figures in the income statement for 2012 have been restated. The Group’s charter activities relating to the leasing of ships to the oil industry were also classified as discontinued in 2012. The business was discontinued from 1 January 2012 and the result from this business recognised in 2012 reflects the discontinued items.

Eliminations Eliminations in 2012 and 2013 primarily consisted of the subsidiary Cominor AS’s excursions for Hurtigruten.

(b) Secondary reporting format—geographical segments Operating revenues cannot be reliably allocated to separate geographical segments. Group management only monitors geographical segments for selected areas of consolidated sales.

F-49 Note 7 Assets held-for-sale and discontinued operations ASSETS CLASSIFIED AS HELD-FOR-SALE As of 31 December 2013 the Group’s bus business was classified as held for sale.

Assets in the disposal group classified as held-for-sale

2013 2012 (in NOK 1,000) Property, plant and equipment (note 8) ...... 142,459 — Investments in associates (note 10) ...... 2,640 — Deferred income tax assets (note 18) ...... 467 — Non-current receivables and investments (note 12) ...... 1,105 — Inventories (note 13) ...... 909 — Trade and other receivables (note 12) ...... 11,099 — Cash and cash equivalents (note 14) ...... 55,765 — Total assets ...... 214,444 —

Liabilities in the disposal group classified as held-for-sale

2013 2012 (in NOK 1,000) Borrowings (note 17) ...... 26,140 — Derivative financial instruments (note 11) ...... 1,439 — Retirement benefit obligations (note 19) ...... 24,375 — Trade and other payables (note 22) ...... 29,099 — Borrowings (note 17) ...... 8,901 — Total liabilities ...... 89,954 —

DISCONTINUED OPERATIONS In accordance with company’s planned sale of non-strategic shareholdings, the bus business was classified as discontinued as of 31 December 2013. The comparative figures in the income statement for 2012 have been restated. In addition the Group’s charter activities relating to the leasing of ships to the oil industry were recognised under discontinued operations in 2012.

Profit/loss from discontinued operations

2013 2012 (in NOK 1,000) Operating revenues (note 23) ...... 186,534 222,322 Payroll costs (note 24) ...... (93,786) (111,662) Depreciation, amortisation and impairment losses ...... (32,324) (37,137) Other operating costs (note 26) ...... (70,441) (231,671) Other (losses)/gains—net (note 27) ...... — 6,307 Operating profit/(loss) ...... (10,017) (151,840) Finance income (note 28) ...... 1,393 23,211 Finance expenses (note 28) ...... (3,220) (17,285) Finance expenses—net ...... (1,827) 5,925 Share of profit/(loss) of associates (note 10) ...... (2,990) (213) Profit/(loss) before tax ...... (14,834) (146,128) Income tax expense (note 18) ...... 3,245 5,386 Profit/(loss) for the year ...... (11,589) (140,742)

The result for 2012 includes losses on receivables in the amount of NOK 99 million following settlement with a contracting party, foreign exchange effects and lawyers’ fees in connection with the concluded arbitration case.

F-50 Net cash flows from discontinued operations

2013 2012 (in NOK 1,000) Net cash flows from (used in) operating activities ...... 28,266 (123,746) Net cash flows from (used in) investing activities ...... (8,875) 26,384 Net cash flows from (used in) financing activities ...... (14,088) (142,210) Total net cash flows ...... 5,303 (239,572)

Note 8 Property, plant and equipment

Other Land property, and plant and buildings Ships equipment Total (in NOK 1,000) 2012 financial year Book value as of 1 January 2012 ...... 173,846 3,449,705 227,537 3,851,087 Reclassification of operating assets held-for-sale ...... — 60,384 — 60,384 Additions ...... 4,283 246,510 20,428 271,222 Disposals ...... 2,474 (7,229) (31,058) (35,813) Depreciation ...... (6,932) (322,493) (36,858) (366,283) Impairment losses ...... — (28,292) (3,614) (31,906) Book value as of 31 December 2012 ...... 173,671 3,398,585 176,435 3,748,690 As of 31 December 2012 Cost ...... 262,489 6,296,068 754,049 7,312,606 Accumulated depreciation and impairment losses ...... (88,818) (2,897,483) (577,614) (3,563,915) Book value as of 31 December 2012 ...... 173,671 3,398,585 176,435 3,748,690 2013 accounting year Book value as of 1 January 2013 ...... 173,671 3,398,585 176,435 3,748,690 Additions ...... 3,297 230,657 18,966 252,920 Disposals ...... (13,786) — 5,953 (7,832) Depreciation ...... (5,939) (340,970) (35,768) (382,676) Impairment losses ...... (570) 85,230 (13,996) 70,664 Of which operating assets held-for-sale (note 7) ...... (11,952) — (130,507) (142,459) Book value as of 31 December 2013 ...... 144,722 3,373,502 21,082 3,539,306 As of 31 December 2013 Cost ...... 252,001 6,526,725 778,968 7,557,694 Accumulated depreciation and impairment losses ...... (95,327) (3,153,223) (627,377) (3,875,927) Of which assets held-for-sale (note 7) ...... (11,952) — (130,507) (142,459) Book value as of 31 December 2013 ...... 144,722 3,373,502 21,082 3,539,306

Indications of potential impairments in ships are assessed each quarter. The impairment test of the ships used for the Norwegian coastal service as of 31 December 2013 did not reveal any indication of impairment as the ships’ respective recoverable amounts were higher than their book values.

The following impairment losses and reversal of impairment losses have been done in 2013: • An impairment loss of NOK 100 million was recognised in 2008 to reflect the expected fair value of the Explorer ship MS Fram. As a result of improved earnings and a healthy order book at the start of 2014, the impairment loss was reversed in its entirety as of 31 December 2013. The reversal was based on a value-in-use calculation for the Explorer segment. A discount rate of 9.3 per cent was used to determine the value-in-use calculation. After adjusting for depreciation for the period, the reversal of the net impairment loss amounts to NOK 78 million. • The Groups two remaining fast ferries were sold in 2014, and NOK 7.5 million of the previous impairment loss was reversed as of 31 December 2013 in order to reflect fair value.

F-51 • The bus business has recognised an impairment loss of NOK 5 million as a result of the loss of a driving contract for the Norwegian Armed Forces. • Following ANS Havnebygningen’s sale of the building where the company hired business premises in Tromsø, an impairment loss of NOK 9 million was recognised in respect of the upgrading of the premises in the consolidated financial statements.

Leases In 2012 and parts of 2013 the Group leased office premises and another building from HRG Eiendom AS, along with office premises from the associate ANS Havnebygningen. As part of the company’s efficiency- improvement and reorganisation measures implemented in 2013 both buildings and a residence in HRG Eiendom AS were sold during 2013. The commercial building owned by ANS Havnebygningen was also sold. Consequently, the Group gradually started to lease other premises from external parties during 2013. The parent company and subsidiaries also incur external lease costs relating to premises. The parent company’s charter of Hurtigruten ships has been eliminated in the consolidated financial statements (sale-leaseback agreement with two limited partnerships). Please see Note 20 concerning the details of this agreement. Furthermore, the parent company and subsidiaries have external costs related to the leasing of other equipment and means of transport. These are operating leases.

Total leasing costs related to the above comprise

2013 2012 (in NOK 1,000) Rent for premises ...... 15,467 11,750 Lease charges for other property, plant and equipment ...... 693 1,076 Total leasing costs ...... 16,160 12,826

Note 9 Intangible assets

Other intangible Goodwill assets Total (in NOK 1,000) 2012 financial year Book value as of 1 January 2012 ...... 143,714 128,596 272,311 Currency translation differences ...... — (21) (21) Additions ...... — 104,457 104,457 Amortisation ...... — (17,616) (17,616) Book value as of 31 December 2012 ...... 143,714 215,416 359,130 As of 31 December 2012 Cost ...... 321,888 330,447 652,335 Accumulated amortisation and impairment losses ...... (178,174) (115,031) (293,205) Book value as of 31 December 2012 ...... 143,714 215,416 359,130 2013 accounting year Book value as of 1 January 2013 ...... 143,714 215,416 359,130 Additions ...... — 43,993 43,993 Amortisation ...... — (27,712) (27,712) Impairment losses ...... — (1,500) (1,500) Book value as of 31 December 2013 ...... 143,714 230,198 373,911 As of 31 December 2013 Cost ...... 321,888 374,440 696,328 Accumulated amortisation and impairment losses ...... (178,174) (144,243) (322,417) Book value as of 31 December 2013 ...... 143,714 230,198 373,911

F-52 Goodwill has arisen in connection with business acquisitions. Other intangible assets primarily comprise capitalised development expenses related to ICT systems (booking, inventories, etc.) with a limited lifespan. The assets are amortised on a straight-line basis over 3–10 years. Amortisation is presented under amortisation in the financial statements.

Impairment losses in 2013 relate to ICT systems that have been scrapped and replaced with new systems.

Goodwill relates to the following cash-generating unit

2013 2012 (in NOK 1,000) Spitsbergen ...... 143,714 143,714

The recoverable amount of a cash-generating unit is calculated on the basis of budgets and liquidity forecasts for the units approved by management.

Assumptions applied when calculating the recoverable amount

Spitsbergen (in NOK 1,000, unless otherwise indicated) Budgeted EBITDA 2014 Growth rate from 2014 ...... 2.0% Discount rate before tax ...... 8.9% The recoverable amount is calculated as ...... 627,725

The forecast period is three years. Subsequently the terminal value is used.

Note 10 Investments in associates Group investments recognised in accordance with the equity method are specified below. All the companies only have ordinary shares and are not listed.

Company Registered office Shareholding 2013 Senja Rutebil AS ...... Vangsvik, Norway 49.3% ANS Havnebygningen ...... Tromsø, Norway 50.0% Green Dog Svalbard AS ...... Longyerbyen, Svalbard 50.0% 2012 Funn IT AS ...... Narvik, Norway 50.0% Senja Rutebil AS ...... Vangsvik, Norway 49.3% ANS Havnebygningen ...... Tromsø, Norway 50.0%

Senja Rutebil AS has no connection with the Group, other than AS TIRB’s shareholding in the company.

ANS Havnebygningen owned and leased out the building in which the company previously hired offices in Tromsø. ANS Havnebygningen sold this building during the reporting period.

Green Dog Svalbard AS offers dog-related services for tourists on Svalbard. These include dog sleigh rides, overnight trips with teams of dogs and similar.

Funn IT AS previously managed parts of Hurtigruten ASA’s IT function. The shares were sold at the start of 2013.

Abridged financial information for associates The table below shows abridged financial information for Senja Rutebil AS, ANS Havnebygningen and Green Dog Svalbard AS, which are recognised in accordance with the equity method. The table shows the accounting results of the associates, and not the Hurtigruten Group’s share of these results.

F-53 Abridged balance sheet

ANS Green Dog Senja Rutebil AS Havnebygningen Svalbard AS Funn IT AS Total 2013 2012 2013 2012 2013 2012 2013 2012 2012 (in NOK 1,000) Current items Cash and cash equivalents ...... 2,075 2,373 3,404 3,049 1,730 — — 9,147 7,208 14,569 Other current assets ...... 803 2,044 49,893 163 530 — — 18,381 51,226 20,588 Total current assets ..... 2,878 4,417 53,296 3,212 2,260 — — 27,528 58,434 35,157 Other current liabilities (incl. trade payables) . . . (1,001) (1,591) (236) (225) (907) — — (17,365) (2,144) (19,181) Total current liabilities ... (1,001) (1,591) (236) (225) (907) — — (17,365) (2,144) (19,181) Non-current items Non-current assets ...... 4,442 6,851 — 4,185 1,834 — — 15,521 6,276 26,558 Total non-current assets ...... 4,442 6,851 — 4,185 1,834 — — 15,521 6,276 26,558 Financial liabilities ...... — — (489) (2,174) — — — (399) (489) (2,573) Other liabilities ...... (218) (335) — — (2,241) — — — (2,458) (335) Total non-current liabilities ...... (218) (335) (489) (2,174) (2,241) — — (399) (2,948) (2,908) Net assets ...... 6,102 9,343 52,571 4,997 946 — — 25,286 59,618 39,626

Abridged income statement

ANS Green Dog Senja Rutebil AS Havnebygningen Svalbard AS Funn IT AS Total 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 (in NOK 1,000) Operating revenues ...... 8,968 11,494 50,015 3,639 5,682 — — 106,408 64,665 121,540 Depreciation, amortisation and impairment losses ...... (1,357) (1,098) (832) (794) (254) — — (10,303) (2,443) (12,195) Interest income ...... 31 58 37 46 4 — — 317 71 421 Interest expenses ...... — (1) (45) (110) (26) — — (90) (71) (201) Profit/loss from discontinued operations ...... (9,900) (11,402) (1,602) (1,563) (4,274) — — (100,609) (15,776) (113,575) Income tax ...... 263 — — (191) — — 801 (191) 1,063 Profit/loss from continuing operations after tax ...... (2,259) (687) 47,573 1,217 941 — — (3,477) 46,255 (2,946) Profit/loss from discontinued operations after tax ...... — — — — — — — — — — Comprehensive income ...... (2,259) (687) 47,573 1,217 941 — — (3,477) 46,255 (2,946)

F-54 Reconciliation with financial statements

ANS Green Dog Senja Rutebil AS Havnebygningen Svalbard AS Funn IT AS Total 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 (in NOK 1,000) Net assets as of 1 January ...... 9,343 13,984 4,997 3,780 (13) — — 28,762 14,327 46,526 Profit/loss ...... (2,259) (687) 47,573 1,217 941 — — (3,477) 46,255 (2,946) Net assets as of 31 December 2013 ...... 7,084 13,297 52,571 4,997 928 — — 25,286 60,582 43,580 The Group’s share of net assets . . . 3,492 6,554 26,285 2,499 473 — — 12,643 30,250 21,696 Goodwill ...... — — 13,671 13,671 — — — 3,109 13,671 16,780 Impairment losses ...... (852) (924) (13,671) — — — — (1,000) (14,523) (1,924) Of which classified as discontinued operations (note 7) ...... (2,640) — — — — — — — (2,640) — Amount recognised in balance sheet ...... — 5,630 26,285 16,170 473 — — 14,752 26,758 36,552

Note 11A Financial instruments by category The following principles have been applied for the subsequent measurement of financial assets and liabilities As of 31 December 2013

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Non-current receivables (note 12) ...... 904 — — — 904 Shares in other companies (note 12) ...... — 9,021 — — 9,021 Of which shares in other companies classified as held-for- sale (note 7) ...... — (1,105) — — (1,105) Financial assets—current Trade and other receivables (note 12) ...... 139,119 — — — 139,119 Derivative financial instruments (note 11C) ...... — — 12,932 — 12,932 Cash and cash equivalents (note 14) ...... 443,661 16,546 — — 460,207 Of which trade and other receivables classified as held-for- sale (note 7) ...... (11,099) — — — (11,099) Of which cash and cash equivalents classified as held-for- sale (note 7) ...... (55,765) — — — (55,765) Financial liabilities—non-current Borrowings (note 17) ...... — — — 3,002,627 3,002,627 Derivative financial instruments (note 11C) ...... — — 61,191 — 61,191 Of which borrowings classified as held-for-sale (note 7) . . . — — — (35,041) (35,041) Of which derivative financial instruments classified as held- for-sale (note 7) ...... — — (1,439) — (1,439) Financial liabilities—current Trade and other payables (note 22) ...... — — — 635,028 635,028 Derivative financial instruments (note 11C) ...... — 12,671 39,329 — 52,000 Of which trade and other payables classified as held-for-sale ...... — — — (25,052) (25,052)

F-55 As of 31 December 2012

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Non-current receivables (note 12) ...... 16,555 — — — 16,555 Shares in other companies (note 12) ...... — 9,868 — — 9,868 Financial assets—current Trade and other receivables (note 12) ...... 293,762 — — — 293,762 Derivative financial instruments (note 11C) ...... — 5,717 — — 5,717 Cash and cash equivalents (note 14) ...... 539,685 9,162 — — 548,847 Financial liabilities—non-current Borrowings (note 17) ...... — — — 3,209,535 3,209,535 Derivative financial instruments (note 11C) ...... — — 60,778 — 60,778 Financial liabilities—current Trade and other payables (note 22) ...... — — — 716,243 716,243 Derivative financial instruments (note 11C) ...... — — 21,049 — 21,049

Assessment of fair value The level hierarchy used for the measurement of fair value is based on the following categories: • Listed price in an active market for an identical asset or liability (Level 1) • Valuation based on observable factors, either directly (price) or indirectly (derived from prices), other than listed price (used in Level 1) for the asset or liability (Level 2) • Valuation based on factors not obtained from observable markets (unobservable assumptions) (Level 3)

The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2013

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... 1,815 11,117 — 12,932 Derivatives held for trading purposes ...... — — — — Shares in other companies ...... — — 9,021 9,021 Other securities ...... 16,546 — — 16,546 Total assets ...... 18,360 11,117 9,021 38,498 Liabilities Derivatives used for hedging ...... — 100,519 — 100,519 Derivatives held for trading purposes ...... — 12,671 12,671 Total liabilities ...... — 113,191 — 113,191

F-56 The following table presents the Group’s assets and liabilities measured at fair value as of 31 December 2012

Level 1 Level 2 Level 3 Total (NOK ’000) Assets Derivatives held for trading purposes ...... — 5,717 — 5,717 Shares in other companies ...... — — 9,868 9,868 Other securities ...... 9,162 — — 9,162 Total assets ...... 9,162 5,717 9,868 24,747 Liabilities Derivatives used for hedging ...... 11,244 70,584 — 81,828 Total liabilities ...... 11,244 70,584 — 81,828

There were no transfers between Level 1 and 2 or between Level 2 and Level 3 during the year.

The fair value of financial instruments that are traded in active markets is based on the market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and these prices represent actual and regularly occurring market transactions on an arm’s length basis. The market price used for financial assets is the current bid price, and the price used for financial liabilities is the current asking price. These instruments are included in Level 1 and comprise the fair value of some forward bunker oil contracts and other securities.

The fair value of financial instruments that are not traded in an active market is determined by means of various valuation methods. The Group uses various methods and makes assumptions based on the prevailing market conditions at the balance sheet date. If all the significant data inputs that are required to determine the fair value of an instrument are observable data, then the instrument will be included in Level 2. This includes the fair value of forward foreign exchange contracts, foreign exchange options and interest rate swaps and some forward bunker oil contracts.

The nominal value less impairment for losses incurred on trade receivables and the nominal value of trade payables are assumed to approximate the fair value of the items.

If one or more of the significant data inputs are not based on observable market data, the instrument will be included in Level 3. Non-current borrowings measured at amortised cost whose fair value is disclosed in note 17 are recorded at Level 3.

Particular valuation methods that are used to assess financial instruments include: • Quoted market or trading price for corresponding instruments. • Fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flow based on the observable yield curve. • Fair value of forward contracts in a foreign currency is calculated as the present value of the difference between the agreed forward price and the forward price at the balance sheet date multiplied by the contract volume in a foreign currency. The relevant interest rate at the balance sheet date is used for calculation of the present value. • Other methods, such as discounted cash flows, are used to determine the fair value of the remaining financial instruments.

F-57 The following table illustrates changes in the Level 3 category instruments as of 31 December 2013 and as of 31 December 2012

31.12.2013 31.12.2012 (in NOK 1,000) Shares in other companies Opening balance ...... 9,868 15,314 Share issues during the period ...... — 750 Sales during the period ...... (317) (24,560) Gain in income statement (under “Finance income”) ...... 112 18,364 Loss in income statement (under “Finance expenses”) ...... (15) — Impairment losses during the period ...... (627) — Closing balance ...... 9,021 9,868

Total gains or losses for the period included in the profit or loss for assets held at the balance sheet date.

Note 11B Creditworthiness of financial assets

Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has long-standing partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2013 2012 (in NOK 1,000) Trade and other receivables Counterparties without external credit rating ...... 139,119 293,762 Total trade and other receivables ...... 139,119 293,762 Cash at bank(1) AA...... 104,777 96,998 A ...... 321,046 412,785 BBB...... — 2,036 Without external credit rating ...... 17,838 16,154 Total cash at bank ...... 443,661 527,974

(1) The remainder of the cash and cash equivalents in the balance sheet is cash

Market-based investments A ...... 16,546 9,162 Total ...... 16,546 9,162 Derivative financial instruments AA...... 8,159 5,717 A ...... 2,958 — Without external credit rating ...... 1,815 — Total ...... 12,932 5,717

None of the financial assets have been renegotiated during the last financial year.

Note 11C Derivative financial instruments

All derivatives designated as cash flow hedges are recognised at fair value in the balance sheet, while changes in fair value are adjusted in other comprehensive income, and recognised in the income statement when the hedged cash flow is recognised in the income statement. Changes in the fair value of currency options held for trading purposes are recognised as operating revenues and changes in the fair value of bunker options held for trading purposes are classified as bunker costs.

F-58 Fair value is calculated based on the mid-price set by the contract counterparty based on current prices in the market on the reporting date.

The table below illustrates the fair value of derivatives designated as cash flow hedges and derivatives held for trading purposes.

2013 2012 Assets Liabilities Assets Liabilities (in NOK 1,000) Forward foreign exchange contracts—cash flow hedging ...... — 45,390 —— Foreign exchange options—held for trading purposes ...... — 11,242 5,717 — Interest rate swaps—cash flow hedging ...... — 55,130 — 68,763 Forward bunker oil contracts—cash flow hedging ...... 12,932 — — 13,065 Bunker options—for trading purposes ...... — 1,429 —— Of which interest rate swaps held-for-sale (note 7) ...... — (1,439) —— Total ...... 12,932 111,752 5,717 81,828 Of which non-current Forward foreign exchange contracts—cash flow hedging ...... — 6,062 —— Interest rate swaps—cash flow hedging ...... — 55,130 — 59,373 Forward bunker oil contracts—cash flow hedging ...... ——— 1,405 Of which interest rate swaps held-for-sale (note 7) ...... — (1,439) —— Total ...... — 59,752 — 60,778 Of which current ...... 12,932 52,000 5,717 21,049

Derivatives held for trading purposes are classified as current assets or liabilities. The entire fair value of hedging instruments is classified as a non-current asset or non-current liability if the remaining maturity of the hedging object is more than 12 months, and as a current asset or current liability if the remaining maturity of the hedging object is less than 12 months.

No ineffectiveness was recordable for any of the cash flow hedges in 2012 or 2013. All the forecast cash flows that were hedged in 2013 continue to qualify for hedge accounting. a) Forward foreign exchange contracts The nominal amount of outstanding forward foreign exchange contracts as of 31 December 2013 was NOK 1,157 million (as of 31 December 2012 there were no outstanding forward foreign exchange contracts that qualified for hedge accounting).

The hedged, highly probable transactions in foreign currency are expected to occur at various dates over the next 18 months. The forward foreign exchange contracts satisfy the requirements for hedge accounting in accordance with IFRSs and the changes in the fair value are adjusted in other comprehensive income. Gains and losses on contracts recognised in other comprehensive income as of 31 December 2013 will be recognised in the income statement in the same accounting periods that the hedged transactions affect the income statement. Realised gains and losses are allocated to passenger revenues. In 2013 realised losses allocated to passenger revenues amounted to NOK 20.8 million (2012: gains of NOK 31.1 million).

(b) Interest rate swaps The nominal principal on outstanding interest rate swaps as of 31 December 2013 was NOK 1,785 million (2012: NOK 2,088 million).

As of 31 December 2013 the fixed interest rate ranged from 2.7 to 4.5 per cent (2012: from 2.7 to 5.3 per cent). The variable interest rates were NIBOR. Gains and losses on interest rate swaps recognised in other comprehensive income as of 31 December 2013 (note 16), will continuously be reversed in the income statement until the bank borrowings (note 17) have been repaid. Realised gains and losses are allocated to interest expenses. In 2013 realised losses totalling NOK 31.4 million were allocated to interest expenses (2012: NOK 19.6 million).

F-59 (c) Oil derivatives The nominal amount of outstanding forward bunker oil contracts as of 31 December 2013 was NOK 266 million (2012: NOK 163 million).

The hedged, highly probable transactions are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward bunker oil contracts satisfy the requirements for hedge accounting under IFRSs and changes in fair value are recognised directly in other comprehensive income. Gains or losses on oil derivatives recognised in other comprehensive income as of 31 December 2013 (note 16), will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. Realised gains or losses are allocated to bunker costs. In 2013 realised gains of approximately NOK 0 were allocated to bunker costs (2012: NOK 5.3 million).

Transfers to and from equity The following movements in equity related to cash flow hedges have occurred during the year

2013 2012 (in NOK 1,000) Fair value of cash flow hedging for foreign currency opening balance ...... — 22,298 Change in value during the year recognised in other comprehensive income ...... (45,390) (22,298) Fair value of cash flow hedging for foreign currency closing balance ...... (45,390) — Fair value of cash flow hedging for interest rates opening balance ...... (68,763) (17,776) Change in value during the year recognised in other comprehensive income ...... 13,633 (50,987) Fair value of cash flow hedging for interest rates closing balance ...... (55,130) (68,763) Fair value of cash flow hedging for bunker oil opening balance ...... (13,065) 6,341 Change in value during the year recognised in other comprehensive income ...... 25,997 (19,406) Fair value of cash flow hedging for bunker oil closing balance ...... 12,932 (13,065) Total fair value of cash flow hedging opening balance ...... (81,828) 10,863 Total changes in value during the year recognised in other comprehensive income ...... (5,760) (92,691) Total fair value of cash flow hedging closing balance ...... (87,588) (81,828)

Note 12 Receivables and other investments

2013 2012 (NOK 1,000) Trade receivables ...... 202,096 290,679 Less provision for impairment of trade receivables ...... (123,861) (121,385) Trade receivables—net ...... 78,236 169,294 Other receivables ...... 60,883 124,468 Of which current receivables held-for-sale (note 7) ...... (11,099) — Total current receivables (note 11) ...... 128,020 293,762 Plan assets (note 19) ...... 2,686 1,871 Prepayments ...... 1,368 2,226 Shares in other companies (note 11A) ...... 9,021 9,868 Other non-current receivables (note 11A) ...... 904 16,555 Of which non-current receivables and investments held-for-sale (note 7) ...... (1,105) — Total current receivables and investments ...... 12,874 30,520

With regard to the specification of receivables from related parties, please see note 30.

F-60 Age distribution of overdue trade receivables is as follows

2013 2012 (in NOK 1,000) Up to three months ...... 5,862 38,148 Three to six months ...... 1,341 4,179 Over six months ...... 1,661 10,892 Of which due trade receivables held-for-sale (note 7) ...... (865) — Total trade receivables overdue ...... 7,999 53,218

The change in the provisions for impairment of trade receivables is as follows

2013 2012 (in NOK 1,000) Provision for impairment of receivables as of 1 January ...... 121,385 63,026 Provision for impairment of receivables during the year ...... 3,827 218,707 Receivables written off during the year ...... 862 (146,030) Reversal of unused amounts ...... (1,330) (14,318) Of which provisions for impairment of trade receivables held-for-sale (note 7) ...... (109) — Total change in the provisions for impairment of trade receivables ...... 124,635 121,385

The above amount in 2012 primarily relates to a provision of NOK 108 million recognised, relating to the Supplementary Agreement with the Norwegian government following the ruling by the EFTA Court on the ESA case.

The other classes of trade and other receivables do not contain impaired assets.

Note 13 Inventories Inventories consist of the following types of goods

2013 2012 (in NOK 1,000) Goods purchased for resale ...... 64,413 52,589 Spare parts ...... 909 909 Bunkers ...... 21,064 23,550 Of which inventories held-for-sale (note 7) ...... (909) — Total inventories ...... 85,477 77,048

The cost of goods sold included in other operating costs amounted to NOK 500 million (2012: NOK 573 million).

Inventories are measured at cost. If the fair value is deemed to be lower than the cost price, then the inventories will be written down.

Note 14 Cash and cash equivalents

2013 2012 (in NOK 1,000) Cash at bank and on hand (note 11A) ...... 443,661 539,685 Market-based investments(1) (note 11A) ...... 16,546 9,162 Of which cash, cash on hand and market-based investments held-for-sale (note 7) ...... (55,765) — Cash at bank, cash on hand and market-based investments in the balance sheet ...... 404,442 548,847

F-61 In the cash flow statement cash and cash equivalents consist of the following

2013 2012 (in NOK 1,000) Cash at bank and on hand ...... 443,661 539,685 Market-based investments(1) ...... 16,546 9,162 Restricted bank deposits(2) ...... (76,990) (83,053) Of which cash, cash on hand and market-based investments held-for-sale (note 7) ...... (55,765) — Cash and cash equivalents in the cash flow statement ...... 327,452 465,794

Market-based investments consist of the following items

2013 2012 (in NOK 1,000) Securities held for trading purposes Other securities(1) ...... 16,546 9,162 Total ...... 16,546 9,162

(1) Funds owned by a foreign subsidiary. (2) Restricted bank deposits primarily comprise tax withholding funds, pledged bank deposits and guarantees to limited partnerships.

Note 15 Share capital and premium

Number of Nominal value of Share Treasury shares ordinary shares premium shares Total (in NOK 1,000 unless otherwise indicated) As of 31 December 2012 ...... 420,259,163 420,259 734,622 (293) 1,154,588 As of 31 December 2013 ...... 420,259,163 420,259 734,622 (293) 1,154,588

All ordinary shares have equal rights.

The Annual General Meeting was held on 17 April 2013 and granted the company’s board power of attorney to acquire treasury shares. The general meeting adopted the following resolution: I. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire treasury shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of treasury shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. II. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. III. The board is free to determine how the acquisition and sale of treasury shares shall take place. IV. This power of attorney shall remain valid until the company’s Annual General Meeting in 2014.

The board does not have any power of attorney to increase the company’s share capital.

F-62 20 largest shareholders as of 31 December 2013

Number of Shareholding shares (%) Periscopus AS ...... 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... 69,310,196 16.49 MP Pensjon PK ...... 28,170,366 6.70 Skagen Vekst ...... 22,671,503 5.39 Home Capital AS ...... 21,023,693 5.00 Nordkraft AS ...... 10,844,896 2.58 Dahle, Bjørn ...... 7,598,657 1.81 J.M. Hansen Invest AS ...... 4,290,000 1.02 Berg-Larsen Alexande ...... 2,590,966 0.62 Alta Invest AS ...... 2,029,367 0.48 Odin Maritim ...... 2,000,000 0.48 Warrenwicklund Norge securities fund ...... 1,980,316 0.47 Netfonds Liv ...... 1,839,877 0.44 Flisa Eiendomsinvest ...... 1,750,569 0.42 Warbo AS ...... 1,680,000 0.40 Widnes Odd-Ingar ...... 1,450,000 0.35 Holger Invest I AS ...... 1,400,000 0.33 Narvik Local Authority ...... 1,382,767 0.33 Suveren AS ...... 1,100,000 0.26 Troms County Council ...... 1,048,461 0.25 20 largest shareholders ...... 323,384,923 76.95 Other shareholders ...... 96,874,240 23.05 Total no. of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.38 per cent and ML Pierce Fenner owns 3.11 per cent.

F-63 Shares held by elected officers and senior executives of Hurtigruten ASA as of 31 December 2013 (directly and indirectly)

Number of shares Corporate assembly Westye Høegh, Chair ...... 950,000 Bjørn Dahle, Deputy Chair ...... 7,598,657 Karen M. Kuvaas ...... 699 Fay Hege Fredriksen ...... — Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Tor Zachariassen ...... — Asbjørn Larsen, elected by employees ...... — Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... — Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Berit Kjøll ...... 100,000 Arve Giske ...... — Guri Mai Elmar ...... — Petter Anker Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... — Management Daniel A. Skjeldam, President/CEO ...... 95,000 Asta Lassesen, CFO ...... 700,000 Sigurd Bay, Senior Vice President Price & Revenue Management from 8 April ...... 33,500 Anne Marit Bjørnflaten, Senior Vice President, Corporate Communications from 11 September . . — Kjell Christoffersen, Senior Vice President HR Development from 15 August ...... 12,782 Tor Geir Engebretsen, Acting Senior Vice President Maritime Operations from 28 October ...... — Oscar Engeli, Senior Vice President ICT from 16 September ...... — Vidar Engen, Senior Vice President Product & Markets from 1 July ...... — Chris Hudson, Senior Vice President Hotel Operations from 8 April ...... — Magnus Wrahme, Senior Vice President Global Sales from 2 May ...... 30,000 Ole Fredrik Hienn, Senior Vice President Legal Affairs until 8 April ...... — Hans Rood, Senior Vice President Global Sales until 8 April ...... — Torkild Torkildsen, Senior Vice President Public Affairs until 1 November ...... 1,684 Dag-Arne Wensel, Senior Vice President Maritime Operations until 28 October ...... 63,650

(1) The shares are owned through the company Periscopus AS (2) The shares are owned through the company Home Capital AS

The company’s auditor does not own any shares in Hurtigruten ASA.

F-64 20 largest shareholders as of 31 December 2012

Number of Shareholding shares (%) Periscopus AS ...... 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... 71,835,396 17.09 MP Pensjon PK ...... 29,000,000 6.90 Skagen Vekst ...... 22,671,503 5.39 Home Capital AS ...... 21,023,693 5.00 Nordkraft AS ...... 10,844,896 2.58 Dahle, Bjørn ...... 7,099,979 1.69 J.M. Hansen Invest AS ...... 4,608,293 1.10 Odin Maritim ...... 2,000,000 0.48 Netfonds Liv ...... 1,672,246 0.40 Holger Invest I AS ...... 1,400,000 0.33 Narvik Local Authority ...... 1,382,767 0.33 Alta Invest AS ...... 1,378,119 0.33 Skagen Vekst III ...... 1,223,405 0.29 Fjellvit AS(2) ...... 1,119,040 0.27 Troms County Council ...... 1,048,461 0.25 JPMorgan Chase Bank ...... 1,041,115 0.25 Kvade, Kai Vallin ...... 1,000,100 0.24 Avanza Bank AB brokerage account ...... 950,015 0.23 State Street Bank AN ...... 919,738 0.22 20 largest shareholders ...... 321,442,055 76.49 Other shareholders ...... 98,817,108 23.51 Total no. of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

Shares held by elected officers and senior executives of Hurtigruten ASA as of 31 December 2012 (directly and indirectly)

Number of shares Corporate assembly Westye Høegh, Chair ...... — Bjørn Dahle, Deputy Chair ...... 7,099,979 Karen M. Kuvaas ...... 699 Svein Otto Garberg ...... 835,327 Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Fay Hege Fredriksen ...... — Asbjørn Larsen, elected by employees ...... 5,550 Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... 285 Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Mai Elmar ...... — Arve Giske ...... — Berit Kjøll ...... 100,000 Petter Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... —

F-65 Number of shares Management Daniel A. Skjeldam, President/CEO from 1 October 2012 ...... 29,000 Olav Fjell, President/CEO until 30 September 2012(3) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Asta Lassesen, CFO ...... 600,000 Glen Peter Hartridge, Senior Vice President Product and Pricing Management ...... — Ole Fredrik Hienn, Senior Vice President Legal Affairs ...... 170,950 Hans Rood, Senior Vice President Sales and Marketing ...... 90,000 Dag-Arne Wensel, Senior Vice President Maritime Operations ...... 63,650

(1) The shares are owned through the company Periscopus AS (2) The shares are owned through the company Home Capital AS (3) Of which 1,068,890 shares are owned through the company Fjellvit AS

The company’s auditor does not own any shares in Hurtigruten ASA.

Earnings per share The earnings per share are calculated by dividing the portion of the net profit or loss for the year that is attributable to the owners of the parent by a weighted average of the number of ordinary shares throughout the year, less the number of treasury shares.

2013 2012 (in NOK 1,000) Net profit or loss for the year attributable to the owners of the parent from continuing operations ...... 39,546 (236,613) Profit or loss from discontinued operations attributable to the owners of the parent ...... (8,263) (138,768) Net profit or loss for the year attributable to owners of the parent ...... 31,283 (375,381) Weighted average number of outstanding shares ...... 419,965,791 419,965,791

Diluted earnings per share Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.

Dividend per share No dividend was paid for 2012 and no dividend has been proposed for the 2013 financial year.

Note 16 Other equity not recognised in the income statement

Currency Convertible Hedging translation loan reserve differences Total (in NOK 1,000) Book value as of 1 January 2012 ...... 20,711 113,827 5,535 140,073 Redemption of convertible loan ...... (20,711) — — (20,711) Cash flow hedging after tax ...... — (66,721) — (66,721) Currency translation differences ...... — — 6,246 6,246 Book value as of 1 January 2013 ...... — 47,106 11,781 58,888 Cash flow hedging after tax ...... — (4,281) — (4,281) Currency translation differences ...... — — 12,335 12,335 Book value as of 31 December 2013 ...... — 42,825 24,116 66,943

Please see note 17 with regard to detailed information on the convertible loan.

F-66 Note 17 Borrowings

2013 2012 (in NOK 1,000) Non-current borrowings Bank borrowings ...... 2,027,692 2,376,576 Bond loan ...... 491,508 488,407 Of which non-current borrowings classified as held-for-sale (note 7) ...... (26,140) — Total non-current borrowings ...... 2,493,060 2,864,983 Current borrowings Bank borrowings, including first year’s instalments on non-current borrowings ...... 483,427 344,552 Of which current borrowings classified as held-for-sale (note 7) ...... (8,901) — Total current borrowings ...... 474,526 344,552 Total borrowings ...... 2,967,586 3,209,535

The Group’s buildings, ships, chattels, operating equipment, inventories, trade receivables and some bank deposits have been pledged as collateral for bank borrowings.

2013 2012 (in NOK 1,000) Book value of pledged assets ...... 3,479,923 3,790,438 Of which pledged assets classified as held-for-sale (note 7) ...... (149,128) — Book value of pledged assets for continuing operations ...... 3,330,795 3,782,234

The Group is exposed to interest rate changes with respect to borrowings based on the following re-pricing structure

2013 2012 (in NOK 1,000) Six months or less ...... 331,495 165,467 Six to twelve months ...... 138,771 165,467 One to five years ...... 2,518,388 2,861,635 Over five years ...... 13,972 16,965 Of which borrowings classified as held-for-sale (note 7) ...... (35,041) — Total ...... 2,967,586 3,209,535

Book value and fair value of borrowings

Book value Fair value 2013 2012 2013 2012 (in NOK 1,000) Current borrowings ...... 474,526 344,552 474,526 344,552 Non-current bank borrowings ...... 2,001,552 2,376,576 1,714,399 1,921,957 Bond loan ...... 491,508 488,407 367,579 335,367 Total ...... 2,967,586 3,209,535 2,556,504 2,601,876

The Group primarily borrows at variable interest rates, and interest rate swap contracts (swaps) are used for the portion of the borrowings that are to have a fixed interest rate, as dictated by the Group’s hedging policy. For further information on the hedging instruments, see note 11C (Derivative financial instruments).

The fair value is based on discounting cash flows from borrowings by a discount rate based on the market’s expectations of the future variable interest rates or the agreed fixed rate. The discount rate for 2013 ranged from 5.0 to 10.1 per cent (2012: from 5.5 per cent to 10.5 per cent).

F-67 The fair value of current borrowings corresponds to the book value as the effect of the discount is insignificant.

The book value of the Group’s borrowings in different currencies is as follows

2013 2012 (in NOK 1,000) NOK ...... 2,902,436 3,060,223 EUR...... 52,983 113,688 USD...... 12,167 35,625 Total borrowings ...... 2,967,586 3,209,535

An agreement has been entered into for the sale of two of the remaining fast ferries with an agreed delivery date of the middle of March 2014. In connection with the delivery a loan connected with the fast ferries will be redeemed in the amount of NOK 43 million. The entire loan is recognised in the first year’s instalments of non- current debt.

In December 2013 Hurtigruten ASA utilised a current drawdown facility of NOK 150 million that has to be repaid in its entirety no later than 30 June 2014. The loan is recognised in the first year’s instalments of non- current debt.

Hurtigruten ASA refinanced its debt in the first quarter of 2012, and the new loan agreement with the banks is dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The term of the loan is five years with annual instalments of NOK 260 million, where the first instalment falls due in September 2012. The financial covenants are as follows: • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current debt excluding the first year’s instalments on non-current debt. • Minimum liquidity holding The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum fixed charge coverage ratio/liquidity holding At the end of each quarter the consolidated EBITDA excluding gains/losses on the sale of assets must be equal to or greater than the Group’s annual debt obligations and dividend payments, or the Group’s unrestricted liquidity including unused credit facilities must be a minimum of NOK 350 million. • Minimum equity ratio The Group’s equity ratio must be measured on 30 June and 31 December each year, and shall be 22.5 per cent up to 31 December 2014. Thereafter until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreement. From 31 December 2012 until 30 June 2013 the equity ratio requirement was temporarily reduced to 20 per cent.

As part of its refinancing Hurtigruten ASA issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month and is irredeemable until its final maturity date in April 2017. The financial covenants are as follows: • Maximum senior debt facilities ratio The Group’s hedged debt shall be less than 65 per cent of the Group’s total assets until 30 June 2013. This percentage will be reduced annually by 5 per cent from 1 July 2013. From 1 July 2015 to the expiration of the term of the agreement, hedged debt shall be lower than 50 per cent of total assets.

F-68 • Maximum leverage ratio The Group’s interest bearing debt shall be less than 6.5 per cent of the consolidated EBITDA, excluding gains/losses on the sale of assets from 31 December 2012. This percentage shall be reduced annually by 0.5 per cent from 31 December 2013. From 31 December 2012 until 30 September 2013 this requirement was temporarily increased to 12.5 per cent. The requirement for 6.5 per cent also had to be satisfied using normalised EBITDA as a base for the calculation. Normalised EBITDA in this context is the consolidated EBITDA adjusted for i) losses arising in connection with the charter arbitration case (cf. notes 5 and 12) and ii) the provision relating to the ESA case (cf. notes 5 and 12). • Minimum liquidity holding The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current debt excluding the first year’s instalments on non-current debt.

In March 2012 Hurtigruten ASA redeemed the bond loan issued in February/March 2009 pursuant to the loan agreement.

The company also redeemed the convertible bond loan in June 2012 in accordance with the loan agreement.

The convertible bond loan is recognised in the balance sheet as follows

Convertible loan (in NOK 1,000) Debt component as of 1 January ...... 47,089 Interest expenses (note 28) ...... 2,788 Redemption of convertible bond loan ...... (49,877) Debt component as of 31 December 2012 ...... —

The fair value of the debt component and the component related to the equity conversion was determined when the loan was issued. The fair value of the debt component, which is included in the non-current liabilities, is calculated using the market interest rate for an equivalent non-convertible loan. The residual amount, which represents the value of the equity component, is recognised in equity under “Other equity not recognised in the income statement”.

The loan’s interest expenses are calculated based on the effective interest rate method by using an effective interest rate of 10.0 per cent for the debt component.

In 2012 Hurtigruten ASA made both scheduled and deferred instalment payments on the bareboat lease to the two limited partnerships Kystruten KS and Kirberg Shipping KS, from which the company leases two ships. The deferred instalment payments were in accordance with the agreement entered into with the banks and limited partnerships in February 2009. The agreement specified that no instalment payments should be paid on the loan between March 2009 and December 2011. The deferred instalments were paid back on a pro rata basis together with the instalments due for payment from February 2012 to February 2013.

F-69 Note 18 Income tax INCOME TAX EXPENSE The income tax expense for the year can be broken down as follows

2013 2012 (in NOK 1,000) Income tax payable ...... (4,984) (10,264) Change in deferred income tax liabilities/assets ...... (800) (8,079) Change in income tax payable for previous years (recognised in income) ...... 5,114 — Total income tax expense ...... (670) (18,343) Of which income tax expense for discontinued operations (note 7) ...... 3,245 5,386 Total income tax expense for continuing operations ...... (3,915) (23,729) Discontinued operations Change in deferred income tax liabilities/assets ...... 3,245 5,386 Total income tax expense for discontinued operations (note 7) ...... 3,245 5,386

The tax on the Group’s profit or loss before tax deviates from the amount that would have applied if the Group’s weighted average tax rate had been used. The difference can be explained as follows:

2013 2012 (in NOK 1,000) Profit/(loss) before tax from continuing and discontinued operations ...... 26,092 (310,469) Estimated income tax expense based on the tax rates in the various countries and the respective results ...... (4,684) 90,268 Change in the income tax expense as a result of: —non-taxable income ...... 1,646 33,016 —non-tax-deductible costs ...... (12,338) (5,455) —income tax on profit or loss attributable to companies assessed as a partnership ..... 334 (316) —utilisation of tax loss carryforwards ...... 614 284 —effect of change in tax rate ...... (6,062) — —unrecognised deferred income tax assets ...... 15,899 (161,895) —income tax repayable ...... 5,114 — —miscellaneous items (foreign exchange differences, SPE) ...... (1,193) 25,755 Income tax expense for continuing and discontinued operations ...... (670) (18,343) Weighted average tax rate ...... 17.95% 28.89%

The change in the weighted average tax rate is attributable to a change in the profitability of the Group’s subsidiaries abroad and in Svalbard, and a change in the tax rate from 28 per cent to 27 per cent in Norway.

Income tax expense for items recognised in other comprehensive income

2013 2012 Income tax Income tax Before tax expense After tax Before tax expense After tax (in NOK 1,000) Actuarial gains/losses pensions ...... (11,443) 3,230 (8,213) 57,468 (17,829) 39,639 Cash flow hedging ...... (5,761) 1,613 (4,148) (92,690) 25,953 (66,737) Currency translation differences ...... 12,335 — 12,335 6,246 — 6,246 Other comprehensive income ...... (4,869) 4,843 (26) (28,976) 8,124 (20,852)

F-70 DEFERRED INCOME TAX LIABILITIES Deferred income tax liabilities are recognised on a net basis if the differences that are reversible can be offset. All differences are reversed over a period of 12 months due to the fact that all the companies are assessed in arrears. The following amounts have been recognised on a net basis:

2013 2012 (in NOK 1,000) Deferred income tax assets Gross deferred income tax assets that reverse after more than 12 months ...... (749,108) (752,992) Total deferred income tax assets ...... (749,108) (752,992) Deferred income tax liabilities Gross deferred income tax liabilities that reverse after more than 12 months ...... 583,244 591,171 Total deferred income tax liabilities ...... 583,244 591,171 Net deferred income tax liabilities/assets ...... (165,864) (161,821) Of which deferred tax liabilities/assets classified as discontinued operations (note 7) ..... 467 — Net deferred income tax liabilities/assets for continuing operations ...... (165,397) (161,821) Change in recognised net deferred income tax liabilities Book value as of 1 January ...... 8,105 9,643 Recognised in the income statement during the period ...... (2,474) (12,522) Tax on current financial assets recognised in other comprehensive income ...... 180 (22) Tax on estimate deviations pensions recognised in other comprehensive income ...... (4,631) 10,191 Correction of errors in deferred income tax from previous years ...... — 815 Book value as of 31 December ...... 1,180 8,105 Book value continuing operations as of 31 December ...... 1,180 8,105 Change in book value of deferred income tax assets—net Book value as of 1 January ...... (169,926) (172,234) Recognised in the income statement during the period ...... 3,274 21,272 Tax on current financial assets recognised in other comprehensive income ...... (1,793) (25,931) Tax on issue costs recognised in equity ...... — — Tax on estimate deviations pensions recognised in other comprehensive income ...... 1,401 6,967 Currency conversion recognised in equity ...... — 0 Book value as of 31 December ...... (167,044) (169,926) Of which discontinued operations ...... 467 — Book value continuing operations as of 31 December ...... (166,576) (169,926)

Change in deferred income tax assets and liabilities Tax effect of tax-increasing temporary differences

Non-current Other assets differences Total (in NOK 1,000) As of 1 January 2012 ...... 587,766 42,402 630,168 Recognised in the income statement during the period ...... (15,607) 1,749 (13,858) Correction for previous years ...... 815 — 815 Equity adjustments ...... — (25,953) (25,953) As of 31 December 2012 ...... 572,974 18,198 591,172 Recognised in the income statement during the period ...... 5,017 (11,332) (6,315) Equity adjustments ...... — (1,613) (1,613) As of 31 December 2013 ...... 577,991 5,253 583,244

F-71 Tax effect of tax-reducing temporary differences

Tax loss Provisions carryforward Current items Total (in NOK 1,000) As of 1 January 2012 ...... (11,592) (725,484) (55,683) (792,759) Recognised in the income statement during the period ...... (12,263) 60,515 (25,644) 22,608 Equity adjustments ...... 17,158 — — 17,158 As of 31 December 2012 ...... (6,697) (664,969) (81,327) (752,993) Recognised in the income statement during the period ...... 1,337 357 5,422 7,115 Equity adjustments ...... (3,230) — — (3,230) As of 31 December 2013 ...... (8,590) (664,612) (75,905) (749,108)

The deferred income tax assets relating to tax loss carryforwards are recognised in the balance sheet to the extent that the Group can utilise the tax loss carryforward against future taxable income. The Group has significant tax-increasing temporary differences relating to the same tax authority as the tax loss carryforward. In preparing the financial statements, management deems the future taxable income to be sufficient to utilise the recognised deferred income tax assets. This assessment has been made based on conservative management estimates of future profits in the Group, in which particular importance has been attached, for example, to the Group’s procurement contract with the government in effect until 2019 inclusive, as well as the effects of the Group’s planned and completed restructuring methods. On grounds of prudence the Group has elected not to recognise the deferred income tax asset relating to the tax loss for the year. Tax losses may be carried forward for an indefinite period in Norway. The tax loss carryforward as of 31 December 2013 was NOK 2,861 million (2012: NOK 2,836 million).

Deferred income tax liabilities recognised directly through equity during the year are as follows

2013 2012 (in NOK 1,000) Tax on estimate deviations related to pension plans ...... (3,230) 17,829 Tax on current financial assets recognised in equity ...... (1,613) (25,953) Total ...... (4,843) (8,124)

Note 19 Pensions The Group operates both defined contribution and defined benefit pension plans. For the defined contribution plans the cost is equal to the contributions to the employees’ pension savings during the period. The future pensions are dependent on the size of the contributions and the return on the pension plan.

The Group has defined benefit plans in Norway and Germany. For the Norwegian defined benefit plans, the employer is responsible for paying an agreed pension to the employee based on his/her final salary. Future defined benefits are mainly dependent on the number of contribution years, salary level upon reaching retirement age and the size of the National Insurance benefits. These obligations are covered through an insurance company. In addition to the pension obligations that are covered through insurance schemes, the company has unfunded pension obligations that are funded from operations, primarily for former key management personnel. Pension fund assets managed by insurance companies are regulated by local legislation and practice. The relationship between the company and the insurance company is regulated by applicable legislation. The boards of the insurance companies are responsible for managing the plans, including making investment decisions and determining premium levels. An agreed fixed sum per month is paid as a pension for the German pension plan, where most beneficiaries receive the same agreed amount, while three former directors receive a considerably higher payment. The German plan is organised as a CTA (contractual trust arrangement), where the plan assets are earmarked for the pension fund, but the company’s management determine how the assets are to be invested.

F-72 The new Contractual Early Retirement (AFP) Scheme Act adopted by the Storting in 2010 entailed the derecognition and recognition in the income statement of provisions related to the old contractual early retirement scheme. Provisions were set aside to cover the assumed underfunding of the old contractual early retirement scheme. The new AFP early retirement scheme is based on a tri-party collaboration between employer and employee organisations, and the government. The government covers one-third of the pension expenses for the early retirement scheme, while affiliated enterprises cover the remaining two-thirds. The scheme is recognised as a defined benefit multi-entity plan in the financial statements. This means that each individual company shall account for its proportional share of the scheme’s pension obligations, plan assets and pension costs. Until reliable and consistent information is available for allocation, the new contractual early retirement scheme will be accounted for as a defined contribution plan. The Group’s Norwegian onshore employees are the only members of the scheme. At the reporting date there were a total of 596 beneficiaries, of whom 363 were connected to discontinued operations. On exit an annual pension is calculated based on 0.314 per cent of annual pensionable income up to 7.1G from the age of 13 to 61. In 2013 the premium amounted to 2 per cent of salary between 1G and 7.1G, while in 2014 the premium will be 2.2 per cent. A total of NOK 2.6 million was paid into the scheme in 2013.

The established pension plans cover 1,729 Group employees. The pension costs for the period illustrate the agreed future pension entitlements earned by employees in the financial year.

Financial assumptions

2013 2012 Norway Discount rate ...... 4.10% 3.90% Expected annual wage adjustment ...... 3.75% 3.50% Expected annual pension adjustment ...... 0.60% 0.20% Expected annual National Insurance basic amount (G) adjustment ...... 3.50% 3.25% Table book used for estimating liabilities ...... K2013 K2005 Table book used for estimating disabilities ...... IR02 IR02 Germany Discount rate ...... 3.10% 4.60% Expected annual wage adjustment ...... N/A N/A Expected annual pension adjustment ...... 1.90% 1.90% Expected annual National Insurance basic amount (G) adjustment ...... N/A N/A Average expected years of service until retirement age ...... one to five 11.3 years years Average expected life (in years) for a person retiring when he/she reaches age 67 —Women ...... 19.9 year 18.6 years —Men ...... 16.6 years 15.3 years Average expected life (in years) 20 years after the balance sheet date for a person retiring when he/she reaches age 67 —Women ...... 20.7 years 19.3 years —Men ...... 17.7 years 16.6 years

F-73 Pension costs recognised in the income statement for the year are as follows

2013 2012 (in NOK 1,000) Present value of accrued pension entitlements for the year ...... 7,411 12,645 Defined contribution plan ...... 39,822 39,251 Interest expenses on accrued pension obligations ...... 10,329 9,294 Return on plan assets ...... (7,861) (5,912) Discontinuation and plan changes ...... — (5,607) Net pension costs funded from operations ...... 130 73 Payroll tax ...... 1,588 2,130 Total pension costs included in payroll costs ...... 51,419 51,874 Estimate deviations recognised in other comprehensive income (before tax expense) ...... (11,443) 57,468

Specification of net pension assets/obligations

2013 2012 (in NOK 1,000) Present value of accrued pension obligations as of 31 December for funded defined benefit plans ...... 275,867 276,216 Estimated fair value of plan assets as of 31 December ...... 244,545 255,628 Total ...... 31,322 20,588

Present value of pension obligations for unfunded plans ...... 506 2,850 Present value of pension obligations funded from operations ...... 20,619 20,994 Net pension obligations ...... 52,448 44,432 Of which classified as discontinued operations ...... 24,375 10,608 Net pension obligations for continuing operations ...... 28,073 33,824 Defined contribution plan assets ...... 2,793 —

Net pension assets/obligations are classified as follows on the balance sheet

2013 2012 (in NOK 1,000) Other non-current receivables (note 12) ...... 2,793 1,871 Pension obligations ...... 28,072 46,303 Assets held-for-sale (note 7) ...... 24,375 — Net pension obligations ...... 49,654 44,432

Change in the defined benefit pension obligations during the year

2013 2012 (in NOK 1,000) Pension obligations as of 1 January ...... 300,062 366,843 Present value of accrued pension entitlements for the year ...... 7,411 12,645 Interest expense ...... 10,329 9,294 Effect of recalculation: Changes in financial assumptions ...... 4,772 (19,657) Changes in demographic assumptions ...... 14,865 4,070 Estimate deviations ...... (11,435) (36,959) Currency translation differences—obligations ...... 5,036 (1,687) Discontinuation of pension plans (plan changes) ...... (14,982) (19,295) Exits on sale of subsidiary ...... — — Pension benefits paid ...... (18,395) (14,945) Change in payroll tax on net pension obligations ...... (671) (248) Pension obligations as of 31 December ...... 296,992 300,062

F-74 Change in the fair value of the plan assets

2013 2012 (in NOK 1,000) Fair value as of 1 January ...... 255,630 265,790 Return on plan assets ...... 7,861 5,912 Actual return on assets re interest income recognised in income statement ...... (3,241) 4,923 Paid-up policies and disbursements due to discontinuation of plans (plan changes) ...... (14,724) (22,932) Employer contributions ...... 7,878 13,130 Currency translation differences—assets ...... 4,573 (1,414) Pension benefits paid ...... (13,433) (9,779) Fair value as of 31 December ...... 244,544 255,630

Composition of the plan assets

2013 2012 Shares ...... 13.6% 12.8% Current bonds ...... 20.3% 16.8% Money market ...... 12.7% 9.9% Non-current bonds ...... 37.0% 38.8% Property ...... 11.1% 17.2% Other ...... 5.3% 4.5% Total ...... 100.0% 100.0% Actual return on plan assets ...... 3.64% 4.35%

The geographical allocation of the obligations and plan assets for the defined benefit plans is as follows

2013 2012 Norway Germany Total Norway Germany Total (in NOK 1,000) Present value of obligations ...... 256,622 40,370 296,992 264,408 35,654 300,062 Fair value of plan assets ...... 207,275 37,269 244,544 223,895 31,735 255,630 Net pension obligations (assets) ...... 49,347 3,101 52,448 40,513 3,919 44,432

Risk The Group is exposed to several types of risk through the defined benefit pension plans, the most significant of which are as follows.

Investment volatility The pension obligations are calculated using a discount rate based on the interest rate on bonds. If the investment in the pension fund assets provides a lower return than the bond interest rate, this gives rise to a deficit. All the plans comprise shares that are expected to give a higher return than interest on bonds over the long term, but which may, however, result in increased volatility and risk over the short term. As the pension plans’ obligations mature, the target will be to reduce the share of risky investments to better match the obligations.

Changes in interest rates on bonds A reduction in interest rates on bonds would increase the pension plans’ obligations. However, this would be partially offset by an increase in the return on the investments in bonds.

F-75 Inflation risk The defined benefit pension plans’ obligations are exposed to inflation risk. An increase in inflation could result in higher obligations. The key assets of the pension plans are either unaffected by inflation (fixed-interest bonds) or loosely correlated with inflation (shares). A rise in inflation could therefore increase deficits in the plans.

Life expectancy The payment obligation only applies to the remaining life expectancy of the plan beneficiaries. A rise in life expectancy would increase the plans’ obligations. This is particularly important for the Norwegian plan, where the adjustment for inflation results in higher sensitivity to changes in life expectancy. A new mortality table, K2013, was introduced during the reporting period to reflect the rising average life expectancy of the Norwegian population. The effect of the above is shown under changes in demographic assumptions under recalculations of the change in the pension obligation.

Asset management A basic intention of asset management of plans organised through pension insurance companies is to secure cover of the non-current obligations by delivering a competitive annual return at least equal to the guaranteed interest rate. Asset management is based on a long-term arrangement of the investment portfolios, tailored to the company’s long-term obligations. Norwegian legislation imposes restrictions on concentration risk in the investment of all plan assets. The investments are made in collective portfolios with cautious, moderate risk. The assets in the German plan are currently invested in listed funds that are managed by a professional asset manager. The fund follows a multi-asset strategy with a conservative risk profile. The composition of the fund is regularly changed to accommodate optimal returns and risk management. At the end of the year fifty per cent of the assets were invested in shares in various markets. Consequently, these shares are exposed to risk attaching to the performance of global equity markets. While company management cannot influence the fund’s investments, it may at any time elect to exit fund investments.

2014 2013 (in NOK 1,000) The company’s expected contributions to funded plans in the next year ...... 10,473 10,188

The average weighted term of the pension obligation is 23.7 years.

Expected maturity for the defined benefit plans as of 31 December 2013

<1 year 1–2 years 2–5 years >5 years Total (in NOK 1,000) Defined-benefit pension ...... 16,203 23,483 52,337 300,239 392,262

The Group has established mandatory occupational pension plans in the companies where this is required. These plans satisfy the requirements stipulated in the Norwegian Mandatory Occupational Pension Act.

Table of the historical present values of pension obligations and assets as of 31 December

2013 2012 2011 2010 2009 (in NOK 1,000) Present value of defined benefit pension obligations ...... 296,992 300,062 366,843 380,890 328,922 Fair value of plan assets ...... 244,544 255,630 265,790 254,842 232,599 Deficit/(surplus) ...... 52,448 44,432 101,053 126,048 96,323

F-76 Norway Germany 2013 2012 2013 2012 Actual estimate deviations on the defined benefit obligations as a percentage ...... 6.62% (23.95)% 0.00% 16.44% Actual estimate deviations on funds in defined benefit plans as a percentage ...... -0.09% 0.25% -0.30% -1.80%

Sensitivity analysis for changes in the assumptions

Norway Germany Discount rate Discount rate +1 per cent -1 per cent +1 per cent -1 per cent (in NOK 1,000) Increase (+) reduction (–) in the net pension costs for the period ...... (1,903) 1,972 (73) 101 Increase (+) reduction (–) in the net pension obligations as of 31 December ...... (20,020) (24,098) (4,562) 5,611

Pension adjustment Pension adjustment +1 per cent -1 per cent +1 per cent -1 per cent Increase (+) reduction (–) in the net pension costs for the period ...... 4,169 (2,585) 46 (38) Increase (+) reduction (–) in the net pension obligations as of 31 December ...... 22,198 (15,681) 5,006 (4,279)

Change in the annual salary growth +1 per cent -1 per cent Increase (+) reduction (–) in the net pension costs for the period .... 5,598 (3,327) Increase (+) reduction (–) in the net pension obligations as of 31 December ...... 1,982 (1,461)

Change in National Insurance basic amount (G) adjustment +1 per cent -1 per cent Increase (+) reduction (–) in the net pension costs for the period .... (2,831) 3,741 Increase (+) reduction (–) in the net pension obligations as of 31 December ...... (81) 360

The sensitivity analysis above is based on a change in one of the assumptions, with all other assumptions remaining unchanged. In practice this would not happen as more than one assumption could vary simultaneously. The sensitivity calculation is performed applying the same method as the actuarial calculation used to determine the pension obligation in the balance sheet.

The method and the assumptions in the sensitivity analysis have not been changed compared with the previous year.

The Group only has one open defined benefit plan under which beneficiaries have entitlements. Consequently, this is the only plan affected by changes in annual salary growth and adjustments to G.

Change in accounting policy IAS 19, Employee Benefits, has been significantly amended in that the net interest expense is now calculated based on the net deficit measured applying the discount rate to the balance at the start of the year. The effect of this is that the expected return on plan assets in excess of the discount rate for 2012 has been set to zero in the comparative figures. The change has increased the pension cost for 2012 by NOK 2.1 million. Please refer to note 3B for the restatement of comparative figures.

F-77 Estimate deviation A new mortality table, K2013, was introduced to replace the previously used K2005 table for Norwegian pension plans during the year under review. Application of the new table has increased the pension obligation due to the longer inherent life expectancy. The resulting changes have been recognised as estimate deviations for demographic assumptions.

Note 20 Provisions

Deferred revenue Share-value-based recognition Restructuring Legal disputes remuneration Total (in NOK 1,000) Book value as of 1 January 2012 . . . 5,450 — 8,000 819 14,269 Provisions ...... — 10,300 — 216 10,516 Utilisation of provisions from the prior year ...... (167) — (8,000) — (8,167) Book value as of 31 December 2012 ...... 5,283 10,300 — 1,035 16,619 Provisions for the year ...... — — — 1,302 1,302 Utilisation of provisions from the prior year ...... (167) (10,300) — (1,035) (11,502) Book value as of 31 December 2013 ...... 5,117 — — 1,302 6,419

Classification on the balance sheet at 31 December 2013 Non-current liabilities (deferred revenue recognition) ...... 5,117 Non-current liabilities—continuing operations ...... 5,117 Current liabilities ...... 1,302 Current liabilities—continuing operations ...... 1,302

Deferred revenue recognition A line-by-line recognition has been carried out with respect to the investment contribution received, including a possible repayment obligation. Revenue recognition of the investment contribution occurs in conjunction with depreciation and amortisation of the associated asset. This year’s recognised revenue is NOK 167,000. The remainder of the investment contribution as of 31 December 2013 amounts to NOK 5.1 million.

Restructuring A provision was recognised in 2012 for costs relating to function duplication and the closing and relocation of offices in connection with the adopted efficiency-improvement programme covering the onshore organisation in Hurtigruten Pluss AS. This provision was utilised in its entirety in 2013.

Legal disputes Legal charges were brought against AS TIRB and its subsidiary Cominor AS by Troms County Council in May 2009. A complaint was filed with the Court of Conciliation in December 2009. Troms County Council claimed that the companies had overcharged for occasional assistance, and for unforeseen and unplanned driving, for a total amount of NOK 25 million, excluding interest. The Hålogaland Court of Appeal delivered its ruling in the case on 26 November 2012 and ordered TIRB and Cominor to pay compensation of NOK 11.7 million to Troms County Council. The ruling will not be appealed.

F-78 Share-value-based remuneration In 2010 the company established a share-based option scheme for all permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA as of 31 December 2010. Hurtigruten ASA entered into an option agreement that grants the CEO the right to acquire up to three million shares. In 2013 the board of Hurtigruten ASA allocated NOK 12 million share options to Group management and selected key personnel in the Hurtigruten Group. Please refer to note 21 for further details.

Investment obligations The company has no contractual investments at the balance sheet date.

Operating lease commitments—Group company as lessee The Group leases an office in Tromsø, in addition to some other offices. These leases have varying payment dates, price adjustment clauses and renewal rights. The Group also leases machinery and transport equipment. Leasing costs for the year are specified in note 8. The Group has no non-cancellable leases.

The parent company entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten ships MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR.

Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12—Special Purpose Entities in the consolidated financial statements. Recognised bareboat charter hire payments in the income statement of the parent company have thus been eliminated against charter hire income in the limited partnerships on consolidation.

Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the ships. In the charter agreements between the limited partnerships and Hurtigruten ASA, identical requirements (financial covenants) have been stipulated for Hurtigruten ASA for the term of the agreements, which the company has as a component of its non-current loan agreements linked to ships. Please see note 17 with regard to these financial covenants.

A breach of the financial covenants may entail a termination of the charter agreements by the lessor. The Group has satisfied all the financial covenants as of 31 December 2013.

In connection with the financial restructuring in February 2009, an agreement was reached with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charter-party agreement with the two limited partnerships would not be payable for the period up to 31 December 2011. The postponed instalments would, however, be added to the instalments that were paid in 2012 and will be paid 2013, thereby reverting to the original repayment plan in August 2013. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back MS Nordlys and MS Richard With will be cancelled.

Guarantees

2013 2012 (in NOK 1,000) Associates ...... — 2,016 Total guarantees ...... — 2,016

F-79 Note 21 Share-value-based remuneration The company has the following three share-value-based remuneration agreements • An option scheme was offered to all the permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA as of 31 December 2010. This scheme expired on 31 December 2013. The market price was the average weighted value for December in the respective years. The average market price for the second half of 2010, which was NOK 4.01, would be used as the basis for calculating gains. The number of shares held on 31 December 2010 had to be kept until the options are exercised. Any gains would be distributed as an extraordinary bonus without any right to holiday pay after the end of each year. The employees would pay ordinary income tax on the gain. • Hurtigruten ASA entered into an option agreement that grants the CEO the right to acquire up to three million shares. The options may not be exercised for fewer than one million shares at a time. The options mature on 30 April 2017. • In 2013 the board of Hurtigruten ASA allocated NOK 12 million share options to Group management and selected key personnel in the Hurtigruten Group. The share options have an exercise price of NOK 3.50 and can be exercised for the first time no earlier than in three and no later than after four years.

Movements in the number of outstanding share options and the associated weighted average exercise prices are as follows

2013 2013 2012 2012 Average Average exercise price in Options exercise price in Options NOK per share (in thousands) NOK per share (in thousands) As of 1 January ...... — 1,350 — 2,963 Allotment this year ...... 4.38 15,050 —— Forfeited ...... ——4.01 (510) Exercised ...... ———— Expired ...... 4.01 (1,350) 4.01 (1,104) As of 31 December ...... 4.01 15,050 4.01 1,350

Expiration date and exercise price for outstanding options at year end

2013 2012 Exercise price in Options Options Expiration date NOK per share (in thousands) (in thousands) 31 December 2013 ...... 4.01 — 1,350 30 April 2015 ...... 4.00 1,000 — 30 April 2016 ...... 5.00 1,000 — 30 April 2017 ...... 6.00 1,000 — 7 November 2017 ...... 3.50 12,050 — 15,050 1,350

After this period the fair value of the allotted options, calculated using the Black-Scholes option-pricing model, was NOK 0.62 per option (2012: NOK 0.19 per option). The most important input data includes the share price as of 31 December 2013 of NOK 3.47 (as of 31 December 2012: NOK 3.00), the exercise prices shown above, a standard deviation of the expected share return of 43 per cent (2012: 33 per cent) and an annual risk-free interest rate of 1.30 per cent (2012: 1.49 per cent). Volatility is measured using the standard deviation of the expected return based on a statistical analysis of the daily share prices for the whole of 2013. The volatility of the share option scheme for Group management and selected key personnel in the Hurtigruten Group in 2013 is measured by reference to daily share prices in the option period in 2013, where the standard deviation of the expected return on the scheme is 55 per cent.

The fair value is recognised as an expense under payroll costs over the vesting period. A total of NOK 0.3 million was recognised as an expense in 2013 (2012: NOK 0.2 million).

F-80 In calculating gains for the option scheme for all permanent employees at Hurtigruten ASA, the average price in December each year will be measured against the average price for the second half of 2010, which was NOK 4.01. The average price in December 2013 was NOK 3.57 (2012: NOK 3.07), meaning that there was no gains calculation or payment for 2013. This option scheme expired on 31 December 2013.

Note 22 Trade and other payables

2013 2012 (in NOK 1,000) Trade payables ...... 215,058 247,435 Public duties payable ...... 30,347 14,739 Other current liabilities ...... 419,970 468,808 Of which trade payables and other current payables held-for-sale (note 7) ...... (29,099) — Total trade and other payables ...... 636,276 730,981

See note 30 for information on trade payables and other current liabilities to related parties.

Note 23 Operating revenues

2013 2012 (in NOK 1,000) Operating revenues ...... 2,616,260 2,737,427 Contractual revenues ...... 875,888 747,491 Of which classified as discontinued operations (note 7) ...... (186,534) (222,322) Total operating revenues ...... 3,305,614 3,262,596

Operating revenues include the accounting effect of the insurance settlement relating to the repair of MS Nordlys in the amount of NOK 14 million (2012: NOK 33 million). Recognition of income from the insurance settlement is in accordance with IAS 16.66.

The extent of the Group’s revenues related to public procurement of services are as follows

2013 2012 (in NOK 1,000) Revenues relating to public transport from Nordland County Council ...... — 45,766 Revenues relating to public transport from the government ...... 46,959 — Revenues relating to public transport from Troms County Council ...... 70,313 82,940 Revenue relating to the Bergen to Kirkenes coastal service from the government ..... 758,616 618,784 Of which classified as discontinued operations (note 7) ...... (117,272) (128,707) Total revenues related to public procurement services ...... 758,616 618,784

Public procurement of services is related to the purchase of Hurtigruten services along the Norwegian coast and bus transport operations. The existing contract with the government represented by the Ministry of Transport and Communications for the Bergen to Kirkenes coastal service for the period 2012–2019 entered into force on 1 January 2012.

Note 24 Payroll costs

2013 2012 (in NOK 1,000) Payroll costs Wages and salaries ...... 749,083 783,798 Payroll tax ...... 45,450 53,760 Pension costs (note 19) ...... 51,419 51,874 Other benefits ...... 54,106 51,163 Of which payroll costs classified as discontinued operations (note 7) ...... (93,786) (111,662) Total payroll costs ...... 806,272 828,933 Average number of full-time equivalents ...... 1,918 2,161

F-81 Note 25 Remuneration, etc. Figures for 2013

Pension Other Position Salary(3) cost(3) remuneration(3)(4) Loans Fees(3)(6) (in NOK 1,000) Daniel A. Skjeldam ...... President/CEO 2,854 414 1,035 — — Asta Lassesen ...... CFO 1,243 118 703 — — Sigurd Bay ...... Senior Vice 1,033 76 203 — — President Price and Revenue Management from 8 April Anne Marit Bjørnflaten(1) ...... Senior Vice — — — — 474 President Corporate Communications from 11 September Kjell Christoffersen ...... Senior Vice 323 21 83 — — President HR Development from 15 August Tor Geir Engebretsen(2) . . . Acting Senior — — — — 4,861 Vice President Maritime Operations from 28 October Oscar Engeli ...... Senior Vice 424 44 143 — — President ICT from 16 September Vidar Engen ...... Senior Vice 741 98 217 — — President Product and Markets from 1 July Chris Hudson ...... Senior Vice 880 61 161 — — President Hotel Operations from 8 April Magnus Wrahme ...... Senior Vice 1,048 124 293 — — President Global Sales from 2 May Ole Fredrik Hienn ...... Senior Vice 1,543 158 201 — — President Legal Affairs until 8 April Hans Rood(5) ...... Senior Vice 1,757 186 2,895 — — President Sales and Markets until 8 April Torkild Torkildsen ...... Senior Vice 1,679 169 187 — — President Public Affairs until 1 November

F-82 Pension Other Position Salary(3) cost(3) remuneration(3)(4) Loans Fees(3)(6) (in NOK 1,000) Dag-Arne Wensel ...... Senior Vice 1,320 120 1,949 — — President Maritime Operations until 28 October Trygve Hegnar ...... Chair — — — — 310 Helene Jebsen Anker ...... Deputy Chair — — — — 190 Berit Kjøll ...... Director — — — — 130 Arve Giske ...... Director — — — — 150 Guri Mai Elmar ...... Director — — — — 130 Petter Anker Stordalen ..... Director — — — — 130 Tone Mohn-Haukland ..... Director, elected 401 9 7 — 72 by employees Per-Helge Isaksen ...... Director, elected 410 14 3 — 65 by employees Deputy members ...... — — — — — Corporate assembly ...... — — — — 209 Auditor fees—statutory auditing(6) ...... — — — — 2,507 Assistance IFRSs, accounting and tax(6) .... — — — — 343 Other attestations(6) ...... — — — — 189 Auditor fees—other assistance(6) ...... — — — — 188

(1) Bjørnflaten is a hired-in consultant from Mørland og Johnsen Analyse og Kommunikasjon AS. (2) Engebretsen is a hired-in consultant and has held several temporary positions at Hurtigruten during the year. The fee is invoiced by DHT Corporate Services AS. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Including the estimated cost associated with the share-based remuneration scheme, and severance benefits for outgoing managers. (5) Rood’s salary is partially paid in USD and translated to NOK. (6) Fees exclusive of Value Added Tax.

The company’s CEO receives an annual salary of NOK 2.8 million. Other benefits include fixed car remuneration and an ordinary telephone, Internet, newspaper and home PC allowance.

The CEO also has a time-limited agreement on a performance-related bonus linked to the operating result before depreciation, amortisation and impairments, where performance is indexed against the adjusted operating result before depreciation, amortisation and impairments for 2012. The bonus agreement confers the right to a maximum of two bonus payments of up to a total of NOK 7.5 million in addition to holiday pay. The agreement expires in 2015. The payment of the bonus is contingent on the CEO still being in office at the end of the year to which the bonus relates. No payments were made in connection with this bonus agreement for 2013.

The CEO is included in the company’s ordinary defined contribution pension scheme for salaries up to 12G and the defined contribution scheme that provides a pension basis for salaries over 12G. The CEO’s conditions of employment do not include any personal pension obligations.

An option agreement has been entered into that grants the CEO the right to acquire up to three million shares. The options may not be exercised for fewer than one million shares at a time. From the time of publication of the figures for the fourth quarter of 2013 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 4 per share. From the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 5 per share. From the time of publication of the figures for the fourth

F-83 quarter of 2015 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2016 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 6 per share. Options that are not exercised within the exercise period lapse without compensation. If an individual shareholder or several collaborating shareholders together should own more than fifty per cent of the shares in Hurtigruten ASA. the CEO has the right to exercise all options within three months from publication of the mandatory notification. The estimated costs for the year related to the option agreement is included under other remuneration above.

The board has allocated 12.1 million share options for members of Group management. The options have an exercise price of NOK 3.5 and can be exercised in the period 7 November 2016 to 7 November 2017. CEO Daniel Skjeldam was allocated 3.5 million of these options, in addition to the special option agreement described above. The estimated costs for the year related to senior management covered by the scheme are included under other remuneration above.

The company’s executive management are members of the company’s defined contribution plan. In addition, a supplementary defined contribution pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). The scheme applies to the whole company and covers all employees with salaries over 12G, including members of the executive management and the CEO. The pension costs for the executive management have been included under pension costs above.

A performance-based bonus scheme was introduced for the company’s management in 2013. The bonus payments are determined based on pre-determined targets/parameters, partly based on overall results for the Group and partly on the result of the relevant sphere of responsibility, where the maximum bonus for individual managers is NOK 0.6 million. The bonus scheme covers some members of Group management, with the exception of the CEO. The CEO has a separate performance-related bonus scheme as described above. A provision of NOK 0.3 million was recognised for the bonus for 2013. This bonus is recognised in the item other remuneration above.

In 2010 a share-value-based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and its wholly owned subsidiaries. The scheme was closed without any payments being made as of 31 December 2013. Please see note 21 to the consolidated financial statements for further details on the scheme.

F-84 Figures for 2012

Pension Other Position Salary(3) costs(3) remuneration(3)(4) Loans Fees(3) (in NOK 1,000) Daniel A. Skjeldam ...... CEOfrom 700 99 29 — 1 October Olav Fjell ...... CEOuntil 1 4,008 64 105 — — October Torkild Torkildsen ...... Deputy CEO 2,064 175 104 — — Asta Lassesen ...... CFO 1,188 110 164 — — Glen Peter Hartridge ...... Director product 1,276 109 127 — — and pricing management Ole Fredrik Hienn ...... Director legal 1,640 150 145 — — affairs Hans Rood(1) ...... Sales and marketing 2,200 225 140 — — director Dag-Arne Wensel ...... Director technical 1,363 111 154 — — maritime operations Trygve Hegnar ...... Board Chair — — — — 310 Per Heidenreich ...... Deputy Chair until —— — — 41 19 April Helene Jebsen Anker ...... Deputy Chair from — — — — 191 19 April Guri Mai Elmar ...... Director — — — — 130 Arve Giske ...... Director — — — — 156 Berit Kjøll ...... Director — — — — 130 Petter Anker Stordalen ...... Director from —— — — 98 19 April Tone Mohn-Haukland ...... Director, elected by 378 8 4 — 160 employees Per-Helge Isaksen ...... Director, elected by 470 16 4 — 134 employees Corporate assembly ...... — — — — 170 Auditor fees—statutory auditing(2) ...... 3,019 Assistance IFRSs, accounting and tax(2) . . 252 Other attestations(2) ...... 85 Auditor fees—other assistance(2) ...... 360

(1) Rood’s salary is partially paid in USD and translated to NOK. (2) Fees exclusive of Value Added Tax. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Including the estimated cost associated with the share-based remuneration scheme.

F-85 Statement on the determination of salary and other remuneration for senior executives in Hurtigruten ASA Guidelines for determining the remuneration of senior executives in Hurtigruten ASA The following guidelines have been specified with effect from 18 February 2014:

1. Definitions 1.1 Senior executives include the chief executive and other senior executives, cf. Proposition no. 55 (2005– 2006), which refers to the provisions of the Norwegian Accounting Act and Public Limited Liability Companies Act concerning “senior executives”. 1.2 In these guidelines, a compensation scheme means a remuneration package comprising one or more of the following elements: Fixed salary, variable pay (bonuses, share-based programs, options, etc.) and other benefits (pension schemes, pay guarantee schemes, fringe benefits, and the like). 1.3 Severance pay refers here to compensation related to departure from the company and may involve a pay guarantee, other financial benefits and payments in kind.

2. Main principles for determining compensation schemes 2.1 Remuneration to senior executives in Hurtigruten ASA will be competitive but not market leading compared with similar companies. 2.2 The main element in a compensation scheme should be fixed salary. 2.3 Compensation schemes shall be formulated to avoid unreasonable benefits arising as a result of external circumstances which the executive management cannot influence. 2.4 The individual elements in a pay package shall be assessed from an overarching perspective, with fixed salary, possible variable pay and other benefits such as pension schemes and severance pay viewed as a whole. The board of directors shall maintain an overview of the total value of each executive’s agreed compensation. 2.5 Determining guidelines for the remuneration of senior executives is the responsibility of the entire board of directors. Remuneration of the group’s chief executive is determined by the board of directors. 2.6 The board of directors shall ensure that remuneration schemes for senior executives do not have unfortunate effects for the company or weaken its reputation. 2.7 Senior executives shall not receive special remuneration for serving as directors of wholly-owned subsidiaries in the same group. 2.8 Agreements entered into before these guidelines came into effect may continue.

3. Variable pay Any variable pay shall be based on the following principles: 3.1 A clear connection shall exist between the underlying goals for the variable pay and the company’s objectives. 3.2 Variable pay shall be based on objective, definable and measurable criteria. 3.3 These criteria shall be based on conditions which the executive in question can influence. 3.4 Several relevant measurable criteria should be applied. 3.5 A variable pay scheme shall be transparent and clearly understandable. Identifying the anticipated and the maximum payment for each participant in the programme is important when explaining the scheme. 3.6 The scheme shall be of limited duration. 3.7 Total variable pay received in any year should not exceed six months of fixed salary, unless exceptional circumstances dictate otherwise.

F-86 4. Pension schemes 4.1 Pension terms shall be equivalent to those enjoyed by other employees in the company. 4.2 To the extent that a retirement age lower than the National Insurance retirement age of 67 years is agreed, it should generally not be lower than 65. 4.3 Agreements on pensions shall be based on the same years of pensionable service as for other comparable employees in the company. 4.4 Pension entitlements earned in other positions shall be taken into account. 4.5 Pension entitlements should not exceed 66 per cent of salary. Retiring at an age younger than 65 shall result in a lower pension entitlement. 4.6 The board of directors shall obtain an overview of the total cost of a pension agreement before it is entered into.

5. Severance pay 5.1 Severance pay can be agreed when a senior executive waives their right in advance to the employment protection provisions in the Norwegian Working Environment Act. Severance pay should not be provided in the event of voluntary resignation except in special circumstances. 5.2 Severance pay should not exceed 12 months fixed salary in addition to possible pay during the period of notice. 5.3 Should the person concerned be appointed to a new position or receive remuneration from an enterprise in which they are an active owner, severance pay should be reduced by a proportionate amount calculated on the basis of the person’s new annual income. Such a reduction should first be made after the normal period of notice has expired. 5.4 Severance pay may be suspended if conditions exist which would have justified dismissal or if, during the severance period, irregularities or acts of negligence are discovered which might lead to compensation claims or to criminal charges against the person concerned.

Note 26 Other operating costs

2013 2012 (in NOK 1,000) Cost of goods sold ...... 500,013 572,363 Operating costs ...... 1,204,425 1,323,534 Sales and administrative costs ...... 304,651 337,880 Of which other operating costs classified as discontinued operations (note 7) ...... (70,441) (231,671) Total other operating costs ...... 1,938,648 2,002,106

Note 27 Other (losses)/gains—net Other (losses)/gains consist of the following items

2013 2012 (in NOK 1,000) Gain on the sale of property, plant and equipment ...... 10,079 10,235 Loss on the sale of property, plant and equipment ...... (691) (436) Of which (losses)/gains classified as discontinued operations (note 7) ...... — (6,307) Total other (losses)/gain ...... 9,387 3,493

The gain on the sale of property, plant and equipment in 2013 primarily relates to the sale of property in HRG Eiendom AS.

The gain on the sale of property, plant and equipment in 2012 primarily relates to the sale of property in HRG Eiendom AS and in the bus business.

F-87 Note 28 Finance income and expenses

2013 2012 (in NOK 1,000) Interest expenses —Bank borrowings ...... (174,210) (196,748) —Bond loan ...... (54,048) (43,008) —Convertible loan (note 17) ...... — (2,788) —Interest expenses group account ...... (6,025) (10,243) —other interest expenses ...... (2,576) — Foreign exchange losses ...... (85,357) (107,839) Losses on sale of financial assets ...... (15) — Impairment of financial non-current assets ...... (627) — Other finance expenses ...... (994) (7,355) Of which finance expenses classified as discontinued operations (Note 7) ...... 3,220 17,285 Total finance expenses ...... (320,632) (350,695) Interest income on current bank deposits ...... 6,976 7,268 Foreign exchange gains ...... 79,809 126,172 Gains on sale of financial assets ...... 112 18,364 Dividends ...... 1,416 259 Other finance income ...... 2,620 1,250 Of which finance income classified as discontinued operations (Note 7) ...... (1,393) (23,211) Total finance income ...... 89,540 130,102 Finance expenses—net ...... (231,092) (220,593)

Note 29 Net foreign exchange gains/(losses) Foreign exchange differences are recognised on the following lines in the income statement

2013 2012 (in NOK 1,000) Operating revenues ...... (50,958) (41,447) Other operating costs ...... (3,226) 1,282 Net finance income/(expenses) ...... (5,547) 18,333 Of which net foreign exchange losses classified as discontinued operations (note 7) .... — 9,794 Total foreign exchange gains/(losses) ...... (59,732) (12,039)

Note 30 Transactions with related parties Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company and associates. Associates in 2013 included ANS Havnebygningen (50 per cent shareholding), Green Dog Svalbard AS (50 per cent shareholding) and Senja Rutebil AS (49.3 per cent shareholding). ANS Havnebygningen owned and leased out the parent company’s former office premises in Tromsø until September 2013. Green Dog supplies dog-related services on Spitsbergen to Spitsbergen Travel AS. The Group also owned 50 per cent of Funn IT AS which in 2012 delivered IT services to the parent company Hurtigruten ASA and Hurtigruten Pluss AS; the shareholding was sold on 13 February 2013.

F-88 The Group conducted the following transactions with related parties

2013 2012 (in NOK 1,000) Purchase of services from associates Rent for premises ...... 3,014 2,931 IT services and similar ...... — 22,652 Dog racing services ...... 4,100 — Total purchase of services from associates ...... 7,113 25,583 Remuneration paid to senior management Salaries and other current benefits (incl. former senior management) ...... 30,246 17,612 Pension costs (including former senior management) ...... 1,612 1,067 Total remuneration paid to senior management ...... 31,858 18,678 Balances with associates at year-end Non-current receivables ...... 1,500 — Current receivables ...... 350 — Trade payables ...... — 944 Net balances with associates as of 31 December ...... 1,850 944

Transactions with shareholders Transactions with the company’s largest shareholders are conducted on the arm’s length principle, and in 2013 and 2012 included the sale of public transport-related services to Troms County Council. Please refer to note 23.

The Group hires offices in Oslo from Home Invest AS which is a sister company of shareholder Home Capital AS, which is in turn owned by director Petter Stordalen. The lease is not of a material nature.

Note 31 Events after the balance sheet date There have not been any events after the balance sheet date.

F-89 Income statement

Note 2013 2012 (in NOK 1,000) Operating revenues Operating revenues ...... 16 2,553,591 2,505,305 Operating costs Payroll costs ...... 17 (367,658) (611,716) Depreciation, amortisation and impairment losses ...... 3 (187,686) (281,052) Other operating costs ...... (1,777,338) (1,803,684) Total operating costs ...... (2,332,683) (2,696,452) Operating profit/(loss) ...... 220,908 (191,147) Finance income ...... 20 109,818 239,718 Finance expenses ...... 20 (330,076) (349,013) Finance expenses—net ...... (220,259) (109,294) Profit/(loss) before income tax ...... 649 (300,442) Income tax expense ...... 5 (280) (21,584) Profit/(loss) for the year ...... 369 (322,026)

Transfers Transferred (from)/to other equity ...... 369 (322,026) Total transfers ...... 369 (322,026)

F-90 Statement of comprehensive income

Note 2013 2012 (in NOK 1,000) Profit/(loss) for the year ...... 369 (322,026) Other comprehensive income Actuarial gains/(loss) on retirement benefit obligations, net of tax ...... 14 3,890 11,159 Cash flow hedges, net of tax ...... (4,611) (66,680) Currency translation differences ...... (1) 17 Other comprehensive income for the year, net of tax ...... (722) (55,504) Total comprehensive income for the year ...... (352) (377,530)

Attributable to Owners of the company ...... (352) (377,530) Total comprehensive income for the year ...... (352) (377,530)

F-91 Balance sheet at 31 December

Note 2013 2012 (in NOK 1,000) Assets Non-current assets Intangible assets ...... 3 73,862 38,741 Deferred income tax assets ...... 5 170,562 170,562 Land and buildings ...... 3 — 570 Ships ...... 3 3,136,915 3,092,372 Other tangible non-current assets ...... 3 1,377 1,799 Total tangible and intangible non-current assets ...... 3,382,715 3,304,043 Investments in subsidiaries ...... 6 444,892 492,118 Investments in associates ...... 7 14,103 19,609 Investments in other companies ...... 8 7,916 8,346 Non-current trade and other receivables ...... 9 169,805 89,788 Total financial non-current assets ...... 636,716 609,861 Total non-current assets ...... 4,019,432 3,913,904

Current assets Inventories ...... 11 59,255 53,961 Trade and other receivables ...... 9 186,776 422,411 Derivative financial instruments ...... 8 12,932 5,717 Cash and cash equivalents ...... 12 40,911 53,482 Total current assets ...... 299,874 535,571 Total assets ...... 4,319,305 4,449,476

Equity and liabilities Paid-in equity ...... 13 1,154,588 1,154,588 Other reserves ...... (322,492) (322,141) Total equity ...... 832,096 832,447 Retirement benefit obligations ...... 14 205 12,515 Total provisions ...... 205 12,515 Borrowings ...... 10 2,411,411 2,700,746 Other non-current liabilities ...... 10 22,840 21,967 Derivative financial instruments ...... 8 59,752 58,695 Total non-current liabilities ...... 2,494,002 2,781,409 Current liabilities ...... 9 941,002 802,057 Derivative financial instruments ...... 8 52,000 21,049 Total current liabilities ...... 993,002 823,106 Total liabilities ...... 3,487,210 3,617,030 Total equity and liabilities ...... 4,319,305 4,449,476

F-92 Statement of changes in equity

Share capital including treasury Note shares Share premium Retained earnings Total equity (in NOK 1,000) Balance at 1 January 2012 ...... 419,966 734,622 55,390 1,209,977 Profit/(loss) for the year ...... — — (322,026) (322,026) Other comprehensive income Currency translation differences ...... — — 17 17 Cash flow hedges, net of tax ...... — — (66,680) (66,680) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 14 — — 11,159 11,159 Total other comprehensive income, net of tax ...... — — (55,504) (55,504) Total comprehensive income for the year ...... — — (377,530) (377,530) Balance at 31 December 2012 ...... 419,966 734,622 (322,141) 832,447 Balance at 1 January 2013 ...... 419,966 734,622 (322,141) 832,447 Profit/(loss) for the year ...... — — 369 369 Other comprehensive income Currency translation differences ...... — — (1) (1) Cash flow hedges, net of tax ...... — — (4,611) (4,611) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 14 — — 3,890 3,890 Total other comprehensive income, net of tax ...... — — (722) (722) Total comprehensive income for the year ...... — — (352) (352) Balance at 31 December 2013 ...... 419,966 734,622 (322,492) 832,096

F-93 Cash flow statement

Note 2013 2012 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax ...... 649 (300,442) Depreciation, amortisation and impairment ...... 3 187,686 281,052 Gains/losses on sale of property, plant and equipment and shares ...... (9,979) (18,263) Dividends received ...... 20 (23,816) (71,518) Proceeds from group contribution ...... (2,076) (37,253) Impairment of non-current shares ...... 47,451 — Difference between expensed pension and payments ...... 10,269 25,715 Change in working capital: Inventories ...... (5,294) (4,498) Trade and other receivables ...... 238,798 203,410 Trade and other payables ...... (18,964) 105,663 Net cash flows from (used in) operating activities ...... 424,725 183,867 Cash flows from investing activities Purchases of property, plant, equipment (PPE) and intangible assets ...... 3 (266,679) (165,421) Proceeds from insurance settlement ...... 14,162 — Proceeds from sale of PPE ...... 523 6,039 Purchase of shares and shareholdings ...... — (750) Proceeds from sale of shares and shareholdings ...... 15,450 24,560 Dividends received ...... 20 23,816 71,518 Change in other investments and other receivables ...... (79,145) (84,847) Change in restricted funds ...... 12 2,356 43,611 Net cash flows from (used in) investing activities ...... (289,516) (105,290) Cash flows from financing activities Proceeds from borrowings ...... 150,000 3,040,525 Repayments of borrowings ...... (273,333) (3,165,487) Net cash flows from (used in) financing activities ...... (123,333) (124,962) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... 11,876 (46,385) Cash and cash equivalents at 1 January ...... (46,521) (136) Cash, cash equivalents and bank overdrafts at 31 December ...... 12 (34,645) (46,521)

F-94 Accounting policies

Hurtigruten ASA has chosen to adopt simplified International Financial Reporting Standards (IFRS) in its parent company accounts, pursuant to section 3–9, paragraph 5 of the Norwegian Accounting Act, cf. regulation of 21 January 2008.

Applying the simplified version of IFRS to the parent company accounts means that valuation rules and accounting policies applied in the consolidated accounts also apply to the parent company, Hurtigruten ASA. See the group accounting policies for further information. A simplified application of IFRS enables the financial statements and note information to accord with the Norwegian Accounting Act (NGAAP). The financial statements and notes for the parent company have been organised in accordance with the NGAAP, with the exception of the comprehensive income statement which follows IFRS.

Shares in subsidiaries and associates are recorded in accordance with the cost method of accounting in the parent company accounts.

Note 1 Financial market risk

The company uses financial instruments such as bank loans and bond loans. In addition, the company has financial instruments such as trade receivables, trade payables, etc., which are directly linked to day-to-day operations. For hedging purposes the company makes use of certain financial derivatives.

As a result of its regular operations, the company is exposed to risks related, for example, to fluctuations in exchange and interest rates and bunker oil costs. Hurtigruten’s overarching hedging strategy is to create predictability for the company’s operations and reduce the impact volatility in macroeconomic conditions might have on the company’s financial performance and standing. The primary management parameter is the expected cash flow. Extensive use is made of simple, transparent and liquid hedging instruments, mainly forward contracts, combined possibly with options.

Currency risk

The company operates internationally and is exposed to currency risk in multiple foreign currencies. in particular EUR, USD and GBP. Currency risk arises from future ticket sales as well as recognised assets or liabilities. In addition, fuel cost is quoted in USD. Currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency which is not the entity’s functional currency.

The company’s strategy is to hedge up to 80 per cent of the expected cash flow in EUR and GBP up to 18 months into the future through the use of transparent and liquid instruments, usually forward contracts combined with options. Hedges have been made on around 75 per cent of expected cash flows in EUR for 2014 and on around 40 per cent for 2015. Hedges have also been made on just under 40 per cent of expected cash flows in GBP for 2014. The company refinanced its debt in March 2012, where portions of the loan can be converted from NOK to EUR to achieve a “natural hedge”. The conversion right applies for the entire term of the loan.

Forward foreign exchange contracts

The nominal amount of outstanding forward foreign exchange contracts as of 31 December 2013 was NOK 1,157 million (as of 31 December 2012 there were no outstanding forward foreign exchange contracts that qualified for hedge accounting).

The hedged, highly probable transactions in foreign currency are expected to occur at various dates over the next 18 months. The forward foreign exchange contracts satisfy the requirements for hedge accounting in accordance with IFRSs and the changes in fair value are adjusted in other comprehensive income. Gains and losses on contracts recognised in other comprehensive income as of 31 December 2013 will be recognised in the income statement in the same accounting periods that the hedged transactions affect the income statement. Realised gains and losses are allocated to passenger revenues. In 2013 realised losses allocated to passenger revenues amounted to NOK 20.8 million (2012: gains of NOK 31.1 million).

F-95 Interest rate risk The company’s interest rate risk is associated with current and non-current borrowings. Borrowings at variable interest rates entail an interest rate risk for the company’s cash flow. Fixed interest rate borrowings expose the company to a fair-value interest rate risk. In 2012 and 2013 the company’s borrowings with variable interest rates were in NOK. The company manages the variable interest rate risk by means of variable-to-fixed- interest rate swap contracts. Interest rate swaps involve converting loans with variable interest rates to fixed- interest loans. The company enters into a contract with other parties to exchange the difference between the contract’s fixed interest rate and the amount of the variable interest rate calculated on the agreed principal through the interest rate swaps. A new strategy was adopted for hedging interest rates in connection with the refinancing of the company’s non-current debt in March 2012, under which 40–60 per cent of the company’s total debt is to be hedged. Non-amortising interest rate swaps have been entered into equivalent to 56.5 per cent of the company’s debt on refinancing. As of 31 December 2013 around 65 per cent of the company’s total debt was hedged.

Interest rate swaps The nominal principal on outstanding interest rate swaps as of 31 December 2013 was NOK 1,750 million (2012: NOK 2,050 million).

As of 31 December 2013 the fixed interest rate ranged from 2.7 to 3.1 per cent (2012: from 2.7 to 5.3 per cent). The variable interest rates were NIBOR. Gains and losses on interest rate swaps recognised in other comprehensive income as of 31 December 2013 will continuously be reversed in the income statement until the bank borrowings (note 10) have been repaid. Realised gains and losses are allocated to interest expenses. In 2013 realised losses totalling NOK 31.4 million were allocated to interest expenses (2012: NOK 19.6 million).

Bunkers The company is exposed to fluctuations in bunker oil prices. The price of oil, and thus bunker oil, is determined in international trading in USD, while the parent company purchases bunker oil in NOK. The risk can therefore be split into a currency element and a product element. In its risk management strategy, the company has emphasised the need to coordinate risk, and has therefore chosen to reduce the bunkers risk while the currency risk is coordinated with the company’s other currency exposures.

The company enters into revolving quarterly forward contracts for the next one to six quarters to hedge 0– 100 per cent of the expected bunker oil consumption, with a greater share being hedged in the near future and less being hedged further into the future. In addition, the company has a stop-loss strategy where it attempts to hedge the non-hedged amount if the price of oil rises above a predefined threshold. Hedges are made in the forward market on 87 per cent of expected bunker consumption for 2014, distributed with a higher proportion in the coming quarters, and a lower proportion towards the end of the year.

Oil derivatives The nominal amount of outstanding forward bunker oil contracts as of 31 December 2013 was NOK 266 million (2012: NOK 168 million).

The hedged, highly probable transactions are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward bunker oil contracts satisfy the requirements for hedge accounting under IFRSs and changes in the fair value are recognised directly in other comprehensive income. Gains or losses on oil derivatives recognised in other comprehensive income as of 31 December 2013 will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. Realised gains or losses are allocated to bunker costs. In 2013 realised gains of approximately NOK 0 were allocated to bunker costs (2012: NOK 5.3 million).

F-96 Credit risk and liquidity risk The company is exposed to credit and liquidity risks. The company has no significant concentration of credit risk. Sales to end users are settled in cash or with recognised credit cards. Sales to external agents are made either through prepayment/credit cards or through invoicing. The company has routines to ensure that credit is only extended to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The counterparties to the derivative contracts and cash transactions are limited to financial institutions with high credit ratings. The company has routines that limit exposure to credit risk related to a single financial institution.

As of 31 December 2011 a larger share of trade receivables than normal was due but not impaired. This was due to the fact that additional compensation received from the Norwegian government for the purchase of services under the previous coastal service contract had not been settled pending a decision on an EFTA Surveillance Authority (ESA) inquiry as to whether additional compensation by the government contravened EU rules on state aid. The company also had outstanding claims against a subsidiary, which in turn had outstanding claims against contracting parties in connection with the discontinuation of the Group’s charter business in Australia. The Group’s liquidity was boosted by just over NOK 300 million in December 2012 as a result of settlements in these two cases; however, the Group also had to recognise further loss provisions. The Group no longer has any claims in the balance sheet regarding the charter business, but the parent company still has a receivable due from the subsidiary Hurtigruten Pty. Ltd. The residual receivable due from the Norwegian government represented by the Ministry of Transport and Communications relating to the supplementary agreement has been fully written down as a result of the loss provision. These matters are discussed in further detail in note 2 Contingencies and in note 9 Combined items.

The company’s strategy with regard to liquidity is to have sufficient cash, cash equivalents or credit facilities to finance its ongoing operations and investments. The Group has a group account that ensures that some of the Group’s unrestricted liquidity is available to the parent company.

Note 2A Contingencies As of 31 December 2013 the company had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent outcomes in the course of regular operations. No significant liabilities are expected to arise with respect to contingent outcomes, with the exception of the provisions that have already been recognised in the financial statements (cf. note 20 to the consolidated financial statements).

Membership of the NOx Fund Hurtigruten ASA is a member of the Confederation of Norwegian Enterprise’s (NHO) NOx Fund. The main objective of the Environmental Agreement concerning reductions of NOx and the NHO’s NOx Fund is to reduce emissions of nitrogen oxide. The Fund is a joint venture to which affiliated businesses can apply for support for emission-reducing measures. Payment to the Fund replaces the nitrogen oxide tax for affiliated businesses.

The Environmental Agreement concerning reductions in NOx for 2011–2017 was signed on 14 December 2010 by 15 business organisations and the Ministry of the Environment. The agreement is a prolongation of the Environmental Agreement concerning reductions in NOx for the period 2008–2010. The Environmental Agreement and the additional declaration form the basis for work performed by the NHO’s NOx Fund. The signatories of the Environmental Agreement for the period 2011–2017 have undertaken to reduce their overall NOx emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, which can be broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017. The Environmental Agreement concerning reductions in NOx for 2008–2012 was satisfied through a total reduction of 18,000 tonnes of NOx each year. The Fund has also reported that the targets for 2011 and 2012 were satisfied.

F-97 The Norwegian Environment Agency monitors whether individual reduction targets have been achieved. Deviations of more than 10 per cent of reduction targets trigger a collective fine, under which businesses must pay the nitrogen oxide tax for the pro rata share of the target that has not been satisfied. However, the businesses will never pay more than the official government rate for nitrogen oxide tax.

Both Environmental Agreements have been approved by the EFTA Surveillance Authority (ESA). The 2011–2017 Environmental Agreement was approved by the ESA on 19 May 2011, and the 2008–2010 Environmental Agreement was approved on 16 July 2008.

NOK 15.5 million was recognised in respect of the nitrogen oxide tax in Hurtigruten ASA’s financial statements for 2013 (2012: NOK 15.3 million).

Dispute with Stranda Hamnevesen port authority In summer 2013 Stranda Hamnevesen instigated legal proceedings against Hurtigruten ASA concerning non-payment of passenger handling and harbour-related fees in the total amount of NOK 4 million. On 6 January 2014 Sunnmøre District Court ruled that Stranda could not claim either docking fees or passenger-handling fees from Hurtigruten for 2012 and 2013. The ruling is not legally binding as Stranda has appealed the case. However, the case is of significance in that it is the first case dealing with the application of the new Harbour Act, and will be of particular importance with regard to the establishment of legal principles.

Note 2B Restatement of comparative figures IAS 19, Employee Benefits, has been significantly amended in that the net interest expense is now calculated based on the net deficit measured applying the discount rate to the balance at the start of the year. The effect of this is that the expected return on pension assets in excess of the discount rate for 2012 has been set to zero in the comparative figures.

Effect of change in accounting policies in income statement

Net profit/(loss) Net profit/(loss) for for 2012, after 2012, before changes changes in in policy New IAS 19 policy (in NOK 1,000) Operating revenues Operating revenues ...... 2,505,305 — 2,505,305 Total operating revenues ...... 2,505,305 — 2,505,305 Operating costs Payroll costs ...... (610,636) (1,080) (611,716) Depreciation, amortisation and impairment losses ...... (281,052) — (281,052) Other operating costs ...... (1,803,684) — (1,803,684) Total operating costs ...... (2,695,372) (1,080) (2,696,452) Operating profit/(loss) ...... (190,067) (1,080) (191,147) Finance income ...... 239,718 — 239,718 Finance expenses ...... (349,013) — (349,013) Finance expenses—net ...... (109,294) — (109,294) Profit/(loss) before income tax ...... (299,362) (1,080) (300,442) Income tax expense ...... (21,887) 303 (21,584) Profit/(loss) for the year ...... (321,249) (777) (322,026)

F-98 Effect of change in accounting policy on statement of total comprehensive income

Total Total comprehensive comprehensive income for 2012, income for 2012, before changes in after changes in policy New IAS 19 policy (in NOK 1,000) Net profit/(loss) for the year ...... (321,249) (777) (322,026) Other comprehensive income Actuarial gains/(loss) on retirement benefit obligations, net of tax...... 10,382 777 11,159 Cash flow hedges, net of tax ...... (66,680) — (66,680) Currency translation differences ...... 17 — 17 Other comprehensive income for the year, net of tax ...... (56,281) 777 (55,504) Total comprehensive income for the year ...... (377,530) — (377,530) Attributable to Owners of the parent ...... (377,530) — (377,530) Total comprehensive income for the year ...... (377,530) — (377,530)

The change in accounting policy does not affect the balance sheet for 2012

Effect of change in accounting policies on statement of changes in equity

Total paid-in Share capital equity and including treasury retained shares Share premium Retained earnings earnings (in NOK 1,000) Balance at 1 January 2012, before change in policy ...... 419,966 734,622 55,390 1,209,977 Net profit/(loss) for the year 2012, before change in policy ...... — — (321,249) (321,249) Effect of change in policy ...... — — (777) (777) Net profit/loss for the year 2012, after changes in policy ...... (322,026) (322,026) Other comprehensive income, before changes in policy Currency translation differences ...... — — 17 17 Cash flow hedges, net of tax ...... — — (66,680) (66,680) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... — — 10,382 10,382 Other comprehensive income, net of tax, before changes in policy ...... — — (56,281) (56,281) Effect of change in policy, estimate deviation pensions ...... — — 777 777 Other comprehensive income, net of tax and changes in policy ...... — — (55,504) (55,504) Total comprehensive income for the year after changes in policy ...... — — (377,530) (377,530) Balance at 31 December 2012, before change in policy ...... 419,966 734,622 (322,140) 832,447 Balance at 31 December 2012, after change in policy ...... 419,966 734,622 (322,140) 832,447

F-99 Effect of change in accounting policies on statement of cash flow

Cash flow for Cash flow for 2012, 2012, after before changes in changes in policy New IAS 19 policy (in NOK 1,000) Cash flow from operating activities Profit/(loss) before income tax ...... (299,362) (1,080) (300,442) Depreciation, amortisation and impairment losses ...... 281,052 — 281,052 Gains/losses on sale of property, plant and equipment and shares . . (18,263) — (18,263) Dividends received ...... (71,518) — (71,518) Proceeds from group contribution ...... (37,253) — (37,253) Difference between expensed pension and payments ...... 24,635 1,080 25,715 Change in working capital: Inventories ...... (4,498) — (4,498) Trade and other receivables ...... 203,410 — 203,410 Trade and other payables ...... 105,663 — 105,663 Net cash flows from (used in) operating activities ...... 183,867 — 183,867 Cash flow from investing activities Purchases of property, plant, equipment (PPE) and intangible assets ...... (165,421) — (165,421) Proceeds from sale of PPE ...... 6,039 — 6,039 Purchase of shares and shareholdings ...... (750) — (750) Proceeds from sale of shares and shareholdings ...... 24,560 — 24,560 Dividends received ...... 71,518 — 71,518 Change in other investments and other receivables ...... (84,847) — (84,847) Change in restricted funds ...... 43,611 — 43,611 Net cash flows from (used in) investing activities ...... (105,290) — (105,290) Cash flow from financing activities Proceeds from borrowings ...... 3,040,525 — 3,040,525 Repayments of borrowings ...... (3,165,487) — (3,165,487) Net cash flows from (used in) financing activities ...... (124,962) — (124,962) Net (decrease)/increase in cash and cash equivalents ...... (46,385) — (46,385) Cash and cash equivalents as of 1 January ...... (136) — (136) Cash and cash equivalents as of 31 December ...... (46,521) — (46,521)

F-100 Note 3 Property, plant and equipment and intangible assets

Intangible Land and Other property, plant assets buildings Ships and equipment Total (in NOK 1,000) Book value as of 1 January 2013 ...... 38,741 570 3,092,372 1,799 3,133,481 Additions ...... 36,022 — 230,657 — 266,679 Disposals ...... — — — (321) (321) Depreciation/amortisation for the year . . . (901) — (271,345) (101) (272,346) Impairment losses for the year ...... — (570) 85,230 — 84,660 Book value as of 31 December 2013 .... 73,862 — 3,136,915 1,377 3,212,154 As of 31 December 2013 Cost ...... 85,081 — 5,654,514 3,417 5,743,013 Accumulated depreciation/amortisation as of 31 December 2013 ...... (8,857) — (2,456,062) (2,040) (2,466,959) Accumulated impairment losses as of 31 December 2013 ...... (2,363) — (61,538) — (63,901) Book value as of 31 December 2013 .... 73,862 — 3,136,915 1,377 3,212,154 Useful economic lifetime ...... 3–7years 25–100 years 12–30 years 5–10 years

Intangible assets consist of internal/external development/adaptation of ICT systems and software related to the ships.

An impairment loss of NOK 100 million was recognised in 2008 to reflect the expected fair value of the Explorer ship MS Fram. As a result of improved earnings and a healthy order book at the start of 2014, the impairment loss was reversed in its entirety as of 31 December 2013. After adjusting for depreciation for the period, the reversal of the net impairment loss amounts to NOK 78 million.

The company’s two remaining fast ferries were sold in 2014, and NOK 7.5 million of the previous impairment loss was reversed as of 31 December 2013 in order to reflect fair value.

Note 4 Assets held-for-sale and discontinued operations HELD-FOR-SALE As part of the company’s plan to sell the non-strategic assets, the bus business was classified as held for sale as of 31 December 2013. The company’s shares in the subsidiary AS TIRB were therefore classified in the same category.

Assets in the disposal group classified as held-for-sale

2013 2012 (in NOK 1,000) Shares in subsidiaries ...... 142,755 — Assets held-for-sale ...... 142,755 —

F-101 DISCONTINUED OPERATIONS The Group’s activities connected to the leasing of ships to the oil industry have been discontinued since 1 January 2012, and consequently classified as a discontinued operation in 2012. The profit or loss from discontinued operations includes the company’s charter activities.

Profit/(loss) from discontinued operations

2013 2012 (in NOK 1,000) Operating revenues (note 16) ...... — (10,819) Payroll costs ...... — (6,128) Depreciation, amortisation and impairment losses ...... — (4,455) Other operating costs ...... — (112,285) Operating profit/(loss) ...... — (133,687) Finance income ...... — 21,690 Finance expenses ...... — (11,675) Finance expenses—net ...... — 10,015 Profit/(loss) before tax ...... — (123,671) Income tax expense ...... — 34,628 Profit/(loss) for the year ...... — (89,043)

Net cash flows from discontinued operations

2013 2012 (in NOK 1,000) Net cash flows from (used in) operating activities ...... — (131,330) Net cash flows from (used in) investing activities ...... — — Net cash flows from (used in) financing activities ...... — — Total net cash flows ...... — (131,330)

Note 5 Income tax

2013 2012 (in NOK 1,000) The income tax expense for the year can be broken down as follows Change in deferred income tax assets ...... — (7) Deferred income tax liabilities/assets relate to transactions recognised in equity included in the change in deferred income tax assets ...... 280 21,591 Total income tax expense ...... 280 21,584 Calculation of tax basis for the year Profit/(loss) before tax ...... 649 (300,442) Permanent differences ...... 41,097 (82,843) Permanent differences relating to recognition in equity ...... 5,403 15,500 Change in hedging derivatives ...... (6,404) (92,611) Change in temporary differences that affect the tax payable ...... (65,014) 211,204 Tax basis for the year ...... (24,269) (249,193)

F-102 Summary of temporary differences

2013 2012 (in NOK 1,000) Current assets ...... (279,836) (288,977) Non-current assets ...... 2,098,698 1,997,110 Gains and losses account ...... 123,043 153,804 Pension obligations ...... (205) (12,515) Other differences ...... (112,101) (84,838) Tax loss carryforward ...... (2,858,382) (2,834,130) Basis for unrecognised deferred income tax assets ...... 397,074 460,398 Total temporary differences ...... (631,710) (609,148) Estimated deferred income tax assets ...... (170,562) (170,562) Tax rate applied ...... 27% 28%

In preparing the financial statements, management deems the future taxable income to be sufficient to utilise the recognised deferred income tax assets. This view is based on management’s estimates of future profits generated by the company, where particular importance has been attached to the company’s procurement contract with the government which runs until 2019, as well as the company’s ongoing efficiency program. On grounds of prudence, the company has decided not to recognise the deferred income tax asset relating to the tax loss for the year. The is no restriction on the time tax losses may be carried forward.

Reconciliation of the income tax expense for the year

2013 2012 (in NOK 1,000) Profit/(loss) before tax ...... 649 (300,442) Estimated tax on the profit/(loss) for the year 28% ...... 182 (84,125) Change in the income tax expense as a result of: —non-taxable income ...... (9,153) (24,635) —non-tax-deductible expenses ...... 14,704 1,154 —tax on profit or loss attributable to companies assessed as a partnership ...... 5,947 296 —unrecognised deferred income tax assets ...... (17,731) 128,911 —effect of change in income tax rate ...... 6,317 — —miscellaneous items ...... 14 (18) Total income tax expense ...... 280 21,584

Note 6 Investments in subsidiaries

Ownership/voting Registered office share Net profit/loss 2013 Book value (in NOK 1,000) (NOK 1,000) HRG Eiendom AS ...... Tromsø, Norway 100.0% 6,444 385 Hurtigruten Pluss AS ...... Tromsø, Norway 100.0% 3,430 4,062 Hurtigruten Estonia OÜ ...... Tallinn, Estonia 100.0% 5,836 20 Hurtigruten GmbH ...... Hamburg, Germany 100.0% (1,134) 48,832 Hurtigruten Inc...... NewYork, USA 100.0% (2,443) 1 Hurtigruten Limited ...... London, UK 100.0% 1,585 11,920 Hurtigruten Pty. Ltd...... Sydney, Australia 100.0% 6,821 — Hurtigruten SAS ...... Paris, France 100.0% 2,844 315 Hurtigruten Sjø AS ...... Kirkenes, Norway 100.0% (3,247) 110 Spitsbergen Travel AS ...... Longyearbyen, Svalbard, Norway 100.0% 35,533 283,719 AS TIRB ...... Finnsnes, Norway 71.3% (11,589) 95,529 Total ...... 444,892

Please refer to note 21 for additional information on the balances with subsidiaries.

F-103 Note 7 Investments in associates

Equity as of Ownership/ 31 December Net profit/(loss) Registered office voting share 2013 for 2013 Book value (in NOK 1,000) (in NOK 1,000) (in NOK 1,000) ANS Havnebygningen ...... Tromsø, Norway 50.0% 26,285 23,787 14,103

The shares in Funn IT AS were sold in 2013.

Please refer to note 21 for additional information on the company’s transactions with associates.

Note 8A Financial instruments by category The following principles have been applied for the subsequent measurement of financial assets and liabilities

At 31 December 2013

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Shares in other companies ...... — 7,916 — — 7,916 Non-current receivables (note 9) ...... 169,805 — — — 169,805 Financial assets—current Trade and other receivables (note 9) ...... 186,776 — — — 186,776 Derivative financial instruments ...... — — 12,932 — 12,932 Cash and cash equivalents (note 12) ...... 40,911 — — — 40,911 Financial liabilities—non-current Borrowings (notes 10 and 21) ...... — — — 2,887,584 2,887,584 Derivative financial instruments ...... — — 59,752 — 59,752 Financial liabilities—current Drawdowns on group account (note 12) ...... — — — 47,237 47,237 Trade and other payables (note 9) ...... — — — 462,144 462,144 Derivative financial instruments ...... — 12,671 39,329 — 52,000

At 31 December 2012

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Shares in other companies ...... — 8,346 — — 8,346 Non-current receivables (note 9) ...... 89,788 — — — 89,788 Financial assets—current Trade and other receivables (note 9) ...... 422,411 — — — 422,411 Derivative financial instruments ...... — 5,717 — — 5,717 Cash and cash equivalents (note 12) ...... 53,482 — — — 53,482 Financial liabilities—non-current Borrowings (notes 10 and 21) ...... — — — 2,996,046 2,996,046 Derivative financial instruments ...... — — 58,695 — 58,695 Financial liabilities—current Drawdowns on group account (note 12) ...... — — — 69,328 69,328 Trade and other payables (note 9) ...... — — — 447,003 447,003 Derivative financial instruments ...... — — 21,049 — 21,049

F-104 Note 8B Creditworthiness of financial assets Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has long-standing partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2013 2012 (in NOK 1,000) Trade and other receivables Counterparties without external credit rating ...... 186,776 422,411 Total trade and other receivables ...... 186,776 422,411 Cash at bank(1) AA...... 5,183 8,301 A ...... 15,897 26,183 Without external credit rating ...... 7,867 7,646 Total cash at bank ...... 28,948 42,131

(1) The remainder of the cash and cash equivalents in the balance sheet is cash

Derivative financial instruments AA ...... 8,159 5,717 A ...... 2,958 — Without external credit rating ...... 1,815 — Total derivative financial instruments ...... 12,932 5,717

None of the financial assets have been renegotiated during the last financial year.

Note 9 Combined items

2013 2012 (in NOK 1,000) Other non-current receivables Non-current receivables (note 21) ...... 169,766 89,653 Other non-current receivables ...... 39 135 Total non-current receivables (notes 8A, 10) ...... 169,805 89,788 Current receivables Trade receivables ...... 66,507 112,839 Total trade and other current receivables from Group companies (note 21) ...... 119,294 218,113 Other current receivables ...... 975 91,460 Total current receivables (note 8) ...... 186,776 422,411 Other current liabilities Drawdowns on group account (note 12) ...... 47,237 69,328 Trade payables ...... 154,652 155,537 Public duties payable ...... (21,713) 12,394 First-year instalments on non-current debt (note 10) ...... 453,333 273,333 Trade payables and other current debt Group companies (note 21) ...... 245,424 163,996 Other current liabilities ...... 62,067 127,470 Total other current liabilities ...... 941,002 802,057

Receivables and liabilities denominated in foreign currencies are translated to NOK at the rate in effect at the balance sheet date.

As of 31 December 2013 Hurtigruten’s Australian subsidiary Hurtigruten Pty. Ltd. was being wound up as of 31 December 2013. Consequently, the company’s trade and other current receivables from Group companies were significantly reduced.

F-105 As of 31 December 2012 the company’s provisions for bad debts increased to NOK 377 million as of The increase was primarily attributable to two factors: • The EFTA Court’s ruling in the ESA case relating to the supplementary agreement with the government (from 2008) resulted in the recognition of loss provisions for contractual revenues in the amount of NOK 108 million. • Hurtigruten’s Australian subsidiary Hurtigruten Pty. Ltd. reached a settlement in the arbitration case concerning outstanding claims in connection with the chartering of MS Finnmarken. The settlement was made in December 2012 and resulted in the recognition of a further loss provision of NOK 99 million, in addition to the provision of NOK 46 million that had already been recognised as of 31 December 2011.

The increase in the first year’s instalments is attributable drawings on a current credit facility in December 2013.

Note 10 Receivables and liabilities

2013 2012 (in NOK 1,000) Receivables that mature in more than one year Other non-current receivables (note 9) ...... 169,805 89,788 Total receivables that mature in more than one year ...... 169,805 89,788 Other non-current liabilities Other non-current liabilities ...... 22,840 21,967 Total other non-current liabilities ...... 22,840 21,967 Repayment profile for interest-bearing debt 2013 ...... — 258,643 2014 ...... 440,139 260,830 2015 ...... 249,430 262,763 2016 ...... 251,155 264,488 2017=> ...... 1,924,021 1,927,355 Total ...... 2,864,744 2,974,079

Deferred income tax and pension obligations are not included above.

An agreement has been entered into for the sale of two of the remaining fast ferries with an agreed delivery date of the middle of March 2014. In connection with the delivery a loan connected with the fast ferries will be redeemed in the amount of NOK 43 million. The entire loan is recognised in the first year’s instalments of non- current debt.

In December 2013 the company used a current drawdown facility of NOK 150 million that has to be repaid in its entirety no later than 30 June 2014. The loan is recognised in the first year’s instalments of non-current debt.

The company refinanced its debt in the first quarter of 2012, and the new loan agreement with the banks was dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The term of the loan is five years with annual instalments of NOK 260 million, where the first instalment falls due in September 2012. The financial covenants are as follows: • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current debt excluding the first year’s instalments on non-current debt. • Minimum liquidity holding The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan.

F-106 • Minimum fixed charge coverage ratio/liquidity holding

At the end of each quarter the Group’s EBITDA excluding gains/losses on the sale of assets must be equal to or greater than the Group’s annual debt obligations and dividend payments, or the Group’s unrestricted liquidity including unused credit facilities must be a minimum of NOK 350 million. • Minimum equity ratio

The Group’s equity ratio must be measured on 30 June and 31 December each year, and shall be 22.5 per cent up to 31 December 2014. Thereafter until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreement. From 31 December 2012 until 30 June 2013 the equity ratio requirement was temporarily reduced to 20 per cent.

As part of its refinancing Hurtigruten ASA issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month and is irredeemable until its final maturity date in April 2017. The financial covenants are as follows: • Maximum senior debt facilities ratio

The Group’s hedged debt shall be less than 65 per cent of the Group’s total assets until 30 June 2013. This percentage will be reduced annually by 5 per cent from 1 July 2013. From 1 July 2015 to the expiration of the term of the agreement, hedged debt shall be lower than 50 per cent of total assets. • Maximum leverage ratio The Group’s interest bearing debt shall be less than 6.5 per cent of the Group’s EBITDA, excluding gains/ losses on the sale of assets from 31 December 2012. This percentage shall be reduced annually by 0.5 per cent from 31 December 2013. From 31 December 2012 until 30 September 2013 this requirement was temporarily increased to 12.5 per cent. The requirement for 6.5 per cent also had to be satisfied using normalised EBITDA as a base for the calculation. Normalised EBITDA in this context is the Group’s EBITDA adjusted for i) losses arising in connection with the charter arbitration case (cf. notes 2 and 9) and ii) the provision relating to the ESA case (cf. notes 2 and 9). • Minimum liquidity holding The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current debt excluding the first year’s instalments on non-current debt.

In March 2012 Hurtigruten ASA redeemed the bond loan issued in February/March 2009 pursuant to the loan agreement.

The company also redeemed the convertible bond loan in June 2012 in accordance with the loan agreement.

Note 11 Inventories Inventories consist of the following types of goods

2013 2012 (in NOK 1,000) Goods purchased for resale ...... 38,191 30,411 Bunkers ...... 21,064 23,550 Total inventories ...... 59,255 53,961

The cost of goods sold included in other operating costs amounted to NOK 301.8 million (2012: NOK 311.3 million).

F-107 Inventories are measured at cost. If the fair value is deemed to be lower than the cost price, then the inventories will be written down.

Note 12 Restricted funds and market-based financial current assets

2013 2012 (in NOK 1,000) Cash and cash equivalents (note 8A) ...... 40,911 53,482 Drawdowns on group account (notes 8A and 9) ...... (47,237) (69,328) Total cash and cash equivalents in the balance sheet ...... (6,327) (15,846) Cash and cash equivalents in the cash flow statement consist of the following Cash at bank and on hand ...... (6,327) (15,846) Restricted bank deposits ...... (28,319) (30,675) Cash and cash equivalents in the cash flow statement ...... (34,645) (46,521) Restricted bank deposits consist of the following Cash at bank(1) ...... 28,319 30,675 Total restricted bank deposits ...... 28,319 30,675

(1) Restricted bank deposits mainly comprise tax withholding funds, a licence guarantee to the Ministry of Transport and Communications and guarantees to limited partnerships.

Hurtigruten ASA is included in the Hurtigruten Group’s group account scheme. Hurtigruten ASA is the group account owner in accordance with the agreement and other Group companies are subaccount owners or participants. Cash at bank includes deposits both within and outside the group account scheme. Restricted funds are not included in the group account scheme.

Note 13 Share capital and premium

Number of Nominal value of Share Treasury shares ordinary shares premium shares Total (in NOK 1,000 unless otherwise indicated) As of 31 December 2012 ...... 420,259,163 420,259 734,622 (293) 1,154,588 As of 31 December 2013 ...... 420,259,163 420,259 734,622 (293) 1,154,588

All ordinary shares have equal rights.

The Annual General Meeting was held on 17 April 2013 and granted the company’s board power of attorney to acquire treasury shares. The general meeting adopted the following resolution: I. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire treasury shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of treasury shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. II. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. III. The board is free to determine how the acquisition and sale of treasury shares shall take place. IV. This power of attorney shall remain valid until the company’s Annual General Meeting in 2014.

The board does not have any power of attorney to increase the company’s share capital.

F-108 The 20 largest shareholders at 31 December 2013

Number of Shareholding shares (%) Periscopus AS ...... 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... 69,310,196 16.49 MP Pensjon PK ...... 28,170,366 6.70 Skagen Vekst ...... 22,671,503 5.39 Home Capital AS ...... 21,023,693 5.00 Nordkraft AS ...... 10,844,896 2.58 Dahle, Bjørn ...... 7,598,657 1.81 J.M. Hansen Invest AS ...... 4,290,000 1.02 Berg-Larsen Alexande ...... 2,590,966 0.62 Alta Invest AS ...... 2,029,367 0.48 Odin Maritim ...... 2,000,000 0.48 Warrenwicklund Norge securities fund ...... 1,980,316 0.47 Netfonds Liv ...... 1,839,877 0.44 Flisa Eiendomsinvest ...... 1,750,569 0.42 Warbo AS ...... 1,680,000 0.40 Widnes Odd-Ingar ...... 1,450,000 0.35 Holger Invest I AS ...... 1,400,000 0.33 Narvik Local Authority ...... 1,382,767 0.33 Suveren AS ...... 1,100,000 0.26 Troms County Council ...... 1,048,461 0.25 20 largest shareholders ...... 323,384,923 76.95 Other shareholders ...... 96,874,240 23.05 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.38 per cent and ML Pierce Fenner owns 3.11 per cent.

F-109 Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2013 (directly and indirectly)

Number of shares Corporate assembly Westye Høegh, Chair ...... 950,000 Bjørn Dahle, Deputy Chair ...... 7,598,657 Karen M. Kuvaas ...... 699 Fay Hege Fredriksen ...... — Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Tor Zachariassen ...... — Asbjørn Larsen, elected by employees ...... — Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... — Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Berit Kjøll ...... 100,000 Arve Giske ...... — Guri Mai Elmar ...... — Petter Anker Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... — Management Daniel A. Skjeldam, President/CEO ...... 95,000 Asta Lassesen, CFO ...... 700,000 Sigurd Bay, Senior Vice President Price & Revenue Management from 8 April ...... 33,500 Anne Marit Bjørnflaten, Senior Vice President, Corporate Communications from 11 September . . — Kjell Christoffersen, Senior Vice President HR Development from 15 August ...... 12,782 Tor Geir Engebretsen, Acting Senior Vice President Maritime Operations from 28 October ...... — Oscar Engeli, Senior Vice President ICT from 16 September ...... — Vidag Engen, Senior Vice President Product & Markets from 1 July ...... — Chris Hudson, Senior Vice President Hotel Operations from 8 April ...... — Magnus Wrahme, Senior Vice President Global Sales from 2 May ...... 30,000 Ole Fredrik Hienn, Senior Vice President Legal Affairs until 8 April ...... — Hans Rood, Senior Vice President Global Sales until 8 April ...... — Torkild Torkildsen, Senior Vice President Public Affairs until 1 November ...... 1,684 Dag-Arne Wensel, Senior Vice President Maritime Operations until 28 October ...... 63,650

(1) The shares are owned through the company Periscopus AS (2) The shares are owned through the company Home Capital AS

The company’s auditor does not own any shares in Hurtigruten ASA.

F-110 The 20 largest shareholders at 31 December 2012

Ownership No. of shares interest (%) Periscopus AS ...... 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... 71,835,396 17.09 MP Pensjon PK ...... 29,000,000 6.90 Skagen Vekst ...... 22,671,503 5.39 Home Capital AS ...... 21,023,693 5.00 Nordkraft AS ...... 10,844,896 2.58 Dahle, Bjørn ...... 7,099,979 1.69 J.M. Hansen Invest AS ...... 4,608,293 1.10 Odin Maritim ...... 2,000,000 0.48 Netfonds Liv ...... 1,672,246 0.40 Holger Invest I AS ...... 1,400,000 0.33 Narvik Local Authority ...... 1,382,767 0.33 Alta Invest AS ...... 1,378,119 0.33 Skagen Vekst III ...... 1,223,405 0.29 Fjellvit AS(2) ...... 1,119,040 0.27 Troms County Council ...... 1,048,461 0.25 JPMorgan Chase Bank ...... 1,041,115 0.25 Kvade, Kai Vallin ...... 1,000,100 0.24 Avanza Bank AB brokerage account ...... 950,015 0.23 State Street Bank AN ...... 919,738 0.22 20 largest shareholders ...... 321,442,055 76.49 Other shareholders ...... 98,817,108 23.51 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

F-111 Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2012 (directly and indirectly)

No. of shares Corporate assembly Westye Høegh, Chair ...... — Bjørn Dahle, Deputy Chair ...... 7,099,979 Karen M. Kuvaas ...... 699 Svein Otto Garberg ...... 835,327 Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Fay Hege Fredriksen ...... — Asbjørn Larsen, elected by employees ...... 5,550 Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... 285 Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Mai Elmar ...... — Arve Giske ...... — Berit Kjøll ...... 100,000 Petter Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... — Management Daniel A. Skjeldam, CEO since 1 October 2012 ...... 29,000 Olav Fjell, CEO until 30 September 2012(3) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Asta Lassesen, CFO ...... 600,000 Glen Peter Hartridge, Director product and pricing management ...... — Ole Fredrik Hienn, Director legal affairs ...... 170,950 Hans Rood, Sales and marketing director ...... 90,000 Dag-Arne Wensel, Director technical maritime operations ...... 63,650

(1) The shares are owned through the company Periscopus AS. (2) The shares are owned through the company Home Capital AS. (3) Of which 1,068,890 shares are owned through the company Fjellvit AS.

The company’s auditor does not own any shares in Hurtigruten ASA.

Note 14 Pensions Until 31 July 2013 the company operated pension plans that gave entitlement to defined future pension benefits. These were mainly dependent on the number of years of service, salary level upon reaching retirement age, and the size of the National Insurance benefits. These obligations were covered through an insurance company. The defined benefit pension plans covered 1,220 employees in the parent company. For maritime personnel there are three pension plans that covering different pension periods. A defined benefit plan that covers the period from age 60 to 67, and a defined contribution plan through an insurance company that covers pensions after reaching the age of 67. In addition to the pension obligations funded through insurance companies, the company has defined contribution plans for maritime personnel (Norwegian Pension Insurance for Seafarers) which are administrated by the government. All pension plans were transferred to the subsidiary Hurtigruten Sjø AS in connection with the transfer of business that covered all employees in the company. As of 31 December 2013 the company also has an unfunded plan funded from operations.

F-112 Financial assumptions

2013 2012 Discount rate ...... 4.10% 3.90% Expected return on pension fund assets ...... 4.10% 3.90% Expected annual wage adjustment ...... 3.50% 3.50% Expected annual pension adjustment ...... 0.20% 0.20% Expected annual National Insurance basic amount (G) adjustment ...... 3.25% 3.25% Table book used for estimating liabilities ...... K2013 K2005 Table book used for estimating disabilities ...... IR02 IR02 The actuarial assumptions are based on the normal assumptions used in the insurance industry with respect to demographic factors and staff turnover. Average expected years of service until retirement age ...... 1 year 11.6 years

Pension costs for the year are calculated as follows

2013 2012 (in NOK 1,000) Present value of accrued pension entitlements for the year ...... 4,438 10,014 Defined contribution plans for maritime personnel ...... 17,431 29,694 Interest expenses on accrued pension obligations ...... 1,920 2,390 Expected return on plan assets ...... (1,081) (1,345) Discontinuation of plans ...... — (34) Payroll tax ...... 672 1,939 Total pension costs included in payroll costs (note 17) ...... 23,380 42,658 Actuarial gains/losses recognised in other comprehensive income (before tax) ...... 5,403 15,500

Specification of net pension assets/obligations

2013 2012 (in NOK 1,000) Present value of accrued pension obligations as of 31 December for funded defined benefit plans ...... — 86,453 Estimated value of plan assets as of 31 December ...... — (74,437) Total ...... — 12,015 Present value of pension obligations funded from operations ...... 205 499 Net pension obligations ...... 205 12,515

Net pension assets/obligations are classified as follows on the balance sheet

2013 2012 (in NOK 1,000) Pension obligations ...... 205 12,515 Net pension obligations ...... 205 12,515

F-113 Change in recognised pension obligations

2013 2012 (in NOK 1,000) Book value as of 1 January ...... 86,952 94,259 Present value of accrued pension entitlements for the year ...... 4,438 10,014 Interest expenses ...... 1,920 2,390 Effect of recalculation: Changes in financial assumptions ...... 1,687 (11,895) Changes in demographic assumptions ...... 1,810 1,353 Estimate deviations ...... (19,339) (6,987) Pension benefits paid ...... (4,480) (2,287) Reduction from the sale of businesses ...... (72,201) — Change in payroll tax, net obligation ...... (583) 106 Book value as of 31 December ...... 205 86,952

Change in the fair value of the plan assets

2013 2012 (in NOK 1,000) Book value as of 1 January ...... 74,437 69,512 Expected return on plan assets ...... 1,081 1,345 Employer contributions ...... 7,235 7,651 Actual return on assets re interest income recognised in income statement ...... (10,439) (2,030) Pension benefits paid ...... (4,271) (2,040) Assets transferred through the sale of businesses ...... (68,044) — Book value as of 31 December ...... — 74,437

Composition of the plan assets

2013 2012 Shares ...... 0.0% 9.2% Current bonds ...... 0.0% 15.6% Money market ...... 0.0% 18.3% Non-current bonds ...... 0.0% 36.8% Property ...... 0.0% 18.3% Other ...... 0.0% 1.8% Total ...... 0.0% 100.0% Actual return on plan assets ...... 0.00% 5.70%

2014 2013 (in NOK 1,000) The company’s expected contributions to funded plans in the next year ...... 0 4,433

At the 31 December 2013 the company had no employees and was therefore not required to establish an occupational pension plan pursuant to the Norwegian Mandatory Occupational Pension Act.

Table of the historical present values of pension obligations and assets at 31 December

2013 2012 2011 2010 2009 (in NOK 1,000) Present value of defined benefit pension obligations . . 205 86,952 94,259 75,677 205,980 Fair value of plan assets ...... 0 74,437 69,512 56,913 140,408 Deficit/(surplus) ...... 205 12,515 24,747 18,763 65,572 Actual estimate deviations pension obligations ...... -49.16% -22.00% Actual estimate deviations pension assets ...... 0.00% 1.60%

F-114 Restatement of comparative figures IAS 19, Employee Benefits, has been significantly amended in that the net interest expense is now calculated based on the net deficit measured applying the discount rate to the balance at the start of the year. The effect of this is that the expected return on pension assets in excess of the discount rate for 2012 has been set to zero in the comparative figures. Please refer to note 2B for further information.

Note 15 Liabilities and secured debt

2013 2012 (in NOK 1,000) Secured debt ...... 2,373,236 2,485,672 Assets pledged as security Ships ...... 3,001,649 3,028,928 Shares in subsidiaries ...... 426,474 426,474 Trade receivables ...... 162,801 169,294 Cash at bank ...... 11,840 8,204 Total assets pledged as security ...... 3,602,764 3,632,899 Guarantee liabilities, etc. Other companies ...... 242 242 Subsidiaries and associates ...... 145,769 134,471 Total guarantees ...... 146,010 134,713

In its ongoing business activities, the parent company Hurtigruten ASA assumes a conditional liability through guarantees issued directly to or on behalf of its subsidiaries/associates. The amounts in the table above represent the maximum potential amount of future commitments the company could be obligated to meet under the guarantees. None of these amounts have been recognised as of 31 December 2013.

In 2012 Hurtigruten ASA and the subsidiaries Hurtigruten Ltd. and Hurtigruten GmbH entered into a merchant establishment agreement with a card issuer. At the time of entering into the agreement Hurtigruten ASA issued an unconditional and irrevocable guarantee for Hurtigruten GmbH’s and Hurtigruten Ltd.’s current and future liabilities in connection with or under the agreement.

Note 16 Operating revenues The reporting of operating segments at parent company level is not part of internal management reporting. Please see note 6 to the consolidated financial statements for operating segment information.

2013 2012 (in NOK 1,000) Operating revenues ...... 2,553,591 2,516,124 Of which classified as discontinued operations (note 4) ...... — (10,819) Total operating revenues ...... 2,553,591 2,505,305

Discontinued operations in 2012 include the chartering of MS Finnmarken as a hotel ship in Australia.

F-115 Note 17 Payroll costs

2013 2012 (in NOK 1,000) Payroll costs Wages and salaries ...... 290,480 502,459 Payroll tax ...... 25,712 33,656 Pension costs (note 14) ...... 23,380 42,658 Other benefits ...... 28,086 32,943 Total payroll costs ...... 367,658 611,716 Average number of full-time equivalents ...... — 1,313

On 5 August 2013 the company’s maritime employees were transferred to the wholly owned subsidiary Hurtigruten Sjø AS. Hurtigruten ASA did not employ any staff following the above transfer.

Note 18 Remuneration, etc. Figures for 2013

Pension Other Position Salary(3) cost(3) remuneration(3)(4) Loans Fees(3)(6) (in NOK 1,000) Daniel A. Skjeldam ...... President/CEO 2,854 414 1,035 — — Asta Lassesen ...... CFO 1,243 118 703 — — Sigurd Bay ...... Senior Vice President 1,033 76 203 — — Price & Revenue Management from 8 April Anne Marit Bjørnflaten(1) ...... Senior Vice President — — — — 474 Corporate Communications from 11 September Kjell Christoffersen ...... Senior Vice President 323 21 83 — — HR Development from 15 August Tor Geir Engebretsen(2) ...... Acting Senior Vice — — — — 4,861 President Maritime Operations from 28 October Oscar Engeli ...... Senior Vice President 424 44 143 — — ICT from 16 September Vidar Engen ...... Senior Vice President 741 98 217 — — Product and Markets from 1 July Chris Hudson ...... Senior Vice President 880 61 161 — — Hotel Operations from 8 April Magnus Wrahme ...... Senior Vice President 1,048 124 293 — — Global Sales from 2 May Ole Fredrik Hienn ...... Senior Vice President 1,543 158 201 — — Legal Affairs until 8 April Hans Rood(5) ...... Senior Vice President 1,757 186 2,895 — — Sales and Markets until 8 April

F-116 Pension Other Position Salary(3) cost(3) remuneration(3)(4) Loans Fees(3)(6) (in NOK 1,000) Torkild Torkildsen ...... Senior Vice President 1,679 169 187 — — Public Affairs until 1 November Dag-Arne Wensel ...... Senior Vice President 1,320 120 1,949 — — Maritime Operations until 28 October Trygve Hegnar ...... Chair — — — — 310 Helene Jebsen Anker ...... Deputy Chair — — — — 190 Berit Kjøll ...... Director — — — — 130 Arve Giske ...... Director — — — — 150 Guri Mai Elmar ...... Director — — — — 130 Petter Anker Stordalen ..... Director — — — — 130 Tone Mohn-Haukland ...... Director, elected by 401 9 7 — 72 employees Per-Helge Isaksen ...... Director, elected by 410 14 3 — 65 employees Deputy members ...... — — — — — Corporate assembly ...... — — — — 209 Auditor fees—statutory auditing(6) ...... — — — — 975 Assistance IFRSs, accounting and tax(6) ...... — — — — 93 Other attestations(6) ...... — — — — 189 Auditor fees—other assistance(6) ...... — — — — 10

(1) Bjørnflaten is a hired-in consultant from Mørland og Johnsen Analyse og Kommunikasjon AS. (2) Engebretsen is a hired-in consultant and has held several temporary positions at Hurtigruten during the year. The fee is invoiced by DHT Corporate Services AS. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Including the estimated cost associated with the share-based remuneration scheme, and severance benefits for outgoing managers. (5) Rood’s salary is partially paid in USD and translated to NOK. (6) Fees exclusive of Value Added Tax.

The company’s CEO receives an annual salary of NOK 2.8 million. Other benefits include fixed car remuneration and an ordinary telephone, Internet, newspaper and home PC allowance.

The CEO also has a time-limited agreement on a performance-related bonus linked to the operating result before depreciation and amortisation, where performance is indexed against the adjusted operating result before depreciation and amortisation for 2012. The bonus agreement confers the right to a maximum of two bonus payments of up to a total of NOK 7.5 million in addition to holiday pay. The agreement expires in 2015. The payment of the bonus is contingent on the CEO still being in office at the end of the year to which the bonus relates. No payments were made in connection with this bonus agreement for 2013.

The CEO is included in the company’s ordinary defined contribution pension scheme for salaries up to 12G and the defined contribution scheme that provides a pension basis for salaries over 12G. The CEO’s conditions of employment do not include any personal pension obligations.

An option agreement has been entered into that grants the CEO the right to acquire up to three million shares. The options may not be exercised for fewer than one million shares at a time. From the time of publication of the figures for the fourth quarter of 2013 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 4 per share. From the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares

F-117 at a subscription price of NOK 5 per share. From the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2016 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 6 per share. Options that are not exercised within the exercise period lapse without compensation. If an individual shareholder or several collaborating shareholders together should own more than fifty per cent of the shares in Hurtigruten ASA. the CEO has the right to exercise all options within three months from publication of the mandatory notification. The estimated costs for the year related to the option agreement is included under other remuneration above.

The board has allocated 12,1 million share options for members of Group management. The options have an exercise price of NOK 3.5 and can be exercised in the period 7 November 2016 to 7 November 2017. CEO Daniel Skjeldam was allocated 3.5 million of these options, in addition to the special option agreement described above. The estimated costs for the year related to senior management covered by the scheme are included under other remuneration above.

The company’s executive management are members of the company’s defined contribution plan. In addition, a supplementary defined contribution pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). The scheme applies to the whole company and covers all employees with salaries over 12G, including members of the executive management and the CEO. The pension costs for the executive management have been included under pension costs above.

A performance-based bonus scheme was introduced for the company’s management in 2013. The bonus payments are determined based on pre-determined targets/parameters, partly based on overall results for the Group and partly on the result of the relevant sphere of responsibility, where the maximum bonus for individual managers is NOK 0.6 million. The bonus scheme covers some members of Group management, with the exception of the CEO. The CEO has a separate performance-related bonus scheme as described above. A provision of NOK 0.3 million was recognised for the bonus for 2013. This bonus is recognised in the item other remuneration above.

In 2010 a share-value-based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and its wholly owned subsidiaries. The scheme was closed without any payments being made as of 31 December 2013. Please see note 21 to the consolidated financial statements for further details on the scheme.

Figures for 2012

Pension Other Position Salary(3) costs(3) remuneration(3)(4) Loans Fees(3) (in NOK 1,000) Daniel A. Skjeldam ...... CEOfrom 1 October 700 99 29 — — Olav Fjell ...... CEOuntil 1 October 4,008 64 105 — — Torkild Torkildsen ...... Deputy CEO 2,064 175 104 — — Asta Lassesen ...... CFO 1,188 110 164 — — Glen Peter Hartridge ..... Director product and 1,276 109 127 — — pricing management Ole Fredrik Hienn ...... Director legal affairs 1,640 150 145 — — Hans Rood(1) ...... Sales and marketing 2,200 225 140 — — director Dag-Arne Wensel ...... Director technical 1,363 111 154 — — maritime operations Trygve Hegnar ...... Chair — — — — 310 Per Heidenreich ...... Deputy Chair until —— — — 41 19 April Helene Jebsen Anker .... Deputy Chair from — — — — 191 19 April Guri Mai Elmar ...... Director — — — — 130 Arve Giske ...... Director — — — — 156 Berit Kjøll ...... Director — — — — 130

F-118 Pension Other Position Salary(3) costs(3) remuneration(3)(4) Loans Fees(3) (in NOK 1,000) Petter Anker Stordalen . . . Director from 19 April — — — — 98 Tone Mohn-Haukland .... Director, elected by 378 8 4 — 160 employees Per-Helge Isaksen ...... Director, elected by 470 16 4 — 134 employees Deputy members ...... — — — — — Corporate assembly ..... — — — — 170 Auditor fees—statutory auditing(2) ...... 1,289 Assistance IFRSs, accounting and tax(2) ...... 44 Other attestations(2) ..... 72 Auditor fees—other assistance(2) ...... —

(1) Rood’s salary is partially paid in USD and translated to NOK. (2) Fees exclusive of Value Added Tax. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Includes the estimated cost associated with the share-based remuneration scheme.

Statement on the determination of salary and other remuneration for senior executives in Hurtigruten ASA Guidelines for determining the remuneration of senior executives in Hurtigruten ASA The following guidelines have been specified with effect from 18 February 2014:

1. Definitions 1.1 Senior executives include the chief executive and other senior executives, cf. Proposition no. 55 (2005– 2006), which refers to the provisions of the Norwegian Accounting Act and Public Limited Liability Companies Act concerning “senior executives”. 1.2 In these guidelines, a compensation scheme means a remuneration package comprising one or more of the following elements: Fixed salary, variable pay (bonuses, share-based programs, options, etc.) and other benefits (pension schemes, pay guarantee schemes, fringe benefits, and the like). 1.3 Severance pay refers here to compensation related to departure from the company and may involve a pay guarantee, other financial benefits and payments in kind.

2. Main principles for determining compensation schemes 2.1 Remuneration to senior executives in Hurtigruten ASA will be competitive but not market leading compared with similar companies. 2.2 The main element in a compensation scheme should be fixed salary. 2.3 Compensation schemes shall be formulated to avoid unreasonable benefits arising as a result of external circumstances which the executive management cannot influence. 2.4 The individual elements in a pay package shall be assessed from an overarching perspective, with fixed salary, possible variable pay and other benefits such as pension schemes and severance pay viewed as a whole. The board of directors shall maintain an overview of the total value of each executive’s agreed compensation. 2.5 Determining guidelines for the remuneration of senior executives is the responsibility of the entire board of directors. Remuneration of the group’s chief executive is determined by the board of directors.

F-119 2.6 The board of directors shall ensure that remuneration schemes for senior executives do not have unfortunate effects for the company or weaken its reputation. 2.7 Senior executives shall not receive special remuneration for serving as directors of wholly-owned subsidiaries in the same group. 2.8 Agreements entered into before these guidelines came into effect may continue.

3. Variable pay Any variable pay shall be based on the following principles: 3.1 A clear connection shall exist between the underlying goals for the variable pay and the company’s objectives. 3.2 Variable pay shall be based on objective, definable and measurable criteria. 3.3 These criteria shall be based on conditions which the executive in question can influence. 3.4 Several relevant measurable criteria should be applied. 3.5 A variable pay scheme shall be transparent and clearly understandable. Identifying the anticipated and the maximum payment for each participant in the programme is important when explaining the scheme. 3.6 The scheme shall be of limited duration. 3.7 Total variable pay received in any year should not exceed six months of fixed salary, unless exceptional circumstances dictate otherwise.

4. Pension schemes 4.1 Pension terms shall be equivalent to those enjoyed by other employees in the company. 4.2 To the extent that a retirement age lower than the National Insurance retirement age of 67 years is agreed, it should generally not be lower than 65. 4.3 Agreements on pensions shall be based on the same years of pensionable service as for other comparable employees in the company. 4.4 Pension entitlements earned in other positions shall be taken into account. 4.5 Pension entitlements should not exceed 66 per cent of salary. Retiring at an age younger than 65 shall result in a lower pension entitlement. 4.6 The board of directors shall obtain an overview of the total cost of a pension agreement before it is entered into.

5. Severance pay 5.1 Severance pay can be agreed when a senior executive waives their right in advance to the employment protection provisions in the Norwegian Working Environment Act. Severance pay should not be provided in the event of voluntary resignation except in special circumstances. 5.2 Severance pay should not exceed 12 months fixed salary in addition to possible pay during the period of notice. 5.3 Should the person concerned be appointed to a new position or receive remuneration from an enterprise in which they are an active owner, severance pay should be reduced by a proportionate amount calculated on the basis of the person’s new annual income. Such a reduction should first be made after the normal period of notice has expired. 5.4 Severance pay may be suspended if conditions exist which would have justified dismissal or if, during the severance period, irregularities or acts of negligence are discovered which might lead to compensation claims or to criminal charges against the person concerned.

F-120 Note 19 Leases Annual rent for non-capitalised non-current assets (operating leases)

Lease expires Asset Charter of MS Nordlys ...... 2019 Charter of MS Richard With ...... 2018

2013 2012 (in NOK 1,000) Future minimum lease payments as of 31 December Within one year(1) ...... 71,404 142,881 Between one and five years ...... 152,827 194,593 Over five years ...... — 7,380

(1) Of the amount that was paid in 2013, NOK 28 million was recognised as an expense during the period 2008–2012.

Hurtigruten ASA entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten ships MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR. The variable element is linked to variable interest rates, and 6-month Euribor and Libor rates.

Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the ships. In the charter agreements between the limited partnerships and Hurtigruten ASA, identical requirements (covenants) have been stipulated for Hurtigruten ASA for the term of the agreements, which the company has as a component of its long-term loan agreements linked to the ships. Please see note 10 with regard to these financial covenants.

In connection with the financial restructuring in February 2009, an agreement was reached with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charter-party agreement with the two limited partnerships would not be payable for the period up to 31 December 2011. The postponed instalments would, however, be added to the instalments that were paid in 2012 and 2013, thereby reverting to the original repayment plan from August 2013. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back MS Nordlys and MS Richard With should be cancelled. The annual rent and the instalments that accrue in accordance with the agreement are recognised as an expense in the financial statements.

Note 20 Finance income and expenses

2013 2012 (in NOK 1,000) Interest expenses —Bank borrowings ...... (166,610) (174,678) —Bond loan ...... (54,048) (43,008) —Convertible bond loan ...... — (2,788) —Interest expenses group account ...... (6,025) (10,243) —other interest expenses ...... (2,442) (10,567) Foreign exchange losses ...... (53,499) (102,241) Impairment of financial non-current assets ...... (47,451) — Other finance expenses ...... — (5,489) Total finance expenses ...... (330,076) (349,013)

F-121 2013 2012 (in NOK 1,000) Interest income on current bank deposits ...... 4,833 4,495 Foreign exchange gains ...... 69,490 107,797 Group contribution received from subsidiaries ...... 2,076 37,253 Dividends ...... 23,816 71,518 Gains on sale of financial assets ...... 9,603 18,364 Other finance income ...... — 290 Total finance income ...... 109,818 239,718 Finance expenses—net ...... (220,259) (109,294)

Following the company’s plan to sell non-strategic assets, the shares in the bus business AS TIRB were written down in the amount of NOK 47.2 million as of 31 December 2013.

Note 21 Transactions with related parties and intragroup balances Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company, companies in the same group and associates. Associates in 2013 included Funn IT AS and ANS Havnebygningen. Funn IT delivered IT services to Hurtigruten ASA, while ANS Havnebygningen owned and leased out the building the company formerly used as offices in Tromsø. During the reporting period the company sold its 50 per cent shareholding in Funn IT AS. The company’s shareholding in ANS Havnebygningen during the period was 50 per cent. During the period ANS Havnebygningen sold its office premises in Tromsø.

The company has been involved in transactions with the following related parties

2013 2012 (in NOK 1,000) Purchase of services from associates Rental of premises in Tromsø from ANS Havnebygningen ...... — 2,979 Purchase of IT-related services from Funn IT AS ...... — 9,482 Balances with associates at year end Trade payables ...... — 505 Remuneration of senior management at Hurtigruten ASA Salaries and other short-term employee benefits ...... 30,246 17,612 Pension costs (including former senior management personnel) ...... 1,612 1,067

Transactions with Group companies

2013 2012 (in NOK 1,000) Sale of goods and services to Group companies Hurtigruten GmbH ...... 655,581 686,057 Hurtigruten Ltd...... 261,885 223,405 Hurtigruten Inc...... 94,995 — Hurtigruten SAS ...... 55,554 48,229 Hurtigruten Pluss AS ...... 4,317 4,331 Hurtigruten Sjø AS ...... 12,345 — Hurtigruten Estonia OÜ ...... 55 — Spitsbergen Travel AS ...... — 3,894 Purchase of goods and services from Group companies Hurtigruten GmbH ...... 1,133 899 Hurtigruten Ltd...... 743 2,718 Hurtigruten Inc...... 1,181 1,558 Hurtigruten SAS ...... 117 238 Spitsbergen Travel AS ...... 3,195 8,414

F-122 2013 2012 (in NOK 1,000) Cominor AS ...... 14,098 14,499 Rental of premises from Hurtigruten Eiendom AS ...... 462 462 Purchase of administrative services from Hurtigruten Pluss AS ...... 271,741 378,551 Purchase of services from Hurtigruten Sjø AS ...... 217,427 — Purchase of flight booking and related services from Hurtigruten Estonia OÜ ...... — 573 Bareboat charter hire from Kirberg Shipping KS ...... 35,275 45,908 Bareboat charter hire from Kystruten KS ...... 46,474 37,419 Interest income from Group companies Hurtigruten Estonia OÜ ...... 122 15 Hurtigruten Pluss AS ...... 1,004 1,635 Hurtigruten Ltd...... 313 564 RezCenter OÜ ...... — 13 Hurtigruten Inc...... 1,640 1,045 Interest paid to Group companies Hurtigruten GmbH ...... — 2,940 Spitsbergen Travel AS ...... 622 572 Svalbard Polar Hotel AS ...... 419 386 Hurtigruten Estonia OÜ ...... — 16 Hurtigruten Ltd...... — 1,410

Intragroup balances

2013 2012 (in NOK 1,000) Non-current receivables due from Group companies Hurtigruten Pluss AS ...... 28,174 28,174 Hurtigruten Estonia OÜ ...... 2,884 249 Hurtigruten Ltd ...... 6,901 7,668 Kystruten KS ...... 45,997 42,841 Kirberg Shipping KS ...... 85,810 7,932 RezCenter OÜ ...... — 2,789 Total non-current receivables from Group companies (note 9) ...... 169,766 89,653 Trade and other current receivables from Group companies Hurtigruten Pty. Ltd...... 131,254 260,071 Hurtigruten GmbH ...... 35,617 12,327 Hurtigruten Ltd ...... 26,131 2,733 Hurtigruten SAS ...... 2,126 863 Hurtigruten Inc...... 69,556 70,274 Hurtigruten Estonia OÜ ...... 317 — Hurtigruten Greenland AS ...... — 1,406 Hurtigruten Pluss AS ...... 39,534 95,667 Hurtigruten Sjø AS ...... 720 1 Hurtigruten Eiendom AS ...... 2,076 2,820 Spitsbergen Travel AS ...... 23,000 — Provisions for losses on trade receivables from Group companies ...... (211,038) (228,049) Total trade and other current receivables from Group companies (note 9) ...... 119,294 218,113 Other non-current liabilities to Group companies Spitsbergen Travel AS ...... 13,644 13,123 Svalbard Polar Hotel AS ...... 9,195 8,844 Total non-current liabilities to Group companies (note 10) ...... 22,840 21,967

F-123 2013 2012 (in NOK 1,000) Trade payables and other current payables to Group companies Hurtigruten Pluss AS ...... 38 139,281 Hurtigruten Sjø AS ...... 237,626 — Hurtigruten Eiendom AS ...... 250 78 Spitsbergen Travel AS ...... 2,483 13 Hurtigruten GmbH ...... 8 116 Hurtigruten Pty Ltd...... — 253 Hurtigruten SAS ...... — 4 Hurtigruten Inc...... 4,466 23,547 Hurtigruten Ltd...... 236 — Kirberg Shipping AS ...... (53) — Kystruten AS ...... — 88 AS TIRB ...... 371 617 Total trade payables and other current payables to Group companies (note 9) ..... 245,424 163,996

F-124 Auditor’s report

State Authorised Public Accountants Ernst & Young AS Roald Amundsens Plass 1,9008 Tromsø Postboks 1212, NO-9262 Tromsø Business Register: NO 976 389 387 MVA Tel.: +47 24 00 32 00 Fax: +47 77 64 14 63 www.ey.no Member of the Norwegian Institute of Public Accountants

To the Annual Shareholders’ Meeting of Hurtigruten ASA

AUDITOR’S REPORT Report on the financial statements We have audited the accompanying financial statements of Hurtigruten ASA, comprising the financial statements for the Parent Company and the Group. The financial statements of the Parent Company and the Group comprise the statement of financial position as at 31 December 2012, the statements of income, comprehensive income, cash flows and changes in equity for the year then ended as well as a summary of significant accounting policies and other explanatory information.

The Board of Directors’ and Chief Executive Officer’s responsibility for the financial statements The Board of Directors and Chief Executive Officer are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the Parent Company and the International Financial Reporting Standards as adopted by the EU for the financial statements of the Group, and for such internal control as the Board of Directors and Chief Executive Officer determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend or the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements for the Parent Company and the Group.

A member firm of Ernst & Young Global Limited

F-125 Opinion on the financial statements of the Parent Company In our opinion, the financial statements of Hurtigruten ASA have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Company as at 31 December 2012 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.

Opinion on the financial statements of the Group In our opinion, the financial statements of the Group have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Group as at 31 December 2012 and its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the EU.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Opinion on the Board of Directors’ report and the statement on corporate governance Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Directors’ report and the statement on corporate governance concerning the financial statements, the going concern assumption and the proposal for the allocation of the result is consistent with the financial statements and complies with the law and regulations.

Opinion on registration and documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000. «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that the Board of Directors and Chief Executive Officer have fulfilled their duty to ensure that the Company’s accounting information is properly recorded and documented as required by law and generally accepted bookkeeping practice in Norway.

Tromsø, 20 March 2013 ERNST & YOUNG AS

John Giæver State Authorised Public Accountant (Norway)

(This translation from Norwegian has been made for information purposes only.)

F-126 Consolidated income statement

Note 2012 2011 (in NOK 1,000) Operating revenues ...... 23 3,485,752 3,268,966 Payroll costs ...... 24 (934,666) (941,483) Depreciation, amortisation and impairment losses ...... 7,8,9 (411,350) (422,821) Other operating costs ...... 26 (2,101,476) (2,029,216) Other (losses)/gains—net ...... 27 9,800 83,320 Operating profit/(loss) ...... 48,060 (41,234) Financial income ...... 28 131,535 71,772 Financial expenses ...... 28 (353,729) (238,694) Finance expenses—net ...... (222,194) (166,922) Share of profit/(loss) of associates ...... 10 (2,343) 2,352 Profit/(loss) before income tax from continuing operations ...... (176,477) (205,804) Income tax expense ...... 18 (19,014) 109,085 Profit/(loss) for the year from continuing operations ...... (195,491) (96,719) Profit/(loss) before income tax from discontinued operations ...... 7 (133,861) 26,752 Profit/(loss) for the year ...... (329,353) (69,968) Profit/(loss) for the year attributable to: Owners of the parent ...... (373,921) (126,465) Non-controlling interests ...... 44,568 56,497 Earnings per share from continuing and discontinued operations attributable to the owners of the parent during the year (expressed in NOK per share) Basic earnings per share From continuing operations ...... 15 (0.57) (0.36) From discontinued operations ...... 15 (0.32) 0.06 Total ...... (0.89) (0.30) Diluted earnings per share: From continuing operations ...... 15 (0.57) (0.36) From discontinued operations ...... 15 (0.32) 0.06 Total ...... (0.89) (0.30)

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-127 Consolidated statement of comprehensive income

Note 2012 2011 (in NOK 1,000) Profit/(loss) for the year ...... (329,353) (69,968) Other comprehensive income: Actuarial gain/(loss) on retirement benefit obligations ...... 19 55,337 (49,103) Tax...... 18 (17,158) 13,261 Cash flow hedges ...... 16 (92,690) 15,617 Tax...... 18 25,953 (4,373) Currency translation differences ...... 16 6,246 (394) Other equity adjustments ...... — 582 Other comprehensive income for the year, net of tax ...... (22,312) (24,410) Total comprehensive income for the year ...... (351,665) (94,378) Attributable to: Owners of the parent ...... (405,313) (144,826) Non-controlling interests ...... 53,648 50,448 Total comprehensive income for the year ...... (351,665) (94,378)

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-128 Consolidated balance sheet at 31 December

Note 2012 2011 (in NOK 1,000) ASSETS Non-current assets Property, plant and equipment ...... 8 3,748,690 3,851,087 Intangible assets ...... 9 359,130 272,311 Investments in associates ...... 10 36,552 38,895 Deferred income tax assets ...... 18 169,926 172,234 Trade and other receivables ...... 12 30,520 34,003 Total non-current assets ...... 4,344,817 4,368,531 Current assets Inventories ...... 13 77,048 74,696 Trade and other receivables ...... 12 293,762 920,176 Derivative financial instruments ...... 11 5,717 28,639 Cash and cash equivalents ...... 14 548,847 574,511 925,374 1,598,022 Assets of disposal group classified as held-for-sale ...... 7 — 60,384 Total current assets ...... 925,374 1,658,406 Total assets ...... 5,270,191 6,026,936 EQUITY Equity attributable to owners of the parent Ordinary shares ...... 15 419,966 419,966 Share premium ...... 15 734,622 734,622 Other reserves ...... 16 58,888 140,073 Retained earnings ...... (393,250) (69,123) Total equity attributable to owners of the parent ...... 820,228 1,225,540 Non-controlling interests ...... 346,327 338,574 Total equity ...... 1,166,555 1,564,114 LIABILITIES Non-current liabilities Borrowings ...... 17 2,864,983 2,455,508 Derivative financial instruments ...... 11 60,778 17,776 Deferred income tax liabilities ...... 18 8,105 9,643 Retirement benefit obligations ...... 19 46,303 101,693 Provisions for other liabilities and charges ...... 20 5,283 5,450 Total non-current liabilities ...... 2,985,454 2,590,070 Current liabilities Trade and other payables ...... 22 730,981 755,597 Current income tax liabilities ...... 18 10,264 11,932 Borrowings ...... 17 344,552 1,026,252 Derivative financial instruments ...... 11 21,049 152 Provisions for other liabilities and charges ...... 20 11,335 8,819 1,118,182 1,802,752 Liabilities of disposal group classified as held-for-sale ...... 7 — 70,000 Total current liabilities ...... 1,118,182 1,872,752 Total liabilities ...... 4,103,636 4,462,822 Total equity and liabilities ...... 5,270,191 6,026,936

Notes 1 to 31 are an integral part of the consolidated financial statements.

Oslo, 20 March 2013

F-129 The board of directors of Hurtigruten ASA

Trygve Hegnar Helene Jebsen Anker Guri Mai Elmar Chair Deputy chair Director

Arve Giske Per-Helge Isaksen Berit Kjøll Director Director Director

Tone Mohn-Haukland Petter Stordalen Daniel A Skjeldam Director Director CEO

F-130 Consolidated statement of changes in equity

Share Share Other Retained Non-controlling Total Note capital premium reserves earnings Total interests equity (in NOK 1,000) Balance at 1 January 2011 ...... 419,966 734,622 129,059 86,716 1,370,364 288,126 1,658,490 Net profit/(loss) for the year ...... — — — (126,464) (126,464) 56,497 (69,968) Other comprehensive income Currency translation differences ...... 16 — — (394) — (394) — (394) Cash flow hedges, net of tax ...... 16,18 — — 11,408 — 11,408 (164) 11,244 Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18,19 — — — (29,958) (29,958) (5,885) (35,843) Other equity adjustments ...... — — — 582 582 — 582 Total other comprehensive income, net of tax...... — — 11014 (29,375) (18,361) (6,049) (24,410) Total comprehensive income for the year . . . — — 11 014 (155,839) (144,825) 50,448 (94,377) Balance at 31 December 2011 ...... 419,966 734,622 140,073 (69,123) 1,225,540 338,574 1,564,114 Balance at 1 January 2012 ...... 419,966 734,622 140,073 (69,123) 1,225,540 338,574 1,564,114 Net profit/(loss) for the year ...... — — — (373,921) (373,921) 44,568 (329,353) Redemption of convertible bond loan ...... — — (20,711) 20,711 — — — Other comprehensive income Currency translation differences ...... 16 — — 6,246 — 6,246 — 6,246 Cash flow hedges, net of tax ...... 16,18 — — (66,721) — (66,721) (16) (66,737) Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18,19 — — — 29,083 29,083 9,096 38,179 Total other comprehensive income, net of tax...... — — (60,475) 29,083 (31,392) 9,080 (22,312) Total comprehensive income for the year . . . — — (60,475) (344,838) (405,313) 53,648 (351,665) Transactions with owners Distributions to owners ...... — — — — — (45,895) (45,895) Total transactions with owners ...... — — — — — (45,895) (45,895) Balance at 31 December 2012 ...... 419,966 734,622 58,888 (393,250) 820,228 346,327 1,166,555

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-131 Consolidated cash flow statement

Note 2012 2011 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax from continuing and discontinued business ...... (310,339) (152,692) Adjusted for: Depreciation and impairment on continuing and discontinued business ...... 7,8,9 415,805 457,992 Other (losses)/gains—net ...... 27,28 (28,164) (83,320) Foreign exchange (losses)/gains unrealised ...... (9,124) (258) Dividends received ...... (259) (1,378) Interest expenses ...... 28 252,787 206,001 Share of profit/(loss) of associates on continuing and discontinued operations ...... 10 2,343 (2,352) Difference between expensed pension and payments ...... 22,418 (67,897) Change in working capital: Inventories ...... (2,352) (1,778) Trade and other receivables ...... 509,041 (127,183) Net adjustments on financial assets through income statement ...... 7,293 (7,538) Trade and other payables ...... (48,563) 34,464 Cash flows from operations ...... 810,886 254,061 Interests paid ...... (229,218) (208,883) Income tax paid ...... (7,382) (6,712) Net cash flows from operating activities ...... 574,287 38,467 Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... 8 (271,222) (188,140) Purchases of PPE through insurance settlement ...... 119,000 — Proceeds from sale of PPE ...... 48,897 164,740 Purchases of intangible assets ...... 9 (104,457) (56,004) Purchases of shares ...... (750) (995) Proceeds from sale of shares ...... 24,560 90,000 Dividends received ...... 259 1,378 Change in restricted funds ...... 14 64,997 90,871 Net cash flows (used in)/from investing activities ...... (118,717) 101,851 Cash flows from financing activities Proceeds from borrowings ...... 3,040,525 5,000 Repayment of borrowings ...... (3,403,573) (218,581) Dividend paid to non-controlling interests ...... (45,895) — Net cash flows used in financing activities ...... (408,943) (213,581) Net (decrease)/increase in cash, cash equivalents and bank overdrafts . . 46,626 (73,264) Cash, cash equivalents and bank overdrafts at 1 January ...... 426,461 492,187 Foreign exchange gains/(losses) on cash and bank overdrafts ...... (7,293) 7,538 Cash, cash equivalents and bank overdrafts at 31 December ...... 14 465,794 426,461

Notes 1 to 31 are an integral part of the consolidated financial statements.

F-132 Note 1 General information

Hurtigruten ASA (the company) and its subsidiaries (together the Group) are engaged in tourism and transport activities in Norway and abroad. The company’s core business consists of the Hurtigruten service along the Norwegian coast, with daily calls in 34 ports between Bergen and Kirkenes, and explorer activity in the Polar regions.

The Group’s operating segments are organised into the following three product areas: Hurtigruten Norwegian Coast, Explorer products/MS Fram and Spitsbergen. Activities that do not naturally fall within these three segments are bundled in Other business. In 2011 Charter was a separate product area based on the leasing of MS Finnmarken to a company in the Australian oil industry. Following the conclusion of the contract in October 2011, this activity has been included under discontinued operations in Other business in the segment reporting since 2012. The previous year’s figures have been re-stated accordingly. These operating segments are reported in the same way as in internal reporting to the board of directors and executive management.

The company is a public limited company incorporated and domiciled in Norway, with headquarters at Havnegata 2, Narvik. The Group also has offices in Tromsø and Finnsnes, wholly-owned foreign sales companies in Hamburg, London and Paris, a reservations centre in Tallinn as well as activities in Longyearbyen. The company is listed on the Oslo Stock Exchange.

The Group’s presentation currency is NOK.

The consolidated financial statements were approved by the board of directors on 20 March 2013.

Note 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of the Group’s consolidated financial statements are described below. Unless otherwise stated in the description, these policies have been consistently applied to all periods presented.

2.1 Basic policies The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the EU.

The consolidated financial statements have been prepared on a historical cost basis, with the following modifications: • financial assets and liabilities (including derivative instruments) at fair value through profit or loss

The preparation of financial statements in conformity with IFRSs requires the use of estimates. It also requires management to exercise its judgment in the process of applying the company’s accounting policies. Areas which make extensive use of judgments or involve a high degree of complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are described in more detail in Note 3.

The Group’s consolidated financial statements have been prepared according to uniform accounting policies for similar transactions and events under similar conditions.

2.1.1 Changes in accounting policies and disclosures (a) New and amended standards adopted by the Group, which have no effect on the financial statements at this time

The Group made no changes to its accounting policies in 2012. New standards, amendments and interpretations, which were adopted at the 2012 financial year but which had no significant impact on the Group, are described below. • IAS 1 Presentation of Financial Statements. Amendments affecting the presentation of other comprehensive income, differentiating between items that later will be reversed in profit or loss and items that will not be reversed in profit or loss.

F-133 (b) Standards, amendments and interpretations for existing standards that have not entered into force and which the Group has not early adopted: The impact of these changes is expected to be: • IAS 19 Employee Benefits was amended in June 2011. Interest expenses and the expected return on pension assets will be replaced with a net interest amount calculated by applying the discount rate to the net pension obligation (asset). The Group will implement this amendment from 1 January 2013. Other amendments to IAS 19 have already been applied by the Group through existing options already permitted by the standard. Please refer to point 2.23 on pension obligations for further information. • IFRS 9 Financial Instruments regulates the classification, measurement and accounting of financial assets and liabilities. IFRS 9 was published in November 2009 and October 2010, and replaces those sections of IAS 39 dealing with accounting, classification and measurement of financial instruments. Under IFRS 9, financial assets should be divided into two categories, based on the measurement method: those that are measured at fair value and those measured at amortised cost. A classification assessment is performed upon initial accounting. The classification will depend on the company’s business model for managing its financial instruments and the characteristics of the contractual cash flows from the instrument. Requirements for financial liabilities are mainly similar to IAS 39. The main difference, in cases where the fair value of financial liabilities is used, is that the portion of the change in fair value attributable to a change in the company’s own credit risk recognised in the consolidated statement of comprehensive income instead of in the income statement, as long as it does not cause an accrual discrepancy in the measurement of profit or loss. The Group plans to apply IFRS 9 when the standard takes effect and has been approved by the EU. The standard takes effect for accounting periods beginning 1 January 2013 or later, but the IASB has distributed for comment a proposal for deferred commencement to accounting periods beginning 1 January 2015 or later. • IFRS 10 Consolidated Financial Statements is based on current policies regarding the concept of control as the determining factor for whether a company should be included in the consolidated financial statements of the parent company. The standard provides extensive instructions for assessing whether or not control exists in difficult cases. The implementation of the standard will not result in any material changes for the Group. The Group has not assessed all of the potential consequences of IFRS 10. The Group is planning to apply the standard to accounting periods beginning 1 January 2013 and later. • IFRS 12 Disclosures of Interest in Other Entities contains disclosure requirements for economic interests in subsidiaries, joint ventures, associates, special purpose entities (SPEs) and other off-balance sheet companies. The Group has not assessed the full impact of IFRS 12. The Group is planning to apply the standard to accounting periods beginning 1 January 2014 and later. • IFRS 13 Fair Value Measurement defines what is meant by the term “fair value” under IFRSs, provides a uniform definition of how fair value should be determined under IFRSs and defines which additional disclosures should be provided when fair value is used. The standard does not extend the scope of accounting to fair value but provides information on its application where use of fair value is already required or permitted under the other IFRSs. The Group uses fair value as a measurement criterion for certain assets and liabilities. The Group has not assessed the full impact of IFRS 13. The Group is planning to apply the standard to accounting periods beginning 1 January 2013 and later.

2.2 Consolidation principles (a) Subsidiaries and consolidation Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are exercisable or convertible at the balance sheet date are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date control is transferred to the Group and are excluded from consolidation when control ceases.

F-134 The Group also assesses whether control exists in the case of shareholdings of less than 50 per cent of the voting rights, but where the Group is nonetheless in a position to control financial and operational strategies (actual control). Actual control can arise in situations where other voting rights are spread over a large number of owners who are not realistically in a position to co-ordinate their voting. In assessing whether actual control exists the extent to which the Group can influence the composition of the board is critical.

Intragroup transactions, intercompany balances and unrealised intragroup profits and losses are eliminated. If necessary, the subsidiaries’ financial statements are revised to achieve consistency with the Group’s accounting policies.

Transactions with non-controlling shareholders in subsidiaries are treated as equity transactions. When shares are purchased from non-controlling shareholders, the difference between the consideration and the shares’ proportionate book value of the subsidiary’s net assets is recorded in equity for the owners of the parent. Gains or losses on disposals to non-controlling shareholders are also recorded in equity.

When the Group no longer has control, any remaining shareholdings are recognised at fair value, with changes in value recognised in profit or loss. The fair value for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset is cost. Amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of underlying assets and liabilities. This may entail that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(b) SPEs A sale-leaseback solution was carried into effect in 2002 with the Hurtigruten ship MS Richard With, whereby Kystruten KS acquired the ship and leased it back for a 15 year period. Correspondingly, a sale-leaseback solution was carried into effect with the Hurtigruten ship MS Nordlys, whereby Kirberg Shipping KS acquired the ship and leased it back for a 15-year period. On the basis of established contracts, Kystruten KS and Kirberg Shipping KS are considered to be SPEs (special purpose entities), which are to be consolidated in the Hurtigruten Group. This has been done by recognising the ship’s book value and external liabilities in the consolidated balance sheet. Previously recognised gains are corrected against equity. The KS’s financial statements have been revised to apply the same accounting policies as used by the Hurtigruten Group.

Since 2012 the Group has consolidated a further special purpose entity (SPE). The entity in question is the Group’s reservation centre RezCenter OÜ in Tallinn, Estonia. Hurtigruten has no shares in the company, but exercises a controlling influence on the company’s financial and operating strategy. Hurtigruten Estonia OÜ and RezCenter OÜ were merged with effect from 1 January 2013. The company is continuing under the name Hurtigruten Estonia OÜ.

2.3 Business combinations Business combinations are recognised using the acquisition method. The consideration is measured at the fair value of any transferred assets, liabilities or issued equity instruments. Contingent consideration is measured at fair value and is included in the consideration. The contingent consideration is classified as a liability under IAS 39 and recognised at fair value in subsequent periods, with the change of value recognised in profit or loss. In cases where the contingent consideration is classified as equity, fair value measured at the acquisition date remains unchanged. Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities are recognised at their fair values on the date of acquisition. Non-controlling interests in the acquired company are measured on an acquisition-by-acquisition basis, either at fair value, or at their proportionate share of the company’s net assets.

If the amount of the consideration, the book value of non-controlling interests and the fair value on the date of acquisition of previous equity interests exceeds the fair value of the identifiable net assets of the acquired company, the difference is recorded as goodwill, cf. Note 2.8. If the sum is less than the company’s net assets, the difference is recognised immediately.

F-135 2.4 Associates Associates are all entities over which the Group has significant influence but not control. Significant influence normally exists for investments where the Group owns 20–50 per cent of the voting capital. Investments in associates are initially recognised at cost and subsequently using the equity method. Goodwill is included in the amount of the investment and is assessed for impairment as part of the investment. At the time of reporting, the Group assesses whether there are indications of an impairment of the investment. If there are such indications, the recoverable value of the investment amount is estimated when calculating any impairment loss.

The Group’s share of associates’ profit or loss is recognised in profit and loss, and is added to the book value of the investments. The Group’s share of associates’ other comprehensive income is recognised in the Group’s other comprehensive income and is also added to the book value of the investments. The Group does not recognise any share of an associate’s losses in its income statement if this results in the book value of the investment falling below zero (including unsecured receivables from the entity), unless the Group has assumed liabilities or made payments on behalf of the associate.

The Group’s share of unrealised profits on transactions between the Group and its associates are eliminated. The same applies to unrealised losses, unless the transaction justifies an impairment of the transferred asset. When necessary, the associates’ financial statements are revised to achieve consistency with the Group’s accounting policies.

Gains and losses with respect to the dilution of ownership in associates are recognised in profit and loss.

When the Group no longer has a significant influence, any remaining shareholdings are recognised at fair value with changes in value recognised in profit and loss. Subsequently, the fair value for subsequent accounting as a financial asset is cost. Amounts previously recognised in other comprehensive income in respect to that entity are accounted for as if the associate had directly disposed of underlying assets and liabilities. This may entail that amounts previously recognised in other comprehensive income are reclassified to profit or loss. When the Group’s shareholding in an associate is reduced, but a significant influence is retained by the Group, a proportional amount of the sum previously recognised in other comprehensive income is reclassified to profit and loss.

2.5 Segment reporting A operating segment is a part of the business that delivers products or services that are subject to risks and returns that are different from other operating segments. The Group has three operating segments, called product areas: Hurtigruten Norwegian Coast, Explorer products, and Spitsbergen. Activities that do not naturally fall within these segments are bundled in Other business. The Group’s Charter activities relating to the leasing of ships to the oil industry have been discontinued. In 2010 and 2011 this business was reported as a separate operating segment in the Group’s segment reporting, but since 1 January 2012 has been classified as a discontinued operation and included in Other business in segment reporting. The comparative figures in the income statement for 2011 have been restated. These operating segments are reported in the same way as internal reporting to the board of directors and executive management.

2.6 Translation of foreign currencies (a) Functional and presentation currency The financial statements of the individual entities in the Group are measured in the currency used in the economic area in which the entity primarily operates (the functional currency). The consolidated financial statements are presented in Norwegian kroner (NOK), which is both the parent company’s functional currency and the Group’s presentation currency.

(b) Transactions and balance sheet items Foreign currency transactions are translated into the functional currency using average exchange rates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of exchange rates of monetary assets and liabilities denominated in foreign currencies

F-136 on the balance sheet date are recognised in the income statement. If the currency position is considered a cash flow hedge, gains and losses are recognised as other comprehensive income.

Foreign exchange gains and losses on loans, cash and cash equivalents are presented (net) in the income statement as financial income or expenses.

(c) Group companies The income statement and balance sheet of all Group entities (none subject to hyperinflation) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • The balance sheet is translated at the rate in force at the balance sheet date • The income statement is translated at the average exchange rate • Translation differences are recognised in other comprehensive income and specified separately in equity as a separate item

2.7 Property, plant and equipment Property, plant and equipment consist primarily of ships (Hurtigruten ships), land and buildings (hotels, offices and workshops) as well as buses. Property, plant and equipment are recognised at cost less depreciation. Cost includes costs directly associated with the acquisition of the asset. Cost also comprises the gains or losses transferred from other income and expenses at the time of purchase, due to cash flow hedging in foreign currency for purchases of non-current assets.

Subsequent expenses are added to the asset’s book value or are recognised separately in the balance sheet (periodic maintenance) when it is probable that any future financial benefits associated with the expense will devolve to the Group, and the expense can be reliably measured. The book value of replaced parts is recognised in the income statement. Other repair and maintenance expenses are recognised in profit and loss in the period in which the expenses are incurred.

Land is not depreciated. Other operating assets are depreciated on a straight-line basis, such that the cost is depreciated to residual value over the asset’s expected useful life. Expected useful life is determined on the basis of historical figures, as well as the standard lifetimes in the industry. Residual value is calculated on the basis of estimated sales values for operating assets at the end of their expected useful life. Expected useful life is:

Ships 12–30 years Buildings 25–100 years Vehicles 5–12 years Other 3–10 years

The useful life and residual value of operating assets are assessed on every balance sheet date and amended as necessary. When important components of operating assets have different useful lives, these operating assets are recognised as their various components. These components are depreciated separately over each component’s useful life. At the end of each accounting period operating assets are assessed for indications of lasting impairment and, in the event of such impairment, the asset’s recoverable amount is estimated. When the book value of an operating asset is higher than the estimated recoverable amount, it is written down to the recoverable amount.

Gains and losses on disposals are recognised in the income statement under “Other (losses)/gains—net”, as the difference between the sales price and the book value.

Received investment grants for hotel construction on Svalbard are recognised using the gross method and recognised in revenue in line with depreciation of the corresponding asset.

F-137 2.8 Intangible assets (a) Goodwill Goodwill is the difference between the cost of an acquisition and the fair value of the Group’s share of the entity’s net identifiable assets at the time of acquisition. Goodwill can also arise on acquisitions where the decision is made to measure non-controlling interests at fair value at the time of acquisition. Goodwill arising on the acquisition of subsidiaries is classified as an intangible asset.

Impairment is assessed annually, or more often in the case of events or changes in circumstances that indicate potential impairments. The recoverable amount is estimated for calculating any impairment. Goodwill is written down to the recoverable amount, when this is lower than the book value. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of an entity include the book value of goodwill related to the divested entity.

When assessing the need for impairment of goodwill, it is allocated to the relevant cash-generating units (operating segments). Goodwill is allocated to the cash-generating units or groups of cash-generating units that are expected to benefit from the acquisition (Note 2.9).

(b) Other intangible assets Other intangible assets are largely directly associated with development costs for computer systems recognised in the balance sheet at cost, if the criteria for capitalisation are met. The criteria for capitalisation are: • It is technically feasible to complete the development of the software so that it is available for use. • Management intends to complete the development of the software and take it into use or sell it. • Probable usage of the asset in the company can be proved. • Future economic benefits to the company associated with use of the asset can be calculated. • Adequate technical, financial and other resources are available to complete the development and take into use or sell the software • Development costs for the asset can be measured reliably.

Intangible assets are considered to have a limited life span, and are amortised over their expected useful life. Assessments are made at the end of each accounting period to find any indications of impairment of intangible assets. If there are indications of impairment, the intangible assets are written down to their recoverable value when this is lower than the book value. Subsequent expenses for recognised intangible assets are recognised only when they increase the future economic benefits related to this asset. All other costs are expensed during the period in which they are incurred.

Other development expenditures that do not meet the criteria for capitalisation are expensed as they are incurred.

Development expenditures that have already been expensed cannot be recognised as an asset in future periods.

2.9 Impairment of non-financial assets Intangible assets with indefinite useful life and goodwill are not amortised but are tested annually or more frequently if there are indications of impairment. Depreciated property, plant and equipment and amortised intangible assets are assessed for impairment when there is any indication that the book value may not be recoverable.

The difference between the book value and recoverable amount is recorded as an impairment loss. The recoverable amount is the higher of the asset’s fair value less sales costs and its value in use. In assessing impairments, non-current assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each reporting date the possibility of reversing previous impairment of non- financial assets (except goodwill) is assessed.

F-138 2.10 Discontinued operations and non-current assets held-for-sale Non-current assets and disposal groups are classified as held-for-sale if their book values will be recovered through sale and not through continued use. This condition is deemed to be fulfilled if a sale is highly probable and the asset (or disposal group) is available for immediate sale in its current condition. Management at the relevant level must have made a commitment to complete the sale and the transaction must be expected to be completed within one year of the classification date.

Non-current assets (and disposal groups) that are classified as held-for-sale are measured at the lower of previous book value and net sale value, and are not depreciated.

A discontinued operation is a segment that has been disposed of or classified as held-for-sale, and which represents a significant area, geographical region, or is a subsidiary acquired exclusively for resale.

Net profits or losses after tax for discontinued operations are reported separately in income from continuing operations. Results from the previous period for discontinued operations are reclassified in order to obtain comparable figures. Assets and liabilities classified as held-for-sale are presented on separate lines in the balance sheet under current assets and current liabilities respectively. Previous periods are not restated on the balance sheet.

2.11 Financial assets 2.11.1 Classification The Group classifies financial assets in the following categories: at fair value through profit or loss, as well as loans and receivables. The classification depends on the object of the asset. Management determines the classification of financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified in this category if it was acquired primarily to provide a profit from short-term price fluctuations. Derivatives are categorised as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets.

(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed payments that are not traded in an active market. They are classified as current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as “trade and other receivables” in the balance sheet (Note 2.16).

2.11.2 Recognition and measurement Regular purchases and sales of investments are recognised on the trade-date, which is the day the Group commits to purchase or sell the asset. All financial assets that are not recognised at fair value through profit or loss are initially recognised at fair value plus transaction costs. Financial assets recognised at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Investments are derecognised when the rights to receive cash flows from the investment expire or when these rights have been transferred and the Group has substantially transferred all risks and rewards of ownership. Financial assets recognised at fair value in profit or loss are carried at fair value after initial recognition in the balance sheet. Loans and receivables are carried in successive periods at amortised cost, using the effective interest method.

Gains or losses from changes in fair value of assets classified as “financial assets at fair value through profit or loss”, including interest income and dividends, are included in the income statement under financial items in the period in which they arise. Dividends from financial assets at fair value through profit or loss are included in the income statement when the Group’s right to receive payments is established.

F-139 2.12 Offsetting of financial assets and liabilities Financial assets and liabilities may only be offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.13 Impairment of financial assets Assets carried at amortised cost At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets (a “loss event”) and the impact of that loss event (or events) on estimated future cash flows can be estimated reliably.

The criteria that the Group uses to determine whether there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or debtor • Breach of contract, such as default or delinquency in interest or principal payments • The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider • It becomes probable that the borrower will enter bankruptcy or other financial restructuring • The disappearance of an active market for that financial asset because of financial difficulties • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the portfolio’s individual financial assets, including: • Adverse changes in the payment status of the portfolio’s borrowers. • National or local economic conditions that correlate with defaults on the portfolio’s assets.

The amount of the loss is measured as the difference between the asset’s book value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s book value is reduced and the amount of the loss recognised in the consolidated income statement.

If the impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the fall in value was recognised (such as an improvement in the debtor’s credit rating), the previous loss is reversed in the consolidated income statement. Reversal of previous losses must not exceed the expected value, if the impairment had not been made.

Impairment testing of trade receivables is described in Note 2.16.

2.14 Derivatives and hedging Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value on an ongoing basis. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group classifies derivatives that are part of a hedging instrument as either: (i) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair-value hedge) or (ii) hedges with variable cash flows with a particular risk associated with a recognised asset, liability or a highly probable forecast transaction (cash flow hedge).

At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents whether the derivatives that are used in

F-140 hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. Such assessments are documented both at hedge inception and on an ongoing basis.

The fair values of derivatives used for hedging purposes are presented in Note 11C. Changes in the equity item hedging are presented in Note 16. The fair value of a hedging derivative is classified as a non-current asset or non-current liability if the remaining term of the hedging item is more than 12 months and as a current asset or current liability if the remaining term of the hedging item is less than 12 months. Trading derivatives are classified as current assets or current liabilities.

Cash flow hedging The effective portion of changes in the fair value of derivatives that are designated and qualify as hedging instruments in cash flow hedges is recognised directly in other comprehensive income. Losses and profits on the ineffective portion are recognised in the income statement.

Hedge gains or losses recognised in other comprehensive income and accumulated in equity are recognised as income or expense in the period during which the hedged item affects the income statement (for example, when the planned sale is taking place). Gains or losses relating to the effective portion of interest rate swaps hedging variable rate loans are recognised in the income statement under “financial expenses”. Gains or losses on the ineffective portion are recognised in the income statement. When the forecast hedged transaction results in the recognition of a non-financial asset (such as inventories or property, plant and equipment), the gains and losses previously recognised within other comprehensive income are transferred to the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold or in depreciation of property, plant and equipment.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is recognised in the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

2.15 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first- out (FIFO) method. Net realisable value is the estimated selling price less costs to sell.

2.16 Trade receivables Trade receivables are amounts due from customers for merchandise or services sold in the ordinary course of business. If settlement is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are classified as non-current assets.

Trade receivables are recognised and presented at the original invoice amount and written down following “loss events” which have an impact on the payment of the receivable that can be reliably estimated. Thus, trade receivables are accounted for at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant.

2.17 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank deposits and other short-term liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities in the balance sheet. Cash and cash equivalents are defined differently in the balance sheet and cash flow presentation. Restricted capital is included in the balance sheet presentation but not in the cash flow presentation

2.18 Share capital and premiums Ordinary shares are classified as equity.

Expenses directly connected to the issue of new shares or options net of tax are recognised as a reduction in consideration received in equity.

F-141 Where any Group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable transaction costs (net of taxes), is deducted from equity attributable to owners of the parent until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable transaction costs and the related tax effects, is included in equity attributable to owners of the parent.

2.19 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are classified as non-current liabilities.

Trade payables are recognised initially at fair value. Subsequently, trade payables are measured at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant.

2.20 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are recognised at amortised cost using the effective interest method. The difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as part of the effective interest.

Borrowings are classified as current liabilities unless there is an unconditional right to defer payment of the liability for at least 12 months after the reporting date.

2.21 Compound financial instruments Compound financial instruments issued by the Group include convertible loans that the owner can convert to share capital, where the number of shares to be issued does not vary with changes in the fair value of the shares. Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are recognised at amortised cost using the effective interest method. The difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as part of the effective interest.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

2.22 Current and deferred income taxes The tax expense for a period comprises current and deferred income tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In such case, the tax is also recognised in other comprehensive income or directly in equity.

Current tax is calculated in accordance with the tax laws and regulations enacted or substantively enacted on the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax laws are subject to interpretation. Based on management’s assessment, a provision is made for expected tax payments when necessary.

Deferred income tax is recognised, using the liability method, on all temporary differences between the tax bases of assets and liabilities and their book values in the consolidated financial

F-142 statements. Deferred income tax is not recognised in the balance sheet if it arises from initial recognition of an asset or liability in a transaction other than a business combination, which at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and tax laws which have been enacted or substantially enacted by the balance sheet date and which are expected to apply when the deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the tax-reducing temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences is controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group makes provisions for uncertain and contested tax positions. This provision is reversed if the contested tax position is decided in favour of the Group and can no longer be appealed.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.23 Pension obligations, bonus plans and other employee benefits (a) Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies, determined by periodic actuarial calculations. The Group has both defined contribution and defined benefit plans. A defined contribution plan is a pension scheme under which the Group pays fixed contributions to a separate legal entity. The Group has no legal or constructive obligations to pay further contributions if the entity does not have sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension scheme that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement. Pension payments are dependent on one or more factors such as age, number of years of service and salary.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised estimate variances and unrecognised past-service costs. The pension liability is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation, alternatively government bond rates if such rates are not available. For Norwegian schemes, corporate bonds, covered bonds at the balance sheet date, are used, with an additional provision taking into account relevant terms to maturity for the pension obligations.

Variances from estimates arising from experience adjustments or changes in actuarial assumptions are recognised in equity within other comprehensive income, in the period in which they arise.

Changes in pension scheme benefits are recognised immediately as expenses or income in the income statement, unless rights in the new pension scheme are conditional on the employee remaining in service for a specific period of time (the vesting period). In such case, the costs associated with the change in benefit are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as payroll costs when they are due. Prepaid contributions are recognised as a financial asset to the extent that a cash refund or a reduction in the future payments is available.

F-143 The Norwegian Parliament adopted a new law on the AFP early retirement scheme in February 2010. The new AFP early retirement scheme is accounted as a benefit-based multi-entity plan. This entails that individual entities account for their proportional share of the plan’s pension obligations, assets and costs. Until there is reliable and consistent information for provisions, the new AFP early retirement scheme is recognised as a defined contribution plan.

(b) Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits falling due more than 12 months after the balance sheet date are discounted to the present value. A discount rate before tax that reflects the current market situation and is risk-specific for the liability concerned is used. Any increase in the liability as a result of changed time values is recognised as an interest expense.

(c) Profit-sharing and bonus plans The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to owners of the parent after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

2.24 Provisions Provisions for restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination benefits. Provisions are not recognised for future operating losses; however, provisions for unprofitable contracts are recognised.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Thus a provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. A discount rate before tax that reflects the current market situation and is risk-specific for the obligation concerned is used. Any increase in the obligation as a result of changed time values is recognised as an interest expense.

2.25 Revenue recognition Revenue from the sale of goods and services is recognised at the fair value, net of VAT, returns, discounts, and rejects. Intragroup sales are eliminated.

Sales are recognised when revenue can be reliably measured, it is probable that the economic benefits associated with the transaction will flow to the Group and specific criteria related to the various forms of sale that are listed below are met. The Group bases its accounting estimates on historic income, an assessment of the type of customer and transaction concerned, as well as any specific conditions attached to the individual transaction.

Revenues are recognised in the income statement as follows:

(a) Sales of services and travel Sales of services are recognised in the accounting period when the service is rendered and/or delivered. For ship voyages, this is based on the days the passenger is on board. Revenues related to

F-144 ship voyages are accrued on the basis of the number of days the voyage lasts before and after the end of the accounting period. Prepaid revenues on the balance sheet date are recognised as liabilities. Earned but not invoiced services are recognised in the income statement on the balance sheet date as a receivable.

(b) Sales of goods Sales of goods are recognised when an entity within the Group has sold the product to the customer. The sale is considered completed when the customer has received the item after payment. Payment for retail transactions is usually made in the form of cash or by credit card. The revenue is recognised in the income statement including the credit card fees incurred for the transaction. The fees are recorded as sales expenses.

(c) Public procurement Revenues received from public procurement are recognised in the income statement on a continuous basis over the year on the basis of existing contracts. These contracts are primarily based on a tender, where the company has a fixed contract sum for planned (annual) production. There are specific conditions and calculation methods for the indexation of the contract sum. Any changes beyond the planned production are compensated/ deducted utilising agreed-upon rates set out in the agreements, and recognised in the periods in which they occur.

(d) Rental income Rental income is recognised continuously over the year, divided by the number of days/months the tenant has had the object at their disposal in relation to the agreement.

(e) Interest income Interest income is recognised in accordance with the effective interest method. Should an impairment of loans and trade receivables be required, the book value is reduced to the recoverable amount. The recoverable amount is estimated future cash flow discounted by the original effective interest rate. After impairment, interest income is recognised based on the original effective interest rate.

(f) Dividend income Dividend income is recognised when the right to receive payment is established.

2.26 Leases 2.26.1 The Group as lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

When the Group has substantially assumed all the risks and rewards of ownership, leases are classified as finance leases. Assets secured through finance leases are recognised in the income statement at the inception of the lease at the lower of the fair value of the asset and the present value of the minimum lease payment. The Group employs the implicit interest rate for the lease in its calculations. Direct expenditures related to entering the contract are added to the amount recognised as an asset. Assets are depreciated according to the asset’s expected useful life.

Debt to the lessor is recognised in the balance sheet as a finance lease liability. The liability is reduced by lease payments less estimated interest expenses.

F-145 2.26.2 The Group as lessor In 2011 the Group leased out ships on time-charter and bareboat agreements. All of the Group’s leasing agreements for ships are considered a lease of assets and fall under IAS 17 Leases. These leases are considered operating leases based on the structure and term of the agreement.

(a) Time charter The Group leases out ships on time charter (TC). For time charters (supplytime 89), the ship is leased out with a crew. The lessee determines, within the limitations of the lease, how the ship will be used. The lessor covers operating costs, such as crew, operational supplies, insurance, repairs, and administration, while the lessee covers expenses such as bunker and port fees. In addition to the lease of ships, there are, in some instances, agreements for additional services such as extra crew, sale of provisions and coverage of other operating costs. Revenues from leasing ships on time charters are recognised on a straight-line basis over the term of the lease. The lease period starts from the time the ship is at the disposal of the lessee and ceases upon the agreed return delivery. Leasing of additional crew and considerations for coverage of other operating costs are recognised on a straight-line basis over the term of the lease.

Services supplied in connection with a time charter are recognised in the accounting period when the service is rendered and/or delivered. Please see Note 2.25.

(b) Bareboat In a bareboat agreement, all operational risk rests with the lessee, who is responsible for covering all costs related to the ship. Revenues from leasing ships on bareboat agreements are recognised on a straight-line basis over the term of the lease. The lease period starts from the time the ship is at the disposal of the lessee and ceases upon the agreed return delivery.

2.27 Dividends Dividend distribution to owners of the parent is recognised as a liability in the Group’s financial statements when the dividends are approved by the general meeting.

2.28 Government grants Government grants are recognised at fair value when there is reasonable assurance that the grant will be received and that the Group will meet the terms of the grant.

2.29 Classification and maintenance costs In connection with docking ships, expenditures and improvements required by the classification will be capitalised and depreciated over time up to the next class survey/docking. The same applies to costs for class recertification. Periodic maintenance is recognised in the balance sheet and expensed over the period until the next periodic maintenance. The cost of newbuilds and second-hand tonnage is decomposed (Note 2.7), with a portion corresponding to the first periodic maintenance cost recognised in the balance sheet and expensed over the period until the next periodic maintenance. On the disposal of ships, capitalised costs charged to expenses will be classified as part of the gain/loss.

Ongoing maintenance for all ship types is expensed continuously during the period in which the work is performed.

2.30 Borrowing costs Borrowing costs directly attributable to the construction of operating assets are recognised in the balance sheet until the asset is ready for its intended use. Other borrowing costs are expensed.

2.31 Remuneration based on share prices The Group has remuneration based on share price, structured as synthetic options with cash settlements.

F-146 The fair value of options allocated during the period is calculated using the Black-Scholes option pricing model. This is done quarterly. Key inputs for calculations are: the share price at allotment date, exercise prices, the standard deviation of expected stock returns and annual risk-free interest rate. Volatility measured using the standard deviation of expected returns is based on statistical analysis of the daily share price for the agreed period.

The fair value is expensed over the vesting period.

On each balance sheet date, the Group reviews its estimates for the number of expected options. The Group recognises any effects of changes to the original estimates in the income statement.

Note 3 Important accounting estimates and judgments Estimates and judgments are reviewed on an ongoing basis and are based on past experience, consultation with experts, trend analyses and a number of other factors, including forecasted future events that are deemed probable under current circumstances.

3.1 Key accounting estimates and assumptions The Group makes estimates and assumptions about the future. By their very nature, the accounting estimates that are made as a result of the above processes will therefore rarely fully correspond with the final outcome. Estimates and assumptions that have a significant risk of causing a material adjustment to the book values of assets and liabilities within the next financial year are outlined below.

(a) Estimated impairment of goodwill The Group performs annual tests to assess potential impairment of goodwill, cf. Note 2.8. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. These calculations require the use of estimates of the required rate of return for the period, cash flows and the growth factor of the cash flows (Note 9).

The Group does not apply a general growth factor beyond expected inflation for cash flows when testing goodwill for impairment. The required rate of return used to discount cash flows is calculated as a weighted average of the return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

(b) Ships Useful economic lifetime The level of depreciation depends on the estimated economic lifetime of the ships. These estimates are based on history and experience relating to the Group’s ships. The estimates are reviewed at regular intervals. A change in the estimate will affect depreciation in future periods.

Estimated impairment of ships Where there are indications of such, the Group tests whether ships have suffered any impairment, cf. Note 2.7. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash- generating units. Ships are considered within their segment as a collective cash-generating unit. These calculations require the use of estimates to establish the required rate of return for the period, cash flows and the growth factor of the cash flows (Note 8).

The Group does not use a general growth factor beyond expected inflation for cash flows when testing ships for impairment. The required rate of return used to discount cash flows is calculated as a weighted average of the return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

F-147 (c) Fair value of derivatives and other financial instruments The fair value of financial instruments not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses its judgment to select a variety of methods and to make assumptions based mainly on market conditions existing at each balance sheet date. Please refer to Note 11A for further information.

(d) Pension assumptions The Group operates both defined contribution and defined benefit pension schemes. Measurement of pension costs and pension obligations for defined benefit plans involves the application of a number of assumptions and estimates, including the discount rate, future salary levels, expected employee turnover rate, the return on plan assets, annual pension increases, expected adjustments to G (the National Insurance Scheme basic amount) and demographic factors.

The Group has pension obligations in Norway and Germany. The discount rate used to calculate pension obligations in Norway is based on 15-year corporate covered bonds, with an additional provision taking into account relevant terms to maturity for the pension obligations. Covered bonds are primarily issued by credit institutions to listed Norwegian commercial and saving banks and are secured against loans directly owned by the credit institution. Hurtigruten’s pension obligations for 2012 relate to Norway. The discount rate applied in Norway at 31 December 2012 was 3.9 per cent, in accordance with guidance from the Norwegian Accounting Standards Board on the determination of pension assumptions at 31 December 2012. For obligations in Germany, the discount rate is determined based on the interest rates on high-quality corporate bonds denominated in the currency in which the benefits will be paid, with terms to maturity approximating to the term of the related pension obligation. The discount rate applied in Germany at 31 December 2012 was 3.1 per cent.

Changes in pension assumptions will affect the pension obligation and pension cost for the period. Pension obligations are significantly affected by changes in the discount rate, life expectancy and expected salary and pension adjustments.

Please refer to Note 19 for more information about pensions.

(e) Income tax Income tax is calculated based on results in the individual Group companies. The Group is subject to income taxes in several jurisdictions. Calculation of the period’s tax expense and distribution of tax payable and deferred income tax for the period requires a discretionary assessment of complex tax regulations in several countries. Consequently, uncertainty attaches to the final tax liability for many transactions and calculations. Where there is a discrepancy between the final tax outcome and the amounts that were initially recognised, this discrepancy will impact the recognised tax expense and provision for deferred income tax assets and liabilities in the period in which such determination is made. Please refer to Note 18 for more information about income tax.

(f) Deferred income tax assets The basis for recognising deferred income tax assets is based mainly on the utilisation of tax loss carryforwards against future taxable income in the Group. The assessment is made based on management’s estimates of future profits in the Group and includes an assessment of the Group’s future strategy, economic developments in the markets in which the Group operates, future tax regimes and the Group’s ability to deliver forecast synergies. In preparing the financial statements, management has assessed the future taxable income to be sufficient to utilise the recognised deferred income tax assets. Please refer to Note 18 for more information on deferred income tax assets recognised in the balance sheet.

(g) Disputes, claims and regulatory requirements The Group is a party to, or affected by disputes, claims and regulatory requirements the outcome of which is to a large extent unknown. Management considers the probability of negative outcomes and opportunities for estimating any loss in the event of such negative outcomes. Unexpected events or changes to factors taken into consideration that have an impact on specific conditions, may result in

F-148 increases or reductions to provisions. Such changes may also necessitate the recognition of provisions for conditions that were previously assessed as an unlikely outcome or for which it was previously not possible to make reliable estimates.

3.2 Key judgments affecting the entity’s accounting policies (a) Provision for planned efficiency measures In connection with the notified efficiency-improvement measures in the onshore organisation, Group management has recognised a provision of NOK 10.3 million in respect of function duplication in downscaling processes and costs relating to the relocation and closing down of offices. A key consideration in assessing the above was the fact that the new structure has been adopted and communicated, giving rise to an existing obligation. The new structure is effective from 31 March 2013. The Group is relocating its headquarters to Tromsø, and current operations in Narvik will gradually be phased out in the period leading up to 30 September 2013. Costs will be incurred in connection with disassembly and removal of equipment from Narvik. A provision has been recognised for voluntary redundancy packages/severance pay for redundant employees. The notice period has been set at three months from 1 April 2013. A further provision has been recognised for salaries of employees who do not wish to transfer to the new workplace, but who will temporarily commute to the new headquarters in order to ensure transfer of expertise to new employees. The provisions also cover salary paid to an external project manager in respect of the efficiency programme.

(b) Discontinued operations In accordance with IFRS 8 Operating Segments, the Group’s activities relating to the chartering of ships to the oil industry were reported as a separate segment to reflect the fact that this business represented an extensive activity for the Group for a number of years. The segment’s final assignment was concluded at the end of 2011 and the activity is now deemed to be discontinued. The business has consequently been classified as a discontinued operation in the annual financial statements in accordance with IFRS 5. Please refer to Note 7 for further information.

Note 4 Financial risk management The Group uses financial instruments such as bank loans and bond loans. In addition, the Group utilises financial instruments such as trade receivables, trade payables, etc., that are directly related to day-to-day operations. The Group utilises certain financial derivatives for hedging purposes.

4.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including currency, price, fair- value interest rate and variable interest rate risk), credit risk and liquidity risk. The Group’s overarching risk management goal is to increase predictability for the Group’s operations and to minimise the impact of fluctuations in macro conditions on the Group’s results and financial position.

The Group has defined overarching principles for risk management which encompass guidelines for specific areas such as currency, interest rate and credit risk and the use of financial derivatives. The board of directors approves the Group’s risk management strategy and reviews this annually. The CFO function is responsible, in consultation with the CEO, for conducting ongoing tactical risk management in line with the approved strategy, including exposure analyses and reporting.

(a) Market risk (i) Currency risk The Group operates internationally and is exposed to currency risk in multiple currencies, in particular, the euro (EUR), US dollar (USD), and pound sterling (GBP). Currency risk arises from future ticket sales as well as recognised assets or liabilities. In addition, fuel cost is quoted in USD. Currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency which is not the entity’s functional currency.

F-149 The Group’s risk management policy is aimed at securing 60–80 per cent of expected cash flows in EUR for the next one to two years, using transparent and liquid financial derivatives, normally futures contracts combined with options. Hedges have been made on just under 70 per cent of expected cash flows in EUR for 2013. These were mainly entered into during the first quarter of 2013. The company refinanced its debt in March 2012, where portions of the loan can be converted from NOK to EUR to achieve a “natural hedge”. This conversion right applies for the entire term of the loan.

The Group was also exposed to currency risk in Australian dollars (AUD) in connection with the leasing of MS Finnmarken as a hotel ship outside Australia in the period 30 April 2010–30 October 2011. Following the conclusion of the contract the Group had some material outstanding claims against the contracting party. Forward hedges were then made corresponding to 50 per cent of exposure in AUD in respect of the above. The currency hedges were settled in connection with settlements with the contracting partner and subsequent payment received by Hurtigruten at the end of 2012.

The price of oil, and thus bunker oil, is internationally traded in USD, while the Group purchases bunker oil in NOK. The risk can therefore be split into a currency element and a product element. The currency element is partially aligned with the Group’s cash flow exposure in USD, and the product risk is hedged separately.

Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12 “Consolidation— Special Purpose Entities”. The two entities have portions of their debt in EUR and USD. The Group is therefore exposed to currency risk when paying interest and converting this debt to NOK. The debt in EUR and USD is partially hedged through the Group’s net revenues in these currencies.

The Group has some investments in foreign subsidiaries whose net assets are exposed to currency translation risk.

The table below shows the Group’s sensitivity to potential changes in the exchange rate for NOK against relevant currencies in relation to the exchange rate at 31 December, with all other variables held constant. Changes mainly relate to foreign exchange gains/losses on translation of financial derivatives, borrowings, trade receivables, cash and cash equivalents and other investments.

Effect on net profit/loss after tax Effect on equity 2012 2011 2012 2011 (in NOK million) Change EUR/NOK 5% ...... 4.5 4.9 4.5 5.7 Change USD/NOK 5% ...... (1.2) (1.3) (1.2) (1.3) Change GBP/NOK 5% ...... 6.5 0.4 6.5 0.4 Change AUD/NOK 5% ...... 4.2 9.4 4.2 9.4

The calculations assume that the NOK depreciates by 5 per cent against the relevant currencies. With an equivalent appreciation of the NOK, the amounts would have an equal and opposite value. In 2011 the effect on equity was different to the effect on the income statement due to the fact that currency derivatives are recognised as hedges, while changes in value on these are recognised directly in equity. At 31 December 2012 the Group only held currency options held for trading purposes, meaning that the effect on the income statement and equity of the above are the same.

(ii) Price risk The Group is exposed to bunker oil price risk and the board of directors has approved a strategy of quarterly rolling hedges of 0–80 per cent of estimated future consumption for one to six future quarters, where the Group hedges a larger share of consumption in the near future and a smaller share further ahead. In addition, the Group has a stop-loss strategy where it attempts to hedge the unhedged amount if the price of oil rises above a predefined threshold. Hedges are made in the forward market on 45 per cent of expected bunker consumption for 2013, distributed with a higher proportion in the coming quarters, and a lower proportion towards the end of the year. Forward hedges have also been made on 12 per cent of expected bunker consumption in the first and second quarter of 2014.

F-150 The table below shows the Group’s sensitivity to potential changes in price of bunker oil, with all other variables held constant.

Effect on net profit/loss after tax Effect on equity 2012 2011 2012 2011 (in NOK million) Change bunker price 20% ...... (43.8) (36.6) (45.7) (35.6)

These calculations are based on the average unhedged bunker volume, and indicate how an increase of 20 per cent in bunker prices would have had an impact on the financial statements for 2011 and 2012. The effect on equity is different than the effect on the income statement because these hedging activities fulfil the requirements for hedge accounting and unrealised changes in value are recognised directly in equity.

(iii) Cash flow and fair-value interest rate risk The Group’s interest rate risk is associated with current and non-current borrowings. Loans subject to a variable interest rate present a risk to the Group’s overall cash flow. Fixed interest rates expose the Group to fair- value interest rate risk. Over the course of 2011 and 2012, the Group’s loans at variable interest rates were mainly in NOK. A portion of the loans assumed by Kystruten KS (SPE) and Kirberg Shipping KS (SPE) are in EUR and USD.

The Group manages its variable interest rate risk through variable-to-fixed interest rate swaps. Interest rate swaps involve converting loans with variable interest rates to fixed-interest loans. Through interest rate swaps, the Group enters into contracts with other parties to swap the difference between the contract’s fixed interest rate and the amount of the variable interest rate calculated on the agreed principal. In connection with the refinancing of the company’s long-term debt in March 2012 a new strategy was adopted for hedging interest, under which 40–60 per cent of the Group’s total exposure is to be hedged. Non-amortising interest rate swaps have been entered into corresponding to 58 per cent of the Group’s total debt on refinancing.

The table below shows the Group’s sensitivity to potential changes in interest rate levels, with all other variables held constant. These calculations take all interest-bearing instruments and associated derivatives into consideration.

Effect on net profit/loss after tax Effect on equity 2012 2011 2012 2011 (in NOK million) Change in interest rate level with +50 basis points ...... (4.1) (11.4) 3.4 (10.3)

An increase of 0.5 per cent in the variable interest rate would increase the Group’s interest costs by approximately NOK 4.1 million (2011: NOK 11.4 million) after tax. Equity would have been NOK 3.4 million higher (2011: NOK 10.3 million lower) as a result of the change in the fair value of interest rate swaps.

(b) Credit risk The Group has no significant concentration of credit risk. Sales to end users are settled in cash or with recognised credit cards. Sales to external agents are made either through prepayment/credit cards or through invoicing. The Group has routines to ensure that credit is only extended to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The counterparties to the derivative contracts and cash transactions are limited to financial institutions with high credit ratings. The Group has routines that limit exposure to credit risk relating to individual financial institutions.

At 31 December 2011 a larger share of trade receivables than normal was due but not impaired. This related to non-settled supplementary compensation from the government for the purchase of services under the former coastal service contract, and outstanding claims against the contracting

F-151 party in connection with the winding down of the Group’s charter activities in Australia. The Group received just over NOK 300 million in liquidity in December 2012 in connection with these two cases, but at the same time had to recognise a loss for the charter business along with a further provision relating to the supplementary agreement with the government. Hurtigruten no longer has any balance sheet claims relating to the charter business, and the remaining receivable due from the government represented by the Ministry of Transport and Communications in connection with the supplementary agreement has been fully written down as a result of the provision. For further details please see Note 5 Contingencies and Note 12 Receivables and other investments.

(c) Liquidity risk Liquidity risk management includes maintaining a sufficient level of liquid assets geared to operational and investment plans, and ensuring the availability of sufficient funding from committed credit facilities. The Group has a group account that ensures that part of the Group’s unrestricted liquidity is available to the parent company, and which also optimises availability and flexibility in liquidity management. The Group’s finance function has overall responsibility for managing the Group’s liquidity risk. Rolling liquidity forecasts are prepared in order to ensure that the Group has sufficient liquidity reserves to satisfy the Group’s obligations and financial loan covenants.

The table below outlines the maturity of the Group’s financial liabilities.

Under one year One to three years Three to five years More than five years (in NOK 1,000) 31 December 2012 Bank loans ...... 553,312 979,365 1,923,688 21,045 Bond loan ...... 35,486 70,972 547,153 — Trade payables and other current liabilities ...... 716,243 — — — Total ...... 1,305,041 1,050,337 2,470,841 21,045 31 December 2011 Bank loans ...... 1,186,071 2,440,819 86,133 54,202 Convertible bond loan ...... 50,538 — — — Bond loan ...... 52,067 — — — Trade payables and other current liabilities ...... 719,462 — — — Total ...... 2,008,137 2,440,819 86,133 54,202

Hurtigruten has financial covenants attached to its loan liabilities (Note 17). At 31 December 2012 all these covenants had been met.

The following table specifies the Group’s derivatives classified according to maturity. Classification is based on contractual maturity. Forward exchange contracts are settled gross, while interest rate swaps and futures contracts for bunker oil are settled net. The amounts in the table are undiscounted cash flows.

Under one year One to three years Three to five years More than five years (in NOK 1,000) 31 December 2012 Forward exchange contracts— hedges —outflow ...... — — — — —inflow ...... — — — — Interest rate swaps—hedges —outflow ...... (30,965) (41,283) (25,741) — —inflow ...... — — — — Futures contracts bunker oil— hedges —outflow ...... (12,085) (980) — — —inflow ...... — — — —

F-152 Under one year One to three years Three to five years More than five years (in NOK 1,000) 31 December 2011 Forward exchange contracts— hedges —outflow ...... (465,240) — — — —inflow ...... 493,115 — — — Interest rate swaps—hedges —outflow ...... (6,344) (6,327) — — —inflow ...... — — — — Futures contracts bunker oil— hedges —outflow ...... — — — — —inflow ...... 6,341 — — —

4.2 Risk relating to asset management The Group’s long-term goal for asset management is to ensure continued operations, and thereby secure future dividends for shareholders. Furthermore, the object is to maintain an optimal capital structure, and thereby reduce the Group’s capital costs. There has been no significant change in the Group’s asset management from 2011 to 2012.

In order to maintain and improve the capital structure, the Group has no plans for declaring dividends or repaying capital to shareholders in the short term. In recent years the Group has prioritised divesting non-core activities. No additional share issues have been planned for the short and medium terms.

The Group monitors capital structure on the basis of, inter alia, the equity ratio. This ratio is calculated as equity divided by total assets and at 31 December 2012 was 22.1 per cent (31 December 2011: 26.0 per cent). The company meets the requirements for equity in the loan agreements (Note 17).

Note 5 Contingencies At 31 December 2012, the Group had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent outcomes in the course of regular operations. No significant liabilities are expected to arise with respect to contingent liabilities with the exception of the provisions that have already been provided for in the financial statements (Note 20).

Membership of the NOx Fund Hurtigruten ASA is a member of the Confederation of Norwegian Enterprise’s (NHO) Nitrogen Oxide (NOx) Fund. The main objective of the Environmental Agreement concerning reductions of NOx and the NHO’s NOx Fund, is to reduce emissions of nitrogen oxide. The Fund is a joint venture to which affiliated businesses can apply for support for emission-reducing measures. Payment to the Fund replaces the nitrogen oxide tax for affiliated businesses.

NOK 15.3 million in NOx tax was charged to the annual financial statements for 2012 (2011: NOK 13.4 million). Members of the NOx Fund collectively undertook to reduce their emissions of these gases by 18,000 tonnes in total in the period 2008–2010 through the Environmental Agreement. A new Environmental Agreement relating to NOx for the period 2011–2017 was signed on 14 December 2010. The signatories of the Environmental Agreement for the period 2011–2017 have undertaken to reduce their overall NOx emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, which can be broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017.

The Norwegian Climate and Pollution Agency will monitor that the Fund reaches its collective targets. If these targets are not met, the members may be required to pay the full amount of the tax on their respective share of the emissions. This requirement will be calculated on the basis of the percentage of the collective target that has not been achieved. The Fund has achieved its targets for the period 2008–2011.

F-153 Supplementary Agreement in connection with the public procurement contract for the Bergen to Kirkenes coastal service The Norwegian authorities agreed in 2004 on a contract with Hurtigruten ASA for the delivery of transport services along the Norwegian coast from Bergen to Kirkenes for the period 2005–2012. This contract was awarded based on competitive tendering. In October 2008 it was decided to increase the compensation to Hurtigruten ASA for the remaining term of the contract by refunding 90 per cent of the NOx payments, general compensation due to higher costs and allowing a reduction in the number of ships from 11 to 10 in the winter. The Ministry of Transport and Communications had assumed that the additional grant was in line with state aid policies.

In July 2010 the EFTA Surveillance Authority (ESA) decided to formally investigate in order to verify whether the supplementary agreement entered into in 2008 was in accordance with the EEA’s rules for state aid. In June 2011 the ESA concluded that the supplementary compensation had not been granted in accordance with the EEA’s rules. It was not evident from the conclusion what portion of the supplementary agreement the ESA believed to represent illegal state aid. On 8 October the EFTA Court upheld the ESA’s ruling. In the process leading up to the ruling, the ESA clarified its own resolution of June 2011, and established that around NOK 145 million of the grant given constituted illegal state aid.

At 31 December 2012 Hurtigruten had recognised income of NOK 405 million under the supplementary agreement, including the effect of reducing the number of ships in the winter from 11 to 10, and received NOK 262 million of this amount. On grounds of prudence, a provision of NOK 108 million was recognised in the third quarter of 2012 to reflect the ESA’s most recent calculation. This was in addition to the provision of NOK 35 million that had been recognised at 31 December 2011. The provision was recorded as a reduction in contractual revenues. Together with the government Hurtigruten will work to reduce the loss.

The previous contract with the government represented by the Ministry of Transport and Communications expired on 31 December 2011 after Hurtigruten and the government agreed on a new contract for the Bergen to Kirkenes coastal service for the period 2012–2019 on 13 April 2011. The new contract entered into force on 1 January 2012.

Charter arbitration case At the start of 2012 Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd initiated arbitration proceedings against a contracting partner concerning an outstanding claim. The claim related to the leasing of MS Finnmarken as a hotel ship in connection with the construction of the Gorgon field off the coast of Australia. The contract was concluded on 30 October 2011. The outstanding claim amounted to NOK 370 million. On grounds of prudence, Hurtigruten recognised provisions totalling NOK 46 million in respect of the above at 31 December 2011.

An agreement was entered into with the contracting partner with regard to payment of the net outstanding amount through arbitration. This provided the Group with a cash inflow of AUD 38 million (around NOK 221 million), but also resulted in the recognition of a further loss provision in the income statement in the amount of AUD 17 million (around NOK 99 million).

Following the reaching of agreement on the case, Hurtigruten no longer has any claims in the balance sheet concerning the Charter business in Australia.

Legal charges against TIRB and Cominor Legal charges were brought against AS TIRB and its subsidiary Cominor AS by Troms County Council in May 2009. A complaint was filed with the Court of Conciliation in December 2009. Troms County Council claimed that the companies had overcharged for occasional assistance, and for unforeseen and unplanned driving, for a total amount of NOK 25 million, excluding interest.

Nord Troms District Court delivered its ruling in the case on 4 January 2012 and ordered TIRB and Cominor to pay compensation of NOK 16 million to Troms County Council. The companies only recognised a loss for portions of the ruling at 31 December 2011, NOK 8 million, since the companies disputed the financial calculation on which the ruling was based.

F-154 The case was heard before Hålogaland Court of Appeal and a final ruling was made on the case on 26 November 2012. The Court of Appeal set the total damages at NOK 11.7 million. In the fourth quarter compensation was recognised in respect of the ruling in the amount of NOK 7.5 million including interest.

Note 6 Segment information (a) Primary reporting format—operating segments (product areas) The operating segments are identified based on the same reporting as the management and board apply to their evaluations of performance and profitability at a strategic level. The company’s chief operating decision- maker, which is responsible for allocation of resources to and assessment of earnings generated by the operating segments, is defined as the board of directors and executive management. The classification is broken down into the product areas Hurtigruten Norwegian Coast, Explorer Products/MS Fram and Spitsbergen. Business activities that do not naturally fall under these three areas are classified as Other business.

F-155 Hurtigruten Norwegian Explorer products/MS Coast Fram Spitsbergen Other business Eliminations Hurtigruten Group 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 (in NOK 1,000) Operating revenues ...... 1,840,128 1,757,174 261,882 263,952 163,839 137,760 106,026 201,005 (23,045) (10,852) 2,348,830 2,349,039 Sales revenues ...... 374,430 366,118 13,311 15,483 1,690 — — — — — 389,431 381,601 Contractual revenues (Note 23) ...... 618,784 325,271 — — — — 128,707 213,055 — — 747,491 538,326 Total revenues ...... 2,833,342 2,448,563 275,193 279,435 165,529 137,760 234,733 414,060 (23,045) (10,852) 3,485,752 3,268,966 Payroll costs ...... (721,239) (653,565) (41,550) (37,099) (58,573) (47,884) (113,304) (202,188) — (746) (934,666) (941,483) Depreciation, amortisation and impairment losses ...... (300,207) (287,690) (20,388) (19,156) (11,418) (11,087) (79,337) (104,888) — — (411,350) (422,821) Other operating costs ...... (1,736,486) (1,590,936) (192,700) (196,686) (89,831) (85,459) (105,504) (167,734) 23,045 11,598 (2,101,476) (2,029,216) Other (losses)/gains—net ...... (347) 40 — — — — 10,146 83,280 — — 9,800 83,320 Operating profit/(loss) ...... 75,063 (83,588) 20,555 26,494 5,707 (6,670) (53,266) 22,530 — — 48,060 (41,234) Finance expenses—net ...... (220,469) (140,360) (31,694) (23,745) 877 1,402 29,092 (4,219) — — (222,194) (166,922) Share of profit/(loss) of associates ...... — — — — — — (2,343) 2,352 — — (2,343) 2,352

F-156 Profit/(loss) before tax from continuing operations ...... (145,406) (223,948) (11,139) 2,749 6,584 (5,268) (26,517) 20,663 — — (176,477) (205,804) Profit/(loss) before tax from discontinued operations (Note 7) ...... — — — — — — (133,861) 53,112 — — (133,861) 53,112 Profit/(loss) before tax ...... (145,406) (223,948) (11,139) 2,749 6,584 (5,268) (160,378) 73,775 — — (310,338) (152,692) Segment profit/(loss): Operating profit/(loss) before depreciation and impairment losses (EBITDA) ...... 375,270 204,102 40,943 45,650 17,125 4,417 26,071 127,418 — — 459,410 381,587

The reporting of segment assets and liabilities is not part of the internal management reporting in the Group. Material assets and monetary items are monitored at Group level, and certain key figures (such as trade receivables) are assessed based on the status of the individual legal entities. Segment assets and liabilities are therefore not presented. Hurtigruten Norwegian Coast

This product area comprises the company’s operation of the Bergen to Kirkenes coastal service in accordance with the contract with the Norwegian government represented by the Ministry of Transport and Communications. This service is operated using 11 ships with daily calls to 34 ports between Bergen and Kirkenes. Although passenger transport represents the greatest portion of the service, the cargo service is also substantial

Explorer Products/MS Fram

This product area includes the cruise activities in Polar waters—Antarctica, Svalbard, Greenland and cruises between Antarctica and the Arctic. The cruises are operated by MS Fram, which was custom-built to operate in Polar waters.

Spitsbergen

Activities in Svalbard are organised under the Spitsbergen Travel Group, a wholly owned subsidiary of Hurtigruten ASA. The product area consists of cruise operations, year-round overnight accommodation and adventure products in Svalbard. The company owns and runs two hotels and one guest house, and the adventure products are produced by the company’s own employees and local partners.

Other business

The reporting segment other business comprises activities relating to the bus business managed by AS TIRB and the subsidiary Cominor AS. The Group also owns a small portfolio of properties, primarily through its subsidiary HRG Eiendom AS, which is partially leased by the Group and partially leased to external tenants. The reporting segment includes a further smaller business that cannot be readily classified in the other areas.

The Group’s Charter activities relating to the leasing of ships to the oil industry have been discontinued. In 2010 and 2011 this business was reported as a separate operating segment in the Group’s segment reporting, but since 1 January 2012 has been classified as a discontinued operation and included in Other business in segment reporting. The company’s two remaining fast ferries were previously included in “Profit/(loss) before tax from discontinued operations”, but are now classified together with continuing operations since they no longer fulfil the requirements to be classified as a discontinued operation in accordance with IFRSs. The comparative figures in the income statement for 2011 have been restated.

Eliminations

Eliminations in 2011 and 2012 consisted primarily of the subsidiary Cominor AS’s excursions for Hurtigruten.

(b) Secondary reporting format—geographical segments

Operating revenues cannot be reliably allocated to separate geographical segments. Management’s monitoring of geographical segments applies only to portions of the company’s revenue and is also to a large degree based on key non-financial indicators (such as the number of cruise nights).

Note 7 Assets held-for-sale and discontinued operations

HELD-FOR-SALE

The Group had no assets and associated liabilities classified as held-for-sale at 31 December 2012. At 31 December 2011 the book value and secured liabilities relating to the Group’s two remaining fast ferries were classified as held-for-sale. Both ships are still laid up, but no longer satisfy the requirements to be classified as held-for-sale in accordance with IFRSs. Consequently, they have been classified as part of continuing operations since the third quarter of 2012. Nonetheless, the company still intends to sell the ferries.

F-157 Assets in the disposal group classified as held-for-sale:

2012 2011 (in NOK 1,000) Property, plant and equipment (Note 8) ...... — 60,384 Assets held-for-sale ...... — 60,384

Liabilities in the disposal group classified as held-for-sale:

2012 2011 (in NOK 1,000) Borrowings (Note 17) ...... — 70,000 Liabilities related to assets held-for-sale ...... — 70,000

DISCONTINUED OPERATIONS Profit or loss from discontinued operations includes the Group’s Charter business. The Group’s activities connected to the leasing of ships to the oil industry were discontinued from 1 January 2012, and subsequently classified as a discontinued operation. In 2010 and 2011 the business was reported as a separate operating segment in the Group’s segment reporting; however, since 1 January 2012 it has been included in Other business in the segment reporting. The comparative figures in the income statement for 2011 have been restated.

Profit/(loss) from discontinued operations:

2012 2011 (in NOK 1,000) Operating revenues (Note 23) ...... (834) 666,617 Payroll costs (Note 24) ...... 3,798 245,322 Depreciation and impairment losses ...... 4,455 35,171 Other operating costs (Note 26) ...... 132,301 303,388 Andre (tap)/gevinster—netto (note 27) ...... — — Operating profit/(loss) ...... (141,387) 82,736 Finance income (Note 28) ...... 21,778 2,233 Finance expenses (Note 28) ...... (14,251) (31,857) Finance expenses—net ...... 7,526 (29,623) Profit/(loss) before tax ...... (133,861) 53,112 Income tax expense (Note 18) ...... — 26,360 Profit/(loss) for the year ...... (133,861) 26,752

The result for 2012 is primarily attributable to losses on receivables in the amount of NOK 99 million following settlement with a contracting party, foreign exchange effects and lawyers’ fees in connection with the concluded arbitration case.

Net cash flows from discontinued operations:

2012 2011 (in NOK 1,000) Net cash flows (used in)/from operating activities ...... (141,520) 90,990 Net cash flows from investing activities ...... — — Net cash flows from financing activities ...... — — Total net cash flows ...... (141,520) 90,990

F-158 Note 8 Property, plant and equipment

Other property, Land and plant and buildings Ships equipment Total (in NOK 1,000) 2011 financial year Book value at 1 January 2011 ...... 258,483 3,711,290 261,631 4,231,404 Additions ...... 15,795 145,299 27,046 188,140 Disposals ...... (93,084) — — (93,084) Depreciation for the year ...... (7,348) (300,176) (48,148) (355,672) Impairment losses for the year ...... — (46,324) (12,992) (59,316) Of which assets held-for-sale (Note 7) ...... — (60,384) — (60,384) Book value at 31 December 2011 ...... 173,846 3,449,705 227,537 3,851,087 At 31 December 2011 Cost ...... 255,732 6,025,785 744,627 7,026,145 Accumulated depreciation and impairment losses ...... (81,886) (2,515,696) (517,091) (3,114,673) Of which assets held-for-sale (Note 7) ...... — (60,384) — (60,384) Book value at 31 December 2011 ...... 173,846 3,449,705 227,537 3,851,087 2012 financial year Book value at 1 January 2012 ...... 173,846 3,449,705 227,537 3,851,087 Reclassification of assets held-for-sale (Note 7)...... — 60,384 — 60,384 Additions ...... 4,283 246,510 20,428 271,222 Disposals ...... 2,474 (7,229) (31,058) (35,813) Depreciation for the year ...... (6,932) (322,493) (36,858) (366,283) Impairment losses for the year ...... — (28,292) (3,614) (31,906) Book value at 31 December 2012 ...... 173,671 3,398,585 176,435 3,748,690 At 31 December 2012 Cost ...... 262,489 6,265,073 733,998 7,261,560 Accumulated depreciation and impairment losses ...... (88,818) (2,866,488) (557,563) (3,512,869) Book value at 31 December 2012 ...... 173,671 3,398,585 176,435 3,748,690

Indications of potential impairments in ships are assessed each quarter. An impairment test is carried out where indications of impairment are found to exist. The impairment test of the ships used for the Norwegian coastal service and for MS Fram for 2011 revealed the ships’ respective recoverable values were higher than their book values, and hence no impairment loss was recognised. The assumptions underlying the impairment test have not changed significantly, and there are no indications of any impairment of the Norwegian coastal service ships or MS Fram

The following impairment losses were recognised in 2012: • A total impairment loss of NOK 17.7 million was recognised for the fast ferries to reflect their expected net realisable value on completion of the ongoing sales process. • An impairment loss of NOK 6 million was recognised to write MS Nordstjernen down to fair value in connection with the sale of the ship. • A new estimate of the insurance settlement resulted in the recognition of a further impairment of damaged assets on MS Nordlys as the result of a fire on board in September 2011, totalling NOK 4.7 million.

Leases The Group leases premises from the subsidiary HRG Eiendom AS as well as the associate ANS Havnebygningen. The parent company and subsidiaries also have external lease costs relating to premises. The parent company’s charter of Hurtigruten ships has been eliminated in the consolidated financial statements (sale- leaseback agreement with two limited partnerships). Please see Note 20

F-159 concerning the details of this agreement. Furthermore, the parent company and subsidiaries have external costs related to the leasing of other equipment and means of transport. These are operating leases.

Total leasing costs related to the above comprise:

2012 2011 (in NOK 1,000) Rent for premises ...... 11,750 13,597 Lease charges for other property, plant and equipment ...... 1,076 1,806 Total rental costs ...... 12,826 15,403

Note 9 Intangible assets

Other intangible Goodwill assets Total (in NOK 1,000) 2011 financial year Book value at 1 January 2011 ...... 173,612 85,914 259,526 Currency translation differences ...... — (216) (216) Additions ...... — 56,004 56,004 Amortisation for the year ...... — (13,106) (13,106) Impairment losses for the year ...... (29,898) — (29,898) Book value at 31 December 2011 ...... 143,714 128,597 272,311 At 31 December 2011 Cost ...... 321,888 203,444 525,332 Accumulated amortisation and impairment losses ...... (178,174) (74,847) (253,021) Book value at 31 December 2011 ...... 143,714 128,596 272,311 2012 financial year Book value at 1 January 2012 ...... 143,714 128,596 272,311 Currency translation differences ...... — (21) (21) Additions ...... — 104,457 104,457 Amortisation for the year ...... — (17,616) (17,616) Book value at 31 December 2012 ...... 143,714 215,416 359,130 At 31 December 2012 Cost ...... 321,888 307,879 629,767 Accumulated amortisation and impairment losses ...... (178,174) (92,463) (270,637) Book value at 31 December 2012 ...... 143,714 215,416 359,130

Goodwill has arisen in connection with business acquisitions. Other intangible assets primarily comprise capitalised development expenses related to ICT systems (booking, inventories, etc.) with a limited lifespan. The assets are amortised on a straight-line basis over 3–10 years. Amortisation is presented under amortisation in the financial statements.

Impairment losses in 2011 relate to the bus operations (Tromsø office) as a result of the fact that Cominor lost the competitive tender for a new contract in Tromsø and surroundings commencing on 1 February 2012. Loss of the tender will entail lower future earnings.

Goodwill relates to the following cash-generating unit:

2012 2011 (in NOK 1,000) Spitsbergen ...... 143,714 143,714 Total ...... 143,714 143,714

The recoverable amount of a cash-generating unit is calculated on the basis of the approved budgets for the units. Liquidity forecasts based on budgets approved by the management are used.

F-160 Assumptions applied when calculating the recoverable amount:

Spitsbergen Budgeted EBITDA 2013 Growth rate from 2014 ...... 2.0% Discount rate before tax ...... 8.9%

The forecast period is four years. Subsequently the terminal value is used.

Note 10 Investments in associates

2012 2011 (in NOK 1,000) Book value at 1 January ...... 38,895 36,705 Profit/(loss) for the year ...... (1,343) 2,352 Impairment losses ...... (1,000) — Dividends ...... — (334) Other equity movements ...... — 172 Book value at 31 December ...... 36,552 38,895

The shares in Funn IT AS were sold in 2013.

The Group’s share of the profit/(loss), assets and liabilities in associates, none of which are listed, is as follows:

Share of profit/(loss) Ownership Voting Registered office Assets Liabilities Revenue after tax interest share 2012 Funn IT AS(1) ...... Narvik, Norway 21,525 8,882 53,204 (2,739) 50.0% 50.0% Senja Rutebil AS ...... Vangsvik, Norway 5,698 1,054 5,694 (213) 49.3% 49.3% ANS Havnebygningen ...... Tromsø, Norway 3,699 1,200 1,819 609 50.0% 50.0% Total ...... 30,922 11,136 60,717 (2,343) 2011 Funn IT AS ...... Narvik, Norway 25,945 11,564 37,475 2,629 50.0% 50.0% Senja Rutebil AS ...... Vangsvik, Norway 6,894 2,081 3,326 (927) 49.3% 49.3% ANS Havnebygningen ...... Tromsø, Norway 3,256 1,366 1,832 650 50.0% 50.0% Total ...... 36,095 15,011 42,632 2,352

Note 11A Financial instruments by category The following principles have been applied for the subsequent measurement of financial assets and liabilities: At 31 December 2012:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Non-current receivables (Note 12) ...... 16,555 — — — 16,555 Investments in other companies (Note 12) ...... — 9,868 — — 9,868 Financial assets—current Trade and other receivables (Note 12) ...... 293,762 — — — 293,762 Derivative financial instruments (Note 11C) ..... — 5,717 — — 5,717 Cash and cash equivalents (Note 14) ...... 539,685 9,162 — — 548,847

F-161 Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial liabilities—non-current Borrowings (Note 17) ...... — — — 3,209,535 3,209,535 Derivative financial instruments (Note 11C) ..... — — 60,778 — 60,778 Financial liabilities—current Trade and other payables (Note 22) ...... — — — 716,243 716,243 Derivative financial instruments (Note 11C) ..... — — 21,049 — 21,049

At 31 December 2011:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Non-current receivables (Note 12) ...... 318 — — — 318 Investments in other companies (Note 12) ...... — 15,314 — — 15,314 Financial assets—current Trade and other receivables (Note 12) ...... 920,176 — — — 920,176 Derivative financial instruments (Note 11C) ..... — — 28,639 — 28,639 Cash and cash equivalents (Note 14) ...... 573,153 1,358 — — 574,511 Financial liabilities—non-current Borrowings (Note 17) ...... — — — 3,551,760 3,551,760 Derivative financial instruments (Note 11C) ..... — — 17,776 — 17,776 Of which borrowings classified as held-for-sale (Note 7) ...... — — — (70,000) (70,000) Financial liabilities—current Trade and other payables (Note 22) ...... — — — 719,462 719,462 Derivative financial instruments (Note 11C) ..... — 152 — — 152

Assessment of fair value The level hierarchy used for the measurement of fair value is based on the following categories: • Listed price in an active market for an identical asset or liability (Level 1) • Valuation based on observable factors, either directly (price) or indirectly (derived from prices), other than listed price (used in Level 1) for the asset or liability (Level 2) • Valuation based on factors not obtained from observable markets (unobservable assumptions) (Level 3)

The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2012:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives held for trading purposes ...... — 5,717 — 5,717 Investments in other companies ...... — — 9,868 9,868 Other securities ...... 9,162 — — 9,162 Total assets ...... 9,162 5,717 9,868 24,747 Liabilities Derivatives used for hedging ...... 11,244 70,584 — 81,828 Total liabilities ...... 11,244 70,584 — 81,828

F-162 The following table presents the Group’s assets and liabilities measured at fair value at 31 December 2011:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... 5,504 23,135 — 28,639 Investments in other companies ...... — — 15,314 15,314 Other securities ...... 1,358 — — 1,358 Total assets ...... 6,862 23,135 15,314 45,311 Liabilities Derivatives used for hedging ...... — 17,776 — 17,776 Derivatives held for trading purposes ...... — 152 — 152 Total liabilities ...... — 17,776 — 17,776

The fair value of financial instruments that are traded in active markets is based on the market prices on the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and these prices represent actual and regularly occurring market transactions on an arm’s length basis. The market price used for financial assets is the current bid price, and the price used for financial liabilities is the current asking price. These instruments are included in Level 1 and comprise the fair value of some forward bunker oil contracts and other securities.

The fair value of financial instruments that are not traded in an active market is determined by means of various valuation methods. The Group uses various methods and makes assumptions based on the prevailing market conditions on the balance sheet date. If all the significant data inputs that are required to determine the fair value of an instrument are observable data, then the instrument will be included in Level 2. This includes the fair value of forward foreign exchange contracts, foreign exchange options, interest rate swaps and some forward bunker oil contracts.

The nominal value less impairment for losses incurred on trade receivables and the nominal value of trade payables are assumed to approximate the fair value of the items.

If one or more of the significant data inputs are not based on observable market data, the instrument will be included in Level 3.

Special valuation methods that are used to assess financial instruments include: • Quoted market or trading price for corresponding instruments. • Fair value of interest rate swap contracts is calculated as the present value of the estimated future cash flow based on the observable yield curve. • Fair value of forward contracts in a foreign currency is calculated as the present value of the difference between the agreed forward price and the forward price on the balance sheet date multiplied by the contract volume in a foreign currency. The relevant interest rate on the balance sheet date is used for calculation of the present value. • Other methods, such as discounted cash flows, are used to determine the fair value of the remaining financial instruments.

The following table illustrates changes in the Level 3 category instruments at 31 December 2012 and at 31 December 2011:

2012 2011 (in NOK 1,000) Investments in other companies Opening balance ...... 15,314 14,371 Investments during the period ...... — 995 Share issues during the period ...... 750 — Sales during the period ...... (24,560) (52) Gain in income statement (under “Finance income”) ...... 18,364 — Closing balance ...... 9,868 15,314

F-163 Note 11B Creditworthiness of financial assets Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has long-standing partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2012 2011 (in NOK 1,000) Trade and other receivables Counterparties with external credit rating ...... — — Counterparties without external credit rating ...... 293,762 920,176 Total trade and other receivables ...... 293,762 920,176 Cash at bank AAA ...... — 527 AA...... 96,998 481,809 A ...... 412,785 73,524 BBB...... 2,036 56 Without external credit rating ...... 16,154 9,969 Total cash at bank ...... 527,974 565,885 Market-based investments A ...... 9,162 1,358 Total ...... 9,162 1,358 Derivative financial instruments AA...... 5,717 20,493 A ...... — 2,642 Without external credit rating ...... — 5,504 Total ...... 5,717 28,639

(1) The remainder of the cash and cash equivalents on the balance sheet is cash

None of the financial assets have been renegotiated during the last financial year.

Note 11C Derivative financial instruments All derivatives designated as cash flow hedges are recognised at fair value on the balance sheet, while changes in the fair value are recognised temporarily in the hedging reserve in equity and recognised in the income statement when the hedged cash flow is recognised in the income statement. Changes in the fair value of derivatives held for trading are recognised as finance income or finance expenses.

Fair value is calculated based on the mid-price set by the contract counterparty based on current prices in the market on the reporting date.

The table below illustrates the fair value of derivatives designated as cash flow hedges and derivatives held for trading purposes.

2012 2011 Assets Liabilities Assets Liabilities (in NOK 1,000) Forward foreign exchange contracts—cash flow hedging ...... ——22,298 — Foreign exchange options—held for trading purposes ...... 5,717 — — 152 Interest rate swaps—cash flow hedging ...... — 68,763 — 17,776 Forward bunker oil contracts—cash flow hedging ...... — 13,065 6,341 — Total ...... 5,717 81,828 28,639 17,928 Of which non-current Interest rate swaps—cash flow hedging ...... — 59,373 — 17,776 Forward bunker oil contracts—cash flow hedging ...... — 1,405 —— Total ...... — 60,778 — 17,776 Of which current ...... 5,717 21,049 28,639 152

F-164 Derivatives held for trading purposes are classified as current assets or liabilities. The entire fair value of hedging instruments is classified as a non-current asset or non-current liability if the remaining maturity of the hedged item exceeds 12 months, and as a current asset or current liability if the remaining maturity of the hedged item is less than 12 months.

No ineffectiveness was recordable for any of the cash flow hedges in 2011 or 2012. All the forecast cash flows that were hedged in 2012 continue to qualify for hedge accounting. a) Forward foreign exchange contracts There are no outstanding forward foreign exchange contracts at 31 December 2012 that qualify for hedge accounting (2011: NOK 465 million).

The forward foreign exchange contracts that were entered into for 2012 matured in the period July– September, when most of the hedged cash flow was expected to occur. The forward foreign exchange contracts satisfied the requirements for hedge accounting in accordance with IFRSs and the changes in the fair value were recognised in other comprehensive income. Gains and losses on contracts that were recorded in other comprehensive income in 2012 were recognised in income in the same periods in which the hedged transactions affected the profit or loss. Realised gains and losses were allocated to passenger revenues. In 2012 realised gains allocated to passenger revenues amounted to NOK 31.1 million (2011: loss of NOK 0.5 million).

(b) Interest rate swaps The nominal principal on outstanding interest rate swaps at 31 December 2012 was NOK 2,088 million (2011: NOK 341 million).

At 31 December 2012 the fixed interest rate ranged from 2.71 to 5.31 per cent (2011: from 3.87 to 5.31 per cent). The variable interest rates were NIBOR. Gains and losses on interest rate swaps recognised in other comprehensive income at 31 December 2012 (Note 16), will continuously be reversed in the income statement until the bank borrowings (Note 17) have been repaid. Realised gains or losses are allocated to interest expenses. In 2012 realised losses totalling NOK 19.6 million were allocated to interest expenses (2011: NOK 7.5 million). c) Oil derivatives The nominal amount of outstanding forward bunker oil contracts at 31 December 2012 was NOK 163 million (2011: NOK 150 million).

The hedged, highly probable transactions are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward bunker oil contracts satisfy the requirements for hedge accounting under IFRSs and changes in the fair value are recognised directly in other comprehensive income. Gains or losses on oil derivatives recognised in other comprehensive income at 31 December 2012 (Note 16), will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. Realised gains or losses are allocated to bunker costs. In 2012 realised gains of NOK 5.3 million were allocated to bunker costs (2011: NOK 19.5 million).

Transfers to and from equity The following movements in equity related to cash flow hedges have occurred during the year:

2012 2011 (in NOK 1,000) Fair value of cash flow hedging for foreign currency opening balance ...... 22,298 3,042 Change in value during the year recognised in other comprehensive income ...... (22,298) 19,256 Fair value of cash flow hedging for foreign currency closing balance ...... — 22,298 Fair value of cash flow hedging for interest rates opening balance ...... (17,776) (19,551) Change in value during the year recognised in other comprehensive income ...... (50,987) 1,775 Fair value of cash flow hedging for interest rates closing balance ...... (68,763) (17,776)

F-165 2012 2011 (in NOK 1,000) Fair value of cash flow hedging for bunker oil opening balance ...... 6,341 11,755 Change in value during the year recognised in other comprehensive income ...... (19,406) (5,414) Fair value of cash flow hedging for bunker oil closing balance ...... (13,065) 6,341 Total fair value of cash flow hedging opening balance ...... 10,863 (4,754) Total change in value during the year recognised in other comprehensive income ...... (92,691) 15,617 Total fair value of cash flow hedging closing balance ...... (81,828) 10,863

Note 12 Receivables and other investments

2012 2011 (in NOK 1,000) Trade receivables ...... 290,679 696,931 Less provision for impairment of trade receivables ...... (121,385) (63,026) Trade receivables—net ...... 169,294 633,905 Other receivables ...... 124,468 286,271 Total current receivables (Note 11) ...... 293,762 920,176 Pension assets (Note 19) ...... 1,871 640 Prepayments ...... 2,226 17,732 Investments in other companies (Note 11A) ...... 9,868 15,314 Other non-current receivables (Note 11A) ...... 16,555 318 Total non-current receivables and investments ...... 30,520 34,003

With regard to the specification of receivables from related parties, please see Note 30.

Age distribution of overdue trade receivables is as follows:

2012 2011 (in NOK 1,000) Up to three months ...... 38,148 87,067 Three to six months ...... 4,179 242,862 Over six months ...... 10,892 142,309 Total ...... 53,218 472,238

At 31 December 2012 trade receivables totalling NOK 53.2 million were overdue after provision for impairment of doubtful receivables (at 31 December 2011: NOK 472.2 million). The reduction is primarily attributable to the discontinuation of the Group’s activities in Australia.

The change in the provisions for impairment of trade receivables is as follows:

2012 2011 (in NOK 1,000) Provision for impairment of receivables at 1 January ...... 63,026 16,408 Provision for impairment of receivables during the year ...... 218,707 47,127 Receivables written off during the year ...... (146,030) 1,949 Reversal of unused amounts ...... (14,318) (2,457) Total ...... 121,385 63,026

The year’s loss provision primarily comprises: • A provision of NOK 99 million following the settlement relating to the discontinued Charter business, which is described in more detail below and in Note 5 • A provision of NOK 108 million relating to the Supplementary Agreement with the Norwegian government following the ruling by the EFTA Court on the ESA case, cf. Note 5

F-166 Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd has reached a settlement with the contracting party in the arbitration case concerning the outstanding claims in connection with chartering of MS Finnmarken. The settlement was reached in December 2012 and resulted in the write-off of NOK 146 million in confirmed losses. The above write-off included NOK 46 million already recognised at 31 December 2011. Following this agreement Hurtigruten has no further claims on the balance sheet relating to the Charter business in Australia.

The other classes of trade and other receivables do not contain impaired assets.

Note 13 Inventories Inventories consist of the following types of goods:

2012 2011 (in NOK 1,000) Goods purchased for resale ...... 52,589 49,754 Spare parts ...... 909 909 Bunkers ...... 23,550 24,033 Total ...... 77,048 74,696

The cost of goods sold included in other operating costs amounted to NOK 573 million (2011: NOK 579 million).

Inventories are measured at cost. If the fair value is assessed to be lower than cost, then the inventories will be written down.

Note 14 Cash and cash equivalents

2012 2011 (in NOK 1,000) Cash at bank and on hand (Note 11A) ...... 539,685 573,153 Market-based investments(1) (Note 11A) ...... 9,162 1,358 Cash at bank, cash on hand and market-based investments on the balance sheet ... 548,847 574,511

In the cash flow statement cash and cash equivalents consist of the following:

2012 2011 (in NOK 1,000) Cash at bank and on hand ...... 539,685 573,153 Market-based investments(1) ...... 9,162 1,358 Restricted bank deposits(2) ...... (83,053) (148,050) Cash and cash equivalents in the cash flow statement ...... 465,794 426,461

Market—based investments consist of the following items:

2012 2011 (in NOK 1,000) Securities held for trading purposes: Other securities(1) ...... 9,162 1,358 Total ...... 9,162 1,358

(1) Funds owned by a foreign subsidiary. (2) Restricted bank deposits primarily comprise employee tax withholding funds, pledged bank deposits and guarantees to limited partnerships.

F-167 Note 15 Share capital and premium

Nominal value of Number of shares ordinary shares Treasury shares Share premium Total (in NOK 1,000 unless otherwise indicated) At 31 December 2011 ...... 420,259,163 420,259 (293) 734,622 734,329 At 31 December 2012 ...... 420,259,163 420,259 (293) 734,622 734,329

All ordinary shares have equal rights.

The annual general meeting was held on 19 April 2012 and granted the company’s board power of attorney to acquire treasury shares. The general meeting adopted the following resolution: I. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire treasury shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of treasury shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. II. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. III. The board is free to determine how the acquisition and sale of treasury shares shall take place. IV. This power of attorney shall remain valid until the company’s annual general meeting in 2013. The board does not have any power of attorney to increase the company’s share capital. In 2012 the Group redeemed a convertible bond loan. See Note 17 for further information.

The 20 largest shareholders at 31 December 2012

Domicile No. of shares Ownership interest (%) Periscopus AS ...... Oslo 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 MP Pensjon PK ...... Oslo 29,000,000 6.90 Skagen Vekst ...... Oslo 22,671,503 5.39 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 2,000,000 0.48 Netfonds Liv ...... Oslo 1,672,246 0.40 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik Local Authority ...... Narvik 1,382,767 0.33 Alta Invest AS ...... Alta 1,378,119 0.33 Skagen Vekst III ...... Oslo 1,223,405 0.29 Fjellvit AS(2) ...... Oslo 1,119,040 0.27 Troms County Council ...... Tromsø 1,048,461 0.25 JPMorgan Chase Bank ...... USA 1,041,115 0.25 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Avanza Bank AB brokerage account ...... Stockholm 950,015 0.23 State Street Bank AN ...... United Arab Emirates 919,738 0.22 20 largest shareholders ...... 321,442,055 76.49 Other shareholders ...... 98,817,108 23.51 Total no. of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

F-168 The 20 largest shareholders at 31 December 2011

Ownership interest Domicile No. of shares (%) Periscopus AS ...... Oslo 118,723,289 28.25 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 Skagen Vekst ...... Oslo 30,296,503 7.21 MP Pensjon PK ...... Oslo 29,000,000 6.90 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,379,534 0.80 Netfonds Liv ...... Oslo 2,825,827 0.67 Svendsen, Geir Arild ...... Bergen 1,965,245 0.47 Skagen Vekst III ...... Oslo 1,550,905 0.37 Avanza Bank AB brokerage account ...... Stockholm 1,438,781 0.34 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik Local Authority ...... Narvik 1,382,767 0.33 Fjellvit AS(2) ...... Oslo 1,119,040 0.27 Troms County Council ...... Tromsø 1,048,461 0.25 Warrenwicklund Norge securities fund ...... Oslo 1,013,518 0.24 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Bergen Handel og Invest ...... Bergen 1,000,000 0.24 20 largest shareholders ...... 312,556,227 74.37 Other shareholders ...... 107,702,936 25.63 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2012 (directly and indirectly)

No. of shares Corporate assembly Westye Høegh, Chair ...... — Bjørn Dahle, Deputy Chair ...... 7,099,979 Karen M. Kuvaas ...... 699 Svein Otto Garberg ...... 835,327 Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Fay Hege Fredriksen ...... — Asbjørn Larsen, elected by employees ...... 5,550 Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... 285 Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Mai Elmar ...... — Arve Giske ...... — Berit Kjøll ...... 100,000 Petter Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... —

F-169 No. of shares

Management Daniel A. Skjeldam, CEO from 1 October 2012 ...... 29,000 Olav Fjell, CEO until 30 September 2012(3) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Asta Lassesen, CFO ...... 600,000 Glen Peter Hartridge, Director product and pricing management ...... — Ole Fredrik Hienn, Director legal affairs ...... 170,950 Hans Rood, Sales and marketing director ...... 90,000 Dag-Arne Wensel, Director technical maritime operations ...... 63,650

(1) The shares are owned through the company Periscopus AS. (2) The shares are owned through the company Home Capital AS. (3) Of which 1,068,890 shares are owned through the company Fjellvit AS.

The company’s auditor does not own any shares in Hurtigruten ASA.

Earnings per share The earnings per share are calculated by dividing the portion of the profit or loss for the year that is attributable to the owners of the parent by a weighted average of the number of ordinary shares throughout the year, less the number of treasury shares.

2012 2011 (in NOK 1,000) Profit or loss for the year attributable to the owners of the parent from continuing operations ...... (240,060) (153,217) Profit or loss from discontinued operations attributable to the owners of the parent ...... (133,861) 26,752 Profit or loss for the year attributable to owners of the parent ...... (373,921) (126,465) Weighted average number of outstanding shares ...... 419,965,791 419,965,791

Diluted earnings per share Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares.

Dividend per share No dividend was paid for 2011, and no dividend has been proposed for the 2012 financial year.

Note 16 Other equity not recognised in the income statement

Currency translation Convertible loan Hedging reserve differences Total (in NOK 1,000) Book value at 1 January 2011 ...... 20,711 102,419 5,929 129,059 Cash flow hedging after tax ...... — 11,408 — 11,408 Currency translation differences ...... — — (394) (394) Book value at 1 January 2012 ...... 20,711 113,827 5,535 140,073 Redemption of convertible bond loan ...... (20,711) — — (20,711) Cash flow hedging after tax ...... — (66,721) — (66,721) Currency translation differences ...... — — 6,246 6,246 Book value at 31 December 2012 ...... — 47,106 11,781 58,888

Please see Note 17 with regard to detailed information on the convertible bond loan.

F-170 Note 17 Borrowings

2012 2011 (in NOK 1,000) Non-current borrowings Bank borrowings ...... 2,376,576 2,455,508 Bond loan ...... 488,407 — Total non-current borrowings ...... 2,864,983 2,455,508 Current borrowings Bank borrowings, including first year’s instalment on non-current borrowings ...... 344,552 1,096,252 Of which current borrowings classified as held-for-sale (Note 7) ...... — (70,000) Total current borrowings ...... 344,552 1,026,252 Total borrowings ...... 3,209,535 3,481,760

The Group’s buildings, ships, chattels, operating equipment, inventories, trade receivables and some bank deposits have been pledged as collateral for bank borrowings.

2012 2011 (in NOK 1,000) Book value of pledged assets ...... 3,790,438 3,720,689 Of which pledged assets classified as held-for-sale (Note 7) ...... — (60,384) Book value of pledged assets for continuing operations ...... 3,782,234 3,660,305

The Group is exposed to interest rate changes with respect to borrowings based on the following re-pricing structure:

2012 2011 (in NOK 1,000) Six months or less ...... 165,467 3,219,354 Six to twelve months ...... 165,467 — One to five years ...... 2,861,635 332,406 Over five years ...... 16,965 — Of which borrowings classified as held-for-sale (Note 7) ...... — (70,000) Total ...... 3,209,535 3,481,760

Book value and fair value of borrowings:

Book value Fair value 2012 2011 2012 2011 (in NOK 1,000) Current borrowings ...... 344,552 1,026,252 344,552 1,026,252 Non-current bank borrowings ...... 2,376,576 2,455,508 1,921,957 2,314,553 Bond loan ...... 488,407 — 335,367 — Total ...... 3,209,535 3,481,760 2,601,876 3,340,805

The Group primarily borrows at variable interest rates, and interest rate swap contracts (swaps) are used for the portion of the borrowings that are to have a fixed interest rate, as dictated by the Group’s hedging policy. For further information on the hedging instruments, see Note 11C (Derivative financial instruments).

The fair value is based on discounting cash flows from borrowings by a discount rate based on the market’s expectations of the future variable interest rates or the agreed fixed rate. The discount rate for 2012 ranged from 5.5 to 10.5 per cent (2011: average 5 per cent).

The fair value of current borrowings corresponds to the book value as the effect of the discount is insignificant.

F-171 The book value of the Group’s borrowings in different currencies is as follows:

2012 2011 (in NOK 1,000) NOK ...... 3,060,223 3,211,895 EUR...... 113,688 195,556 USD...... 35,625 74,309 Total borrowings ...... 3,209,535 3,481,760

Hurtigruten ASA refinanced its debt in the first quarter of 2012, and the new loan agreement with the banks is dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The term of the loan is five years with annual instalments of NOK 260 million, where the first instalment falls due in September 2012. The financial covenants are as follows: • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current liabilities excluding the first year’s instalments of long term debt. • Minimum liquidity The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum fixed charge coverage ratio/liquidity At the end of each quarter the Group’s EBITDA excluding gains/losses on the sale of assets must be equal to or greater than the Group’s annual debt obligations and dividend payments, or the Group’s unrestricted liquidity including unused credit facilities must be a minimum of NOK 350 million. • Minimum equity ratio The Group’s equity ratio must be measured on 30 June and 31 December each year, and shall be 22.5 per cent up to an including 31 December 2014. From 31 December 2014 until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreement. From and including 31 December 2012 until and including 30 June 2013 the equity ratio requirement will be temporarily reduced to 20 per cent.

As part of its refinancing Hurtigruten ASA issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month and is irredeemable until its final maturity date in April 2017. The financial covenants are as follows: • Maximum senior debt facilities ratio The Group’s secured debt shall be less than 65 per cent of the Group’s total assets until and including 30 June 2013. This percentage will be reduced annually by 5 per cent from and including 1 July 2013. From and including 1 July 2015 to the expiration of the term of the agreement, secured debt shall be lower than 50 per cent of total assets. • Maximum leverage ratio The Group’s interest bearing debt shall be less than 6.5 per cent of the Group’s EBITDA, excluding gains/ losses on the sale of assets from and including 31 December 2012. This percentage shall be reduced annually by 0.5 per cent from and including 31 December 2013. From and including 31 December 2012 until and including 30 September 2013 this requirement has been temporarily set at 12.5 per cent. The requirement for 6.5 per cent shall also be satisfied using normalised EBITDA as a base for the calculation. Normalised EBITDA in this context is the Group’s EBITDA adjusted for i) losses arising in connection with the charter arbitration case (cf. Notes 5 and 12) and ii) the provision relating to the ESA case (cf. Notes 5 and 12). • Minimum liquidity

F-172 The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current liabilities excluding the first year’s instalments of long term debt.

In March 2012 Hurtigruten ASA redeemed the bond loan issued in February/March 2009 pursuant to the loan agreement.

The company also redeemed the convertible bond loan in June 2012 in accordance with the loan agreement.

The convertible bond loan is recognised in the balance sheet as follows:

Convertible bond loan (in NOK 1,000) Debt component at 1 January 2011 ...... 44,530 Interest expenses (Note 28) ...... 6,576 Accrued, unpaid interest ...... (4,017) Debt component at 31 December 2011 ...... 47,089 Interest expenses (Note 28) ...... 2,788 Redemption of convertible bond loan ...... (49,877) Debt component at 31 December 2012 ...... 0

The fair value of the debt component and the component related to the equity conversion was determined when the loan was issued. The fair value of the debt component, which is included in the non-current liabilities, is calculated using the market interest rate for an equivalent non-convertible loan. The residual amount, which represents the value of the equity component, is recognised in equity under “Other equity not recognised in the income statement”.

The loan’s interest expenses are calculated based on the effective interest rate method by using an effective interest rate of 10.0 per cent for the debt component.

In the first quarter of 2011 Hurtigruten ASA made an extraordinary instalment payment on the instalment portion of the bareboat lease to the two limited partnerships Kystruten KS and Kirberg Shipping KS, from which the company leases two Hurtigruten ships. The extraordinary instalment payment was made through the release of funds that were restricted as security for the charter agreement. These funds were used in their entirety for an extraordinary repayment of borrowings in the two limited partnerships. Kystruten and Kirberg Shipping are recognised in the consolidated financial statements in accordance with IFRS SIC-12—Special Purpose Entities. A further extraordinary repayment of debt was made in the parent company in the second quarter of 2011 of NOK 100 million.

In 2012 ordinary instalments payments were made as part of the bareboat lease to the limited partnerships mentioned above, along with deferred repayments in accordance with the agreement entered into with the banks and limited partnerships in February 2009. The agreement specified that no instalment payments should be paid on the loan between March 2009 and December 2011. The postponed instalments will be paid back on a pro rata basis together with the instalments due for payment from February 2012 to February 2013.

F-173 Note 18 Income tax Income tax expense The income tax expense for the year can be broken down as follows:

2012 2011 (in NOK 1,000) Tax payable ...... (10,264) (11,932) Change in deferred income tax liabilities/assets ...... (8,750) 94,657 Total income tax expense ...... (19,014) 82,725 Of which income tax expense for discontinued operations (Note 7) ...... — 26,360 Total income tax expense for continuing operations ...... (19,014) 56,365 Discontinued operations Tax payable ...... — — Change in deferred income tax liabilities/assets ...... — 26,360 Total income tax expense for discontinued operations (Note 7) ...... — 26,360

The tax on the Group’s profit or loss before tax deviates from the amount that would have applied if the Group’s weighted average tax rate had been used. The difference can be explained as follows:

2012 2011 (in NOK 1,000) Profit/(loss) before tax for continuing and discontinued operations ...... (310,338) (152,692) Estimated income tax expense based on the tax rates in the various countries and the respective results ...... 89,653 41,800 Change in the income tax expense as a result of: —non-taxable income ...... 33,016 54,037 —non-tax-deductible costs ...... (5,455) (24,758) —tax on profit or loss attributable to companies assessed as a partnership ...... (316) 918 —utilisation of tax loss carryforwards ...... 284 336 —unrecognised deferred income tax assets ...... (161,895) (9,454) —miscellaneous items (foreign exchange differences, SPE) ...... 25,700 19,845 Income tax expense for continuing and discontinued operations ...... (19,014) 82,725 Weighted average tax rate ...... 28.89% 27.38%

The change in the weighted average tax rate is attributable to a change in the profitability of the Group’s subsidiaries abroad.

Income tax expense for items recognised in other comprehensive income:

2012 2011 Income tax Income tax Before tax expense After tax Before tax expense After tax (in NOK 1,000) Actuarial gains/losses pensions ...... 55,337 (17,158) 38,179 (49,103) 13,261 (35,843) Cash flow hedging ...... (92,690) 25,953 (66,737) 15,617 (4,373) 11,244 Currency translation differences ...... 6,246 — 6,246 (394) — (394) Other equity adjustments ...... ———582 — 582 Other comprehensive income ...... (31,107) 8,795 (22,312) (33,298) 8,888 (24,410)

F-174 Deferred income tax liabilities Deferred income tax liabilities are recognised on a net basis if the differences that are reversible can be offset. All differences are reversed over a period of 12 months due to the fact that all the companies are assessed in arrears. The following amounts have been recognised on a net basis:

2012 2011 (in NOK 1,000) Deferred income tax assets: Gross deferred income tax assets that reverse after more than 12 months ...... (752,992) (792,759) Total deferred income tax assets ...... (752,992) (792,759) Deferred income tax liabilities: Gross deferred income tax liabilities that reverse after more than 12 months ...... 591,171 630,168 Total deferred income tax liabilities ...... 591,171 630,168 Net deferred income tax liabilities/assets ...... (161,821) (162,591) Net deferred income tax liabilities/assets for continuing operations ...... (161,821) (162,591) Change in recognised net deferred income tax liabilities Book value at 1 January ...... 9,643 13,367 Recognised in the income statement during the period ...... (12,522) 7,277 Tax on current financial assets recognised in other comprehensive income ...... (22) (222) Tax on estimate deviations pensions recognised in other comprehensive income ...... 10,191 (8,155) Correction of errors in deferred income tax from earlier years ...... 815 (2,624) Book value at 31 December ...... 8,105 9,643 Change in book value of deferred income tax assets—net: Book value at 1 January ...... (172,234) (69,789) Recognised in the income statement during the period ...... 21,272 (101,933) Tax on current financial assets recognised in other comprehensive income ...... (25,931) 4,595 Tax on estimate deviations pensions recognised in other comprehensive income ...... 6,967 (5,107) Book value at 31 December ...... (169,926) (172,234)

Change in deferred income tax assets and liabilities Tax effect of tax-increasing temporary differences:

Non-current Other assets differences Total (in NOK 1,000) 1, January 2011 ...... 613,668 64,297 677,965 Recognised in the income statement during the period ...... (23,278) (26,268) (49,546) Correction for earlier years ...... (2,624) — (2,624) Equity adjustments ...... — 4,373 4,373 31, December 2011 ...... 587,766 42,402 630,168 Recognised in the income statement during the period ...... (15,607) 1,749 (13,858) Correction for earlier years ...... 815 — 815 Equity adjustments ...... — (25,953) (25,953) 31, December 2012 ...... 572,974 18,198 591,172

F-175 Tax effect of tax-reducing temporary differences:

Tax loss Current Provisions carryforward items Total (in NOK 1,000) 1, January 2011 ...... (20,986) 670,913) (42,488) (734,387) Recognised in the income statement during the period ...... 22,655 (54,571) (13,195) (45,111) Equity adjustments ...... (13,261) — — (13,261) 31, December 2011 ...... (11,592) (725,484) (55,683) (792,759) Recognised in the income statement during the period ...... (12,263) 60,515 (25,644) 22,608 Equity adjustments ...... 17,158 — — 17,158 31, December 2012 ...... (6,697) (664,969) (81,327) (752,993)

The deferred income tax assets relating to tax loss carryforwards are recognised on the balance sheet to the extent that the Group can utilise the tax loss carryforward against future taxable income. The Group has significant tax-increasing temporary differences relating to the same tax authority as the tax loss carryforward. In preparing the annual financial statements management has found that the future taxable income is adequate to utilise the recognised deferred income tax asset. This assessment is based on a conservative estimate of the Group’s future profits, where management attached particular importance to the Group’s procurement contract with the government which runs until 2019, as well as the effects of the Group’s completed, and planned, restructuring measures. On grounds of prudence the Group has elected not to recognise the deferred income tax asset relating to the tax loss for the year. Tax loss carryforwards may be carried forward for an indefinite period in Norway. The tax loss carryforward at 31 December 2012 was NOK 2,836 million (2011: NOK 2,591 million).

Deferred income tax liabilities recognised directly through equity during the year are as follows:

2012 2011 (in NOK 1,000) Tax on estimate deviations related to pension plans ...... 17,158 (13,261) Tax on current financial assets recognised through equity ...... (25,953) 4,373 Total ...... (8,795) (8,888)

Note 19 Pensions The Group has both defined contribution and defined benefit pension plans. For the defined contribution plans the cost is equal to the contributions to the employees’ pension savings during the period. The future pensions are dependent on the size of the contributions and the return on the pension plan. For the defined benefit plans, the employer is responsible for paying the agreed pension to the employee based on his/her final salary. Future defined benefits are mainly dependent on the number of contribution years, salary level upon reaching retirement age and the size of the National Insurance benefits. These obligations are covered through an insurance company. In addition to the pension obligations that are covered through insurance schemes, the company has unfunded pension obligations that are funded from revenue, primarily for former key management personnel.

The new Contractual Early Retirement (AFP) Scheme Act adopted by the Storting in 2010 entailed the derecognition of provisions related to the old contractual early retirement scheme and recognition in the income statement. Provisions were set aside to cover the assumed underfunding of the old contractual early retirement scheme. The new contractual early retirement scheme is regarded as a benefit-based multi-entity plan in the financial statements. This means that each individual company shall account for its proportional share of the scheme’s pension obligations, plan assets and pension costs. Until reliable and consistent information is available for allocation, the new contractual early retirement scheme will be accounted for as a defined contribution plan.

The established pension plans cover 1,789 employees in the Group. The pension costs for the period illustrate the agreed future pensions earned by employees in the financial year.

F-176 Financial assumptions:

2012 2011 Norway Discount rate ...... 3.90% 2.60% Expected return on pension fund assets ...... 4.00% 4.10% Expected annual wage adjustment ...... 3.50% 3.50% Expected annual pension adjustment ...... 0.20% 0.10% Expected annual National Insurance basic amount (G) adjustment ...... 3.25% 3.25% Table book used for estimating liabilities ...... K2005 K2005 Table book used for estimating disabilities ...... IR02 IR02 Germany Discount rate ...... 3.10% 4.60% Expected return on pension fund assets ...... 3.95% 3.51% Expected annual wage adjustment ...... N/A N/A Expected annual pension adjustment ...... 1.90% 1.90% Expected annual National Insurance basic amount (G) adjustment ...... N/A N/A Average expected years of service until retirement age ...... 11.3 years 12.1 years Average expected life (in years) for a person retiring when he/she reaches age 67: —Women ...... 18.6 years 17.2 years —Men ...... 15.3 years 13.6 years Average expected life (in years) 20 years after the balance sheet date for a person retiring when he/she reaches age 67: —Women ...... 19.3 years 18.4 years —Men ...... 16.6 years 15.6 years

Pension costs recognised in the income statement for the year are as follows:

2012 2011 (in NOK 1,000) Present value of current year’s pension benefits earned ...... 12,645 14,821 Defined contribution plan ...... 39,251 38,827 Interest expenses on accrued pension obligations ...... 9,294 12,741 Expected return on plan assets ...... (8,043) (10,505) Discontinuation and plan changes ...... (5,607) (23,383) Net pension costs funded from revenue ...... 73 50 Payroll tax ...... 2,130 2,278 Employee contributions ...... — (348) Total pension costs included in payroll costs ...... 49,743 34,481 Estimated deviations recognised in other comprehensive income ...... 55,332 (49,103)

Specification of net pension assets/obligations:

2012 2011 (in NOK 1,000) Present value of accrued pension obligations at 31 December for funded defined benefit plans ...... 276,216 340,266 Estimated fair value of plan assets at 31 December ...... 255,628 265,790 Total ...... 20,588 74,476 Present value of pension obligations for unfunded plans ...... 2,850 4,405 Present value of pension obligations funded from revenue ...... 20,994 22,172 Net pension obligations ...... 44,432 101,053 Net pension obligations for continuing operations ...... 44,432 101,053

F-177 Net pension assets/obligations are classified as follows on the balance sheet:

2012 2011 (in NOK 1,000) Other non-current receivables ...... 1,871 640 Pension obligations ...... 46,303 101,693 Net pension obligations ...... 44,432 101,053

Change in the defined benefit pension obligations during the year:

2012 2011 (in NOK 1,000) Pension obligations at 1 January ...... 366,843 380,890 Present value of current year’s pension benefits earned ...... 12,645 14,821 Interest expenses ...... 9,294 12,742 Estimate deviations ...... (52,545) 47,905 Currency translation differences—obligations ...... (1,687) 308 Discontinuation of pension plans (plan changes) ...... (19,295) (71,436) Pension benefits paid ...... (14,945) (16,265) Change in payroll tax on net pension obligations ...... (248) (2,122) Pension obligations at 31 December ...... 300,062 366,843

Change in the fair value of the plan assets:

2012 2011 (in NOK 1,000) Fair value at 1 January ...... 265,790 254,842 Expected return on plan assets ...... 8,043 10,505 Estimate deviations ...... 2,792 (1,198) Paid-up policies and disbursements due to discontinuation of plans (plan changes) ...... (22,932) (47,223) Employer contributions ...... 13,130 60,770 Currency translation differences assets ...... (1,414) — Pension benefits paid ...... (9,779) (11,906) Fair value at 31 December ...... 255,630 265,790

Composition of the plan assets:

2012 2011 Shares ...... 12.8% 19.7% Current bonds ...... 16.8% 12.7% Money market ...... 9.9% 19.3% Non-current bonds ...... 38.8% 30.4% Property ...... 17.2% 15.3% Other ...... 4.5% 2.6% Total ...... 100.0% 100.0%

2012 2011 Actual return on plan assets ...... 4.35% 1.78%

2013 2012 (NOK ’000) The company’s expected contributions to funded plans next year ...... 10,188 15,191

The Group has established mandatory occupational pension plans in the companies where this is required. These plans satisfy the requirements stipulated in the Norwegian Mandatory Occupational Pension Act.

F-178 Table of the historical present values of pension obligations and assets at 31 December

2012 2011 2010 2009 2008 (in NOK 1,000) Present value of defined benefit pension obligations ...... 300,062 366,843 380,890 328,922 411,660 Fair value of plan assets ...... 255,630 265,790 254,842 232,599 252,135 Deficit/(surplus) ...... 44,432 101,053 126,048 96,323 159,525 Actual estimate deviations on the defined benefit obligations as a percentage ...... (23.95)% 22.98% Actual estimate deviations on funds in defined benefit plans as a percentage ...... 0.25% (3.62)%

Sensitivity analysis for changes in the assumptions:

Discount rate +1 per cent –1 per cent Increase (+) reduction (–) in the net pension costs for the period ...... (1,574) 1,993 Increase (+) reduction (–) in the net pension obligations at 31 December ...... (6,220) 7,109

Change in the annual wage inflation +1 per cent –1 per cent Increase (+) reduction (–) in the net pension costs for the period ...... 6,820 (4,407) Increase (+) reduction (–) in the net pension obligations at 31 December ...... 17,773 (12,441)

Change in National Insurance basic amount (G) adjustment +1 per cent –1 per cent Increase (+) reduction (–) in the net pension costs for the period ...... (3,777) 4,512 Increase (+) reduction (–) in the net pension obligations at 31 December ...... (10,664) 11,552

Estimate deviation

The discount rate used to calculate the pension obligations for the Group’s Norwegian companies was previously based on the 10-year Norwegian government bond interest rate. In light of the Norwegian Accounting Standards Board’s declaration that due to changes in the Norwegian financial markets in recent years calculation of the discount rate can now be based on covered Norwegian bonds, in 2012 the Group has opted to calculate the discount rate based on the above covered bonds. The change in calculation basis from using the government bond rate to using covered bonds represents an estimate deviation that has reduced the value of the recognised pension obligation by NOK 61 million.

Note 20 Provisions

Deferred revenue Share-value-based recognition Restructuring Legal disputes remuneration Total (in NOK 1,000) Book value at 1 January 2011 ...... 5,617 — — 566 6,183 Provisions for the year ...... — — 8,000 253 8,253 Utilisation of provisions from the prior year ...... (167) — — — (167) Book value at 31 December 2011 ...... 5,450 — 8,000 819 14,269 Provisions for the year ...... — 10,300 — 216 10,516 Utilisation of provisions from the prior year ...... (167) — (8,000) — (8,167) Book value at 31 December 2012 ...... 5,283 10,300 — 1,035 16,619

F-179 Classification on the balance sheet at 31 December 2012:

Non-current liabilities (deferred revenue recognition) ...... 5,283 Non-current liabilities—continuing operations ...... 5,283 Current liabilities ...... 11,335 Current liabilities—continuing operations ...... 11,335

Deferred revenue recognition A line-by-line recognition has been carried out with respect to the investment contribution received, including a possible repayment obligation. Revenue recognition of the investment contribution occurs in conjunction with depreciation of the associated asset. This year’s recognised revenue is NOK 167,000. The remainder of the investment contribution at 31 December 2012 amounts to NOK 5.3 million.

Restructuring A provision has been recognised for costs relating to function duplication and the closing and relocation of offices in connection with the adopted efficiency-improvement programme covering the onshore organisation in Hurtigruten Pluss AS.

Legal disputes Legal charges were brought against AS TIRB and its subsidiary Cominor AS by Troms County Council in May 2009. A complaint was filed with the Court of Conciliation in December 2009. Troms County Council claimed that the companies had overcharged for occasional assistance, and for unforeseen and unplanned driving, for a total amount of NOK 25 million, excluding interest. The Hålogaland Court of Appeal delivered its ruling in the case on 26 November 2012 and ordered TIRB and Cominor to pay compensation of NOK 11.7 million to Troms County Council. The ruling will not be appealed.

Share-value-based remuneration (synthetic options) In 2010 the company established a share-based option scheme for all permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA at 31 December 2010. This is a share-value-based remuneration programme in which the employees receive cash instead of shares (synthetic options). Please refer to Note 21 for further details.

Investment obligations The company has no contractual investments at the balance sheet date.

Operating lease commitments—Group company as lessee The Group leases an office in Tromsø, in addition to some other offices. These leases have varying payment dates, price adjustment clauses and renewal rights. The Group also leases machinery and transport equipment. Leasing costs for the year are specified in Note 8. The Group has no non-cancellable leases.

The parent company entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten ships MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR.

Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12—Special Purpose Entities in the consolidated financial statements. Recognised bareboat charter hire payments in the income statement of the parent company have thus been eliminated against charter hire income in the limited partnerships on consolidation.

F-180 Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the ships. In the charter agreements between the limited partnerships and Hurtigruten ASA, identical requirements (financial covenants) have been stipulated for Hurtigruten ASA for the term of the agreements, which the company has as a component of its long-term loan agreements linked to ships. Please see Note 17 with regard to these financial covenants.

A breach of the financial covenants may entail a termination of the charter agreements by the lessor. The Group has satisfied all the financial covenants at 31 December 2012.

In connection with the financial restructuring in February 2009, an agreement was reached with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charter-party agreement with the two limited partnerships would not be payable for the period up to 31 December 2011. The postponed instalments would, however, be added to the instalments that were paid in 2012 and will be paid 2013, thereby reverting to the original repayment plan in August 2013. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back MS Nordlys and MS Richard With will be cancelled. In the first quarter of 2011 Hurtigruten ASA made an extraordinary instalment payment on the bareboat charter hire. The extraordinary instalment payment was made through the release of funds that were restricted as security for the leases. The payments were used in their entirety for an extraordinary instalment payment of borrowings in the two limited partnerships.

Guarantees

2012 2011 (in NOK 1,000) Associates ...... 2,016 2,541 Total guarantees ...... 2,016 2,541

Note 21 Share-value-based remuneration Hurtigruten would like to encourage its employees to invest in their own company through an incentive scheme. The purpose of this scheme is to make Hurtigruten a more attractive place to work in the long term and raise awareness of shareholder value and profitability, as well as encourage behaviour that will increase shareholder value in the company over time. An option scheme was offered to all the permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA at 31 December 2010.

For each share the employee owned on 31 December 2010, the employee received three options. The executive management and personnel reporting directly to the CEO may participate with up to 83,333 shares (for a total of 250,000 share options), employees who report directly to a member of the executive management can participate with up to 33,333 shares (for a total of 100,000 share options) and all other employees can participate with up to 8,333 shares (for a total of 25,000 share options).

The programme is structured as a synthetic share option programme, in which the options can be exercised over the next three years. In December 2011, 20 per cent of the options can be exercised; in December 2012, 30 per cent of the options can be exercised; and, in December 2013, 50 per cent of the options can be exercised. The market price will be the average market price in December for the respective years. The average market price for the second half of 2010, which was NOK 4.01, will be used as the basis for calculating gains. The number of shares held on 31 December 2010 must be kept until the options are exercised. Any gains will be distributed as an extraordinary bonus without any right to holiday pay after the end of each year. The employees will pay ordinary income tax on the gain.

F-181 Movements in the number of outstanding share options and the associated weighted average exercise prices are as follows:

2012 2012 2011 2011 Average Options Average Options exercise price in (in exercise price in (in NOK per share thousands) NOK per share thousands) At 1 January ...... — 2,963 — 3,878 Allotment this year ...... ———— Forfeited ...... 4.01 (510) 4.01 (173) Exercised ...... ———— Expired ...... 4.01 (1,104) 4.01 (741) At 31 December ...... 4.01 1,350 4.01 2,963

Expiration date and exercise price for outstanding options at year end:

2012 2011 Options Options Exercise price in (in (in Expiration date NOK per share thousands) thousands) 31 December 2011 ...... 4.01 — — 31 December 2012 ...... 4.01 — 1,111 31 December 2013 ...... 4.01 1,350 1,852 1,350 2,963

After this period the fair value of the allotted options, calculated using the Black-Scholes option-pricing model, was NOK 0.19 per option (2011: NOK 1.49 per option). The most important input data includes the share price at 31 December 2012 of NOK 3.00 (at 31 December 2011: NOK 3.03), the exercise prices shown above, a standard deviation of the expected share return of 33 per cent (2011: 59 per cent) and an annual risk-free interest rate of 1.49 per cent (2011: 1.31 per cent). Volatility is measured using the standard deviation of the expected return based on a statistical analysis of the daily share prices in 2012.

The fair value is recognised as an expense under payroll costs over the vesting period. A total of NOK 0.2 million was recognised as an expense in 2012 (2011: NOK 0.3 million). The average price in December each year will be measured against the average price for the second the half of 2010, which was NOK 4.01. The average rate in December 2012 was NOK 3.07 (2011: NOK 3.13), meaning that there was no gains calculation or payment for 2012.

Note 22 Trade and other payables

2012 2011 (in NOK 1,000) Trade payables ...... 247,435 226,865 Public duties payable ...... 14,739 36,135 Other current liabilities ...... 468,808 492,597 Total ...... 730,981 755,597

See Note 30 for information on trade payables and other current liabilities to related parties.

Note 23 Operating revenues

2012 2011 (in NOK 1,000) Operating revenues ...... 2,361,556 3,015,656 Sales revenues ...... 375,871 381,601 Contractual revenues ...... 747,491 538,326 Of which (operating revenues)/costs classified as discontinued operations (Note 7) ..... 834 (666,617) Total operating revenues ...... 3,485,752 3,268,966

F-182 The operating revenues include the accounting effect of the insurance settlement related to the repair of MS Nordlys of NOK 33 million (2011: NOK 86 million). Recognition of income from the insurance settlement is in accordance with IAS 16.66.

The extent of the Group’s revenues related to public procurement of services are as follows:

2012 2011 (in NOK 1,000) Revenues relating to public transport from Nordland County Council ...... 45,766 45,285 Revenues relating to public transport from Troms County Council ...... 82,940 167,770 Revenue relating to the Bergen to Kirkenes coastal service from the government ..... 618,784 325,271 Total ...... 747,491 538,326

Public procurement of services is related to the purchase of Hurtigruten services along the Norwegian coast and bus transport operations. The existing contract with the government represented by the Ministry of Transport and Communications for the Bergen to Kirkenes coastal service for the period 2012–2019 entered into force on 1 January 2012.

Note 24 Payroll costs

2012 2011 (in NOK 1,000) Payroll costs Wages and salaries ...... 783,798 1,053,618 Payroll tax ...... 53,760 52,335 Pension costs (Note 19) ...... 49,743 34,481 Other benefits ...... 51,163 46,371 Of which payroll costs classified as discontinued operations (Note 7) ...... (3,798) (245,322) Total ...... 934,666 941,483 Average number of full-time equivalents ...... 2,161 2,133

F-183 Note 25 Remuneration, etc. Figures for 2012:

Pension Other Position Salary(3) costs(3) remuneration(3)(4) Loans Fees(3) (in NOK 1,000) Daniel A. Skjeldam ...... CEOfrom 1 October 700 99 29 — Olav Fjell ...... CEOuntil 1 October 4,008 64 105 — — Torkild Torkildsen ...... Deputy CEO 2,064 175 104 — — Asta Lassesen ...... CFO 1,188 110 164 — — Glen Peter Hartridge ...... Director product and 1,276 109 127 — — pricing management Ole Fredrik Hienn ...... Director legal affairs 1,640 150 145 — — Hans Rood(1) ...... Sales and marketing director 2,200 225 140 — — Dag-Arne Wensel ...... Director technical 1,363 111 154 — — maritime operations Trygve Hegnar ...... Board Chair — — — — 310 Per Heidenreich ...... Deputy Chair until 19 April — — — — 41 Helene Jebsen Anker ...... Deputy Chair from 19 April — — — — 191 Guri Mai Elmar ...... Director — — — — 130 Arve Giske ...... Director — — — — 156 Berit Kjøll ...... Director — — — — 130 Petter Anker Stordalen ...... Director from 19 April — — — — 98 Tone Mohn-Haukland ...... Director, elected by employees 378 8 4 — 160 Per-Helge Isaksen ...... Director, elected by employees 470 16 4 — 134 Corporate assembly ...... — — — — 170 Auditor fees—statutory auditing(2) . . . 3,019 Assistance IFRSs, accounting and tax(2) ...... 252 Other attestations(2) ...... 85 Auditor fees—other assistance(2) ..... 360

(1) Rood’s salary is partially paid in USD and translated to NOK. (2) Fees exclusive of Value Added Tax. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Including the estimated cost associated with the share-based remuneration scheme.

The company’s CEO receives an annual salary of NOK 2.8 million. Other benefits include fixed car remuneration and an ordinary telephone, Internet, newspaper and home PC allowance.

The CEO also has a time-limited agreement on a performance-related bonus linked to the operating result before depreciation and amortisation, where performance is indexed against the adjusted operating result before depreciation and amortisation for 2012. The bonus agreement confers the right to a maximum of two bonus payments of up to a total of NOK 7.5 million in addition to holiday pay. The agreement expires in 2015. The payment of the bonus is contingent on the CEO still being in office at the end of the year to which the bonus relates.

The CEO is included in the company’s ordinary defined contribution pension scheme for salaries up to 12G and the defined contribution scheme that provides a pension basis for salaries over 12G. The CEO’s conditions of employment do not include any personal pension obligations.

F-184 An option agreement has been entered into that grants the CEO the right to acquire up to three million shares. The options may not be exercised for fewer than one million shares at a time. From the time of publication of the figures for the fourth quarter of 2013 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 4 per share. From the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 5 per share. From the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2016 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 6 per share. Options that are not exercised within the exercise period lapse without compensation. If an individual shareholder or several collaborating shareholders together should own more than fifty per cent of the shares in Hurtigruten ASA. the CEO has the right to exercise all options within three months from publication of the mandatory notification.

The company’s executive management are members of the company’s collective defined contribution plan. In addition, a supplementary pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). The scheme applies to the whole company and covers all employees with salaries over 12G, including members of the executive management and the CEO. The pension costs for the executive management have been included under pension costs above.

The board agreed at a board meeting on 26 February 2008 to introduce a performance-based bonus scheme for the company’s executive management with effect from 1 January 2008. The bonus payments are limited to one-third of each executive’s annual salary, with 25 per cent of the bonus being determined by the Group’s overall results, and the remaining 75 per cent being determined by the results achieved in the executive’s area of responsibility. Results within the executive’s area of responsibility are compared with predefined targets/ parameters. The bonus scheme includes the executive management with the exception of the CEO. The CEO has a separate performance-related bonus scheme as described above. The executive management has waived its right to bonuses based on the 2012 financial statements.

In 2010 a share-value-based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and wholly owned subsidiaries. The estimated costs for the year related to senior management covered by the plan are included under other remuneration above. Please see Note 21 for further details on the scheme.

F-185 Figures for 2011:

Pension Other Position Salary(4) costs(4) remuneration(4)(5) Loans Fees(4) (in NOK 1,000) Olav Fjell ...... CEO 4,471 94 7,503 — — Torkild Torkildsen ...... Deputy CEO 2,131 343 168 — — Anders Olstad(1)(3) ...... CFOuntil 31 December — — — — 3,634 Trond Øverås ...... Product and marketing director until 1 December 1,416 391 90 — — Glen Peter Hartridge ...... Director product and pricing management 946 198 124 — — Ole Fredrik Hienn ...... Director legal affairs 1,611 297 249 — — Hans Rood(2) ...... Sales and marketing director 2,146 547 691 — — Dag-Arne Wensel ...... Director of technical and maritime operations 993 265 155 — — Trygve Hegnar ...... Board Chair — 5 — 308 Per Heidenreich ...... Deputy Chairman — — 10 — 161 Helene Jebsen Anker ...... Director — — — — 133 Guri Mai Elmar ...... Director from 14 April — — — — 98 Arve Giske ...... Director from 14 April — — — — 117 Berit Kjøll ...... Director — — 1 — 129 Merete Nygaard Kristiansen ...... Director until 14 April — — — — 42 Olav Larsen ...... Director until 14 April — — — — 48 Tone Mohn-Haukland ...... Director, elected by employees 465 14 4 — 155 Per-Helge Isaksen ...... Director, elected by employees 494 15 4 — 129 Deputy members ...... — — — — — Corporate assembly ...... — — — — 166 Auditor fees—statutory auditing(3) ...... 3,639 Assistance IFRSs, accounting and tax(3) ...... 381 Other attestations(3) ...... 101 Auditor fees—other assistance(3) ...... 481

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. The CFO receives only fees and is not included in the company’s other benefit programmes. (2) Rood’s salary is paid in USD and translated to NOK. (3) Fees exclusive of Value Added Tax. (4) Salaries, fees and directors’ remuneration are paid from the management company Hurtigruten Pluss AS, except employee representatives’ salaries, which are paid by Hurtigruten ASA. (5) Includes bonus based on approved financial statements for 2011 (payable in 2012), and estimated costs related to the share-value-based remuneration programme.

Payments were made under the bonus scheme to the executive management, and the CEO, on the basis of the 2011 results. The payments were made in 2012. This bonus is included under other remuneration above.

F-186 Note 26 Other operating costs

2012 2011 (in NOK 1,000) Cost of goods sold ...... 572,855 578,827 Operating costs ...... 1,323,042 1,411,418 Sales and administrative costs ...... 337,880 342,359 Of which other operating costs classified as discontinued operations (Note 7) ...... (132,301) (303,388) Total other operating costs ...... 2,101,476 2,029,216

Note 27 Other (losses)/gains—net Other (losses)/gains consist of the following items:

2012 2011 (in NOK 1,000) Gain on the sale of shares ...... — (1,889) Gain on the sale of property, plant and equipment ...... 10,235 85,209 Loss on the sale of property, plant and equipment ...... (436) — Total ...... 9,800 83,320

The gain on the sale of property, plant and equipment in 2012 primarily relates to the sale of property in HRG Eiendom AS and in the bus business.

The loss on the sale of property, plant and equipment in 2012 primarily relates to the sale of MS Nordstjernen.

The gain on the sale of property, plant and equipment in 2011 primarily relates to the sale of property in the bus business.

Note 28 Finance income and expenses

2012 2011 (in NOK 1,000) Interest expenses: —Bank borrowings ...... (196,748) (193,628) —Bond loan ...... (43,008) (5,797) —Convertible bond loan (Note 17) ...... (2,788) (6,576) —Interest expenses group account ...... (10,243) — Foreign exchange losses ...... (107,839) (59,707) Other finance expenses ...... (7,355) (4,843) Of which finance expenses classified as discontinued operations (Note 7) ...... 14,251 31,857 Finance expenses ...... (353,729) (238,694) Interest income on current bank deposits ...... 7,268 4,419 Foreign exchange gains ...... 126,172 67,350 Gain on the sale of financial assets ...... 18,364 — Dividends ...... 259 1,378 Other finance income ...... 1,250 859 Of which finance income classified as discontinued operations (Note 7) ...... (21,778) (2,233) Finance income ...... 131,535 71,772 Finance expenses—net ...... (222,194) (166,922)

F-187 Note 29 Net foreign exchange gains/(losses) Foreign exchange differences are recognised on the following lines in the income statement:

2012 2011 (in NOK 1,000) Operating revenues ...... (41,447) (64,488) Other operating costs ...... 1,282 1,903 Net finance income/(expenses) ...... 18,333 (7,643) Of which net foreign exchange losses classified as discontinued operations (Note 7) ...... 9,794 13,392 Total ...... (12,039) (56,836)

Note 30 Transactions with related parties Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company and associates. The main associates in 2012 were Funn IT AS and ANS Havnebygningen. Funn IT has delivered IT services to Hurtigruten ASA, while ANS Havnebygningen owns and leases out the building the company uses as offices in Tromsø. The company’s ownership interest in both companies during the period was 50 per cent.

The Group has been involved in the following transactions with related parties:

2012 2011 (in NOK 1,000) Purchase of services from associates Rent for premises ...... 2,931 2,976 IT and other services ...... 22,652 32,890 Total purchase of services from associates ...... 25,583 35,866 Remuneration of senior management Salaries and other short-term employee benefits ...... 17,612 28,629 Pension costs (including former senior management personnel) ...... 1,067 2,164 Total remuneration of senior management ...... 18,678 30,793 Balances with associates at year end Trade payables ...... 944 1,025 Net balances with associates at 31 December ...... 944 1,025

Transactions with shareholders Transactions with the company’s largest shareholders are conducted on the arm’s length principle, and in 2011 and 2012 included the purchase of public transport-related services from Troms County Council.

Note 31 Events after the balance sheet date There have not been any events after the balance sheet date.

F-188 Income statement

Note 2012 2011 (in NOK 1,000) Operating revenues Operating revenues ...... 16 2,505,305 2,216,276 Total operating revenues ...... 2,505,305 2,216,276 Operating costs Payroll costs ...... 17 (610,636) (574,014) Depreciation, amortisation and impairment losses ...... 3 (281,052) (253,618) Other operating costs ...... (1,803,684) (1,541,129) Total operating costs ...... (2,695,372) (2,368,761) Operating profit/(loss) ...... (190,067) (152,484) Financial income ...... 20 239,718 57,153 Financial expenses ...... 20 (349,013) (245,574) Finance expenses—net ...... (109,294) (188,421) Profit/(loss) before income tax ...... (299,362) (340,906) Income tax expense ...... 5 (21,887) 93,225 Profit/(loss) for the year ...... (321,249) (247,680) Transfers Transferred (from)/to other equity ...... (321,249) (247,680) Total transfer ...... (321,249) (247,680)

F-189 Statement of comprehensive income

Note 2012 2011 (in NOK 1,000) Profit/(loss) for the year ...... (321,249) (247,680) Other comprehensive income: Actuarial gains/(loss) on retirement benefit obligations, net of tax ...... 14 10,382 (6,513) Cash flow hedges, net of tax ...... (66,680) 11,815 Currency translation differences ...... 17 (28) Other comprehensive income for the year, net of tax ...... (56,281) 5,274 Total comprehensive income for the year ...... (377,530) (242,406) Attributable to: Owners of the company ...... (377,530) (242,406) Total comprehensive income for the year ...... (377,530) (242,406)

F-190 Balance sheet at 31 December

Note 2012 2011 (in NOK 1,000) ASSETS Non-current assets Intangible assets ...... 3 38,741 2,946 Deferred income tax assets ...... 5 170,562 170,555 Land and buildings ...... 3 570 570 Ships ...... 3 3,092,372 3,250,965 Other tangible non-current assets ...... 3 1,799 1,063 Total tangible and intangible non-current assets ...... 3,304,043 3,426,100 Investments in subsidiaries ...... 6 492,118 492,118 Investments in associates ...... 7 19,609 19,609 Investments in other companies ...... 8,346 13,792 Non-current trade and other receivables ...... 9 89,788 40,722 Total financial non-current assets ...... 609,861 566,241 Total non-current assets ...... 3,913,904 3,992,340 Current assets Inventories ...... 11 53,961 49,464 Current trade and other receivables ...... 9 422,411 625,821 Derivative financial instruments ...... 8 5,717 28,639 Cash and cash equivalents ...... 12 53,482 74,150 Total current assets ...... 535,571 778,074 Total assets ...... 4,449,476 4,770,414 EQUITY AND LIABILITIES Paid-in equity ...... 13 1,154,588 1,154,588 Other reserves ...... (322,141) 55,390 Total equity ...... 832,447 1,209,977 Retirement benefit obligations ...... 14 12,515 24,747 Total provisions ...... 12,515 24,747 Borrowings ...... 10 2,700,746 2,200,644 Other non-current liabilities ...... 10 21,967 57,747 Derivative financial instruments ...... 8 58,695 15,772 Total non-current liabilities ...... 2,781,409 2,274,164 Current liabilities ...... 9 802,057 1,261,374 Derivative financial instruments ...... 8 21,049 152 Total current liabilities ...... 823,106 1,261,526 Total liabilities ...... 3,617,030 3,560,437 Total equity and liabilities ...... 4,449,476 4,770,414

F-191 Statement of changes in equity

Share capital (including treasury Share Retained Total Note shares) premium earnings equity (in NOK 1,000) Balance at 1 January 2011 ...... 419,966 734,622 297,796 1,452,384 Profit/(loss) for the year ...... — — (247,680) (247,680) Other comprehensive income Currency translation differences ...... — — (28) (28) Cash flow hedges, net of tax ...... — — 11,815 11,815 Actuarial gain/(loss) on retirement benefit obligations, net oftax ...... 14 — — (6,513) (6,513) Total other comprehensive income, net of tax ...... — — 5,274 5,274 Total comprehensive income for the year ...... — — (242,406) (242,406) Balance at 31 December 2011 ...... 419,966 734,622 55,390 1,209,977 Balance at 1 January 2012 ...... 419,966 734,622 55,390 1,209,977 Profit/(loss) for the year ...... — — (321,249) (321,249) Other comprehensive income Currency translation differences ...... — — 17 17 Cash flow hedges, net of tax ...... — — (66,680) (66,680) Actuarial gain/(loss) on retirement benefit obligations, net oftax ...... 14 — — 10,382 10,382 Total other comprehensive income, net of tax ...... — — (56,281) (56,281) Total comprehensive income for the year ...... — — (377,530) (377,530) Balance at 31 December 2012 ...... 419,966 734,622 (322,141) 832,447

F-192 Cash flow statement

Note 2012 2011 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax ...... (299,362) (340,906) Depreciation and impairment ...... 3 281,052 253,618 (Profit)/loss on disposal of property, plant and equipment (PPE) and shares ...... (18,263) 1,849 Dividends received ...... 20 (71,518) (1,378) Proceeds from group contribution ...... (37,253) — Impairment of long term shares ...... — — Difference between expensed pension and payments ...... 24,635 (3,062) Change in working capital: Inventories ...... (4,498) (9,138) Trade and other receivables ...... 9 203,410 106,576 Trade and other payables ...... 9 105,663 58,793 Net cash flows generated from operations ...... 183,867 66,352 Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... 3 (165,421) (145,360) Proceeds from sale of PPE ...... 6,039 — Purchases of shares ...... (750) (994) Proceeds from disposal of shares ...... 24,560 90,000 Dividends received ...... 20 71,518 1,378 Change in other investments and other receivables ...... (84,847) (57,720) Change in restricted funds ...... 12 43,611 103,385 Net cash flows used in investing activities ...... (105,290) (9,311) Cash flows from financing activities Proceeds from borrowings ...... 3,040,525 — Repayments of borrowings ...... (3,165,487) (103,333) Net cash flows used in financing activities ...... (124,962) (103,333) Net (decrease)/increase in cash and cash equivalents ...... (46,385) (46,293) Cash and cash equivalents at 1 January ...... (136) 46,157 Cash and cash equivalents at 31 December ...... 12 (46,521) (136)

F-193 Accounting policies

Hurtigruten ASA has chosen to adopt simplified International Financial Reporting Standards (IFRS) in its parent company accounts, pursuant to section 3–9, paragraph 5 of the Norwegian Accounting Act, cf. regulation of 21 January 2008.

Applying the simplified version of IFRS to the parent company accounts means that valuation rules and accounting policies applied in the consolidated accounts also apply to the parent company, Hurtigruten ASA. See the group accounting policies for further information. A simplified application of IFRS enables the financial statements and note information to accord with the Norwegian Accounting Act (NGAAP). The financial statements and notes for the parent company have been organised in accordance with the NGAAP, with the exception of the comprehensive income statement which follows IFRS.

Shares in subsidiaries and associates are recorded in accordance with the cost method of accounting in the parent company accounts.

Note 1 Financial market risk

The company uses financial instruments such as bank loans and bond loans. In addition, the company has financial instruments such as trade receivables, trade payables, etc., which are directly linked to day-to-day operations. For hedging purposes the company makes use of certain financial derivatives.

As a result of its regular operations, the company is exposed to risks related, for example, to fluctuations in exchange and interest rates and bunker oil costs. Hurtigruten’s overarching hedging strategy is to create predictability for the company’s operations and reduce the impact volatility in macroeconomic conditions might have on the company’s financial performance and standing. The primary management parameter is the expected cash flow. Extensive use is made of simple, transparent and liquid hedging instruments, mainly forward contracts, combined possibly with options.

Currency risk

The company operates internationally and is exposed to currency risk in multiple foreign currencies, in particular, the euro (EUR), US dollar (USD) and pound sterling (GBP). The currency risk arises from future ticket sales as well as assets and liabilities recognised on the balance sheet. In addition, the bunker oil cost is quoted in USD. A currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency other than the entity’s functional currency.

The company’s strategy is to hedge 60–80 per cent of the expected cash flow in EUR one to two years into the future through the use of transparent and liquid instruments, usually forward contracts combined with options. Hedges have been made on just under 70 per cent of expected cash flows in EUR for 2013. These were mainly entered into in the first quarter of 2013. The company refinanced its debt in March 2012, where portions of the loan can be converted from NOK to EUR to achieve a “natural hedge”. The conversion right applies for the entire term of the loan.

The company was also exposed to currency risk in Australian dollars (AUD) in connection with the leasing of MS Finnmarken as a hotel ship off the Australian coast in the period 30 April 2010–30 October 2011. Following the conclusion of the contract, the company had material outstanding claims against a subsidiary, which in turn had outstanding claims against the contracting party. Forward hedges was made corresponding to 50 per cent of exposure in AUD in respect of the above. The currency hedges were settled in connection with settlement reached with the contracting partner and subsequent payment received by Hurtigruten at the end of 2012.

Forward foreign exchange contracts

There are no outstanding forward foreign currency contracts at 31 December 2012 that qualify for hedge accounting (2011: NOK 465 million).

F-194 The forward foreign exchange contracts that were entered into for 2012 matured in the period July– September, when most of the hedged cash flow was expected to occur. The forward foreign exchange contracts satisfied the requirements for hedge accounting in accordance with IFRSs and the changes in the fair value were recognised in other comprehensive income. Gains and losses on contracts that were recorded in other comprehensive income in 2012 were recognised in income in the same periods in which the hedged transactions affected the profit or loss. Realised gains and losses were allocated to passenger revenues. In 2012 realised gains allocated to passenger revenues amounted to NOK 31.1 million (2011: loss of NOK 0.5 million).

Interest rate risk

The company’s interest rate risk is associated with current and non-current borrowings. Borrowings at variable interest rates entail an interest rate risk for the company’s cash flow. Fixed interest rate borrowings expose the company to a fair-value interest rate risk. In 2011 and 2012 the company’s borrowings with variable interest rates were in NOK.

The company manages the variable interest rate risk by means of variable-to-fixed-interest rate swap contracts. Interest rate swap contracts entail a conversion of variable interest rate borrowings to fixed interest rate borrowings. The company enters into a contract with other parties to exchange the difference between the contract’s fixed interest rate and the amount of the variable interest rate calculated on the agreed principal through the interest rate swaps. A new strategy was adopted for hedging interest rates in connection with the refinancing of the company’s non-current debt in March 2012, under which 40–60 per cent of the company’s total debt is to be hedged. Non-amortising interest rate swaps have been entered into equivalent to 56.5 per cent of the company’s debt on refinancing. Including an existing interest-swap agreement with maturity at the end of 2013, just under 69 per cent of the company’s total debt was hedged at 31 December 2012.

Interest rate swaps

The nominal principal on outstanding interest rate swaps at 31 December 2012 was NOK 2,050 million (2011: NOK 300 million).

At 31 December 2012 the fixed interest rate ranged from 2.71 to 5.31 per cent (2011: 5.31 per cent). The variable interest rates were NIBOR. Gains and losses on interest rate swaps recognised in other comprehensive income at 31 December 2012 will continuously be reversed in the income statement until the bank borrowings (Note 10) have been repaid. Realised gains and losses are allocated to interest expenses. In 2012 realised losses totalling NOK 19.6 million were allocated to interest expenses (2011: NOK 7.5 million).

Bunker oil

The company is exposed to fluctuations in bunker oil prices. The price of oil, and thus bunker oil, is determined in international trading in USD, while the parent company purchases bunker oil in NOK. The risk can therefore be split into a currency element and a product element. In its risk management strategy, the company has emphasised the need to coordinate risk, and has therefore chosen to reduce the bunkers risk while the currency risk is coordinated with the company’s other currency exposures.

The company enters into revolving quarterly forward contracts for the next one to six quarters to hedge 0–80 per cent of the expected bunker oil consumption, with a greater share being hedged in the near future and less being hedged further into the future. In addition, the company has a stop-loss strategy where it attempts to hedge the unhedged amount if the price of oil rises above a predefined threshold. Hedges are made in the forward market on 45 per cent of expected bunker consumption for 2013, distributed with a higher proportion in the coming quarters, and a lower proportion towards the end of the year. Forward hedges have also been made on 12 per cent of expected bunker consumption in the first and second quarter of 2014.

Oil derivatives

The nominal amount of outstanding forward bunker oil contracts at 31 December 2012 was NOK 168 million (2011: NOK 150 million).

F-195 The hedged, highly probable transactions denominated in a foreign currency are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward bunker oil contracts satisfy the requirements for hedge accounting under IFRSs and changes in the fair value are recognised directly in other comprehensive income. Gains or losses on oil derivatives recognised in other comprehensive income at 31 December 2012 will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. Realised gains and losses are allocated to bunker costs. In 2012 realised gains of NOK 5.3 million were allocated to bunker costs (2011: NOK 19.5 million).

Credit risk and liquidity risk The company is exposed to credit and liquidity risks. The company has no significant concentration of credit risk. Sales to end users are settled in cash or with recognised credit cards. Sales to external agents occur either through prepayment/credit cards or through invoicing. The company has routines to ensure that credit is only extended to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The counterparties to the derivative contracts and cash transactions are limited to financial institutions with high credit ratings. The company has routines that limit exposure to credit risk related to a single financial institution.

At 31 December 2011 a larger share of trade receivables than normal was due but not impaired. This was due to the fact that additional compensation received from the Norwegian government for the purchase of services under the previous coastal service contract had not been settled pending a decision on an EFTA Surveillance Authority (ESA) inquiry as to whether the additional compensation from the government contravened EU rules on state aid. The company also had outstanding claims against a subsidiary, which in turn had outstanding claims against a contracting party in connection with the discontinuation of the Group’s charter business in Australia. The Group’s liquidity was boosted by just over NOK 300 million in December 2012 as a result of settlements in these two cases; however, the Group also had to recognise further loss provisions. The Group no longer has any claims on the balance sheet regarding the charter business, but the parent company still has a receivable due from the subsidiary Hurtigruten Pty. Ltd. The residual receivable due from the Norwegian government represented by the Ministry of Transport and Communications relating to the supplementary agreement has been fully written down as a result of the loss provision. These matters are discussed in further detail in Note 2 Contingencies and in Note 9 Combined items.

The company’s strategy with regard to liquidity is to have sufficient cash, cash equivalents or credit facilities to finance its ongoing operations and investments. The Group has a group account that ensures that some of the Group’s unrestricted liquidity is available to the parent company.

Note 2 Contingencies At 31 December 2012 the company had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent liabilities in the course of regular operations. No significant liabilities are expected to arise with respect to contingent liabilities, with the exception of the provisions that have already been recognised in the financial statements (cf. Note 20 to the consolidated financial statements).

Membership of the NOx Fund Hurtigruten ASA is a member of the Confederation of Norwegian Enterprise’s (NHO) Nitrogen Oxide (NOx) Fund. The main objective of the Environmental Agreement concerning reductions of NOx and the NHO’s NOx Fund, is to reduce emissions of nitrogen oxide. The Fund is a joint venture to which affiliated businesses can apply for support for emission-reducing measures. Payment to the Fund replaces the nitrogen oxide tax for affiliated businesses.

NOK 15.3 million in NOx tax was charged to the annual financial statements for 2012 (2011: NOK 13.4 million). Members of the NOx Fund collectively undertook to reduce their emissions of these gases by 18,000 tonnes in total in the period 2008–2010 through the Environmental Agreement. A new environmental agreement relating to NOx for the period 2011–2017 was signed on 14 December 2010.

F-196 The signatories of the Environmental Agreement for the period 2011–2017 have undertaken to reduce their overall NOx emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, which can be broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017.

The Norwegian Climate and Pollution Agency will monitor that the Fund reaches its collective targets. If these targets are not met, the members may be required to pay the full amount of the tax on their respective share of the emissions. This requirement will be calculated on the basis of the percentage of the collective target that has not been achieved. The Fund has achieved its targets for the period 2008–2011.

Supplementary Agreement in connection with the public procurement contract for the Bergen to Kirkenes coastal service The Norwegian authorities agreed in 2004 on a contract with Hurtigruten ASA for the delivery of transport services along the Norwegian coast from Bergen to Kirkenes for the period 2005–2012. This contract was awarded based on competitive tendering. In October 2008 it was decided to increase the compensation to Hurtigruten ASA for the remaining term of the contract by refunding 90 per cent of the NOx payments, general compensation due to higher costs and allowing a reduction in the number of ships from 11 to 10 in the winter. The Ministry of Transport and Communications had assumed that the additional grant was in line with state aid policies.

In July 2010 the ESA decided to formally investigate in order to verify whether the supplementary agreement entered into in 2008 was in accordance with the EEA’s rules for state aid. In June 2011 the ESA concluded that the supplementary compensation had not been granted in accordance with the EEA’s rules. It was not evident from the conclusion what portion of the supplementary agreement the ESA believed to represent illegal state aid. On 8 October the EFTA Court upheld the ESA’s ruling. In the process leading up to the ruling, the ESA clarified its own resolution of June 2011, and established that around NOK 145 million of the grant given constituted illegal state support.

At 31 December 2012 Hurtigruten had recognised income of NOK 405 million under the supplementary agreement, including the effect of reducing the number of ships in the winter from 11 to 10, and received NOK 262 million of this amount. On grounds of prudence, a provision of NOK 108 million was recognised in the third quarter of 2012 to reflect the ESA’s most recent calculation. This was in addition to the provision of NOK 35 million that had been recognised at 31 December 2011. The provision was recorded as a reduction in contractual revenues. Together with the government Hurtigruten will work to reduce the loss.

The previous contract with the government represented by the Ministry of Transport and Communications expired on 31 December 2011 after Hurtigruten and the government agreed on a new contract for the Bergen to Kirkenes coastal service for the period 2012–2019 on 13 April 2011. The new contract entered into force on 1 January 2012.

Charter arbitration case At the start of 2012 Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd initiated arbitration proceedings against a contracting partner concerning an outstanding claim. The claim related to the leasing of MS Finnmarken as a hotel ship in connection with the construction of the Gorgon field off the coast of Australia. The contract was concluded on 30 October 2011. On grounds of prudence, Hurtigruten recognised provisions totalling NOK 46 million in respect of the above at 31 December 2011.

An agreement was entered into with the contracting partner with regard to payment of the net outstanding amount through arbitration. This provided the Group with a cash inflow of around NOK 221 million in December 2012, but also resulted in recognition of a further loss provision in the income statement in the amount of NOK 99 million.

F-197 Note 3 Property, plant and equipment and intangible assets

Other property, Land and plant and Intangible buildings Ships equipment assets Total (in NOK 1,000) Book value at 1 January 2012 ...... 570 3,250,965 1,063 2,946 3,255,544 Additions ...... — 127,510 836 37,075 165,421 Disposals ...... — (6,432) — — Depreciation and amortisation for the year ...... — (255,979) (100) (1,281) (257,360) Impairment losses for the year ...... — (23,692) — (23,692) Book value at 31 December 2012 ...... 570 3,092,372 1,799 38,741 3,133,481 At 31 December 2012 Cost ...... 570 5,454,859 3,895 49,059 5,508,384 Accumulated depreciation at 31 December 2012 ...... — (2,215,719) (2,096) (7,956) (2,225,771) Accumulated impairment losses at 31 December 2012 ...... — (146,768) — (2,363) (149,131) Book value at 31 December 2012 ...... 570 3,092,372 1,799 38,741 3,133,481 Economic lifetime ...... 25–100 years 12–30 years 5–10 years 3–7 years

Intangible assets consist of internal/external development/adaptation of ICT systems and software related to the ships.

The following impairment losses were recognised in 2012: • A total impairment loss of NOK 17.7 million was recognised for the fast ferries to reflect their expected net realisable value on completion of the ongoing sales process. • An impairment loss of NOK 6 million was recognised to write MS Nordstjernen down to fair value in connection with the sale of the ship.

Note 4 Assets held-for-sale and discontinued operations HELD-FOR-SALE The company had no assets or associated liabilities classified as held-for-sale at 31 December 2012. At 31 December 2011 the book value and secured debt relating to the company’s two remaining fast ferries were classified as held-for-sale. Both ships are still laid up, but no longer satisfy the requirements to be classified as held-for-sale in accordance with IFRSs. Consequently, they have been classified as part of continuing operations since the third quarter of 2012. Nonetheless, the company still intends to sell the ferries.

Assets in the disposal group classified as held-for-sale:

2012 2011 (in NOK 1,000) Property, plant and equipment ...... — 60,384 Assets held-for-sale ...... — 60,384

Liabilities in the disposal group classified as held-for-sale:

2012 2011 (in NOK 1,000) Borrowings ...... — 70,000 Liabilities related to assets held-for-sale ...... — 70,000

F-198 DISCONTINUED OPERATIONS The profit or loss from discontinued operations includes the company’s charter activities. The Group’s activities connected to the leasing of ships to the oil industry were discontinued from 1 January 2012, and subsequently classified as a discontinued operation. In 2010 and 2011 the business was reported as a separate operating segment in the Group’s segment reporting; however, since 1 January 2012 it has been included in Other business in the segment reporting. The comparative figures in the income statement for 2011 have been restated.

Profit/(loss) from discontinued operations:

2012 2011 (in NOK 1,000) Operating revenues (Note 16) ...... (10,819) 146,916 Payroll costs ...... (6,128) (23,262) Depreciation, amortisation and impairment losses ...... (4,455) (34,306) Other operating costs ...... (112,285) (3,990) Operating profit/(loss) ...... (133,687) 85,358 Finance income ...... 21,690 (7,714) Finance expenses ...... (11,675) (31,400) Finance expenses—net ...... 10,015 (39,114) Profit/(loss) before tax ...... (123,671) 46,243 Income tax expense ...... (34,628) 12,948 Net profit/(loss) for the year ...... (89,043) 33,295

The loss for 2012 is primarily attributable to a provision for losses on receivables of NOK 99 million recognised after Hurtigruten’s Australian subsidiary reached a settlement with a contracting party in December 2012. See Notes 2 and 9 for further information. Currency effects also impacted the result for the year.

Net cash flows from discontinued operations:

2012 2011 (in NOK 1,000) Net cash flows (used in)/from operating activities ...... (131,330) 83,255 Net cash flows from investing activities ...... — — Net cash flows from financing activities ...... — — Total net cash flows ...... (131,330) 83,255

Note 5 Income tax

2012 2011 (in NOK 1,000) The income tax expense for the year can be broken down as follows: Change in deferred income tax assets ...... (7) (91,164) Deferred income tax liabilities/assets relate to transactions recognised in equity included in the change in deferred income tax assets ...... 21,894 (2,062) Total income tax expense ...... 21,887 (93,225)

Calculation of tax basis for the year: Profit/(loss) before tax ...... (299,362) (340,907) Permanent differences ...... (82,843) 4,599 Permanent differences relating to recognition through equity ...... 14,419 (9,046) Change in hedging derivatives ...... (92,611) 16,409 Change in temporary differences that affect the tax payable ...... 211,204 92,301 Tax basis for the year ...... (249,193) (236,643)

F-199 Summary of temporary differences:

2012 2011 (in NOK 1,000) Current assets ...... (288,977) (195,688) Non-current assets ...... 1,997,110 2,024,912 Gains and losses account ...... 153,804 193,787 Pension obligations ...... (12,515) (24,747) Other differences ...... (84,838) (22,475) Tax loss carryforward ...... (2,834,130) (2,584,914) Basis for unrecognised deferred income tax assets ...... 460,398 — Total ...... (609,148) (609,125) Estimated deferred income tax assets ...... (170,562) (170,555) Tax rate applied ...... 28% 28%

In preparing the financial statements, management has found the future taxable income to be sufficient to utilise the recognised deferred income tax assets. This view is based on management’s estimates of future profits generated by the company, where particular importance has been attached to the company’s procurement contract with the government which runs until 2019, as well as the effects of the company’s completed, and planned, restructuring measures. On grounds of prudence, the company has decided not to recognise the deferred income tax asset relating to the loss for the year. There is no restriction on the time tax losses may be carried forward.

Reconciliation of the income tax expense for the year:

2012 2011 (in NOK 1,000) Profit/(loss) before tax ...... (299,362) (340,907) Estimated tax on the profit/(loss) for the year 28% ...... (83,821) (95,454) Change in the income tax expense as a result of: —non-taxable income ...... (24,339) (94) —non-tax-deductible expenses ...... 1,154 1,382 —unrecognised deferred income tax assets ...... 128,911 — —miscellaneous items ...... (18) 941 Total income tax expense ...... 21,887 (93,225)

Note 6 Investments in subsidiaries

Ownership/voting Registered office share Net profit/(loss) Book value (NOK 1,000) (NOK 1,000) HRG Eiendom AS ...... Narvik, Norway 100.0% 3,577 385 Hurtigruten Pluss AS ...... Narvik, Norway 100.0% 21,090 4,062 Hurtigruten Estonia OÜ ...... Tallinn, Estonia 100.0% 486 20 Hurtigruten GmbH ...... Hamburg, Germany 100.0% 13,593 48,832 Hurtigruten Greenland AS ...... Nuuk, Greenland 100.0% — 1 Hurtigruten Inc...... NewYork, USA 100.0% 251 1 Hurtigruten Limited ...... London, UK 100.0% 8,256 11,920 Hurtigruten Pty. Ltd...... Sydney, Australia 100.0% (109,564) — Hurtigruten SAS ...... Paris, France 100.0% 521 315 Hurtigruten Verdens Vakreste Sjøreise AS ...... Tromsø, Norway 100.0% 1 110 Spitsbergen Travel AS ...... Longyearbyen, 100.0% 2,989 283,719 Svalbard, Norway AS TIRB ...... Finnsnes, Norway 71.3% (21,331) 142,755 Total ...... 492,118

Please refer to Note 21 for additional information on the balances with subsidiaries.

F-200 Note 7 Investments in associates

Ownership/voting Profit/(loss) Registered office share Equity for the year Book value (NOK 1,000) (NOK 1,000) (NOK 1,000) Funn IT AS ...... Narvik, Norway 50.0% 25,286 (3,477) 5,505 ANS Havnebygningen ...... Tromsø, Norway 50.0% 4,997 1,281 14,103 Total investments in associates ...... 19,609

The shares in Funn IT AS were sold in 2013.

Please refer to Note 21 for additional information on the company’s transactions with associates.

Note 8A Financial instruments by category The following principles have been applied for the subsequent measurement of financial assets and liabilities: At 31 December 2012:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Investments in other companies ...... — 8,346 — — 8,346 Non-current receivables (Note 9) ...... 89,788 — — — 89,788 Financial assets—current Trade and other receivables (Note 9) ...... 422,411 — — — 422,411 Derivative financial instruments ...... — 5,717 — — 5,717 Cash and cash equivalents (Note 12) ...... 53,482 — — — 53,482 Financial liabilities—non-current Borrowings (Notes 10 and 21) ...... — — — 2,996,046 2,996,046 Derivative financial instruments ...... — — 58,695 — 58,695 Financial liabilities—current Drawdowns on group account (Note 12) ...... — — — 69,328 69,328 Trade and other payables (Note 9) ...... — — — 447,003 447,003 Derivative financial instruments ...... — — 21,049 — 21,049

At 31 December 2011:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Investments in other companies ...... — 13,792 — — 13,792 Non-current receivables (Note 9) ...... 40,722 — — — 40,722 Financial assets—current Trade and other receivables (Note 9) ...... 625,821 — — — 625,821 Derivative financial instruments ...... — — 28,639 — 28,639 Cash and cash equivalents (Note 12) ...... 74,150 — — — 74,150 Financial liabilities—non-current Borrowings (Notes 10 and 21) ...... — — — 3,153,452 3,153,452 Derivative financial instruments ...... — — 15,772 — 15,772 Of which classified as held-for-sale (Note 4) ...... — — — (70,000) (70,000) Financial liabilities—current Trade and other payables (Note 9) ...... — — — 348,644 348,644 Derivative financial instruments ...... — 152 — — 152

F-201 Note 8B Creditworthiness of financial assets Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has long-standing partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2012 2011 (in NOK 1,000) Trade and other receivables Counterparties with external credit rating ...... — — Counterparties without external credit rating ...... 422,411 625,821 Total trade and other receivables ...... 422,411 625,821 Cash at bank(1) AA...... 8,301 67,100 A ...... 26,183 9 Without external credit rating ...... 7,646 1,270 Total cash at bank ...... 42,131 68,379 Derivative financial instruments AA...... 5,717 20,493 A ...... — 2,642 Without external credit rating ...... — 5,504 Total ...... 5,717 28,639

(1) The remainder of the cash and cash equivalents on the balance sheet is cash

None of the financial assets have been renegotiated during the last financial year.

Note 9 Combines items

2012 2011 (in NOK 1,000) Other non-current receivables Non-current receivables Group companies (Note 21) ...... 89,653 37,509 Other non-current receivables ...... 135 3,212 Total non-current trade and other receivables (Notes 8A, 10) ...... 89,788 40,722

Current receivables Trade receivables ...... 112,839 233,852 Trade and other current receivables Group companies (Note 21) ...... 218,113 285,723 Other current receivables ...... 91,460 106,247 Total current trade and other receivables (Note 8) ...... 422,411 625,821

Other current liabilities Drawdown on group account (Note 12) ...... 69,328 — Trade payables ...... 155,537 110,974 Public duties payable ...... 12,394 17,669 First-year instalments on non-current debt (Note 10) ...... 273,333 895,061 Trade payables and other current debt Group companies (Note 21) ...... 163,996 107,982 Other current liabilities ...... 127,470 129,688 Total current liabilities ...... 802,057 1,261,374

Receivables and liabilities denominated in foreign currencies are translated to NOK at the rate in effect on the balance sheet date.

The company’s provisions for bad debts have increased from NOK 143 million at 31 December 2011 to NOK 347 million at 31 December 2012. The increase is primarily attributable to two factors: • Hurtigruten’s Australian subsidiary Hurtigruten Pty. Ltd. reached a settlement in the arbitration case concerning outstanding claims in connection with the chartering of MS Finnmarken. The

F-202 settlement was made in 2012 and resulted in the recognition of a further loss provision of NOK 99 million, in addition to the provision of NOK 46 million that had already been recognised at 31 December 2011. • The EFTA Court’s ruling in the ESA case relating to the supplementary agreement with the government (from 2008) resulted in the recognition of loss provisions for contractual revenues in the amount of NOK 108 million.

The reduction in the first-year instalments is attributable to the fact that the company refinanced its debt in March 2012.

Note 10 Receivables and liabilities Receivables that mature in more than one year

2012 2011 (in NOK 1,000) Non-current trade and other receivables (Note 9) ...... 89,788 40,772 Total ...... 89,788 40,772

Other non-current liabilities of NOK 22.0 million (2011: NOK 57.7 million) refer in their entirety to liabilities to subsidiaries (Note 21).

Non-current liabilities that mature after more than five years

2012 2011 (in NOK 1,000) Repayment profile for interest-bearing debt: 2012 ...... — 895,061 2013 ...... 258,643 2,200,644 2014 ...... 260,830 — 2015 ...... 262,763 — 2016 ...... 264,488 — 2017=> ...... 1,927,355 — Total ...... 2,974,079 3,095,705

Deferred income tax and pension obligations are not included above.

Hurtigruten ASA refinanced its debt in the first quarter of 2012, and the new loan agreement with the banks is dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The term of the loan is five years with annual instalments of NOK 260 million, where the first instalment falls due in September 2012. The financial covenants are as follows: • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current liabilities excluding the first year’s instalments of long term debt. • Minimum liquidity The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum fixed charge coverage ratio/liquidity At the end of each quarter the Group’s EBITDA excluding gains/losses on the sale of assets must be equal to or greater than the Group’s annual debt obligations and dividend payments, or the Group’s unrestricted liquidity including unused credit facilities must be a minimum of NOK 350 million.

F-203 • Minimum equity ratio The Group’s equity ratio must be measured on 30 June and 31 December each year, and shall be 22.5 per cent up to an including 31 December 2014. From 31 December 2014 until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreement. From and including 31 December 2012 until and including 30 June 2013 the equity ratio requirement will be temporarily reduced to 20 per cent.

As part of its refinancing Hurtigruten ASA issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month and is irredeemable until its final maturity date in April 2017. The financial covenants are as follows: • Maximum senior debt facilities ratio The Group’s secured debt shall be less than 65 per cent of the Group’s total assets until and including 30 June 2013. This percentage will be reduced annually by 5 per cent from and including 1 July 2013. From and including 1 July 2015 to the expiration of the term of the agreement, secured debt shall be lower than 50 per cent of total assets. • Maximum leverage ratio The Group’s interest bearing debt shall be less than 6.5 per cent of the Group’s EBITDA, excluding gains/ losses on the sale of assets from and including 31 December 2012. This percentage shall be reduced annually by 0.5 per cent from and including 31 December 2013. From and including 31 December 2012 until and including 30 September 2013 this requirement will be temporarily increased to 12.5 per cent. The requirement for 6.5 per cent shall also be satisfied using normalised EBITDA as a base for the calculation. Normalised EBITDA in this context is the Group’s EBITDA adjusted for i) losses arising in connection with the charter arbitration case (cf. Notes 2 and 9) and ii) the provision relating to the ESA case (cf. Notes 2 and 9). • Minimum liquidity The Group must maintain unrestricted liquidity of at least NOK 200 million over the term of the loan. • Minimum working capital At the end of each quarter the Group’s current assets including unused credit facilities shall be greater than the Group’s current liabilities excluding the first year’s instalments of long term debt.

In March 2012 Hurtigruten ASA redeemed the bond loan issued in February/March 2009 pursuant to the loan agreement.

The company also redeemed the convertible bond loan in June 2012 in accordance with the loan agreement.

Note 11 Inventories Inventories consist of the following types of goods:

2012 2011 (in NOK 1,000) Goods purchased for resale ...... 30,411 26,144 Bunker oil ...... 23,550 23,320 Total ...... 53,961 49,464

The cost of goods sold included in other operating costs amounted to NOK 311.3 million (2011: NOK 303.7 million).

Inventories are measured at cost. If the fair value is deemed to be lower than cost, then the inventories will be written down.

F-204 Note 12 Restricted funds and market-based financial current assets

2012 2011 (in NOK 1,000) Cash and cash equivalents (Note 8A) ...... 53,482 74,150 Drawdowns on group account (Notes 8A and 9) ...... (69,328) — Total cash and cash equivalents on the balance sheet ...... (15,846) 74,150 Cash and cash equivalents in the cash flow statement consist of the following: Cash at bank and on hand ...... (15,846) 74,150 Restricted bank deposits ...... (30,675) (74,286) Cash and cash equivalents in the cash flow statement ...... (46,521) (136) Restricted bank deposits consist of the following Cash at bank(1) ...... 30,675 74,286 Total ...... 30,675 74,286

(1) Restricted bank deposits mainly comprise employee tax withholding funds, a licence guarantee to the Ministry of Transport and Communications and guarantees to limited partnerships.

The Group has a group account scheme. Hurtigruten ASA is the group account owner in accordance with the agreement and other Group companies are subaccount owners or participants. The bank may offset drawdowns and balances so that the net position represents the balance between the bank and group account holder. Cash and cash equivalents include cash on hand and bank deposits not included in the group account scheme.

Note 13 Share capital and premium

Nominal value of Treasury Share No. of shares ordinary shares shares premium Total (in NOK 1,000 unless otherwise indicated)

At 31 December 2011 ...... 420,259,163 420,259 (293) 734,622 1,154,588 At 31 December 2012 ...... 420,259,163 420,259 (293) 734,622 1,154,588

All ordinary shares have equal rights.

The annual general meeting was held on 19 April 2012 and granted the company’s board power of attorney to acquire treasury shares. The general meeting adopted the following resolution: I. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire treasury shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of treasury shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. II. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. III. The board is free to determine how the acquisition and sale of treasury shares shall take place. IV. This power of attorney shall remain valid until the company’s annual general meeting in 2013.

The board does not have any power of attorney to increase the company’s share capital. In 2012 the company redeemed a convertible bond loan. See Note 17 to the consolidated financial statements for further information.

F-205 The 20 largest shareholders at 31 December 2012

Ownership interest Domicile No. of shares (%) Periscopus AS ...... Oslo 139,223,289 33.13 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 MP Pensjon PK ...... Oslo 29,000,000 6.90 Skagen Vekst ...... Oslo 22,671,503 5.39 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 2,000,000 0.48 Netfonds Liv ...... Oslo 1,672,246 0.40 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik Local Authority ...... Narvik 1,382,767 0.33 Alta Invest AS ...... Alta 1,378,119 0.33 Skagen Vekst III ...... Oslo 1,223,405 0.29 Fjellvit AS(2) ...... Oslo 1,119,040 0.27 Troms County Council ...... Tromsø 1,048,461 0.25 JPMorgan Chase Bank ...... USA 1,041,115 0.25 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Avanza Bank AB brokerage account ...... Stockholm 950,015 0.23 State Street Bank AN ...... United Arab Emirates 919,738 0.22 20 largest shareholders ...... 321,442,055 76.49 Other shareholders ...... 98,817,108 23.51 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

The 20 largest shareholders at 31 December 2011

Ownership interest Domicile No. of shares (%) Periscopus AS ...... Oslo 118,723,289 28.25 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 Skagen Vekst ...... Oslo 30,296,503 7.21 MP Pensjon PK ...... Oslo 29,000,000 6.90 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,379,534 0.80 Netfonds Liv ...... Oslo 2,825,827 0.67 Svendsen, Geir Arild ...... Bergen 1,965,245 0.47 Skagen Vekst III ...... Oslo 1,550,905 0.37 Avanza Bank AB brokerage account ...... Stockholm 1,438,781 0.34 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik Local Authority ...... Narvik 1,382,767 0.33 Fjellvit AS(2) ...... Oslo 1,119,040 0.27 Troms County Council ...... Tromsø 1,048,461 0.25 Warrenwicklund Norge securities fund ...... Oslo 1,013,518 0.24 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Bergen Handel og Invest ...... Bergen 1,000,000 0.24 20 largest shareholders ...... 312,556,227 74.37 Other shareholders ...... 107,702,936 25.63 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent. (2) Olav Fjell owns 0.02 per cent of the shares personally and controls 0.25 per cent through Fjellvit AS.

F-206 Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2012 (directly and indirectly)

No. of shares Corporate assembly Westye Høegh, Chair ...... — Bjørn Dahle, Deputy Chair ...... 7,099,979 Karen M. Kuvaas ...... 699 Svein Otto Garberg ...... 835,327 Richard Sandnes ...... — Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Fay Hege Fredriksen ...... — Asbjørn Larsen, elected by employees ...... 5,550 Mette Fredrikke Indrevik, elected by employees ...... 200 Oddleif Engvik, elected by employees ...... 2,009 Jonny Johnsen, elected by employees ...... — Randi Heggelund, observer ...... 611 Egil Johansen, observer ...... 285 Board of directors Trygve Hegnar, Chair(1) ...... 139,223,289 Helene Jebsen Anker, Deputy Chair ...... 90,000 Mai Elmar ...... — Arve Giske ...... — Berit Kjøll ...... 100,000 Petter Stordalen(2) ...... 21,023,693 Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... — Management Daniel A. Skjeldam, CEO since 1 October 2012 ...... 29,000 Olav Fjell, CEO until 30 September 2012(3) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Asta Lassesen, CFO ...... 600,000 Glen Peter Hartridge, Director product and pricing management ...... — Ole Fredrik Hienn, Director legal affairs ...... 170,950 Hans Rood, Sales and marketing director ...... 90,000 Dag-Arne Wensel, Director technical maritime operations ...... 63,650

(1) The shares are owned through the company Periscopus AS. (2) The shares are owned through the company Home Capital AS. (3) Of which 1,068,890 shares are owned through the company Fjellvit AS.

The company’s auditor does not own any shares in Hurtigruten ASA.

Note 14 Pensions The company has pension plans that give entitlement to defined future pension benefits. These are mainly dependent on the number of years of service, salary level upon reaching retirement age, and the size of the National Insurance benefits. These obligations are covered through an insurance company. The defined benefit pension plans cover 1,109 employees in the parent company. For maritime personnel there are three pension plans that cover different pension periods. A defined benefit plan that covers the period from age 60 to 67, and a defined contribution plan through an insurance company that covers pensions after reaching the age of 67. In addition to the pension obligations funded through insurance companies, the company has defined contribution plans for maritime personnel (Norwegian Pension Insurance for Seafarers) which are administrated by the government. The company also has an unfunded plan funded from revenue.

F-207 Financial assumptions:

2012 2011 Discount rate ...... 3.90% 2.60% Expected return on pension fund assets ...... 4.00% 4.10% Expected annual wage adjustment ...... 3.50% 3.50% Expected annual pension adjustment ...... 0.20% 0.10% Expected annual National Insurance basic amount (G) adjustment ...... 3.25% 3.25% Table book used for estimating liabilities ...... K2005 K2005 Table book used for estimating disabilities ...... IR02 IR02 The actuarial assumptions are based on the normal assumptions used in the insurance industry with respect to demographic factors and staff turnover. Average expected years of service until retirement age ...... 11.6 years 12.3 years

Pension costs for the year are calculated as follows:

2012 2011 (in NOK 1,000) Present value of current year’s pension benefits earned ...... 10,014 8,771 Defined contribution plans for maritime personnel ...... 29,694 28,442 Interest expenses on accrued pension obligations ...... 2,390 2,946 Expected return on plan assets ...... (2,426) (2,756) Discontinuation of plans ...... (34) — Payroll tax ...... 1,939 1,888 Total pension costs included in payroll costs ...... 41,578 39,290 Actuarial gains/losses recognised in other comprehensive income (before tax) ..... 14,419 (9,046)

Specification of net pension assets/obligations:

2012 2011 (in NOK 1,000) Present value of accrued pension obligations at 31 December for funded defined benefit plans ...... 86,453 93,426 Estimated value of plan assets at 31 December ...... (74,437) (69,512) Total ...... 12,015 23,914 Present value of pension obligations funded from revenue ...... 499 833 Net pension obligations ...... 12,515 24,747

Net pension assets/obligations are classified as follows on the balance sheet:

2012 2011 (in NOK 1,000) Pension obligations ...... 12,515 24,747 Net pension obligations ...... 12,515 24,747

Change in recognised pension obligations:

2012 2011 (in NOK 1,000) Book value at 1 January ...... 94,259 75,677 Present value of current year’s pension benefits earned ...... 10,014 8,771 Interest expenses ...... 2,390 2,946 Estimate deviations ...... (17,529) 9,251 Pension benefits paid ...... (2,287) (2,237) Change in payroll tax, net obligation ...... 106 (149) Book value at 31 December ...... 86,952 94,259

F-208 Change in the fair value of the plan assets:

2012 2011 (in NOK 1,000) Book value at 1 January ...... 69,512 56,913 Expected return on plan assets ...... 2,426 2,756 Employer contributions ...... 7,651 11,874 Estimate deviations ...... (3,110) 205 Pension benefits paid ...... (2,040) (2,237) Book value at 31 December ...... 74,437 69,512

Composition of the plan assets:

2012 2011 Shares ...... 9.2% 8.2% Current bonds ...... 15.6% 15.2% Money market ...... 18.3% 23.4% Non-current bonds ...... 36.8% 35.0% Property ...... 18.3% 17.8% Other ...... 1.8% 0.4% Total ...... 100.0% 100.0%

2012 2011 Actual return on plan assets ...... 5.70% 2.10%

2013 2012 (in NOK 1,000) The company’s expected contributions to funded plans in the next year ...... 4,433 5,764

The company is required to establish an occupational pension plan pursuant to the Norwegian Mandatory Occupational Pension Act. The company has established a plan that satisfies the requirements of this Act.

Table of the historical present values of pension obligations and assets at 31 December

2012 2011 2010 2009 2008 (in NOK 1,000) Present value of defined benefit pension obligations ...... 86,952 94,259 75,677 205,980 243,274 Fair value of plan assets ...... 74,437 69,512 56,913 140,408 144,366 Deficit/(surplus) ...... 12,515 24,747 18,763 65,572 98,908 Actual estimate deviations pension obligations ...... (22.00)% 24.59% Actual estimate deviations pension assets ...... 1.60% (3.30)%

F-209 Note 15 Liabilities and secured debt

2012 2011 (in NOK 1,000) Secured debt ...... 2,485,672 2,997,466 Assets pledged as security: Ships ...... 3,028,928 3,191,571 Shares in subsidiaries ...... 426,474 426,474 Trade receivables ...... 169,294 463,299 Cash at bank ...... 8,204 — Total ...... 3,632,899 4,081,344 Guarantee liabilities, etc.: Other companies ...... 242 242 Subsidiaries and associates ...... 134,471 5,848 Total guarantees ...... 134,713 6,090

In its ongoing business activities, the parent company Hurtigruten ASA assumes a conditional liability through guarantees issued directly to or on behalf of its subsidiaries/associates. The amounts in the table above represent the maximum potential amount of future commitments the company could be obligated to meet under the guarantees. None of these amounts have been recognised on the balance sheet at 31 December 2012.

In 2012 Hurtigruten ASA and the subsidiaries Hurtigruten Ltd and Hurtigruten GmbH entered into a merchant establishment agreement with a card issuer. At the time of entering into the agreement Hurtigruten ASA issued an unconditional and irrevocable guarantee for Hurtigruten Gmbh’s and Hurtigruten Ltd’s current and future liabilities in connection with or under the agreement.

Note 16 Operating revenues The reporting of operating segments at parent company level is not part of internal management reporting. Please see Note 6 to the consolidated financial statements for operating segment information.

2012 2011 (in NOK 1,000) Operating revenues: Continuing operations ...... 2,516,124 2,069,361 Discontinued operations ...... (10,819) 146,916 Total ...... 2,505,305 2,216,276

Discontinued operations include the chartering of MS Finnmarken as a hotel ship in Australia.

Note 17 Payroll costs

2012 2011 (in NOK 1,000) Payroll costs: Wages and salaries ...... 502,459 474,236 Payroll tax ...... 33,656 29,907 Pension costs (Note 14) ...... 41,578 39,290 Other benefits ...... 32,943 30,581 Total ...... 610,636 574,014 Average number of full-time equivalents ...... 1,313 1,369

F-210 Note 18 Remuneration, etc.

FIGURES FOR 2012: Pension Other Position Salary(3) costs(3) remuneration(3)(4) Loans Fees(3) (in NOK 1,000) Daniel A. Skjeldam ...... CEOfrom 1 October 700 99 29 — — Olav Fjell ...... CEOuntil 1 October 4,008 64 105 — — Torkild Torkildsen ...... Deputy CEO 2,064 175 104 — — Asta Lassesen ...... CFO 1,188 110 164 — — Glen Peter Hartridge ...... Director product and pricing management 1,276 109 127 — — Ole Fredrik Hienn ...... Director legal affairs 1,640 150 145 — — Hans Rood(1) ...... Sales and marketing director 2,200 225 140 — — Dag-Arne Wensel ...... Director technical maritime operations 1,363 111 154 — — Trygve Hegnar ...... Chair — — — — 310 Per Heidenreich ...... Deputy Chair until 19 April — — — — 41 Helene Jebsen Anker ...... Deputy Chair from 19 April — — — — 191 Guri Mai Elmar ...... Director — — — — 130 Arve Giske ...... Director — — — — 156 Berit Kjøll ...... Director — — — — 130 Petter Anker Stordalen ...... Director from 19 April — — — — 98 Tone Mohn-Haukland ...... Director, elected by employees 378 8 4 — 160 Per-Helge Isaksen ...... Director, elected by employees 470 16 4 — 134 Deputy members ...... — — — — — Corporate assembly ...... — — — — 170 Auditor fees—statutory auditing(2) . . . 1,289 Assistance IFRSs, accounting and tax(2) ...... 44 Other attestations(2) ...... 72 Auditor fees—other assistance(2) ..... —

(1) Rood’s salary is partially paid in USD and translated to NOK. (2) Fees exclusive of Value Added Tax. (3) Salaries and other remuneration are paid from the management company Hurtigruten Pluss AS, except the employee representatives’ salaries and board fees, which are paid by Hurtigruten ASA. (4) Includes the estimated cost associated with the share-based remuneration scheme.

The company’s CEO receives an annual salary of NOK 2.8 million. Other benefits include fixed car remuneration and an ordinary telephone, Internet, newspaper and home PC allowance.

The CEO also has a time-limited agreement on a performance-related bonus linked to the operating result before depreciation and amortisation, where performance is indexed against the adjusted operating result before depreciation and amortisation for 2012. The bonus agreement confers the right to a maximum of two bonus payments of up to a total of NOK 7.5 million in addition to holiday pay. The agreement expires in 2015. The payment of the bonus is contingent on the CEO still being in office at the end of the year to which the bonus relates.

The CEO is included in the company’s ordinary defined contribution pension scheme for salaries up to 12G and the defined contribution scheme that provides a pension basis for salaries over 12G. The CEO’s conditions of employment do not include any personal pension obligations.

An option agreement has been entered into that grants the CEO the right to acquire up to three million shares. The options may not be exercised for fewer than one million shares at a time. From the

F-211 time of publication of the figures for the fourth quarter of 2013 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 4 per share. From the time of publication of the figures for the fourth quarter of 2014 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 5 per share. From the time of publication of the figures for the fourth quarter of 2015 and for a period of two months thereafter, or from the time of publication of the figures for the fourth quarter of 2016 and for a period of two months thereafter, the CEO has the right to subscribe to a million shares at a subscription price of NOK 6 per share. Options that are not exercised within the exercise period lapse without compensation. If an individual shareholder or several collaborating shareholders together should own more than fifty per cent of the shares in Hurtigruten ASA, A54 the CEO has the right to exercise all options within three months from publication of the mandatory notification.

The company’s executive management are members of the company’s defined contribution plan. In addition, a supplementary defined contribution pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). The scheme applies to the whole company and covers all employees with salaries over 12G, including members of the executive management and the CEO. The pension costs for the executive management have been included under pension costs above.

The board agreed at a board meeting on 26 February 2008 to introduce a performance-based bonus scheme for the company’s executive management with effect from 1 January 2008. The bonus payments are limited to one-third of each executive’s annual salary, with 25 per cent of the bonus being determined by the Group’s overall results, and the remaining 75 per cent being determined by the results achieved in the executive’s area of responsibility. Results within the executive’s area of responsibility are compared with predefined targets/ parameters. The bonus scheme includes the executive management, with the exception of the CEO. The CEO has a separate performance-related bonus scheme as described above. The executive management has waived its right to bonuses based on the 2012 financial statements.

In 2010 a share-value-based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and wholly owned subsidiaries. The estimated costs for the year related to senior management covered by the plan are included under other remuneration above. Please see Note 21 to the consolidated financial statements for further details on the scheme.

F-212 FIGURES FOR 2011:

Pension Other Position Salary(4) costs(4) remuneration(4)(5) Loans Fees(4) (in NOK 1,000) Olav Fjell ...... CEO 4,471 94 7,503 — — Torkild Torkildsen ...... Deputy CEO 2,131 343 168 — — Anders Olstad(1)(3) ...... CFOuntil 31 December — — — — 3,634 Glen Peter Hartridge ...... Director product and pricing management 946 198 124 — — Ole Fredrik Hienn ...... Director legal affairs 1,611 297 249 — — Hans Rood(2) ...... Sales and marketing director 2,146 547 691 — — Dag-Arne Wensel ...... Director of technical and maritime operations 993 265 155 — — Trond Øverås ...... Product and marketing director until 1 December 1,416 391 90 — — Trygve Hegnar ...... Chair — — 5 — 308 Per Heidenreich ...... Deputy Chair — — 10 — 161 Helene Jebsen Anker ...... Director — — — — 133 Guri Mai Elmar ...... Director from 14 April — — — — 98 Arve Giske ...... Director from 14 April — — — — 117 Berit Kjøll ...... Director — — 1 — 129 Merete Nygaard Kristiansen ...... Director until 14 April — — — — 42 Olav Larsen ...... Director until 14 April — — — — 48 Tone Mohn-Haukland ...... Director, elected by employees 465 14 4 — 155 Per-Helge Isaksen ...... Director, elected by employees 494 15 4 — 129 Deputy members ...... — — — — — Corporate assembly ...... — — — — 166 Auditor fees—statutory auditing(3) . . . 1,900 Assistance IFRSs, accounting and tax(3) ...... 95 Other attestations(3) ...... 101 Auditor fees—other assistance(3) ..... 77

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. The CFO receives only fees and is not included in the company’s other benefit programmes. (2) Rood’s salary is paid in USD and translated to NOK. (3) Fees exclusive of Value Added Tax. (4) Salaries, fees and directors’ remuneration are paid from the management company Hurtigruten Pluss AS, except employee representatives’ salaries, which are paid by Hurtigruten ASA. (5) Includes bonus based on approved financial statements for 2011 (payable in 2012), and estimated costs related to the share-value-based remuneration programme.

Note 19 Leases Annual rent for non-capitalised non-current assets (operating leases):

Lease expires Asset Charter of MS Nordlys ...... 2019 Charter of MS Richard With ...... 2018

2012 2011 (in NOK 1,000) Future minimum lease payments at 31 December Within one year(1) ...... 142,881 172,056 Between one and five years ...... 194,593 295,749 Over five years ...... 7,380 37,111

F-213 (1) Of the amount that is to be paid within one year NOK 48 million has been recognised as an expense during the period 2008–2012.

Hurtigruten ASA entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten ships MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR. The variable element is linked to variable interest rates, 6-month Libor and Euribor rates.

Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the ships. In the charter agreements between the limited partnerships and Hurtigruten ASA, identical requirements (covenants) have been stipulated for Hurtigruten ASA for the term of the agreements, which the company has as a component of its long-term loan agreements linked to the ships. Please see Note 10 with regard to these financial covenants.

In connection with the financial restructuring in February 2009, an agreement was agreed on with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charter parties with the two limited partnerships would not be payable for the period up to 31 December 2011. The postponed instalments would, however, be added to the instalments that were paid in 2012 and will be paid 2013, thereby reverting to the original repayment plan in August 2013. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back MS Nordlys and MS Richard With will be cancelled. The annual rent and the instalments that accrue in accordance with the agreement are recognised as an expense in the financial statements. In the first quarter of 2011 Hurtigruten ASA made an extraordinary instalment payment on the bareboat charter hire. The extraordinary instalment payment was made through the release of funds that were restricted as security for the charter agreement. These funds were used in their entirety for an extraordinary repayment of borrowings in the two limited partnerships.

Note 20 Finance income and expenses

2012 2011 (in NOK 1,000) Interest expenses: —Bank borrowings ...... (185,245) (174,615) —Bond loan ...... (43,008) (5,797) —Convertible bond loan ...... (2,788) (6,576) —Interest expenses group account ...... (10,243) — Foreign exchange losses ...... (102,241) (56,827) Other finance expenses ...... (5,489) (1,759) Finance expenses ...... (349,013) (245,574) Interest income on current bank deposits ...... 4,495 (10,339) Foreign exchange gains ...... 107,797 64,558 Group contribution received from subsidiaries ...... 37,253 1,555 Dividends ...... 71,518 1,378 Gains on sale of financial assets ...... 18,364 — Other finance income ...... 290 1 Finance income ...... 239,718 57,153 Finance expenses—net ...... (109,294) (188,421)

Note 21 Transactions with related parties and intragroup balances Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company, companies in the same Group and associates. The associates in 2012 include Funn IT AS and ANS Havnebygningen.

F-214 Funn IT has delivered IT services to Hurtigruten ASA, while ANS Havnebygningen owns and leases out the building the company uses as offices in Tromsø. The company’s ownership interest in both companies during the period was 50 per cent.

The company has been involved in transactions with the following related parties: 2012 2011 (in NOK 1,000) Purchase of services from associates Purchase of IT-related services from Funn IT AS ...... 9,482 7,419 Balances with associates at year end Trade payables ...... 505 345 Remuneration of senior management in Hurtigruten ASA Salaries and other short-term employee benefits ...... 17,612 28,629 Pension costs (including former senior management personnel) ...... 1,067 2,164

Transactions with shareholders Transactions with the company’s largest shareholders are conducted in accordance with the arm’s length principle and in 2011 and 2012 include Group purchases of public transport-related services from Troms County Council.

Transactions with Group companies 2012 2011 (in NOK 1,000) Sale of goods and services to Group companies Hurtigruten GmbH ...... 686,057 674,628 Hurtigruten Ltd ...... 223,405 197,309 Hurtigruten Inc...... — 193 Hurtigruten SAS ...... 48,229 53,287 Hurtigruten Pluss AS ...... 4,331 — Spitsbergen Travel AS ...... 3,894 434 Cominor AS ...... — 179 Bareboat revenue from Hurtigruten Pty Ltd ...... — 158,049 Purchase of goods and services from Group companies Hurtigruten GmbH ...... 899 3,696 Hurtigruten Ltd ...... 2,718 4,140 Hurtigruten Inc...... 1,558 2,144 Hurtigruten SAS ...... 238 117 Spitsbergen Travel AS ...... 8,414 3,357 Cominor AS ...... 14,499 15,398 Rental of premises from Hurtigruten Eiendom AS ...... 462 459 Purchase of administrative services from Hurtigruten Pluss AS ...... 378,551 331,608 Purchase of flight booking and related services from Hurtigruten Estonia OÜ ...... 573 507 Bareboat charter hire from Kirberg Shipping KS ...... 45,908 37,112 Bareboat charter hire from Kystruten KS ...... 37,419 33,776 Interest income from Group companies Hurtigruten Estonia OÜ ...... 15 15 Hurtigruten Pluss AS ...... 1,635 1,561 Hurtigruten Ltd ...... 564 340 RezCenter OÜ ...... 13 — Hurtigruten Inc...... 1,045 — Interest paid to Group companies Hurtigruten Eiendom AS ...... — 245 Hurtigruten GmbH ...... 2,940 85 Spitsbergen Travel AS ...... 572 539 Svalbard Polar Hotel AS ...... 386 310 Hurtigruten Estonia OÜ ...... 16 — Hurtigruten Ltd ...... 1,410 —

F-215 Intragroup balances

2012 2011 (in NOK 1,000) Non-current receivables due from Group companies Hurtigruten Pluss AS ...... 28,174 29,735 Hurtigruten Estonia OÜ ...... 249 311 Hurtigruten Ltd ...... 7,668 7,413 Hurtigruten SAS ...... — 22 Spitsbergen Travel AS ...... — 28 Kystruten KS ...... 42,841 — Kirberg Shipping KS ...... 7,932 — RezCenter OÜ ...... 2,789 — Total non-current receivables from Group companies (Note 9) ...... 89,653 37,509 Trade and other current receivables from Group companies Hurtigruten Pty Ltd ...... 260,071 265,898 Hurtigruten GmbH ...... 12,327 18,439 Hurtigruten Ltd ...... 2,733 2,245 Hurtigruten SAS ...... 863 2,447 Hurtigruten Inc...... 70,274 67,781 Hurtigruten Estonia OÜ ...... — 41 Hurtigruten Greenland AS ...... 1,406 1,606 Hurtigruten Pluss AS ...... 95,667 54,209 AS TIRB ...... — (4) Hurtigruten Eiendom AS ...... 2,820 1,733 Hurtigruten Verdens Vakreste Sjøreise AS ...... 1 2 Provisions for losses on trade receivables from Group companies ...... (228,049) (128,675) Total trade and other current receivables from Group companies (Note 9) ...... 218,113 285,723 Other non-current liabilities to Group companies Spitsbergen Travel AS ...... 13,123 12,551 Svalbard Polar Hotel AS ...... 8,844 8,459 Kirberg Shipping KS ...... — 29,989 Kystruten KS ...... — 6,749 Total non-current liabilities to Group companies (Note 10) ...... 21,967 57,747 Note 22 Trade and other current payables to Group companies Hurtigruten Pluss AS ...... 139,281 26,952 Hurtigruten Eiendom AS ...... 78 762 Spitsbergen Travel AS ...... 13 349 Hurtigruten GmbH ...... 116 78,053 Hurtigruten Pty Ltd ...... 253 — Hurtigruten SAS ...... 4 113 Hurtigruten Inc...... 23,547 1,330 Kirberg Shipping KS ...... — 125 Kystruten KS ...... 88 — AS TIRB ...... 617 298 Total trade and other current payables to Group companies (Note 9) ...... 163,996 107,982

Events after the balance sheet date There have not been any events after the balance sheet date.

F-216 Statsautoriserte revisorer Ernst & Young AS

Storgata 118, NO-9008 Tromsø Postboks 1212, NO-9262 Tromsø

Foretaksregisteret: NO 976 389 387 MVA Tel: +47 24 00 32 00 Fax: +47 77 64 14 63 www.ey.no

TO THE ANNUAL SHAREHOLDERS’ MEETING OF HURTIGRUTEN ASA

AUDITOR’S REPORT REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of Hurtigruten ASA, comprising the financial statements for the Parent Company and the Group. The financial statements of the Parent Company and the Group comprise the statement of financial position as at 31 December 2011, the statements of income, comprehensive income, cash flows and changes in equity for the year then ended as well as a summary of significant accounting policies and other explanatory information.

The Board of Directors’ and Chief Executive Officer’s responsibility for the financial statements The Board of Directors and Chief Executive Officer are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the Parent Company and the International Financial Reporting Standards as adopted by the EU for the Group, and for such internal control as the Board of Directors and Chief Executive Officer determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements for the Parent Company and the Group.

Opinion on the financial statements of the Parent Company In our opinion, the financial statements of Hurtigruten ASA have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Company as of 31 December 2011 and its financial performance and cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.

F-217 Opinion on the financial statements of the Group In our opinion, the financial statements of the Group have been prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Group as of 31 December 2011 and its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards on Accounting as adopted by the EU.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Opinion on the Board of Directors’ report and the statement on corporate governance Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Directors’ report and the statement on corporate governance concerning the financial statements, the going concern assumption and the proposal for the allocation of the result is consistent with the financial statements and complies with the law and regulations.

Opinion on registration and documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the international standard on assurance engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that the Board of Directors and Chief Executive Officer have fulfilled their duty to ensure that the Company’s accounting information is properly recorded and documented as required by law and generally accepted bookkeeping practice in Norway.

Tromsø, 27 March 2012 ERNST & YOUNG AS

John Giæver (sign) State Authorised Public Accountant (Norway)

(This translation from Norwegian has been made for information purposes only.)

F-218 CONSOLIDATED INCOME STATEMENT

Note 2011 2010 (in NOK 1,000) Operating revenue ...... 23 3,926,720 3,787,859 Payroll costs ...... 24 (1,186,744) (1,055,078) Ordinary depreciation and impairment ...... 7,8,9 (450,300) (360,105) Other operating costs ...... 26 (2,326,615) (2,155,680) Other (losses)/gains—net ...... 27 83,320 7,455 Operating profit ...... 46,381 224,451 Finance income ...... 28 74,005 70,928 Finance expenses ...... 28 (267,570) (279,395) Finance expenses—net ...... (193,565) (208,467) Share of profit/(loss) of associates ...... 10 2,352 (757) Profit/(loss) before income tax from continuing business ...... (144,832) 15,227 Income tax expense ...... 18 80,524 10,957 Profit/(loss) for the year from continuing business ...... (64,308) 26,184 Profit/(loss) before income tax from discontinued business ...... 7 (5,660) 4,261 Profit/(loss) for the year ...... (69,968) 30,445 Profit/(loss) for the year attributable to: Owners of the parent ...... (126,465) 8,325 Non-controlling interests ...... 56,497 22,120 Earnings per share from continuing and discontinued business attributable to the owners of the parent during the year (expressed in NOK per share) Basic earnings per share From continuing businesses ...... 15 (0.28) 0.01 From discontinued businesses ...... 15 (0.02) 0.01 Total ...... (0.30) 0.02 Diluted earnings per share: From continuing businesses ...... 15 (0.28) 0.01 From discontinued businesses ...... 15 (0.02) 0.01 Total ...... (0.30) 0.02

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-219 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

1 January to 31 December Note 2011 2010 (in NOK 1,000) Profit/(loss) for the year ...... (69,968) 30,445 Other comprehensive income: Actuarial gain/(loss) on retirement benefit obligations ...... 19 (49,103) (22,575) Tax ...... 18 13,261 5,854 Cash flow hedges ...... 16 15,617 22,591 Tax ...... 18 (4,373) (6,326) Currency translation differences ...... 16 (394) (5,072) Other equity adjustments ...... 582 (174) Other comprehensive income for the year, net of tax ...... (24,410) (5,702) Total comprehensive income for the year ...... (94,378) 24,744 Attributable to: Owners of the parent ...... (144,826) 8,361 Non-controlling interests ...... 50,448 16,383 Total comprehensive income for the year ...... (94,378) 24,744

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-220 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER

Note 2011 2010 (in NOK 1,000) ASSETS Non-current assets Property, plant and equipment ...... 8 3,851,087 4,163,328 Intangible assets ...... 9 272,311 259,526 Investments in associates ...... 10 38,895 36,705 Deferred tax assets ...... 18 172,234 69,789 Derivative financial instruments ...... 11 — 12,677 Trade and other receivables ...... 12 34,003 30,816 Total non-current assets ...... 4,368,531 4,572,841 Current assets Inventories ...... 13 74,696 72,918 Trade and other receivables ...... 12 920,176 885,271 Derivative financial instruments ...... 11 28,639 21,633 Cash and cash equivalents ...... 14 574,511 731,109 1,598,022 1,710,930 Assets of disposal group classified as held-for-sale ...... 7 60,384 68,076 Total current assets ...... 1,658,406 1,779,006 Total assets ...... 6,026,936 6,351,848 EQUITY Equity attributable to owners of the parent Ordinary shares ...... 15 419,966 419,966 Share premium ...... 15 734,622 734,622 Other reserves ...... 16 140,073 129,059 Retained earnings ...... (69,123) 86,716 Total equity attributable to owners of the parent ...... 1,225,540 1,370,364 Non-controlling interests ...... 338,574 288,126 Total equity ...... 1,564,114 1,658,490 LIABILITIES Non-current liabilities Borrowings ...... 17 2,455,508 3,682,801 Derivative financial instruments ...... 11 17,776 18,041 Deferred tax liabilities ...... 18 9,643 13,367 Retirement benefit obligations ...... 19 101,693 126,721 Provisions for other liabilities and charges ...... 20 5,450 5,617 Total non-current liabilities ...... 2,590,070 3,846,548 Current liabilities Trade and other payables ...... 22 755,597 716,604 Current income tax liabilities ...... 18 11,932 13,419 Borrowings ...... 17 1,026,252 15,785 Derivative financial instruments ...... 11 152 17,102 Provisions for other liabilities and charges ...... 20 8,819 566 1,802,752 763,477 Liabilities of disposal group classified as held-for-sale ...... 7 70,000 83,333 Total current liabilities ...... 1,872,752 846,811 Total liabilities ...... 4,462,822 4,693,358 Total equity and liabilities ...... 6,026,936 6,351,848

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-221 Oslo, 27 March 2012

The board of directors of Hurtigruten ASA

Trygve Hegnar Per Heidenreich Helene Jebsen Anker Chair Deputy chair Director

Guri Mai Elmar Arve Giske Per Helge Isaksen Director Director Director

Berit Kjøll Tone Mohn-Haukland Olav Fjell Director Director CEO

F-222 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Share Other Retained Non-controlling Total Note capital premium reserves earnings Total interest equity (in NOK 1,000) Balance at 1 January 2010 ...... 419,966 734,622 117,613 89,801 1,362,002 282,663 1,644,665 Net profit/(loss) for the year ...... — — — 8,325 8,325 22,120 30,445 Other comprehensive income Currency translation differences ...... 16 — — (5,072) — (5,072) — (5,072) Cash flow hedges, net of tax ...... 16,18 — — 16,518 — 16,518 (253) 16,265 Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18 — — — (11,411) (11,411) (5,311) (16,721) Other equity adjustments ...... — — — — — (174) (174) Total other comprehensive income, net of tax ...... — — 11,446 (11,411) 35 (5,737) (5,702) Total comprehensive income for the year . . . — — 11,446 (3,085) 8,361 16,383 24,744 Transactions with owners Distributions to owners ...... — — — — — (10,920) (10,920) Total transactions with owners ...... — — — — — (10,920) (10,920) Balance at 31 December 2010 ...... 419,966 734,622 129,059 86,716 1,370,364 288,126 1,658,490 Balance at 1 January 2011 ...... 419,966 734,622 129,059 86,716 1,370,364 288,126 1,658,490 Net profit/(loss) for the year ...... — — — (126,464) (126,464) 56,497 (69,968) Other comprehensive income Currency translation differences ...... 16 — — (394) — (394) — (394) Cash flow hedges, net of tax ...... 16,18 — — 11,408 — 11,408 (164) 11,244 Actuarial gain/(loss) on retirement benefit obligations, net of tax ...... 18 — — — (29,958) (29,958) (5,885) (35,843) Other equity adjustments ...... — — — 582 582 — 582 Total other comprehensive income, net of tax ...... — — 11,014 (29,375) (18,361) (6,049) (24,410) Total comprehensive income for the year . . . — — 11,014 (155,839) (144,825) 50,448 (94,377) Balance at 31 December 2011 ...... 419,966 734,622 140,073 (69,123) 1,225,540 338,574 1,564,114

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-223 CONSOLIDATED CASH FLOW STATEMENT

Note 2011 2010 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax from continuing and discontinued business ...... (152,692) 21,568 Adjusted for: Depreciation and impairment on continuing and discontinued business ..... 7,8,9 457,992 367,798 Other (losses)/gains—net ...... 27 (83,320) (18,653) Foreign exchange (losses)/gains unrealised ...... (258) (14,279) Dividends received ...... (1,378) — Interest expenses ...... 28 206,001 226,164 Share of profit/(loss) of associates on continuing and discontinued business ...... 10 (2,352) 13,247 Impairment of long-term shares ...... — 316 Difference between expensed pension and payments ...... 19 (67,897) 16,410 Change in working capital: Inventories ...... (1,778) 2,422 Trade and other receivables ...... (127,183) (425,326) Net adjustments on financial assets through income statement ...... (7,538) (10,789) Trade and other payables ...... 34,464 155,618 Cash flows from operations ...... 254,061 334,496 Interest paid ...... (208,883) (223,927) Income tax paid ...... (6,712) (7,484) Net cash flows from operating activities ...... 38,467 103,084 Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... 8 (188,140) (168,731) Proceeds from sale of PPE ...... 8 164,740 26,152 Purchases of intangible assets ...... 9 (56,004) (25,134) Loan to associates ...... 30 — 7,000 Proceeds from purchase of shares ...... (995) — Proceeds from sale of shares ...... 90,000 8,500 Net liquid assets from purchase and sale of businesses ...... — (1,046) Dividends received ...... 1,378 1,273 Change in restricted funds ...... 14 90,871 5,981 Net cash flows from/(used in) investing activities ...... 101,851 (146,005) Cash flows from financing activities Proceeds from borrowings ...... 5,000 15,000 Repayment of borrowings ...... 17 (218,581) (37,466) Dividend paid to non-controlling interests ...... — (10,920) Net cash flows used in financing activities ...... (213,581) (33,386) Net (decrease)/increase in cash, cash equivalents and bank overdrafts ...... (73,264) (76,306) Cash, cash equivalents and bank overdrafts at 1 January ...... 492,187 557,704 Foreign exchange gains/(losses) on cash and bank overdrafts ...... 7,538 10,789 Cash, cash flows equivalents and bank overdrafts at 31 December ...... 14 426,461 492,187

Notes 1 to 31 are an integral part of these consolidated financial statements.

F-224 NOTES TO THE ACCOUNTS

NOTE 1 GENERAL INFORMATION Hurtigruten ASA (the company) and its subsidiaries (together the group) are engaged in tourism and transport activities in Norway and abroad. The company’s core business consists of Hurtigruten service along the Norwegian coast, with daily calls in 34 ports between Bergen and Kirkenes and explorer activity in the Polar regions.

The group’s operating segments are organised into the following four product areas: Hurtigruten Norwegian coast, Explorer products, Spitsbergen and Charter. Activities that do not naturally fall within these four segments are grouped into Other business. These operating segments are reported in the same way as internal reporting to the board of directors and executive management.

The company is a public limited company incorporated and domiciled in Norway, with headquarters at Havnegata 2, Narvik. The group also has offices in Tromsø and Finnsnes, wholly-owned foreign sales companies in Hamburg, London and Paris as well as activities in Longyearbyen. The company is listed on the Oslo Stock Exchange.

The group’s presentation currency is the Norwegian kroner.

Consolidated financial statements were approved by the board of directors on 27 March 2012.

The following companies are included in the group’s consolidated financial statements:

Ownership and Business office voting rights Owned by Hurtigruten ASA (parent) HRG Eiendom AS ...... Narvik, Norway 100.0% Hurtigruten GmbH ...... Hamburg, Germany 100.0% Hurtigruten Greenland AS ...... Nuuk, Greenland 100.0% Hurtigruten Inc...... NewYork, USA 100.0% Hurtigruten Ltd ...... London, England 100.0% Hurtigruten Pty Ltd ...... Sydney, Australia 100.0% Hurtigruten SAS ...... Paris, France 100.0% Hurtigruten Verdens Vakreste Sjøreise AS ...... Tromsø, Norway 100.0% Hurtigruten Pluss AS ...... Narvik, Norway 100.0% Spitsbergen Travel AS ...... Longyearbyen, Svalbard 100.0% Hurtigruten Estonia OÜ ...... Tallinn, Estonia 100.0% AS TIRB ...... Finnsnes, Norway 71.3% Kirberg Shipping KS ...... Bergen, Norway 1.0% Kystruten KS ...... Oslo, Norway 0.0% Owned by Spitsbergen Travel AS Ingeniør G. Paulsen AS ...... Longyearbyen, Svalbard 100.0% Svalbard Polar Hotel AS ...... Longyearbyen, Svalbard 100.0% Spitsbergen Travel Hotel AS ...... Longyearbyen, Svalbard 100.0% Owned by AS TIRB Cominor AS ...... Finnsnes, Norway 100.0% TIRB Eiendom AS ...... Finnsnes, Norway 100.0% Owned by TIRB Eiendom AS Gimle I AS ...... Tromsø, Norway 100.0%

Hurtigruten AB was closed down in December 2011. The company was owned by Hurtigruten ASA. TIRB Eiendom II AS was sold in December 2011. The company was owned by TIRB Eiendom AS.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the group’s consolidated financial statements are described below. Unless otherwise stated in the description, these policies have been consistently applied to all periods presented.

F-225 2.1 Basic policies The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU.

The consolidated financial statements have been prepared based on historical cost basis, with the following modifications: • financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. Areas which make extensive use of discretionary assessments or involve a high degree of complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are described in note 3.

The group’s consolidated financial statements have been prepared according to uniform accounting policies for similar transactions and events under similar conditions.

2.1.1 Changes in accounting policies and disclosures (a) New and amended standards adopted by the group, which have no significant effect on accounts at this time The group made no changes to its accounting policies in 2011. • IAS 1 Presentation of Financial Statements. Changes in the requirement to show all items under other comprehensive income in the statement of changes in equity. • IAS 24 Related party disclosures. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. • IAS 32 (amendment) Classification of rights issues. The amendment addresses the accounting for rights issues that are in a currency other than the functional currency of the issuer. Provided these conditions are met, such rights issues are now classified as equity, regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as financial liabilities. The amendment is retroactive, in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. • IAS 34 Interim Financial Statements. The amendments include clearer note requirements for significant events in interim financial reporting, including impairments, changes in classification or measurement of financial instruments, etc. • IFRS 3 Business Combinations. The amendment requires that transactions with non-controlling interests who do not have the right to a share of the net assets be measured at fair value on the acquisition date. • IFRS 7 Financial Instruments—Disclosures. Eased note requirements for credit risk, which entails that information is no longer necessary if maximum credit loss is equal to the carrying amount, as well as less comprehensive information requirements for pledged assets. • IFRIC 13 Customer Loyalty Programmes. Points accrued in bonus programs shall be measured at the fair value of redeemable goods and services. • IFRIC 19 Extinguishing financial liabilities with equity instruments. The interpretation regulates accounting when a financial liability is renegotiated and the creditor extinguishes all or part of the financial liability in exchange for the issuing of equity instruments (“debt for equity swap”). The debtor records a gain or loss from the conversion, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the value is set as equivalent to the financial liability extinguished. • Other changes as a result of IASB’s annual improvement project.

F-226 (b) Standards, amendments and interpretations for existing standards that have not entered into force and which the group has not selected for early implementation: The impact of these changes is expected to be: • IAS 1 Presentation of Financial Statements. Amendments affecting the presentation of other comprehensive income, differentiating between items that later will be reversed in profit or loss and items that will not be reversed in profit or loss. The group will implement these amendments from 1 July 2012. • IFRS 9 Financial Instruments Instruments regulates the classification, measurement and accounting of financial assets and liabilities. IFRS 9 was published in November 2009 and October 2010, and replaces those sections of IAS 39 dealing with accounting, classification and measurement of financial instruments. Under IFRS 9, financial assets should be divided into two categories, based on measurement method: those that are measured at fair value and those measured at amortised cost. A classification assessment is performed upon initial accounting. The classification will depend on the company’s business model for managing its financial instruments and the characteristics of the contractual cash flows from the instrument. Requirements for financial liabilities are mainly similar to IAS 39. The main difference, in cases where the fair value of financial liabilities is used, is that the portion of the change in fair value attributable to a change in the company’s own credit risk will be recognised in other comprehensive income instead of in the income statement, as long as it does not cause an accrual discrepancy in the measurement of profit or loss. The group plans to apply IFRS 9 when the standard takes effect and has been approved by the EU. The standard takes effect for accounting periods beginning 1 January 2013 or later, but IASB has distributed for comment a proposal for deferred commencement to accounting periods beginning 1 January 2015 or later. • IFRS 10 Consolidated Financial Statements is based on current policies regarding the concept of control as the determining factor for whether a company should be included in the consolidated financial statements of the parent company. The standard provides extensive instructions for assessing whether or not control exists in difficult cases. The group has not assessed all of the potential consequences of IFRS 10. The group is planning to apply the standard to accounting periods beginning 1 January 2013 and later. • IFRS 12 Disclosures of Interest in Other Entities contains information requirements for economic interests in subsidiaries, joint ventures, associates, special purpose entities (SPE) and other off-balance sheet companies. The group has not assessed the full impact of IFRS 12. The group is planning to apply the standard to accounting periods beginning 1 January 2013 and later. • IFRS 13 Fair Value Measurement defines what is meant by the term “fair value” in IFRS, provides a uniform definition of how fair value should be determined in IFRS and defines which additional information should be provided when fair value is used. The standard does not extend the scope of accounting to fair value but provides information on its application where use of fair value is already required or permitted in the other IFRS’s. The group uses fair value as a measurement criterion for certain assets and liabilities. The group has not assessed the full impact of IFRS 13. The group is planning to apply the standard to accounting periods beginning 1 January 2013 and later.

2.2 Consolidation principles (a) Subsidiaries and consolidation Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are exercisable or convertible at the balance sheet date are considered when assessing whether the group controls another entity. Subsidiaries are consolidated from the date control is transferred to the group and are excluded from consolidation when control ceases.

Intragroup transactions, intercompany balances and unrealised intragroup profits and losses are eliminated. If necessary, the subsidiaries’ accounts are revised to achieve consistency with the group’s accounting policies.

F-227 Transactions with non-controlling shareholders in subsidiaries are treated as equity transactions. When shares are purchased from non-controlling shareholders, the difference between the remuneration and the share’s proportionate carrying amount of the subsidiary’s net assets is recorded in equity for the parent company’s shareholders. Gains or losses on disposals to non-controlling shareholders are also recorded in equity.

When the group no longer has control, any remaining shareholdings are recognised at fair value, with changes in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. Amounts previously recognised in other comprehensive income in respect to that entity are accounted for as if the group had directly disposed of underlying assets and liabilities. This may entail that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(b) SPE A sale-leaseback solution was carried into effect in 2002 with the Hurtigruten vessel MS Richard With, whereby Kystruten KS acquired the vessel and leased it back for a 15 year period. Correspondingly, a sale- leaseback solution was carried into effect with the Hurtigruten vessel MS Nordlys, whereby Kirberg Shipping KS acquired the vessel and leased it back for a 15-year period. On the basis of established contracts, Kystruten KS and Kirberg Shipping KS are considered to be SPEs (special purpose entities), which are to be consolidated in the Hurtigruten group. This has been done by recognising the vessel’s book value and external liabilities in the consolidated balance sheet. Previously recognised gains are corrected against equity. The KS’s accounts have been revised to apply the same accounting policies as used by Hurtigruten group.

Changes in accounting policies As a consequence of the revised standard for consolidated accounts and financial accounts (IAS 27 revised), the group has changed its accounting policy for transactions with non-controlling interests and accounting in connection with loss of control or significant influence at 1 January 2010. The revision to IAS 27 contained consequential amendments to IAS 28, Investments in Associates and IAS 31, Interests in Joint Ventures.

Previously, transactions with non-controlling interests were treated as transactions with 3rd parties. Disposals therefore resulted in gains or losses in profit or loss and purchases resulted in the recognition of goodwill. On disposal or partial disposal, a proportionate interest in reserves attributable to the subsidiary was reclassified to profit or loss or directly to retained earnings.

Remaining ownership interests upon the loss of control or significant influence were previously measured as a proportional share of the amount recognised in the balance sheet.

The group has applied this new accounting policy to transactions occurring on or after 1 January 2010. No adjustments were made to any of the amounts previously recognised in the financial statements.

2.3 Business combinations Business combinations are recognised using the acquisition method. The consideration is measured at the fair value of any transferred assets, liabilities or issued equity instruments. Contingent consideration is measured at fair value and is included in the consideration. The contingent consideration is classified as a liability under IAS 39 and recognised at fair value in subsequent periods, with the change of value recognised in profit or loss. In cases where the contingent consideration is classified as equity, fair value measured at the acquisition date remains unchanged. Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities are recognised at their fair values on the date of acquisition. Non-controlling interests in the acquired company are measured on an acquisition-by-acquisition basis, either at fair value, or at their proportionate share of the company’s net assets.

If the amount of the consideration, the carrying amount of non-controlling interests and the fair value on the date of acquisition of previous equity interests exceeds the fair value of the identifiable net assets of the acquired company, the difference is recorded as goodwill, cf. note 2.8. If the sum is less than the company’s net assets, the difference is recognised immediately.

F-228 2.4 Associates Associates are all entities over which the group has significant influence but not control. Significant influence normally exists for investments where the group owns 20–50 per cent of the voting capital. Investments in associates are initially recognised at the initial carrying amount and subsequently using the equity method. Goodwill is included in the amount of the investment and is assessed for impairment as part of the investment. At the time of reporting, the group assesses whether there are indications of an impairment of the investment. If there are such indications, the recoverable value of the investment amount is estimated when calculating any impairment loss.

The group’s share of associates’ profit or loss is recognised in profit and loss, and is added to the book value of the investments. The group’s share of associates’ other comprehensive income is recognised in the group’s other comprehensive income and is also added to the book value of the investments. The group does not recognise any share of an associate’s losses in its income statement if this results in the book value of the investment falling below zero (including unsecured receivables from the entity), unless the group has assumed liabilities or made payments on behalf of the associate.

The group’s share of unrealised profits on transactions between the group and its associates are eliminated. The same applies to unrealised losses, unless the transaction justifies an impairment of the transferred asset. When necessary, the associates’ accounts are revised to achieve consistency with the group’s accounting policies.

Gains and losses with respect to the dilution of assets in associates are recognised in profit and loss.

When the group no longer has a significant influence, any remaining shareholdings are recognised at fair value with changes in value recognised in profit and loss. Then, the fair value is the initial carrying amount for subsequent accounting as a financial asset. Amounts previously recognised in other comprehensive income in respect to that entity are accounted for as if the associate had directly disposed of underlying assets and liabilities. This may entail that amounts previously recognised in other comprehensive income are reclassified to profit or loss. When the group’s shareholding in an associate is reduced, but a significant influence is retained, a proportional amount of the sum previously recognised in other comprehensive income is reclassified to profit and loss.

2.5 Segment reporting An operating segment is a part of the business that delivers products or services that are subject to risks and returns that are different from other operating segments. The group has four operating segments, called product areas: Hurtigruten Norwegian coast, Explorer products, Spitsbergen and Charter. Activities that do not naturally fall within these four segments are grouped into Other business. These operating segments are reported in the same way as internal reporting to the board of directors and executive management.

2.6 Translation of foreign currencies (a) Functional and presentation currency The financial statements of the individual entities in the group are measured in the currency used in the economic area in which the entity primarily operates (the functional currency). The consolidated financial statements are presented in Norwegian kroner (NOK), which is both the parent company’s functional currency and the group’s presentation currency.

(b) Transactions and balance sheet items Foreign currency transactions are translated into the functional currency using average exchange rates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of exchange rates of monetary assets and liabilities denominated in foreign currencies on the balance sheet date are recognised in the income statement. If the currency position is considered a cash flow hedge, gains and losses are recognised as other comprehensive income.

Foreign exchange gains and losses on loans, cash and cash equivalents are presented (net) in the income statement as financial income or expense.

F-229 (c) Group companies The income statement and balance sheet of all group entities (none subject to hyperinflation) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • The balance sheet is translated at the closing rate on the balance sheet date. • The income statement is translated at the average exchange rate. • Translation differences are recognised in other comprehensive income and specified separately in equity as a separate item.

2.7 Property, plant and equipment Property, plant and equipment consist primarily of ships (Hurtigruten ships), land and buildings (hotels, offices and workshops) as well as buses. Property, plant and equipment are recognised at their initial carrying amount less depreciation. The initial carrying amount includes costs directly associated with the acquisition of the asset. The initial carrying amount also comprises the gains or losses transferred from other income and expenses at the time of purchase, due to cash flow hedging in foreign currency for purchases of non-current assets.

Subsequent expenses are added to the asset’s book value or are recognised separately in the balance sheet (periodic maintenance) when it is probable that any future financial benefits associated with the expense will devolve to the group, and the expense can be reliably measured. The carrying amount of replaced parts is recognised. Other repair and maintenance expenses are recognised in profit and loss in the period in which the expenses are incurred.

Land is not depreciated. Other operating assets are depreciated linearly, such that the initial carrying amount is depreciated to residual value over the asset’s expected useful life. Expected useful life is determined on the basis of historical figures, as well as the standard lifetimes in the industry. Residual value is calculated on the basis of estimated sales values for operating assets at the end of their expected useful life. Expected useful life is:

Ships 12–30 years Buildings 25–100 years Vehicles 5–12 years Other 3–10 years

The useful life and residual value of operating assets are assessed on every balance sheet date and amended as necessary. When important components of operating assets have different useful lives, these operating assets are recognised as their various components. These components are depreciated separately over each component’s useful life. At the end of each accounting period operating assets are assessed for indications of lasting impairment and, in the event of such impairment, the asset’s recoverable amount is estimated. When the book value of an operating asset is higher than the estimated recoverable amount, it is written down to the recoverable amount.

Gains and losses on disposals are recognised in the income statement under “Other (losses)/gains—net”, as the difference between the sales price and the carrying amount.

Received investment grants for hotel construction on Svalbard are recognised using the gross method and recognised in revenue in line with depreciation of the corresponding asset.

2.8 Intangible assets (a) Goodwill Goodwill is the difference between the initial carrying amount of an acquisition and the fair value of the group’s share of the entity’s net identifiable assets at the time of acquisition. Goodwill in connection with the acquisition of subsidiaries is classified as an intangible asset. Assessments are made annually for the impairment of goodwill. The recoverable amount is estimated for calculating any impairment. Goodwill is written down to the recoverable amount, when this is lower than the book value. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of an entity include the carrying amount of goodwill related to the divested entity.

F-230 When assessing the need for impairment of goodwill, it is allocated to the relevant cash-generating entities (operating segments). Goodwill is allocated to the cash-generating entities or groups of cash-generating entities that are expected to benefit from the acquisition (note 2.9).

(b) Other intangible assets Other intangible assets are largely directly associated with development costs for computer systems recognised in the balance sheet at their initial carrying amount, if the criteria for capitalisation are met. The criteria for capitalisation are: • Probable usage of the asset in the company can be proved. • Future economic benefits to the company associated with use of the asset can be calculated. • Development costs for the asset can be measured reliably.

Intangible assets are considered to have a limited life span, and are amortised over their expected useful life. Assessments are made at the end of each accounting period to find any indications of impairment of intangible assets. If there are indications of impairment, the intangible assets are written down to their recoverable value when this is lower than the book value. Later expenses for recognised intangible assets are recognised only when they increase the future economic benefits related to this asset. All other costs are expensed during the period in which they are incurred.

Other development expenditures that do not meet the criteria for capitalisation are expensed as they are incurred. Development expenditures that have already been expensed cannot be recognised as an asset in future periods.

2.9 Impairment of non-financial assets Intangible assets with indefinite useful life and goodwill are not amortised but are tested annually or more frequently if there are indications of impairment. Depreciated property, plant and equipment and amortised intangible assets are assessed for impairment when there is any indication that the carrying amount may not be recoverable.

The difference between the carrying amount and recoverable amount is recorded as impairment loss. The recoverable amount is the higher of the asset’s fair value less sales costs and its value in use. In assessing impairments, non-current assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each reporting date the possibility of reversing previous impairment of non- financial assets (except goodwill) is assessed.

2.10 Discontinued business and non-current assets held-for-sale Non-current assets and disposal groups are classified as held-for-sale if their carrying amounts will be recovered through sale and not through continued use. This condition is deemed to be fulfilled if a sale is highly probable and the asset (or disposal group) is available for immediate sale in its current condition. Management at the relevant level must have made a commitment to complete the sale and the transaction must be expected to be completed within one year of the classification date.

Non-current assets (and disposal groups) that are classified as held-for-sale are measured at the lowest of previous carrying amount and net sale value, and are not depreciated.

A discontinued business is a segment that has been disposed of or classified as held-for-sale, and which represents a significant business area, geographical region, or is a subsidiary acquired exclusively for resale.

Net profits or losses after tax for discontinued business are reported separately from income from continued business. Results from the previous period for discontinued business are reclassified in order to get comparable numbers. Assets and liabilities classified as held-for-sale are presented on separate lines on the balance sheet under current assets and current liabilities respectively. Previous periods are not revised on the balance sheet.

F-231 2.11 Financial assets 2.11.1 Classification The group classifies financial assets in the following categories: at fair value through profit or loss, as well as loans and receivables. The classification depends on the object of the asset. Management determines the classification of financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified in this category if it was acquired primarily to provide a profit from short-term price fluctuations. Derivatives are categorised as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets.

(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed payments that are not traded in an active market. They are classified as current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as “trade and other receivables” in the balance sheet (note 2.16).

2.11.2 Recognition and measurement Regular purchases and sales of investments are recognised on the trade-date, which is the day the group commits to purchase or sell the asset. All financial assets that are not recognised at fair value through profit or loss are initially recognised at fair value plus transaction costs. Financial assets recognised at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Investments are derecognised when the rights to receive cash flows from the investment expire or when these rights have been transferred and the group has substantially transferred all risks and rewards of ownership. Financial assets recognised at fair value in profit or loss are carried at fair value after initial recognition in the balance sheet. Loans and receivables are carried in successive periods at amortised cost, using the effective interest method.

Gains or losses from changes in fair value of assets classified as “financial assets at fair value through profit or loss”, including interest income and dividends, are included in the income statement under financial items in the period in which they arise. Dividends from financial assets at fair value through profit or loss are included in the income statement when the group’s right to receive payments is established.

2.12 Offsetting of financial assets and liabilities Financial assets and liabilities may only be offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.13 Impairment of financial assets Assets carried at amortised cost At the end of each reporting period, the group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets (a “loss event”) and the impact of that loss event (or events) on estimated future cash flows can be estimated reliably.

The criteria that the group uses to determine whether there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or debtor; • Breach of contract, such as default or delinquency in interest or principal payments; • The group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

F-232 • It becomes probable that the borrower will enter bankruptcy or other financial restructuring; • The disappearance of an active market for that financial asset because of financial difficulties; • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the portfolio’s individual financial assets, including: • Adverse changes in the payment status of the portfolio’s borrowers. • National or local economic conditions that correlate with defaults on the portfolio’s assets. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss recognised in the consolidated income statement.

If the impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the fall in value was recognised (such as an improvement in the debtor’s credit rating), the previous loss is reversed in the consolidated income statement. Reversal of previous losses must not exceed the expected value, if the impairment had not been made.

Impairment testing of trade receivables is described in note 2.16.

2.14 Derivatives and hedging Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value on an ongoing basis. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group classifies derivatives that are part of a hedging instrument as either: i. hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge) or ii. hedges with variable cash flows with a particular risk associated with a recognised asset, liability or a highly probable forecast transaction (cash flow hedge).

At the inception of the transaction, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. Such assessments are documented both at hedge inception and on an ongoing basis.

The fair values of derivatives used for hedging purposes are presented in note 11C. Changes in the equity item hedging are presented in note 16. The fair value of a hedging derivative is classified as a non-current asset or long-term liability if the remaining term of the hedging item is more than 12 months and as a current asset or current liability if the remaining term of the hedging item is less than 12 months. Trading derivatives are classified as current assets or current liabilities.

Cash flow hedging The effective portion of changes in the fair value of derivatives that are designated and qualify as hedging instruments in cash flow hedges is recognised directly in other comprehensive income. Losses and profits on the ineffective portion are recognised in the income statement.

Hedge gains or losses recognised in other comprehensive income and accumulated in equity are recognised as income or expense in the period during which the hedged item affects the income statement (for example, when the planned sale is taking place). Gains or losses relating to the effective portion of interest rate swaps hedging variable rate loans are recognised in the income statement under “financial expenses”. Gains or losses on the ineffective portion are recognised in the income statement. When the forecast hedged transaction results in the recognition of a non-financial asset (such as inventories or tangible non-current assets), the gains and losses previously recognised within other comprehensive income are transferred to the initial carrying amount of the asset. The deferred amounts are ultimately recognised in cost of goods sold or in depreciation of tangible non- current assets.

F-233 When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is recognised in the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

2.15 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first- out (FIFO) method. Net realisable value is the estimated selling price less costs to sell.

2.16 Trade receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If settlement is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are classified as non-current assets.

Trade receivables are recognised and presented at the original invoice amount and written down following “loss events” which have an impact on the payment of the receivable that can be reliably estimated. Thus, trade receivables are accounted for at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant.

2.17 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank deposits and other short-term liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities in the balance sheet. Cash and cash equivalents are defined differently in the balance sheet and cash flow presentation. Restricted capital is included in the balance sheet presentation but not in the cash flow presentation

2.18 Share capital and premiums Ordinary shares are classified as equity.

Expenses directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the company’s equity share capital (own shares), the consideration paid, including any directly attributable transaction costs (net of taxes), is deducted from equity attributable to owners of the parent until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable transaction costs and the related tax effects, is included in equity attributable to owners of the parent.

2.19 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are classified as non-current liabilities.

Trade payables are recognised initially at fair value. Subsequently, trade payables are measured at amortised cost using the effective interest method. The interest element is disregarded if it is insignificant.

2.20 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are recognised at amortised cost using the effective interest method. The difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as part of the effective interest.

F-234 2.21 Compound financial instruments Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are recognised at amortised cost using the effective interest method. The difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings as part of the effective interest.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

2.22 Current and deferred taxes The tax expense for a period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In such case, the tax is also recognised in other comprehensive income or directly in equity.

Current tax is calculated in accordance with the tax laws and regulations enacted or substantively enacted on the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax laws are subject to interpretation. Based on management’s assessment, a provision is made for expected tax payments when necessary.

Deferred tax is recognised, using the liability method, on all temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not recognised in the balance sheet if it arises from initial recognition of an asset or liability in a transaction other than a business combination, which at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and tax laws which have been enacted or substantially enacted by the balance sheet date and which are expected to apply when the deferred tax asset is realised, or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the tax-reducing temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences is controlled by the group, and it is probable that the temporary difference will not reverse in the foreseeable future.

The group makes provisions for uncertain and contested tax positions. This provision is reversed if the contested tax position is decided in favour of the group and can no longer be appealed.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.23 Pension obligations, bonus plans and other employee benefits (a) Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies, determined by periodic actuarial calculations. The group has both defined contribution and defined benefit plans. A defined contribution plan is a pension scheme under which the group pays fixed contributions to a separate entity. The group has no legal or constructive obligations to pay further contributions if the entity does not have sufficient assets to pay all employees

F-235 the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension scheme that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement. Pension payments are dependent on one or more factors such as age, number of years of service and salary.

The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date, less the fair value of plan assets. The pension obligation is calculated annually by an independent actuary. The present value of the defined benefit obligation is determined by discounting estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation, alternatively government bond rates if such rates are not available. For Norwegian schemes, the 10-year government bond rate at the balance sheet date is used, with an additional provision taking into account relevant terms to maturity for the pension obligations.

Variances from estimates arising from experience adjustments or changes in actuarial assumptions are recognised in equity within other comprehensive income, for the period in which they arise.

Changes in pension scheme benefits are recognised immediately as expenses or income in the income statement, unless rights in the new pension scheme are conditional on the employee remaining in service for a specific period of time (the vesting period). In such case, the costs associated with the change in benefit are amortised linearly over the vesting period.

For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as payroll costs when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

The Norwegian Parliament (Storting) adopted a new law on the AFP early retirement scheme in February 2010. The new AFP early retirement scheme is accounted as a benefit-based multi-entity plan. This entails that individual entities account for their proportional share of the plan’s pension obligations, assets and costs. Until there is reliable and consistent information for provisions, the new AFP early retirement scheme is recognised as a defined contribution plan.

(b) Termination benefits Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to the present value. A discount rate before tax that reflects the current market situation and is risk-specific for the liability concerned is used. Any increase in the liability as a result of changed time values is recognised as an interest expense.

(c) Profit-sharing and bonus plans The group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the parent company’s shareholders after certain adjustments. The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

2.24 Provisions Provisions for restructuring costs and legal claims are recognised when the group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination benefits. Provisions are not recognised for future operating losses; however, provisions for unprofitable contracts are recognised.

F-236 Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Thus a provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. A discount rate before tax that reflects the current market situation and is risk-specific for the obligation concerned is used. Any increase in the obligation as a result of changed time values is recognised as an interest expense.

2.25 Revenue recognition

Revenue from the sale of goods and services is recognised at the fair value, net of VAT, returns, discounts, and rejects. Intragroup sales are eliminated.

Sales are recognised when revenue can be reliably measured, it is probable that the economic benefits associated with the transaction will flow to the group and specific criteria related to the various forms of sale that are listed below are met. The group bases its accounting estimates on historic income, an assessment of the type of customer and transaction concerned, as well as any specific conditions attached to the individual transaction.

Revenues are recognised in the income statement as follows:

(a) Sales of services and travel

Sales of services are recognised in the accounting period when the service is rendered and/or delivered. For ship voyages, this is based on the days the passenger is on board. Revenues related to ship voyages are accrued on the basis of the number of days the voyage lasts before and after the end of the accounting period. Prepaid revenues on the balance sheet date are recognised as debt. Earned but not invoiced services are recognised in the income statement on the balance sheet date as a receivable.

(b) Sales of goods

Sales of goods are recognised when an entity within the group has sold the product to the customer. The sale is considered completed when the customer has received the item after payment. Payment for retail transactions is usually made in the form of cash or by credit card. The revenue is recognised in the income statement including the credit card fees incurred for the transaction. The fees are recorded as sales expenses.

(c) Public procurement

Revenues received from public procurement are recognised in the income statement on a continuous basis over the year on the basis of existing contracts. These contracts are primarily based on a tender, where the company has a fixed contract sum for planned (annual) production. There are specific conditions and calculation methods for the indexation of the contract sum. Any changes beyond the planned production are compensated/ deducted utilising agreed-upon rates set out in the agreements, and recognised in the periods in which they occur.

(d) Rental income

Rental income is recognised continuously over the year, divided by the number of days/months the tenant has had the object at their disposal in relation to the agreement.

(e) Interest income

Interest income is recognised in accordance with the effective interest method. Should an impairment of loans and trade receivables be required, the carrying amount is reduced to the recoverable amount. The recoverable amount is estimated future cash flow discounted by the original effective interest rate. After impairment, interest income is recognised based on the original effective interest rate.

F-237 (f) Dividend income Dividend income is recognised when the right to receive payment is established.

2.26 Leases 2.26.1 The group as lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a linear basis over the period of the lease.

When the group has substantially all the risks and rewards of ownership, leases are classified as finance leases. Assets secured through finance leases are recognised in the income statement at the inception of the lease at the lower of the fair value of the asset and the present value of the minimum lease payment. The group employs the implicit interest rate for the lease in its calculations. Direct expenditures related to entering the contract are added to the amount recognised as an asset. Assets are depreciated according to the asset’s expected useful life.

Debt to the lessor is recognised in the balance sheet as a finance lease liability. The liability is reduced by lease payments less estimated interest expenses.

2.26.2 The group as lessor The group leases out vessels on time charter and bareboat agreements. All of the group’s leasing agreements for vessels are considered a lease of assets and fall under IAS 17 Leases. These leases are considered operating leases based on the structure and duration of the agreement.

(a) Time charter The group leases out vessels on time charter (TC). For time charters (supplytime 89), the vessel is leased out with a crew. The lessee determines, within the limitations of the lease, how the vessel will be used. The lessor covers operating costs, such as crew, operational supplies, insurance, repairs and administration, while the lessee covers costs such as bunkers and port fees. In addition to the lease of vessels, there are, in some instances, agreements for additional services such as extra crew, sale of provisions and coverage of other operating costs. Revenues from leasing vessels on time charters are recognised linearly over the duration of the lease. The lease period starts from the time the vessel is at the disposal of the lessee and ceases upon the agreed return delivery. Leasing of additional crew and considerations for coverage of other operating costs are recognised linearly over the duration of the lease.

Services supplied in connection with a time charter are recognised in the accounting period when the service is rendered and/or delivered. Ref. note 2.25.

(b) Bareboat In a bareboat agreement, all operational risk rests with the lessee, who is responsible for covering all costs related to the vessel. Revenues from leasing vessels on bareboat agreements are recognised linearly over the duration of the lease. The lease period starts from the time the vessel is at the disposal of the lessee and ceases upon the agreed return delivery.

2.27 Dividends Dividend distribution to the parent company’s shareholders is recognised as a liability in the group’s financial statements when the dividends are approved by the general meeting.

2.28 Government grants Government grants are recognised at fair value when there is reasonable assurance that the grant will be received and that the group will meet the terms of the grant.

F-238 2.29 Classification and maintenance costs In connection with docking vessels, expenditures and improvements required by the classification will be capitalised and depreciated over time up to the next class survey/docking. The same applies to costs for class recertification. Periodic maintenance is recognised in the balance sheet and expensed over the period until the next periodic maintenance. The initial carrying amount of newbuildings and second-hand tonnage is decomposed (note 2.7), with a portion corresponding to the first periodic maintenance cost recognised in the balance sheet and expensed over the period until the next periodic maintenance. On the disposal of vessels, capitalised costs charged to expenses will be classified as part of the gain/loss.

Fast ferries, classified as discontinued business and as held-for-sale, are subject to regular annual classification with costs expensed on a continuous basis.

Ongoing maintenance for all vessel types is expensed continuously during the period in which the work is performed.

2.30 Borrowing costs Borrowing costs directly attributable to the construction of operating assets are recognised in the balance sheet until the asset is ready for its intended use. Other borrowing costs are expensed.

2.31 Remuneration based on share prices The group has remuneration based on share price, structured as synthetic options with cash settlements.

The fair value of options allocated during the period is calculated using the Black-Scholes option pricing model. This is done quarterly. Key inputs for calculations are: the share price at allotment date, exercise prices, the standard deviation of expected stock returns and annual risk-free interest rate. Volatility measured using the standard deviation of expected returns is based on statistical analysis of the daily share price for the agreed period.

The fair value is expensed over the vesting period. On each balance sheet date, the group reviews its estimates for the number of expected options. The group recognises any effects of changes to the original estimates in the income statement.

NOTE 3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS Estimates and discretionary assessments are reviewed on an ongoing basis and are based on past experience, consultation with experts, trend analyses and other factors, including forecasted future events that are regarded as likely under current circumstances.

3.1 Critical accounting estimates and assumptions The group makes estimates and assumptions about the future. By definition, the accounting estimates that are made as a result of the above processes will rarely fully correspond with the final outcome. Estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Estimated impairment of goodwill The group performs annual tests to assess impairment of goodwill, cf. note 2.8. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. These calculations require the use of estimates (note 9) for the required rate of return for the period, cash flows and the growth factor of the cash flows.

The group does not use a general growth factor beyond expected inflation for cash flows when testing goodwill for impairment. The required rate of return used to discount cash flows is calculated as a weighted average return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk-free interest rate, risk premium, beta and the liquidity premium.

F-239 (b) Ships Useful economic lifetime The level of depreciation depends on the estimated economic life of the ships. This estimate is based on history and experience related to the group’s ships. The estimate is re-assessed periodically. A change in the estimate will affect depreciation in future periods.

Estimated impairment of ships On indication, the group tests whether ships have suffered any impairment, see note 2.7. The estimated recoverable amount is determined using the present value of budgeted cash flows for the cash-generating units. Ships are considered within their segment as a collective cash-generating unit. These calculations require the use of estimates (note 8) for the required rate of return for the period, cash flows and the growth factor of the cash flows.

The group does not use a general growth factor beyond expected inflation for cash flows when testing ships for impairment. The required rate of return used to discount cash flows is calculated as a weighted average return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of the risk- free interest rate, risk premium, beta and the liquidity premium.

(c) Fair value of derivatives and other financial instruments The fair value of financial instruments not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The group uses its judgement to select a variety of methods and to make assumptions based mainly on market conditions existing at each balance sheet date. Refer to note 11A for more information.

(d) Pension assumptions The group has both defined contribution and defined benefit pension schemes. Measurement of pension cost and pension obligations for defined benefit plans requires that the actuary include a number of assumptions and estimates such as discount rate, level of future salary, expected employee turnover rate, return on plan assets, annual pension increase, the expected G-regulation (the National Insurance Scheme basic amount) and demographic assumptions.

The group has pension obligations in Norway and Germany. The discount rate used to calculate pension obligations in Norway is based on the 10-year government bond rate at the balance sheet date, with an additional provision taking into account relevant terms to maturity for the pension obligations. Hurtigruten’s pension obligations for 2011 apply to Norway. The discount rate applied in Norway at 31 December 2011 is 2.6 per cent, in accordance with guidance from the Norwegian Accounting Standards Board on the determination of pension assumptions at 31 December 2011. For obligations in Germany, the discount rate is determined by the interest rates on high-quality corporate bonds denominated in the currency in which the benefits will be paid, with terms to maturity approximating the term of the related pension obligation. The discount rate applied in Germany at 31 December 2011 is 4.6 per cent.

Changes in pension assumptions would affect the pension obligation and pension cost for the period. Pension obligations are significantly affected by changes in the discount rate, life expectancy and expected salary and pension adjustments.

Refer to note 19 for more information about pensions.

(e) Income tax Income tax is calculated based on results in the individual group companies. The group is subject to income taxes in several jurisdictions. Calculation of the period’s tax expense and distribution of tax payable and deferred tax for the period requires a discretionary assessment of complex tax regulations in several countries. Therefore, there will be uncertainty about the final tax liability for many transactions and calculations. Where there is a discrepancy between the final tax outcome and the

F-240 amounts that were initially recorded, this discrepancy will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Refer to note 18 for more information about income tax.

(f) Deferred tax assets The basis for recognising deferred tax assets is based mainly on the utilisation of loss-carry forwards through future taxable income in the group. The assessment is made based on management’s estimates of future profits in the group and includes an assessment of the group’s future strategy, economic developments in the markets in which the group operates, future tax regimes and the group’s ability to deliver forecasted synergies. In the presentation of the financial statements, management has assessed the future taxable income to be sufficient to utilise the recognised deferred income tax assets. Refer to note 18 for more information on recognised deferred tax assets.

(g) Disputes, claims and regulatory requirements The group is a party to, or affected by disputes, claims and regulatory requirements where the outcome is to a large degree unknown. Among other things, management considers the probability of negative outcomes and opportunities for estimating any loss in the event of such negative outcomes. Unexpected events or changes to factors taken into consideration that have an impact on specific conditions, may result in increases or reductions to provisions. Such changes may also result in that new provisions must be made for conditions that were previously assessed as an unlikely outcome or for which it was previously not possible to make reliable estimates.

3.2 Important discretionary assessments utilising the entity’s accounting policies (a) Provisions for the possible return of income in connection with a supplementary agreement In connection with a case in front of the EFTA court, the group’s management has made a discretionary provision of NOK 35 million. Refer to note 5 for more information.

(b) Provisions for possible losses in connection with charters In connection with an open arbitration case in Australia, the group’s management has made a discretionary provision of NOK 46 million. Refer to note 5 for more information.

(c) Assets held-for-sale The group’s fast ferries are classified as held-for-sale. This classification is made based on the management’s decision on the sale of the fast ferries after operation of the fast ferry business was discontinued. Refer to note 7 for more information.

NOTE 4 FINANCIAL RISK MANAGEMENT The group uses financial instruments such as bank loans, bonds and convertible bonds. The purpose of these financial instruments is to provide capital for investments necessary for the group’s operations. In addition, the group utilises financial instruments such as trade receivables, trade payables, etc., that are directly related to day- to-day operations. The group uses certain financial derivatives for hedging purposes. The group uses financial derivatives for trading purposes to a limited extent.

4.1 Financial risk factors The group’s activities expose it to a variety of financial risks: market risks (including currency, price, fair value interest rate and floating interest rate risk), credit risk and liquidity risk. The group’s overarching risk management goal is to increase predictability for the group’s operations and to minimise the impact of fluctuations in macro conditions on the group’s results and financial position.

The group has defined overarching principles for risk management which encompass guidelines for specific areas such as currency, interest rate and credit risk, the use of financial derivatives, and the management of surplus liquidity. The board of directors approves the group’s risk management

F-241 strategy and follows up risk exposure quarterly. The CFO function is responsible for conducting ongoing tactical risk management in line with the approved strategy, including exposure analyses and reporting.

(a) Market risk (i) Currency risk The group operates internationally and is exposed to currency risk in multiple currencies, in particular, the euro (EUR), US dollar (USD), pound sterling (GBP) and the Australian dollar (AUD). Currency risk arises from future ticket sales as well as recognised assets or liabilities. In addition, fuel cost is quoted in USD. Currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency which is not the entity’s functional currency.

The group’s risk management policy is aimed at securing 60–80 per cent of net expected cash flows in EUR for the next one to two years, using transparent and liquid financial derivatives, normally futures contracts combined with foreign currency loans. Forward hedges have been made on 60 per cent of net expected cash flows in EUR for 2012. The company implemented a refinancing of debt that was completed in March 2012. Portions of the loan can be converted from NOK to EUR to achieve a “natural hedge”. The exact time for the conversion has not been set.

In connection with the 18 month lease of MS Finnmarken as a hotel ship to Boskalis Australia Pty Limited, starting in April 2010, the group has also had foreign currency hedges in AUD, equivalent to approximately 60 per cent of the expected cash flow for the remaining period of the contract. These foreign currency hedges expired simultaneously with the contract 30 October 2011.

The price of oil, and thus bunker oil, is internationally traded in USD, while the group purchases bunker oil in NOK. The risk can therefore be split into a currency element and a product element. The currency element is partially aligned with the group’s cash flow exposure in USD, and the product risk is hedged separately.

Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12 Consolidation— special purpose entities. The two entities have portions of their debt in EUR and USD. The group is therefore exposed to currency risk when paying interest and converting this debt to NOK. The debt in EUR and USD is partially hedged through the group’s net revenues in these currencies.

The group has minor investments in foreign subsidiaries whose net assets are exposed to currency translation risk.

The table below shows the group’s sensitivity to potential changes in the exchange rate for NOK against relevant currencies in relation to the exchange rate on 31 December, with all other variables held constant. Changes mainly relate to foreign exchange gains/losses on translation of financial derivatives, borrowings, trade receivables, cash in bank and other placements.

Effect on net profit/loss after tax Effect on equity 2011 2010 2011 2010 (in NOK million) Change EUR/NOK 5% ...... 4.9 (4.9) 5.7 (4.2) Change USD/NOK 5% ...... (1.3) (1.5) (1.3) (1.4) Change GBP/NOK 5% ...... 0.4 1.6 0.4 1.6 Change AUD/NOK 5% ...... 9.4 10.7 9.4 10.1

The calculations assume that the NOK weakens by 5 per cent against the relevant currencies. With an equivalent strengthening of the NOK, the amounts would have the opposite value. The effect on equity is different than the effect on profit/loss because the currency and bunker derivatives are recognised as hedges and adjustments are recognised directly in equity.

(ii) Price risk The group is exposed to bunker price risk and the board of directors has approved a strategy of quarterly rolling hedges of 20–80 per cent of estimated future consumption for 4–6 future quarters, where the group hedges a larger share of consumption in the near future and a smaller share further

F-242 ahead. In addition, the group has a stop-loss strategy where it attempts to hedge the unhedged amount if the price of oil rises above a predefined threshold. Hedges are made in the forward market on 48 per cent of expected bunker consumption for 2012, distributed with a higher proportion in the coming quarters, and a lower proportion towards the end of the year.

The table below shows the group’s sensitivity to potential changes in price of bunker, with all other variables held constant.

Effect on net profit/loss after tax Effect on equity 2011 2010 2011 2010 (in NOK million) Change bunker price 20% ...... (36.6) 1.3 (30.5) 2.4

These calculations are based on the average unhedged bunker volume, and indicate how an increase of 20 per cent in bunker prices would have had an impact on financial statements for 2010 and 2011. The effect on equity is different than the effect on profit/loss because these hedging activities fulfil the requirements for hedge accounting and unrealised changes in value are recognised directly in equity.

(iii) Cash flow and fair value interest rate risk

The group’s interest rate risk is associated with current and non-current debt. Loans with a variable interest rate present a risk to the group’s total cash flow. Fixed interest rates expose the group to fair value interest rate risk. Over the course of 2010 and 2011, the group’s loans at variable interest rates were mainly in NOK. A portion of the loans assumed by Kystruten KS (SPE) and Kirberg Shipping KS (SPE) are in EUR and USD.

The group manages its variable interest rate risk through variable-to-fixed interest rate swaps. Interest rate swaps involve converting loans with variable interest rates to fixed-interest loans. Through interest rate swaps, the group enters into contracts with other parties to swap the difference between the contract’s fixed interest rate and the amount of the variable interest rate calculated on the agreed principal. At 31 December 2011, a smaller portion (approximately 8 per cent) of the group’s debt was hedged. In connection with Hurtigruten’s refinancing of debt in March 2012, interest rate hedges will be established for 40–60 per cent of the bank loan.

The table below shows the group’s sensitivity to potential changes in interest rate levels, with all other variables held constant. These calculations take all interest-bearing instruments and associated derivatives into consideration.

Effect on net profit/loss after tax Effect on equity 2011 2010 2011 2010 (in NOK million) Change in interest rate level with +50 basis points ...... (11.4) (12.2) 1.1 1.1

An increase of 0.5 per cent in the variable interest rate would increase the group’s interest costs by approximately NOK 11.4 million (2010: NOK 12.2 million) net of tax. Equity would have been NOK 1.1 million (2010: NOK 1.1 million) higher as a result of the change in the fair value of interest rate swaps.

(b) Credit risk

The group has no significant concentration of credit risk. Sales to end users are settled in cash or with recognised credit cards. Sales to external agents occur either through prepayment/credit cards or through invoicing. The group has routines to ensure that credit is only given to agents with a satisfactory credit rating. Individual risk exposure limits are set based on internal and external assessments of credit ratings.

The counterparties to the derivative contracts and cash transactions are limited to financial institutions with high credit ratings. The group has routines that limit exposure to credit risk related to a single financial institution.

F-243 At 31 December 2011 a larger share of trade receivables than normal was due but not impaired. This is primarily due to additional compensation from the Norwegian government still pending a decision on an ESA inquiry as to whether additional compensation from the government is contrary to EU rules on state aid. Credit risk related to the Norwegian government as a customer is considered very low. For further details on the contingent outcome see note 5 and the note about receivables and other investments (note 12). In addition, there is an increase in outstanding trade receivables in relation to the group’s concluded operations in Australia. Hurtigruten’s Australian subsidiary, Hurtigruten Pty Ltd, has filed an arbitration case against the contracting party concerning outstanding claims in connection with the leasing of MS Finnmarken. Hurtigruten is considered to have a good case but, following the prudence principle, has chosen to make a provision of NOK 46 million at 31 December 2011. For further details on the contingent outcome see note 5.

(c) Liquidity risk Liquidity risk management includes maintaining a sufficient level of liquid assets, and ensuring the availability of sufficient funding from committed credit facilities. The group has a group account that ensures that part of the group’s free liquidity is available to the parent company, thus minimising the risk of internal factors affecting the group’s liquidity.

The table below outlines the maturity of the group’s financial liabilities.

Under One to Three to More than one year three years five years five years (in NOK 1,000) 31 December 2011 Bank loan ...... 1,186,071 2,440,819 86,133 54,202 Convertible bond loan ...... 50,538 — — — Bond loan ...... 52,067 — — — Trade payables and bond other current liabilities ...... 719,462 — — — Total ...... 2,008,137 2,440,819 86,133 54,202 31 December 2010 Bank loans ...... 282,378 3,546,231 143,748 173,998 Convertible bond loan ...... 4,840 50,618 — — Bond loan ...... 5,115 53,494 — — Trade payables and other current liabilities ...... 679,257 — — — Total ...... 971,590 3,650,344 143,748 173,998

Hurtigruten has financial covenants attached to its loan liabilities (note 17). At 31 December 2011 all these covenants had been met.

F-244 The following table specifies the group’s derivatives classified according to maturity. Classification is based on contractual maturity. Forward exchange contracts are settled gross, while interest rate swaps and futures contracts for bunker oil are settled net. The amounts in the table are undiscounted cash flows.

Under One to Three to More than one year three years five years five years (in NOK 1,000) 31 December 2011 Forward exchange contracts—hedges —outflow ...... (465,240) — — — —inflow ...... 493,115 — — — Interest rate swaps—hedges —outflow ...... (6,344) (6,327) — — —inflow ...... — — — — Futures contracts bunker oil—hedges —outflow ...... — — — — —inflow ...... 6,341 — — — 31 December 2010 Forward exchange contracts—hedges —outflow ...... (614,189) (351,563) — — —inflow ...... 605,953 374,675 — — Interest rate swaps—hedges —outflow ...... (8,196) (17,057) — — —inflow ...... — — — — Futures contracts bunker oil—hedges —outflow ...... — — — — —inflow ...... 11,755 — — —

4.2 Risk related to asset management The group’s long-term goal for asset management is to ensure continued operation, and thereby ensure future dividends for shareholders. Furthermore, the object is to maintain an optimal capital structure, and thereby reduce the group’s capital costs. There has been no significant change in the group’s asset management from 2010 to 2011.

In order to maintain and improve the capital structure, the group has no plans for declaring dividends or repaying capital to shareholders in the short term. As part of the group’s asset management, and part of the restructuring plan adopted and implemented in the period 2008–2011, the group has focused on disposing of entities defined as non-core business activities, and on completing a share issue in early 2009. The group has an opportunistic stance on the divestiture of entities defined as non-core business activities. No additional share issues have been planned for the short and medium terms.

The group monitors capital structure on the basis of, inter alia, equity ratio. This ratio is calculated as equity divided by total assets and was, at 31 December 2011, at 26.0 per cent (31 December 2010: 26.1 per cent).

The group has a convertible bond loan at a total of NOK 48.4 million, which is recognised as equity in accordance with the group’s loan agreements. Including the convertible bond loan the equity ratio was 26.7 per cent at 31 December 2011. The company meets the requirements for equity in the loan agreements (note 17).

NOTE 5 CONTINGENCIES At 31 December 2011, the group had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent outcomes in the course of regular operations. Significant liabilities are not expected to arise with respect to contingent outcomes with the exception of the provisions that have already been set aside in the accounts (note 20).

F-245 Membership in the NOx Fund NOK 13.4 million in nitrogen oxide tax was charged to the annual accounts for 2011 (2010: NOK 14.0 million). Members of the industrial fund for nitrogen oxides have collectively undertaken to reduce emissions of these gases by 18,000 tonnes in total, broken down into 2,000 tonnes in 2008, 4,000 tonnes in 2009 and 12,000 tonnes in 2010. A new environmental agreement relating to NOx for the period from 2011 to 2017 was signed on 14 December 2010. The signatories of the environmental agreement for the period from 2011 to 2017 have undertaken to reduce their overall nitrogen oxide emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017.

The Norwegian Climate and Pollution Agency will monitor that the Fund reaches its collective targets. If these targets are not met, the members may be required to pay the full amount of the tax on their respective share of the emissions. This requirement will be calculated on the basis of the percentage of the collective target that has not been achieved. The Fund has achieved its targets for the period from 2008 to 2010. The NOx Fund has disclosed on its website that if all of the planned measures are implemented as intended until the end of 2011, the affiliated companies will meet their overall commitments for 2011 with a high level of probability.

Supplementary Agreement in connection with the public procurement contract for the Bergen to Kirkenes coastal service The Norwegian authorities agreed in 2004 on a contract with Hurtigruten ASA for the delivery of transport services along the Norwegian coast from Bergen to Kirkenes for the period from 2005 to 2012. This contract was awarded based on competitive tendering. In October 2008 it was decided to increase the compensation to Hurtigruten ASA for the remaining term of the contract by refunding 90 per cent of the NOx payments, general compensation due to higher costs and allowing a reduction in the number of ships from 11 to 10 in the winter for the remaining term of the contract. The Ministry of Transport and Communications has assumed that the additional grant is in line with state aid policies.

In July 2010 the EFTA Surveillance Authority (ESA) decided to formally investigate in order to verify whether the supplementary agreement entered into in 2008 is in accordance with the EEA’s rules for state aid. In June 2011 the ESA concluded that the additional compensation had not been granted in accordance with the EEA’s rules. It was not evident from the conclusion what portion of the supplementary agreement the ESA believed to represent illegal state aid.

At 31 December 2011 Hurtigruten had recognised income of NOK 405 million (NOK 89 million of which was recognised in 2011) under the supplementary agreement, including the effect of reducing the number of ships in the winter from 11 to 10, and received NOK 170 million of this. The government represented by the Ministry of Transport and Communications has appealed the ESA’s decision and declared that no portion of the additional compensation represents illegal state aid. Hurtigruten has also appealed. The ESA replied on 15 December 2011 and maintained its assertion that Hurtigruten was overcompensated during the period in question. The government represented by the Ministry of Transport and Communications and Hurtigruten do not share the opinion of the ESA, and the issue will be settled by the EFTA court. A hearing in the case has been scheduled for 18 April 2012. Normally it takes up to half a year before a decision is handed down. Due to the principle of prudence, Hurtigruten has set aside provisions totalling NOK 35 million with respect to the supplementary agreement at 31 December 2011. These provisions have been accounted for as a reduction in the contractual revenue and receivables from the government (note 12).

The existing contract with the government represented by the Ministry of Transport and Communications expired on 31 December 2011 after Hurtigruten and the government agreed on a new contract for the Bergen to Kirkenes coastal service for the period from 2012 to 2019. The new contract entered into force on 1 January 2012.

Charter arbitration case Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd filed an arbitration case against the other contracting party for outstanding claims in connection with the charter of the MS Finnmarken. The

F-246 outstanding claim amounts to NOK 360 million. Hurtigruten believes that it has a good case, but, due to the principle of prudence, it has set aside provisions totalling NOK 46 million at 31 December 2011. The provisions have been accounted for as provisions for bad debts under other operating costs (note 12). Operating revenues for the 2011 financial year totalled NOK 667 million (note 6). It is expected that the case will be heard by the arbitration tribunal by the end of 2012.

The charter party expired on 30 October 2011.

Legal charges against TIRB and Cominor Legal charges were brought against AS TIRB and its subsidiary Cominor AS by the Troms county council in May 2009. A complaint was filed with the court of conciliation in December 2009. The Troms county council claimed that the companies have overcharged for occasional assistance, and for unforeseen and unplanned driving, for a total amount of NOK 25 million, excluding interest. The Nord Troms District Court delivered its judgment in the case on 4 January 2012 and ordered TIRB and Cominor to pay compensation of NOK 16 million to the Troms county council. The judgment has been appealed to the Court of Appeal. The companies have set aside provisions for losses for only a portion of the judgment, NOK 8 million, since the financial calculations in the judgment are disputed.

F-247 NOTE 6 SEGMENT INFORMATION (a) Primary reporting format—operating segments (product areas) The operating segments are identified based on the same reporting as the management and board apply to their evaluations of performance and profitability at a strategic level. The classification is broken down into the product areas Hurtigruten Norwegian Coast, Explorer products/MS Fram, Spitsbergen and Charter. Business activities that do not naturally fall under these four areas are classified as Other business.

Hurtigruten Explorer products/ Other Hurtigruten Norwegian Coast MS Fram Spitsbergen Charter business Eliminations group 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 (in NOK 1,000) Operating revenue ...... 1,757,174 1,642,964 263,952 228,119 137,760 200,854 666,617 590,753 192,143 220,594 (10,852) (30,429) 3,006,794 2,852,855 Sales revenue ...... 366,118 348,781 15,483 13,820 — — — — — — — — 381,601 362,601 Contractual revenue (note 23) ...... 325,271 376,948 — — — — — — 213,055 195,455 — — 538,326 572,403 Total revenue ...... 2,448,563 2,368,693 279,435 241,939 137,760 200,854 666,617 590,753 405,198 416,049 (10,852) (30,429) 3,926,720 3,787,859 Payroll costs ...... (653,565) (636,828) (37,099) (35,628) (47,884) (45,453) (246,068) (134,407) (202,127) (202,763) — — (1,186,744) (1,055,078) Depreciation and impairment ...... (287,690) (239,929) (19,156) (18,542) (11,087) (10,915) (35,171) (34,862) (97,196) (55,857) — — (450,300) (360,105) Other operating costs ...... (1,590,936) (1,472,794) (196,686) (152,018) (85,459) (118,234) (302,643) (280,454) (161,745) (162,610) 10,852 30,429 (2,326,615) (2,155,680) Other (losses)/gains—net ...... 40 (435) — — — — — — 83,280 7,889 — — 83,320 7,455 F-248 Operating profit/(loss) ...... (83,588) 18,707 26,494 35,751 (6,670) 26,252 82,735 141,030 27,410 2,708 — — 46,381 224,451 Finance expenses—net ...... (140,360) (146,840) (23,745) (22,654) 1,402 704 (29,623) (36,668) (1,238) (3,010) — — (193,565) (208,467) Share of profit/(loss) of associates ...... — — — — — — — — 2,352 (758) — — 2,352 (757) Profit/(loss) before tax from continuing business ...... (223,948) (128,133) 2,749 13,097 (5,268) 26,956 53,112 104,362 28,524 (1,060) — — (144,832) 15,227 Profit/(loss) before tax from discontinued business ...... — — — — — — — — (7,861) 6,341 — — (7,861) 6,341 Profit/(loss) before tax ...... (223,948) (128,133) 2,749 13,097 (5,268) 26,956 53,112 104,362 20,663 5,281 — — (152,693) 21,568 Segment profit/(loss): Operating profit before depreciation and impairment (EBITDA) ...... 204,102 258,636 45,650 54,293 4,417 37,167 117,906 175,892 124,606 58,565 — — 496,681 584,556 There has been a minor reclassification of the “Finance expenses—net” from the operating segment Other business to Hurtigruten Norwegian coast for 2010. This applies to interest expenses for the convertible bond loan and bond loan, which are presented now under Hurtigruten Norwegian coast.

The reporting of segment assets and liabilities is not part of the internal management reporting in the group. These are followed up primarily at the group level for significant assets and liabilities, and certain key figures (such as trade receivables) are assessed based on the status of the individual legal entities. Segment assets and liabilities are therefore not presented.

Hurtigruten Norwegian coast This product area comprises the company’s operation of the Bergen to Kirkenes coastal service in accordance with the contract with the Norwegian government represented by the Ministry of Transport and Communications. This service is operated using 11 ships with daily calls to 34 ports between Bergen and Kirkenes. Although passenger transport represents the greatest portion of the service, the cargo service is also substantial.

Explorer products/MS Fram This product area includes the cruise activities in Polar waters—Antarctica, Svalbard, Greenland and cruises between Antarctica and the Arctic. The cruises are operated by the MS Fram, which was custom-built to operate in Polar waters.

Spitsbergen Activities in Svalbard are organised under the Spitsbergen Travel group, a wholly owned subsidiary of Hurtigruten ASA. The product area consists of cruise operations, year-round overnight accommodation and adventure products in Svalbard. The company owns and runs two hotels and one guest house, and the adventure products are produced by the company’s own employees and local partners.

Charter This area includes the rental (charter) of ships to the oil industry, where they are used as hotel ships. The MS Finnmarken was taken out of the coastal operations late in 2009 for preparation for a charter as a hotel ship, and it has been chartered in the Gorgon field west of Australia from 30 April 2010 to 30 October 2011. After the expiration of the charter, the ship has undergone demobilisation and a 10-year classification survey in preparation for its return to coastal service in the middle of February 2012.

Other business This area mainly comprise the bus business, a limited portfolio of property and other activities that do not naturally fall under the other product areas. In 2010 this area also included Hurtigruten’s ownership interest in freight operations.

The bus business is operated by AS TIRB, which has its head office in Finnsnes and branch offices in Narvik and Tromsø. The group also owns a small portfolio of properties, primarily through its subsidiary HRG Eiendom AS, which is partially leased by the group and partially leased to external tenants. The freight business was operated through a 50 per cent ownership interest in Nor Lines AS, and the profit or loss from these operations is classified under “Profit/(loss) before tax from discontinued business” in the income statement. This business was sold with effect from 31 December 2010. “Profit/(loss) before tax from discontinued business” also includes the company’s two remaining fast ferries, which have been chartered on short-term contracts in 2010 and the first half of 2011 to a new operator for the Tromsø to Harstad service. The fast ferries were laid up in the middle of 2011, and the company is actively seeking to find interested parties in the market.

Eliminations Eliminations in 2010 consisted primarily of the charter of the MS Fram to Spitsbergen Travel AS, as well as the subsidiary Cominor AS’s excursions for Hurtigruten. Eliminations in 2011 consisted primarily of the subsidiary Cominor AS’s excursions for Hurtigruten.

F-249 (b) Secondary reporting format—geographical segments Operating revenues cannot be allocated to separate geographical segments with reliable figures. Management’s monitoring of geographical segments applies only to portions of the company’s revenue and is also to a large degree based on key non-financial indicators (such as the number of cruise nights).

NOTE 7 ASSETS HELD-FOR-SALE AND DISCONTINUED BUSINESS HELD-FOR-SALE Assets and liabilities related to the group’s fast ferry business are classified as held-for-sale in 2010 and 2011. The fast ferries have been chartered on short-term contracts in 2010 and until the summer of 2011. The fast ferries were laid up in the middle of 2011, and the company is actively seeking to find interested parties in the market.

Assets in the disposal group classified as held-for-sale:

2011 2010 (in NOK 1,000) Property, plant and equipment (note 8) ...... 60,384 68,076 Assets held-for-sale ...... 60,384 68,076

Liabilities in the disposal group classified as held-for-sale:

2011 2010 (in NOK 1,000) Borrowings (note 17) ...... 70,000 83,333 Liabilities related to assets held-for-sale ...... 70,000 83,333

DISCONTINUED BUSINESS Profit or loss from discontinued business includes the group’s remaining fast ferry business. The share of profit/loss of Nor Lines AS was also included in 2010. The shares in Nor Lines AS were sold in December 2010.

Profit/(loss) from discontinued business:

2011 2010 (in NOK 1,000) Operating revenue ...... 8,862 22,128 Payroll costs (note 24) ...... — (209) Depreciation and impairment (note 8) ...... (7,692) (7,692) Other operating costs (note 26) ...... (6,050) (3,391) Other (losses)/gains—net (note 27) ...... — (201) Operating profit/(loss) ...... (4,880) 10,635 Finance income (note 28) ...... — 7 Finance expenses (note 28) ...... (2,981) (3,210) Finance expenses—net ...... (2,981) (3,203) Share of profit/(loss) of associates (note 10, 27)(1) ...... — (1,091) Profit/(loss) before tax ...... (7,861) 6,341 Income tax expense (note 18) ...... 2,201 (2,080) Profit/(loss) for the year ...... (5,660) 4,261

(1) Includes the Hurtigruten group’s share of the loss from Nor Lines AS of NOK 12.5 million and capital gain from the sale of the shares in Nor Lines AS of NOK 11.4 million.

F-250 2011 2010 (in NOK 1,000) Net cash flow from operating activities ...... (169) 15,325 Net cash flow from investing activities ...... — 21,311 Net cash flow used in financing activities ...... (13,333) (13,333) Total net cash flow ...... (13,502) 23,303

Three fast ferries were sold at book value in 2010.

NOTE 8 PROPERTY, PLANT AND EQUIPMENT

Other property, Land and plant and buildings Ships equipment Total (in NOK 1,000) 2010 financial year Carrying amount at 1 January 2010 ...... 266,162 3,942,588 237,285 4,446,034 Additions ...... 5,085 86,566 77,080 168,731 Disposals ...... (4,849) (17,004) (6,846) (28,699) Depreciation for the year ...... (7,915) (293,168) (45,888) (346,971) Impairment losses for the year ...... — (7,692) — (7,692) Of which assets held-for-sale (note 7) ...... — (68,076) — (68,076) Carrying amount at 31 December 2010 ...... 258,483 3,643,214 261,631 4,163,328 At 31 December 2010 Acquisition cost ...... 403,981 5,880,495 754,332 7,038,808 Accumulated depreciation and impairment ...... (145,498) (2,169,205) (492,701) (2,807,404) Of which assets held-for-sale (note 7) ...... — (68,076) — (68,076) Carrying amount at 31 December 2010 ...... 258,483 3,643,214 261,631 4,163,328 2011 financial year Carrying amount at 1 January 2011 ...... 258,483 3,711,290 261,631 4,231,404 Additions ...... 15,795 145,299 27,046 188,140 Disposals ...... (93,084) — — (93,084) Depreciation for the year ...... (7,348) (300,176) (48,148) (355,672) Impairment losses for the year ...... — (46,324) (12,992) (59,316) Of which assets held-for-sale (note 7) ...... — (60,384) — (60,384) Carrying amount at 31 December 2011 ...... 173,846 3,449,705 227,537 3,851,087 At 31 December 2011 Acquisition cost ...... 255,732 6,025,785 744,627 7,026,145 Accumulated depreciation and impairment ...... (81,886) (2,515,696) (517,091) (3,114,673) Of which assets held-for-sale (note 7) ...... — (60,384) — (60,384) Carrying amount at 31 December 2011 ...... 173,846 3,449,705 227,537 3,851,087

Impairment tests for ships Ships that can be used within the same service are considered part of the same cash-generating unit. The following units have been tested for impairment:

Growth rate Discount rate Budget after 2012 before tax Hurtigruten ships ...... 2012 2.00% 9.69% MS Fram ...... 2012 2.00% 9.69%

The discount rate is before tax and based on the company’s internal required rate of return, in addition to the observable required rate of return for comparable companies. The growth rate after 2012 is based on the average nominal price inflation.

The following impairment losses were recognised in 2011: • impairment of damaged assets on the Hurtigruten ship the MS Nordlys as the result of a fire on board in September 2011, totalling NOK 39 million

F-251 • impairment of fast ferries as a result of the fact that the ferries have been chartered out for parts of the year, totalling NOK 8 million • impairment of the vehicle fleet related to the bus operations, totalling NOK 13 million

Lease agreements The group leases premises from the subsidiary HRG Eiendom AS as well as the associate ANS Havnebygningen. In addition, the parent company and subsidiaries also have external rental costs related to premises, and a subsidiary had chartered a vessel in 2010. The parent company’s charter of Hurtigruten ships has been eliminated in the consolidated financial statements (sale-leaseback agreement with two limited partnerships), and reference is made to note 20 concerning the details of this agreement. Furthermore, the parent company and subsidiaries have external costs related to the rental of other equipment and means of transport. These are operating leases.

Total rental costs related to the above comprise:

2011 2010 (in NOK 1,000) Rent for premises ...... 13,597 14,035 Charter hire for ships ...... — 11,214 Lease charges for other property, plant and equipment ...... 1,806 2,266 Total rental costs ...... 15,403 27,515

NOTE 9 INTANGIBLE ASSETS

Other intangible Goodwill assets Total (in NOK 1,000) 2010 financial year Carrying amount at 1 January 2010 ...... 179,340 68,477 247,817 Currency translation differences ...... (289) — (289) Additions ...... — 25,134 25,134 Depreciation for the year ...... — (13,135) (13,135) Reclassification ...... (5,439) 5,439 — Carrying amount at 31 December 2010 ...... 173,612 85,914 259,526 At 31 December 2010 Acquisition cost ...... 327,327 142,217 469,544 Accumulated depreciation and impairment ...... (148,276) (61,741) (210,017) Reclassification ...... (5,439) 5,439 — Carrying amount at 31 December 2010 ...... 173,612 85,914 259,526

Other intangible Goodwill assets Total (in NOK 1,000) 2011 financial year Carrying amount at 1 January 2011 ...... 173,612 85,914 259,526 Currency translation differences ...... — (216) (216) Additions ...... — 56,004 56,004 Depreciation for the year ...... — (13,106) (13,106) Impairment losses for the year ...... (29,898) — (29,898) Carrying amount at 31 December 2011 ...... 143,714 128,597 272,311 At 31 December 2011 Acquisition cost ...... 321,888 203,444 525,332 Accumulated depreciation and impairment ...... (178,174) (74,847) (253,021) Carrying amount at 31 December 2011 ...... 143,714 128,596 272,311

F-252 Goodwill has arisen in connection with business acquisitions. Other intangible assets consists primarily of capitalised development expenses related to ICT systems (booking, inventory systems, etc.) with a limited lifespan. The assets are depreciated on a straight-line basis over 3–10 years. Depreciation is presented under depreciation in the accounts.

Impairment losses in 2011 are related to the bus operations (Tromsø office) as a result of the fact that Cominor lost the competitive tendering for a new contract in Tromsø and surroundings commencing on 1 February 2012. Loss of the tender will entail lower future earnings.

A summary of the allocation of goodwill at the segment level is as follows:

2011 2010 (in NOK 1,000) Spitsbergen ...... 143,714 143,714 Other business (Bus) ...... — 29,898 Total ...... 143,714 173,612

The recoverable amount of a cash-generating unit is calculated on the basis of the approved budgets for the units. Liquidity forecasts based on budgets approved by the management are used.

Assumptions applied when calculating the recoverable amount:

Spitsbergen Budgeted EBITDA 2012 Growth rate from 2014 ...... 2.00% Discount rate before tax ...... 9.06%

NOTE 10 INVESTMENTS IN ASSOCIATES

2011 2010 (in NOK 1,000) Carrying amount at 1 January ...... 36,705 136,478 Disposal of associates ...... — (80,193) Profit/(loss) from discontinued business ...... — (12,490) Profit/(loss) for the year ...... 2,352 (757) Dividends ...... (334) (6,334) Other equity movements ...... 172 — Carrying amount at 31 December ...... 38,895 36,705

The group’s share of the profit/(loss), assets and liabilities in associates, none of which are listed, is as follows:

Share of profit/(loss) Ownership Voting Company Business office Assets Liabilities Revenue after tax interest share (NOK 1,000) (NOK 1,000) (NOK 1,000) (NOK 1,000) 2010 Funn IT AS ...... Narvik, Norway 18,282 6,702 35,151 (965) 50.0% 50.0% Senja Rutebil AS ...... Vangsvik, Norway 8,500 2,542 11,559 795 49.3% 49.3% ANS Havnebygningen ...... Tromsø, Norway 3,138 1,898 1,655 (587) 50.0% 50.0% Nor Lines AS ...... Stavanger, Norway — — 458,919 12,490 50.0% 50.0% Classified as held-for-sale (note 7) ...... — — (458,919) (12,490) 50.0% 50.0% Total ...... 29,920 11,142 48,365 (757) 2011 Funn IT AS ...... Narvik, Norway 25,945 11,564 37,475 2,629 50.0% 50.0% Senja Rutebil AS ...... Vangsvik, Norway 6,894 2,081 3,326 (927) 49.3% 49.3% ANS Havnebygningen ...... Tromsø, Norway 3,256 1,366 1,832 650 50.0% 50.0% Total ...... 36,095 15,011 42,632 2,352

F-253 NOTE 11A FINANCIAL INSTRUMENTS BY CATEGORY The following principles have been applied for the subsequent measurement of financial assets and liabilities:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) At 31 December 2011: Financial assets—non-current Receivables (note 12) ...... 318 — — — 318 Shares in other companies (note 12) ...... — 15,314 — — 15,314 Financial assets—current Trade and other receivables (note 12) ...... 920,176 — — — 920,176 Derivative financial instruments (note 11C) ...... — — 28,639 — 28,639 Cash and cash equivalents (note 14) ...... 573,153 1,358 — — 574,511 Financial liabilities—non-current Borrowings (note 17) ...... — — — 3,551,760 3,551,760 Derivative financial instruments (note 11C) ...... — — 17,776 — 17,776 Of which classified as held-for-sale (note 7) ...... — — — (70,000) (70,000) Financial liabilities—current Trade and other payables (note 22) ...... — — — 719,462 719,462 Derivative financial instruments (note 11C) ...... — 152 — — 152

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) At 31 December 2010: Financial assets—non-current Receivables (note 12) ...... 3,753 — — — 3,753 Shares in other companies (note 12) ...... — 14,371 — — 14,371 Derivative financial instruments (note 11C) ...... — — 12,677 — 12,677 Financial assets—current Trade and other receivables (note 12) ...... 885,271 — — — 885,271 Derivative financial instruments (note 11C) ...... — 2,709 18,924 — 21,633 Cash and cash equivalents (note 14) ...... 724,156 6,953 — — 731,109 Financial liabilities—non-current Borrowings (note 17) ...... — — — 3,781,919 3,781,919 Derivative financial instruments (note 11C) ...... — — 18,041 — 18,041 Of which classified as held-for-sale (note 7) ...... — — — (83,333) (83,333) Financial liabilities—current Trade and other payables (note 22) ...... — — — 679,257 679,257 Derivative financial instruments (note 11C) ...... — — 17,102 — 17,102

Assessment of fair value The level hierarchy used for the measurement of fair value is based on the following categories: • Listed price in an active market for an identical asset or liability (level 1)

F-254 • Valuation based on observable factors, either directly (price) or indirectly (derived from prices), other than listed price (used in level 1) for the asset or liability (level 2) • Valuation based on factors not obtained from observable markets (unobservable assumptions) (level 3)

The following table presents the group’s assets and liabilities measured at fair value at 31 December 2011:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... 5,504 23,135 — 28,639 Investments in other companies ...... — — 15,314 15,314 Other securities ...... 1,358 — — 1,358 Total assets ...... 6,862 23,135 15,314 45,311 Liabilities Derivatives used for hedging ...... — 17,776 — 17,776 Derivatives held for trading purposes ...... — 152 — 152 Total liabilities ...... — 17,776 — 17,776

The following table presents the group’s assets and liabilities measured at fair value at 31 December 2010:

Level 1 Level 2 Level 3 Total (in NOK 1,000) Assets Derivatives used for hedging ...... 11,755 22,556 — 34,311 Investments in other companies ...... — — 14,371 14,371 Other securities ...... 6,953 — — 6,953 Total assets ...... 18,708 22,556 14,371 55,635 Liabilities Derivatives used for hedging ...... — 35,143 — 35,143 Total liabilities ...... — 35,143 — 35,143

The fair value of financial instruments that are traded in active markets is based on the market prices on the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and these prices represent actual and regularly occurring market transactions on an arm’s length basis. The market price used for financial assets is the current bid price, and the price used for financial liabilities is the current asking price. These instruments are included in level 1 and comprise the fair value of forward bunker oil contracts and other securities.

The fair value of financial instruments that are not traded in an active market is determined by means of various valuation methods. The group uses various methods and makes assumptions based on the prevailing market conditions on the balance sheet date. If all the significant data inputs that are required to determine the fair value of an instrument are observable data, then the instrument will be included in level 2. This includes the fair value of interest rate swaps and forward foreign exchange contracts.

The nominal value less impairment for losses incurred on trade receivables and the nominal value of trade payables are assumed to approximate the fair value of the items.

If one or more of the significant data inputs are not based on observable market data, the instrument will be included in level 3.

F-255 Special valuation methods that are used to assess financial instruments include: • Quoted market or trading price for corresponding instruments. • Fair value of interest rate swap contracts is calculated as the present value of the future cash flow based on the observable yield curve. • Fair value of forward contracts in a foreign currency is calculated as the present value of the difference between the agreed forward price and the forward price on the balance sheet date multiplied by the contract volume in a foreign currency. The relevant interest rate on the balance sheet date is used for calculation of the present value. • Other methods, such as discounted cash flows, are used to determine the fair value of the remaining financial instruments.

The following table illustrates changes in the level 3 category instruments at 31 December 2011 and at 31 December 2010:

2011 2010 (in NOK 1,000) Investments in other companies Opening balance ...... 14,371 14,434 Investments during the period ...... 995 252 Sales during the period ...... (52) — Impairment losses during the period ...... — (316) Closing balance ...... 15,314 14,371 Total gains or losses for the period included in the profit or loss for assets held on the balance sheet date ...... — —

NOTE 11B CREDITWORTHINESS OF FINANCIAL ASSETS Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has longstanding partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2011 2010 (in NOK 1,000) Trade and other receivables Counterparties with external credit rating ...... — — Counterparties without external credit rating ...... 920,176 885,271 Total trade and other receivables ...... 920,176 885,271

2011 2010 (in NOK 1,000) Cash at bank(1) AAA ...... 527 — AA...... 481,809 571,765 A ...... 73,524 21,950 BBB...... 56 — Without external credit rating ...... 9,969 125,946 Total cash at bank ...... 565,885 719,661

(1) Remainder of the cash and cash equivalents is cash

F-256 Market-based investments AA...... — 6,953 A ...... 1,358 — Total ...... 1,358 6,953 Derivative financial instruments AA...... 20,493 22,556 A ...... 2,642 — Without external credit rating ...... 5,504 11,755 Total ...... 28,639 34,311

None of the financial assets have been renegotiated during the last financial year

NOTE 11C DERIVATIVE FINANCIAL INSTRUMENTS All derivatives designated as cash flow hedges are booked at fair value on the balance sheet, while changes in the fair value are recognised temporarily in the hedging reserve in equity and recognised in the income statement when the hedged cash flow is recognised in the income statement. Changes in the fair value of trading derivatives are recognised as finance income or finance expenses.

Fair value is calculated based on the mid-price set by the contract counterparty based on current prices in the market on the reporting date.

The table below illustrates the fair value of derivatives designated as cash flow hedges and derivatives held for trading purposes.

2011 2010 Assets Liabilities Assets Liabilities (in NOK 1,000) Forward foreign exchange contracts—cash flow hedging ...... 22,298 — 19,847 16,805 Currency options—held for trading purposes ...... — 152 2,709 — Interest rate swaps—cash flow hedging ...... — 17,776 — 18,339 Forward bunker oil contracts—cash flow hedging ...... 6,341 — 11,755 — Total ...... 28,639 17,928 34,311 35,143 Of which non-current Forward foreign exchange contracts—cash flow hedging ...... ——12,677 — Interest rate swaps—cash flow hedging ...... — 17,776 — 18,041 Total ...... — 17,776 12,677 18,041 Of which current ...... 28,639 152 21,633 17,102

Derivatives held for trading purposes are classified as current assets or liabilities. The entire fair value of hedging instruments is classified as a non-current asset or non-current liability if the remaining maturity exceeds 12 months, and as a current asset or current liability if the remaining maturity is less than 12 months.

No ineffectiveness was recordable for any of the cash flow hedges in 2010 or 2011. All the forecasted cash flows hedged in 2011 continue to qualify for hedge accounting. a) Forward foreign exchange contracts The nominal amount of outstanding forward foreign exchange contracts at 31 December 2011 was NOK 465 million (2010: NOK 1,264 million).

The hedged, highly probable transactions denominated in a foreign currency are expected to occur at various dates over the next 12 months. The forward foreign exchange contracts mature during the period from July to September, when most of the hedged cash flow is expected to occur. The forward foreign exchange contracts satisfy the requirements for hedge accounting under IFRS and

F-257 changes in the fair value are recognised directly in the hedging reserve in equity. Gains and losses on forward foreign exchange contracts that are recognised in equity at 31 December 2011 (note 16), will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. The gains or losses realised are allocated to passenger revenues.

(b) Interest rate swaps The nominal principal on outstanding interest rate swaps at 31 December 2011 was NOK 341 million (2010: NOK 300 million).

At 31 December 2011 the fixed rate ranged from 3.87 to 5.31 per cent (2011: 5.31 per cent). The floating interest rates were NIBOR. Gains or losses on interest rate swaps recorded directly in equity at 31 December 2011 (note 16), will continuously be reversed in the income statement until the bank borrowings (note 17) have been repaid. The gains or losses realised are allocated to interest expenses. c) Oil derivatives The nominal amount of outstanding forward bunker oil contracts at 31 December 2011 was NOK 150 million (2010: NOK 94 million).

The hedged, highly probable transactions denominated in a foreign currency are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward bunker oil contracts satisfy the requirements for hedge accounting under IFRS and changes in the fair value are recognised directly in equity on a current basis. Gains or losses on bunker oil derivatives recognised directly in equity at 31 December 2011 (note 16), will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. The gains or losses realised are allocated to bunker costs.

Transfers to and from equity. The following movements in equity related to cash flow hedges have occurred during the year:

2011 2010 (in NOK 1,000) Fair value of cash flow hedging for foreign currency opening balance ...... 3,042 (1,673) Change in value during the year recognised through other comprehensive income ...... 19,256 4,715 Fair value of cash flow hedging for foreign currency closing balance ...... 22,298 3,042 Fair value of cash flow hedging for interest opening balance ...... (19,551) (34,820) Change in value during the year recognised through other comprehensive income ...... 1,775 15,269 Fair value of cash flow hedging for interest closing balance ...... (17,776) (19,551) Fair value of cash flow hedging for bunker oil opening balance ...... 11,755 8,533 Change in value during the year recognised through other comprehensive income ...... (5,414) 3,222 Fair value of cash flow hedging for bunker oil closing balance ...... 6,341 11,755 Total fair value of cash flow hedging opening balance ...... (4,754) (27,960) Total change in value during the year recognised through other comprehensive income ..... 15,617 23,206 Total fair value of cash flow hedging closing balance ...... 10,863 (4,754)

F-258 NOTE 12 RECEIVABLES AND OTHER INVESTMENTS

2011 2010 (in NOK 1,000) Trade receivables ...... 696,931 529,437 Less provision for impairment of trade receivables ...... (63,026) (16,408) Trade receivables—net ...... 633,905 513,029 Other receivables ...... 286,271 372,242 Total current receivables (note 11) ...... 920,176 885,271 Retirement benefit obligations ...... 640 673 Prepayments ...... 17,732 12,019 Investments in other companies (note 11A) ...... 15,314 14,371 Other non-current receivables (note 11A) ...... 318 3,753 Total non-current receivables and investments ...... 34,003 30,816

With regard to the specification of receivables from related parties, reference is made to note 30.

Age distribution of overdue trade receivables is as follows:

2011 2010 (in NOK 1,000) Up to three months ...... 87,067 20,575 Three to six months ...... 242,862 261,518 Over six months ...... 142,309 101,661 Total ...... 472,238 383,754

At 31 December 2011 trade receivables totalling NOK 472.2 million were overdue after provision for impairment of doubtful receivables (31 December 2010: NOK 383.8 million). Receivables overdue by up to three months are higher than in 2010. This is attributed primarily to the group’s activities in Australia, which have ended (note 5).

Receivables overdue by more than six months primarily concern additional compensation from the government, which has not been settled pending the outcome of the ESA case concerning whether the additional compensation is contrary to the EU rules on state aid (note 5).

Change in the provisions for impairment of trade receivables is as follows:

2011 2010 (in NOK 1,000) Provision for impairment of receivables at 1 January ...... 16,408 19,836 Provision for impairment of receivables during the year ...... 47,127 100 Receivables written off during the year ...... 1,949 (2,196) Reversal of unused amounts ...... (2,457) (1,332) Total ...... 63,026 16,408

Due to the principle of prudence it has been decided to set aside provisions totalling NOK 46 million at 31 December 2011. This is in reference to Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd, which has filed an arbitration case against the other contracting party for outstanding claims in connection with the charter of the MS Finnmarken (note 5).

The other classes of trade and other receivables do not contain impaired assets.

F-259 NOTE 13 INVENTORIES The inventories consist of the following types of goods:

2011 2010 (in NOK 1,000) Goods purchased for resale ...... 49,754 54,007 Spare parts ...... 909 902 Bunkers ...... 24,033 18,008 Total ...... 74,696 72,918

The cost of goods sold included in other operating costs amounted to NOK 578.8 million (2010: NOK 536.4 million).

Inventories are measured at cost. If the fair value is assessed to be lower than the cost price, then the inventories will be written down.

NOTE 14 CASH AND CASH EQUIVALENTS

2011 2010 (in NOK 1,000) Cash at bank and on hand (note 11A) ...... 573,153 724,156 Market-based investments (note 11A)(1) ...... 1,358 6,953 Cash at bank, cash on hand and market-based investments on the balance sheet ... 574,511 731,109

In the cash flow statement cash and cash equivalents consist of the following:

2011 2010 (in NOK 1,000) Cash at bank and on hand ...... 573,153 724,156 Market-based investments(1) ...... 1,358 6,953 Restricted bank deposits(2) ...... (148,050) (238,921) Cash and cash equivalents in the cash flow statement ...... 426,461 492,187

Market-based investments consist of the following items:

2011 2010 (in NOK 1,000) Securities held for trading purposes: Other securities(1) ...... 1,358 6,953 Total ...... 1,358 6,953

(1) Funds owned by a foreign subsidiary (2) Restricted bank deposits consist primarily of employee tax withholdings, licence guarantee to the Ministry of Transport and Communications and guarantees to limited partnerships.

NOTE 15 SHARE CAPITAL AND PREMIUM

Number of Nominal value of Share Own shares ordinary shares premium shares Total (in NOK 1,000 unless otherwise indicated) At 31 December 2010 ...... 420,259,163 420,259 734,622 (293) 1,154,588 At 31 December 2011 ...... 420,259,163 420,259 734,622 (293) 1,154,588

All ordinary shares have equal rights.

The shareholders’ agreement between the Narvik local authority, Narvik port authority, Sparebanken Narvik, Ankenes Sparebank, Nordlandsbanken ASA, DnB NOR ASA and Nordkraft AS

F-260 (formerly Narvik Energi AS) expired on 31 December 2010. The agreement committed the parties to (i) cooperate on the election of members to the corporate assembly and board so that the parties would maintain their representation on the board and corporate assembly, (ii) attend any general meeting where it is proposed to amend article 2 of Hurtigruten ASA’s Articles of Association concerning localisation of the company’s registered office and central administration, and to vote against such proposal, (iii) contribute to ensuring that the company does not create or acquire any subsidiary conducting activities that would conflict with the intentions of the parties to the agreement with regard to article two, and (iv) to participate in new share issues in the company (with the exception of the Narvik local authority and Narvik port authority) limited to the individual contracting party’s proportionate share of the share capital in the company when the merger took effect (1 March 2006) and limited to a maximum new issue amount of NOK 300 million.

The annual general meeting was held on 14 April 2011 and granted the company’s board power of attorney to acquire own shares. The general meeting adopted the following resolution: i. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire own shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of own shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. ii. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. iii. The board is free to determine how the acquisition and sale of own shares shall take place. iv. This power of attorney shall remain valid until the company’s annual general meeting in 2012.

The board does not have any power of attorney to increase the company’s share capital. With regard to convertible bond loan, reference is made to note 17.

The 20 largest shareholders at 31 December 2011

Ownership Domicile No. of shares interest (%) Periscopus AS ...... Oslo 118,723,289 28.25 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 Skagen Vekst ...... Oslo 30,296,503 7.21 MP Pensjon PK ...... Oslo 29,000,000 6.90 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,379,534 0.80 Netfonds Liv ...... Oslo 2,825,827 0.67 Svendsen, Geir Arild ...... Bergen 1,965,245 0.47 Skagen Vekst III ...... Oslo 1,550,905 0.37 Avanza Bank AB brokerage account ...... Stockholm 1,438,781 0.34 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik local authority ...... Narvik 1,382,767 0.33 Fjellvit AS ...... Oslo 1,068,890 0.25 Troms county council ...... Tromsø 1,048,461 0.25 Warrenwicklund Norge Securities Fund ...... Oslo 1,013,518 0.24 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Bergen Handel og Invest ...... Bergen 1,000,000 0.24 Top 20 shareholders ...... 312,506,077 74.36 Other shareholders ...... 107,753,086 25.64 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent.

F-261 The 20 largest shareholders at 31 December 2010

Ownership Domicile No. of shares interest (%) Periscopus AS ...... Oslo 110,723,289 26.35 Heidenreich Enterprise L.P...... USA 71,835,396 17.09 MP Pensjon PK ...... Oslo 29,000,000 6.90 Skagen Vekst ...... Oslo 26,179,943 6.23 DnB NOR Bank ASA ...... Oslo 16,000,126 3.81 Nordkraft AS ...... Narvik 10,844,896 2.58 Odin Norge ...... Oslo 9,602,920 2.28 Troms Kraft AS ...... Tromsø 7,396,579 1.76 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,500,000 0.83 Avanza Bank AB ...... Stockholm 2,715,453 0.65 Skagen Vekst III ...... Oslo 1,390,157 0.33 Narvik local authority ...... Narvik 1,382,767 0.33 WarrenWicklund Norge ...... Oslo 1,113,295 0.26 Fjellvit AS ...... Oslo 1,068,890 0.25 Troms county council ...... Tromsø 1,048,461 0.25 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Dyvi, Espen ...... Oslo 1,000,000 0.24 DZ Bank International S.A ...... Luxembourg 1,000,000 0.24 Top 20 shareholders ...... 308,510,544 73.41 Other shareholders ...... 111,748,619 26.59 Total number of shares ...... 420,259,163 100.00

Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2011 (directly and indirectly)

Corporate assembly No. of shares Karen M. Kuvaas, chair ...... 699 Bjørn Dahle, deputy chair ...... 7,099,979 Fay Hege Fredriksen ...... — Svein Otto Garberg ...... 835,327 Nina Hjort(1) ...... — Westye Høegh ...... 800,000 Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Sissel Kinn Berg, elected by employees ...... 5,000 Randi Heggelund, elected by employees ...... 611 Haldor Moen, elected by employees ...... — Regina-Mari Aasli, elected by employees ...... — Marlen Hauge, observer ...... 10,000 Mette Fredrikke Indrevik, observer ...... 200

(1) Through the company Hjort Holding AS, Nina Hjort has ownership interests in J.M. Hansen Invest AS, and thus an indirect ownership interest in Hurtigruten ASA

Board of directors No. of shares Trygve Hegnar, chair(2) ...... 118,723,289 Per Heidenreich, deputy chair(3) ...... 71,895,396 Berit Kjøll ...... 100,000 Arve Giske ...... — Helene Jebsen Anker ...... 90,000 Guri Mai Elmar ...... — Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... —

F-262 No. of Management shares Olav Fjell, CEO(4) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Anders Olstad, CFO until 31 December 2011 ...... — Asta Lassesen, CFO from 1 January 2012 ...... 600,000 Glen P. Hartridge, Director product and pricing management ...... — Ole F. Hienn, Director legal affairs ...... 170,950 Hans Rood, Sales and marketing director ...... 90,000 Trond Øverås, Product and marketing director until 1 December 2011 ...... 5,000 Dag Arne Wensel, Director maritime technical operations ...... 63,650

(2) Shares are owned through the company Periscopus AS (3) Shares are owned through the companies Heidenreich Enterprise L.P. and ML Pierce Fenner (4) Of which 1,068,890 shares are owned through the company Fjellvit AS

The company’s auditor does not own any shares in Hurtigruten ASA.

Earnings per share The earnings per share are calculated by dividing the portion of the profit or loss for the year that is attributable to the owners of the parent with a weighted average of the number of ordinary shares throughout the year, less the number of own shares.

2011 2010 (in NOK 1,000) Profit or loss for the year attributable to the owners of the parent from continuing business ...... (118,604) 2,212 Profit or loss from discontinued business attributable to the owners of the parent . . (7,861) 6,113 Profit or loss for the year attributable to the owners of the parent ...... (126,465) 8,325 Weighted average number of outstanding shares ...... 419,965,791 419,965,791

Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. The company has a category of potential shares that may entail dilution, convertible bond loan. It is assumed that the convertible bond loan will not be converted to ordinary shares based on the current share price. No adjustment of the convertible bond loan will therefore be made in this context.

The diluted earnings per share will thus be identical to the earnings per share for 2010 and 2011.

Dividend per share No dividend was paid for 2010, and no dividend has been proposed for the 2011 financial year.

NOTE 16 OTHER EQUITY NOT RECOGNISED IN THE INCOME STATEMENT

Currency Convertible Hedging translation bond loan reserve differences Total (in NOK 1,000) Carrying amount at 1 January 2010 ...... 20,711 85,901 11,001 117,613 Cash flow hedging, net of tax ...... — 16,518 — 16,518 Currency translation differences ...... — — (5,072) (5,072) Carrying amount at 1 January 2011 ...... 20,711 102,419 5,929 129,059 Cash flow hedging, net of tax ...... — 11,408 — 11,408 Currency translation differences ...... — — (394) (394) Carrying amount at 31 December 2011 ...... 20,711 113,827 5,535 140,073

Reference is made to note 17 with regard to detailed information on the convertible bond loan.

F-263 NOTE 17 BORROWINGS

2011 2010 (in NOK 1,000) Non-current borrowings Bank borrowings ...... 2,455,508 3,587,121 Convertible bond loan ...... — 44,530 Bond loan ...... — 51,150 Total non-current borrowings ...... 2,455,508 3,682,801 Current borrowings Bank borrowings, including first year’s instalment on non-current borrowings ...... 1,096,252 99,118 Current borrowings classified as held-for-sale (note 7) ...... (70,000) (83,333) Total current borrowings ...... 1,026,252 15,785 Total borrowings ...... 3,481,760 3,698,586

The group’s buildings, ships, operating equipment, inventories and trade receivables have been pledged as collateral for bank borrowings.

2011 2010 (in NOK 1,000) Carrying amount of pledged assets ...... 3,720,689 3,929,492 Pledged assets classified as held-for-sale (note 7) ...... (60,384) (68,076) Carrying amount of pledged assets for continuing business ...... 3,660,305 3,861,416

2011 2010 (in NOK 1,000) The group is exposed to interest rate changes with respect to borrowings based on the following repricing structure: Six months or less ...... 3,149,354 3,602,906 Six to twelve months ...... — — One to five years ...... 332,406 95,680 Over five years ...... — — Total ...... 3,481,760 3,698,586

2011 2010 (in NOK 1,000) Non-current borrowings mature as follows: Less than one year ...... 1,096,252 99,118 Between one and five years ...... 2,445,653 3,525,596 More than five years ...... 9,855 157,205 Of which classified as held-for-sale (note 7) ...... (70,000) (83,333) Total ...... 3,481,760 3,698,586

Carrying amount and fair value of borrowings:

Carrying amount Fair value 2011 2010 2011 2010 (in NOK 1,000) Current borrowings ...... 1,026,252 15,785 1,026,252 15,785 Non-current bank borrowings ...... 2,455,508 3,587,121 2,314,553 3,375,688 Bond loan ...... — 51,150 — 46,500 Convertible bond loan ...... — 44,530 — 44,000 Total ...... 3,481,760 3,698,586 3,340,805 3,481,973

F-264 Hurtigruten ASA borrows primarily at variable interest rates, and interest rate swap contracts are used for the portion of the borrowings that are to have a fixed interest rate, as dictated by policy. For further information on the hedging instruments, see note 11C (Derivative financial instruments).

The fair value is based on discounting cash flows from borrowings by a discount rate based on the market’s expectations of the future variable interest rates or the agreed fixed rate. The average discount rate for 2011 is 5 per cent (2010: 5 per cent).

The fair value of current borrowings corresponds to the carrying amount as the effect of the discount is insignificant.

The fair value of the convertible bond loan is estimated by adding the equity component, which is recognised separately in the accounts based on the rules for embedded options, to the carrying amount of the loan, and the cash flow from the loan is discounted at a fixed rate of 10 per cent.

The carrying amount of the group’s borrowings in different currencies is as follows:

2011 2010 (in NOK 1,000) NOK ...... 3,211,895 3,374,410 EUR...... 195,556 239,844 USD...... 74,309 84,332 Total for continuing business ...... 3,481,760 3,698,586

The company has financial covenants for portions of its borrowings.

The financial covenants are listed below: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • EBITDA must be greater than the group’s annual debt obligation and dividend payments, or the group’s free liquidity including unused credit facilities must be a minimum of NOK 350 million. • The equity ratio must be 25 per cent from 30 September 2010 to the end of the loan term. At 31 December 2011, the equity requirement has been reduced (waived) temporarily to 23 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreements.

An addendum to the loan agreement was signed with the bank syndicate that had financed the Hurtigruten ships in February 2009. The addendum specifies that no instalments will be paid on the loan between March 2009 and December 2011. The postponed instalments will be paid back on a pro rata basis together with the remaining instalments due for payment from March 2012. The revised loan agreement contains a cash sweep clause, which implies that Hurtigruten is committed from the first quarter of 2010 to devote all unrestricted cash that exceeds NOK 500 million at the end of the first quarter of each year for repayment of the loan. A repayment made under the cash sweep clause can only be drawn down again under the loan agreement by an amount equal to 50 per cent of the repayment made in the first quarter of 2010. No such drawdown right exists for a repayment made under the cash sweep clause in the first quarter of 2011. The cash sweep clause also encompasses the limited partnerships Kystruten KS and Kirberg Shipping KS with respect to their proportionate share of the outstanding debt. There have been no repayments under the cash sweep clause in 2010, nor have there been any such repayments in the first quarter of 2011. Hurtigruten has refinanced the aforementioned loan agreement. The refinancing was completed in March 2012.

The bond loan is irredeemable until it matures in March 2012, and the loan has a fixed interest rate of 10 per cent.

The merged company TFDS ASA issued 150,000 convertible bonds with an interest rate of 7 per cent at a nominal value of NOK 150 million on 15 June 2004.

F-265 The term to maturity was five years from the issue date. The loan was irredeemable and should have been paid back in full on 8 June 2009. The bondholder alternatively had the right to convert the bonds to ordinary shares in Hurtigruten ASA at a conversion price of NOK 101.57 per share.

In connection with the financial restructuring approved and completed in 2009, the terms of the convertible bond loan were amended. Repayment of the loan was extended by 36 months and a new maturity date of 8 June 2012 was set. The loan will be irredeemable until its final maturity date, and no interest will be charged on the loan from 1 January 2009 to 31 December 2009. From 1 January 2010, the interest rate will be 7 per cent per year, payable on the repayment date for the convertible bond loan.

As an alternative to retaining their interests in the convertible bond loan on the revised terms described above, bondholders were given the right to redeem or buy back bonds in the convertible bond loan by subscribing for new shares at the proposed subscription price in the private offering for an amount equal to 50 per cent of the nominal value of the bonds held by the bondholder in question, with the remaining 50 per cent to be placed in a new bond loan issued by Hurtigruten ASA against a contribution in cash. As a result, the company bought back bonds at a value of NOK 53.5 million through the private offering and an additional NOK 48.1 million through the subsequent repair issue.

The conversion price for the new convertible bond loan was NOK 20.70 per share.

The fair value of the debt component and the component related to the equity conversion was determined when the loan was issued. The fair value of the debt component, which is included in the non-current liabilities, is calculated using the market interest rate for an equivalent non-convertible loan. The residual amount, which represents the value of the equity component, is recognised in equity under other equity not recognised in the income statement.

The convertible bond loan is recognised in the balance sheet as follows:

Convertible bond loan (in NOK 1,000) Debt component at 1 January 2010 ...... 41,932 Interest expenses (note 28) ...... 6,692 Accrued, unpaid interest ...... (4,094) Debt component at 31 December 2010 ...... 44,530 Interest expenses (note 28) ...... 6,576 Accrued, unpaid interest ...... (4,017) Debt component at 31 December 2011 ...... 47,089

The loan’s interest expenses are calculated based on the effective interest rate method by using an effective interest rate of 10 per cent for the debt component.

Hurtigruten ASA has refinanced its debt, and the new loan agreement with the banks is dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The loan has a term of five years with annual instalments of NOK 260 million, which will fall due for the first time in September 2012. The financial covenants are as follows: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • EBITDA must be greater than the group’s annual debt obligation and dividend payments, or the group’s free liquidity including unused credit facilities must be a minimum of NOK 350 million. • An equity ratio of 22.5 per cent from 31 March 2012 to 31 December 2014, inclusive. From 31 December 2014 until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreements.

F-266 As part of its refinancing Hurtigruten ASA has issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month. The financial covenants are as follows: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • Non-current interest-bearing liabilities shall be less than 65 per cent of the total assets until 30 June 2013. This shall be reduced annually by 5 per cent at 1 July 2013. At 1 July 2015 to the expiration of the term of the agreement, non-current interest-bearing liabilities shall be lower than 50 per cent of the totals assets. • EBITDA shall be lower than 6.5 in relation to the interest-bearing liabilities from 31 December 2013, and this shall be reduced by 0.5 annually.

NOTE 18 INCOME TAX INCOME TAX EXPENSE The income tax expense for the year can be broken down as follows:

2011 2010 (in NOK 1,000) Tax payable ...... (11,932) (13,419) Change in deferred tax liabilities/assets ...... 94,657 22,296 Total income tax expense ...... 82,725 8,877 Of which income tax expense for discontinued business (note 7) ...... 2,201 (2,080) Total income tax expense for continuing business ...... 80,524 10,957 Discontinued business Tax payable ...... — — Change in deferred tax liabilities/assets ...... 2,201 (2,080) Total income tax expense for discontinued business (note 7) ...... 2,201 (2,080)

The tax on the group’s profit or loss before tax deviates from the amount that would have applied if the group’s weighted average tax rate had been used. The difference can be explained as follows:

2011 2010 (in NOK 1,000) Profit/(loss) before tax for continuing and discontinued business ...... (152,692) 21,568 Estimated income tax expense based on the tax rates in the various countries and the respective results ...... 41,800 (5,198) Change in the income tax expense as a result of: —non-taxable income ...... 54,037 5,996 —non-tax-deductible costs ...... (24,758) (7,644) —tax on profit or loss attributable to companies assessed as a partnership ...... 918 6,756 —application of tax loss carryforwards ...... 336 182 —recognition of deferred tax assets not previously recognised on the balance sheet ...... — 4,859 —unrecognised deferred tax assets ...... (9,454) — —miscellaneous items (foreign exchange differences, SPE) ...... 19,845 3,926 Income tax expense for continuing and discontinued business ...... 82,725 8,877 Weighted average tax rate ...... 27.38% 24.10%

The change in the weighted average tax rate is attributed to a change in the profitability of the group’s subsidiaries abroad.

F-267 Income tax expense for items recognised through other comprehensive income:

2011 2010 Income tax Income tax Before tax expense After tax Before tax expense After tax (in NOK 1,000) Actuarial gains/(losses) ...... (49,103) 13,261 (35,843) (22,575) 5,854 (16,721) Cash flow hedging ...... 15,617 (4,373) 11,244 22,591 (6,326) 16,265 Currency translation differences ...... (394) — (394) (5,072) — (5,072) Other equity adjustments ...... 582 — 582 (174) — (174) Other comprehensive income ...... (33,298) 8,888 (24,410) (5,230) (472) (5,702)

Income tax expense recognised through equity:

2011 2010 (in NOK 1,000) Deferred tax liabilities Other tax adjustments recognised through equity ...... — (240) Total ...... — (240)

DEFERRED TAX LIABILITIES Deferred tax liabilities are recognised on a net basis if the differences that are reversible can be offset. All differences are reversed over a period of 12 months due to the fact that all the companies are assessed in arrears.

The following amounts have been recognised on a net basis:

2011 2010 (in NOK 1,000) Deferred tax assets: Deferred tax assets that reverse after more than 12 months ...... (792,759) (734,387) Total deferred tax assets ...... (792,759) (734,387) Deferred tax liabilities: Deferred tax liabilities that reverse after more than 12 months ...... 630,168 677,965 Total deferred tax liabilities ...... 630,168 677,965 Net deferred tax liabilities/assets ...... (162,591) (56,422) Net deferred tax liabilities/assets for continuing business ...... (162,591) (56,422) Change in recognised net deferred tax liabilities Carrying amount at 1 January ...... 13,367 25,099 Recognised in the income statement during the period ...... 7,277 1,606 Tax on current financial assets recognised through other comprehensive income ...... (222) (342) Tax on actuarial gains/(losses) recognised through other comprehensive income ...... (8,155) (7,401) Correction of deferred tax based on tax payable in earlier years(1) ...... — (5,595) Correction of errors in deferred tax from earlier years ...... (2,624) — Carrying amount at 31 December ...... 9,643 13,367 Change in carrying amount of deferred tax assets—net: Carrying amount at 1 January ...... (69,789) (53,862) Recognised in the income statement during the period ...... (101,933) (23,902) Tax on current financial assets recognised through other comprehensive income ...... 4,595 6,668 Tax on actuarial gains/(losses) recognised through other comprehensive income ...... (5,107) 1,547 Foreign currency translation recognised through equity ...... — (240) Carrying amount at 31 December ...... (172,234) (69,789)

(1) Classification errors from earlier years in a foreign subsidiary

F-268 Change in deferred tax assets and liabilities: Deferred tax liabilities:

Non-current Other assets differences Total (in NOK 1,000) 1 January 2010 ...... 618,930 77,541 696,471 Recognised in the income statement during the period ...... (5,262) (13,735) (18,997) Correction for earlier years ...... — (5,595) (5,595) Equity adjustments ...... — 6,086 6,086 31 December 2010 ...... 613,668 64,297 677,965 Recognised in the income statement during the period ...... (23,278) (26,268) (49,546) Correction for earlier years ...... (2,624) — (2,624) Equity adjustments ...... — 4,373 4,373 31 December 2011 ...... 587,766 42,402 630,168

Deferred tax assets:

Provisions for Tax loss Current liabilities carryforward items Total (in NOK 1,000) 1 January 2010 ...... (29,713) (667,312) (28,209) (725,234) Recognised in the income statement during the period ...... 14,581 (3,601) (14,279) (3,299) Equity adjustments ...... (5,854) — — (5,854) 31 December 2010 ...... (20,986) (670,913) (42,488) (734,387) Recognised in the income statement during the period ...... 22,655 (54,571) (13,195) (45,111) Equity adjustments ...... (13,261) — — (13,261) 31 December 2011 ...... (11,592) (725,484) (55,683) (792,759)

The deferred tax assets related to tax loss carryforwards are recognised on the balance sheet when it is probable that the group can apply the carryforward loss against future taxable income. In preparing the annual financial statements the management has found that the future taxable income is adequate to utilise the recognised tax loss carryforward. This assessment has been made based on the management’s estimates of future profits in the group, in which particular importance has been attached, for example, to the group’s procurement contract with the government in effect until 2019 inclusive, as well as the effects of the restructuring carried out by the group. The tax loss carryforward at 31 December 2011 was NOK 2,591 million (2010: NOK 2,394 million).

Deferred tax liabilities recognised directly through equity during the year is as follows:

2011 2010 (in NOK 1,000) Tax on actuarial gains/(losses) related to pension plans ...... (13,261) (5,854) Tax on current financial assets recognised through equity ...... 4,373 6,326 Other adjustments through equity ...... — (240) Total ...... (8,888) 232

NOTE 19 PENSIONS The group has both defined contribution and defined benefit pension plans. For the defined contribution plans the cost is equal to the contributions to the employees’ pension savings during the period. The future pensions are dependent on the size of the contributions and the return on the pension plan. For the defined benefit plans, the employer is responsible for paying the agreed pension to the employee based on his /hers final salary. Future defined benefits are mainly dependent on the

F-269 number of contribution years, salary level upon reaching retirement age and the size of the National Insurance benefits. These obligations are covered through an insurance company. In addition to the pension obligations that are covered through insurance schemes, the company has uninsured pension obligations that are funded from revenue, primarily for former key management personnel. The new Contractual Early Retirement (AFP) Scheme Act adopted by the Norwegian Parliament (Storting) in 2010 entailed the capitalisation of provisions related to the old contractual early retirement scheme and recognition in the income statement. Provisions were set aside to cover the assumed underfunding of the old contractual early retirement scheme. The new contractual early retirement scheme is regarded as a defined benefit multi-company scheme in the accounts. This means that each individual company shall account for its proportional share of the scheme’s pension obligations, plan assets and pension costs. Until reliable and consistent information is available for allocation, the new contractual early retirement scheme will be accounted for as a defined contribution plan. The established pension plans cover 2,073 employees in the group. The pension costs for the period illustrate the agreed future pensions earned by employees in the financial year.

Financial assumptions:

2011 2010 Norway Discount rate ...... 2.60% 4.00% Expected return on pension fund assets ...... 4.10% 5.40% Expected annual wage adjustment ...... 3.50% 4.00% Expected annual pension adjustment ...... 0.10% 1.30% Expected annual National Insurance basic amount (G) adjustment ...... 3.25% 3.75% Table book used for estimating liabilities ...... K2005 K2005 Table book used for estimating disabilities ...... IR02 IR02 Germany Discount rate ...... 4.60% 5.00% Expected return on pension fund assets ...... 3.51% IA Expected annual wage adjustment ...... IA 2.50% Expected annual pension adjustment ...... 1.90% 1.90% Expected annual National Insurance basic amount (G) adjustment ...... IA IA Average expected years of service until retirement age ...... 12.1 år 12.1 år Average expected life (in years) for a person retiring when he/she reaches age 67: —Women ...... 17.2 years 17.5 years —Men ...... 13.6 years 13.8 years Average expected life (in years) 20 years after the balance sheet date for a person retiring when he/she reaches age 67: —Women ...... 18.4 years 18.5 years —Men ...... 15.6 years 15.4 years

Pension costs recognised in the income statement for the year are as follows:

2011 2010 (in NOK 1,000) Present value of current year’s pension benefits earned ...... 14,821 21,941 Contributory plan for maritime personnel ...... 38,827 35,691 Interest expenses on accrued pension obligations ...... 12,741 14,227 Expected return on plan assets ...... (10,505) (10,386) Discontinuation and plan changes ...... (23,383) 2,476 Net pension costs funded from revenue ...... 50 — Payroll tax ...... 2,278 2,589 Employee contributions ...... (348) (902) Total pension costs included in payroll costs ...... 34,481 65,636 Actuarial gains/(losses) in the comprehensive income statement (before tax) ...... (49,103) (22,575)

F-270 Specification of net pension assets/obligations:

2011 2010 (in NOK 1,000) Present value of accrued pension obligations at 31 December for funded defined benefit plans ...... 340,266 313,698 Estimated fair value of plan assets at 31 December ...... 265,790 254,842 Total ...... 74,476 58,856 Present value of pension obligations for unfunded plans ...... 4,405 13,169 Present value of pension obligations funded from revenue ...... 22,172 54,023 Net pension obligations ...... 101,053 126,048 Of which classified as discontinued business ...... — — Net pension obligations for continuing business ...... 101,053 126,048

Net pension assets/obligations are classified as follows on the balance sheet:

2011 2010 (in NOK 1,000) Other non-current receivables ...... 640 673 Pension obligations ...... 101,693 126,721 Assets held-for-sale ...... — — Net pension obligations ...... 101,053 126,048

Change in the defined benefit pension obligations during the year:

2011 2010 (in NOK 1,000) Pension obligations at 1 January ...... 380,890 328,922 Present value of current year’s pension benefits earned ...... 14,821 21,941 Interest expenses ...... 12,742 14,227 Actuarial gains/losses ...... 47,905 28,501 Currency translation differences—obligations ...... 308 (2,035) Discontinuation of pension plans (plan changes) ...... (71,436) 2,102 Reduction in obligations from the sale of subsidiaries ...... — (872) Pension benefits paid ...... (16,265) (10,373) Change in payroll tax on net pension obligations ...... (2,122) (1,523) Pension obligations at 31 December ...... 366,843 380,890

Change in the fair value of the plan assets:

2011 2010 (in NOK 1,000) Fair value at 1 January ...... 254,842 232,599 Expected return on plan assets ...... 10,505 10,586 Actuarial gains/(losses) ...... (1,198) 5,916 Paid-up policies and disbursements due to discontinuation of plans (plan changes) ...... (47,223) (11,342) Employer contributions ...... 60,770 24,877 Pension benefits paid ...... (11,906) (7,794) Fair value at 31 December ...... 265,790 254,842

F-271 Composition of the plan assets:

2011 2010 (in NOK 1,000) Shares ...... 19.7% 13.6% Current bonds ...... 12.7% 24.1% Money market ...... 19.3% 14.6% Non-current bonds ...... 30.4% 27.0% Property ...... 15.3% 16.1% Other ...... 2.6% 4.6% Total ...... 100.0% 100.0% Actual return on plan assets ...... 1.78% 5.67%

2012 2011 (in NOK 1,000) The company’s expected contributions to funded plans next years ...... 15,191 22,888

The group has established mandatory occupational pension plans in the companies where this is required. These plans satisfy the requirements stipulated in the Norwegian Mandatory Occupational Pension Act.

Table of the historical present values of pension obligations and assets at 31 December

2011 2010 2009 2008 2007 (in NOK 1,000) Present value of defined benefit pension obligations ...... 366,843 380,890 328,922 411,660 532,608 Fair value of plan assets ...... 265,790 254,842 232,599 252,135 363,168 Deficit/(surplus) ...... 101,053 126,048 96,323 159,525 169,440

2011 2010 Fact-based adjustments of the defined benefit obligations as a percentage ...... 22.98% 8.73%

Sensitivity analysis for changes in the assumptions:

Discount rate +1 per cent -1 per cent (in NOK 1,000) Increase (+) reduction (–) in the net pension costs for the period ...... (8,275) 8,965 Increase (+) reduction (–) in the net pension obligations at 31 December ...... (22,232) 22,232

Change in the annual wage inflation +1 per cent -1 per cent (in NOK 1,000) Increase (+) reduction (–) in the net pension costs for the period ...... 5,862 (5,517) Increase (+) reduction (–) in the net pension obligations at 31 December ...... 15,158 (14,147)

Change in National Insurance basic amount (G) adjustment +1 per cent -1 per cent (in NOK 1,000) Increase (+) reduction (–) in the net pension costs for the period ...... (3,793) 3,448 Increase (+) reduction (–) in the net pension obligations at 31 December ...... (9,095) 8,084

F-272 NOTE 20 PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Deferred revenue Share value based recognition Restructuring Legal dispute remuneration Total (in NOK 1,000) Carrying amount at 1 January 2010 ...... 5,784 15,000 — — 20,784 Provisions for the year ...... — — — 566 566 Use of provisions from the prior year ...... (167) (15,000) — — (15,167) Carrying amount at 31 December 2010 . . . 5,617 — — 566 6,183 Provisions for the year ...... — — 8,000 253 8,253 Use of provisions from the prior year ...... (167) — — — (167) Carrying amount at 31 December 2011 . . . 5,450 — 8,000 819 14,269 Classification on the balance sheet: Non-current liabilities (deferred revenue recognition) ...... 5,450 Non-current liabilities—continuing business ...... 5,450 Current liabilities ...... 8,819 Current liabilities—continuing business .. 8,819

Deferred revenue recognition A line-by-line recognition has been carried out with respect to the investment contribution received, including a possible repayment obligation. Revenue recognition of the investment contribution occurs in conjunction with depreciation of the associated asset. This year’s recognised revenue is NOK 166,000. The remainder of the investment contribution at 31 December 2011 amounts to NOK 5.5 million.

Restructuring In connection with the cost reduction programme, provisions were set aside with respect to costs related to duplicated functions in the downsizing processes, in addition to costs related to the divestment of offices, companies and other functions. Around half of the planned processes were carried out in 2009, and the rest were carried out in 2010. The remainder of the provisions, NOK 15 million, was recognised in 2010 in connection with the execution of the workforce reduction and divestment process.

Legal dispute Legal charges were brought against AS TIRB and its subsidiary Cominor AS by the Troms county council in May 2009. A complaint was filed with the court of conciliation in December 2009. The Troms county council claimed that the companies have overcharged for occasional assistance, and for unforeseen and unplanned driving, for a total amount of NOK 25 million, excluding interest. The Nord Troms District Court delivered its judgment in the case on 4 January 2012 and ordered TIRB and Cominor to pay compensation of NOK 16 million to the Troms county council. The judgment has been appealed to the Court of Appeal. The companies have set aside provisions for losses for only a portion of the judgment, NOK 8 million, since the financial calculations in the judgment are disputed.

F-273 Share value based remuneration (synthetic options) In 2010 the company established a share-based option scheme for all permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA at 31 December 2010. It is a share value based remuneration programme in which the employees receive cash instead of shares (synthetic options). Reference is made to note 21 for further details.

Investment obligations The group has no contractual investments at the balance sheet date.

Operating lease commitments—group company as lessee The group leases an office in Tromsø, in addition to some other offices. These leases have varying payment dates, price adjustment clauses and renewal rights. The group also leases machinery and transport equipment. Leasing costs for the year are specified in note 8. The group has no non-cancellable leases.

The parent company entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten vessels the MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR.

In the consolidated financial statements Kystruten KS and Kirberg Shipping KS are consolidated in accordance with IFRS SIC-12 on special purpose entities. Recognised bareboat charter hire payments in the income statement of the parent company have thus been eliminated against charter hire income in the limited partnerships in connection with the consolidation.

Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the vessels. In the charter agreements between the limited partnerships and Hurtig-ruten ASA, identical requirements (financial covenants) have been stipulated for Hurtigruten ASA for the duration of the agreements, which the company has as a component of its long-term loan agreements linked to vessels. Reference is made to note 17 with regard to these financial covenants.

A breach of the financial covenants may entail a termination of the charter agreements by the lessor. The group has satisfied all the financial covenants at 31 December 2011.

In connection with the financial restructuring in February 2009, an addendum to the charter agreement was agreed on with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charterparties with the two limited partnerships will not be payable until 31 December 2011. The postponed instalments will, however, be added to the instalments to be paid in 2012 and 2013, thereby reverting to the original repayment plan in August 2013. For their proportionate shares of the outstanding debt, the limited partnerships will receive any payments that are made under the cash sweep clause for the banks, as described in note 17. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back the MS Nordlys and MS Richard With will be cancelled. No instalment payments have been made under the cash sweep clause in 2011. In the first quarter of 2011 Hurtigruten ASA has made extraordinary instalment payments on the bare-boat charter hire. The extraordinary instalment payments have been made through the release of funds that were restricted as security for the charter agreement. The payments have been used in their entirety for an extraordinary repayment of borrowings in the two limited partnerships.

Guarantees

2011 2010 (in NOK 1,000) Associates ...... 2,541 3,066 Total guarantees ...... 2,541 3,066

F-274 NOTE 21 SHARE VALUE BASED REMUNERATION Hurtigruten would like to encourage its employees to invest in their own company through an incentive scheme. The purpose of this scheme is to make Hurtigruten a more attractive place to work in the long term and raise awareness of shareholder value and profitability, as well as encourage behaviour that will increase shareholder value in the company over time. An option scheme was offered to all the permanent employees of Hurtigruten ASA and wholly owned subsidiaries who owned shares in Hurtigruten ASA at 31 December 2010.

For each share the employee owned on 31 December 2010, the employee would receive three options. The executive management and personnel reporting directly to the CEO may participate with up to 83,333 shares (for a total of 250,000 share options), employees who report directly to a member of the executive management can participate with up to 33,333 shares (for a total of 100,000 share options) and all other employees can participate with up to 8,333 shares (for a total of 25,000 share options).

The programme is structured as a synthetic share option programme, in which the options can be exercised over the next three years. In December 2011, 20 per cent of the options can be exercised; in December 2012, 30 per cent of the options can be exercised; and, in December 2013, 50 per cent of the options can be exercised. The market price will be the average market price in December for the respective years. The average market price for the second half of 2010, which was NOK 4.01, will be used as the basis for calculating gains. The number of shares held on 31 December 2010 must be kept until the options are exercised. Any gains will be distributed as an extraordinary bonus without any right to holiday pay after the end of each year. The employees will pay ordinary income tax on the gain.

Movements in the number of outstanding share options and the associated weighted average exercise prices are as follows:

2011 2010 Average Average exercise price in Options exercise price in Options NOK per share (in thousands) NOK per share (in thousands) At 1 January ...... — 3,878 —— Allotment this year ...... ——4.01 3,878 Forfeited ...... 4.01 (173) —— Exercised ...... ———— Expired ...... 4.01 (741) —— At 31 December ...... 4.01 2,963 4.01 3,878

Expiration date and exercise price for outstanding options at year end:

2011 2010 Exercise price in Options Options NOK per share (in thousands) (in thousands) Expiration date 31 December 2011 ...... 4.01 — 776 31 December 2012 ...... 4.01 1,111 1,163 31 December 2013 ...... 4.01 1,852 1,939 2,963 3,878

After this period the fair value of the allotted options, calculated using the Black-Scholes option-pricing model, was NOK 1.49 per option (NOK 4.91 per option in 2010). The most important input data includes the share price at 31 December 2011 of NOK 3.03 (NOK 4.88 at 31 December 2010), exercise prices listed above, the standard deviation of the expected share price return of 59 per cent (39 per cent in 2010), and the annual risk- free interest rate of 1.31 per cent (2.34 per cent in 2010). Volatility is measured using the standard deviation of the expected return based on a statistical analysis of the daily share prices in 2011.

F-275 The fair value is recognised as an expense under payroll costs over the vesting period. A total of NOK 0.3 million and NOK 0.6 million was recognised as an expense in 2011 and 2010, respectively. The average price in December for the next three years will be measured against the average price for the second the half of 2010, which was NOK 4.01. The average price in December 2011 was NOK 3.13, and thus there was no calculation of a gain or distributions for 2011.

NOTE 22 TRADE AND OTHER PAYABLES

2011 2010 (in NOK 1,000) Trade payables ...... 226,865 301,303 Public duties payable ...... 36,135 37,347 Other current liabilities ...... 492,597 377,954 Total ...... 755,597 716,604

See note 30 for information on trade payables and other current liabilities to related parties.

NOTE 23 OPERATING REVENUES

2011 2010 (in NOK 1,000) Operating revenue ...... 3,015,656 2,872,539 Sales revenue ...... 381,601 362,601 Contractual revenue ...... 538,326 574,847 Of which classified as discontinued business ...... (8,862) (22,128) Total operating revenue ...... 3,926,720 3,787,859

The operating revenue includes the accounting effect of the insurance settlement related to the repair of the MS Nordlys of NOK 86 million. Recognition of income from the insurance settlement is in accordance with IAS 16.66.

The extent of the group’s revenues related to public procurement of services are as follows:

2011 2010 (in NOK 1,000) Revenues relating to public transport from Nordland county council ...... 45,285 53,374 Revenues relating to public transport from Troms county council ...... 167,770 144,525 Revenue relating to the Bergen to Kirkenes coastal service from the government ..... 325,271 376,948 Of which classified as discontinued business ...... — (2,444) Total ...... 538,326 572,403

Public procurement of services is related to the purchase of Hurtigruten services along the Norwegian coast and bus transport operations. The existing contract with the government represented by the Ministry of Transport and Communications expired on 31 December 2011 after Hurtigruten and the government agreed on a new contract for the Bergen to Kirkenes coastal service for the period from 2012 to 2019. The new contract entered into force on 1 January 2012.

F-276 NOTE 24 PAYROLL COSTS

2011 2010 (in NOK 1,000) Payroll costs Wages and salaries ...... 1,053,618 911,885 Payroll tax ...... 52,335 48,971 Pension costs (note 19) ...... 34,481 65,636 Other benefits ...... 46,309 28,794 Of which classified as discontinued business (note 7) ...... — (209) Total ...... 1,186,744 1,055,078 Average number of full-time equivalents ...... 2,133 1,971

NOTE 25 REMUNERATION, ETC. Figures for 2011:

Pension Other Position Salary(4) costs(4) remuneration(4)(5) Loans Fees(4) (in NOK 1,000) Olav Fjell ...... CEO 4,471 94 7,503 — — Torkild Torkildsen ...... Deputy CEO 2,131 343 168 — — Anders Olstad(1)(3) ...... CFOuntil 31 December — — — — 3,634 Trond Øverås ...... Product & marketing 1,416 391 90 — — director until 1 December Glen Hartridge ...... Director product and pricing 946 198 124 — — management Ole Fredrik Hienn ...... Director legal affairs 1,611 297 249 — — Hans Rood(2) ...... Sales and marketing director 2,146 547 691 — — Dag-Arne Wensel ...... Director of technical and 993 265 155 — — maritime operations Trygve Hegnar ...... Chair — — 5 — 308 Per Heidenreich ...... Deputy Chair — — 10 — 161 Berit Kjøll ...... Director — — 1 — 129 Olaf Larsen ...... Director until 14 April — — — — 48 Arve Giske ...... Director from 14 April — — — — 117 Helene Jebsen Anker ...... Director — — — — 133 Merete Nygaard Kristiansen ...... Director until 14 April — — — — 42 Guri Mai Elmar ...... Director from 14 April — — — — 98 Tone Mohn-Haukland ...... Director, elected by the 465 14 4 — 155 employees Per-Helge Isaksen ...... Director, elected by the 494 15 4 — 129 employees Deputy members ...... — — — — — Corporate assembly ...... — — — — 166 Auditor fee—statutory auditing(3) ...... — — — — 3,639 Assistance IFRS, accounting and tax(3) ...... — — — — 381 Other attestations(3) ...... — — — — 101 Auditor fees—other assistance(3) ...... — — — — 481

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. CFO receives only fees and is not included in the company’s other benefit programmes.

F-277 (2) Rood’s salary is paid in USD and translated to NOK. (3) Fees exclusive of value added tax. (4) Salaries, fees and directors’ remuneration have been paid from the management company Hurtigruten Pluss AS, except the directors elected by the employees, which have been paid by Hurtigruten ASA. (5) Includes bonus based on approved accounts for 2011 (payable in 2012), and estimated costs related to the share value based remuneration programme.

The company’s chief executive, Olav Fjell, has a contract with the company stipulating an annual salary of NOK 4.3 million. Other benefits include a company car and an ordinary telephone, internet, newspaper and home PC allowance. He is also entitled to a bonus as determined by the company’s board. The board is free to consider whether a bonus shall be paid and how much should be paid within a maximum limit of one-third of the chief executive’s annual salary. The four first years that Fjell was employed the payment of a bonus was not considered. However, the board decided in the autumn of 2011 to pay a bonus of NOK 0.7 million for the years 2007 to 2011. This amount has been included under other remuneration above. The chief executive’s conditions of employment do not include any personal pension obligations.

When Fjell was appointed as the company’s chief executive in September 2007, there had been a number of chief executives during a short period of time, and the board wanted to motivate Fjell to stay with the company for a number of years. The chief executive’s contract of employment stipulated therefore that if the chief executive resigned of his own free will after a minimum of three year’s employment, the company would continue to pay his salary for 18 months. Any other pay received from permanent positions during this period would not be deducted from the termination pay provided by Hurtigruten ASA. In the autumn of 2011, Fjell had been employed for four years and the board decided to pay the agreed termination pay as a bonus for remaining in his position for at least three years and removed the termination pay clause from his contract at the same time. The termination pay clause upon resignation at the wishes of the board was also removed, and Fjell now has an ordinary period of notice of six months without any entitlement to termination pay. The payment of NOK 6.6. million has been included in the other remuneration column above.

The company’s executive management are members of the company’s defined contribution plan. In addition, a supplementary pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). This plan is an ordinary arrangement in the company, and it includes all employees, including members of the executive management, with a salary exceeding 12 times the basic amount, with the exception of the chief executive, who is not a member of any personal pension plan in the company. The pension costs for the executive management have been included under pension costs above.

The board agreed at a board meeting on 26 February 2008 to introduce a performance-based bonus scheme for the company’s executive management with effect from 1 January 2008. The bonus payments are limited to one-third of each executive’s annual salary, with 25 per cent of the bonus being determined by the group’s overall results, and the remaining 75 per cent being determined by the results achieved in the executive’s area of responsibility. Results within the executive’s area of responsibility are compared with predefined targets/ parameters. The bonus scheme includes the executive management with the exception of the chief executive. The chief executive has his own bonus scheme, in which the board determines the size of the bonus. This scheme has been described above in the section on the chief executive’s remuneration. Payments will be made under the bonus scheme to the executive management on the basis of the 2011 results. The payments will be made in 2012. This bonus is included under other remuneration above.

In 2010 a share value based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and wholly owned subsidiaries of Hurtigruten ASA. The estimated costs for the year related to senior management covered by the plan are included under other remuneration above. Reference is made to note 21 for further details on the scheme.

F-278 Figures for 2010:

Pension Other Position Salary costs remuneration(2) Loans Fees (in NOK 1,000) Olav Fjell ...... CEO 4,049 158 205 — — Torkild Torkildsen ...... Deputy CEO 1,378 174 331 — — Anders Olstad(1) ...... CFO — — — — 3,189 Trond Øverås ...... Product and marketing 1,318 333 284 — — director Glen Hartridge ...... Director pricing and revenue 860 142 269 — — management Ole Fredrik Hienn ...... Director legal affairs 1,575 361 266 — — Hans Rood ...... Sales director 2,223 637 705 — — Dag-Arne Wensel ...... Director maritime technical 878 139 480 — — operations Trygve Hegnar ...... Chair — — — — 288 Per Heidenreich ...... Deputy Chair — — — — 151 Berit Kjøll ...... Director — — — — 118 Olaf Larsen ...... Director — — — — 130 Helene Jebsen Anker ...... Director — — — — 135 Merete Nygaard Kristiansen ...... Director — — — — 118 Anton Abrahamsen ...... Director until 10 June, —— — — 50 elected by the employees Tone Mohn-Haukland ...... Director from 10 June, —— — — 80 elected by the employees Rigmor Sand ...... Director until 10 June, —— — — 50 elected by the employees Per-Helge Isaksen ...... Director from 10 June, —— — — 67 elected by the employees Rolf Andersen ...... Observer on the board until —— — — — 10 June Herodd Widding ...... Observer on the board until —— — — 22 10 June Bo Lennart Christer Thorbjørnsson ...... Observer on the board — — — — 177 Deputy members ...... — — — — — Former directors and observers ...... — — — — 12 Corporate assembly ...... — — — — 188 Auditor fees—statutory auditing(3) ...... — — — — 2,603 Assistance IFRS, accounting and tax(3) ...... — — — — 524 Other attestations(3) ...... — — — — 119 Auditor fees—other assistance(3) ...... — — — — 760

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. CFO receives only fees and is not included in the company’s other benefit programmes. (2) Includes bonus based on accounts for 2010 (payable in 2011), and estimated costs related to the share value based remuneration programme. (3) Fees exclusive of value added tax.

Payments were made under the bonus scheme to the executive management, as mentioned above, on the basis of the 2010 results. The payments were made in 2011. This bonus is included under other remuneration above. No payments were made under the bonus scheme for the chief executive.

F-279 STATEMENT ON THE DETERMINATION OF SALARY AND OTHER REMUNERATION FOR SENIOR EXECUTIVES IN HURTIGRUTEN ASA The following guidelines have been specified with effect from 15 February 2011:

1. Definitions 1.1 Senior executives include the chief executive and other senior executives, cf. Proposition no. 55 (2005– 2006), which refers to the provisions of the Norwegian Accounting Act and Public Limited Liability Companies Act concerning “senior executives”. 1.2 In these guidelines, a compensation scheme means a remuneration package comprising one or more of the following elements: Fixed salary, variable pay (bonuses, share-based programs, options, etc.) and other benefits (pension schemes, pay guarantee schemes, fringe benefits, and the like). 1.3 Severance pay refers here to compensation related to departure from the company and may involve a pay guarantee, other financial benefits and payments in kind.

2. Main principles for determining compensation schemes 2.1 Remuneration to senior executives in Hurtigruten ASA will be competitive but not market leading compared with similar companies. 2.2 The main element in a compensation scheme should be fixed salary. 2.3 Compensation schemes shall be formulated to avoid unreasonable benefits arising as a result of external circumstances which the executive management cannot influence. 2.4 The individual elements in a pay package shall be assessed from an overarching perspective, with fixed salary, possible variable pay and other benefits such as pension schemes and severance pay viewed as a whole. The board of directors shall maintain an overview of the total value of each executive’s agreed compensation. 2.5 Determining guidelines for the remuneration of senior executives is the responsibility of the entire board of directors. Remuneration of the group’s chief executive is determined by the board of directors. 2.6 The board of directors shall ensure that remuneration schemes for senior executives do not have unfortunate effects for the company or weaken its reputation. 2.7 Senior executives shall not receive special remuneration for serving as directors of wholly-owned subsidiaries in the same group. 2.8 Agreements entered into before these guidelines came into effect may continue.

3. Variable pay Any variable pay shall be based on the following principles: 3.1 A clear connection shall exist between the underlying goals for the variable pay and the company’s objectives. 3.2 Variable pay shall be based on objective, definable and measurable criteria. 3.3 These criteria shall be based on conditions which the executive in question can influence. 3.4 Several relevant measurable criteria should be applied. 3.5 A variable pay scheme shall be transparent and clearly understandable. Identifying the anticipated and the maximum payment for each participant in the programme is important when explaining the scheme. 3.6 The scheme shall be of limited duration. 3.7 Total variable pay received in any year should not exceed six months of fixed salary, unless exceptional circumstances dictate otherwise.

4. Pension schemes 4.1 Pension terms shall be equivalent to those enjoyed by other employees in the company.

F-280 4.2 To the extent that a retirement age lower than the National Insurance retirement age of 67 years is agreed, it should generally not be lower than 65. 4.3 Agreements on pensions shall be based on the same years of pensionable service as for other comparable employees in the company. 4.4 Pension entitlements earned in other positions shall be taken into account. 4.5 Pension entitlements should not exceed 66 per cent of salary. Retiring at an age younger than 65 shall result in a lower pension entitlement. 4.6 The board of directors shall obtain an overview of the total cost of a pension agreement before it is entered into.

5. Severance pay 5.1 Severance pay can be agreed when a senior executive waives their right in advance to the employment protection provisions in the Norwegian Working Environment Act. Severance pay should not be provided in the event of voluntary resignation except in special circumstances. 5.2 Severance pay should not exceed 12 months fixed salary in addition to possible pay during the period of notice. 5.3 Should the person concerned be appointed to a new position or receive remuneration from an enterprise in which they are an active owner, severance pay should be reduced by a proportionate amount calculated on the basis of the person’s new annual income. Such a reduction should first be made after the normal period of notice has expired. 5.4 Severance pay may be suspended if conditions exist which would have justified dismissal or if, during the severance period, irregularities or acts of negligence are discovered which might lead to compensation claims or to criminal charges against the person concerned.

NOTE 26 OTHER OPERATING COSTS 2011 2010 (in NOK 1,000) Cost of goods sold ...... 578,827 536,368 Operating costs ...... 1,411,479 1,267,315 Sales and administrative costs ...... 342,359 355,388 Of which classified as discontinued business (note 7) ...... (6,050) (3,391) Total other operating costs ...... 2,326,615 2,155,680

NOTE 27 OTHER (LOSSES)/GAINS—NET Other (losses)/gains consist of the following items:

2011 2010 (in NOK 1,000) Gain on the sale of shares ...... (1,889) 18,873 Gain on the sale of property, plant and equipment ...... 85,209 416 Loss on the sale of property, plant and equipment ...... — (636) Of which classified as discontinued business (note 7) ...... — (11,198) Total ...... 83,320 7,455

The gain on the sale of property, plant and equipment in 2011 is related primarily to the sale of property in the bus business (TIRB Eiendom II AS). The gain on the sale of shares refers to the sale of the group’s shareholdings in Nor Lines AS and Cominor Bilservice AS.

F-281 NOTE 28 FINANCE INCOME AND EXPENSES

2011 2010 (in NOK 1,000) Interest expenses: —Bank borrowings ...... (199,425) (219,472) —Convertible bond loan (note 17) ...... (6,576) (6,692) —Foreign exchange losses ...... (59,707) (55,018) —Other finance expenses ...... (4,843) (1,107) Financial assets—fair value ...... — (316) Of which classified as discontinued business (note 7) ...... 2,981 3,210 Finance expenses ...... (267,570) (279,395) Interest income on current bank deposits ...... 4,419 10,552 Foreign exchange gains ...... 67,350 56,920 Other finance income ...... 2,237 3,463 Of which classified as discontinued business (note 7) ...... — (7) Finance income ...... 74,005 70,928 Finance expenses—net ...... (193,565) (208,467)

NOTE 29 NET FOREIGN EXCHANGE GAINS/(LOSSES) Foreign exchange differences are recognised in the income statement as follows:

2011 2010 (in NOK 1,000) Operating revenue ...... (64,488) 27,910 Other operating costs ...... (1,903) 437 Net finance income/(expenses) ...... (7,643) 1,902 Total ...... (70,228) 29,375

NOTE 30 TRANSACTIONS WITH RELATED PARTIES Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company and associates. The associated companies in 2011 are mainly Funn IT AS and ANS Havnebygningen. Funn IT handles Hurtigruten ASA’s IT function, while ANS Havnebygningen owns and leases out the building the parent company uses as offices in Tromsø. The group’s ownership interest in both companies is 50 per cent. The group acquires freight services from Nor Lines AS through a space charter agreement. The shares in Nor Lines AS have been sold with effect from 31 December 2010, and transactions with the company are no longer defined as transactions with a related party from 1 January 2011.

The group has been involved in the following transactions with related parties:

2011 2010 (in NOK 1,000) Sale of services to associates Revenues ...... — 57,686 Total sale of services to associates ...... — 57,686 Purchase of services from associates Rent for premises ...... 2,976 4,742 IT and other services ...... 32,890 32,160 Total purchase of services from associates ...... 35,866 36,903

F-282 2011 2010 (in NOK 1,000) Remuneration of senior management Salaries and other short-term employee benefits ...... 28,629 19,407 Pension costs (including former senior management personnel) ...... 2,164 1,944 Total remuneration of senior management ...... 30,793 21,351 Balances with associates at year end Trade payables ...... 1,025 3,379 Balances with associates at 31 December ...... 1,025 3,379

Transactions with shareholders Transactions with the company’s largest shareholders have been carried out in accordance with the arm’s length principle and are as follows: • Troms county council purchases public transport services from the group.

NOTE 31 EVENTS AFTER THE BALANCE SHEET DATE Refinancing of Hurtigruten’s debt On 7 March 2012 Hurtigruten ASA signed a loan agreement for NOK 2.6 billion with a bank syndicate consisting of eight Norwegian and foreign banks. Six of these banks also participated in Hurtigruten’s former bank syndicate. The loan is to be repaid in annual instalments of NOK 260 million and have a term of five years with a margin of 350 basis points (3.5 per cent).

An unsecured bond loan totalling NOK 500 million was also issued on the same date. The loan has a term of five years and one month and a margin of 700 basis points (7.0 per cent).

This means that all of Hurtigruten’s existing bank debt of approximately NOK 3 billion has been refinanced. This refinancing has been made possible by the operational restructuring that has taken place in recent years, the good development on the passenger side, and the new agreement with the government that takes effect on 1 January 2012 with significantly better terms than the old agreement.

The refinancing provides Hurtigruten with a prudent capital structure for the next five years with a repayment profile adapted to the company’s operations and expected earnings.

F-283 INCOME STATEMENT

Note 2011 2010 (in NOK 1,000) Operating revenues Operating revenues ...... 16 2,216,276 2,322,381 Total operating revenues ...... 2,216,276 2,322,381 Operating costs Payroll costs ...... 17 (574,014) (637,718) Ordinary depreciation and impairment ...... 3 (253,618) (258,626) Other operating costs ...... (1,541,129) (1,234,973) Total operating costs ...... (2,368,761) (2,131,317) Operating profit/(loss) ...... (152,484) 191,064 Finance income ...... 20 57,153 87,366 Finance expenses ...... 20 (245,574) (259,239) Finance expenses—net ...... (188,421) (171,874) Profit/(loss) before income tax ...... (340,906) 19,190 Income tax expense ...... 5 93,225 723 Profit/(loss) for the year ...... (247,680) 19,913 Transfers Transferred (from)/to other equity ...... (247,680) 19,913 Total transfer ...... (247,680) 19,913

F-284 STATEMENT OF COMPREHENSIVE INCOME

1 January to 31 December Note 2011 2010 (in NOK 1,000) Profit/(loss) for the year ...... (247,680) 19,913 Other comprehensive income: Actuarial gains /(loss) on retirement benefit obligations, net of tax ...... 14 (6,513) 4,909 Cash flow hedges, net of tax ...... 11,815 17,781 Currency translation differences ...... (28) — Other comprehensive income for the year, net of tax ...... 5,274 22,690 Total comprehensive income for the year ...... (242,406) 42,603 Attributable to: Owners of the company ...... (242,406) 42,603 Total comprehensive income for the year ...... (242,406) 42,603

F-285 BALANCE SHEET AT 31 DECEMBER

Note 2011 2010 (in NOK 1,000) ASSETS Non-current assets Intangible assets ...... 3 2,946 4,294 Deferred tax assets ...... 5 170,555 79,391 Land and buildings ...... 3 570 570 Ships ...... 3 3,250,965 3,357,729 Other tangible non-current assets ...... 3 1,063 1,209 Total tangible and intangible non-current assets ...... 3,426,100 3,443,193 Investments in subsidiaries ...... 6 492,118 492,118 Investments in associates ...... 7 19,609 19,609 Investments in other companies ...... 13,792 12,798 Derivative financial instruments ...... 8 — 21,633 Non-current trade and other receivables ...... 9 40,722 36,419 Total financial non-current assets ...... 566,241 582,577 Total non-current assets ...... 3,992,340 4,025,770 Current assets Inventories ...... 11 49,464 40,325 Current trade and other receivables ...... 9 625,821 822,396 Derivative financial instruments ...... 8 28,639 12,677 Cash and cash equivalents ...... 12 74,150 223,828 Total current assets ...... 778,074 1,099,226 Total assets ...... 4,770,414 5,124,998 EQUITY AND LIABILITES Paid-in equity ...... 13 1,154,588 1,154,588 Other reserves ...... 55,390 297,796 Total equity ...... 1,209,977 1,452,384 Retirement benefit obligations ...... 14 24,747 18,763 Total provisions ...... 24,747 18,763 Borrowings ...... 10 2,200,644 3,119,729 Other non-current liabilities ...... 10 57,747 111,165 Derivative financial instruments ...... 8 15,772 18,041 Total non-current liabilities ...... 2,274,164 3,248,935 Current liabilities ...... 9 1,261,374 387,813 Derivative financial instruments ...... 8 152 17,102 Total current liabilities ...... 1,261,526 404,915 Total liabilities ...... 3,560,437 3,672,613 Total equity and liabilities ...... 4,770,414 5,124,998

F-286 STATEMENT OF CHANGES IN EQUITY

Share capital (including own Share Retained Total Note shares) premium earnings equity (in NOK 1,000) Balance at 1 January 2010 ...... 419,965 734,622 255,194 1,409,781 Profit/(loss) for the year ...... — — 19,913 19,913 Other comprehensive income Cash flow hedges, net of tax ...... — — 17,781 17,781 Actuarial gain/(loss) on retirement benefit obligations, netoftax...... 14 — — 4,909 4,909 Total other comprehensive income, net of tax ...... — — 22,690 22,690 Total comprehensive income for the year ...... — — 42,603 42,603 Balance at 31 December 2010 ...... 419,966 734,622 297,796 1,452,384 Balance at 1 January 2011 ...... 419,966 734,622 297,796 1,452,384 Profit/(loss) for the year ...... — — (247,680) (247,680) Other comprehensive income Currency translation differences ...... — — (28) (28) Cash flow hedges, net of tax ...... — — 11,815 11,815 Actuarial gain/(loss) on retirement benefit obligations, netoftax...... 14 — — (6,513) (6,513) Total other comprehensive income, net of tax ...... — — 5,274 5,274 Total comprehensive income for the year ...... — — (242,406) (242,406) Balance at 31 December 2011 ...... 419,966 734,622 55,390 1,209,977

F-287 CASH FLOW STATEMENT

Note 2011 2010 (in NOK 1,000) Cash flows from operating activities Profit/(loss) before income tax ...... (340,906) 19,190 Depreciation and impairment ...... 3 253,618 258,626 (Profit)/loss on disposal of property, plant and equipment (PPE) and shares ...... 1,849 (44,180) Dividends received ...... 20 (1,378) (29,600) Impairment of long term shares ...... — 316 Difference between expensed pension and payments ...... (3,062) 15,900 Change in working capital: Inventories ...... (9,138) (1,716) Trade and other receivables ...... 106,576 (351,737) Trade and other payables ...... 58,793 57,205 Net cash flows generated from operations ...... 66,352 (75,996) Cash flows from investing activities Purchases of property, plant and equipment (PPE) ...... 3 (145,360) (88,746) Proceeds from sale of PPE ...... 3 — 21,311 Purchases of shares ...... (994) (252) Proceeds from disposal of shares ...... 90,000 — Dividends received ...... 20 1,378 29,600 Change in other investments and other receivables ...... (57,720) 13,871 Change in restricted funds ...... 12 103,385 (2,969) Net cash flows used in investing activities ...... (9,311) (27,185) Cash flows from financing activities Repayments of borrowings ...... (103,333) (19,625) Net cash flows used in financing activities ...... (103,333) (19,625) Net (decrease)/increase in cash and cash equivalents ...... (46,293) (122,806) Cash and cash equivalents at 1 January ...... 46,157 168,963 Cash and cash equivalents at 31 December ...... 12 (136) 46,157

F-288 NOTES TO THE ACCOUNTS

ACCOUNTING POLICIES Hurtigruten ASA has chosen to adopt simplified International Financial Reporting Standards (IFRS) in its parent company accounts, pursuant to section 3–9, paragraph 5 of the Norwegian Accounting Act, cf. regulation of 21 January 2008.

Applying the simplified version of IFRS to the parent company accounts means that valuation rules and accounting policies applied in the consolidated accounts also apply to the parent company, Hurtigruten ASA. See the group accounting policies for further information. A simplified application of IFRS enables the financial statements and note information to accord with the Norwegian Accounting Act (NGAAP). The financial statements and notes for the parent company have been organised in accordance with the NGAAP, with the exception of the comprehensive income statement which follows IFRS.

Shares in subsidiaries and associates are recorded in accordance with the cost method of accounting in the parent company accounts.

NOTE 1 FINANCIAL MARKET RISK The company uses financial instruments such as bank loans, bond loans and convertible bond loans. The purpose of these financial instruments is to raise capital for investments that are necessary for the company’s activities. In addition, the company has financial instruments such as trade receivables, trade payables, etc., which are directly linked to the day-to-day operations. For hedging purposes the company makes use of certain financial derivatives. The company uses financial derivatives for trading purposes to a limited extent.

As a result of its regular operations, the company is exposed to risks related, for example, to fluctuations in exchange and interest rates and bunker costs. The company’s overall hedging strategy is to create predictability for the company’s operations and reduce the impact volatility in macro-economic conditions might have on the company’s financial performance and standing. The primary management parameter is the expected net cash flow. Extensive use is made of simple, transparent and liquid hedging instruments, mainly forward contracts, combined possibly with options and corridors.

Currency risk The company operates internationally and is exposed to currency risk in multiple foreign currencies. This risk is especially relevant in relation to the euro (EUR), US dollar (USD), pound sterling (GBP) and Australian dollar (AUD). The currency risk arises from future ticket sales and assets and liabilities recognised on the balance sheet. In addition, the bunker cost is quoted in USD. A currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency other than the entity’s functional currency.

The company’s strategy is to hedge 60–80 per cent of the net expected cash flow in euro one to two years into the future through the use of transparent and liquid instruments, usually forward contracts combined with foreign currency loans. For 2012, 60 per cent of the net expected cash flow in EUR has been hedged. The company completed the refinancing of its debt in March 2012. Portions of the loan can be converted from NOK to EUR in order to achieve “natural hedging”. No decision has been made on the timing of the conversion.

In connection with chartering out the MS Finnmarken as a hotel ship to Boskalis Australia Pty Limited for 18 months, starting in April 2010, the company has had currency hedges for AUD corresponding to approximately 60 per cent of the expected cash flow throughout the term of the charter. The currency hedges expired at the same time as the expiration of the charter on 30 October 2011.

F-289 Forward foreign currency contracts The nominal amount of outstanding forward foreign exchange contracts at 31 December 2011 was NOK 465 million (2010: NOK 1,264 million).

The hedged, highly probable transactions denominated in a foreign currency are expected to occur at various dates over the next 12 months. The forward foreign exchange contracts mature during the period from July to September, when most of the hedged cash flow is expected to occur. The forward foreign exchange contracts satisfy the requirements for hedge accounting under IFRS and changes in the fair value are recognised directly in the hedging reserve in equity. Gains and losses on forward foreign exchange contracts that are recognised in equity at 31 December 2011, will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. The gains or losses realised are allocated to passenger revenues.

Interest rate risk The company’s interest rate risk is associated with current and non-current borrowings. Borrowings at variable interest rates entail an interest rate risk for the company’s cash flow. Fixed interest rate loans expose the company to a fair value interest rate risk. In 2010 and 2011 the group’s loans with variable interest rates have been in NOK.

The company manages the variable interest rate risk by means of variable to fixed interest rate swap contracts. Interest rate swap contracts entail a conversion of variable interest rate borrowings to fixed interest rate borrowings. The group enters into a contract with other parties to exchange the difference between the contract’s fixed interest rate and variable interest rate calculated based on the agreed principal through the interest rate swaps. At 31 December 2011 a minor portion (around 10 per cent) of the company’s debt has been hedged. In connection with Hurtigruten’s refinancing of its debt in March 2012, interest rate hedges will be established for 40–60 per cent of the bank loan.

Interest rate swaps The nominal principal on outstanding interest rate swaps at 31 December 2011 was NOK 300 million (2010: NOK 300 million).

At 31 December 2011 the fixed interest rate was 5.31 per cent (2010: 5.31 per cent). The variable interest rates were NIBOR. Gains or losses on interest rate swaps recorded directly in equity at 31 December 2011, will continuously be reversed in the income statement until the bank borrowings (note 10) have been repaid. The gains or losses realised are allocated to interest expenses.

Bunker oil The company is exposed to fluctuations in bunker prices. The price of oil, and thus bunker oil, is determined in international trading in USD, while the parent company purchases bunker oil in NOK. The risk can therefore be split into a currency element and a product element. In its risk management strategy, the company has emphasised the need to coordinate risk, and has therefore chosen to reduce the bunkers risk while the currency risk is coordinated with the company’s other currency exposures.

The company enters into revolving quarterly forward contracts for the next 4–6 quarters to hedge 20–80 per cent of the expected bunker consumption, with a greater share being hedged in the near future and less being hedged further into the future. For 2012, 48 per cent of the expected bunker consumption has been hedged, with a greater share being hedged in the first quarters and less being hedged towards the end of the year.

Oil derivatives The nominal amount of outstanding forward bunker oil contracts at 31 December 2011 was NOK 150 million (2010: NOK 94 million).

The hedged, highly probable transactions denominated in a foreign currency are expected to occur at various dates over the next 12 months. The forward contracts mature monthly. Forward

F-290 bunker oil contracts satisfy the requirements for hedge accounting under IFRS and changes in the fair value are recognised directly in equity on a current basis. Gains or losses on bunker oil derivatives recognised directly through equity at 31 December 2011, will be recognised in the income statement in the same accounting periods that the hedged transactions affect the profit or loss. The gains or losses realised are allocated to bunker costs.

Credit risk and liquidity risk The company is exposed to credit and liquidity risks. At 31 December 2011 there was a greater percentage of the trade receivables that were overdue, but not written down. This is attributed primarily to the additional compensation from the government that has not been settled pending the outcome of the ESA case concerning whether the additional compensation is contrary to the EU rules on state aid. The credit risk to the government as a customer is regarded as very low. This situation is discussed in greater detail in the note on contingencies (note 2) and the note on combined items (note 9).

The company’s strategy with regard to liquidity is to have sufficient cash, cash equivalents or credit facilities to finance its operations and investments.

NOTE 2 CONTINGENCIES At 31 December 2011, the company had contingent liabilities relating to bank guarantees and other guarantees, in addition to other contingent outcomes in the course of regular operations. Significant liabilities are not expected to arise with respect to contingent outcomes.

Membership in the NOx Fund NOK 13.4 million in nitrogen oxide tax was charged to the annual accounts for 2011 (2010: NOK 14.0 million). Members of the industrial fund for nitrogen oxides have collectively undertaken to reduce emissions of these gases by 18,000 tonnes in total, broken down into 2,000 tonnes in 2008, 4,000 tonnes in 2009 and 12,000 tonnes in 2010. A new environmental agreement relating to NOx for the period from 2011 to 2017 was signed on 14 December 2010. The signatories of the environmental agreement for the period from 2011 to 2017 have undertaken to reduce their overall nitrogen oxide emissions by 16,000 tonnes and to maintain the emission reductions achieved for the entire period. During this period the agreement has annual and biennial targets that are to be met, broken down into 3,000 tonnes in 2011, 2,000 tonnes in 2012, 4,000 tonnes in 2013 and 2014, 4,000 tonnes in 2015 and 2016 and 3,000 tonnes in 2017.

The Norwegian Climate and Pollution Agency will monitor that the Fund reaches its collective targets. If these targets are not met, the members may be required to pay the full amount of the tax on their respective share of the emissions. This requirement will be calculated on the basis of the percentage of the collective target that has not been achieved. The Fund has achieved its targets for the period from 2008 to 2010. The NOx Fund has disclosed on its website that if all of the planned measures are implemented as intended until the end of 2011, the affiliated companies will meet their overall commitments for 2011 with a high level of probability.

Supplementary Agreement in connection with the public procurement contract for the Bergen to Kirkenes coastal service The Norwegian authorities agreed in 2004 on a contract with Hurtigruten ASA for the delivery of transport services along the Norwegian coast from Bergen to Kirkenes for the period from 2005 to 2012. This contract was awarded based on competitive tendering. In October 2008 it was decided to increase the compensation to Hurtigruten ASA for the remaining term of the contract by refunding 90 per cent of the NOx payments, general compensation due to higher costs and allowing a reduction in the number of ships from 11 to 10 in the winter for the remaining term of the contract. The Ministry of Transport and Communications has assumed that the additional grant is in line with state aid policies.

In July 2010 the EFTA Surveillance Authority (ESA) decided to formally investigate in order to verify whether the supplementary agreement entered into in 2008 is in accordance with the EEA’s rules for state aid. In June 2011 the ESA concluded that the additional compensation had not been granted in accordance with the EEA’s rules. It was not evident from the conclusion what portion of the supplementary agreement the ESA believed to represent illegal state aid.

F-291 At 31 December 2011 Hurtigruten had recognised income of NOK 405 million (NOK 89 million of which was recognised in 2011) under the supplementary agreement, including the effect of reducing the number of ships in the winter from 11 to 10, and received NOK 170 million of this. The government, represented by the Ministry of Transport and Communications, has appealed the ESA’s decision and declared that no portion of the additional compensation represents illegal state aid. Hurtigruten has also appealed. The ESA replied on 15 December 2011 and maintained its assertion that Hurtigruten was overcompensated during the period in question. The government, represented by the Ministry of Transport and Communications, and Hurtigruten do not share the opinion of the ESA, and the issue will be settled by the EFTA court. A hearing in the case has been scheduled for 18 April 2012. Normally it takes up to half a year before a decision is handed down. Due to the principle of prudence, Hurtigruten has set aside provisions totalling NOK 35 million with respect to the supplementary agreement at 31 December 2011. These provisions have been accounted for as a reduction in the contract income and receivables from the government (note 9).

The existing contract with the government, represented by the Ministry of Transport and Communications, expired on 31 December 2011 after Hurtigruten and the government agreed on a new contract for the Bergen to Kirkenes coastal service for the period from 2012 to 2019. The new contract entered into force on 1 January 2012.

NOTE 3 PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

Other property, Land and plant Intangible buildings Ships and equipment assets Total (in NOK 1,000) Carrying amount at 1 January 2011 . . 570 3,357,729 1,209 4,294 3,363,801 Additions ...... — 144,501 — 859 145,360 Disposals ...... — — — — Depreciation for the year ...... — (243,562) (146) (2,207) (245,915) Impairment losses for the year ...... — (7,702) — — (7,702) Carrying amount at 31 December 2011 ...... 570 3,250,965 1,063 2,946 3,255,544 At 31 December 2011 Acquisition cost ...... 570 5,333,781 3,059 11,985 5,349,394 Accumulated depreciation at 31 December 2011 ...... — (1,959,740) (1,996) (6,675) (1,968,411) Accumulated impairment losses at 31 December 2011 ...... — (123,076) — (2,363) (125,439) Carrying amount at 31 December 2011 ...... 570 3,250,965 1,063 2,946 3,255,544 Economic life ...... 25–100 years 12–30 years 5–10 years 3–7 years

Intangible assets consist of internal/external development/adaptation of ICT systems and software related to the ships.

Impairment losses recorded under ships are related primarily to the two remaining fast ferries as a result of the fact that the ferries have been chartered out for parts of the year.

Net carrying value of assets held-for-sale at 31 December 2011 ...... 60,384 Net carrying value of liabilities related to non-current assets held-for-sale at 31 December 2011 70,000 Net profit or loss before tax in 2011 from assets held-for-sale ...... (7,861)

F-292 NOTE 4 ASSETS HELD-FOR-SALE AND DISCONTINUED BUSINESS HELD-FOR-SALE Assets and liabilities related to the company’s fast ferry business are classified as held-for-sale in 2010 and 2011. The fast ferries have been chartered on short-term contracts in 2010 and until the summer of 2011. The fast ferries were laid up in the middle of 2011, and the company is actively seeking to find interested parties in the market.

Assets in the disposal group classified as held-for-sale:

2011 2010 (in NOK 1,000) Property, plant and equipment ...... 60,384 68,076 Assets held-for-sale ...... 60,384 68,076

Liabilities in the disposal group classified as held-for-sale:

2011 2010 (in NOK 1,000) Borrowings (note 10) ...... 70,000 83,333 Liabilities related to assets held-for-sale ...... 70,000 83,333

DISCONTINUED BUSINESS Profit or loss from discontinued business includes the company’s remaining fast ferry business. Share of profit/loss from Nor Lines AS was also included in 2010. The shares in Nor Lines AS were sold in December 2010. The profit or loss from discontinued business is included in Other business in the segment summary (note 6 to the consolidated financial statements).

Profit/(loss) from discontinued business:

2011 2010 (in NOK 1,000) Operating revenue (note 16) ...... 8,862 22,128 Payroll costs ...... — (209) Depreciation and impairment ...... (7,692) (7,692) Other operating costs ...... (6,050) (3,391) Other (losses)/gains—net ...... — (201) Operating profit/(loss) ...... (4,880) 10,635 Finance income ...... — 7 Finance expenses ...... (2,981) (3,210) Finance expenses—net ...... (2,981) (3,203) Share of profit/(loss) of associates(1) ...... — (1,091) Profit/(loss) before tax ...... (7,861) 6,341 Income tax expense ...... 2,201 (2,080) Profit/(loss) for the year ...... (5,660) 4,261

(1) Includes Hurtigruten’s share of the loss from Nor Lines AS of NOK 12.5 million and capital gain from the sale of the shares in Nor Lines AS of NOK 11.4 million.

2011 2010 (in NOK 1,000) Net cash flow from operating activities ...... (169) 15,325 Net cash flow from investing activities ...... — 21,311 Net cash flow used in financing activities ...... (13,333) (13,333) Total net cash flow ...... (13,502) 23,303

Three fast ferries were sold at book value in 2010.

F-293 NOTE 5 INCOME TAX

2011 2010 (in NOK 1,000) The income tax expense for the year can be broken down as follows: Change in deferred tax assets ...... (91,164) 7,854 Deferred tax liabilities/assets related to recognition through equity included in change in deferred tax assets ...... (2,062) (8,577) Total income tax expense ...... (93,225) (723) Calculation of tax basis for the year: Profit/(loss) before tax ...... (340,907) 19,190 Permanent differences ...... 4,599 (54,306) Permanent differences related to recognition through equity ...... (9,046) 6,818 Change in hedging derivatives ...... 16,409 23,813 Change in temporary differences that affect the tax payable ...... 92,301 (6,215) Tax basis for the year ...... (236,643) (10,701)

Summary of temporary differences:

2011 2010 (in NOK 1,000) Current assets ...... (195,688) (148,710) Non-current assets ...... 2,024,912 1,997,619 Other differences ...... 146,565 223,544 Tax loss carryforward ...... (2,584,914) (2,355,994) Total ...... (609,125) (283,540) Estimated deferred tax assets ...... (170,555) (79,391) Tax rate applied ...... 28% 28%

In preparing the annual financial statements the management has found that the future taxable income is adequate to utilise the recognised tax loss carryforward. This assessment has been made based on the management’s estimates of future profits in the group, in which particular importance has been attached, for example, to the company’s procurement contract with the government in effect until 2019 inclusive, as well as the effects of the restructuring carried out by company.

Reconciliation of the income tax expense for the year:

2011 2010 (in NOK 1,000) Profit/(loss) before tax ...... (340,907) 19,190 Estimated tax on the profit/(loss) for the year 28% ...... (95,454) 5,373 Change in the income tax expense as a result of: —non-taxable income ...... (94) (20,412) —non-tax-deductible expenses ...... 1,382 7,017 —reversed deferred tax assets after prevailing tax case ...... — 6,954 —miscellaneous items ...... 941 345 Total income tax expense ...... (93,225) (723)

F-294 NOTE 6 INVESTMENTS IN SUBSIDIARIES

Ownership/ Business office voting share Profit/(loss) for 2011 Book value (in NOK 1,000) (in NOK 1,000) HRG Eiendom AS ...... Narvik, Norway 100.0% 433 385 Hurtigruten Pluss AS ...... Narvik, Norway 100.0% 19,316 4,062 Hurtigruten Estonia OÜ ...... Tallinn, Estonia 100.0% (28) 20 Hurtigruten GmbH ...... Hamburg, Germany 100.0% 12,829 48,832 Hurtigruten Greenland AS ...... Nuuk, Greenland 100.0% (209) 1 Hurtigruten Inc...... NewYork, USA 100.0% 1,017 1 Hurtigruten Limited ...... London, England 100.0% 1,282 11,920 Hurtigruten Pty Ltd ...... Sydney, Australia 100.0% (4,170) — Hurtigruten SAS ...... Paris, France 100.0% (1,130) 315 Hurtigruten Verdens Vakreste Sjøreise AS ...... Tromsø, Norway 100.0% 1 110 Spitsbergen Travel AS ...... Longyearbyen, Svalbard 100.0% 355 283,719 AS TIRB ...... Finnsnes, Norway 71.3% 27,808 142,755 Total ...... 492,118

Reference is made to note 21 for additional information on the balances with subsidiaries.

NOTE 7 INVESTMENTS IN ASSOCIATES

Ownership/ Equity at Company’s Business office voting share 31 December 2011 profit/(loss) Book value (in NOK 1,000) (in NOK 1,000) (in NOK 1,000) Funn IT AS ...... Narvik, Norway 50.0% 28,762 5,257 5,506 ANS Havnebygningen ...... Tromsø, Norway 50.0% 3,780 1,300 14,103 Total investments in associates ...... 19,609

Reference is made to note 21 for additional information on the company’s transactions with associates.

F-295 NOTE 8A FINANCIAL INSTRUMENTS BY CATEGORY The following principles have been applied for the subsequent measurement of financial assets and liabilities:

At 31 December 2011:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Shares in other companies ...... — 13,792 — — 13,792 Receivables (note 9) ...... 40,722 — — — 40,722 Financial assets—current Trade and other receivables (note 9) ...... 625,821 — — — 625,821 Derivative financial instruments ...... — — 28,639 — 28,639 Cash and cash equivalents (note 12) ...... 74,150 — — — 74,150 Financial liabilities—non-current Borrowings (notes 10 and 21) ...... — — — 3,153,452 3,153,452 Derivative financial instruments ...... — — 15,772 — 15,772 Of which classified as held-for-sale (note 4) ...... — — — (70,000) (70,000) Financial liabilities—current Trade and other payables (note 9) ...... — — — 348,644 348,644 Derivative financial instruments ...... — 152 — — 152

At 31 December 2010:

Held for Derivatives Other Loans and trading used for financial receivables purposes hedging liabilities Total (in NOK 1,000) Financial assets—non-current Shares in other companies ...... — 12,798 — — 12,798 Derivative financial instruments ...... — — 12,677 — 12,677 Receivables (note 9) ...... 36,419 — — — 36,419 Financial assets—current Trade and other receivables (note 9) ...... 822,396 — — — 822,396 Derivative financial instruments ...... — 2,709 18,924 — 21,633 Cash and cash equivalents (note 12) ...... 223,828 — — — 223,828 Financial liabilities—non-current Borrowings (notes 10 and 21) ...... — — — 3,314,227 3,314,227 Derivative financial instruments ...... — — 18,041 — 18,041 Of which classified as held-for-sale (note 4) ...... — — — (83,333) (83,333) Financial liabilities—current Trade and other payables (note 9) ...... — — — 286,909 286,909 Derivative financial instruments ...... — — 17,102 — 17,102

F-296 NOTE 8B CREDITWORTHINESS OF FINANCIAL ASSETS Hurtigruten does not have a system that distinguishes between trade receivables and other receivables based on the counterparty’s creditworthiness. Hurtigruten has longstanding partners, and it follows up their creditworthiness through periodic reconciliation of the trade receivables ledger and credit monitoring.

2011 2010 (in NOK 1,000) Trade and other receivables Counterparties with external credit rating ...... — — Counterparties without external credit rating ...... 625,821 822,396 Total trade and other receivables ...... 625,821 822,396

2011 2010 (in NOK 1,000) Cash at bank(1) AA...... 67,100 150,509 A ...... 9 3,183 Without external credit rating ...... 1,270 65,699 Total cash at bank ...... 68,379 219,391

(1) Remainder of the cash and cash equivalents is cash

2011 2010 (in NOK 1,000) Derivative financial instruments AA...... 20,493 22,555 A ...... 2,642 — Without external credit rating ...... 5,504 11,755 Total ...... 28,639 34,310

None of the financial assets have been renegotiated during the last financial year.

NOTE 9 COMBINED ITEMS

2011 2010 (in NOK 1,000) Non-current receivables Non-current intra-group receivables (note 21) ...... 37,509 36,419 Other non-current receivables ...... 3,212 — Total non-current trade and other receivables (notes 8A,10) ...... 40,722 36,419 Current receivables Trade receivables ...... 233,852 148,333 Trade receivables and other current intra-group receivables (note 21) ...... 285,723 366,939 Other current receivables ...... 106,247 307,124 Total current trade and other receivables (note 8) ...... 625,821 822,396 Current liabilities Trade payables ...... 110,974 115,647 Public duties payable ...... 17,669 17,571 First-year instalments on non-current debt (note 10) ...... 895,061 83,333 Trade payables and other current intra-group debt (note 21) ...... 107,982 42,772 Other current liabilities ...... 129,688 128,490 Total current liabilities (note 8) ...... 1,261,374 387,813

Receivables and liabilities denominated in foreign currencies are translated to NOK at the rate in effect on the balance sheet date. The company’s provisions for bad debt have increased from

F-297 NOK 96 million at 31 December 2010 to NOK 143 million at 31 December 2011. The increase in the provisions for bad debt are attributed to the fact that Hurtigruten’s Australian subsidiary Hurtigruten Pty Ltd filed an arbitration case against the other contracting party for outstanding claims in connection with the charter of the MS Finnmarken. Due to the principle of prudence provisions have been set aside totalling NOK 46 million at 31 December 2011 (note 2).

The increase in trade receivables is attributed primarily to the additional compensation from the government that has not been settled pending the outcome of the ESA case concerning whether the additional compensation is contrary to the EU rules on state aid. The reduction in other current receivables is attributed primarily to the settlement for the sale of the shares in Nor Lines and accounting provisions of NOK 35 million concerning the supplementary agreement (note 2).

The increase in the first-year instalments is attributed to the fact that the deferred instalment agreement expired on 31 December 2011 (note 10).

NOTE 10 RECEIVABLES AND LIABILITIES

2011 2010 (in NOK 1,000) Receivables that mature in more than one year Non-current trade and other receivables ...... 40,772 36,419 Total ...... 40,772 36,419

Other non-current liabilities of NOK 57.7 million (2010: NOK 111.2 million) refer in their entirety to liabilities to subsidiaries (note 21).

Non-current liabilities that mature after more than 5 years

2011 2010 (in NOK 1,000) Repayment profile for interest-bearing debt: 2011 ...... — 83,333 2012 (classified as first-year instalments) ...... 895,061 824,482 2013 ...... 2,200,644 2,295,247 2014 ...... — — 2015 ...... — — 2016=> ...... — — Total ...... 3,095,705 3,203,062

The convertible bond loan of NOK 47 million (debt element at the balance sheet date) and a bond loan of NOK 51 million are included above. Deferred tax and pension obligations are not included above.

Hurtigruten ASA entered into an agreement in September 2006 with a bank syndicate headed by Nordea comprising a revolving credit facility of up to NOK 3,300 million, which permitted the repayment of current loans for the financing of Hurtigruten and for external financing of the MS Fram. An addendum to the loan agreement was signed in February 2009. The addendum specifies that no instalments will be paid on the loan between March 2009 and December 2011. The postponed instalments will be paid back on a pro rata basis together with the remaining instalments due for payment from March 2012. The revised loan agreement contains a cash sweep clause, which implies that Hurtigruten is committed from the first quarter of 2010 to devote all unrestricted cash that exceeds NOK 500 million at the end of the first quarter of each year for repayment of the loan. A repayment made under the cash sweep clause can only be drawn down again under the loan agreement by an amount equal to 50 per cent of the repayment made in the first quarter of 2010. No such drawdown right exists for a repayment made under the cash sweep clause in the first quarter of 2011. There have been no repayments under the cash sweep clause in 2010, nor have there been any such repayments in the first quarter of 2011.

F-298 The loan agreement specifies financial covenants related to liquidity, equity and cash flow. These covenants must be met at the end of every quarter, and the required minimum free liquidity of NOK 200 million must be maintained during the term of the loan. The financial covenants are as follows: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • EBITDA must be greater than the group’s annual debt obligation and dividend payments, or the group’s free liquidity including unused credit facilities must be a minimum of NOK 350 million. • The equity ratio must be 25 per cent from 30 September 2010 to the end of the loan term. At 31 December 2011, the equity requirement has been reduced (waived) temporarily to 23 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreements.

Hurtigruten ASA has refinanced its debt, and the new loan agreement with the banks is dated 7 March 2012. The agreement for a total of NOK 2.6 billion is with a bank syndicate consisting of eight banks, two of which are foreign banks. The term of the loan is five years with annual instalments of NOK 260 million and the first instalment falls due in September 2012. The financial covenants are as follows: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • EBITDA must be greater than the group’s annual debt obligation and dividend payments, or the group’s free liquidity including unused credit facilities must be a minimum of NOK 350 million. • An equity ratio of 22.5 per cent from 31 March 2012 to 31 December 2014, inclusive. From 31 December 2014 until the expiration of the agreement term the equity ratio requirement will increase to 25 per cent. The convertible bond loan issued by Hurtigruten ASA is regarded as equity in relation to the loan agreements.

As part of its refinancing Hurtigruten ASA has issued an unsecured bond loan of NOK 500 million. The loan has a term of five years and one month. The financial covenants are as follows: • The working capital including unused credit facilities must be positive. • The group must maintain free liquidity of at least NOK 200 million over the term of the loan. • Non-current interest-bearing liabilities shall be less than 65 per cent of the total assets until 30 June 2013. This shall be reduced annually by 5 per cent at 1 July 2013. At 1 July 2015 to the expiration of the term of the agreement, non-current interest-bearing liabilities shall be less than 50 per cent of the total assets. • EBITDA shall be lower than 6.5 in relation to the interest-bearing liabilities from 31 December 2013, and this shall be reduced by 0.5 annually.

NOTE 11 INVENTORIES The inventories consist of the following types of goods:

2011 2010 (in NOK 1,000) Goods purchased for resale ...... 26,144 23,121 Bunkers ...... 23,320 17,204 Total ...... 49,464 40,325

The cost of goods sold included in other operating costs amounted to NOK 303.7 million (2010: NOK 301.6 million).

Inventories are measured at cost. If the fair value is assessed to be lower than the cost price, then the inventories will be written down.

F-299 NOTE 12 RESTRICTED FUNDS AND MARKET-BASED FINANCIAL CURRENT ASSETS

2011 2010 (in NOK 1,000) Cash and cash equivalents (note 8) ...... 74,150 223,828 Total cash and cash equivalents on the balance sheet ...... 74,150 223,828 In the cash flow statement cash and cash equivalents consist of the following: Cash at bank and on hand ...... 74,150 223,828 Restricted bank deposits ...... (74,286) (177,671) Cash and cash equivalents in the cash flow statement ...... (136) 46,157 Restricted bank deposits consist of the following Bank deposits(1) ...... 74,286 177,671 Total ...... 74,286 177,671

(1) Restricted bank deposits consist primarily of employee tax withholdings, licence guarantee to the Ministry of Transport and Communications and guarantees to limited partnerships.

NOTE 13 SHARE CAPITAL AND PREMIUM

Nominal value of Share Own No. of shares ordinary shares premium shares Total (in NOK 1,000 unless otherwise indicated) At 31 December 2010 ...... 420,259,163 420,259 734,622 (293) 1,154,588 At 31 December 2011 ...... 420,259,163 420,259 734,622 (293) 1,154,588

All ordinary shares have equal rights.

The shareholders’ agreement between the Narvik local authority, Narvik port authority, Sparebanken Narvik, Ankenes Sparebank, Nordlandsbanken ASA, DnB NOR ASA and Nordkraft AS (formerly Narvik Energi AS) expired on 31 December 2010. The agreement committed the parties to (i) cooperate on the election of members to the corporate assembly and board so that the parties would maintain their representation on the board and corporate assembly, (ii) attend any general meeting where it is proposed to amend article 2 of Hurtigruten ASA’s Articles of Association concerning localisation of the company’s registered office and central administration, and to vote against such proposal, (iii) contribute to ensuring that the company does not create or acquire any subsidiary conducting activities that would conflict with the intentions of the parties to the agreement with regard to article 2, and (iv) to participate in new share issues in the company (with the exception of the Narvik local authority and Narvik port authority) limited to the individual contracting party’s proportionate share of the share capital in the company when the merger took effect (1 March 2006) and limited to a maximum new issue amount of NOK 300 million.

The annual general meeting was held on 14 April 2011 and granted the company’s board power of attorney to acquire own shares. The general meeting adopted the following resolution: i. Pursuant to sections 9–4 and 9–5 of the Norwegian Public Limited Companies Act, the board of Hurtigruten ASA is hereby granted power of attorney to acquire own shares for a maximum nominal value of NOK 42,025,916, which corresponds to 10 per cent of the share capital. The overall holdings of own shares shall not exceed 10 per cent of the company’s share capital. The shares may be acquired on the market over an exchange or otherwise. ii. For the acquisition of shares in Hurtigruten ASA, a minimum of NOK 1 and maximum of NOK 10 shall be paid for each share with a nominal value of NOK 1. If there is a change in the nominal value of the shares, the limits for the acquisition of the shares shall be adjusted correspondingly. iii. The board is free to determine how the acquisition and sale of own shares shall take place. iv. This power of attorney shall remain valid until the company’s annual general meeting in 2012.

The board does not have any power of attorney to increase the company’s share capital. With regard to the convertible bond loan, reference is made to note 17 in the consolidated financial statements.

F-300 The 20 largest shareholders at 31 December 2011:

Ownership Domicile No. of shares interest (%) Periscopus AS ...... Oslo 118,723,289 28.25 Heidenreich Enterprise L.P.(1) ...... USA 71,835,396 17.09 Skagen Vekst ...... Oslo 30,296,503 7.21 MP Pensjon PK ...... Oslo 29,000,000 6.90 Home Capital AS ...... Oslo 21,023,693 5.00 Nordkraft AS ...... Narvik 10,844,896 2.58 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,379,534 0.80 Netfonds Liv ...... Oslo 2,825,827 0.67 Svendsen, Geir Arild ...... Bergen 1,965,245 0.47 Skagen Vekst III ...... Oslo 1,550,905 0.37 Avanza Bank AB brokerage account ...... Stockholm 1,438,781 0.34 Holger Invest I AS ...... Drammen 1,400,000 0.33 Narvik local authority ...... Narvik 1,382,767 0.33 Fjellvit AS ...... Oslo 1,068,890 0.25 Troms county council ...... Tromsø 1,048,461 0.25 Warrenwicklund Norge securities fund ...... Oslo 1,013,518 0.24 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Bergen Handel og Invest ...... Bergen 1,000,000 0.24 Top 20 shareholders ...... 312,506,077 74.36 Other shareholders ...... 107,753,086 25.64 Total number of shares ...... 420,259,163 100.00

(1) Heidenreich Enterprise Partnership owns 13.98 per cent and ML Pierce Fenner owns 3.11 per cent

The 20 largest shareholders at 31 December 2010

Ownership Domicile No. of shares interest (%) Periscopus AS ...... Oslo 110,723,289 26.35 Heidenreich Enterprise L.P...... USA 71,835,396 17.09 MP Pensjon PK ...... Oslo 29,000,000 6.90 Skagen Vekst ...... Oslo 26,179,943 6.23 DnB NOR Bank ASA ...... Oslo 16,000,126 3.81 Nordkraft AS ...... Narvik 10,844,896 2.58 Odin Norge ...... Oslo 9,602,920 2.28 Troms Kraft AS ...... Tromsø 7,396,579 1.76 Dahle, Bjørn ...... Stavanger 7,099,979 1.69 J.M. Hansen Invest AS ...... Tromsø 4,608,293 1.10 Odin Maritim ...... Oslo 3,500,000 0.83 Avanza Bank AB ...... Stockholm 2,715,453 0.65 Skagen Vekst III ...... Oslo 1,390,157 0.33 Narvik local authority ...... Narvik 1,382,767 0.33 WarrenWicklund Norge ...... Oslo 1,113,295 0.26 Fjellvit AS ...... Oslo 1,068,890 0.25 Troms county council ...... Tromsø 1,048,461 0.25 Kvade, Kai Vallin ...... Arendal 1,000,100 0.24 Dyvi, Espen ...... Oslo 1,000,000 0.24 DZ Bank International S.A ...... Luxembourg 1,000,000 0.24 Top 20 shareholders ...... 308,510,544 73.41 Other shareholders ...... 111,748,619 26.59 Total number of shares ...... 420,259,163 100.00

F-301 Shares held by elected officers and senior executives of Hurtigruten ASA at 31 December 2011 (directly and indirectly)

Corporate assembly No. of shares Karen M. Kuvaas, chair ...... 699 Bjørn Dahle, deputy chair ...... 7,099,979 Fay Hege Fredriksen ...... — Svein Otto Garberg ...... 835,327 Nina Hjort(1) ...... — Westye Høegh ...... 800,000 Ingolf Marifjæren ...... 200,000 Jon Tenden ...... — Sissel Kinn Berg, elected by employees ...... 5,000 Randi Heggelund, elected by employees ...... 611 Haldor Moen, elected by employees ...... — Regina-Mari Aasli, elected by employees ...... — Marlen Hauge, observer ...... 10,000 Mette Fredrikke Indrevik, observer ...... 200

(1) Through the company Hjort Holding AS, Nina Hjort has ownership interests in J.M. Hansen Invest AS, and thus an indirect ownership interest in Hurtigruten ASA

Board of directors No. of shares Trygve Hegnar, chair(2) ...... 118,723,289 Per Heidenreich, deputy chair(3) ...... 71,895,396 Berit Kjøll ...... 100,000 Arve Giske ...... — Helene Jebsen Anker ...... 90,000 Guri Mai Elmar ...... — Tone Mohn-Haukland, elected by employees ...... — Per-Helge Isaksen, elected by employees ...... —

No. of Management shares Olav Fjell, CEO(4) ...... 1,119,040 Torkild Torkildsen, Deputy CEO ...... 1,684 Anders Olstad, CFO until 31 December 2011 ...... — Asta Lassesen, CFO from 1 January 2012 ...... 600,000 Glen P. Hartridge, Director product and pricing management ...... — Ole F. Hienn, Director legal affairs ...... 170,950 Hans Rood, Sales and marketing director ...... 90,000 Trond Øverås, Product and marketing director until 1 December 2011 ...... 5,000 Dag Arne Wensel, Director maritime technical operations ...... 63,650

(2) Shares are owned through the company Periscopus AS (3) Shares are owned through the companies Heidenreich Enterprise L.P. and ML Pierce Fenner (4) Of which 1,068,890 shares are owned through the company Fjellvit AS

The company’s auditor does not own any shares in Hurtigruten ASA.

NOTE 14 PENSIONS

The company has pension plans that give entitlement to defined future pension benefits. These are mainly dependent on the number of years of service, salary level upon reaching retirement age, and the size of the National Insurance benefits. These obligations are funded through an insurance company. The defined benefit pension plans cover 1,285 employees in the parent company. For maritime personnel there are three pension plans that cover different pension periods. A defined benefit plan that covers the period from age 60 to 67, and a defined contribution plan through an insurance company that covers pensions after reaching the age of 67. In addition to the pension obligations funded through insurance companies, the company has defined contribution plans for maritime personnel (Norwegian Pension Insurance for Seafarers) which are administrated by the government. The company also has an unfunded plan funded from revenue.

F-302 Financial assumptions:

2011 2010 Discount rate ...... 2.60% 4.00% Expected return on pension fund assets ...... 4.10% 5.40% Expected annual wage adjustment ...... 3.50% 4.00% Expected annual pension adjustment ...... 0.10% 1.30% Expected annual National Insurance basic amount (G) adjustment ...... 3.25% 3.75% Table book used for estimating liabilities ...... K2005 K2005 Table book used for estimating disabilities ...... IR02 IR02

The actuarial assumptions are based on the normal assumptions used in the insurance industry with respect to demographic factors and staff turnover.

Average expected years of service until retirement age ...... 12.3 years 12.2 years

Pension costs for the year are calculated as follows:

2011 2010 (in NOK 1,000) Present value of current year’s pension benefits earned ...... 8,771 17,681 Defined contribution plans for maritime personnel ...... 28,442 29,168 Interest expenses on accrued pension obligations ...... 2,946 8,772 Expected return on plan assets ...... (2,756) (6,528) Discontinuation of plans ...... — 644 Plan changes ...... — 224 Payroll tax ...... 1,888 2,429 Employee contributions ...... — (902) Total pension costs included in payroll costs ...... 39,290 51,487 Actuarial gains/(losses) recognised in other comprehensive income (before tax) .... (9,046) 6,818

Specification of net pension assets/obligations:

2011 2010 (in NOK 1,000) Present value of accrued pension obligations at 31 December for funded defined benefit plans ...... 93,426 74,588 Estimated value of plan assets at 31 December ...... (69,512) (56,913) Total ...... 23,914 17,675

Present value of pension obligations funded from revenue ...... 833 1,089 Net pension obligations ...... 24,747 18,763

Net pension assets/obligations are classified as follows on the balance sheet:

2011 2010 (in NOK 1,000) Pension obligations ...... 24,747 18,763 Net pension obligations ...... 24,747 18,763

F-303 Change in recognised pension obligations:

2011 2010 (in NOK 1,000) Carrying amount at 1 January ...... 75,677 205,980 Present value of current year’s pension benefits earned ...... 8,771 17,681 Interest expenses ...... 2,946 8,772 Actuarial gains/(losses) ...... 9,251 2,441 Discontinuation of pension plans (plan changes) ...... — 600 Pension benefits paid ...... (2,237) (7,262) Reduction from the sale of businesses ...... — (152,583) Change in employer’s payroll tax, net obligation ...... (149) 47 Carrying amount at 31 December ...... 94,259 75,677

Change in the fair value of the plan assets:

2011 2010 (in NOK 1,000) Carrying amount at 1 January ...... 56,913 140,408 Expected return on plan assets ...... 2,756 6,528 Employer contributions ...... 11,874 17,762 Actuarial gains/(losses) ...... 205 9,259 Paid-up policies and disbursements due to discontinuation of plans (plan changes) ...... — (11,343) Pension benefits paid ...... (2,237) (5,407) Assets acquired through business combinations ...... — — Assets transferred through the sale of businesses ...... — (100,294) Carrying amount at 31 December ...... 69,512 56,913

Composition of the plan assets:

2011 2010 Shares ...... 8.2% 15.1% Current bonds ...... 15.2% 15.4% Money market ...... 23.4% 17.4% Non-current bonds ...... 35.0% 33.7% Property ...... 17.8% 16.8% Other ...... 0.4% 1.5% Total ...... 100.0% 100.0% Actual return on plan assets ...... 2.10% 6.20%

2011 2011 (in NOK 1,000) The company’s expected contributions to funded plans next year ...... 5,764 7,892

The company is required to establish an occupational pension plan pursuant to the Norwegian Mandatory Occupational Pension Act. The company has established a plan that satisfies the requirements in this Act.

Table of the historical present values of pension obligations and assets at 31 December

2011 2010 2009 2008 2007 (in NOK 1,000) Present value of defined benefit pension obligations ...... 94,259 75,677 205,980 243,274 219,984 Fair value of plan assets ...... 69,512 56,913 140,408 144,366 137,791 Deficit/(surplus) ...... 24,747 18,763 65,572 98,908 82,193

F-304 2011 2010 Fact-based adjustments ...... 24.59% 7.75%

NOTE 15 LIABILITIES AND SECURED DEBT

2011 2010 (in NOK 1,000) Secured debt ...... 2,997,466 3,107,382 Assets pledged as security: Ships ...... 3,191,571 3,325,979 Trade receivables ...... 463,299 504,279 Shares in subsidiaries ...... 426,474 142,755 Total ...... 4,081,344 3,973,013

2011 2010 (in NOK 1,000) Guarantee liabilities, etc.: Other companies ...... 242 — Subsidiaries and associates ...... 5,848 6,297 Total guarantees ...... 6,090 6,297

In its ongoing business activities, the parent company Hurtigruten ASA assumes a conditional liability through guarantees issued directly to or on behalf of its subsidiaries/associates. The amounts in the table above represent the maximum potential amount of future commitments the company could be obligated to meet under the guarantees. None of these amounts have been recognised on the balance sheet at 31 December 2011.

NOTE 16 OPERATING REVENUES The reporting of operating segments at the parent company level is not part of the internal management reporting. Reference is made to note 6 to the consolidated financial statements for operating segment information.

2011 2010 (in NOK 1,000) Operating revenues: Continuing business ...... 2,207,414 2,300,253 Discontinued business ...... 8,862 22,128 Total ...... 2,216,276 2,322,381

Discontinued business consists of the company’s remaining fast ferry business.

NOTE 17 PAYROLL COSTS

2011 2010 (in NOK 1,000) Payroll costs Wages and salaries ...... 474,236 520,848 Payroll tax ...... 29,907 36,081 Pension costs (note 14) ...... 39,290 51,487 Other benefits ...... 30,581 29,302 Total ...... 574,014 637,718 Average number of full-time equivalents ...... 1,369 1,322

F-305 NOTE 18 REMUNERATION, ETC. Figures for 2011:

Pension Other Position Salary(4) costs(4) remuneration(4)(5) Loans Fees(4) (in NOK 1,000) Olav Fjell ...... CEO 4,471 94 7,503 — — Torkild Torkildsen ...... Deputy CEO 2,131 343 168 — — Anders Olstad(1)(3) ...... CFOuntil 31 December — — — — 3,634 Trond Øverås ...... Product & marketing 1,416 391 90 — — director until 1 December Glen Hartridge ...... Director product and 946 198 124 — — pricing management Ole Fredrik Hienn ...... Director legal affairs 1,611 297 249 — — Hans Rood(2) ...... Sales and marketing 2,146 547 691 — — director Dag-Arne Wensel ...... Director of technical 993 265 155 — — and maritime operations Trygve Hegnar ...... Chair — — 5 — 308 Per Heidenreich ...... Deputy Chair — — 10 — 161 Berit Kjøll ...... Director — — 1 — 129 Olaf Larsen ...... Director until 14 April — — — — 48 Arve Giske ...... Director from 14 April — — — — 117 Helene Jebsen Anker ...... Director — — — — 133 Merete Nygaard Kristiansen ...... Director until 14 April — — — — 42 Guri Mai Elmar ...... Director from 14 April — — — — 98 Tone Mohn-Haukland ...... Director, elected by the 465 14 4 — 155 employees Per-Helge Isaksen ...... Director, elected by the 494 15 4 — 129 employees Deputy members ...... — — — — — Corporate assembly ...... — — — — 166 Auditor fees—statutory auditing(3) . . . — — — — 1,900 Assistance IFRS, accounting and tax(3) ...... — — — — 95 Other attestations(3) ...... — — — — 101 Auditor fees—other assistance(3) ..... — — — — 77

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. CFO receives only fees and is not included in the company’s other benefit programmes. (2) Rood’s salary is paid in USD and translated to NOK. (3) Fees exclusive of value added tax. (4) Salaries, fees and directors’ remuneration have been paid from the management company Hurtigruten Pluss AS, except for the board members elected by the employees, which have been paid by Hurtigruten ASA. (5) Includes bonus based on accounts for 2011 (payable in 2012), and estimated costs related to the share value based remuneration programme.

The company’s chief executive, Olav Fjell, has a contract with the company stipulating an annual salary of NOK 4.3 million. Other benefits include a company car and an ordinary telephone, internet, newspaper and home PC allowance. He is also entitled to a bonus as determined by the company’s board. The board is free to consider whether a bonus shall be paid and how much should be paid within a maximum limit of one-third of the chief executive’s annual salary. The four first years that Fjell was employed the payment of a bonus was not considered. However, the board decided in the autumn of 2011 to pay a bonus of NOK 0.7 million for the years 2007 to 2011. This amount has been included under other remuneration above. The chief executive’s conditions of employment do not include any personal pension obligations.

F-306 When Fjell was appointed as the company’s chief executive in September 2007, there had been a number of chief executives during a short period of time, and the board wanted to motivate Fjell to stay with the company for a number of years. The chief executive’s contract of employment stipulated therefore that if the chief executive resigned of his own free will after a minimum of three year’s employment, the company would continue to pay his salary for 18 months. Any other pay received from permanent positions during this period would not be deducted from the termination pay provided by Hurtigruten ASA. In the autumn of 2011, Fjell had been employed for four years and the board decided to pay the agreed termination pay as a bonus for remaining in his position for at least three years and removed the termination pay clause from his contract at the same time. The termination pay clause upon resignation at the wishes of the board was also removed, and Fjell now has an ordinary period of notice of six months without any entitlement to termination pay. The payment of NOK 6.6 million has been included in the other remuneration column above.

The company’s executive management are members of the company’s defined contribution plan. In addition, a supplementary pension plan has been established, which provides a pension for any salary in excess of 12 times the National Insurance basic amount (12G). This plan is an ordinary arrangement in the company, and it includes all employees, including members of the executive management, with a salary exceeding 12 times the basic amount, with the exception of the chief executive, who is not a member of any personal pension plan in the company. The pension costs for the executive management have been included under pension costs above.

The board agreed at a board meeting on 26 February 2008 to introduce a performance-based bonus scheme for the company’s executive management with effect from 1 January 2008. The bonus payments are limited to one-third of each executive’s annual salary, with 25 per cent of the bonus being determined by the group’s overall results, and the remaining 75 per cent being determined by the results achieved in the executive’s area of responsibility. Results within the executive’s area of responsibility are compared with predefined targets/ parameters. The bonus scheme includes the executive management with the exception of the chief executive. The chief executive has his own bonus scheme, in which the board determines the size of the bonus. This scheme has been described above in the section on the chief executive’s remuneration. Payments will be made under the bonus scheme to the executive management on the basis of the 2011 results. The payments will be made in 2012. This bonus is included under other remuneration above.

In 2010 a share value based bonus scheme (synthetic options) was established for permanent employees of Hurtigruten ASA and wholly owned subsidiaries of Hurtigruten ASA. This scheme includes only permanent employees who owned shares in Hurtigruten ASA at 31 December 2010. For each share the employee owned on 31 December 2010, the employee would receive three synthetic options. The executive management may participate with up to 83,333 shares (for a total of 250,000 share options). The options may be exercised over the next three years. In December 2011, 20 per cent of the options can be exercised; in December 2012, 30 per cent of the options can be exercised; and, in December 2013, 50 per cent of the options can be exercised. The market price will be the average market price in December for the respective years. The number of shares at 31 December 2010 must be kept until the options are exercised. Any gains will be paid as an extraordinary bonus after the end of each year. The employees will pay ordinary income tax on any gain.

The fair value of the options is calculated using the Black-Scholes option-pricing model. The fair value is recognised as an expense over the vesting period. A total of NOK 0.3 million was recognised as an expense (payroll costs) for 2011 and provisions totalling NOK 0.9 million have been set aside (provisions for liabilities). The average price in December for the next three years will be measured against the average price for the second the half of 2010, which was NOK 4. A total of 1.3 million shares are included in the option scheme, which gives a total of 3.9 million options. There have been no payments under this scheme in 2011. The estimated costs for the year related to senior management personnel participating in the scheme are included under other remuneration above. Reference is made to note 21 to the consolidated financial statements for further details on the scheme.

F-307 Figures for 2010:

Pension Other Position Salary costs remuneration(2) Loans Fees (in NOK 1,000) Olav Fjell ...... CEO 4,049 158 205 — — Torkild Torkildsen ...... Deputy CEO 1,378 174 331 — — Anders Olstad(1) ...... CFO — — — — 3,189 Trond Øverås ...... Product and marketing 1,318 333 284 — — director Glen Hartridge ...... Director pricing and 860 142 269 — — revenue management Ole Fredrik Hienn ...... Director legal affairs 1,575 361 266 — — Hans Rood ...... Sales director 2,223 637 501 — — Dag-Arne Wensel ...... Director maritime technical 878 139 480 — — operations Trygve Hegnar ...... Chair — — — — 288 Per Heidenreich ...... Deputy Chair — — — — 151 Berit Kjøll ...... Director — — — — 118 Olaf Larsen ...... Director — — — — 130 Helene Jebsen Anker ...... Director — — — — 135 Merete Nygaard Kristiansen ....Director — — — — 118 Anton Abrahamsen ...... Director until 10 June, —— — — 50 elected by the employees Tone Mohn-Haukland ...... Director from 10 June, —— — — 80 elected by the employees Rigmor Sand ...... Director until 10 June, —— — — 50 elected by the employees Per-Helge Isaksen ...... Director from 10 June, —— — — 67 elected by the employees Rolf Andersen ...... Observer on the board until —— — — — 10 June Herodd Widding ...... Observer on the board until —— — — 22 10 June Bo Lennart Christer — — — — 177 Thorbjørnsson ...... Observer on the board Deputy members ...... — — — — — Former directors and observers . . — — — — 12 Corporate assembly ...... — — — — 188 Auditor fees—statutory auditing(3) ...... — — — — 1,600 Assistance IFRS, accounting and tax(3) ...... — — — — 268 Other attestations(3) ...... — — — — 119 Auditor fees—other assistance(3) ...... — — — — 281

(1) CFO contracted from an external company. The fees include travel costs and a telephone and home PC allowance. CFO receives only fees and is not included in the company’s other benefit programmes. (2) Includes bonus based on accounts for 2010 (payable in 2011), and estimated costs related to the share value based remuneration programme. (3) Fees exclusive of value added tax.

F-308 STATEMENT ON THE DETERMINATION OF SALARY AND OTHER REMUNERATION FOR SENIOR EXECUTIVES IN HURTIGRUTEN ASA The following guidelines have been specified with effect from 15 February 2011:

1. Definitions 1.1 Senior executives include the chief executive and other senior executives, cf. Proposition no. 55 (2005– 2006), which refers to the provisions of the Norwegian Accounting Act and Public Limited Liability Companies Act concerning “senior executives”. 1.2 In these guidelines, a compensation scheme means a remuneration package comprising one or more of the following elements: Fixed salary, variable pay (bonuses, share-based programs, options, etc.) and other benefits (pension schemes, pay guarantee schemes, fringe benefits, and the like). 1.3 Severance pay refers here to compensation related to departure from the company and may involve a pay guarantee, other financial benefits and payments in kind.

2. Main principles for determining compensation schemes 2.1 Remuneration to senior executives in Hurtigruten ASA will be competitive but not market leading compared with similar companies. 2.2 The main element in a compensation scheme should be fixed salary. 2.3 Compensation schemes shall be formulated to avoid unreasonable benefits arising as a result of external circumstances which the executive management cannot influence. 2.4 The individual elements in a pay package shall be assessed from an overarching perspective, with fixed salary, possible variable pay and other benefits such as pension schemes and severance pay viewed as a whole. The board of directors shall maintain an overview of the total value of each executive’s agreed compensation. 2.5 Determining guidelines for the remuneration of senior executives is the responsibility of the entire board of directors. Remuneration of the group’s chief executive is determined by the board of directors. 2.6 The board of directors shall ensure that remuneration schemes for senior executives do not have unfortunate effects for the company or weaken its reputation. 2.7 Senior executives shall not receive special remuneration for serving as directors of wholly-owned subsidiaries in the same group. 2.8 Agreements entered into before these guidelines came into effect may continue.

3. Variable pay Any variable pay shall be based on the following principles: 3.1 A clear connection shall exist between the underlying goals for the variable pay and the company’s objectives. 3.2 Variable pay shall be based on objective, definable and measurable criteria. 3.3 These criteria shall be based on conditions which the executive in question can influence. 3.4 Several relevant measurable criteria should be applied. 3.5 A variable pay scheme shall be transparent and clearly understandable. Identifying the anticipated and the maximum payment for each participant in the programme is important when explaining the scheme. 3.6 The scheme shall be of limited duration. 3.7 Total variable pay received in any year should not exceed six months of fixed salary, unless exceptional circumstances dictate otherwise.

F-309 4. Pension schemes 4.1 Pension terms shall be equivalent to those enjoyed by other employees in the company. 4.2 To the extent that a retirement age lower than the National Insurance retirement age of 67 years is agreed, it should generally not be lower than 65. 4.3 Agreements on pensions shall be based on the same years of pensionable service as for other comparable employees in the company. 4.4 Pension entitlements earned in other positions shall be taken into account. 4.5 Pension entitlements should not exceed 66 per cent of salary. Retiring at an age younger than 65 shall result in a lower pension entitlement. 4.6 The board of directors shall obtain an overview of the total cost of a pension agreement before it is entered into.

5. Severance pay 5.1 Severance pay can be agreed when a senior executive waives their right in advance to the employment protection provisions in the Norwegian Working Environment Act. Severance pay should not be provided in the event of voluntary resignation except in special circumstances. 5.2 Severance pay should not exceed 12 months fixed salary in addition to possible pay during the period of notice. 5.3 Should the person concerned be appointed to a new position or receive remuneration from an enterprise in which they are an active owner, severance pay should be reduced by a proportionate amount calculated on the basis of the person’s new annual income. Such a reduction should first be made after the normal period of notice has expired. 5.4 Severance pay may be suspended if conditions exist which would have justified dismissal or if, during the severance period, irregularities or acts of negligence are discovered which might lead to compensation claims or to criminal charges against the person concerned.

NOTE 19 LEASES Annual rent for non-capitalised non-current assets (operational leases):

Lease expires (in NOK 1,000) Asset Charter of the MS Nordlys ...... 2019 Charter of the MS Richard With ...... 2018

2011 2010 (in NOK 1,000) Future minimum rent at 31 December Within one year(1) ...... 172,056 13,547 Between one and five years ...... 295,749 419,097 Over five years ...... 37,111 129,008

(1) Of the amount that is to be paid within one year NOK 135 million has been recognised as an expense during the period from 2008 to 2011.

Hurtigruten ASA entered into contracts in December 2002 and June 2003 to sell and charter back the Hurtigruten vessels the MS Richard With and MS Nordlys. These ships were sold to Kystruten KS and Kirberg Shipping KS, respectively, and chartered back for a period of 15 years with an option for an additional 5 years on market terms. For the first 15 years the charter hire payments consist of three components; fixed hire in NOK, fixed hire in USD/EUR and a variable element in USD/EUR. The variable element is linked to variable interest rates, 6-month Euribor and Libor rates.

Hurtigruten ASA will undertake and pay for the operation, insurance and all necessary ongoing maintenance of the vessels. In the charter agreements between the limited partnerships and Hurtigruten ASA, identical requirements (financial covenants) have been stipulated for Hurtigruten ASA for the duration of the agreements, which the company has as a component of its long-term loan agreements linked to vessels. Reference is made to note 10 with regard to these financial covenants.

F-310 In connection with the financial restructuring in February 2009, an addendum to the charter agreement was agreed on with the limited partnerships Kystruten KS and Kirberg Shipping KS, which entailed that the instalment component of the charter hire under the charterparties with the two limited companies will not be payable until 31 December 2011. The postponed instalments will, however, be added to the instalments to be paid in 2012 and 2013, thereby reverting to the original repayment plan in August 2013. For their proportionate shares of the outstanding debt, the limited partnerships will receive any payments that are made under the cash sweep clause for the banks, as described in note 10. An increase in the charter hire was also agreed to compensate for the increased costs incurred by the limited partnerships under their loan agreements because of the changes in the repayment profile. In addition, it has been agreed that Hurtigruten’s option to buy back the MS Nordlys and MS Richard With will be cancelled. The annual rent and the instalments that accrue in accordance with the agreement are recognised as an expense in the accounts. No instalment payments have been made under the cash sweep clause in 2011. In the first quarter of 2011 Hurtigruten ASA has made extraordinary instalment payments on the bareboat charter hire. The extraordinary instalment payments have been made through the release of funds that were restricted as security for the charter agreement. These funds have been used in their entirety for an extraordinary repayment of borrowings in the two limited companies.

NOTE 20 FINANCE INCOME AND EXPENSES 2011 2010 (in NOK 1,000) Interest expenses: —Bank borrowings ...... (180,412) (199,143) —Convertible bond loan ...... (6,576) (6,692) —Foreign exchange losses ...... (56,827) (53,404) —Impairment of financial assets ...... — — —Other finance expenses ...... (1,759) — Finance expenses ...... (245,574) (259,239) Interest income on current bank deposits ...... (10,339) 14,373 Foreign exchange gains ...... 64,558 42,616 Dividends ...... 1,378 29,600 Other finance income ...... 1,556 777 Finance income ...... 57,153 87,366 Finance expenses—net ...... (188,421) (171,874)

NOTE 21 TRANSACTIONS WITH RELATED PARTIES AND INTRA-GROUP BALANCES Transactions with related parties are carried out in accordance with the arm’s length principle. Related parties in this respect are the key management personnel in the company, companies in the same group and associates. The associates in 2011 are mainly Funn IT AS and ANS Havnebygningen. Funn IT handles Hurtigruten ASA’s IT function, while ANS Havnebygningen owns and leases out the building the company uses as offices in Tromsø. The company’s ownership interest in both companies is 50 per cent. The company acquires freight services from Nor Lines AS through a space charter agreement. The shares in Nor Lines AS have been sold with effect from 31 December 2010, and transactions with the company are no longer defined as transactions with a related party from 1 January 2011.

The company has been involved in transactions with the following related parties:

2011 2010 (in NOK 1,000) Sale of services to associates Revenue from freight services ...... — 57,686 Purchase of services from associates Rental of premises in Tromsø from ANS Havnebygningen ...... — 4,742 Purchase of IT-related services from Funn IT AS ...... 7,419 32,160 Balances with associates at year end Trade payables ...... 345 3,379

F-311 2011 2010 (in NOK 1,000) Remuneration of senior management in Hurtigruten ASA Salaries and other short-term employee benefits ...... 28,629 19,407 Pension costs (including former senior management personnel) ...... 2,164 1,944

Transactions with shareholders Transactions with the company’s largest shareholders have been carried out in accordance with the arm’s length principle and are as follows: • Troms county council purchases public transport services from the group.

Transactions with group companies

2011 2010 (in NOK 1,000) Sale of goods and services to group companies Hurtigruten GmbH ...... 674,628 631,247 Hurtigruten Ltd ...... 197,309 143,077 Hurtigruten Inc...... 193 142 Hurtigruten SAS ...... 53,287 2,331 Spitsbergen Travel AS ...... 434 801 Cominor AS ...... 179 265 Bareboat revenue from Hurtigruten Pty Ltd ...... 158,049 170,596 Purchase of goods and services from group companies Hurtigruten GmbH ...... 3,696 1,654 Hurtigruten Ltd ...... 4,140 2,080 Hurtigruten Inc...... 2,144 14,735 Hurtigruten SAS ...... 117 155 Spitsbergen Travel AS ...... 3,357 12,627 Cominor AS ...... 15,398 14,271 Rental of premises from Hurtigruten Eiendom AS ...... 459 2,394 Purchase of administrative services from Hurtigruten Pluss AS ...... 331,608 — Purchase of flight booking and related services from Hurtigruten Estonia OÜ ...... 507 — Bareboat charter hire from Kirberg Shipping KS ...... 37,112 38,187 Bareboat charter hire from Kystruten KS ...... 33,776 36,655 Interest income from group companies Hurtigruten Estonia OÜ ...... 15 — Hurtigruten Pluss AS ...... 1,561 299 Hurtigruten Ltd ...... 340 383 Interest expenses to group companies Hurtigruten Eiendom AS ...... 245 — Hurtigruten GmbH ...... 85 — Spitsbergen Travel AS ...... 539 480 Svalbard Polar Hotel AS ...... 310 312

F-312 Balances with group companies

2011 2010 (in NOK 1,000) Non-current receivable from group companies Hurtigruten Pluss AS ...... 29,735 28,424 Hurtigruten Estonia OÜ ...... 311 — Hurtigruten Ltd ...... 7,413 7,102 Hurtigruten SAS ...... 22 22 Hurtigruten AB ...... — 872 Spitsbergen Travel AS ...... 28 — Total non-current receivables from group companies (note 9) ...... 37,509 36,419 Trade and other current receivables from group companies Hurtigruten Pty Ltd ...... 265,898 304,946 Hurtigruten GmbH ...... 18,439 13,104 Hurtigruten Ltd ...... 2,245 13,838 Hurtigruten SAS ...... 2,447 — Hurtigruten Inc...... 67,781 81,423 Hurtigruten Estonia OÜ ...... 41 34 Hurtigruten AB ...... — 14,348 Hurtigruten Greenland AS ...... 1,606 1,547 Hurtigruten Pluss AS ...... 54,209 6,134 AS TIRB ...... (4) 19 Spitsbergen Travel AS ...... — 14,448 Hurtigruten Eiendom AS ...... 1,733 (407) Hurtigruten Verdens Vakreste Sjøreise AS ...... 2 4 Provisions for losses on trade receivables from group companies ...... (128,675) (82,500) Total trade and other current receivables from group companies (note 9) ...... 285,723 366,939 Other non-current liabilities to group companies Spitsbergen Travel AS ...... 12,551 12,012 Svalbard Polar Hotel AS ...... 8,459 8,149 Kirberg Shipping KS ...... 29,989 55,449 Kystruten KS ...... 6,749 35,556 Total non-current liabilities to group companies ...... 57,747 111,165 Trade and other current payables to group companies Hurtigruten Pluss AS ...... 26,952 5 Hurtigruten Eiendom AS ...... 762 5,156 Hurtigruten Pluss AS ...... 349 11,825 Hurtigruten GmbH ...... 78,053 879 Hurtigruten Ltd ...... — 17,605 Hurtigruten SAS ...... 113 51 Hurtigruten Inc...... 1,330 6,851 Hurtigruten AB ...... — (20) Kirberg Shipping KS ...... 125 — Kystruten KS ...... — 75 AS TIRB ...... 298 346 Total trade and other current payables to group companies (note 9) ...... 107,982 42,772

NOTE 22 EVENTS AFTER THE BALANCE SHEET DATE

Refinancing of Hurtigruten’s debt

On 7 March 2012 Hurtigruten ASA signed a loan agreement for NOK 2.6 billion with a bank syndicate consisting of eight Norwegian and foreign banks. Six of these banks also participated in Hurtigruten’s former bank syndicate. The loan is to be repaid in annual instalments of NOK 260 million and have a term of five years with a margin of 350 basis points (3.5 per cent).

F-313 An unsecured bond loan totalling NOK 500 million was also issued on the same date. The loan has a term of five years and one month and a margin of 700 basis points (7.0 per cent).

This means that all of Hurtigruten’s existing bank debt of approximately NOK 3 billion has been refinanced. This refinancing has been made possible by the operational restructuring that has taken place in recent years, the good development on the passenger side, and the new agreement with the government that takes effect on 1 January 2012 with significantly better terms than the old agreement.

The refinancing provides Hurtigruten with a prudent capital structure for the next five years with a repayment profile adapted to the company’s operations and expected earnings.

F-314 OPENING BALANCE OF SILK BIDCO AS

September 1, 2014 (in NOK 1,000) Balance sheet: Assets ...... Current assets ...... Cash and cash equivalents ...... 30,000 Total current assets ...... 30,000 Total assets ...... 30,000 Capital and reserves ...... Ordinary shares ...... 30,000 Total shareholders’ funds ...... 30,000 Total equity and liabilities ...... 30,000

F-315 THE COMPANY Silk Bidco AS c/o Advokatfirmaet BA-HR DA Tjuvholmen allé 16, 0252, Oslo Norway LEGAL ADVISORS To the Company To the Initial Purchaser As to matters of U.S. and English Law As to matters of U.S. Law Simpson Thacher & Bartlett LLP Cravath, Swaine & Moore LLP CityPoint, One Ropemaker Street CityPoint, One Ropemaker Street London EC2Y 9HU London EC2Y 9HR United Kingdom United Kingdom As to matters of Norwegian Law As to matters of Norwegian Law Advokatfirmaet BA-HR DA Arntzen de Besche Advokatfirma AS Tjuvholmen allé 16 Bygdøy allé 2 0252 Oslo Postboks 2734 Solli Norway 0204 Oslo Norway and Advokatfirmaet Wiersholm AS As to matters of English law Ruseløkkveien 26 Clifford Chance LLP 0115 Oslo 10 Upper Bank Street Norway London E14 5JJ United Kingdom To the Trustee White & Case LLP 5 Old Broad Street London EC2N 1DW United Kingdom INDEPENDENT AUDITORS PricewaterhouseCoopers AS Ernst & Young AS PwC Bygget, Bjørvika Dronning Eufemias gate 6 PB 748 Sentrum Oslo Atrium 0106 Oslo P.O. Box 20, NO-0051 Oslo Norway Norway REGISTRAR LUXEMBOURG LISTING AGENT Elavon Financial Services Limited Société Générale Bank & Trust Block E, 1st Floor 11, avenue Emile Reuter Cherrywood Business Park, Loughlinstown L-2420 Luxembourg Dublin 18 Ireland

TRUSTEE AND SECURITY AGENT PAYING AGENT AND TRANSFER AGENT U.S. Bank Trustees Limited Elavon Financial Services Limited, 125 Old Broad Street UK Branch London, EC2N 1AR 125 Old Broad Street United Kingdom London EC2N 1AR United Kingdom SOLE GLOBAL COORDINATOR AND BOOKRUNNER Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB United Kingdom

Silk Bidco AS

€455,000,000 7.50% Senior Secured Notes due 2022

OFFERING MEMORANDUM

Sole Global Coordinator and Bookrunner Goldman Sachs International