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Annual Report 2006

J. LAURITZEN A/S

ANNUAL REPORT 2006

J. Lauritzen in brief 1

Key figures for the group 2

Newbuilding programme as at 31 December 2006 3

Report by the board of directors and executive managementHighlights 2006 4

Outlook 2007 5

Result for the year 6

Corporate governance 8

Lauritzen Bulkers 9

Lauritzen Kosan 12

Lauritzen Reefers 15

Lauritzen Tankers 17

Fleet management 20

Human capital 23

Risk management 25

AccountsAccounting policies 27

Statements and notes 32

Overall group structure and company details 50

Group companies 51

EndorsementsManagement statement 52

The independent auditors’ report 53

Board of directors and executive management 54

J. Lauritzen A/S / Annual Report 2006

J. Lauritzen A/S (JL) was founded in 1884 and is one of the oldest Danish shipping companies. JL is domiciled in Copen-hagen, Denmark and has overseas offices in Singapore, Tokyo (Japan), Stamford (USA), Shanghai (China), Bilbao (Spain) and Cambridge (UK).

The focus at JL is on continuous development of our various business activities world-wide with constant emphasis on cus-tomer service, innovation, safety at sea, and environmental protection.

In 2006, JL reported revenues of USD 457.6 a result of USD 125.6m and a 25.8% return on invested capital. At year-end 2006, JL employed a staff of 708 world-wide.

JL owns and operates bulk carriers, gas carriers, reefer vessels and product tankers. At the end of 2006, JL alone or together with associates controlled a combined fleet of some 175 ves-sels. A total of 49 newbuildings will be added to the JL fleet over the coming years as owned and time-chartered vessels or vessels committed by partners.

Lauritzen BulkersLauritzen Bulkers is a major operator of bulk carriers engaged in ocean transportation of dry bulk cargoes world-wide.

In partnership with Island View Shipping, Lauritzen Bulkers controls some 55 Handysize bulk carriers, making it a leading player in this segment. Lauritzen Bulkers is also engaged in the Handymax, Panamax and Capesize bulk carrier segments and operates a combined fleet of about 70 vessels.

Lauritzen Bulkers will take delivery of 22 newbuildings between 2007 and 2011 as owned and time-chartered vessels or vessels committed by partners, cf. p. 3.

Lauritzen KosanLauritzen Kosan has a leading position in the transportation of pet-rochemical and liquefied petroleum gasses (LPG) with a combined fleet of 36 semi-refrigerated, pressurised and ethylene gas carriers in the 3,000 to 8,000 m3 capacity segment.

Together with Unigas, Lauritzen Kosan operates a combined fleet of 20 pressurised gas carriers predominantly in the Far East in the Unigas venture in Hong Kong.

Lauritzen Kosan will take delivery of 12 newbuildings in the period to 2011 as owned vessels or vessels committed by part-ners, cf. p. 3.

Lauritzen ReefersLauritzen Reefers controls a fleet of 18 bare-boat and time-char-tered specialised reefer vessels. All vessels are commercially operated by NYKLauritzenCool AB, which is jointly owned by JL and NYK Reefers Ltd.

NYKLauritzenCool is a leading reefer operator employing a combined fleet of about 60 specialised reefer vessels world-wide. LauritzenCool Logistics (LCL), a subsidiary of NYKLau-ritzenCool, offers single entry, one-stop-shop logistics services for shippers of fruit and other perishable commodities.

Lauritzen Tankers Established in early 2004, Lauritzen Tankers is engaged in ocean transportation of refined oil products with medium range product tankers. The fleet build-up continued during 2006 sup-ported by leading cargo interests and important tonnage sup-pliers to a total of eight vessels.

Lauritzen Tankers will take delivery of 15 newbuildings between 2007 and 2011 as owned and time-chartered vessels or vessels committed by partners, cf. p. 3.

Mission, vision and valuesThe strategic development of JL continues to be guided by our vision “Together, we create a world-class shipping company”. JL’s vision is closely inter linked with our core values of Compe-tence, Respect, Entrepreneurship, Accountability, Team Spirit and Enthusiasm – all vital elements for our ability to create value for clients, partners and owners.

J. LAURITZEN IN BRIEf

MissionTogether, we CREATE added value

We optimise the operations of our business partners through safe, trouble-free, innovative and value-creating transportation services

We create a working environment that gives job satisfaction, stimulates professional and personal development and acknowledges the values of all employees

We ensure that JL is an attractive investment for its owners

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•

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VisionTogether, we CREATE a world-class shipping company

•

ValuesCompetence

Respect

Entrepreneurship

Accountability

Team spirit

Enthusiasm


1

Main figures and financial ratios for 2003 and earlier have not been adjusted to comply with International Financial Reporting Standards (IFRS).

Key figures have been calculated as follows:

Profit margin:rofit margin: Operating income x 100 Revenue Invested capital:

Total assets less bank deposits, securities, non operational assets and non interest-bearing current liabilities

Solvency ratio: Total equity, year-end x 100 Total equity and liabilities, year-end

Return on Invested capital:

Operating income + result in associates x 100Average invested capital

Return on equity: JL’s share of the result x 100JL’s average share of equity

USDm 2006 2005 2004 2003 2002

Income statementRevenue 458 592 618 898 718Result before depreciation (EBITDA) 100 187 243 72 22Profit and loss on sale of vessels 44 53 22 4 (1)Operating income (EBIT) 117 214 230 51 (23)Net result in associated companies 10 18 11 3 1Result of financial items 9 (0) (2) (7) (7)Result before tax 136 232 239 47 (29)Result for the year 126 210 199 77 (33)Minority shareholder’s share of the result (2) (1) (0) (1) -The J. Lauritzen Group’s share of the result 124 209 199 76 (33)

Balance sheetNon current assets 710 450 399 314 264- including prepayments 211 72 9 3 -Current assets 219 375 184 219 147- including cash and securities 158 317 122 96 72Total assets 930 825 583 533 411Share capital 61 61 61 61 61JL’s share of equity 680 606 444 238 155Non current liabilities 62 91 90 152 144Current liabilities 181 120 44 135 106

Cash flow statementCash flow from operating activities 80 217 222 68 19Cash flow from investment activities (137) (162) (80) (52) (12)- including investments in vessels, property and equipment (369) (157) (151) (78) (67)Cash flow from financing activities (68) (103) (96) 7 (7)Changes for the year in liquid assets (125) (48) 46 23 (1)

Average number of employees 839 704 861 1,011 1,041

DKK exchange rate year end 566 632 547 596 708Average DKK exchange rate 595 600 599 658 789

Financial ratiosProfit margin 25.7% 36.2% 37.2% 5.6% (3.2%)Solvency ratio 74% 74% 77% 46% 39%Solvency ratio (JL’s share of equity) 73% 74% 76% 45% 38%Return on equity 19.3% 39.8% 58.4% 38.8% (23.0)%Return on invested capital 25.8% 60.5% 68.6% 16.4% (8.8)%

KEy fIgURES foR ThE gRoUp


2

NEwBuILDING pROGRAMME As AT 31 DECEMBER 2006

Own vessels Type Size * Delivery Remarks

Lauritzen Bulkers Handysize 28,700 January 2007 Amine BulkerHandysize 28,700 March 2007 Sofie BulkerHandysize 31,800 March 2008Handysize 31,800 July 2008Handysize 31,800 August 2008Handysize 31,800 January 2009Handysize 31,800 March 2010Handysize 31,800 July 2010Handymax 58,000 March 2011Handysize 31,800 March 2011Handymax 58,000 April 2011Handymax 58,000 July 2011Handymax 58,000 October 2011Handysize 31,800 October 2011

Lauritzen Kosan Ethylene 8,000 April 2007 Isabella KosanEthylene 8,000 June 2007 Helena KosanEthylene 8,000 September 2007 Sold to AlloceanEthylene 8,000 November 2007Ethylene 8,000 February 2008 Sold to AlloceanEthylene 8,000 April 2008Ethylene 8,000 November 2008Ethylene 8,000 January 2009

Lauritzen Tankers Product/chemical 40,000 February 2007 Sold at deliveryProduct/chemical 40,000 December 2007Product/chemical 40,000 January 2008Product/MR 53,000 December 2009Product/MR 53,000 October 2010

Time charters (newbuildings) Type Size * Delivery Remarks

Lauritzen Bulkers Panamax 76,000 September 2007Handysize 32,000 September 2007Handysize 32,000 February 2008Panamax 76,000 January 2009

Lauritzen Tankers Product MR 53,000 February 2007 Freja DaniaProduct MR 48,000 March 2007 BelaiaProduct MR 53,000 March 2007 Freja SelandiaProduct MR 53,000 July 2007 Freja FioniaProduct MR 47,000 April 2008Product MR 47,000 November 2009Product MR 47,000 July 2010Product MR 47,000 January 2011

Other newbuildingsIn addition to newbuildings owned or time-chartered by JL, partners will deliver four Handysize bulk carrier, two semi-refrigerated as well as two ethylene carrier and three MR product tanker newbuildings to the JL fleet.

*) Bulk carriers and product tankers recorded in dwt. Gas carriers recorded in m3


3

HIGHLIGHTs 2006

chartered vessels comprised 36 vessels, including 18 bulk car-riers, six gas carriers, and 12 product tankers. The order book for own vessels represents a total value of approximately USD 820m. Revolving credit facilities have been established with banks to meet financial needs, if necessary. In addition to the already committed newbuilding investments JL’s medium term investment capacity amounts to about USD 1bn.

Based on present contracts, JL partners will contribute a fur-ther four bulk carriers, six gas carriers and three product tanker newbuildings to the JL managed fleet; this in addition to JL’s own newbuilding programme.

New offices were opened in Shanghai, China and Cambridge, UK in 2006.

In 2006, JL alone or together with associates controlled an average fleet of 184 vessels, which was similar to 2005, cf. Figure 2.

Investments in fleet expansion amounted to USD 364.8m com-pared to USD 155.1m in 2005. Divestments amounted to USD 121.1m compared to USD 213.3m in 2005.

Total invested capital amounted to USD 626.9m at year-end 2006, up from USD 357.4m at year-end 2005. Average invested capital was USD 492.2m, cf. Figure 3.

After year-end, Lauritzen Bulkers became part owner in two second-hand Handysize bulk carriers. Lauritzen Reefers sold a 378,000 ft3 reefer vessel. This left Lauritzen Reefers’ fleet with only bare-boat and time-chartered tonnage. Finally, a 37,200 dwt product tanker was acquired and a 40,000 dwt product tanker newbuilding was sold.

The result totalled USD 125.6m in 2006 compared to USD 210.4m in 2005. This included profits of USD 43.7m from the sale of vessels, down from USD 52.7m in 2005. Results were better than expected and very satisfactory.

Return on invested capital was 25.8% compared to 60.5% in 2005 and return on equity was 19.3% compared to 39.8% in 2005.

Lauritzen Bulkers was the main contributor to JL’s 2006 net earnings, although Lauritzen Kosan, Lauritzen Reefers and Lau-ritzen Tankers all made positive contributions, cf. Figure 1.

Tax amounted to USD 10.8m in 2006, compared to USD 21.2m in 2005.

Lauritzen Kosan sold its fleet of gas carriers below 3,000 m3, and strengthened its focus on larger sized vessels by entering new strategic alliances on semi-refrigerated tonnage, including ethylene carriers.

Lauritzen Tankers continued its fleet build up through addi-tional newbuilding contracts and acquisition of second-hand vessels.

Land-based activities relating to the reefer business, including the Euroamerica port terminal in Campana, Argentina, were disposed of in the course of 2006 and early 2007 at a small profit.

JL’s newbuilding programme was expanded during 2006 with additional bulk carriers, gas carriers and product tankers and at the end of the year, JL had the largest ever number of ves-sels on order. At the end of 2006, JL’s combined order book of own and time-

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Result before tax Tax a.o. Resultafter tax

2005 2006

Figure 1: Result for the year, usDm

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Figure 2: Average no. of vessels Figure 3: Invested capital average, usDm

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OuTLOOK 2007

At the beginning of 2007, most shipping markets are character-ized by historically high or very high freight rates, which has also served to keep second-hand prices at very high levels. Newbuilding prices have increased as owners placed contracts of the order of 150m dwt during 2006, equal to 15% of the existing global merchant fleet and the highest ever recorded annual orders.

Strong economic growth will support demand for shipping in 2007 but some markets may be negatively affected by the large numbers of new vessels entering the market, with few likely to be scrapped due to the strength of the markets.

Bulk carriersDemand for bulk carriers is expected to remain healthy, benefit-ing from the current strength of the world economy and continu-ing growth in China.

With deliveries of new vessels estimated at about 7% of the current fleet, tonnage supply growth might outpace demand growth in the last half of 2007. Although the age profile of the fleet in general indicates a strong basis for scrapping, owners’ present financial strength combined with expected rate levels suggest another year of modest demolition.

Gas carriersEmployment for small gas carriers is expected to remain healthy in 2007 as demand for petrochemical gasses is forecast to ben-efit from continuing global economic growth.

Based on the existing order book, 2007 deliveries will amount to about 9% of the current fleet. Practically all the new deliveries

are either fully pressurized gas tankers (in the 3,500-7,200 m3 segment) or ethylene carriers (6,500-10,000 m3).

Reefer vesselsDemand for reefer vessels is expected to remain healthy. Avail-ability of modern reefer vessels is becoming ever scarcer due to the limited number of deliveries and vessels on order. The continued influx of container ships with large reefer plug capaci-ties is increasing competition in the traditional reefer trades.

product tankersThe strength of the global economy with lower oil prices than in 2006 is expected to support continued strong demand for oil in 2007, and thus maintain a healthy demand for product and oil/chemical tankers.

The product tanker fleet will see yet another year of high growth possibly surpassing demand growth.

JL consolidated Overall, market scenarios support yet another year of satisfac-tory earnings in 2007 with profits before tax in line with 2006.

Changes in activity levels including sale and purchase, en-ergy prices and world economic trends may impact forecast results.


5

RESULT foR ThE yEAR

RevenuesRevenues totalled USD 457.6m in 2006 compared to USD 591.7m in 2005. The USD 134.1m decrease mainly related to a strategic reduction in chartered vessels at Lauritzen Bulkers as well as declining spot rates in the bulk market. Sale of reefer vessels in 2005 and 2006 affected revenues, although this was partly off-set by an increase in Lauritzen Tankers’ revenues. Revenues of Lauritzen Kosan decreased due to employment of vessels in jointly controlled operations, cf. Figure 4.

Other operating income amounted to USD 17.2m, up from USD 4.4m in 2005. The increase is mainly related to technical man-agement.

CostsHire of chartered vessels amounted to USD 219.1m, down USD 37.7m from the USD 256.8m reported in 2005. The decrease was mainly due to re-delivery of chartered bulk carriers, partly off-set by a small increase in the number of chartered reefer vessels and product tankers.

Operating costs of vessels totalled USD 43.1m, up from USD 34.5m in 2005 primarily due to an increased number of owned bulk carriers.

Other operating costs including bunkers, port expenditures and other voyage-related costs amounted to USD 39.1m compared to USD 53.1m in 2005. The decrease is due to the reduction of chartered bulk vessels.

Staff costs, office, fleet and other administration costs totalled USD 73.4m, up from USD 65.1m in 2005 mainly as a result of increased average headcount as well as higher wages.

Result before depreciation (EBITDA)EBITDA amounted to USD 100.1m compared to USD 186.6m in 2005, cf. Figure 5.

EBITDA for Lauritzen Bulkers fell from USD 130.8m in 2005 to USD 77.6m in 2006 primarily due to the softening of the bulk market.

EBITDA for Lauritzen Kosan was USD 33.5m in line with 2005. The effect of improved market conditions was off-set by a change in the size and mix of the gas tanker fleet.

EBITDA for Lauritzen Reefers was USD (0.2)m, down from USD 24.5m in 2005 mainly as a result of the sale of reefer vessels in 2005 and 2006, but also due to reduced margins on chartered vessels.

EBITDA for Lauritzen Tankers amounted to USD 6.4m, slightly below the figure of USD 6.8m for EBITDA reported for 2005.

EBITDA for land-based activities and unallocated items de-creased from USD (8.4)m in 2005 to USD (17.1)m in 2006 due to down-sizing of land-based operations as well as increases in other costs. The increase in other costs was primarily due to USD exchange rate, internal hedging and organisational growth related to JL’s newbuilding programme.

Depreciation and sale of vesselsTwo bulk carriers, nine gas carriers and one reefer vessel were sold in 2006 generating a profit of USD 43.7m. In 2005 three bulk carriers, three gas carriers and seven reefer vessels were sold generating gains of USD 52.7m.

Depreciation amounted to USD 27.2m, compared to USD 25.6m in 2005. Depreciation on vessels increased by USD 1.6m as a result of changes to the size and mix of owned vessels.

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Figure 4: Revenues 2002-2006 (usDm)

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Figure 5: selected key figures 2002-2006 (usDm)

Figures and financial ratios for 2003 and earlier have not been adjusted to comply with International Financial Reporting Standards (IFRS).


6

Net result in associated companies totalled USD 9.7m com-pared to USD 17.7m in 2005. The decrease mainly related to sales of vessels owned in joint ventures partly off-set by an increase in JL’s share of the profits of NYKLauritzenCool and new investments in part-owned vessels during the second half of the year.

Financial itemsNet financial income totalled USD 9.2m, up from USD (0.1)m in 2005 due to an improved average net cash position and due to net gains on securities and currency positions.

Tax and resultsProfits before tax were USD 136.3m, down from USD 231.6m in 2005. The income tax was USD (10.8)m compared to USD (21.2)m in 2005.

The result for 2006 was USD 125.6m compared to the USD 210.4m reported in 2005. This result was better than expected, primarily due to gains from the sale of vessels and the improved bulk market in the second half of the year. Balance sheetTotal assets were up by USD 105.0m on 2005 from USD 824.7m to USD 929.7m.

Goodwill amounted to USD 1.7m at year-end 2006 in line with year-end 2005. This related to the acquisition of Quantum Tank-ers in 2004.

Vessel values amounted to USD 394.4m compared to USD 268.1m in 2005, an increase mainly due to the acquisition of bulk carriers and a product tanker. All vessels are recognised at values below or equal to their utility values or broker valuations or both. Broker valuations totalled USD 638.4m.

Prepayments were up USD 139.1m to 211.4m due to the bulk, gas carrier and product tanker newbuilding programme.

Investments in associated companies increased to USD 48.9m, up from USD 44.8m in 2005. The increase was mainly due to net investments in vessels owned by partnerships and the Group’s share of the net results reported by joint ventures.

The book value of vessels owned in joint ventures amounted to USD 129.2m, whereas their broker valuation was USD 207.7m.

Other non-current receivables amounted to a total of USD 40.2m, down from USD 51.8m in 2005. These were mainly due to subleases of financially leased reefer vessels.

Total shareholders’ equity was up USD 72.3m at USD 686.1m, cf. Figure 6. Return on JL’s share of equity was 19.3% compared to 39.8% in 2005.

At year-end 2006, total liabilities amounted to USD 243.6m, up USD 32.7m on 2005. Mortgages on vessels and lease debt including next year’s repayments fell by USD 27.3m to USD 49.9m. Debts of USD 49.1m relating to financially leased vessels were off-set by a corresponding amount related to subleases of these vessels included in other receivables. At year-end, debt attributable to JL’s own fleet amounted to USD nil.

Cash flowCash and cash equivalents amounted to USD (55.7)m com-pared to USD 69.7m at year-end 2005, cf. Note 27.

Cash flow from operations totalled USD 79.8m, down from USD 217.0m in 2005, cf. Figure 7. In 2006, cash flow from investment activities decreased to USD (137.2)m from USD (161.6)m in 2005, mainly as a result of less investments in securities partly off-set by an increase in investments in vessels.

Cash flow from financing activities (loan repayments and divi-dends) amounted to USD (68.0)m in 2006 compared to USD (103.4)m in 2005.

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Figure 6: Capital structure (usDm)

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Figure 7: Cash flow from operations (usDm)

Figures and financial ratios for 2003 and earlier have not been adjusted to comply with International Financial Reporting Standards (IFRS).


7

CoRpoRATE govERNANCE

JL is fully-owned by JL-Fondet (the JL Foundation). Ownership is exercised through Vesterhavet A/S which is also fully-owned by JL-Fondet.

JL is managed by a non-executive Board of Directors and JL’s Executive Management. The non-executive Board is appointed by JL-Fondet.

The Board of Directors has eight members, three of whom are elected by the employees according to Danish legislation.

Non-executive Board members serve for one year and may stand for re-election. Board members elected by the employees have four-year tenure and may also stand for re-election. At the end of 2006, average length of service on the Board of Direc-tors was 5.4 years. Board members cannot be re-elected after their 70th birthday.

The principles of corporate governance applied by JL are by and large determined by JL’s Articles of Association, the Rules of Procedure of the Board of Directors and the powers vested in Executive Management.

JL complies with the generally recognized corporate governance guidelines to the greatest possible extent where relevant for a company owned by a Foundation.

Board of Directors and Executive ManagementJL’s Rules of Procedure for the Board of Directors specify that the Board and the Executive Management are jointly responsi-ble for the management and organisation of the company.

The day-to-day management of the company is carried out by the Executive Management in accordance with the Rules of Procedure laid down by the Board of Directors.

The Board of Directors ensures that an annual strategic plan and a budget are prepared and approved and that monthly and quarterly reports are submitted.

The Board of Directors appoints the Executive Management. Exceptional or major dispositions may only be implemented by

the Executive Management on the basis of a specific authoriza-tion granted by the Board of Directors.

Relationship to Vesterhavet A/s and JL-FondetVesterhavet A/S holds the entire share capital in JL on behalf of JL-Fondet, cf. Figure 8.

JL-Fondet’s policy is to grant the greatest possible degree of autonomy to its subsidiaries, allowing JL’s Board of Directors and the Executive Management extensive independence in strategy formulation and execution.

Financial management JL’s financial management comprises long-term financial projec-tions and annual budgets followed up in quarterly and monthly reports. Internal quarterly reports include profit forecasts for the full year and semi-annual estimates for the next year.

Risk managementJL’s policy for managing operational and financial risks is de-scribed on p. 25-26.

Compliance managementTo ensure JL compliance with national and international com-petition regulations, memos and instructions regarding interna-tional competition law have been drawn up and made available to all employees. Memos and instructions are kept updated and are available on JL’s Intranet (Sh@renet) issued by Executive Management.

Figure 8: Group structure

JL-Fondet

Vesterhavet A/S

J. Lauritzen A/S100%

DFDS56%

LauritzenBulkers

LauritzenKosan

LauritzenReefers

LauritzenTankers

Other


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Demand for bulk carriersGlobal seaborne shipments of bulk cargoes increased by about 4% in 2006, slightly less than in 2005. Iron ore shipments en-joyed yet another year of strong growth, again led by China but also supported by increased imports into Europe and Japan. Shipments of coal also rose considerably whereas grain move-ments continued to be subdued.

Movements of minor bulks benefited from strong activity in the building and construction sectors in North America and Europe, leading to a strong rise in movements of cement and steel prod-ucts, for example, from the Black Sea and Asia. Prices of most dry bulk commodities are currently higher than 12 months ago with metals on a generally falling trend at the end of 2006. Price trends supported the build up of stocks, which has in turn had a positive effect on demand for bulk carriers.

Tonnage supplyThe global bulk carrier fleet grew by an estimated 7% in 2006 to more than 365m dwt. In terms of fleet growth, the Handysize segment was static whereas the Handymax, Panamax and Capesize segments all grew by 7-9% between year-end 2005 and year-end 2006.

Deliveries amounted to approximately 300 bulk carriers, equiva-lent to approximately 23m dwt during 2006, compared to 21m dwt in 2005, cf. Table 1.

In 2006, orders amounted to 34.5m dwt, up from 27m dwt in 2005. In terms of numbers of vessels, the first half saw 168 units being

LAURITZEN BULKERSpresident Jens Ditlev Lauritzen

Key figures USDm 2006 2005Revenue 250.0 340.7EBITDA 77.6 130.8Depreciation (10.4) (5.1)Profit on sale of vessels 16.9 23.6Operating income 84.1 149.3Result before tax 93.4 165.9

Invested capital (average) 186.6 109.9Return on invested capital 48.1% 144.6%Average no. of employees 36 38

EBITDA was USD 77.6m in 2006 compared to USD 130.8m in 2005. Earnings were influenced by a softening of freight rates in the first half of the year. However, overall results were better than expected and most satisfactory.

Profits before tax were USD 93.4m compared to USD 165.9m in 2005. This included gains from the sale of vessels of USD 16.9m down from USD 23.6m in 2005 and also included result of USD 5.7m from associated companies compared to USD 9.6m in 2005.

Main eventsDuring the year, six additional 32,000 dwt Handysize bulk car-riers were ordered from the Hakodate Shipyard in Japan for delivery in 2008-11, bringing the total number of newbuildings in the series to eight.

Four 58,000 dwt Handymax bulk carriers were also ordered from Tsuneishi, Japan for delivery in 2011 from their Cebu ship-yard in the Philippines.

One second-hand Handymax bulk carrier was acquired and two Handymax bulk carriers were sold in 2006.

Four second-hand Handysize bulk carriers were acquired as well as the remaining 50% of two part-owned Handysize bulk carriers. Three part-owned Handysize and one part-owned Handymax bulk carriers were acquired in 2006. Finally, a Handysize newbuilding for delivery in 2007 was taken on long-term time-charter.

Two Capesize bulk carriers were taken on long-term time-charter, thus strengthening Lauritzen Bulkers’ presence in this segment.

Market trendsSpot market rates opened on a fairly weak note in 2006. In June, however, a broadly based recovery of the market started doubling spot market rates. Period rates took off at the same time. Towards the end of the year congestion was building up again in Australia and South America, putting further upward pressure on market rates, cf. Figure 9, p. 10.

Second-hand prices increased modestly during the first half of 2006 but ended the year by having improved by about 35% on average depending on vessel size and age. New building prices for bulk carriers increased by 10-20% during the year.


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Figure 9: Charter rates for Handysize bulk carriers 2005-06 (usD per day)

Handy-size

Handy-max

Pana-max

CapeSize

January-June 50 58 36 24July-December 78 86 40 53Total 128 144 76 77On order end 2006 218 309 250 185

Table 2: Number of vessels ordered in 2006 *)

*) Excluding bulk carriers 10-25,000 dwt.Source: Clarkson Research Services, Professional register

Handy-size

Handy-max

Pana-max

CapeSize

January-June 19 52 59 32July-December 15 39 51 27Total 34 91 110 59

Table 1: Number of vessels delivered in 2006*)

*) Excluding bulk carriers 10-25,000 dwt.Source: Clarkson Research Services, Professional register

Source: Clarkson Research Services, Shipping Intelligence Network

ordered, with a further 257 units during the second half of 2006, cf. Table 2. In dwt terms and as a percentage of the existing fleet, the order book stood at approximately 22% at year-end 2006 compared with 19% at year-end 2005. Capesize and Handymax currently have the largest order books, whereas the Handysize order book accounts for 11% of the existing fleet.

During 2006, scrapping of bulk carriers remained modest as total deletions were estimated at 3m dwt, or 0.9% of the global bulk fleet compared to 2m dwt in 2005.

fleetIn 2006, Lauritzen Bulkers’ total number of ship days reached 22,799 (62.5 vessels on average) up 1.8% on the 22,386 days (61.3 vessels on average) reported in 2005.

Lauritzen Bulkers’ fleet of Handysize bulk carriers which is com-

mercially managed in joint-venture with Island View Shipping (IVS) averaged 47 vessels over the year, up from 45 vessels in 2005.

On average during 2006, Lauritzen Bulkers’ Handymax fleet comprised 8 vessels (11 vessels in 2005), the Panamax fleet comprised 4 vessels (4-5 vessels in 2005), and the Capesize fleet 2 vessels (1 vessel in 2005).

At year-end 2006, Lauritzen Bulkers operated about 35 long-term time-chartered vessels, some of them with purchase op-tions, in addition to its fleet of owned vessels.

The fully owned fleet comprised 11 vessels at the end of 2006 and Lauritzen Bulkers also owns 7 vessels in partnerships.


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Fleet management for Lauritzen Bulkers’ fleet of owned bulk carriers is undertaken by New Century Overseas Management Inc., Manila (NCO), a subsidiary of Good Hope Overseas Man-agement Inc. Owned vessels are registered in Singapore, Malta and Panama.

The figure for off-hire of the owned fleet, including scheduled dry docking, was 3.0%.

Events after year-endIn January 2007, Lauritzen Bulkers acquired 35% of a 33,000 dwt second-hand Handysize bulk carrier. In February 2007, Lauritzen Bulkers acquired 30% of a 28,000 dwt second-hand bulk carrier.

prospects for 2007Growth in the demand for bulk carriers is expected to remain healthy and to continue to benefit from the current strength of the world economy and continuing growth in China. Some weak-ening in demand trends may be expected if global economic growth slows during the latter part of 2007.

Based on the current order books deliveries amounting to about 7% of the existing fleet are anticipated. Although the age profile of the fleet in general indicates a strong basis for scrapping, owners’ present financial strength combined with expected rate

levels suggest another year of modest demolition in 2007, al-though probably above the mere 0.9% seen in 2006. Annualized net growth of the order of 5% is thus expected for the fleet.

The forecast is for the supply of Handysize bulk carriers to grow very slowly, if at all, whereas the Handymax, Panamax, and Capesize segments all are expected to grow by about 6% in 2007.

Freight rates and tonnage prices are expected to remain at a high level, with risk of a downward adjustment as supply may overtake demand in the second half of 2007. However, port congestion may contribute to volatility.

In 2007, Lauritzen Bulkers will take delivery of two Handysize newbuildings from Japan and one part-owned second-hand Handysize vessel.

One time-chartered Handysize newbuilding and one time-char-tered Panamax newbuilding will also be added to the fleet during the year, as will one time-chartered second-hand Handysize and one time-chartered Handymax.

Results for 2007 are again expected to be satisfactory and in line with 2006. Profits before tax are expected to be about USD 85-90m excluding possible gains from sale of assets.


11

LAURITZEN KoSANpresident Jan Kastrup-Nielsen

In 2006, EBITDA was USD 33.5m compared to USD 33.0m in 2005. Improved earnings due to continued strong market conditions for sea transportation of liquefied gasses were off-set by changes in fleet composition and size as well as additional operational expenses. Results were better than expected and most satisfactory.

Profits before tax were USD 38.3m compared to USD 32.0m in 2005 and included USD 18.7m gains from the sale of ves-sels compared to USD 9.4m in 2005. Profits also included USD 0.8m results in associated companies compared to USD 6.2m in 2005.

Main events2006 marked a decisive year for Lauritzen Kosan’s fleet adjust-ment strategy.

Early in 2006, Lauritzen Kosan entered into a commercial ven-ture with Allocean Ltd., London, owners of a diversified fleet portfolio. In this venture, Allocean have placed all their gas car-riers under commercial management with Lauritzen Kosan. At the same time, Allocean purchased Gerda Kosan and placed the vessel in commercial management with Lauritzen Kosan and in technical management with Lauritzen Fleet Management. Allocean also acquired two of Lauritzen Kosan’s ethylene car-rier newbuildings under construction at INP Heavy Industries in Korea for delivery in 2007-08.

At the same time as selling the two newbuildings to Allocean, Lauritzen Kosan ordered two additional 8,000 m3 ethylene new-buildings with INP Heavy Industries for delivery in 2008-09.

At the end of 2006, Lauritzen Kosan entered into another ven-

ture with LGR di Navigazione S.p.A. of Naples, which will see LGR place all their future semi-refrigerated and ethylene gas carriers in commercial management with Lauritzen Kosan. LGR has two 4,000 m3 semi-refrigerated vessels under construction for delivery during 2008 and two 8,000 m3 ethylene carriers at INP Heavy Industries for delivery in 2009.

With these ventures and associated newbuildings, Lauritzen Ko-san will own a fleet of six newbuildings and have four additional sister vessels in commercial management in the ethylene gas carrier segment from 2009.

Early in 2006, Lauritzen Kosan acquired a minority shareholding in Star Management Associates, Tokyo. Star Management has for a number of years undertaken technical management for Lauritzen Kosan’s fleet of fully pressurized gas carriers.




12

100,000

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300,000

350,000

jan-05 apr-05 jul-05 okt-05 jan-06 apr-06 jul-06 okt-06

Far East (F/P) North Western Europe (S/R)

Figure 10: spot market freight rates for 3,200 cbm gas carriers 2005-2006 (usD per month)*

In June, the four fully pressurized vessels jointly owned with Exmar were taken over by Lauritzen Kosan.

Towards the end of 2006, Lauritzen Kosan opened an office in Shanghai, China. The office will primarily be responsible for pursuing gas business in China, including marketing the new ethylene carriers to clients in South East Asia, Japan and Ko-rea.

During the second half of 2006, Lauritzen Kosan sold its 50% shareholding in Sigas Kosan as well as the eight vessels in the segment below 3,000 m3 carrying capacity to Eitzen Gas, its partner in Sigas Kosan. The vessels were delivered to Eitzen Gas during the fourth quarter of 2006.

Market trendsThe trend for spot market rates was downwards for most of 2006 in North Western Europe, although they stayed at comparatively high levels. In the Far East, spot market rates dropped by two thirds as high LPG prices reduced consumption and eventually also distribution of LPG during the first half of 2006. In the middle of the year spot rates started to recover, leading the spot market to end 2006 only slightly below the strong market levels of January 2006, cf. Figure 10.

Period rates for fully pressurised tonnage declined slightly whereas period rates for semi-refrigerated gas carriers were fairly stable in 2006. Second-hand prices for gas carriers up to 8,000 m3 saw rises of 5-10% depending on type and age.

Demand for gas carriersPetrochemical gas prices, being influenced by feedstock costs and the demand and supply balance, fluctuated during 2006,

creating arbitrage opportunities for long haul transportation of petrochemical gasses. From time to time this added to normal balancing trades.

European petrochemical plants ran at almost full capacity during the year as demand for plastics and other chemicals rose on the back of the sharp rise in building and construction in Europe.

Tonnage supplyDeliveries of gas carriers in the segment 3-23,000 m3 increased from two units in 2005 to 23 units in 2006, five of which were ethylene carriers. Only one gas carrier was scrapped in 2006 compared to five in 2005.

In 2006 total net fleet growth amounted to 140,000 m3 or some 4% after zero growth in 2005.

In terms of numbers, new orders were down on 2005 as new-building prices went up and delivery times increased. Compared to 2005, there was a noticeable decline in contracting for ethyl-ene and fully pressurized gas tankers in 2006.

Segment in ‘1000 m3 3-7 7-12 12-23 Total3-23

Ethylene 2 9 4 15Semi refrigerated 4 - 10 14Fully pressurized 9 3 - 12Fully refrigerated - - 4 4Total 15 12 18 45

Table 3: Number of vessels ordered in 2006*

*) Orders may include optionsSource: Clarkson Research Services, Professional register

*) Unadjusted for waiting days if any; Source: Fearnleys weekly


13

At year-end 2006, the total order book amounted to 1.1 million m3 or approximately one third of the existing fleet, cf. Table 3.

New owners having entered the market over the past couple of years continued to build up fleets by acquiring existing tonnage and by ordering new vessels.

fleetIn 2006, Lauritzen Kosan’s total number of ship days reached 18,381 for 50.4 vessels on average in line with the 18,506 days for 50.7 vessels on average reported in 2005.

Lauritzen Kosan operated a fleet of 16 semi-refrigerated gas carriers (15 vessels year-end 2005) with a total capacity of about 71,500 m3.

Unigas Kosan Ltd, the 50:50 partnership with Othello Shipping, Schulte Group and Sloman Neptun operating from Hong Kong, controlled a fleet of 20 vessels (unchanged from 2005) with a to-tal capacity of about 72,000 m3. This partnership solely operates fully pressurized gas carriers, predominantly in the Far East.

At the beginning of 2007, Lauritzen Kosan directly and via asso-ciates controlled a combined fleet of 36 gas carriers (51 vessels at year-end 2005) of which 20 vessels were fully owned, owned through associated companies or were on bareboat charter, cf. Figure 11. The fleet decline is due to the sale of eight gas carri-ers in the segment below 3,000 m3 carrying capacity, cf. p. 13.The average age of the company’s owned fleet was 11.0 years compared to 12.0 years at the end of 2005. In comparison, the average age of the global fleet in the 3,000-7,000 m3 range was 14.0 years.

Fleet management of Lauritzen Kosan’s semi-refrigerated gas carriers is undertaken by Lauritzen Fleet Management in Co-penhagen and by wholly-owned Gasnaval S.A, Bilbao, Spain. The pressurized vessels are managed by Star Management Associates, Tokyo. Fleet technical operations were generally satisfactory with eight scheduled dry-dockings completed dur-ing 2006 compared to 13 in 2005. Off-hire including scheduled dry-docking was 3.1% down from 5.9% in 2005.

The Lauritzen Kosan fleet operates under British, Spanish, Por-tuguese, Singapore, Hong Kong and Panamanian flags.

Lauritzen Kosan is highly aware of safety, health and environ-ment issues and adheres to strict technical and operational standards for its fleet. Customer inspection and vetting of ves-sels are carried out with regular intervals and Lauritzen Kosan maintains close contact with customers in order to ensure that the fleet complies with customers’ standards and requirements. During 2006, Lauritzen Kosan’s fleet underwent 126 customer vetting inspections.

The “Zero Remarks Bonus Program” introduced in 2005 to heighten crew safety awareness has proved to be an effective tool and has reduced the number of vetting inspection remarks noticeably.

prospects for 2007Employment for gas carriers is expected to remain healthy in 2007 as demand for petrochemical gasses is forecast to benefit from continuing global economic growth.

Based on the existing order book deliveries will amount to about 9% of the current fleet in 2007. Practically all new deliveries are either fully pressurized gas tankers in the 3,500-7,200 m3 range or ethylene carriers in the 6,500-10,000 m3 segment.

During 2007, Lauritzen Kosan will take delivery of four of the series of ethylene carriers on order in Korea.

Lauritzen Kosan’s earnings before depreciation are expected to be slightly below 2006; however increased financing costs and lower profits from the sale of vessels will reduce earnings compared to 2006. The company is forecasting satisfactory profits before tax of about USD 18m.

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2005* 2006* 2007**

Own Part owned T/C Other

Figure 11: Fleet by type of control

* Average during the year** Beginning of the year


14

LAURITZEN REEfERSpresident Torben Janholt

In 2006, EBITDA for JL’s combined reefer activities was USD (0.2)m down from USD 24.5m in 2005. The decline in earnings was mainly due to the sale of tonnage in 2005 and 2006 and reduced margins on time-chartered tonnage.

Profits before tax were USD 13.2m compared to USD 36.0m in 2005. This included USD 8.3m gains from the sale of ves-sels compared to USD 19.7m in 2005. Results are considered satisfactory.

JL’s reefer activitiesDuring the year, JL’s reefer activities comprised Lauritzen Reef-ers A/S (ship-owning) and the 50% shareholding in NYKLau-ritzenCool AB (operations).

JL’s revenues derive exclusively from earnings from its owned, bareboat chartered and time-chartered reefer vessels com-mercially operated by NYKLauritzenCool. JL’s share of the net results of NYKLauritzenCool is included in the figures for the results from associated companies.

Lauritzen Reefers At the end of 2006 Lauritzen Reefers controlled a fleet of 18 bareboat chartered and time-chartered reefer vessels, all com-mercially operated by NYKLauritzenCool AB.

During the year, one medium sized reefer vessel was acquired and one was sold and the charter parties of some time-char-tered vessels were extended.

NYKLauritzenCoolNYKLauritzenCool is one of the world’s largest operators of specialized reefer vessels. The company employs around 60 specialized reefer vessels ranging from 300,000-760,000 ft3 with additional capacity for reefer containers on deck, equiva-lent to about 20% of the under deck capacity. All vessels are employed in the Leonina system to which JL and NYK Reefers each contribute about 35% of the total fleet capacity.

LauritzenCoolLogisticsLauritzenCool Logistics (LCL), the reefer logistics service of NYKLauritzenCool, continued its growth during 2006 with an increase in excess of 50% of cargo volumes handled. LCL now operates from 35 offices in 21 countries world-wide serving increased demand for specialized perishable logistics services, connecting producers and retailers in a seamless operation.

Market trendsSpot market rates did not live up to expectations during the first half of 2006 as the depressed freight levels from the 2005 off-season continued into 2006. During the second half of the year the market strengthened considerably and was sufficiently strong to take the average annual spot rate for a large reefer vessel 2-3% higher than in 2005, cf. Figure 12, p. 16.

Demand for specialized reefer vesselsDemand for specialized reefer vessels was fairly modest in the first half of 2006 but increased significantly during the second half of the year. At the beginning of the year, Caribbean/Central American banana production was down due to tropical storms in 2005 and harsh weather conditions. Further, a late start to the Chilean season, an initial shortage of grape volumes in South Africa and the ban on Brazilian beef in major importing countries all contributed to a weaker peak season than in 2005.

After a slow summer, banana markets finally started firming up. At the same time, the South African citrus season ended more favourably than it began. On the meat exporting side, some restrictions were lifted on Brazilian and Argentinean meat and trade could be resumed while the US poultry industry saw strong demand for its products.

The year ended on an impressively high note. Many factors contributed at the end of 2006: the strong Moroccan and Chil-ean export seasons started early, there were many fish and poultry shipments and banana production kept up and was not interrupted due to the mild hurricane season.

Key figures USDm 2006 2005Revenue 74.0 96.3EBITDA (0.2) 24.5Depreciation (0.7) (6.0)Profit on sale of assets 9.4 20.1Operating income 8.4 38.6Result before tax 13.2 36.0

Invested capital (average) (1.6) 52.5Return on invested capital N/A 77.0%Average no. of employees 179 157


15

The spot market improvement noted during the autumn had a positive impact on contract rates for 2007. Increases fixed at 5-7% confirmed on-going demand for versatile, modern reefer vessels.

Tonnage supplyAt year-end 2006, the global fleet of specialized reefer vessels in the segment above 250,000 ft3 amounted to about 520 units with total capacity of approximately 225m ft3 down by around 1% from 2005.

Only two 585,000 ft3 capacity newbuildings entered the market in 2006. Scrapping remained low as only eight units with a ca-pacity of 3m ft3 were deleted from the fleet.

The sales and purchase market for reefer vessels in 2006 was not quite as intense as in 2005 but there was still a lot of activity as almost 40 vessels changed owners at high average prices.

Events after year-endAt the beginning of January 2007, a 378,000 ft3 reefer vessel was sold with prompt delivery, leaving the Lauritzen Reefers’ fleet solely consisting of bare-boat and time-chartered ton-nage.

Outlook for 2007The tight supply of modern reefer tonnage is expected to con-tinue to lead to occasional periods of very high freight rates in response to spikes in demand.

However, the continued influx of container vessels with large reefer plug capacities and the growing presence of container lines in traditional reefer trades is increasing competition in the market for transportation of all cargoes requiring temperature control.

Production forecasts in exporting regions are positive although there is a risk that El Niño and other weather phenomena may have a negative impact on export volumes.

Reefer activities are expected to generate satisfactory results although gains from tonnage sales will be considerably lower than in 2006. Profits before tax are forecast at about USD 7m in 2007.

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250,000 cbft 400,000 cbft

Figure 12: spot market freight rates for reefer vessels (us cents per ft3 per 30 days)

Source: Fearnleys weekly


16



LAURITZEN TANKERSpresident Anders Mortensen

In 2006, Lauritzen Tankers’ third year of operations, EBITDA was USD 6.4m compared to USD 6.8m in 2005. Profits before tax were USD 3.8m compared to USD 4.1m in 2005.

Results were in line with expectations.

Main eventsLauritzen Tankers continued to build up its fleet of medium range (MR) product tankers during 2006.

In February, Lauritzen Tankers took delivery of a 53,000 dwt MR product tanker newbuilding from Shin Kurushima Dockyard in Japan, the first of a series of six sister vessels to be delivered to Lauritzen Tankers.

A 46,200 dwt 1999-built product tanker was acquired in Novem-ber 2006 with prompt delivery.

During the year, two 53,000 dwt newbuildings scheduled to be delivered on long-term time-charter were converted to purchase contracts and will thus be owned by Lauritzen Tankers on de-livery in 2009-10.

In 2006, Lauritzen Tankers signed long-term time-charters for three 47,000 dwt MR product tankers for delivery in 2009-11. Further, two 53,000 dwt MR product tankers to be delivered in 2007 were taken on time-charter securing further expansion of the fleet.

Based on current contracts, Lauritzen Tankers’ fleet of owned, time-chartered and managed vessels will increase by 15 new-buildings (with five in 2007) to a total of 23 vessels by 2011.

Market trendsThe impact from the devastating hurricanes in 2005 faded to a large extent during the first part of 2006. However, increased political turmoil in the Middle East and disruptions to production in West Africa increased crude oil prices, peaking in September at about USD 75 a barrel before falling to the mid-USD 50s in December, cf. Figure 13.

Prices of refined products increased due to higher crude oil prices and continued high utilization of refineries, as illustrated in Figure 13. The rises led to a fall in demand for refined products

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jan-05 maj-05 sep-05 jan-06 maj-06 okt-0675

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WTI spot price in USD/barrel NY Harbour gasoline price Cents/gallon

Figure 13: Daily crude oil and gasoline prices during 2005-2006 (usD per barrel)

Source: Energy Information Administration

(RHS)


17

for gasoline as well as diesel oil specifications constantly in-crease in response to new regulatory conditions, local refiner-ies continued to have difficulty in matching local demand. This contributed to demand for product tankers, which grew more than expected in 2006.

New regulations for the seaborne transportation of edible oils had a positive impact on demand.

Tonnage supplyDuring 2006, deliveries of tanker vessels classified as product tankers or oil/chemical carriers of 25,000 dwt or more amounted to 9.6m dwt, up 9% on the previous year. The number of tankers delivered in this segment increased by 17 units to 181 product tankers/oil-chemical tankers. The pace of delivery eased slightly in the second half compared with the first, cf. Table 4.

Demolition of product tankers increased to 1.5m dwt (38 ves-sels) compared to 0.8m dwt (23 vessels) in 2005, cf. Table 4. Published records indicate that the number of product tankers

in many markets, including the USA. Although prices of crude oil and refined products have fallen since September, they are still comparatively high.

The spot market for MR product tankers opened on a very strong note in 2006 with spot rates of around USD 38,000 per day before falling to about USD 7,000 per day in late March in the Far East. Average earnings recovered to about USD 30,000 per day in July. The subsequent set-back ended with spot mar-ket rates in the Far East below USD 8,000 per day in November. In 2006, the winter seasonal upswing did not start until second half of November, cf. Figure 14.

During 2006, spot market rates for MR product tankers were 13% lower on average than in 2005, whereas 12 month period rates were up by about 5%. Second-hand prices for modern tonnage settled at a fairly stable level in 2006.

Demand for product tankersGlobal demand for oil increased by 1.0% in 2006, down from 1.6% the previous year. Falling demand was reported in all re-gions of the OECD. Strong growth was recorded only in China and the Middle East, which together accounted for about 15% of the global market. During 2006, demand for gasoline, gas/diesel oil and other products increased in the OECD area, whereas demand for naphtha, kerosene and heavy fuel oil declined. As requirements

>25,000 dwt Deliveries Demolitions Orders

January -June 93 14 215July - December 88 24 153Total 181 38 368

Table 4: Number of vessels in 2006

Source: Clarkson Research Services Professional Register

0

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Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06

APG Japan 55K Caribs - USEC 30K APG Japan 30K

Figure 14: weekly spot market earnings by route 2005-2006 (usD per day)

Source: Clarkson Research Services, Shipping Intelligence Network


18

and oil/chemical tankers contracted more than doubled between 2005 and 2006 from 164 vessels to 368 vessels, cf. Table 4. The total order book of oil/chemical and product tankers 25,000 dwt or more amounts to almost 39m dwt or 48% of the existing fleet.

fleet In 2006, Lauritzen Tankers’ total number of ship days reached 2,489 (6.8 vessels on average) compared with 2,151 days (5.9 vessels on average) reported in 2005.

At the end of 2006, the company controlled a fleet of eight MR product tankers employed either in the period market or on a spot basis.

Technical management of Lauritzen Tankers’ own vessels was handled by Lauritzen Fleet Management.

Events after year-endA 37,200 dwt 2004-built ice-class product tanker was acquired with delivery in January 2007. Furthermore, a 40,000 dwt product tanker newbuilding was sold and delivered to buyers in February 2007.

prospects for 2007The health of the global economy combined with lower oil prices is expected to ensure a stronger rise in demand for oil than in

2006. This will boost demand for product and oil/chemical tank-ers, which is expected to increase by about 4-5%. If ongoing requirements and changes to fuel quality continue to make it difficult for refineries to match the local demand mix, further growth might be induced. Although located far away from their customers, export refineries remain competitive due to scale and feedstock costs and they continued to expand capacity which helped boost demand due to longer transport distances.

Even after deducting (possibly) higher demolition sales, addi-tions to the product tanker and oil/chemical fleet will lead to an even higher rate of growth in the tanker fleet than in 2006.

During 2007, Lauritzen Tankers will take delivery of a 40,000 dwt vessel. Three 53,000 dwt and one 48,000 dwt long-term time-chartered product tankers will also be added to the fleet.

Results for 2007 are expected to be better than 2006, primarily due to the continued expansion of the fleet. Profits before tax are forecast at about USD 16m.


19

fLEET mANAgEmENT

ship ManagementQuality is paramount to all JL businesses and this is also re-flected in the fleet management operations performed for the JL fleet of bulk and gas carriers, reefer vessels and product tankers.

JL continuously develops its ship management activities world-wide in order to create value for clients, partners and owners. Accountable and skilled staff in offices and onboard our ves-sels ensure the safety of people, ships, cargo and the environ-ment.

JL is determined to meet the stringent demands of the shipping industry for maritime security and the safety of seafarers, cargo and vessels, while protecting the environment and providing our clients with uniform, high quality service.

ActivitiesShip management services are provided by Lauritzen Fleet Management (semi refrigerated gas carriers, product/chemi-cal tankers and reefer vessels) and by Gasnaval S.A. (semi refrigerated gas carriers) as well as by New Century Overseas Management Inc. (bulk carriers) and Star Management Associ-ates (pressurized gas carriers).

In 2006, JL’s ship management providers were responsible for managing an average of 46 owned or long-term operated

vessels comprising 11 bulk carriers, 23 gas tankers, 2 product tankers, and 10 reefer vessels.

QualityThe interaction between JL’s ship management providers and the officers and crew on board our vessels is a key factor to ensure high-quality operations at all levels.

Recruitment and retention of seagoing staff with the right quali-fications is a critical factor to ensure the high quality operations of JL’s fleet. Seagoing staff are continuously trained in order to ensure that JL and customer requirements are lived up to and in order to secure a safe and professional conduct.

In 2006 Lauritzen Fleet Management joined the Tanker Manage-ment Self Assessment (TMSA) programme. The programme en-courages ship managers to assess their management systems against specified key performance indicators, with the aim of continuous improvement in line with best practice. Underlining our dedication to quality ship management, our aim is to reach the highest level of performance in all TMSA categories.

EnvironmentJL is committed to protecting the environment and to minimizing the environmental impact of our operations. Prevention, opti-mization and preparedness are keywords in our approach to environmental protection.


20

In 2006, JL formulated a corporate environmental policy and Lauritzen Fleet Management started implementation of an en-vironmental management system, aiming at achieving ISO14001 certification during 2007.

Energy consumptionJL ships consumed a total of 201,213 tonnes of oil in 2006 to produce 1,732,437 MWh of energy.

In 2006, average energy efficiency was 0.294 kWh/ton-mile, which is better than previous years mainly due to larger, newer and more environmentally friendly ships entering service, cf. Figure 15.

Reductions in emissions were achieved by focusing on propul-sion performance, optimised engine performance and trading patterns, and by minimising ballast time. Emission figures are based on actual consumption, oil quality and engine emission factors, cf. Figures 16 and 17.

Accountability2006 saw the introduction of a common set of Key Performance Indicators (KPIs) across ship management entities, making it easier for JL to measure, document and report the full impact and results of activities.

Lost Time Injury Frequency (LTIF) for 2006 was 2.74. This was a satisfactory improvement on previous years. All accidents can be avoided and it is JL’s goal to reach zero accidents.

A total of 125 port state controls were carried out on JL ships all around the world, with an average of 1.55 deficiencies.

shipboard personnel The crews aboard JL vessels are Danish, Filipino, Spanish, Cuban or from the Baltic states. Regardless of nationality, ves-sel type and trading area, we have a common commitment to safety, environmental protection and the drive for continuous improvements, through continuity training and education for all employees.

In future, the availability of sufficient skilled crew and staff at sea and ashore will be crucial to support JL’s growth strategies and plans.

We shall face these challenges by ensuring that we remain and develop our position as an attractive employer on the global scale, by adjusting employment terms to match competition and by innovative use of technology, IT and systems such as “ships on-line”, and especially by enhancing crew welfare.

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2004 2005 2006

All vessels

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All vessels

Fig. 15: Energy consumption KwH/tonmile* Fig. 16: CO2 Emissions, g/tonmile* Fig. 17: All vessels sO2 and Nox Emissions*

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SO2 g/tonmile NOx g/tonmile*) 2004-05: Lauritzen Fleet Management only. 2006: All JL ship management entities.


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22

hUmAN CApITAL

JL is guided by our vision “Together, we create a world-class shipping company”. This vision is closely interlinked with our core values of Competence, Respect, Entrepreneurship, Ac-countability, Team Spirit and Enthusiasm – all vital elements for our ability to create value for clients, partners and owners.

JL’s human resources are a vital precondition for our value crea-tion, and the personal and professional qualifications of staff are critical for the ongoing development of JL’s business activities and our endeavours to achieve our vision.

Globalisation, changes in the competitive environment, rising complexity and demands for business acumen, technology, fi-nance, IT and compliance with increasing national and interna-tional regulatory requirements constantly impose new, tougher demands on our employees.

Thus it is imperative for JL to attract, develop and retain staff who by virtue of their professional and personal skills can sup-port JL’s business strategies.

Recruitment and retentionJL is constantly aware of ever-increasing competition at sea and ashore in attracting the best suited employees. Especially at JL’s head office in Copenhagen, competition for the most quali-fied staff has increased as a result of the surge in the Danish shipping industry and in the Danish economy as a whole. JL’s overseas offices have also seen increasing demand for skilled staff with international experience.

JL’s shipping trainee programme plays a very important role in our HR strategy. The trainee programme serves as a knowledge base for coming generations of professional shipping staff in operations and chartering, many of whom have the potential to become part of key management. Over the past couple of years, the Danish shipping industry has improved the stand-ards of the theoretical education for shipping trainees. As an important employer, JL also contributes to the education of trainees in such other fields as finance and procurement. As a result of increasing commercial complexity, JL is also recruiting a greater number of graduates from business schools and/or universities.

During 2006, JL recruited the largest ever number of employees in the past ten years at head office in Copenhagen.

In 2006, JL took the initial steps towards implementing a senior employee policy with the dual aim of retaining the know-how


23

of senior employees and providing them with the possibility of phased retirement.

Competency developmentJL regards learning and competency development as important strategic elements for the development of our activities. Con-tinuous maintenance of skills, knowledge and competencies are thus pivotal to ensuring that JL has the human resources required in the future.

All JL employees participate in continuous training and educa-tion, the purpose of which is to qualify them for future chal-lenges. Executive training, including MBA programmes at IMD, INSEAD and Copenhagen Business School are also part of JL’s Business Academy.

JL uses various tools when determining the need for compe-tency development including annual appraisals and a general Company Performance Driver (CPD) survey, which provides an overall assessment of our ability to perform not only within se-lected areas of business but also in terms of human relations.

Maritime personnelJL’s DIS registered fleet (Danish International Register of Ship-ping) are manned by Danish officers. Vessels registered in other registers are manned by officers primarily from other European nations and the Philippines. By working closely together with reputable crew agencies in these countries, JL gets access

to well qualified and well trained staff, who with their personal capabilities will secure retaining of marine engineering and op-erational skills in JL.

Terms of employmentJL offers attractive terms of employment not just by way of competitive employment packages (salary, pension, incentive schemes, health insurance and other benefits) but also by way of challenging careers at head office, overseas offices or on board our vessels.

JL has a long tradition of employing staff with sea-going experi-ence ashore, a policy that now also includes the possibility for attending executive training programmes.

HR profileAt year-end 2006, total headcount was 708 employees (907 at year-end 2005), of whom 159 were working at head office in Copenhagen, 26 at overseas offices, 170 at terminals and 353 were serving with the fleet. The decrease in total headcount was primarily due to the downsizing of land-based activities in South America.

Staff turnover in 2006 was 7% at head office. Average length of service was 9.3 years and average age was 43.2 years, almost the same as 2005. A good working environment and challenging tasking means that JL saw a low level of sick leave at 3.5 days per employee during 2006.


24

RISK mANAgEmENT

The global shipping industry is highly sensitive to any fluc-tuations in world industrial and economic activities. The risks relating to this are primarily commercial risks (fluctuations in freight and charter rates as well as oil prices and vessel values), financial risks (liquidity, currency and interest rates), as well as operational risks (incidents and off-hire).

Charter rate levels and freight rates vary with world market changes and influence the ratio between supply and demand in the various shipping sectors.

JL manages commercial risks through a balanced portfolio of owned vessels, chartered tonnage and contract coverage sup-plemented with oil hedging and to some extent Forward Freight Agreements (FFAs), cf. Note 23.

Over the years, JL has not only participated in but also managed partnerships in order to increase market access and reduce some of the general market risks.

Each business area is responsible for monitoring and control-ling its own business risks associated with supply and demand issues and for including their findings in routine reporting.

The operational risk regarding incidents and off-hire are man-aged through focused high-quality fleet management. For more information on JL’s fleet management please see p. 20-21.

Fleet and cargo are insured by first class international insur-ance companies. Vessels are always insured above their market values.

The overall limits for financial risks and oil risks are defined by

JL’s Board of Directors and managed by JL’s treasury depart-ment. Hedging transactions are made to minimize risks and only apply to the underlying commercial risks.

Oil riskBunker oil is a significant cost element and JL’s policy is to hedge projected consumption of bunker oil needed for contracted cargo volumes not covered by BAF (Bunker Adjustment Factor).

A proportion of estimated bunker oil consumption not covered by BAF and relating to JL vessels may also be hedged. Deci-sions on whether to hedge fully or partially are made periodically depending on future oil price trend forecasts.

Most 2006 JL trades were based on the spot market, where pricing reflects the current price of fuel, and on contracts cov-ered by BAF.

At year-end 2006 around 16% of estimated total bunkers con-sumption for 2007 had been hedged, cf. Note 23.

Liquidity riskDuring the past years, highly positive cash flows have made it possible to self finance the expansion of the fleet, thus building up considerable borrowing potential in debt-free vessels. Cash flow in 2007 is expected to continue supporting the financing of growth, although certain limited external financing will become necessary to continue the expansion of the fleet.

At year-end 2006, credit and overdraft facilities from banks were in place to cover the expected net cash flow for the next couple of years and the sufficient minimum cash requirement defined by the Board of Directors.

5.005.205.405.605.806.006.206.406.60

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Figure 18: usD/DKK development

9095

100105110115120125

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Figure 19: usD/JpY development


25

There are two facets to the interest risk relating to liabilities and assets. Interest changes have reverse effects depending on the type of asset and type of debt interest fixture. JL endeavours to optimize the return on surplus funds and reduce total interest risk by creating natural hedges between assets and liabilities.

A low risk financial strategy is applied and surplus funds are either placed on short term deposits or in short term bonds, making it possible to keep the investment until maturity, if neces-sary. Repo lines are in place to ensure that short term liquidity can always be raised.

At year-end 2006 financial assets valued at USD 83.9m were held in USD bonds and similar products.

In 2006, the rate of return on the average placement of total surplus funds was 3.14% compared with the average rate on the daily USD money market of 4.95%.

Credit and counterparty riskJL’s credit risks mainly consist of freight receivables and prepaid charter fees and are not regarded as exceptional. In previous years, there has only been minimal loss on debtors. The same applied in 2006.

The risks relating to JL’s trading in financial instruments, securi-ties and in placing cash funds are minimised by trading only with financial institutions with a high international credit rating.

Other counterparty risks are limited through agreements and adequate prepayments.

Investment capacityIn order to meet business related and financial risks, JL prepares semi-annual long-term projections based on updated freight rate expectations and comprising all commitments (newbuildings, time charters and other sale and purchase agreements). Based on the projection and including a defined minimum level of cash availability (USD 50-150m) and a defined minimum solvency ratio (35%), JL’s additional medium term investment capacity is calculated to be about USD 1bn.

At year-end 2006, total cash, securities and similar bond-related products amounted to USD 157.8m (USD 316.9m at year-end 2005). Surplus funds are managed in accordance with the in-vestment policy approved by the Board of Directors.

Currency riskIt is JL’s policy to use financial instruments to hedge the currency risk relating to non-USD costs and non-USD investments. Our hedging strategy for operating costs is based on a 12-month rolling cash flow base.

JL’s income is almost exclusively in USD (95%) with 4% in EUR and costs are also mainly in USD (74%). The most important non-USD cost currencies are DKK 17% and EUR 7%.

In order to reduce currency exposure, JL aims to further in-crease the already significant natural currency hedge between income and costs.

In 2006 total non-USD costs amounted to USD 109.7m. At the end of 2006, forward contracts were in place covering three months forward compared to six months of cover at the end of 2005, cf. Note 23.

Some investments in newbuildings are denominated in JPY. Around 45% of the total JPY instalments under the new-build-ing programme were hedged at the target rate or better. The remaining, unhedged proportion of the JPY instalments is ex-clusively due in 2009-11.

The development in USD vis-a-vis DKK and JPY since January 2005 is shown in Figure 18 and 19, p. 25.

Interest riskJL’s interest bearing debt amounted to USD 49.9m at year-end 2006 compared to USD 77.2m at year-end 2005, cf. Note 21. Current interest bearing bank debt amounted to USD 109.3m cf. Note 22.

Debt of USD 49.1m relating to the sale and sub-lease of reefer vessels is set off against other receivables with identical instal-ment and interest profiles.

At year-end 2006, the average interest rate on JL’s loan portfolio including margins was 5.35% excluding lease debt. The cor-responding figure for 2005 was 4.38%.

Trends in the six-month money market and 10-year swap inter-est rates are shown in Table 5.

Table 5: Interest ratesUSD End 2006 End 20056 month 5.37% 4.7%10 year 5.16% 4.95%EUR6 month 3.85% 2.64%10 Year 4.19% 3.44%


26

ACCoUNTINg poLICIES

The annual report has been prepared in accordance with Interna-tional Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for annual reports of reporting class C large enterprises, see the statutory order on the adoption of IFRS issued pursuant to the Danish Financial State-ments Act. In addition, the annual report has been prepared in compliance with the International Financial Reporting Standards issued by the IASB.

New financial reporting standardsIn 2006, the following revised IFRS standards came into force: IAS 19, IAS 21 and IAS 39. The changes to IAS 19 and IAS 21 affected neither JL’s consolidated financial statements nor the financial state-ments of the parent company.

JL has chosen to continue to measure the short-term bond portfolio at fair value in accordance with IAS 39, as the portfolio serves as a cash reserve in accordance with JL’s risk and investment strategy. The portfolio consists of bonds, which are regularly monitored and reported at fair value.

In addition, any parent company guarantees in respect of subsidiar-ies’ financial commitments are issued on arm’s length terms, and the change to IAS 39 in this respect therefore does not affect rec-ognition.

Except for the effect of the above-mentioned revised accounting standards, the accounting policies are consistent with those of last year.

Basis of preparation The financial statements are presented in US dollars, rounded to the nearest thousand. They are prepared under the historical cost convention, except that the following assets and liabilities are stated at their fair value:

Derivative financial instrumentsInvestments held for tradingInvestments available for sale

The accounting policies set out below have been applied consist-ently by all JL entities and to all periods presented in these consoli-dated financial statements.

The preparation of financial statements in conformity with IFRS’s requires management to make judgements, estimates and assump-tions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. Judgements made by

•••

management in the application of IFRS’s that have a significant ef-fect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 1.

Basis of consolidation The Annual Report comprises the Parent Company, J. Lauritzen A/S, and subsidiaries in which the Parent Company has directly or indirectly the power to govern the financial and operating policies. This is normally accomplished by holding more than 50% of the vot-ing rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether JL has control or significant influence over another entity.

Enterprises in which JL has a significant influence, but not control are classified as associates.

Joint ventures are recognised in the consolidated financial state-ments, and in the financial statements of the parent company using the equity method.

The Consolidated Financial Statements are prepared on the basis of the financial statements of the Parent Company and its subsidiaries, by combining items of a uniform nature and eliminating inter-com-pany transactions and balances, and are based on financial state-ments prepared in compliance with JL’s accounting policies.

Acquisitions, disposals and entities formed during the year are in-cluded in the financial statements during the period of JL’s control or significant influence. Comparative figures are not adjusted for acquisitions. Disposals or liquidations are presented as discontinued operations.

On acquisition of businesses, the purchase method is applied, ac-cording to which the identifiable assets, liabilities and contingent liabilities acquired are measured at their fair values on the date of acquisition. The excess of the cost of acquisition over the fair value of JL’s share of the identifiable assets, liabilities and contingent li-abilities acquired are recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the business acquired (negative goodwill), the difference is recognised directly in the in-come statement.

Gains or losses from the disposal or liquidation of subsidiaries or associates are stated as the difference between the proceeds from disposal or liquidation and the book value of the net assets at the date of disposal or liquidation. This includes any goodwill as well as any anticipated disposal or liquidation costs.


27

Translation of foreign currencies Items included in the financial statements of each of JL’s entities are measured using the currency of the primary economic environ-ment in which the entity operates (the functional currency). The consolidated and the parent company’s financial statements of JL are stated in USD which is both JL’s functional and presentation currency.

Foreign currency transactions are translated into the functional cur-rency at the exchange rate of the date when initially recognised. Gains and losses arising between the exchange rate of the trans-action date and that of the settlement date are recognised in the income statement under financial items.

Receivables, payables and other monetary items in foreign cur-rencies that have not been settled at the balance sheet date are translated at the exchange rates then prevailing. Any differences between the exchange rates at the balance sheet date and the transaction date rates are recognised in the income statement under financial items.

The results and financial position of any JL entity that has a function-al currency different from JL’s presentation currency are translated into the presentation currency as follows:

Assets and liabilities, including goodwill and fair value adjust-ments arising on consolidation are translated at the closing rates at the date of the balance sheet.Income and expenses for each income statement are trans-lated at exchange rates approximating the exchange rate of the date of transaction date, andAll resulting exchange differences are recognised as a sepa-rate component of equity.

Exchange differences arising from the translation of the net invest-ment in foreign subsidiaries or associates, and of borrowings or other currency instruments relating to hedging such investments are recognised directly in the translation reserve of equity. Exchange differences are released to the income statement upon disposal of the net investment.

Derivative financial instruments and hedging activities JL uses derivative financial instruments to hedge its exposure to foreign exchange risks, interest rate risks and price risks arising from operational, financing and investment activities. In accordance with its treasury policy, JL does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instru-ments.

Derivatives are recognised initially at cost. Subsequently, derivatives are re-measured at fair value. The gain or loss on re-measurement

•

•

•

to fair value is recognised immediately in the income statement, un-less the derivative qualifies for hedge accounting, where recognition of any resultant gain or loss depends upon the nature of the item being hedged.

JL documents at the inception of the transaction the relationship be-tween the hedge and the items hedged, as well as its risk manage-ment objectives and strategy for undertaking various hedge trans-actions. JL also documents from start to finish of a hedge whether the derivatives used in the hedge are highly effective in offsetting changes in the fair values or cash flows of the hedged items.

Fair value hedgeChanges in the fair value of derivatives designated as and qualifying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement together with changes in the fair value of the hedged asset or liability.

Cash flow hedgeWhere a derivative financial instrument is designated as a hedge of a highly probable forecasted transaction, the effective part of any gain or loss on it is recognised directly in equity. When the forecasted transaction subsequently is realised, the associated cu-mulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecasted transaction affects profit or loss. The ineffec-tive part of any gain or loss is recognised in the income statement immediately.

When a hedging instrument expires or is sold, terminated or exer-cised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction still is expected to occur, the cumu-lative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumula-tive unrealised gain or loss recognised in equity is recognised in the income statement immediately.

Net investment hedgeDerivatives used to hedge net investments in foreign subsidiaries or associated companies are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain and loss relating to the ineffective portion is recognised immediately recognised in the income statement.

Derivatives that do not qualify for hedge accounting For derivatives that do not qualify for hedge accounting, changes in fair value are recognised in the income statement as they occur.

segment information Segment information on key business areas is disclosed in line with


28

JL’s internal financial management, risks and accounting policies.

JL has only one geographical segment because JL considers the global market as a whole and individual vessels are not limited to specific parts of the world.

Non current assets in a segment comprise those that are directly attributable to the segment’s operations, including intangible as-sets, vessels, property, equipment and investments in associated companies.

Current assets in a segment comprise those that are directly em-ployed in the segment’s operation, including inventories, trade and other receivables, prepayments and cash.

Liabilities in a segment comprise those that are directly employed in the segment’s operation, including trade payables, accruals and other liabilities.

Income statementRevenues Revenues comprise freight and demurrage revenues from the vessels, and revenues from land based operations. Revenues are recognised in the income statement as services are delivered. Un-completed voyages are recognised with the share related to the financial year. Earnings from vessels which are engaged in jointly controlled operation are recognised in revenue on a net distribution basis.

Operating cost of vessels Operating cost of vessels includes maintenance and repairs, insur-ance of hulls and machinery, consumption of lubricants and supplies etc.

Other operating costsOther operating costs include bunker oil, port costs, agent’s com-missions and other voyage related costs. Furthermore other operat-ing costs include fair value changes on financial bunkers contracts which are entered into for the purpose of hedging JL’s bunkers costs as hedge accounting is not applied for these transactions.

Results in associated companies The proportionate share of the net result after tax in associated companies, after the elimination of inter-company profits/losses is recognised in the consolidated income statement of JL.

Financial items Financial items include interest income and expense, realised and unrealised exchange gains and losses, financial expenses in respect of finance leases, adjustments to the value of securities and certain financial instruments and other financial income and expenses.

Interest expenses related to the financing of assets under construc-tion are capitalised as part of the cost of the asset.

In the income statement of the parent company dividends received during the year from subsidiaries and associates are shown under financial income.

Income taxIncome tax consists of tax calculated according to the regulations of the Danish Tonnage Tax Act for shipping activities and according to general tax regulations for other activities, as well as adjustments related to deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Balance sheetGoodwill All business combinations are accounted for by applying the pur-chase method. Goodwill represents amounts arising on acquisition of subsidiaries, associates and joint ventures. In respect of business acquisitions that have occurred since 1 January 2004, goodwill rep-resents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP. In accordance with IFRS 1 the classification and accounting treatment of business combinations that occurred prior to 1 January 2004 has not been reconsidered in preparing JL’s opening IFRS balance sheet at 1 January 2004.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annu-ally for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

Other intangible assetsPatents and Rights are measured at historical cost less accumu-lated amortisation. Patents are amortised over the remaining patent period, or service life if shorter. Other intangible assets are stated at historical cost less accumulated amortisation.

Amortisation is charged to the income statement on a straight-line basis over the estimated service lives of the intangible assets from the date they are available for use.

Vessels, property and equipment Vessels Vessels are measured at cost less accumulated depreciation and accumulated impairment losses.


29

Vessels acquired by way of finance leases are stated at the lower of fair value, and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses.

Costs relating to dry dockings are capitalised and depreciated over the period between dockings. In most cases this is 30 months ex-cept for reefers and some gas vessels where it is 60 months.

Rebuilding of vessels is capitalised if the rebuilding is intended to extend the service life and/or improve the earning potential. Rebuild-ing is depreciated over the expected service life of the investment.

Vessels under construction are measured at cost incurred until the time the vessel is taken into service. Vessels are depreciated on a straight line method to an estimated scrap value. The estimated scrap value and estimated service life of a vessel are assessed annually and adjusted if appropriate.

Impairment tests of vessels are carried out annually on an asset by asset basis. Vessels are written down to the recoverable amount if this is lower than the book value. When a vessel has been writ-ten down to its residual value, it continues to be depreciated on a straight line method based on an assessment of the remaining service life and estimated scrap value.

LandLand is measured at cost.

Buildings Buildings are measured at cost less accumulated depreciation and accumulated impairment losses.

Machinery, tools and equipment Machinery, tools and equipment are measured at cost less accumu-lated depreciation and accumulated impairment losses.

Depreciation The straight-line method of depreciation is applied as follows:

Asset YearsReefer vessels 25Gas carriers 25Bulk carriers 25Product tankers 25Dry dockings 3-5Buildings 50Machinery, tools and equipment 5-10

Gains and losses on the disposal of tangible assets are calculated as the difference between the sales price less cost of sales and the net book value at the time of sale. Gains and losses on the disposal of machinery and equipment are recognised in the income statement under the line item “other sales and administrative costs”. Gains and losses on the disposal of vessels are recognised in the income statement as a separate line item.

Investments in associates – consolidated financial state-ments In JL’s consolidated financial statements, investments in associ-ated companies are recognised according to the equity method of accounting.

Any goodwill resulting from the acquisition is included in the carry-ing value of the investment. It is tested for impairment as described below.

Associates with negative equity are measured at USD 0 (nil), un-less JL has a legal or constructive obligation to cover the negative balance of the associate.

Investments in subsidiaries and associates – parent company financial statements In the financial statements of the parent company, investments in subsidiaries and associates are carried at cost less accumulated impairment losses. Dividends are recognised in the income state-ment as received.

Impairment The carrying amount of vessels, goodwill, intangible assets with indefinite service lives and intangible assets not yet available for use are tested annually for impairment.

The carrying amounts of other non current assets, other than de-ferred tax assets, are reviewed at each balance sheet date to de-termine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated based on either discounted future cash flows (utility value) or appraised values (broker’s valuation).

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill al-located to cash generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

In discounting the estimated future cash flows, JL uses its risk ad-justed weighted average cost of capital (WACC).


30

Inventories Bunker oil is measured at cost according to the FIFO principle. Ma-jor spare parts purchased and stored ashore for subsequent use are measured at cost less individually assessed write-down. Other inventories are recognised at the lower of cost or net realisable value.

Receivables Trade and other receivables are recognised at amortised cost less impairment losses.

prepayments Prepayments recognised under assets include payments relating to costs in subsequent periods after the balance sheet date.

securities Listed securities are classified as current assets and are recognised at fair value as from the settlement date, which for listed securities is the market price on the balance sheet date. Any resultant gain or loss is recognised in the income statement.

Equity Proposed dividend is recognised as a separate item under equity until approved at the Annual General Meeting, when it is recognised as a liability.

Liabilities Mortgage debt and other interest bearing debt to credit institutions are initially recognised as the proceeds received less any transac-tion costs incurred. Subsequently, financial liabilities are measured at amortised cost using the effective interest rate method, such that the difference between the proceeds and the redemption value is recognised in the income statement over the lifetime of the loan.

Financial liabilities also include lease obligations on finance leas-es.

Trade payables and other amounts payable are measured at am-ortised cost.

provisionsA provision is recognised in the balance sheet when JL has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be re-quired to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Accruals Accruals include prepayments regarding income relating to periods after the balance sheet date.

Corporate and deferred taxCorporate tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary dif-ferences are not provided for: goodwill not deductible for tax pur-poses, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substan-tively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is prob-able that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the ex-tent that it is no longer probable that the related tax benefit will be realised.

J. Lauritzen A/S is jointly taxed with Vesterhavet A/S and various Danish subsidiaries.

Cash flow statement The cash flow statement has been prepared according to the in-direct method and shows the cash flows from operating, investing and financing activities for the year.

Cash flows from operating activities are calculated as the results for the year as adjusted for non-cash operational items, changes in working capital and corporate tax payments.Cash flows from investment activities cover receipts or payments related to acquisition and disinvestment of companies and/or ac-tivities, transactions relating to non current assets and purchase or sale of securities.

Cash flows from financing activities comprise changes in the size and mix and the JL’s share capital including related costs, raising and re-payment of interest bearing debt, plus payment of dividend to shareholders.

Cash and cash equivalents include bank deposits and short term deposits that without restriction can be exchanged into cash funds and where there is insignificant risk of value fluctuations, with the deduction of short term bank loans.


31

sTATEMENT AND NOTEsJ. LAURITZEN A/S


32

INCOME sTATEMENT (usD 1,000)

Notes Income StatementUSD '000

Group Parent companyNotes 2006 2005 2006 2005

Income2 Revenue 457,638 591,713 - -

Other operating income 17,209 4,372 9,029 7,363 474,847 596,085 9,029 7,363

Hire of chartered vessels (219,061) (256,844) - - 3 Operating costs of vessels (43,081) (34,487) - (27)

Other operating costs (39,134) (53,083) - - 4 Staff costs, office and fleet (59,398) (50,327) (15,415) (11,814) 5 Other sales and administrative costs (14,032) (14,726) (6,643) (7,807)

(374,706) (409,467) (22,058) (19,649)

Result before depreciation (EBITDA) 100,141 186,618 (13,029) (12,286)

Profit and loss on sale of vessels 43,739 52,743 - - Profit and loss on sale of shares 784 345 13 (3,932)

6 Depreciation and write-downs (27,221) (25,637) (8) (7)

Operating income 117,443 214,069 (13,024) (16,225)

17 Net result in associated companies 9,701 17,669 - - 7 Financial income 22,145 11,921 190,344 168,592 8 Financial expenses (12,974) (12,067) (13,891) (10,062)

Result before tax 136,316 231,591 163,429 142,305

9 Income tax (10,761) (21,177) 1,380 (1,816)

Result for the year 125,555 210,415 164,809 140,489

Attributable to:The J. Lauritzen Group 124,382 208,824 Minority shareholders´ share of result in subsidiaries 1,172 1,591

125,555 210,415

Proposed allocation of the result:Proposed dividend 31,096 52,206 Transferred to other reserves 133,713 88,283

164,809 140,489


33

BALANCE sHEET (usD 1,000)


Assets

Non current assets

Intangible assets10 Goodwill 1,735 1,693 - - 11 Patents & Rights - - - -

1,735 1,693 - -

Vessels, property and equipment12 Vessels 394,352 268,085 - - 13 Land and buildings 5,135 5,581 - - 14 Machinery, tools and equipment 5,289 1,473 85 86 15 Prepayments on vessels 211,388 72,276 - -

616,164 347,415 85 86

Financial assets16 Investments in subsidiaries - - 447,876 231,228 17 Investments in associated companies 48,938 44,822 17,944 17,944 9 Deferred tax assets 3,147 4,222 2,543 3,740

18, 22 Other receivables 40,251 51,752 - 3,000 92,336 100,796 468,363 255,913

Total non current assets 710,235 449,904 468,449 255,998

Current assets

Bunkers 1,154 1,669 - -

ReceivablesTrade receivables 15,809 14,548 - -

22 Other receivables 26,995 20,275 11,098 1,834 Receivables from affiliated companies - - 106,367 149,358 Receivables from associated companies 8,674 10,813 742 497

9 Corporate tax receivables 1,614 - 3,016 - Prepayments 7,369 10,529 - -

60,461 56,164 121,223 151,689

27 Securities 104,337 197,278 104,256 197,260

27 Cash and bank deposits 53,511 119,653 2,137 44,560

Total current assets 219,463 374,765 227,616 393,509

Total assets 929,698 824,668 696,065 649,507


34

BALANCE sHEET (usD 1,000)


LiabilitiesEquityShare capital 60,633 60,633 60,633 60,633 Reserve for hedging instruments - 882 - 93 Other reserves 588,088 492,629 404,668 270,955 Proposed dividend 31,096 52,206 31,096 52,206 JL's share of equity 679,816 606,350 496,397 383,887 Minority shareholders' share of equity 6,306 7,434 - -

19 Total Equity 686,122 613,784 496,397 383,887

Liabilities

Non current liabilities9 Deferred tax - - - -

20 Provisions 21,694 24,755 - - 21 Interest bearing debt 40,670 66,321 - -

Total non current liabilities 62,364 91,076 - -

Current liabilities21 Interest bearing debt 9,224 10,881 - - 27 Bank debt 109,253 50,000 109,253 50,000

Trade payables 10,094 5,238 8,443 6,532 Other payables 38,299 23,583 10,397 3,327

20 Provisions 6,187 4,113 - - Prepayments 6,993 1,739 - - Debt to parent company 4 80 4 80 Debt to affiliated companies - - 70,773 200,923 Debt to associated companies 798 790 798 790

9 Corporate tax 359 23,384 - 3,968 Total current liabilities 181,212 119,808 199,668 265,620

Total liabilities 243,575 210,885 199,668 265,620

Total equity and liabilities 929,698 824,668 696,065 649,507 (0.46) (0.06) 0.88 (0.00)

22 Interest bearing financial assets and liabilities23 Derivative financial instruments24 Leasing28 Mortgages29 Contingent liabilities30 Contractual commitments31 Related parties32 Events after the balance sheet date33 New accounting regulations


35

EquITY sTATEMENT (usD 1,000)

Equity statementUSD'000

Group Reserve for ResultShare Hedging carried Proposed Minoritycapital instruments forward dividend Total Interests Total

Equity 1/1 2005 60,633 2,031 340,845 40,118 443,627 6,423 450,050

Result for the year - - 208,824 - 208,824 1,591 210,415 Exchange rate adjustmentsconcerning foreign companies - - (4,834) - (4,834) (580) (5,414) Value adjustment of hedging instruments primo - (2,031) - - (2,031) - (2,031) Value adjustment of hedging instruments ultimo - 882 - - 882 - 882 Total recognised income and expense - (1,149) 203,990 - 202,842 1,011 203,852 Paid dividend - - - (40,118) (40,118) - (40,118) Proposed dividend - - (52,206) 52,206 - - - Equity 31/12 2005 60,633 882 492,629 52,206 606,350 7,434 613,784

Result for the year - - 124,382 - 124,382 1,172 125,555 Exchange rate adjustmentsconcerning foreign companies - - 1,408 - 1,408 15 1,422 Changes in minorities - - 764 - 764 (2,314) (1,550) Value adjustment of hedging instruments primo - (882) - - (882) - (882) Value adjustment of hedging instruments ultimo - - - - - - - Total recognised income and expense - (882) 126,554 - 125,672 (1,127) 124,545

Paid dividend - - - (52,206) (52,206) - (52,206) Proposed dividend - - (31,096) 31,096 - - - Equity 31/12 2006 60,633 - 588,088 31,096 679,816 6,306 686,122

Parent Company Reseve for ResultShare Hedging carried Proposed Minoritycapital Instruments forward dividend Total Interests Total

Equity 1/1 2005 60,633 1,711 182,672 40,118 285,134 - 285,134

Result for the year - - 140,489 - 140,489 - 140,489 Value adjustment of hedging instruments primo - (1,711) - - (1,711) - (1,711) Value adjustment of hedging instruments ultimo - 93 - - 93 - 93 Total recognised income and expense - (1,618) 140,489 - 138,871 - 138,871 Paid dividend - - - (40,118) (40,118) - (40,118) Proposed dividend - - (52,206) 52,206 - - - Equity 31/12 2005 60,633 93 270,955 52,206 383,887 - 383,887

Result for the year - - 164,809 - 164,809 - 164,809 Value adjustment of hedging instruments primo - (93) - - (93) - (93) Value adjustment of hedging instruments ultimo - - - - - - - Total recognised income and expense - (93) 164,809 - 164,716 - 164,716

Paid dividend - - - (52,206) (52,206) - (52,206) Proposed dividend - - (31,096) 31,096 - - - Equity 31/12 2006 60,633 - 404,668 31,096 496,397 - 496,397


36

CAsH FLOw sTATEMENT (usD 1,000)

Notes Cash flow statementUSD '000

Parent companyNotes 2006 2005 2006 2005

Result of operating income 117,443 214,069 (13,024) (16,225) 6 Depreciation carried back 27,221 25,637 8 7

25 Adjustments (58,653) (31,106) 15,705 7,618 26 Change in working capital 24,665 12,389 (93,787) 144,705

Cash flow from operations before financial items 110,675 220,989 (91,098) 136,105 Ingoing financial payments 18,584 11,921 9,463 9,238 Outgoing financial payments (12,974) (12,067) (11,170) (10,062) Cash flow from ordinary operations 116,285 220,843 (92,805) 135,280

9 Paid corporate tax (36,451) (3,891) (4,752) (3,188) Cash flow from operating activities 79,834 216,951 (97,557) 132,092

12 Purchase of vessels (225,650) (92,210) - - 15 Prepayment on vessels (139,112) (62,922) - -

Purchase of company - (1,856) - (1,856) 13 Purchase of land and buildings (7) (1,678) - - 14 Purchase of machinery and equipment (4,664) (536) (8) (38) 17 Purchase of associated companies (6,726) (38,506) - - 17 Disposal of associated companies 2,826 - - -

Sale of vessels 121,116 213,276 - - Sale of other non current assets 176 213 - - Sale of shares 770 14,012 215 14,012 Sale of land and buildings 176 294 - -

16 Increase of share capital in subsidiaries - - (219,525) (169,697) Purchase and sales of securities 92,941 (193,409) 93,005 (193,391) Dividend received from subsidiaries - - 171,400 154,050

17 Dividend received from associated companies 20,939 1,756 - - Cash flow from investment activities (137,215) (161,562) 45,087 (196,920)

Financial receivables 11,501 (39,696) 3,000 (3,000) 21 Instalment on long-term debt (28,450) (29,399) - - 21 Proceeds on raising of loan 1,142 5,833 - -

Dividend paid (52,206) (40,118) (52,206) (40,118) Cash flow from financing activities (68,014) (103,381) (49,206) (43,118)

Changes for the year in cash and cash equivalents (125,394) (47,992) (101,676) (107,946) Cash and cash equivalents at beginning of year 69,652 117,644 (5,440) 102,506 Currency adjustments on cash and cash equivalents - - - -

27 Cash and cash equivalents at the end of the year (55,742) 69,652 (107,117) (5,440)

Group


37

NoTES

1 Accounting estimates and judgments

The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported performance. Management bases its estimates on historical experience and various other assumptions and sources that are believed to be reasonable. Actual results could differ from those estimates.

JL believes the following are the significant accounting estimates and related judgments used in the preparation of its consolidated financial statements.

Critical accounting estimates and judgments

Estimated service life, scrap value and recoverable amount of vessels:

The estimated service life and scrap value of the vessels are assessed annually and adjusted if appropriate. Irrespective of indications of impairment the recoverable values of JL's vessels are determined annually based on broker’s valuations and calculated utility values. Significant changes in the estimated service life and scrap values and the result of the annual impairment test of vessels may have an impact on operating income.

According to the annual impairment test, no vessels have been determined as at risk of impairment as at 31 December 2006, and no foreseeable short term changes in essential assumptions will cause any vessel to be impaired.

Goodwill related to business combinations:

Cool Carriers AB: As of 1 January 2001 JL acquired all the shares in Cool Carriers AB, a major reefer operator. The operator activity of Lauritzen Reefers A/S was subsequently merged with the acquired business, and the combined business was named LauritzenCool AB. As of 1 January 2005, 50% of LauritzenCool AB was sold to NYK Reefers, and the company was renamed NYKLauritzenCool AB.

As of 31 December 2006 the carrying amount of goodwill amounts to USD 6.1 million, which is included in the carrying amount of investments in associated companies. The goodwill amount has been tested for impairment using the calculated utility value based on the expected future cash flow.

The cash generating unit comprises the total NYKLauritzenCool Group as it is no longer possible to separate the cash flow originating from Cool Carriers AB. The estimated future cash flow covers the period 2007 to 2013 to accommodate for the cyclical nature of the business with the addition of a residual value based on the average cash flow for the same period.

Key assumptions determined by management based on historical information and current market expectations are: An average number of vessels in operation, which is 13% below the level of 2006. An average time charter equivalent, which – on a comparable basis - is on level with 2006. An average EBITDA which is 18% above the average EBITDA for 2005 and 2006. A risk adjusted weighted average cost of capital of 8%.

The utility value exceeds the carrying amount of goodwill and other assets allocated to the cash generating unit at 31 December 2006, and no foreseeable short term changes in key assumptions will cause the carrying amount to exceed the utility value.

Quantum Tankers A/S: In 2004 JL acquired all the shares in Quantum Tankers A/S (now Lauritzen Tankers A/S), a company operating and managing product tankers. As the acquisition agreement provided for an adjustment of purchase price contingent on profits for the years 2004 to 2006, the acquisition cost has been finally adjusted by the end of 2006.

As of 31 December 2006 the carrying amount of goodwill amounts to USD 1.7 million, which is disclosed in note 10. The goodwill amount has been tested for impairment using the calculated utility value based on the expected future cash flow.

The cash generating unit comprises the commercial operation of Lauritzen Tankers A/S, i.e. excluding contribution from owned product tankers. The estimated future cash flow covers the period 2007 to 2013 to accommodate for the cyclical nature of the business with the addition of a residual value based on the average cash flow for the same period.

Key assumptions determined by management based on historical information and current market expectations are: An average of 9.1 vessels in commercial operation. An average time charter equivalent for a MR size product tanker, which is 30% below the level of 2006. An average EBITDA exceeding the average EBITDA for 2005 and 2006. A risk adjusted weighted average cost of capital of 7%.

The utility value exceeds the carrying amount of goodwill and other assets allocated to the cash generating unit at 31 December 2006, and no foreseeable short term changes in key assumptions will cause the carrying amount to exceed the utility value.

Critical accounting judgments in applying JL’s accounting policies

Leases: The Group enters into different contracts regarding chartering (leasing) of vessels. The majority of these contacts can easily be categorized as either operational or financial leases. However, some contracts require judgment as to the substance of the agreement in order to recognise and measure them in accordance with JL’s accounting policies.

Joint operations: Some vessels are operated jointly with partners. The statutes of these joint operations including global marketing agreements are individually determined together with the partners. Furthermore, some joint operations/global marketing agreements are managed by JL while others are managed by third parties. Categorising of joint operations as subsidiaries, associates or joint ventures is based on managerial judgment.


38

NOTEs (usDM)

Notes USD million2 Segment information

(a) Primary reporting format - business segments

2006 Lauritzen Lauritzen Lauritzen Lauritzen Landbased TotalBulkers Kosan Reefers Tankers activities Not allocated Group

Revenue 250.0 91.5 74.0 24.5 17.7 (0.0) 457.6Result before depreciation 77.6 33.5 (0.2) 6.4 (2.4) (14.7) 100.1Depreciation and writedowns (10.4) (13.6) (0.7) (1.8) (0.6) (0.0) (27.2)Impaiment losses - - - - - - - Profit and loss on sale of assets 16.9 18.7 9.4 0.0 (0.5) - 44.5Operating income 84.1 38.6 8.4 4.5 (3.5) (14.7) 117.4Net result in associated companies 5.7 0.8 3.2 - - - 9.7Result before tax 93.4 38.3 13.2 3.8 (3.7) (8.7) 136.3Result for the year 86.7 36.4 10.1 3.6 (3.5) (7.8) 125.6

Non current assets 248.5 265.8 65.7 122.6 4.9 2.8 710.2Including investments in associates 29.5 0.0 19.3 - 0.0 0.2 49.0Current assets 37.2 31.3 30.7 15.0 4.8 100.4 219.5Total assets 285.6 297.1 96.4 137.6 9.7 103.3 929.7Liabilities 6.6 29.8 85.0 3.2 4.8 114.1 243.6Net Assets 279.0 267.3 11.3 134.4 4.9 (10.9) 686.1

Average number of employees 36 266 179 36 223 99 839

Profit margin 33.6% 42.2% 11.4% 18.6% (19.7)% 25.7%Return on invested capital 48.1% 17.9% N/A 5.4% (61.0)% 25.8%Investments during the year 163.9 121.5 10.1 73.8 0.2 0.0 369.4Invested Capital - Year end 255.0 243.9 (2.9) 119.7 3.3 8.0 626.9Invested capital - Average 186.6 219.8 (1.6) 84.1 5.7 (2.6) 492.2

2005 Lauritzen Lauritzen Lauritzen Lauritzen Landbased TotalBulkers Kosan Reefers Tankers activities Not allocated Group

Revenue 340.7 113.5 96.3 19.3 22.0 (0.0) 591.7Result before depreciation 130.8 33.0 24.5 6.8 1.4 (9.8) 186.6Depreciation and writedowns (5.1) (12.3) (6.0) (1.6) (0.6) 0.0 (25.6)Impaiment losses - - - - - - - Profit and loss on sale of assets 23.6 9.4 20.1 - - - 53.1Operating income 149.3 30.1 38.6 5.2 0.8 (9.8) 214.1Net result in associated companies 9.6 6.2 1.8 - - - 17.6Result before tax 165.9 32.0 36.0 4.1 0.7 (7.2) 231.5Result for the year 163.7 31.6 28.9 3.9 0.3 (18.0) 210.4

Non current assets 123.9 190.4 75.6 50.6 5.4 4.0 449.9Including investments in associates 18.8 8.6 17.2 - 0.0 0.2 44.7Current assets 9.0 30.8 34.0 2.2 8.0 290.7 374.7Total assets 132.9 221.1 109.6 52.8 13.4 294.8 824.6Liabilities 13.9 27.6 97.7 2.0 4.2 65.5 210.9Net Assets 119.0 193.5 11.9 50.7 9.2 229.3 613.7

Average number of employees 38 272 157 32 120 85 704

Profit margin 43.8% 26.5% 40.1% 26.8% 3.5% 36.2%Return on invested capital 144.6% 20.1% 77.0% 11.8% 10.8% 60.5%Investments during the year 86.1 48.4 7.4 13.4 1.9 0.0 157.3Invested Capital - Year end 118.3 195.8 (0.2) 48.6 8.1 (13.1) 357.4Invested capital - Average 109.9 180.8 52.5 44.0 7.1 (11.3) 382.9

(b) Secondary reporting format - geographical segmentsJL considers the global market as a whole and no specific vessels are limited to specific parts of the world, hense only onegeographical segment applies.


39

NOTEs (usD 1,000)

Group Parent company2006 2005 2006 2005

3 Fair value changes on financial bunkers contracts

2,196 77 - -

4 Staff costs, office and fleetStaff costs include:

Wages and salaries 54,887 46,454 14,111 10,718 Pensions - (defined contribution plan) 2,558 2,283 1,061 852 Social security 1,751 1,378 41 32 Contract labour 202 211 202 211

59,398 50,327 15,415 11,814

Remuneration to J. Lauritzen A/S'Executive Management - salaries 3,142 2,852 3,142 2,852 Executive Management - pensions 108 105 108 105 Executive Management - long term employment bonus 1,708 1,015 1,708 1,015 Directors 542 326 542 326

5,500 4,298 5,500 4,298

Average number of employees 839 704 86 71

Number of employees at year-end 708 907 89 78

Management and a number of executives are members of a bonus and/or severance scheme.

5 Other sales and administrative costsTotal fees to elected auditors 404 476 168 267

Inclusive fee for services other than audit 103 244 72 193

6 Depreciation and write-downsGoodwill - - - - Patents & Rights - - - - Vessels (26,286) (24,531) - - Land and buildings (395) (400) - - Machinery and equipment (539) (706) (8) (7)

(27,221) (25,637) (8) (7)

7 Financial incomeInterest income 18,583 11,875 9,462 9,192 Realised and unrealised gains and losses on securities 3,511 - 3,511 - Realised and unrealised currency exchange gains and losses, net 51 46 697 46 Interest on receivables from subsidiaries - - 5,273 5,304 Dividend received from subsidiaries - - 171,400 154,050 Financial income 22,145 11,921 190,344 168,592

8 Financial expensesImpairment write-down of subsidiaries - - (2,721) - Interest expenses (12,974) (10,722) (7,970) (3,873) Realised and unrealised gains and losses on securities - (634) - (634) Realised and unrealised currency exchange gains and losses, net - (711) - - Interest on debt to subsidiaries - - (3,200) (5,555) Financial expenses (12,974) (12,067) (13,891) (10,062)

The fair value changes on financial bunkers contracts included in other operating costs are


40

NOTEs (usD 1,000)


9 Tax

Certain group companies are jointly taxed with the parent company, Vesterhavet A/S.

Tax in the Income Statement consist of:

Current tax (9,727) (25,027) 2,576 (5,556) Deferred tax (1,035) 3,851 (1,197) 3,740 Income tax (10,761) (21,177) 1,380 (1,816)

Tax on the result is specified as follows: Calculated 28% of result before tax (38,168) (64,846) (45,760) (39,845)

Adjustment in foreign companies deviating from 28% tax 469 1,580 - - Tax effect of: Tonnage tax 20,844 43,561 - - Non-taxable items 3,122 8,519 47,120 45,840 Currency adjustments arising from tax calculation - (13,963) - (8,315) Adjustments previous year 256 (976) 20 24 Net result in associates 2,716 4,947 - 480

(10,761) (21,177) 1,380 (1,816)

Effective tax percent 8% 9% -1% 1%

Deferred tax on the Balance Sheet:

Deferred tax 1 January 4,222 293 3,740 - Disposal of company - 127 - - Exchange rate adjustments in foreign companies (40) (48) - - Tax on result (1,035) 3,851 (1,197) 3,740 Deferred tax 31 December 3,147 4,222 2,543 3,740

Deferred tax concerns:Tangible assets 492 311 - - Liabilities 63 156 - - Taxable losses carried forward 2,592 3,755 2,543 3,740

3,147 4,222 2,543 3,740

Deferred tax, assets 3,147 4,222 2,543 3,740 Deferred tax, liabilities - - - -

3,147 4,222 2,543 3,740 Corporate tax payable can be specified as follows:

Balance 1 January 23,384 3,602 3,968 1,600 Disposal of company - (1,353) - - Exchange rate adjustments 2,086 (0) 345 - Paid during the year (36,451) (3,891) (4,752) (3,188) Provision for the year, incl. jointly taxed subsidiaries 9,727 25,027 (2,576) 5,556

(1,255) 23,384 (3,016) 3,968

Current tax, assets (1,614) - (3,016) - Current tax, liabilities 359 23,384 - 3,968

(1,255) 23,384 (3,016) 3,968

In 2005 the Danish based companies entered the Danish tonnage taxation system, the adoption of which is binding until at least2014. JL does not expect to leave the system and therefore no deferred tax provision is made on the assets or liabilitieseffected by the Danish tonnage taxation system. If, however, JL should leave the Danish tonnage taxation system there could be adeferred tax liability of up to a maximum of USD 21 million


41

NOTEs (usD 1,000)


10 GoodwillCost as at 1 January 2,027 16,153 - - Exchange rate adjustments in foreign companies - - - - Additions during the year 42 202 - - Reclassification to Investment in associated companies - (7,164) - - Disposals during the year - (7,164) - - Cost as at 31 December 2,069 2,027 - -

Write-down as at 1 January (335) (2,381) - - Exchange rate adjustments in foreign companies - - - - Write-down during the year - - - - Reclassification to Investment in associated companies - 1,023 - - Disposals during the year - 1,023 - - Write-down as at 31 December (335) (335) - -

Balance as at 31 December 1,735 1,693 - -

11 Patents & RightsCost as at 1 January - 3,300 - - Exchange rate adjustments in foreign companies - - - - Additions during the year - - - - Disposals in connection with sale of subsidiary - (3,300) - - Cost as at 31 December - - - -

Amortization and write-down at 1 January - (2,310) - - Exchange rate adjustments in foreign companies - - - - Amortization and write-downs during the year - - - - Disposals in connection with sale of subsidiary - 2,310 - - Amortization and write-down as at 31 December - - - -

Balance as at 31 December - - - -

12 VesselsCost as at 1 January 450,302 707,967 - - Exchange rate adjustments in foreign companies (5,330) (5,913) - - Additions during the year 225,650 92,210 - - Disposals during the year (148,891) (343,961) - - Cost as at 31 December 521,731 450,302 - -

Depreciation and write-down as at 1 January (182,217) (370,389) - - Exchange rate adjustments in foreign companies 5,611 4,520 - - Depreciation during the year (26,286) (24,531) - - Disposals during the year 75,513 208,184 - - Depreciation and write-down as at 31 December (127,380) (182,217) - -


Insurance sum including interest against total loss 831,875 507,875 - -


42

NOTEs (usD 1,000)


13 Land and buildingsCost as at 1 January 8,048 8,696 - - Exchange rate adjustments in foreign companies 109 (307) - - Additions during the year 7 1,678 - - Disposals due to sale of company - (1,642) - - Disposals during the year (184) (377) - - Cost as at 31 December 7,979 8,048 - -

Depreciation and write-down as at 1 January (2,467) (2,518) - - Exchange rate adjustments in foreign companies 10 50 - - Depreciation during the year (395) (400) - - Disposals due to sale of company - 319 - - Disposals during the year 8 83 - - Depreciation and write-down as at 31 December (2,844) (2,467) - -


14 Machinery, tools and equipmentCost as at 1 January 8,199 13,809 253 215 Exchange rate adjustments in foreign companies (82) 103 - - Additions during the year 4,664 536 8 38 Disposals due to sale of company (624) (5,792) - - Disposals during the year (1,832) (457) - - Cost as at 31 December 10,324 8,199 261 253

Depreciation and write-down as at 1 January (6,726) (10,232) (168) (160) Exchange rate adjustments in foreign companies 132 (117) - - Depreciation during the year (539) (706) (8) (7) Disposals due to sale of company 442 4,085 - - Disposals during the year 1,656 244 - - Depreciation and write-down as at 31 December (5,035) (6,726) (176) (168)

Balance as at 31 December 5,289 1,473 85 86

15 Prepayments on vesselsCost as at 1 January 72,276 9,355 - - Additions during the year 139,112 62,922 - - Transfers to depreciable category - - - - Cost as at 31 December 211,388 72,276 - -

16 Investments in subsidiaries2006 2005

Lauritzen Bulkers A/S, Denmark 100.0% 100.0%Lauritzen Kosan A/S, Denmark 100.0% 100.0%Lauritzen Reefers A/S, Denmark 100.0% 100.0%Lauritzen Tankers A/S, Denmark 100.0% 100.0%Lauritzen Ship Owner A/S, Denmark 100.0% 100.0%Lauritzen Tankers Shipowner A/S, Denmark 100.0% 100.0%J. Lauritzen Inversiones (Chile) Ltda., Chile 100.0% 100.0%J Lauritzen (Japan) K.K., Japan 100.0% 100.0%J. Lauritzen Singapore Pte., Singapore 100.0% 100.0%Euroamerica S.A., Argentina ** 98.0% 87.2%Segetrans Argentina S.A., Argentina 100.0% 57.9%Segetrans Peru S.A.C.* 0.0% 28.5%ShipInvest A/S, Denmark 100.0% 100.0%

USD '000 2006 2005Cost as at 1 January 490,439 356,822 Additions during the year 219,525 171,553 Transferred to associated companies - (18,968) Disposal during the year (235) (18,968) Cost as at 31 December 709,729 490,439

Accumulated impairment losses at 1 January (259,211) (261,258) Transferred to associated companies - 1,023 Disposals during the year 79 1,023 Impairment during the year ** (2,721) - Accumulated impairment losses at 31 December (261,853) (259,211)

Carrying amount at 31 December 447,876 231,228

*Sold in 2006** Sold in 2007, written down to sales price in 2006

Parent companyOwnership


43

NOTEs (usD 1,000)


17 Investments in associated companiesCost as at 1 January 60,531 3,655 18,968 - Disposal in connection with sale of company - (599) - - Transferred from subsidiary companies - 18,968 - 18,968 Additions during the year 6,726 38,506 - - Disposal during the year (1,189) - - - Cost as at 31 December 66,067 60,531 18,968 18,968

Revaluation as at 1 January 8,778 11,236 - - Disposal in connection with sale of company - (1,058) - - Exchange rate adjustments in foreign companies (416) (97) - - Dividends received (20,939) (1,756) - - Revaluations during the year 17,154 453 - - Disposal during the year (464) - - - Revaluation as at 31 December 4,113 8,778 - -

Write-down as at 1 January (24,487) - (1,023) - Transferred from subsidiary companies - (1,023) - (1,023) Write-downs during the year 3,244 (23,463) - - Write-down as at 31 December (21,243) (24,487) (1,023) (1,023)

Balance as at 31 December 48,938 44,822 17,944 17,944

Investments in associated companies comprise:Net

2006 Ownership Revenue Result Assets Liabilities Net result Equity

McKay Shipping Ltd, New Zealand * 0.0% 1,979 231 - - 113 - Chile Containers S.A., Chile * 0.0% - - - - - - K/S Danred I, Danmark 43.5% 6,101 3,853 16,072 11,344 1,676 2,067 K/S Danred II, Danmark 40.0% 1,050 (240) 33,246 26,425 (96) 2,728 Good Hope Overseas Mngt. 25.0% 15,919 188 856 129 47 220 ID Handysize 40.0% 1,746 604 839 65 242 309 K/S Danskib 34 20.0% 2,653 757 9,616 407 151 1,842 K/S Danskib 52 40.0% 3,581 1,940 16,650 12,350 776 1,720 K/S Danskib 53 40.0% 1,073 453 21,045 17,729 181 1,326 K/S Danskib 57 36.0% 96 (131) 22,284 18,625 (47) 1,317 Unigas Kosan Ltd. 50.0% 1,174 4 396 376 2 10 Sigas Kosan A/S ** 50.0% 1,375 27 - - 14 - Star Management Ltd. 30.0% - - 971 945 - 8 Maryse shipping Ltd 50.0% 4,654 22,158 - - 11,079 - HandyVenture (Singapore) PTE 50.0% 23,650 (8,065) 84,308 16,845 (4,032) 39,318 NYKLauritzenCool 50.0% 109,273 6,152 72,378 43,248 3,076 13,109

13,181 63,974 Internal profit (3,480) (21,177) Goodwill 31 December 2006 - 6,141

9,701 48,938 * Sold in 2006

Net2005 Ownership Revenue Result Assets Liabilities Net result Equity

McKay Shipping Ltd, New Zealand 49.0% 4,824 63 5,139 2,200 31 1,440 Chile Containers S.A., Chile 10.0% 1,004 - 444 216 - 30 K/S Danred, Danmark 43.5% 7,160 4,859 17,071 13,006 2,114 1,769 Good Hope Overseas Mngt. 25.0% 6,181 141 2,678 2,052 35 185 K/S Danskib 34 20.0% 1,260 (30) 10,156 1,490 (6) 1,733 Unigas Kosan Ltd. 50.0% 982 249 186 169 125 8 Sigas Kosan A/S 50.0% 1,475 17 4,360 4,237 8 61 Maryse shipping Ltd 50.0% 9,803 12,070 25,180 8,094 6,035 8,543 HandyVenture (Bahamas) Limited 50.0% 17,827 57,617 - - 28,808 - HandyVenture (Singapore) PTE 50.0% 8,943 2,386 194,641 119,437 1,193 37,764 NYKLauritzenCool 50.0% 87,234 3,524 59,946 39,813 1,762 9,583

40,105 61,117 Internal profit (22,436) (22,436) Goodwill 31 december 2005 - 6,141

17,669 44,822

** Sold in 2007

Group share of

Group share of


44

NOTEs (usD 1,000)

18 Other receivablesIn 2005 three (sublease) bareboat agreements were entered into. These agreements are treated as finance lease agreementswith maturity dates in 2010 and 2011. Reference is made to note 22 and 24.

19 EquityThe authorized and issued share capital of J. Lauritzen A/S is 29 shares of DKK 50,000 or multiples of this. All the shares are ownedby Vesterhavet A/S

20 ProvisionsIn 2006 and 2005 provisions have been recognized to cover certain onerous charter parties and technical managementagreements with a maturity from 3 to 5 years. The provisions are subject to changes in expected vessel earnings and operating costs

2006 2005 2006 2005

Provision as at 1 January 28,868 - - - Additional provision during the year 3,999 34,394 - - Used during the year (4,113) (5,526) - - Reversal of provision during the year (873) - - Provision as at 31 December 27,881 28,868 - -

Non current liabilities 21,694 24,755 - - Current liabilities 6,187 4,113 - - Provision as at 31 December 27,881 28,868 - -

21 Interest bearing debt

Mortgage on vessels - 19,933 - - Financial leasing 49,081 57,269 - - Other debt 814 - - -

49,895 77,202 - -

Balance as at 1 January 77,202 101,230 - - Disposal from sale of company - (461) - - Proceeds from loans 1,142 5,833 - - Repayments and redemption (28,450) (29,399) - - Balance as at 31 December 49,894 77,202 - - Long-term debt due for payment next year (9,224) (10,881) - -

40,670 66,321 - -

Market value 55,272 82,580 - -

The instalments for next year are specified as follows:Mortgage on vessels - 2,364 - - Debt concerning financial leasing 9,224 8,517 - -

9,224 10,881 - -

Due for payment between 1 and 5 yearsMortgage on vessels - 17,569 - - Debt concerning financial leasing 39,856 41,750 - - Other debt 814 -

40,671 59,319 - -

Due for payment after more than 5 years:Mortgage on vessels - - - - Debt concerning financial leasing - 7,002 - -

- 7,002 - -

Group Parent Company


45

NOTEs (usD 1,000)

22 Interest bearing financial assets and liabilities

2006 0 - 1 Year 1 - 5 Year > 5 Year Total Interest %Finance lease asset 9,224 39,856 - 49,081 8.0Finance lease liability (9,224) (39,856) - (49,081) 8.0Bonds and similar products 24,009 59,931 - 83,940 0.0 - 4.125Mortgages (814) - - (814) Bank Debt (109,253) - - (109,253) 5.86 - 5.87Interest rate swaps variable portion - - - - - Interest rate swaps fixed portion - - - - -

2005Financial lease asset 8,517 41,750 7,002 57,269 8.0Financial lease liability (8,517) (41,750) (7,002) (57,269) 8.0Bonds and similar products 126,654 63,810 - 190,465 1.75 - 5.5Mortgages (2,364) (17,569) - (19,933) Bank Debt (50,000) - - (50,000) 4.45 - 4.49Interest rate swaps variable portion 2,364 17,569 - 19,933 4.05Interest rate swaps fixed portion (2,364) (17,569) - (19,933) 3.45

2006 0 - 1 Year 1 - 5 Year > 5 Year Total Interest %Bonds and similar products 23,927 59,931 - 83,858 0.0 - 4.125Bank Debt (109,253) - - (109,253) 5.86 - 5.87

2005Bonds and similar products 126,654 63,810 - 190,465 1.75 - 5.5Bank Debt (50,000) - - (50,000) 4.45 - 4.49

The effective interest rates are those at the balance sheet date, and fair value of bonds and similar products is equivalent to theirstated value

The market value at the balance sheet date of the outstanding interest rate swaps entered into to cover interest rate risks of loans withvariable interest rates was USD 0.0 (2005 USD 789.8).

The fair value option (fair value through profit and loss) has been applied for JL's investments in securities, which primarily comprisebonds, as these investments are managed in accordance with an investment strategy approved by JL's Board of Directors and basedon fair value.

23 Derivative financial instruments

JL enters into derivative transactions for the purpose of hedging its exposure to foreign currency risk and bunkers price risk. JL doesnot apply hedge accounting to these transactions. In addition Forward Freight Agreements (FFA's) are used by JL in the ordinarycourse of business

Details of outstanding derivative market values at 31 December are:

2006 2005 2006 2005Foreign currency risk (5,060) (2,558) 57 (1,668) Bunkers (2,274) (78) - - Forward Freight Agreements - (1,649) - -

The fair values of financial derivative instruments are disclosed in notes 21,22 and 23. The estimated fair values of loans, associatedderivative instruments and other derivative financial instruments are estimated using appropriate market rates prevailing at the balance sheet date. These are based on rates obtained from third parties (banks, oil companies, brokers and tradinghouses). The fair value of JL's investment in bonds are based on bid prices at the balance sheet date obtained from third parties or directly from the market. The market valuations on bond related products where an active and liquid market maynot exist, are obtained by using a "best approximation" value calculated by the counterparty with whom JL has made the relevant trade.

GroupRevaluation date / Maturity date

Parent CompanyRevaluation date / Maturity date



46

NOTEs (usD 1,000)

24 Leasing

JL has entered into leases with mutually interminable lease periods. Leases can include options to renew, and some leases can alsoinclude options to purchase. Exercise of purchase options is based on individual assessment.None of the leases comprise contingent lease payments.

24a Finance Leases (vessels)

JL as lessor of vesselsLease

payment InterestCarryingamount Lease payment Interest

Carryingamount

Within 1 year 12,475 3,251 9,224 12,475 3,958 8,517 Between 1 - 5 years 44,816 4,960 39,856 49,901 8,151 41,750 More than 5 years - - - 7,088 86 7,002 Total 57,291 8,211 49,081 69,464 12,194 57,269

Fair value 49,081 57,269

JL as lessee of vesselsLease

payment InterestCarryingamount Lease payment Interest

Carryingamount

Within 1 year 12,475 3,251 9,224 12,475 3,958 8,517 Between 1 - 5 years 44,816 4,960 39,856 49,901 8,151 41,750 More than 5 years - - - 7,088 86 7,002 Total 57,291 8,211 49,081 69,464 12,194 57,269

Fair value 49,081 57,269

The parent company of JL does not have any finance leases in either 2006 or 2005.

24b Operating Leases (vessels)

At the balance sheet date JL has the following contractually committed T/C income

USD Mill.0 - 1 Year 1 - 5 Year > 5 Year 0 - 1 Year 1 - 5 Year > 5 Year

Time charter and bareboat contracts 97.8 193.8 - 41.7 88.1 -

At the balance sheet date JL has the following operational lease liabilities:

USD Mill.0 - 1 Year 1 - 5 Year > 5 Year 0 - 1 Year 1 - 5 Year > 5 Year

Time charter and bareboat contracts 149.5 368.1 114.9 126.0 290.8 89.6 Others 0.3 0.7 - 0.2 0.2 0.2 Total 149.8 368.8 114.9 126.2 291.1 89.8

The parent company of JL does not have any operating leases in either 2006 or 2005.

Number of vessels on time charter and bareboat contracts 2006 2005Bulk carriers 20 18Gas carriers 1 1Reefer vessels 15 15Product tankers 7 6

Includes the number of vessels:JL has purchase options on at the balance sheet date 13 11JL has options to extend on at the balance sheet date 13 19

2005

Group2006 2005

Group2006 2005

Group2006 2005

Group2006


47

NOTEs (usD 1,000)

2006 2005 2006 200525 Adjustments

Exchange rate adjustments (12,624) (453) 15,718 3,686 Profit on the sale of shares (784) (345) (13) 3,932 Internal profit - associated company 3,480 22,436 - - Profit and loss on sale of tangible fixed assets (43,739) (52,743) - - Changes in provisions (4,986) - - -

(58,653) (31,106) 15,705 7,618

26 Change in working capitalChange in stocks 515 (72) - - Change in receivables (2,683) 4,784 27,450 137,112 Change in trade payables 26,833 7,676 (121,237) 7,593

24,665 12,389 (93,787) 144,705

27 Cash and cash equivalents at end of yearSecurities 104,337 197,278 104,256 197,260 Including listed bonds with market rate risks (63,940) (170,465) (63,858) (170,446) Including listed bonds pledged as collateral (20,000) (20,000) (20,000) (20,000) Including shares at fair value (17,184) (3,963) (17,184) (3,963) Including shares held for sale (3,213) (2,851) (3,213) (2,851) Securities - - - - Liquid funds 53,511 119,653 2,137 44,560 Short-term debt (109,253) (50,000) (109,253) (50,000)

(55,742) 69,653 (107,117) (5,440)

USD Millions

28 MortgagesDebt for a total of : 101 20 100 - has been secured by mortgage in assets at the following book values:

Vessels 112 34 112 - Land and buildings 4 4 - - Securities 25 - 25 -

141 38 137 -

As collateral security for the finance leasing liability the following security has been provided:

Pledged bonds with Sydbank 20 20 20 20

29 Contingent liabilitiesGuarantees undertaken for debt in subsidiaries - - - 20 Guaranties undertaken for debt in associated companies 12 31 12 31 Maximum obligation in projects entered 21 12 - - Guarantees regarding newbuildings 202 130 202 130

Certain claims have been raised against JL. The judgment of the management is that the outcome of these claims will not have anymaterial impact on JL's financial position.

JL has issued certain guarantees in connection with the sale of assets.



48

NOTEs (usD 1,000)

30 Contractual commitmentsJL has entered into newbuilding contracts with a total contractual commitment of USD 822.6 million. These contracts cover thebuilding of fourteen bulkcarriers, eight gascarriers and five product tankers due for delivery in 2007, 2008, 2009, 2010 and 2011.

JL has entered into a contract for one secondhand producttanker for delivery in 2007.

JL has also contracts for specialised containers to gastankers for USD 2.8 million. These containers are due for delivery in 2007.

31 Related parties

As owners of J Lauritzen A/S the JL Foundation and Vesterhavet A/S and its subsidiaries are related parties.

Other related parties with a significant influence of the activities of J Lauritzen A/S is the company's Board of Directors and theExecutive Management.

Finally, additional related parties comprise those subsidiaries and associated companies (ref. notes 16 and 17) in which J LauritzenA/S has a controlling or significant influence. Subsidiaries and associated companies together with J Lauritzen's shareholding isshown in the Group Structure on pages 50 - 51.

Transactions with subsidiaries, associated companies and other related parties are conducted at arms length and have comprisedthe following:

Group Parent companyUSD '000 2006 2005 2006 2005

Rentals, leases and management agreements (1,104) (1,341) 4,377 3,621 Provision of share capital, payment and receipt of dividend (52,206) (40,118) (100,331) 101,844

Transactions with subsidiaries are eliminated in the group accounts in accordance with the accounting policies. There have been noother transactions with related parties other than those stated above.

32 Events after the balance sheet dateAt the time of writing there have been no events after the balance sheet date that could materially affect the accounts as presented.

33 New accounting regulations

The IASB have adopted the following new accounting standards and interpretations: IFRSs 7 and 8 and IFRICs 7 to 12. IFRS 8 andIFRICs 10 to 12 have not yet been endorsed by the EU. None of the above are compulsory for JL in the preparation of the annual report for 2006, and nor does JL expect them to have any effectfor neither 2007 nor 2008. JL expects to implement the standards and interpretations as they become effective.


49

Lauritzen Reefers A/S 100%

Lauritzen Tankers Ship Owner A/S, 100%

Lauritzen Tankers A/S 100%

J. Lauritzen A/S

NYKLauritzenCool AB50%

Handyventure Singapore Pte Ltd50%

J. Lauritzen UK Limited 100%

J. Lauritzen (Japan) K.K. 100%

J. Lauritzen Singapore Pte Ltd100%

Good Hope OverseasManagement Inc.

25%

J. Lauritzen (USA) Inc.100%

Shipinvest A/S100%

Lauritzen Bulkers A/S 100%

Zuper Logistics Private Limited

33%

Lauritzen KosanShip Owner A/S

100%

Lauritzen Kosan A/S100%

Gasnaval S.A100%

Lauritzen Kosan Shanghai Co. Ltd.

100%

Unigas Kosan Ltd50%

East Gate Shipping Ltd 58%

Star Management Associates

30%

ovERALL gRoUp STRUCTURE

Company detailsAddress J. Lauritzen A/S28, Sankt Annae PladsPO Box 2147DK-1291 Copenhagen K

Telephone: (+45) 3396 8000Fax: (+45) 3396 8001 Web: www.j-l.comE-mail: info�[email protected]

Company Registration Number (CVR)55 70 01 17

AuditorsKPMGBorups Allé 177DK-2000 Frederiksberg

Financial year: 1 January – 31 December


50

Share capital

Official name Country Capital currency Amount (1,000) Ownership %J. Lauritzen A/S Denmark DKK 430,000 -

Euroamerica S.A. Argentina ARA 5,691 98Segetrans Argentina S.A. Argentina ARA 950 100J. Lauritzen (Australia) Pty. Ltd. Australia AUD 20 100Greeden Limited Bahamas USD 0 100Labas (Bahamas) Ltd. Bahamas USD 10 100Shoreoff Invest Bermuda Ltd. Bermuda USD 12 100J. Lauritzen Inversiones (Chile) Ltda. Chile CLP 1,593,943 100East Gate Shipping Ltd. China USD 11,876 58Lauritzen Kosan (Hong Kong) Ltd. China HKD 10 100Lauritzen Kosan Shanghai Co. Ltd. China USD 0 100Owneast Shipping Limited China USD 0 100Unigas Kosan Ltd.* China USD 6 50ID Handysize A/S* Denmark DKK 1,000 40K/S Danred I* Denmark DKK - 44K/S Danred II* Denmark DKK - 40K/S Danskib 34* Denmark DKK - 20K/S Danskib 52* Denmark DKK - 40K/S Danskib 53* Denmark DKK - 40K/S Danskib 57* Denmark DKK - 36Lauritzen Bulkers A/S Denmark DKK 10,000 100Lauritzen Kosan A/S Denmark DKK 52,000 100Lauritzen Kosan Ship Owner A/S Denmark DKK 1,000 100Lauritzen Reefers A/S Denmark DKK 100,500 100Lauritzen Ship Owner A/S Denmark DKK 1,000 100Lauritzen Tankers A/S Denmark DKK 500 100Lauritzen Tankers Ship Owner A/S Denmark DKK 1,000 100Quantum Tankers A/S** Denmark DKK 500 50Shipinvest A/S Denmark DKK 1,000 100Sigas Kosan A/S* Denmark DKK 500 50

Zuper Logistics Private Limited* India INR 0 33

J. Lauritzen (Japan) K.K. Japan JPY 25,000 100Star Management Associates* Japan JPY 3,000 30Maryse Shipping Limited* Liberia USD 1 50Good Hope Overseas Management Inc.* Panama USD 100 25Handyventure Singapore Pte Ltd* Singapore USD 2 50J. Lauritzen Singapore Pte Ltd Singapore SGD 398,246 100Gasnaval S.A. Spain EUR 8,955 100NYKLauritzenCool AB* Sweden SEK 60,000 50J. Lauritzen UK Limited UK GBP 100 100J. Lauritzen (USA) Inc. USA USD 1 100

gRoUp CompANIES

* Associated company** Treated as subsidiary as JL has more than 50% of the voting rights


51

The Board of Directors and Executive Management have today discussed and approved the annual report of J. Lauritzen A/S for the financial year 2006.

The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and ad-ditional Danish disclosure requirements for annual reports. We consider the accounting policies used to be appropriate. Accordingly, the annual report gives a true and fair view of the Group’s and the parent company’s financial position at 31 December 2006 and of the results of the Group’s and the parent company’s operations and cash flows for the financial year 2006.

We recommend that the annual report be approved at the Annual General Meeting Copenhagen, 22 March 2007

mANAgEmENT STATEmENT

Executive Management

Torben JanholtPresident & CEO

Board of Directors

Bent Østergaard, Chairman

Peter Poul Bay

Vagn Rosenkilde

Per Larsen*

* Elected by the employees

Birgit Aagaard-SvendsenExecutive Vice President & CFO

Ingar Skaug. Vice Chairman

Niels Heering

Søren Berg*

Claus Pavar*


52

THE INDEpENDENT AuDITORs’ REpORT

To the shareholders of J. Lauritzen A/sWe have audited the annual report of J. Lauritzen A/S for the financial year 1 January - 31 December 2006, which comprises management statement,report by the board of directors and executive management, accounting policies, income statement, balance sheet, statement of changes in equity, cash flow state-ment and notes.

The annual report has been prepared in accordance with In-ternational Financial Reporting Standards as adopted by the EU and additional Danish Disclosure requirements for annual reports.

Management’s responsibility for the annual reportManagement is responsible for the preparation and fair pres-entation of the annual report in accordance with International Financial Reporting Standards as adopted by the EU and ad-ditional Danish Disclosure requirements for annual reports. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presenta-tion of an annual report that is free from material misstatement, whether due to fraud or error; selecting and using appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibilityOur responsibility is to express an opinion on the annual report based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual report is free from material misstatement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the annual report. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and fair presentation of the annual report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

An audit also includes evaluating the appropriateness of ac-counting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the over-all presentation of the annual report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit did not result in any qualification.

OpinionIn our opinion, the annual report gives a true and fair view of the Company’s financial position at 31 December 2006 and of the results of its operations and its cash flows for the financial year 1 January - 31 December 2006 in accordance with International Financial Reporting Standards as adopted by the EU and ad-ditional Danish Disclosure requirements for annual reports.

Copenhagen, 22 March 2007

KpMG C.JespersenStatsautoriseret Revisionsinteressentskab

Kurt Gimsing State Authorised Public Accountant

Lars AndersenState Authorised Public Accountant


53

BOARD OF DIRECTORs AND ExECuTIVE MANAGEMENT

BOARD OF DIRECTORsBent Østergaard, ChairmanPresident, Vesterhavet A/S

Chairman of the Board of Directors of:NanoNord A/SQuantum System A/S

Board member of:Royal Arctic Line A/S

Ingar skaug, Vice ChairmanGroup Chief Executive OfficerWilh. Wilhelmsen ASA

Board member of:Berg-Hansen Reisebureau ASCenter for Creative LeadershipDFDS A/SWilh. Wilhemsen ASA

peter poul Bay Management Consultant

Niels Heering Managing partnerGorrissen Federspiel Kierkegaard

Chairman of the Board of Directors of:Comlex A/SEllos A/SEQT Partners A/SJeudan A/S MRE A/SNesdu A/SNTR Holding A/SStæhr Holding A/S

Board member of:Danske Private Equity A/SOle Mathiesen A/SScandinavian Private Equity Partners A/SStig Jørgensen & Partners A/S

Vagn Rosenkilde Senior Vice President - Danfoss A/S

Chairman of the Board of Directors of:NORISOL A/SEncotec A/SCarl Andersen Motorcykler A/SErik Blacha Holding A/S

Board member of:Skako-Industries A/S

søren Berg*Project Manager, Lauritzen Kosan A/S

per Larsen*Head of Administration, J. Lauritzen A/S

Claus pavar*Senior Vice President, Lauritzen Reefers A/S

* Elected by the employees

ExECuTIVE MANAGEMENTTorben Janholt President & CEO

Chairman of the Board of Directors of:Danish Ship Owners’ Association

Board member of:Tsakos Energy Navigation Limited (TEN)A/S United Shipping & Trading Ltd

Birgit Aagaard-svendsen Executive Vice President & CFO

Board member of:Danske Bank A/S

Member of the council of Norske Veritas


54

HEAD OFFICEJ. Lauritzen A/S28, Sankt Annae PladsPO Box 2147DK-1291 Copenhagen KPhone: +45 33 96 80 00Fax: +45 33 96 80 01Telex: 15522 jlau dkE-mail: [email protected]

USAJ. Lauritzen (USA) Inc4 Landmark Square, Suite 150Stamford, CT 06901-2502USAPhone: +1 203 961 8661Fax: +1 203 964 0350Telex: 6819392 jla uwE-mail: [email protected]

SINGAPOREJ. Lauritzen Singapore Pte. Ltd.1 Harbour Front Avenue# 15-08 Keppel Bay TowerSingapore 098632Phone: +65 6275 8000Fax: +65 6275 7298E-mail: [email protected]

JAPANJ. Lauritzen (Japan) K.K. Kioicho Building 3 A, 3-12 Kioicho, Chiyoda-kuTokyo 102-0094JapanPhone: +81 3 3237 7431 Fax: +81 3 3237 7858Telex: 242 6774 aratok jE-mail: [email protected]

SPAINGasnaval, S.A.PAE Ibarrabarri, Edifico A-1Avda. Sabino Arana 18E-48940 LeioaBiscay - SpainPhone: +34 94 479 5600Fax: +34 94 416 7316Telex: 33080 GNAL EE-mail: [email protected]

CHINALauritzen Kosan Shanghai Unit 1102, Tian An Centre No. 338 West Nanjing Road Huangpu District, Shanghai CHINA 200003 Phone: +86 21 6358 0066Fax: +86 21 6358 [email protected]

UKJ. Lauritzen UK LimitedCompass House, Vision ParkOffice 226 - 227Chivers Way, HistonCambridge, CB24 9ADUnited KingdomPhone: +44 (0) 1223 257747Fax: +44 (0) 1223 257579E-mail: [email protected]

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