COLOR GROUP ANNUAL REPORT 2007 // INTRODUCTION

Annual Report 2007

COLOR GROUP ANNUAL REPORT 2007

COLOR GROUP ANNUAL REPORT 2007 // INTRODUCTION

// INTRODUCTION // HIGHLIGHTS // SOCIETY AND THE ENVIRONMENT

// DIRECTORS’ REPORT AND ACCOUNTS

Principal fi gures and Key fi guresCOLOR GROUP ASA

DEVELOPMENT OF TRAFFIC

Passengers 4 294 691 4 279 868 4 433 072 4 211 284 4 241 870

Cars 879 458 828 284 809 188 823 029 818 467

Freight units (12m-equivalents) 176 634 192 412 177 195 158 357 142 223

PROFIT/LOSS (in NOK mill.) 1) (in EUR mill.)

Revenues 4 762 4 585 4 682 3 944 3 816 598

Operating expenses -4 003 -3 726 -3 740 -3 151 -2 963 -503

EBITDA 2) 759 859 942 793 853 95

Depreciation -399 -397 -495 -367 -367 -50

Charter, leasing expenses -65 -66 -77 -74 -37 -8

Operating income before write-down/loss/gain 296 396 369 352 449 37

Gain and loss on sales, write-downs 1 8

EBIT 296 396 378 353 457 37

Net fi nancial items -124 -31 -122 -89 -107 -16

Pre-tax income 171 365 256 263 349 21

Taxes -50 -104 -87 -94 -108 -6

Net income 121 261 169 169 241 15

BALANCE SHEET (in NOK mill.)

Current assets 1 879 1 534 615 769 549 236

Fixed assets 6 741 5 073 5 699 5 521 3 374 847

Total assets 8 620 6 608 6 314 6 290 3 923 1 083

Current liabilities 1 008 842 566 595 407 127

Long-term debt 4 863 2 928 3 216 3 270 1 361 611

Deferred taxes 574 599 557 512 432 72

Shareholders’ equity 2 005 2 074 1 973 1 912 1 720 252

Total liabilities and shareholders’ equity 8 620 6 608 6 314 6 290 3 923 1 083

LIQUIDITY (in NOK mill.) / SOLIDITY (%)

Cash and cash equivalents as at 31 Dec. 3) 1 307 1 463 1 508 1 465 631 164

Cash fl ow from operations 4) 694 793 865 714 816 87

Equity ratio % 23 31 31 31 44

Net interest-bearing debt 4 955 2 950 3 082 3 017 1 130 622

EMPLOYEES / SUNDRY EXPENSES

Number of employees 5) 3 967 3 821 3 827 3 268 3 065

Costs of wages 1 409 1 296 1 303 1 102 1 053 177

Port fees 152 143 138 121 114 19

Defi nitions:

1) Translated into EURO, exchange rate as at 31 Dec. 07.

2) Operating profi t/loss before ordinary depreciation and charter expenses

3) Including non-utilised credit facilities

4) EBITDA less charter expenses

5) Including part-time employees in 2007, 2006 and 2005.

IFRS NASACCOUNTING STANDARD

CONSOLIDATED 2007 2006 2005 2004 2003 2007

The introduction of “Color Magic” and “Color Fantasy”

marks a new era in quality cruises based on a regular

sailing schedule. The launching of the SuperSpeed concept

has revolutionised a 150-year old shipping tradition and

brought Norway closer to the European continent.

Industrial renewal on this scale requires innovation, and

the will and ability to implement the plan at all levels in

the organisation.

Trond Kleivdal, Group President

’’

’’

of quality cruises on the longer

voyages”, states Kleivdal.

FUTURE-ORIENTED

ENGAGEMENT

Norwegian industry is dependent

on effi cient transport routes to

its markets. Both Norway and the

EU have stated clearly that the

increasing transport requirements

in Europe must be solved by trans-

ferring freight transport from the

roads to sea and rail transport.

“This development is particularly

important for Norway as from a

geographic aspect, we are a

peninsular in relation to the rest

of Europe. Color Line has already

registered a considerable increase

in freight. Based on our modern

ports and ships, industrial enter-

prises now have access to an

effective, intelligent and reliable

transport system which has

effi ciently reduced the distance

between Norway and the conti-

nent. We have established effi cient

motorways at sea,” says Trond

Kleivdal.

Color Line’s engagement is also

important for the shore-based

tourist industry, bringing in large

volumes of tourists who arrive by

sea with their cars onboard.

“Our ships represent a consider-

able growth potential. With the in-

troduction of SuperSpeed, popular

summer and winter destinations

particularly in Norway and Den-

mark will now be regarded as close

to hand for large groups of the

population,” points out Kleivdal.

WELL-SHOD FOR FURTHER

GROWTH

Concurrently with the introduc-

tion of new tonnage and a new

organisation, Color Line will be

focusing on the company’s human

resources.

“We must be certain that we are

professional in our operations and

in the manner in which we take

care of our colleagues. For this

reason, we wish to establish good

platforms for further develop-

ment, competence enhancement

and career plans.” Kleivdal empha-

sizes that Color Line is dependent

on a competent and motivated

staff to enable the company to

fulfi l its ambitious vision.

“We are to be the best in

Europe in the fi elds of cruise and

sea transport, and this is why we

must also have the most motivat-

ed employees.”

Kleivdal underlines that the

measures taken in 2007 and in

the fi rst six months of 2008 have

created a solid foundation that will

secure lasting values for share-

holders as well as fulfi lling the

expectations of employees, pas-

sengers and society as a whole.

“We are now in a good position

and we are well shod for further

growth. Our investments will start

to give positive results towards the

end of 2008. Now is the time to

deliver the goods!” ■

During the period

2004 to 2008,

Color Line has in-

vested almost NOK

7.5 billion on four

custom-built ships,

and on modern ports and termi-

nals in Kristiansand, Larvik, Oslo,

Hirtshals and Kiel. The world’s two

largest cruise ships with car decks,

Color Magic and Color Fantasy,

revitalised the cruise traffi c be-

tween Oslo and Kiel in the autumn

of 2007.

In the spring of 2008, the trans-

port stages between Kristiansand,

Larvik and Hirtshals in Denmark

will also be renewed through the

introduction of the new transpor-

tation concept, SuperSpeed 1 and

SuperSpeed 2.

AN INDUSTRIAL VOYAGE

These new ships and port facili-

ties mark the start of a new era for

Color Line.

“Our industry is facing major

challenges both nationally and

internationally. Following compre-

hensive analyses, we decided some

years ago to meet these challenges

with bold initiatives. We decided to

renew our tonnage and to special-

ise in quality cruises and effi cient

transport”, says Trond Kleivdal,

Color Line’s Group President.

These strategic decisions were

followed up by fi rm action. New

ships were contracted and the

older tonnage was sold at prices

that exceeded book values. In

parallel with the development of

tonnage, Color Line implemented

essential organisational changes

in 2007.

“There was a requirement for

uniting energies. We now have a

keenly focused and transparent

organisation that is well suited for

effi cient transport on the short

services and for the organisation

During the course of 2008, Color Line will be in the fi nal stages of the most ambitious

investment programme in the history of the company. A new foundation has been laid,

based on innovation and the ability to implement such a wide-reaching plan. Color Line is

now ready to fulfi l its ambitious vision: To be the best shipping company in Europe in the

cruise and transportation sectors, having a base in Norway.

D

Time to deliver the goods

COLOR GROUP ANNUAL REPORT 2007 // INTRODUCTION

4 5

Trond Kleivdal, Group President

In addition, the reorganisation

provides openings for invest-

ments in new projects, report-

ing lines are improved and

distribution of responsibility

is clearly defi ned. To sum up,

the new organisation has enabled

Color Line to consolidate its vision

to be the best shipping company in

Europe in the fi elds of cruise and

transport.

CRUISE AND TRANSPORT

As a result of the reorganisation,

the subsidiary company Color Line

was split into two main business

areas, the Cruise Division which is

handled by Color Line Cruises AS

and subsidiaries, and the Trans-

port Division handled by Color Line

Transport AS and subsidiaries. All

employees on board the ships are

employed by Color Line Crew AS.

Color Group ASA holds all the

shares in the sub-group Color Line

AS which is the parent company of

the newly established companies

Color Line Cruises AS, Color Line

Transport AS and Color Line Crew

AS.

All fi nancing and appurtenant

fi nancial activities take place in

the parent company Color Group

ASA and the owner company

O.N. Sunde AS.

EXECUTIVE MANAGEMENT

Group management of Color Line

AS comprises seven units, head-

ed by Trond Kleivdal, the Group

President.

The business area Cruise is re-

sponsible for the Oslo – Kiel service

and for Color Line Germany. The

operative management for Color

Line Cruises is located in Oslo. The

Cruise Division is headed by Knut

Hals, Group Director.

In 2007, Color Group improved its effi ciency through the reorganisation of the subsidiary

company Color Line AS. The reason behind this process was to enable the company to

operate successfully in an increasingly competitive market and at the same time be in a

position to offer quality cruises and effi cient transport.

I

Reorganisation

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COLOR GROUP ANNUAL REPORT 2007 // INTRODUCTION

6 7

Boge GulbrandsenGroup Director Strategy,

Market and Business

Development

Mette KrabberødGroup Director

Financial

Trond KleivdalGroup President

Color Line

Svein SørensenGroup Director

Color Line Marine

Laila ValdalGroup Director

Color Line Transport

Lasse Winge KristensenGroup Director

Human Resources

Knut HalsGroup Director

Color Line Cruises

Helge Otto MathisenGroup Director

Communications and

Public Relations

The business area Transport is

responsible for the Kristiansand –

Hirtshals service, the Larvik – Hirts-

hals service, the Sandefjord –

Strømstad service in addition to

Color Line Denmark, Color Line

Cargo and Color Hotel Skagen. The

operative management of Color

Line Transport is based in Sande-

fjord.

Laila Valdal is Group Director

for the Transport Division. The

other group directors are Svein

Sørensen, Color Line Marine AS,

Boge Gulbrandsen, Strategy, Market

and Business Development, Helge

Otto Mathisen, Communications

and Public Relations, Mette Krab-

berød, Financial and Lasse Winge

Kristensen, Human Resources. ■

COLOR GROUP ANNUAL REPORT 2007 // INTRODUCTION

8 9

Ships in operationColor Line is Norway’s largest and one of Europe’s leading cruise and ferry companies. The

company has a workforce of approx. 3 500 in four countries and with effect from March 2008,

operates seven ships on fi ve international services between seven ports in Norway, Germany,

Denmark and Sweden.

January February March April May June July August September October November December

M/S COLOR FANTASY

Oslo-Kiel

M/S COLOR FANTASY

Oslo-Kiel

M/S KRONPRINS HARALD

Oslo-Frederikshavn

M/S COLOR FESTIVAL

Kristiansand-Hirtshals

M/S CHRISTIAN IV

Larvik-Hirtshals

M/S PETER WESSEL

Sandefjord-Strömstad

M/S COLOR VIKING

Sandefjord-Strömstad

M/S BOHUS

Bergen/Stavanger-Hirtshals

M/S PRINSESSE RAGNHILD

Kristiansand-Hirtshals

F/F SILVIA ANA

Oslo-Kiel

M/S COLOR MAGIC

THE FLEET 2008

Year built: 2004, Aker Yards, Turku FinlandHome port: OsloTonnage: 75 027 GRTLength: 224 metresBeam: 35 metres

Draft: 6.8 metresClass: Det Norske VeritasMax. capacity: 2 700Passenger cars: 750Trailers: lane metres: 1 270

M/S COLOR MAGICYear built: 2007, Aker Yards, Turku FinlandHome port: OsloTonnage: 75 100 GRTLength: 224 metresBeam: 35 metres

Draft: 6.8 metresClass: Det Norske VeritasMax. capacity: 2 700Passenger cars: 550Trailers: lane metres: 1 270

M/S PRINSESSE RAGNHILDYear built: 1981/1982 HDW Kiel/Astilleros, Cadiz, SpainHome port: OsloTonnage: 35 855 GRTLength: 202.25 metres

Beam: 26.6 metres Draft: 6.5 metresClass: Det Norske VeritasMax. capacity: 1 515Passenger cars: 600Trailers: lane metres: 900

M/S SUPERSPEED 1Built: Aker Yards, Rauma, FinlandHome port: KristiansandTonnage: 33 500 GRTLength: 211.3 metresBeam: 26 metres

Draft: 6.5 metresClass: Det Norske VeritasMax. capacity: 1 929Passenger cars: 764Trailers: lane metres: 2 036

M/S SUPERSPEED 2Year built Aker Yards, Rauma, FinlandHome port: KristiansandTonnage: 33 500 BRTLength: 211.3 metresBeam: 26 metres

Draft: 6.5 metresClass: Det Norske VeritasMax. capacity: 1 929Passenger cars: 764Trailers: lane metres: 2 036

M/S COLOR VIKINGYear built 1985, Nakskov, DenmarkHome port: SandefjordTonnage: 19 736 BRTLength: 137 metresBeam: 24 metres

Draft: 5.64 metresClass: Det Norske VeritasMax. capacity: 1 720 Passenger cars: 350Trailers: lane metres: 490

M/S BOHUSYear built 1971, Aalborg, DenmarkHome port: SandefjordTonnage: 9 149 BRTLength: 123.4 metresBeam: 19.2 metres

Draft: 5.4 metresClass: Det Norske VeritasMax. capacity: 1 165 Passenger cars: 230Trailers: lane metres: 462

O.N. Sunde AS

O.N. Sunde AS is an investment company with

ownership interests in businesses engaged in ship-

ping, tourism, clothing, sports and leisure, property,

chemical industry and fi nancial investments. These

companies employ more than 6 000 persons.

O.N. Sunde has a 100 percent stake in Color Group

ASA which owns and operates Color Line AS. Most

of the group’s business takes place in Color Line AS,

Sunpor Kunststoff GmbH and Gresvig Holding AS.

COLOR GROUP ASA

Color Group ASA is engaged in the transport of pas-

sengers and freight, hotel operation, restaurants,

trade, entertainment and tour production. The

company has its head offi ce in Oslo and is an active

holding company for the wholly-owned subsidiary

company Color Line AS.

SUNPOR KUNSTSTOFF GMBH

This company is based in Austria, manufacturing

expanding polystyrene (EPS). This material is used

for insulation in buildings and as shock-absorbing

material for use in packaging and bicycle helmets.

GRESVIG HOLDING AS

This group comprises the business areas sports and

textiles and is one of the leading players in Norway

on the market for sports and leisure equipment

operating the chains G-Sport, Super G, Sportshuset

and Intersport. Voice Norge AS is also part of the

Gresvig Holding AS group. Voice Norge is mainly

engaged in the distribution and marketing of

private brands and other branded goods for which

the company has established exclusive distribution

in Norway through the four chain concepts VIC,

Match, Voice of Europe and Boys of Europe. ■

Group structure:

O.N. Sunde AS

Color Group ASATourism/Transport

Sunpor Kunststoff GmbHChemical industry

Alcam ASShipowning

ONS Invest AS

O.N. Sunde Eiendom AS

Gresvig Holding ASSport/Leisure

Voice Norge ASClothing distribution/Fashion

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

Highlights 2007

10 11

have been specially designed for

short cruises and adapted to tack-

le the logistic challenges of turning

around a ship in port and handling

several thousand passengers and

more than 500 vehicles in the

shortest possible time.

“Cooperating with effi cient land

organisations, we can if necessary

turn the ship around in Oslo or Kiel

in just two and a half hours. This is

impressively quick when you take

into account that the new ships

are two to three times larger than

the previous vessels and can take

almost twice as many passengers”,

explains the Captain.

AMONG THE WORLD’S BEST

Color Magic and Color Fantasy are

the world’s largest cruise ships

equipped with a car deck. From bow

to stern these ships are actually

twice the length of the Royal Palace

in Oslo and from keel to the high-

est point onboard, they are almost

as high as the Oslo City Hall. The 15

decks onboard contain everything

from the engine room and car deck

to cabins, suites, restaurants, shops,

spa and a broad range of entertain-

ment and leisure activities.

“Color Line’s ships have always

been well-run, but when you start

operating a completely new ship,

everyone is on their toes. Magic

and Fantasy can be compared

with the very best cruise ships in

the world. This creates anticipa-

tion and all crew members exert

themselves to do their very best”,

says Hansen.

NORWEGIAN FLAG AND CREW

As the ship’s master, Captain

Hansen frequently receives

positive feedback from Nor-

wegian and foreign guests

with regard to the ship and

its crew who are mainly

Norwegian or Scandina-

vian.

“To be able to operate a

ship with a Norwegian crew and

to sail under the Norwegian fl ag is

a considerable competitive advan-

tage. The fact that colleagues on

board and on shore speak the same

language contributes towards ef-

fi cient operation, but is also con-

nected with a feeling of ownership.

The crew feel a sense of ownership

to the ship and the company and

want to show that they are the best

in the world in the fi eld of short

cruises. Even the big international

cruise companies have started to

show interest in our activities to

see how we manage”, says Captain

Erling B. Hansen. ■

Just two days after

the celebrations, the

ship left on its maiden

voyage from Oslo to

Kiel with both guests

and a well-prepared

crew looking forward to a unique

experience.

“Running a cruise ship can be

compared with a giant jigsaw

puzzle where all the pieces must

fi nd their right place before every-

thing functions well. This has been

the case on board this ship right

from the start. It is all a question

of thorough planning and a real-

ly competent crew. When we left

port with a passenger complement

for the very fi rst time, every crew

member knew exactly what they

had to do”, says Erling B. Hansen,

Captain of Color Magic.

A HIGH LEVEL

When Color Line signed the con-

tract for the building of Color

Magic in May 2005, planning work

started up immediately, aimed at

putting the ship into operation

quickly, maintaining the same high

service level as on the sister ship,

Color Fantasy.

During the building period, the

Aker Yards’ shipyard in Rauma, Fin-

land, was visited on many occasions

in order to do everything possible to

make the ship even more effi cient

than its sister ship. Well in advance

of completion, a number of offi cers

and crew from the sister ship were

selected to crew the new ship.

“When you have been on board

a ship for a time, you will always

fi nd details that can be improved

in some way, particularly with re-

gard to effi cient operation”, says

Hansen, who was previously Cap-

tain on board Color Fantasy and

several other Color Line ships. As

a result of these adaptations, Color

Magic is equipped with a larger

logistics centre than on its sister

ship and one of the decks is used

for additional passenger cabins.

ADAPTED FOR SHORT CRUISES

Color Fantasy and Color Magic

The atmosphere in Kiel on Saturday, 15 September 2007 was charged with excitement

when an armada of leisure craft escorted M/S Color Magic into port. More than 150 000

spectators viewed the naming ceremony performed by the ship’s godmother Veronica

Ferres, either in the port itself or via big screens placed at different locations in the city.

J

A Magical start for Color Magic

13

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

12

Erling B. Hansen,

Captain, Color Magic

ration between Kristiansand and

Hirtshals on 13 March. SuperSpeed

2 will commence ferry operations

between Larvik and Hirtshals in

June.

DYNAMIC AND ELEGANT

The SuperSpeed ships are of mo-

dern design and have completely

new technological solutions. Com-

fort, capacity and effi ciency were

important themes when these ships

were planned. In addition, high im-

portance is attached to effi ciency

in the ports of Kristiansand, Larvik

and Hirtshals. These ships have a

fast turnaround time in port.

“SuperSpeed was created

through close cooperation be-

tween Color Line, the architect

and Aker Yards. These ships rep-

resent a high level of custom

building. No other ships can match

SuperSpeed’s combination of ef-

fi cient goods transport, comfort

and modern design”, emphasises

Laila Valdal.

She underlines that SuperSpeed

represents a large-scale long term

investment for Color Line both at

sea and ashore.

“We are building a new terminal

in Larvik and have invested in up-

grading work of the ports in both

Kristiansand and Hirtshals. In our

view, these investments are abso-

lutely necessary in order to secure

Color Line’s position on the market.

SuperSpeed is the cornerstone in

our transport sector and in com-

bination with the ferries in Sande-

fjord will ensure modern and ef-

fi cient operation for the future”.■

“SuperSpeed is the

ship of the future.

It carries a large

number of passen-

gers, cars and cargo

quickly and effi cient-

ly to the continent in an extremely

comfortable manner”, says Laila

Valdal, Group Director, responsible

for Color Line Transport AS and

godmother for SuperSpeed 1.

She goes on to explain that the

preferences of the travelling pub-

lic have changed in recent years,

particularly on the routes between

Larvik/Kristiansand and Hirtshals.

“Previously, we had a mixture of

transport and cruise guests. How-

ever, the requirement for fast and

effi cient transport between Nor-

way and the continent has shown

a steady increase. The introduction

of the SuperSpeed ferries shows

that Color Line takes guests’ re-

quirements seriously. SuperSpeed

is an innovative transport concept

which is effi cient, fast, smart and

comfortable”, says Valdal proudly.

IMPORTANT FOR

TRANSPORT AND THE

TOURIST INDUSTRY

The new SuperSpeed ships have

trebled Color Line’s freight capa-

city and the company expects a

major increase in freight volumes.

“Transferring freight from the

roads to seaborne and rail trans-

port will be an effi cient contri-

bution towards solving Europe’s

transport challenges”, says Laila

Valdal.

She points out that SuperSpeed

also represents an appreciable

growth potential for the land-

based tourist industry in Norway

and Denmark.

“For example, winter destina-

tions in Norway and the popular

tourist attractions on Jutland will

now be close at hand for Norwe-

gian and Danish tourists”, says

Valdal.

SuperSpeed 1 was put into ope-

With the introduction of the SuperSpeed ships, Color Line has renewed ferry transport

across the Skagerrak radically. SuperSpeed is a revolutionary transport concept and a

necessary investment for the future.

S

Investing in the future

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

14 15

Laila Valdal, Group Director

Color Line Transport For effi cient handling of the increased traffi c, Color Line has invested in a

completely new terminal in Larvik. The ports of Hirtshals and Kristiansand

have been upgraded, including an extension of the vehicle parking area.

Facts SuperSpeed● Length: 211 metres

● Kristiansand-Hirtshals: 3h 15min.

● Larvik-Hirtshals: 3h 45min

● Passenger cars: 764

● Max capacity: 1929

● Hazardous cargo allowed

● Trucker cabins: 54

● Effectly roll-on and roll-off

CONTINUITY AND

PREDICTABILITY

Eirik Borge explains that the com-

pany was faced with a major chal-

lenge in the spring of 2007 when

Color Line withdrew Color Travel-

ler from the service between

Larvik and Frederikshavn.

“We were left with one daily de-

parture by Peter Wessel which was

also laid up for periods. At the same

time, due to the work of extending

the ports, Color Line was obliged

to switch between Frederiks-

havn and Hirtshals. We handled

this by increasing road transport

and we are now looking forward to

the establishment of SuperSpeed

in Larvik. Two daily departures will

give us a high degree of continu-

ity and predictability and will make

it easier for drivers to plan their

driving times and rest periods in

conjunction with the departures”,

says Borge. He emphasises that

DHL is dependant on the regular

service of the SuperSpeed ferries,

even in inclement weather.

“These ships are constructed for

all year round service and we must

assume they will take Skagerrak

winters in their stride”, says Eirik

Borge with a smile. ■“For DHL Freight

Norway it is essential

that there is a well

functioning seaborne

transport system.

SuperSpeed gives

us greater fl exibility and stabili-

ty”, says Eirik Borge, CEO of DHL

Freight Norway.

He mentions several factors

which contribute towards simpli-

fying DHL’s everyday routines.

“SuperSpeed gives us four daily

departures and shorter transport

times between Norway and Den-

mark. This provides a considerable

increase in capacity and means

that we know there will always

be space for our vehicles, even in

the busy seasons. Frequent depar-

tures will probably also contribute

towards better balance in the dis-

tribution of freight, which will have

a positive impact on our working

schedule. Moreover, the new ter-

minals in Larvik, Kristiansand and

Hirtshals will contribute towards

even more rational and effi cient

freight transport on our part”, says

Borge.

AN IMPORTANT ADVANTAGE

The largest part of DHL Freight

Norway’s continental business is

conducted from its base in Lar-

vik, due to the concentration of

industry in the region. Eirik Borge

believes that SuperSpeed will

provide the region with a trading

advantage.

“We have already received in-

quiries from clients on the conti-

nent who now see the opportunity

of becoming established on new

markets”.

Borge is convinced that Super-

Speed will provide positive spin-off

effects for business, industry and

tourism in the region.

“SuperSpeed has brought us even

closer to the continent”.

With the introduction of SuperSpeed, Europe is just a short drive away. For DHL Freight

Norway the result is a distinct advantage – the SuperSpeed concept means that transport

times to and from the continent are shortened appreciably, says CEO Eirik Borge.

F

Continental pleasures

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

16 17

SuperSpeed – more than a ship. The SuperSpeed ferries will have two daily departures in each direction. Each departure is equivalent to the capacity of 14 Boeing 737 aircraft. On board the ferries there is a good selection of shops, restaurants, and lounges – everything to make a voyage across the Skagerrak a pleasant experience. Rolf Kjær, Director of newbuildings

’’’’

18 19

cost air travel, other cruise com-

panies, ferry companies and other

operators in the fi elds of holiday

and leisure.

At the same time the company

must relate to changed framework

conditions outside the control of

the group such as the continuing

high prices for oil and energy and

new tax legislation introduced in

order to meet global climate chal-

lenges.

A NEW ERA

In order to make the most of the

opportunities that lie ahead, Color

Line has invested in new ships and

concepts. New trends in holiday,

leisure and freight transport have

formed a basis for these invest-

ments. The new ships have a much

higher capacity and a higher level

of comfort than the ships they have

replaced. In order to utilize this ca-

pacity in a profi table manner, the

customer base must be extended,

new technology must be applied

and operations optimized. ■

In order to be in a position

to implement the renewal

of the company and to ope-

rate two concepts as profes-

sionally and cost effi ciently

as possible, a reorganisation

programme of Color Group was

implemented during the fi rst six

months of 2007.

TWO BUSINESS DIVISIONS

In the reorganisation process, the

subsidiary company Color Line

was divided into two divisions:

transport and cruise. On the le-

gal side, the group structure was

changed by means of a de-merger

of Color Line AS which, following

the restructuring process became

the parent company of Color Line

Cruises AS, Color Line Transport

AS and Color Line Crew AS. All sea-

going personnel in the group are

employed in the latter company.

In practice, the reorganisa-

tion means that the business

area cruise is responsible for the

Oslo-Kiel cruise service while the

business segment transport is

responsible for the Kristiansand

– Hirtshals, Larvik – Hirtshals and

Sandefjord – Strømstad services.

Cruise and transport take care of

the operative management in Oslo

and Sandefjord respectively.

A CHANGE IN THE

COMPETITION PATTERN

The background for the decision

to restructure the group is the fact

that competition and customers

requirements and anticipations

have changed dramatically in just

a few years. In the tourist market,

Color Line is competing with low

From December 2004 until May 2008, Color Line will have invested NOK 7.5 billion in

new ships, ports and concepts. This initiative implies specialization in effi cient transport

systems on the short routes and high quality cruise entertainment on the long routes.

I

Cultivating Concepts

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

There will still be gaming machines onboard ships

The new regulations represent a tightening up

of the rules and lay down specifi c requirements

for ships offering gaming machines. The aim

of the new act is to secure satisfactory public

control in order to prevent social problems, at

the same time avoiding foreign registration of

Norwegian ships. The new regulations are also

intended to prevent ship traffi c, established

mainly for gambling purposes.

The Inspectorate of Lotteries and Founda-

tions has prepared draft regulations covering

the type of gaming that would be allowed on

board ships- The draft has been distributed

for consultation by the Ministry of Culture and

Ecclesiastica. The new regulations may come

into force from 1. July 2008.

In October 2007 the Ministry of Culture

and Ecclesiastica issued new regula-

tions governing gaming machines on-

board ships. The new regulations re-

quire that ships that have gaming

machines onboard must operate regular

all-year round services between Norwe-

gian and foreign ports. The ships must

also have freight capacity for the large

scale transport of goods and vehicles.

20 21

COLOR GROUP ANNUAL REPORT 2007 // HIGHLIGHTS

We can now offer a choice selection of popular mountain destinations to a large market.Simen Bjørgen, The mayor of Lom

’’’’

Five million guest days

In 2007, Color Line brought in about

5 million guest days to the land-based

tourist industry in Norway. There is

also additional spending by foreign

tourists travelling by Color Line ships

who go ashore in Norway. 2008 will

be the fi rst complete year in which

both Color Fantasy and Color Magic

are in operation and it is expected that

German tourists travelling by these

ships will spend about NOK 750 mil-

lion in Norway. This is an increase of

more than 75 percent compared with

2004 which was the last complete

year of operation without the new

ships.

“A motorway” to Lom

At the food and tourist fair Grüne Woche in Berlin, the mayor of Lom, Simen

Bjørgen said that SuperSpeed is important and that the region will work

actively to attract round trip passengers to plan their route to include Lom

and Gudbrandsdalen when travelling from east to west.

“We have scenery, we have history and we can offer a wide range of

attractions. It is now up to the food and tourist industry in the region to take

an initiative”, said the mayor to Aftenposten. Bjørgen is of the opinion that the

tourist industry and other industries in Gudbrandsdalen will certainly benefi t

if passengers are encouraged to visit inland Norway after they arrive at the

ports of Larvik and Kristiansand.

A short journey to the ski slopes for 25 million Danes and Germans

In 2007, Color Line brought in

several hundred thousand guests

heading for the major ski resorts

in south Norway. in 2008 the new

SuperSpeed ships will represent a

considerable growth potential for the

important winter destinations which

will now be considered close to hand

for large groups of the population in

Denmark and Germany.

Spin-off effects in Larvik

The establishment of a new port in

Larvik for SuperSpeed 2 will have

major spin-off effects both in the port

and for the tourist industry in the

region. The SuperSpeed ferries have

no cabins and all overnight stays

will therefore be ashore. Moreover,

the concept represents effi cient and

regular logistics solutions to and

from the continent which will benefi t

business and industry in the entire

region.

The important round trip market

The Norwegian round trip market

represents approx. 2 million arrivals

each year and total holiday spending

of approx. NOK 15 billion. The intro-

duction of SuperSpeed will open up

one of the most important routes to

Hordaland and inner Rogaland from

Kristiansand through Setesdalen.

In this way Kristiansand will be the

gateway to west Norway.

Edmund H. Utne,

Director of Hotel Ullensvang, Hardanger

COLOR GROUP ANNUAL REPORT 2007 // SOCIETY AND THE ENVIRONMENT

“Color Line has developed into one of Europe’s leading cruise

ferry companies. The company operates at the intersection of

transport and tourism and plays an important part in bringing

foreign tourists into Norway”

Extract from the Government’s strategy for environmentally friendly growth of the maritime industries.

Society and the environment

’’

22 23

COLOR GROUP ANNUAL REPORT 2007 // SOCIETY AND THE ENVIRONMENT

24 25

Sold ships for more than NOK 1 billion in 2007In connection with the fl eet renewal

programme, Color Line sold four

of it’s ships in 2007. The market for

older tonnage was good in 2007 and

these sales brought in a total of more

than NOK 1 billion. All the ships were

sold above book value.

Kronprins Harald was sold to Irish

Ferries, Peter Wessel to MSC (Medi-

terranean Shipping Company) and

Silvia Ana was sold to Buquebus.

Finally, Color Festival was sold to

Corsica Ferries.

EngagementsThe employees on board Color Line’s

new ships have attended either the

cruise school or the SuperSpeed

school. In addition to providing

basic knowledge on Color Line and

its fl eet, the curriculum includes

“engagement” which is Color Line’s

core value. The objective is that

engaged employees are to contribute

towards the guests’ enjoyment so that

they want to repeat the experience.

An effi cient junctionHirtshals is a junction for traffi c be-

tween the Continent and Norway,

served by a four lane motorway and

rail connection leading right into the

port. In 2008 this port will be able to

handle more than 23 000 passengers

daily – equivalent to more than 156

full Boeing 737 aircraft.

A new turn-around proce-dure gave a cleaner portIn 2005, an investigation showed that

Color Viking’s propellers raised up sludge

from the sea bed in Sandefjord port. As a

result of this investigation, Color Line re-

vised the turn-around procedure by using

less engine power and by turning the ship

around further out in the port where the

water is deeper. A new investigation im-

plemented by Den Norske Veritas in 2007

shows that this has had a positive effect:

“No connection is shown between

the departures of Color Viking and an

increase in particle volume in waters in

port. It can therefore be concluded that

the implemented measure has had a

positive effect”.

The show with the largest audienceEvery evening at 7 pm and 9 pm

shows are performed in the show

lounge on board Color Magic and

Color Fantasy. The show programme

is changed in each direction, south-

bound and northbound. The lounge

has more than 500 seats and dur-

ing the course of the year, each of

the two shows are seen by approx.

200 000 guests – the largest audi-

ence of any performance in Norway.

Innovative and environ-mentally friendly“SuperSpeed is an innovative and en-

vironmentally friendly concept. It is

particularly gratifying that Color Line

has taken this wide-reaching initiative

in Norway. This is where we can be

best in competition with other coun-

tries”.

This is a quotation from a speech

by Dag Terje Andersen, the Minister

of Trade and Industry during the

foundation stone ceremony for the

new terminal at Revet in Larvik.

A popular workplaceDuring the course of the next three years, Norwegian shipowning companies will require

almost 4 000 new seamen. In order to meet this requirement, Maritime Forum started

up a major recruiting campaign aimed at encouraging more young people to choose a

career at sea. One of the campaign measures is the website www.ikkeforalle.no which

presents different professions at sea and the different shipowning companies.

Despite the keen competition for employees in the maritime sector, Color Line receives

considerably more applications then there are vacancies. On Maritime Forum’s

recruiting pages, the presentation of Color Fantasy is the most visited feature of all and

when the sister ship Color Magic was to be manned, 1 500 to 2 000 applications were

received despite the fact that very few jobs were advertised externally.

Color Line is a popular employer onshore as well. When Color Line advertised the

fi rst 20 jobs at the new customer centre in Larvik, more than 200 applications were

received.

Thank you for the gift!“Thank you for the gift Color Line!

We will do our utmost to utilize the

potential that SuperSpeed repre-

sents for industry and tourism in our

region”. This quotation is from a

speech by Erik Haatvedt, mayor of

Tinn municipality at the laying of the

foundation stone for the new termi-

nal at Revet in Larvik.

“In recent years the Norwe-

gian Tourist Industry has become

much more profi cient in working

together and in combining travel,

overnight stays and attractions”,

says Tuftin.

PRECISE MARKET

INFORMATION

The Color Magic naming cere-

mony was the initial step in the

Optima Germany project. However,

the project itself started in 2006.

One of the most important aims

of the pilot project was to obtain

precise factual information on the

German tourist market so that the

marketing of Norway could be as

effi cient as possible.

“With regard to what the Ger-

man market wants, we have now

progressed from guesswork to

knowledge so that jointly we can

build up and spread knowledge

of Norway in Germany and apply

effi cient marketing measures on

the market emphasises Tuftin.

MAKING NORWAY EASILY

AVAILABLE

When it comes to focusing on Nor-

way, Tuftin believes that Color Line

plays a very important part.

“There is no doubt that Co-

lor Line’s engagement in both

the new cruise ships to Germany

and the SuperSpeed concept be-

tween Norway and Denmark is an

extremely important factor for the

fl ow of tourists. These ships con-

tribute towards making Norway

easily accessible and this is one

of the most important factors

for increasing tourism”, says

Tuftin. ■

The event was co-

vered by no less than

7 German TV chan-

nels and 160 accredi-

ted journalists. A total

of NOK 15 million was

invested in this event which was

attended by, among others, Oslo

City, Fjord Norway, The Export

Council for Fish and numerous

other Norwegian organisations

and companies. The campaign is

part of the co-operation program-

me Optima Germany. The aim of

the project is to optimize market

communications based on Norway

as a branded product and to serve

as a new tool for product develop-

ment and host development in the

tourist industry in Norway.

Innovation Norway, Color Line

and other players in the tourist in-

dustry have agreed on the objec-

tive of increasing the number of

guest days for German tourists

in Norway by 100 000 each year

in the years ahead. From the time

Color Magic’s sister ship, Color

Fantasy was put into operation

on the Oslo – Kiel service in 2004,

the number of German passen-

gers has increased by about 50

percent. The potential is much

greater however. Germany is one

of the most important tourist

markets for Norway. Despite this,

Norway’s market share of foreign

travel from Germany is less than

1 percent.

AN ENORMOUS POTENTIAL

“This is not nearly enough in re-

lation to the enormous potential

represented by this market”, says

Per-Arne Tuftin, director of tou-

rism in Innovation Norway. One

of the most important criteria for

success in attracting more tourists

to Norway is a co-operation

constellation between tourist en-

terprises.

The naming ceremony for M/S Color Magic in Kiel on 15 September 2007, attended by

almost 150 000 people did not just mark the start-up of the operation of a brand new ship

between Norway and Germany. It also represented the most comprehensive Norwegian

marketing campaign in Germany in 2007.

T

Spin-off effects for tourism in Norway

COLOR GROUP ANNUAL REPORT 2007 // SOCIETY AND THE ENVIRONMENT

26 27

Political aims

Moving more goods traffi c from the roads to

seaborne transport is a political objective both

in Norway and in the EU. In 2007, Color Line

increased its total capacity for the transport of

passengers and goods. Both the SuperSpeed fer-

ries which take large quantities of freight from

the roads and the company’s cruise ships which

are equipped with spacious trailer and container

decks contribute towards this political aim.

A systematic charting of Color Line’s dis-

charge to sea and air took place last year. The

company is now well prepared to introduce fur-

ther environmental protection measures in the

years ahead. The company works to ensure that

all its activities have the least possible impact

on the environment on land, at sea and in the

air. This work takes place in close co-operation

or understanding with the authorities, the clas-

sifi cation company, research environments and

environmental organisations.

TRIPLED

The SuperSpeed ferry can accept three times

as many trailers as the ships they are replacing.

Based on a fully loaded ship, the CO2 discharge

per vehicle will be halved on the voyage from

Kristiansand to Hirtshals. Discharge from the

shopping centre, restaurants, entertainment

events and cabins is included. ■

formance in the operation of the

ships is registered in an electronic

non-conformance system (TQM)

which the ships and the land based

organization have access to. In this

system the non-conformance is

registered and deadlines are given

for the implementation of correc-

tive measures and in particular

who is responsible for implement-

ing these measures.

“In the case of minor non-

conformance, this can usually be

corrected onboard. If this is not

possible, the non-conformance

is taken over by the shore based

offi ce which will implement neces-

sary measures. In all cases, we look

for the cause of the non-conform-

ance and establish good solutions

on a permanent basis”, says the

Safety Manager.

ELECTRONIC

PREPAREDNESS SYSTEM

In order to strengthen prepared-

ness even further, Color Line is

in the process of installing a new

preparedness system (Crisis Issue

Manager). This is an effi cient

electronic system for use in

connection with warnings and

measures in the case of serious

occurrences and operational

faults.

“In the case of serious occur-

rences and operational faults it is

essential to involve the right per-

sons as quickly as possible and to

ensure that all those involved are

notifi ed immediately. Should an

operating fault lead to cancellation

or delay of a departure it is impor-

tant that the right people at the

port of arrival and in Color Line’s

administration are notifi ed so

that the situation can be handled

correctly”, says Hansen.

About 80 persons who all play

key parts in relation to the pre-

paredness plans at sea and at

shore are linked up to the web

based preparedness system which

also handles notifi cation by e-mail,

sms and speech messengers to all

those involved.

“For example key personnel

who are called out by the system

and requested to muster at a spe-

cifi c location, may reply by mobile

phone stating when they can be

present. All information is auto-

matic and is currently updated in

the preparedness system. In this

way, all those with access to the

system in a preparedness situation

will have an overview of who has

done what and who will be present

and where”, says Arild Hansen. He

goes on to state that in 2007 Color

Line has also introduced a new

electronic chemical register on all

ships. This system is a tool for the

control of all chemicals on board

the ships. ■

Color Line has a

long tradition of be-

ing one of the fi rst

to install equipment

for increased safe-

ty. Some years ago,

Color Line was the fi rst shipowning

company in the world to install

watertight barriers on car decks.

Detectors are installed in all

cabins and in all zones on all the

ships in the fl eet. Electronic moni-

tors on the bridge provide the

duty offi cers and the Captain,

who bears the responsibility for

safety onboard, with an overview

of the entire ship. In addition, all

crew members are drilled in safety

routines by means of practices at

least every other week.

GOOD SAFETY SYSTEMS

“The physical safety devices on

board are extremely reliable and

all crew members are trained in

safety procedures. However, it is

equally important to have a basis

in good systems and standards

that ensure that all safety assign-

ments are carried out correctly”,

says Safety Manager Arild Hansen

in Color Line Marine.

The basis for all safety work

onboard Color Line ships are the

international ISM-code and ISPS-

code which require shipowning

companies to establish a manage-

ment system which can be docu-

mented and verifi ed. Based on

these codes, safety manuals have

been prepared for each individual

ship. These cover all aspects of

safety on board. Procedures are

based on the ISM- and ISPS-codes

and are revised each year on four

levels: by the Captain on board,

the safety division in Color Line

Marine, the Shipping Directorate

and Det Norske Veritas (DNV).

REGISTRATION OF

NON-CONFORMANCE – AND

APPROPRIATE ACTION

In daily operations, any non-con-

Color Line gives priority to safety before all else. All the ships in the fl eet have their own

safety offi cers, and onshore the safety division in Color Line Marine ensures that safety

standards and systems are always updated and are complied with.

C

Safety before all else

COLOR GROUP ANNUAL REPORT 2007 // SOCIETY AND THE ENVIRONMENT

28 29

long term framework conditions

for Color Line’s operations inas-

much as the Government believes

it is important that subsidies are

balanced, that the net wages sys-

tem is continued through the intro-

duction of a tax scheme for ship-

owning companies modelled on

the equivalent European Scheme.

VALUABLE EXPERIENCES

The process with regard to the tour-

ist industry strategy is similar to the

maritime strategy and the require-

ments of the tourist industry have

to a great extent been heeded.

Strengthening the building up of

competence and providing favour-

able fi nancing schemes linked to in-

novation and creativity has served

to increase the feasibility of raising

the quality of products and services

to a level that will satisfy internation-

al market requirements. There is a

proposal for establishing a national

quality assurance scheme for tour-

ism in co-operation with the indus-

try. A new investment fund totalling

NOK 2.2 billion is to be established,

and tourism will be one of the high

interest areas with particular em-

phasis on projects with a network

dimension. This is in line with Color

Line’s tourist strategy. Subsidies

for brand building and marketing

of Norway as a tourist destination

have been strengthened. In the

Government budget for 2008, sup-

port for the marketing of Norway

was increased by NOK 15 million

up to NOK 215 million in 2008. This

means that support has been dou-

bled in the course of three years.

A separate section is to be estab-

lished in the Ministry of Trade and

Industry with special responsibility

for tourist policy, and co-operation

between the tourist industry and

the authorities is to be formalised

in the same manner as the mari-

time sector, through the Marut

organisation. ■

Both “a steady

course – the Govern-

ment strategy for

e nv i ro n m e n t a l l y

friendly growth in

the maritime indu-

stries” and “valuable experiences

– a national strategy for the tourist

industry” have an effect on the long

term framework conditions for Color

Line, one of Norway’s largest players

in both these segments.

STABLE AND COMPETITIVE

FRAMEWORK CONDITIONS

Proper management of Color

Line’s considerable investments in

new ships, concepts and infrastruc-

ture is conditional upon stable and

competitive framework conditions.

“The Government’s two strate-

gies for tourism and the maritime

industry respectively received

wide support in the Storting and

paved the way for long term and

comptetitive framework condi-

tions for Color Line” says the

Group Director for Communication

and Public Relations, Helge Otto

Mathisen.

“A STEADY COURSE”

The maritime strategy mentions

Color Line in particular: Color

Line AS has developed into one of

Europe’s leading cruise ferry com-

panies. The company operates in

the intersection between trans-

port and tourism and plays an

important part in bringing foreign

tourists into Norway.

Color Line is also mentioned in

the section “from road to sea”. If

more freight is to be seaborne the

infrastructure must be developed

to ensure an effi cient link-up be-

tween ports, roads and rail (inter-

modality). In this connection the

SuperSpeed concept is highlighted

as an important example of inno-

vation: With high freight capacity

and short turn around times in the

ports, Color Line has extended the

motorways on both sides of the

Skagerrak and has shortened tra-

velling time considerably.

“Steady course” will affect the

In 2007 the Government launched national strategies for the marine industries and the

tourist industry. Both shipping and tourism are included as two of the Government’s fi ve

priority industries in the Soria Moria declaration. These strategies focus on increased

value creation, profi tability and growth and set out clearly how the Government wishes to

achieve this aim.

B

Clear national strategies for shipping and tourism

New important portal for Norwegian tourist and travel companies

The new platform which is to be put into opera-

tion in 2009 will be a future oriented tool which

will contribute towards Color Line achieving its

target to be Europe’s best shipowning company

in the fi elds of cruise and transport. The new plat-

form will however also provide spin-off effects

in relation to the land based tourist industry.

Via the new portal, customers will be able to

reserve tickets for complete packages as is the

case today, but in addition, they will be able to

compose their holiday travel in detail and pay

for everything on the same site. Through the

new booking system, many Norwegian land

based tourist enterprises will have a unique

opportunity of reaching out to the Eu-

ropean tourist market in a business-

like and cost-effi cient manner. ■

After several months of planning, Color

Line selected the Group’s new booking

and Internet system in December

2007.

COLOR GROUP ANNUAL REPORT 2007 // SOCIETY AND THE ENVIRONMENT

30 31

Helge Otto Mathisen,

Group Director, Communications

and Public relations

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

Directors report and Financial statement

32 33

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

34 35

ent weather. The price of bunkers

was also higher in 2007 than in

the preceding year. Net fi nancial

items for the Group changed from

– NOK 31 million in 2006 to – NOK

124 million in 2007. The difference

is mainly due to positive results re-

lated to fi xed interest rate hedging

agreements and other currency/

derivative instruments, in addition

to increased fi nancing expenses in

connection with the renewal of the

fl eet.

The accounts have been closed

with a pre-tax result of NOK 171 mil-

lion and a result after tax of NOK

121 million. The equivalent fi gures

for 2006 were NOK 365 million

and NOK 261 million.

The parent company Color

Group ASA recorded a pre-tax re-

sult of NOK 29 million compared

with NOK 240 million in 2006. The

result after tax is NOK 21 million

in 2007 compared with NOK 173

million in 2006. The Directors pro-

pose that the profi t be transferred

to other equity.

At yearend, distributable equity

in the parent company totalled

NOK 598 million. For 2007, the

parent company will receive an

intercompany contribution from

the owner company in the amount

of NOK 22 million.

FINANCIAL MATTERS

Balance sheet and fi nancing

The Group focuses on long term

fi nancial fl exibility of action. In

2007, Color Group ASA extended

its bond loan COLG05 (maturing

in 2012) in the amount of NOK 123

million. The Groups’ bond loans are

registered on the Oslo Stock Ex-

change. As at 31 December 2007,

the outstanding amount in bond

loans totalled NOK 1 412 million. In

connection with the building of the

new terminal at Revet in Larvik,

Larviksterminalen AS (a subsidiary

company of Color Line Transport

AS) has established a 10 year draw-

ing rights facility with a 20 year

payment profi le in the amount of

NOK 240 million.

In 2005, Color Line AS con-

cluded an agreement with Aker

Finnyards Inc. for the building of a

cruise ferry which was delivered in

September in 2007 at a contract

price of approx. EUR 325 million.

A contract was also concluded for

the building of two Ro/Pax Super-

Speed ships at a contract sum of

approx. EUR 126.7 million per ship.

The ships are to be delivered dur-

ing the fi rst and second quarter of

2008 respectively. These ships are

fi nanced for approx. 80 percent

of the contract sum, maturing 12

years from date of delivery, with a

profi le as a 15 year loan.

As at 31 December 2007 the

Group’s balance totalled NOK

8 620 million. This represented

an increase of NOK 2 013 million

compared with 2006. The change

is mainly attributable to the effect

of the takeover of M/S Color Mag-

ic and the sale of M/S Kronprins

Harald and F/F Silvia Ana. As at

31 December 2007 shareholders’

equity totalled NOK 2 005 million

compared with NOK 2 074 mil-

lion in 2006. Equity ratio was ap-

prox. 23 percent compared with

approx. 31 percent in 2006. In its

loan agreements, the Group has

commitments linked to liquidity,

equity and debt servicing ratio. All

commitments were fulfi lled as at

31 December 2007.

Fleet planning

In connection with the renewal

programme for the fl eet and the

discontinuation of the Bergen/

Stavanger – Hirtshals service, M/S

Kronprins Harald, M/S Peter

Wessel, F/F Silva Ana and M/S Color

Festival were sold during the course

of 2007. M/S Kronprins Harald and

F/F Silvia Ana were handed over in

2007 and M/S Color Festival and

M/S Peter Wessel are to be handed

over in 2008. All ships were sold or

sales agreed at a gain in relation

to book value. The sales sums are

as follows: M/S Kronprins Harald:

EUR 43.6 million, M/S Peter Wessel

EUR 25 million, F/F Silvia Ana USD

16 million and M/S Color Festival

EUR 49 million. M/S Kronprins

Harald and F/F Silvia Ana were de-

livered in 2007 providing a book

value gain of approx. NOK 35 mil-

lion.

As a result of the discontinua-

tion of the West Coast Service, M/S

Prinsesse Ragnhild was transferred

to the Oslo – Hirtshals service.

Cash Flow

In 2007 the Group’s cash fl ow

from operational activities totalled

NOK 781 million. Net cash fl ow

from investing and fi nancing ac-

tivities totalled –NOK 802 million.

The Group’s total equity reserve,

including granted drawing rights

and liquid securities totalled ap-

prox. NOK 1 307 million as at 31

December 2007. Ordinary planned

instalments on the Group’s interest

bearing debt to credit institutions

in 2008 are approx. 336 million.

The fi nancial risk situation

The Group is exposed to foreign ex-

change risk due to fl uctuations in

NOK against other currencies, par-

ticularly USD, EUR and DKK. The

Group is also exposed to interest

risk and fl uctuations in the price

of bunker products. Color Group

practises an active fi nancial risk

ABOUT THE GROUP

Color Group ASA is the parent

company of Color Line AS. Color

Line AS is Norway’s largest, and

one of Europe’s leading cruise and

transportation companies. Color

Line offers market oriented and

profi table tourist and transport

services.

A reorganisation of Color Group

was implemented in 2007. The

subsidiary company, Color Line

was split into two main operative

divisions, the cruise division ope-

rated by Color Line Cruises AS

and subsidiary companies and the

transport division which is hand-

led by Color Line Transport AS

and subsidiary companies. All sea-

going employees in the Group are

employed by the newly established

company Color Line Crew AS. The

reorganisation was implemented

by means of a de-merger of Color

Line AS, with subsequent assign-

ment of shares in order to achieve

the present day group structure.

Color Group ASA own all the

shares in the sub-group Color Line

AS which is the parent company of

the newly established companies

Color Line Cruises AS, Color Line

Transport AS and Color Line Crew

AS.

The business area cruise is

responsible for the Oslo-Kiel

service, the Oslo-Hirtshals service

and Color Line Germany. The ope-

rative management of Color Line

Cruises is in Oslo.

The business area transport is

responsible for the Kristiansand

– Hirtshals service, the Larvik

-Hirtshals service, the Sandefjord

– Strømstad service and Color Line

Denmark, Color Line Cargo and

Color Hotel Skagen. The operative

management of Color Line Trans-

port is in Sandefjord.

Major changes are taking place

in European tourism and transport.

Color Line anticipates future growth

and further segmentation of the two

markets, cruise and transport. Cruise

offers a wide scope of activities and

entertainment on board where the

ship itself is the actual destination.

Transport offers a cost effi cient and

fast transport and cargo concept. By

focusing on high quality cruises on

the longest voyages and effi cient

transport services on the short voy-

ages, Color Line is well equipped to

meet future challenges. The number

of guests in 2007 was approx 4.3

million, a fi gure that is almost un-

changed compared with 2006. The

composition of tonnage differs in

2006 with M/S Color Traveller (re-

turned following the end of the

charter period in December 2006)

operating on the Larvik – Hirtshals

service, in addition to high capacity

on the Oslo – Kiel service from Sep-

tember 2007 with the launching of

M/S Color Magic and the phasing

out of M/S Kronprins Harald. Utilisa-

tion of freight capacity was higher in

2007 than in 2006. The Group car-

ried approx. 180 000 freight units (12

metre equivalents) in 2007.

In 2007, the Directors decided to

discontinue the West Norway ser-

vice. The fi nancial result for the West

Norway line had developed nega-

tively, primarily due to increased

operating costs in the form of the

signifi cantly higher price for bunkers,

the recent institution of NoX-tax and

an increase in sailing schedule inter-

ruptions due to inclement weather

involving many more cancellations

than anticipated.

PROFIT AND LOSS ACCOUNT

Changes in

accounting principles

Color Group ASA is a Norwegian

public limited company with its

head offi ce in Oslo, which up to and

including the year 2006 has pre-

sented its accounts in accordance

with NAS (Norwegian Accounting

standards). The consolidated ac-

counts for Color Group for the ac-

counting year 2007 with compara-

ble fi gures for 2006 and (balance

sheet) 2005 are submitted in ac-

cordance with IFRS (International

Financial Reporting Standards).

In connection with the switch to

IFRS the opening balance as at 1

January 2006 for Color Group has

been revised. The total effect for

the Group at the time of transfer

to IFRS was a negative charge on

equity in the amount of NOK 51.1

million.

Result for the Group

Operating income including gain

on the sale of capital acquisitions

totalled NOK 4 762 million in 2007

compared with NOK 4 585 million

in 2006. In 2007 the Group record-

ed an operating income before de-

preciation and charter expenses

of NOK 759 million compared with

NOK 859 million in 2006. Opera-

ting income in 2007 totalled NOK

296 million compared with NOK

396 million in 2006.

The fi nancial result for Color

Group ASA in 2007 was weaker

than the preceding year. The re-

duction is primarily ascribed to

non-recurring expenses in connec-

tion with the delivery of new ships

and the winding up of the Bergen/

Stavanger - Hirtshals service. Ope-

ration during the fi rst six months

of the year was also affected by

an extraordinary interruption in

operation of the Larvik – Hirtshals

service, lasting approx. one month

in addition to several cancellations

early in the year due to inclem-

Director’s report 2007COLOR GROUP ASA

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

36 37

creased total annual capacity for

the transport of passengers and

goods. With the introduction of the

SuperSpeed ferries, more goods

will be moved from the roads to

seaborne transport. This is a de-

clared political aim both in Norway

and in the EU. Color Line’s cruise

ships have spacious trailer and

container decks and combine

holiday and leisure activities in

parallel with large seaborne freight

capacities between Norway and

Germany.

Cost - and environmentally ef-

fi cient solutions have been imple-

mented in co-operation with leading

technological environments such

as Aker Yards, the marine engine

manufacturer Wärtsilä, Marine Tek

in Trondheim and Det Norske Veri-

tas. Replacing ships that are more

than 20 years old is in itself im-

portant for the environment. New

ships are environmentally effi cient,

they have effi cient hull designs and

modern propulsion machinery.

Guidelines for the operation of

the SuperSpeed ferries are stricter

than the requirements laid down

by Norwegian and international

authorities. For many years, Color

Line has used bunkers with a low

sulphur content and has imple-

mented a modern system for the

sorting of waste at source. In ad-

dition, the Company makes every

effort to reduce harmful discharge

to the air. This work takes place in

co-operation with, or in close un-

derstanding with authorities, the

classifi cation company, research

environments and environmental

organisations.

In 2007 Color Line has system-

ati-cally chartered the company’s

discharge to sea and air and is now

well prepared to introduce fur-

ther environmental measures in

the years ahead. The SuperSpeed

ferries can accept three times as

many trailers as the ships they re-

place. On a fully loaded ship, the

CO2 discharge per vehicle is halved

on the voyage from Kristiansand to

Hirtshals. This includes discharge

from the shopping centre, restau-

rants, entertainment and cabins.

A SuperSpeed ferry discharges

slightly more that 50 tonnes

of CO2 between Kristiansand

and Hirtshals. If the ship is fi lled

with passengers and passen-

ger cars only, a car containing

two adults and one child would

discharge the equivalent of ap-

prox. 70 kilos of CO2 between Kris-

tiansand and Hirtshals. Compared

with driving a car from Norway via

Sweden to Denmark, this discharge

fi gure is lower.

Color Line has installed environ-

mentally effi cient and fuel effi cient

combustion engines in its new

ships. The use of bunkers with a low

sulphur content in effi cient engines

results in low discharges of SOx.

The SuperSpeed ferries also use

diesel engines for the production of

energy onboard. Both propulsion

engines (main engines) and engines

for generating electricity (auxiliary

engines) are medium-speed diesel

engines. These engines can run on

heavy fuel, straight-run oils such

as light marine diesel (MDO) and in

the future also biodiesel subject to

certain criteria. Color Line wishes

to be among the fi rst to run marine

engines on a mixture of biodiesel

and present day fuel provided this

is aesthetically justifi able, available

on the market and conforms to the

recommendations of the authori-

ties and the engine manufacturer.

Color Line co-operates closely with

the Finnish marine engine manu-

facturer Wärtsilä in order to reduce

discharge to air.

THE BOARD OF DIRECTORS

AND SHAREHOLDERS

O.N. Sunde AS owns indirectly 100

percent of the companies 71 800

shares. O.N. Sunde AS is wholly

owned by Director and Group

president Olav Nils Sunde and his

family.

PROSPECTS/OCCURRENCES

AFTER BALANCE SHEET

DATE

Changed market conditions

The cruise and seaborne trans-

port industry is characterized by

a high level of investment result-

ing from an ongoing requirement

for the development of existing

tonnage and investments in new

tonnage. This places heavy de-

mands on cost management and

earning potential. The interna-

tional market for sea transport is

going through a period of major

change. In Europe, the increase in

low price air travel and the con-

siderable increase in the price of

fuel have contributed towards a

fall-off in the number of passen-

gers and an increase in operating

expenses. At the same time devel-

opments in the transport of goods

have been positive.

Strong focus on the environ-

ment by the authorities in the EU

and in Norway involving a defi ned

objective for the transfer of goods

traffi c from road to seaborne and

rail transport has contributed to-

wards stable and long-term frame-

work conditions for shipowners. It

is expected that there will be fur-

ther positive political measures in

the fi eld of transport and industry

which will strengthen the com-

petitiveness of seaborne transport

with particular emphasis on inter-

modality in the ports.

Sale of tonnage

In total in 2007, the company sold

or agreed to sell ships for more

than NOK 1 billion. The sale of

these ships is part of the compa-

ny’s comprehensive fl eet renewal

programme combined with the

decision to discontinue the West

Coast service. All ships have been

sold at a gain in relation to book

value. The market for second-hand

tonnage has been good, and Color

Line has sold off its older tonnage

in line with its adopted strategy

management strategy. This stra-

tegy is entrenched in the Board-

approved annual budgets. The

Group makes use of fi nancial in-

struments in order to curb the

risk of fl uctuations in the Group’s

cash fl ow. On balance sheet date,

approx. 35 percent of the Group’s

interest bearing debt was secured

through fi xed interest agreements.

The Group’s credit risk is moni-

tored systematically. The Group

has a limited market risk as its

business relates to a large number

of customers.

Continued operation

Based on the Group’s result and

its fi nancial position, the Directors

confi rm that the Annual Financial

Statement has been prepared un-

der the assumption of continued

operation as a going concern and

that the report provides a correct

picture of the parent companies

and the Group’s assets, liabilities,

fi nancial position and result.

WORKING ENVIRONMENT

AND PERSONNEL

As at 31 December 2007 the

Group employed a workforce of

3 967 employees, including those in

part-time positions. 2 853 persons

worked onboard the ships. In 2007

the average absence due to illness

in the Group was approx. 6.5 per-

cent for shore-based employees,

(7 percent in 2006) and approx.

9.8 percent for seagoing employ-

ees (11 percent in 2006). Absence

fi gures have been the subject of

special attention and a great deal

of work as been put in to the chart-

ing of causes of absence and in

effi cient measures to reduce this

percentage. This work will be in-

tensifi ed in 2008. This includes the

establishment of a new position as

health and environmental offi cer

in Color Line.

The Directors consider that the

working environment in the Group

is good and will continue to focus

a high level of attention on the

environment and on absence due

to illness in respect of both shore

based and seagoing personnel in

line with the company’s policy and

with trends in society.

EQUAL OPPORTUNITIES

It is Color Group ASA’s objective

that there shall be full equality

between female and male employ-

ees. The Group has taken steps to

ensure that no discrimination takes

place in this area. Of the 2 853 em-

ployees on board the ships, 1 276

are women. There are 286 leading

positions of which 42 are held by

women. The percentage of women

in leading positions on board the

ships is relatively low as technical/

maritime jobs have traditionally

been dominated by males and so

far few women hold the necessary

certifi cates.

Of the 1 114 shore-base person-

nel, 559 are women. There are two

women in the Color Line AS group

management. The percentage of

women in shore-based manage-

ment positions is approx. 39 per-

cent.

SAFETY

Color Line works continuously to

improve the company’s results with

regard to safety. The safety of pas-

sengers, crew members and the

surroundings is Color Line’s fi rst

priority, and the company makes

every effort to prevent the occur-

rence of hazardous situations that

could result in incidents or damage

to the environment. Color Line is

represented in international and

national projects and bodies en-

gaged in the fi eld of safety and the

environment.

The new act concerning the

safety of ships which replaces the

Seaworthiness Act of 1903 came

into force in 2007. The law now

places more responsibility and obli-

gations on the company compared

with the earlier act.

A new chemical register from Eco

Online was introduced onboard all

ships in 2007. The system will con-

tribute towards improved control

of the use of hazardous chemicals

onboard the ships. Despite safety

being a high priority area in Color

Line, there was one serious ac-

cident in 2007. A fi re broke out in

the main terminal panel onboard

M/S Petter Wessel and the ship

had to be towed in to port in Fre-

derikshavn. There were no serious

accidents in 2007 involving injury

or pollution.

THE ENVIRONMENT

It is internationally recognized that

the Norwegian Merchant Fleet and

the maritime industry are spear-

heading environmental work. In

line with its environmental policy,

the Board of the Norwegian Ship-

owners Association has resolved

that Norwegian shipping and the

marine oil and gas industry shall

not have environmentally harmful

discharges to sea or air. This vision

sets a goal for the environmental

work of the Norwegian Shipowners

Association and Norwegian ship-

owners.

Norwegian shipowners shall be a

driving force to ensure high inter-

national environmental standards

in the UN shipping organisation

IMO and other international bodies

and shall be innovative in the devel-

opment of environmentally friendly

solutions. An important condition

for safety and environmental work

is to contribute towards specifi c

measures that are controlled by in-

ternational regulations.

COLOR LINE AND

THE ENVIRONMENT

Through the comprehensive con-

tracting of new ships, Color Line

has been able to embody the best

available technology for the opera-

tion of both ships and ports. Color

Line has reduced its fl eet from 10

to 7 ships and at the same time in-

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

38 39

of concentrating on high quality

cruises and effi cient transport.

The sales contributed positively to

the company’s fi nancial fl exibility

of action.

Delivery of

SuperSpeed 1 and 2

In accordance with the contract,

SuperSpeed was to have been

delivered in December 2007. Due

to high pressure in the European

shipbuilding industry and certain

technical problems, delivery of Su-

perSpeed 1 was delayed and was

delivered on 27 February 2008.

The fi nancial consequences for

Color Line are limited and are to

a certain extend compensated by

the contractual daily fi nes from

Aker Yards throughout the period.

According to the contract, Super-

Speed 2 was due for delivery at

the end of April 2008 but delivery

of this ship was also somewhat

delayed for the same reasons as

mentioned above. With regard to

the fi nancing of SuperSpeed 2,

alternative fi nancing solutions are

being evaluated in which the ship

is not included in the company’s

balance sheet.

Renewal and change

During the period from 2004 to

2008, Color Line has implement-

ed a comprehensive and forward

looking renewal programme of

its fl eet costing a total of approx.

7.5 million encompassing the two

cruise ships M/S Color Fantasy and

M/S Color Magic and the two new

SuperSpeed ferries.

2008 will be the fi rst entire year

of operation for both M/S Color

Fantasy and M/S Color Magic. In

March 2008 SuperSpeed 1 will

be put into operation on the Kris-

tiansand – Hirtshals service and it

is planned that SuperSpeed 2 will

be put into service based at the

new terminal at Revet in Larvik.

The building of the new terminal

in Larvik is progressing accord-

ing to schedule and will be one of

Europe’s most modern and ad-

vanced ferry/freight terminals

ensuring effi cient roll on/roll off

operations. Although the Super-

Speed vessels can accommodate

almost twice as many cars as M/S

Petter Wessel and M/S Kristian IV,

loading and discharging the vessels

can be accomplished in less than

one hour. A long term agreement

with the port authorities in Larvik

provides both fi nancial predicta-

bility and fl exibility with regard to

increased freight volumes and

traffi c from and to the new ter-

minal. From the turn of the year

2007/2008 the company concen-

trated all its business in Denmark

at Hirtshals which in 2008 will be

one of Europe’s largest and most

effi cient ports. In 2007, Color Line

decided to develop a new booking

system and a new internet plat-

form.

Equal competition

Color Line operates in a demand-

ing competition situation with re-

gard to both passengers and the

freight market. The company faces

competition partly from other

ferry companies and partly from

alternative forms of transport.

The market is international and

Color Line is dependant on stable

framework conditions that are in

line with the conditions for foreign

competitors in the EU in order to

develop further as a Norwegian

corporation.

Color Line works actively to es-

tablish terms for Norwegian mari-

time personnel that are equal to

those of the company’s competi-

tors in the other Nordic countries

and in the EU. This initiative takes

place in co-operation with Color

Line maritime personnel and their

unions, the Norwegian Shipowners

Association, the Maritime Forum

and the Norwegian authorities.

Both the European commission,

through its general maritime policy

“Towards a Future Maritime Policy

for the Union: A European vision

for the oceans and seas”, and the

Norwegian Government through

its strategy for environmentally

friendly growth in the maritime in-

dustries “steady course”, are con-

tributing towards equal and long

term framework conditions for

Color Line’s operations. State Aid

Guidelines for Maritime Transport

(SAG) which, among other things

controls the important framework

conditions for Norwegian and

European shipping exposed to

competition, are provisionally fi xed

up to 2011.

Prospects for 2008

For 2008 the Group anticipates a

better result after tax than in 2007,

primarily due to the completion of

the new building programme and

the implementation of new and

more effi cient operating concepts.

The directors are of the opinion

that the company is well equipped

to meet the challengers of 2008.

Oslo, 11. march 2008

Morten GarmanChairman of the Board

Olav Nils SundeGroup President/Owner Color Group ASA

Mette KrabberødDirector

2007 2006 Note 2007 2006

Amounts in TNOK

Income statementCOLOR GROUP ASA

GROUP (IFRS)PARENT COMPANY (NAS)

129 273 128 251 Sales revenues 3,7 4 725 661 4 584 922

0 0 Other operating income 2,7 35 932 0

129 273 128 251 Total operating income 4 761 593 4 584 922

0 0 Cost of goods -1 592 147 -1 579 060

-6 541 -8 244 Cost of wages 4,17,18,19 -1 408 995 -1 296 093

-12 834 -17 393 Other operating expenses 7,14 -1 001 622 -850 368

-19 375 -25 637 Total operating expenses -4 002 764 -3 725 521

109 898 102 614 Operating income before depreciation charter hire and leasing expenses 758 829 859 401

-22 212 -22 212 Ordinary depreciation 4,8,9,10 -398 554 -397 077

0 0 Charter and leasing expenses 14 -64 656 -66 350

87 686 80 402 Operating result 295 619 395 974

-58 767 159 669 Net fi nancial expenses 15,16 -124 194 -31 173

28 919 240 071 Pre-tax income 171 425 364 801

-8 209 -67 237 Taxes 23 -50 181 -103 583

20 710 172 834 Result for the year 4,24 121 244 261 218

16 291 -191 162 Group contribution 1,26

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

40 41

2007 2006 2005 ASSETS Note 2007 2006 2005

Amounts in TNOK

Balance SheetCOLOR GROUP ASA

GROUP (IFRS)PARENT COMPANY (NAS)

2007 2006 For the period 1 january - 31 december 2007 2006

Amounts in TNOK

Cash Flow StatementCOLOR GROUP ASA

2007 2006 2005 LIABILITIES AND SHAREHOLDERS’ EQUITY Note 2007 2006 2005

PARENT COMPANY (NAS) GROUP (IFRS)

Fixed assets

Intangible assets

196 863 218 897 240 931 Goodwill and other intangible assets 4,9,26 671 301 671 301 671 301

196 863 218 897 240 931 Total intangible assets 671 301 671 301 671 301

Property plant and equipment

0 0 0 Plants under construction 2,4,8,10,26 230 504 43 963 12 655

0 0 0 Land, buildings and other real estate 2,4,8,10,26 317 090 337 349 326 531

416 594 773 Machines, F.F.&E 2,4,8,10,26 49 514 63 479 60 166

0 0 0 Ships 2,4,8,10,26 5 344 658 3 814 822 4 116 479

416 594 773 Total property plant and equipment 5 941 766 4 259 613 4 515 831

Financial assets

2 546 638 2 500 929 2 500 929 Investments in subsidiaries 5,6 0 0 0

4 613 774 2 627 732 2 746 597 Long term receivables and investments 6,16 127 751 142 224 641 397

7 160 412 5 128 661 5 247 526 Total fi nancial assets 127 751 142 224 641 397

7 357 691 5 348 152 5 489 230 Total fi xed assets 6 740 818 5 073 138 5 828 529

Current assets

0 0 0 Inventories 11 185 032 168 611 163 870

744 22 25 Accounts receivable and other receivables 16 837 735 1 050 634 336 700

Other fi nancial assets 16 136 850 50 835 262

212 003 226 244 101 169 Bank deposits and cash 16 243 605 264 299 134 238

212 747 226 266 101 194 Total 1 403 222 1 534 379 635 070

0 0 0 Assets for sale 8 476 184 0 0

212 747 226 266 101 194 Total current assets 1 879 406 1 534 379 635 070

7 570 438 5 574 418 5 590 424 TOTAL ASSETS 8 620 224 6 607 517 6 463 599

Contributed capital

Share capital (71 800 000 shares,

143 600 143 600 143 600 nominal value NOK 2.- per share) 6,20,21,26 143 600 143 600 143 600

1 478 436 1 478 436 1 478 436 Premium fund 21 1 478 436 1 478 436 1 478 436

1 622 036 1 622 036 1 622 036 Total contributed capital 1 622 036 1 622 036 1 622 036

811 066 774 065 792 395 Other shareholders’ equity 21,26 382 684 451 974 299 367

2 433 102 2 396 101 2 414 431 Total shareholders’ equity 2 004 720 2 074 010 1 921 403

LIABILITIES

Provisions

58 721 61 953 69 057 Deferred taxes 22,26 573 641 598 800 537 546

868 2 309 831 Pension commitments 4,19 171 194 164 009 153 642

59 589 64 262 69 888 Total provisions 744 835 762 809 691 188

Long-term debt

3 602 572 1 694 672 1 901 234 Debt to credit institutions 2,12,16 3 451 119 1 646 228 1 861 568

1 411 500 1 394 000 1 180 000 Bond loans 12,16 1 411 500 1 282 000 1 180 000

5 014 072 3 088 672 3 081 234 Total long-term debt 4 862 619 2 928 228 3 041 568

Current liabilities

63 675 25 383 24 871 Trade creditors and other current liabilities 13,16 638 581 539 084 566 220

Current share of long term debt 12,16 336 000 286 000 174 000

Other fi nancial commitments 13 33 469 17 386 69 220

63 675 25 383 24 871 Total current liabilities 1 008 050 842 470 809 440

7 570 438 5 574 418 5 590 424 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 8 620 224 6 607 517 6 463 599

28 919 240 071 Income before taxes 171 425 364 801

22 212 22 212 Ordinary depreciation 398 554 397 077

833 1 478 Pensions costs without cash fl ow effect 7 272 8 441

0 0 Changes in inventories -16 421 -4 741

0 0 Changes in accounts receivable 13 093 -1 190

0 0 Changes in accounts payable 36 505 -15 144

-30 468 -264 989 Changes in other accruals 170 952 -143 090

21 496 -1 228 Net cash fl ow provided by operations 781 380 606 154

0 0 Proceeds from sale of property and equipment 484 805 0

0 0 Purchases of property and equipment -3 005 764 -140 859

0 0 Net cash fl ow from investment activities -2 520 959 -140 859

2 225 059 845 000 Proceeds from taking up of long-term debt 2 292 033 845 000

-299 659 -837 562 Repayments of long-term debt -307 642 -846 340

-1 885 243 0 Payment long-term receivables 0 -183 070

0 228 625 Receipt of long-term receivables 0 0

-75 894 -109 760 Intercompany credits/debits -265 506 -150 824

-35 737 126 303 Net cash fl ow from fi nancing activities 1 718 885 -335 234

-14 241 125 075 Net change in liquid resources -20 694 130 061

226 244 101 169 Closing balance liquid resources 1 Jan. 264 299 134 238

212 003 226 244 Closing balance liquid resources 31 Dec. 243 605 264 299

Shareholders’ equity 1 Jan. 2006 143 600 1 478 436 -2 298 301 665 1 921 403

Result for the year 261 218 261 218

Translation difference -18 0 -18

Total revenues and expenses for the period 143 600 1 478 436 -2 316 562 883 2 182 603

Owner’s contribution -108 593 -108 593

Shareholders’ equity 31 Dec. 2006 143 600 1 478 436 -2 316 454 290 2 074 010

Shareholders’ equity 1 Jan. 2007 143 600 1 478 436 -2 316 454 290 2 074 010

Result for the year 121 244 121 244

Translation difference 630 0 630

Total revenues and expenses for the period 143 600 1 478 436 -1 686 575 534 2 195 884

Owner’s contribution -191 162 -191 162

Shareholders’ equity 31 Dec. 2007 143 600 1 478 436 -1 686 384 370 2 004 720

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

42 43

Note 1 ACCOUNTING PRINCIPLES

General Information

Color Group comprises Color Group ASA and its subsidi-

ary companies. Color Group ASA is a public limited com-

pany registered in Norway with its head offi ce in Oslo. The

Group’s activities are mainly concentrated on two core

areas, cruise and transport. These business areas are

described in note 3, Information segment.

1.1. Framework for preparing

the annual fi nancial statement

Group

Color Group ASA has taken up a bond loan which is regis-

tered on the Oslo Stock Exchange. Stock Exchange regu-

lations require that the Group must report in accordance

with international fi nancial reporting standards (IFRS)

and the interpretations issued by the International Finan-

cial Reporting Interpretations Committee (IFRIC).

This is the enterprises’ fi rst IFRS consolidated fi nancial

statement and the accounts are presented in accordance

with IFRS 1. The fi gures for comparison from 2006 and (ba-

lance sheet) 2005 have been translated to IFRS cf. note 26.

All new and amended standards and interpretations

that are relevant for Color Group and that were in force

with effect from the commencement of the accounting

period on 1 January 2007 have been applied when pre-

paring the annual fi nancial statements. At the time the

accounts were closed, numerous new and amended stan-

dards and interpretations had not yet come into force and

the Group decided that these should not be applied. In

the opinion of management, these standards and inter-

pretations will not effect the annual fi nancial statements

signifi cantly.

Preparing the accounts in accordance with IFRS re-

quires the use of estimates. Moreover, consolidated ac-

counting principles require that management shall make

discretionary decisions. Areas that to a large extent are

based on such discretionary evaluations, and are very

complex or areas in which conditions and estimates are

signifi cant for the consolidated accounts are duly descri-

bed in the notes.

The consolidated accounts have been prepared on the

historical cost principle, adjusted in respect of fi nancial

instruments and measured at real value.

The Parent Company

The fi nancial statement for the parent company, Color

Group ASA has been prepared in accordance with the

provisions of the Accounting Act of 1998 and generally

accepted accounting principles in Norway (NAS).

1.2 Translation of foreign exchange

Accounts relating to the individual units in the Group are

presented in the currency normally used in the fi nancial

area where the unit operates (functional currency). The

Group’s presentation currency is NOK and this is also the

parent company’s presentation and functional currency.

Subsidiary companies which have other functional cur-

rency are translated to NOK. Balance sheet items are

translated at the exchange rate ruling at yearend, while

items on the income statement are translated on the ba-

sis of an average exchange rate. Translation differences

are entered against shareholders’ equity and are speci-

fi ed separately.

Transactions and balance sheet items

Money items (assets and liabilities) in foreign currency

are translated at the exchange rate on balance sheet

date. Foreign exchange gain and loss in connection with

the translation of the money items in foreign currency at

yearend, on the closing date of the balance sheet are en-

tered in the income statement. Income statement items

are translated at the exchange rate ruling at the time of

transaction. Foreign currency gains and losses arising

upon payment of such transactions are entered in the

income statement.

1.3 Principles of consolidation

Subsidiary companies comprise all units in which the

Group has a deciding infl uence on the unit’s fi nancial and

operational strategy, normally through a stake of more

than a 50% in the company, and voting control. When

deciding whether the Group has deciding infl uence, the

effect of potential voting rights that may be exercised or

converted on balance sheet date is included. Subsidiary

companies are consolidated from the time control has

been taken over by the Group and are withdrawn from

consolidation when deciding infl uence ceases.

The purchase method of accounting is applied in con-

nection with the acquisition of subsidiary companies.

Procurement and cost is measured at the actual value

of assets used as payment of the purchase, equity in-

struments that are issued, commitments that have been

taken over through the transfer of control and direct ex-

penses connected with the actual acquisition. Identifi a-

ble purchased assets, debts undertaken and conditional

commitments are entered in the accounts at real value at

time of acquisition, irrespective of any minority interests.

Notes of the Accounts 2007COLOR GROUP ASA

Share Premium Translation Retained capital fund differences profi t

Amounts in TNOK

2 182 603

2 074 010

2 004 720

2 195 884

562 883

454 290

384 370

575 534

-2 316

-2 316

-1 686

-1 686

1 478 436

1 478 436

1 478 436

1 478 436

143 600

143 600

143 600

143 600

Total revenues and expenses for the period

Shareholders’ equity 31 Dec. 2006

Shareholders’ equity 31 Dec. 2007

Total revenues and expenses for the period

Statement of changes in equityCOLOR GROUP ASA

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

44 45

1.11 Fixed assets retained for sale

and winding–up of business

Fixed assets and groups of fi xed assets and liabilities are

classifi ed as retained for sale if the book value is to be

regained through a sales transaction, instead of conti-

nued use. This is only considered to be fulfi lled when a

sale is highly probable and the fi xed assets are available

for immediate sale in their present form. Management

must have committed the company to a sale and it must

be expected that the sale will be implemented within one

year from the date of classifi cation.

Fixed assets and groups of fi xed assets and liabilities

that are retained for sale are measured either at the

previous book value or actual value with the deduction

of sales costs, whichever is the lowest. Depreciation of

assets classifi ed for sale ceases with effect from the date

of classifi cation.

1.12 Inventory

Inventories that comprise trade goods, consumer goods

and bunkers are valued at either cost price or net sales

value with the deduction of sales costs, whichever is the

lowest. The FIFO method is applied to procurement cost.

1.13 Cash and cash equivalents

Cash and cash equivalents comprises cash in hand and

bank deposits.

1.14 Shareholders’ equity

Ordinary shares are classifi ed as share capital. Expen-

ses directly connected with the issuing of new shares

with the deduction of tax, are entered as a reduction of

remuneration received in shareholders funds.

Translation differences arise in connection with cur-

rency differences in the consolidation of foreign units.

1.15 Pension commitments and pension costs

The companies in the Group have different pension

schemes. In general, pension schemes are fi nanced by

payments to insurance companies, based on accrued

actuarial calculations.

For the most part, pension schemes are defi ned be-

nefi t schemes. Pension funds are valued at actual value.

Net commitments linked with defi ned benefi t pension

schemes are calculated separately in each scheme by

estimating the amount for future benefi ts earned by the

individual employee through work performed during the

year under review and earlier periods. These future bene-

fi ts are discounted in order to calculate the present day

value and actual value of the pension funds is deducted

to fi nd net commitments. The discount rate is equal to

the balance day interest on government bonds with parti-

cularly high creditworthiness and with approximately the

same tenor as the Group’s commitments. The schemes

are based on a linear earning model. When the benefi ts in

Expenses connected with the acqusition are allocated

to identifi able assets and liabilities based on their actual

value at time of acquisition. Procurement costs that ex-

ceed the share of actual value of identifi able net assets in

subsidiary companies are entered in the balance sheet as

goodwill. If procurement cost is lower than actual value

of net assets in subsidiary companies, the difference is

entered in the balance sheet at time of acqusition.

Intercompany transactions, intercompany accounts

and non-capitalized earnings between companies in the

same Group are eliminated. Non-capitalized loss is elimi-

nated but is evaluated as an indicator of the drop in value

in relation to the writedown of the transferred assets.

Accounting principles in subsidiary companies are

amended whenever necessary in order to conform to the

Group’s accounting principles.

1.4 Principles of taking to income

Income from the sale of goods and services is entered in

the accounts at actual net value after deduction of VAT,

discounts and reductions.

Income from the sale of goods and services is calcula-

ted from the time material risks and rights have passed

over to the buyer, the Group no longer has ownership or

control of the goods, the income amounts can be reliably

measured, it is probable that the fi nancial gain linked to

the sale passes to the Group and that the costs incurred

in connection with the sale can be measured reliably.

Income is calculated as follows:

Sale of services (travel)

Sale of services is calculated at the start of the voyage,

that is to say, the time of transfer of risk.

Sales of goods

Sales of goods in the Group are recorded when delivery

of the goods is made, this being the time of transfer of

risk. Payment of retail sales is frequently in the form of

cash payment or by credit card. Such sales are taken to

income, including credit card fees that are incurred at the

time of the transaction. Fees are entered as sales costs.

Interest earned

Interest earned is taken to income in accordance with the

true rate of interest method.

Income from dividends

Dividends from investments are recorded when the

Group has an unconditional right to receive the dividend.

Public subsidies

Public subsidies are recorded when it is reasonably cer-

tain that the company will fulfi l the subsidy conditions

and the subsidies will in fact be received. Public subsidies

that compensate the business for disbursements are

taken to income as and when the costs are incurred.

Subsidies are deducted from the expense to be covered

by the subsidy.

1.5 Cost of loans

Costs of loans that can be directly related to the acqusi-

tion of qualifi ed assets are capitalized as part of the rele-

vant assets’ expenses until the fi xed asset is ready for its

intended use. Such loan expenses are capitalized as part

of the assets’ procurement cost when it is probable that

this will result in future fi nancial benefi ts for the Group

and the expenses can be measured in a reliable manner.

Other loan expenses are recorded in the income state-

ment in the period when they are incurred.

1.6 Taxes

Tax cost comprises tax payable and changes in deferred

tax. Deferred tax/tax benefi t is calculated on all differen-

ces between value of assets and liabilities in the accounts

and tax value, with the exception of:

● Temporary differences connected to goodwill which

is not deductable with regard to tax.

● Temporary differences related to investments in

subsidiary companies controlled by the Group when

the temporary differences will be reversed and this is

not expected to take place in the foreseeable future.

Deferred tax benefi t is entered in the accounts when it

is probable that the company will have suffi cient taxable

profi t in subsequent periods in order to utilize the tax be-

nefi t. Earlier deferred tax benefi t is entered in the acco-

unts by the company to the extent that it is probable that

the company can make use of the deferred tax benefi t.

Likewise, the company will reduce deferred tax benefi t to

the extent the company no longer considers it probable

that it can utilize the deferred tax benefi t.

Deferred tax and deferred tax benefi t is measured on

the basis of anticipated future tax rates in the companies

in the Group in which temporary differences have arisen.

Deferred tax and deferred tax benefi t are entered at

nominal value in the balance sheet.

1.7 Tangible assets

Assets that are classifi ed as long-term in nature or use

are entered as fi xed assets. Tangible fi xed assets are

mainly comprised of ships, port facilities, land, buildings

and machines/F.F.&E. Tangible fi xed assets are entered at

procurement cost including costs linked to the procure-

ment less deductions for depreciation and write-down in

respect of reduced value. Subsequent major embellish-

ment costs are added to the value of the fi xed assets in

the balance sheets or are entered separately when it is

probable that future fi nancial benefi ts linked to the ex-

pense will be measured reliably. Other repair, classifi cation

and maintenance costs, including costs for the docking of

ships are entered in the income statement in the period

when the expense is incurred. Land is not depreciated.

Other property plant and equipment is depreciated in ac-

cordance with the straight line method so that the pro-

curement cost of fi xed assets is depreciated to residual

value over anticipated usable lifetime, which is:

● Ships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20-35 years

● Buildings/port facilities . . . . . . . . . . . . . . . . . .20-30 years

● Machines and F.F.&E. . . . . . . . . . . . . . . . . . . . . . 4-10 years

The usable lifetime of tangible assets and the residual

value is re-assessed every balance day and amended if

necessary. In respect of the Group’s ships, components

are broken down into components having high wear and

tear and components with low wear and tear. Compo-

nents with high wear and tear are depreciated without

residual value. Scrap value is estimated every year-end,

and any changes in estimates of scrap value are entered

in the accounts as a change in estimate.

Gain and loss upon disposal are entered in the income

statement and make up the difference between sales

price and value in the balance sheet.

Plants under construction are classifi ed as fi xed assets

and are entered at cost price until production or develop-

ment is completed. Plants under construction are not de-

preciated until the fi xed assets are taken into use.

1.8 Intangible assets

Intangible assets procured separately are entered in the

balance sheet at actual value at time of procurement. In-

tangible assets are depreciated according to the straight

line method over the asset’s anticipated lifetime. If the

lifetime of the asset is not limited and economic use

cannot be estimated, the asset is not depreciated, but is

tested annually with regard to fall-off in value.

1.9 Goodwill

The difference between procurement cost at takeover

and actual value of net identifi able assets at the time of

takeover is classifi ed as goodwill.

Goodwill is entered in the balance sheet at procure-

ment cost with the deduction of any accumulated write-

downs. Goodwill is not depreciated but is tested annually

in respect of any loss in value. The test of loss in value

is carried out by allocating goodwill to the Group’s cash

generating units that are expected to benefi t from the

merger. Assets and liabilities taken over in connection

with mergers are entered at actual value in the Group’s

opening balance sheet.

1.10 Leasing, hired plant and equipment

The Group has operational leases only. Lease payments

are classifi ed as operating expenses which are entered in

the income statement currently over the lease period.

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

46 47

2.2 The purchase and sale of assets, investment

commitments

Purchase and sale of ships

M/S Color Magic was delivered to the Group in Septem-

ber 2007 at a price of approx. EUR 325 million. In 2007,

the Group has sold and handed over 2 ships for a total

sales sum of approx. NOK 440 million.

Investment commitments

The Larvik terminal

In 2006, Larvik municipality adopted a new development

plan for the Revet area outside Larvik which is to be the

new port area for the town of Larvik. A 30 year lease was

concluded in 2007 for this area with the option of an

extension of 20 years. The Group is to build a new ferry

terminal costing approx. NOK 280 million. This invest-

ment is fi nanced externally by approx. NOK 240 million

with 10 years drawing rights and an instalment profi le of

30 years.

A new booking and internet platform

In 2007 an agreement was concluded on the develop-

ment/delivery of a new booking system and a new in-

ternet platform with a total investment framework of

approx. NOK 150 million. The system is due to become

operative in 2009.

SuperSpeed 1 and 2

In December 2005, Color Line AS signed a contract

with Aker Finnyards Inc. for the building of 2 new ships

(SuperSpeed 1 and 2) for a total contract sum of approx.

EUR 254 million. Delivery was originally planned to take

place in December 2007 for the fi rst vessel and in the

fi rst six months of 2008 for the second vessel. Delivery

did not take place before the accounts for 2007 were

closed due to delays at the shipyard. The SuperSpeed 1

and 2 ferries are fi nanced by means of approx. 80 per-

cent bound capital maturing at 12 years on a 15 year ba-

sis from date of delivery. CIRR fi xed interest agreements

and swap agreements have been concluded with a ma-

turity of 12 years, giving a net interest of 3.91 percent for

NOK and 3.55 percent for EUR. The currency distribution

of the loan is 70 percent NOK and 30 percent EUR. At

yearend 2007 the Group has paid NOK 307 million in

pre-payments for the ships and NOK 70 million in sundry

project expenses, see note 16.

In connection with the building contracts agreements

were also concluded with Kristiansand Line AS and Oslo

Line AS who have consigned the fi nancing commitment

and the fi xed interest agreements whereby Color Line has

the right to assign the newbuildings at time of delivery at

contract price and with coverage of expenses, including

inspection expenses. The ships have been leased back

to Color Line on operational leases maturing at twelve

years in which contract price, expenses incurred during

the scheme are changed, the share of the increase in be-

nefi t that the employee has earned the right to is entered

in the income statement in accordance with the straight

line method over the remaining earning period. Costs

are entered in the income statement immediately if the

employee has already received an unconditional right to

an increased benefi t. Estimate deviations, not entered in

the balance sheet at the time of change-over to IFRS, are

zeroed and entered directly against shareholders’ equity.

Estimate deviations arising after 1 January 2006 are en-

tered in the income statement and distributed over the

assumed average remaining earning period to the extent

that these exceed 10 percent of the present value of the

defi ned benefi ts pension commitments and actual value

of the pension funds.

1.16 Allocations

An allocation is entered when the Group has a commit-

ment (legal or self-incurred) resulting from an earlier oc-

currence and it is probable that a fi nancial settlement will

take place as a result of this commitment and the amount

can be reliably measured. When an allocation in the ac-

counts is measured by applying the cash fl ows necessary

to pay for the commitment, the amount entered in the

balance sheet is the present value of these cash fl ows.

Restructuring allocations are entered when the Group

has approved a detailed and formal restructuring plan

and the restructuring has either started or been publi-

cised. Allocations for restructuring comprise only direct

costs resulting from and necessary for the restructuring,

and are not part of the normal operations of the unit.

1.17 Conditional commitments and assets

Conditional commitments are not entered in the fi nancial

statements. Information is provided on material conditio-

nal commitments, but conditional commitments where

the probability for the commitments arising is low are

excepted. A conditional asset is not entered in the annual

accounts, but information is provided if there is a certain

probability that a benefi t will be ascribed to the Group.

1.18 Occurrences after the closing

of the balance sheet

New information after closing of the balance sheet con-

cerning the company’s fi nancial position on balance day

is taken into account in the annual fi nancial statement.

Occurrences taking place after balance sheet day that

do not affect the company’s fi nancial position on balance

sheet day but will effect the company’s fi nancial position

in the future are reported if they are of material impor-

tance.

1.19 Financial instruments

Financial assets and fi nancial commitments are ente-

red in the Group balance sheet when the Group beco-

mes a party to the contractual conditions in the instru-

ments. The Group’s fi nancial instruments are classifi ed

in the following three categories: actual value in income

statement, lendings and receivables and other fi nancial

commitments.

Financial assets:

Financial assets at actual value in the income statement

are fi rst entered on the balance sheet at actual value on

the day the contract is concluded and thereafter measu-

red at actual value on each balance day.

Client receivables and other short term receivables

are fi rst registered in the accounts at actual value and

thereafter at amortised cost corrected in respect of any

written-down amount. Current receivables having a ma-

turity of less than 3 months or receivables evaluated as

insignifi cant are not normally discounted. Earned servi-

ces that have not been invoiced are taken to income on

balance day and entered as receivables.

Financial Commitments:

Financial commitments at actual value in the income

statement are entered on the balance sheet for the fi rst

time at the actual value on the date the contract is con-

cluded and measured thereafter at actual value on each

balance day.

Interest bearing loans are fi rst entered on the balance

sheet at actual value with the deduction of transaction

expenses. Subsequent accounting is at amortised cost,

any difference between cost and redemption amount

is calculated over the period of maturity as part of the

effective interest rate.

Accounts payable and other current obligations are

fi rst measured at actual value and thereafter at amor-

tized cost. Current obligations that fall due within three

months or obligations considered as insignifi cant are not

normally discounted. Income paid in advance on balance

sheet day is entered as a liability.

1.20 Royalty

Operating revenues in the parent company refer for the

most part to royalty income.

In connection with the reorganisation of Color Group,

the ferry business in Color Group ASA was transferred to

Color Line AS with effect from 1998. The rights to the use

of the name and trademarks and use of the developed

shipping lines, quay rights etc. were not subject to take-

over. Royalty agreements have been concluded between

the companies regulating Color Line’s right to the use

of rights connected with the use of ferry business and

remuneration for such use.

1.21 Shares in subsidiary companies

Investments in subsidiary companies are evaluated ac-

cording to the cost method. Group contributions from

the parent company to subsidiary companies after

tax are entered in the accounts as an increase in the

investment in the subsidiary company. Dividend received

and group contribution from the subsidiary company is

entered in the accounts as income from investments in

the subsidiary company.

Dividend received and paid out and group contributions

and other contributions are taken to income in the same

year as they are allocated in the subsidiary company.

1.22 The main rule for evaluation and

classifi cation of assets and liabilities in the

parent company

Assets for permanent ownership or use are classifi ed as

fi xed assets. Other assets are classifi ed as current assets.

Receivables for repayment within one year are classifi ed

as current assets. Equivalent criteria are applied in the

classifi cation of current and long term debt. Fixed assets

are evaluated at procurement cost and written down to

actual value when the drop in value is not considered

to be of a short-term nature. Fixed assets having a limi-

ted fi nancial lifetime are subject to a depreciation plan.

Long-term loans are entered in the balance sheet at the

nominal amount received at time of establishment.

Current assets are valued at procurement cost or actual

value, whichever is the lowest. Shares in a trade portfolio

are appraised at actual value on balance day. Changes

in value are entered in the income statement. Current

liabilities are entered in the balance sheet at the nominal

amount received at time of transaction.

1.23 Operating expenses

Expenses in the parent company are expensed in the

same period as the appurtenant income.

1.24 Goodwill in the parent company

Goodwill in the parent company is depreciated according

to the straight line method over the anticipated lifetime

of goodwill.

Note 2: MAJOR INDIVIDUAL TRANSACTIONS

2.1 Reorganisation

In 2007 the Color Group was reorganized. Prior to this

the Group was organized in two main business areas, the

ferry business operated by Color Line AS and subsidiary

companies and the hotel business operated by Color

Hotels AS and subsidiaries. In the new organisation, the

Group is divided into two main business areas, the cruise

division and the transport division, operated by Color Line

Cruises AS and Color Line Transport AS respectively.

Hotel operations are included in the transport divi-

sion. The reorganisation was implemented by means

of a de-merger of Color Line AS, followed by internal

share-assignments leading to the present day corporate

structure.

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

48 49

the building period, fi nancing as described and fi xed inte-

rest agreements are refl ected in the bare boat rate. If this

right is not exercised, Color Line AS takes over fi nancing

with the appurtenant fi xed interest agreements and will

take delivery of the ships on own account. Kristiansand

Line AS and Oslo Line AS are indirectly wholly owned by

ON. Sunde AS.

Note 3: SEGMENT REPORTING

Segment information is presented for each business seg-

ment. This structure is based on a format for information

to Group Management. Purchase and sales of services

within the Group are based on the arm length principal.

The presented business segments are continued in their

entirety. The Group’s operations also take place outside

Norway. No internal result and balance sheet based on

geographical division is prepared.

The Group’s main business areas:

The business area cruise is legally organized in the com-

pany Color Line Cruises AS which markets and sells

cruises, conference travel, travel and hotel packages for

individuals and groups/organizations between Norway,

Denmark and Germany. Freight operations are also inclu-

ded. The business area transport is legally organized in

the company Color Line Transport AS which markets and

sells cost effi cient transport services between Norway,

Sweden and Denmark for individuals, groups and organi-

zations. Freight business is also included in addition to the

sale of travel and hotel packages.

Note 4: UNCERTAIN ESTIMATES

The estimates that are taken as a basis for items in the

income statement and the balance sheet have been

subject to appraisal. Changes in estimates in the

accounts are entered in the income statement in the

period in which the estimate is changed.

Depreciation of property plant and equipment is based

on the estimated lifetime of the tangible assets. Chan-

ges in investment decisions and market conditions may

affect the depreciation time as well as future result.

Calculation of pension commitments is based on seve-

ral fi nancial conditions. Any change in these conditions

will affect the future result.

Goodwill is based on future cash fl ows. These cash fl ows

are subject to uncertainty. Changes in the conditions will

change the value of the cash fl ow and may result in a

write down of goodwill.

Note 6: RELATED PARTIES

All the shares in Color Group ASA are owned

indirectly by O.N. Sunde AS, a company wholly-owned

by Olav Nils Sunde and his family. As at 31 Decem-

ber 2007, Color Group ‘s interest bearing receivable

against the O.N. Sunde Group was NOK 291 million

compared with NOK 379 million as at 31 December

2006. NOK 100 million of this receivable is long term.

In 2007, NOK 15 million has been charged in interest.

The equivalent fi gure for 2006 was NOK 16 million.

Reference is also made to the SuperSpeed 1 and 2

agreement described in Note 2.

There are no fi gures from 2006 for comparison as 2007 is the fi rst year with this organisational structure.

Interest is charged on outstanding amounts equivalent to the interest rate that Color Group ASA pays in

the market. In addition to fi nance expenses, the subsidiary company Color Line AS also pays a royalty to

Color Group ASA for the name and line rights. In 2007, Color Group received NOK 128 million in royalty. The

equivalent fi gure in 2006 was NOK 125 million.

Amounts in TNOK

Amounts in TNOK

Note 3: Key fi gures from the business divisions:

Note 5: SUBSIDIARY COMPANIES

The Group comprises the parent company Color Group ASA and the following subsidiaries

are owned directly and indirectly.

Operating income 2 729 686 2 031 907 4 761 593

Operating expenses -2 222 848 -1 752 105 -3 974 953

Sales fi xed assets/restructuring -17 890 -9 921 -27 811

Ordinary depreciation -251 207 -147 348 -398 555

Charter hire, leasing expenses -48 034 -16 623 -64 657

Operating result/segment result (EBIT) 189 707 105 910 295 619

Net fi nancial expenses -124 194

Pre-tax result 171 425

Tax costs -50 181

Result for the year 121 244

Segment assets 5 851 018 1 007 811 6 858 829

Non-allocated assets 1 761 395

Consolidated total assets 8 620 224

Segment commitments 4 851 169 388 826 5 239 995

Non-allocated commitments 3 380 229

Consolidated total commitments 4 851 169 388 826 8 620 224

Investments during the period (gross) 2 659 050 95 423 2 754 473

Non-allocated investments 251 291

Consolidated total investments 2 659 050 95 423 3 005 764

Owned by Color Group ASA (parent company)

Color Line AS Oslo 49 740 100 2 546 538

Color Hotels AS 100 100 100

Total direct ownership 2 546 638

COMPANIES OWNED INDIRECTLY

Owned by Color Line AS

Color Line Cruises AS Oslo 430 520 100

Color Line Transport AS Oslo 414 142 100

Color Line Crew AS Oslo 3 033 100

Color Line Marine AS Sandefjord 7 250 100

Color Line Marine Verksted AS Sandefjord 4 000 100

Bergen Line AS Oslo 100 100

Norway Line AS Oslo 100 100

Color Scandi Line Oslo 100 100

Owned by Color Line Cruises AS

Color Line GmbH Kiel 26 (EUR) 100

Terminalbygget AS Oslo 100 100

M/V Color Harald AS Oslo 1 500 100

I/S Jahre Line Oslo 100

Owned by Color Line Transport AS

Color Hotel Skagen AS Skagen 5 700 (DKK) 100

Color Line Danmark AS Hirtshals 5 000 (DKK) 100

Hirtshals Skipsproviantering AS Hirtshals 500 (DKK) 100

Larvikterminalen AS Oslo 100 100

M/V Color Skagen AS Oslo 1 000 1004 761 593

2 546 638

295 619

8 620 224

8 620 224

121 244

Division Cruise Division Transport Group

Registered offi ce Share Capital Stake 31.12.2007 Book value in balance sheet

Operating income

Total direct ownership

Operating result/segment result (EBIT)

Consolidated total assets

Consolidated total commitments

Result for the year

2 729 686

189 707

4 851 169

2 031 907

105 910

388 826

Color Group ASA is mainly engaged in the external

fi nancing of all the companies in the Group. As at

31 December 2007, the inter-company outstanding

accounts were as follows:

Amounts in TNOKNote 6: Related parties

Color Hotels AS 7 172 6 798

Color Line AS 4 174 289 2 592 069

Hotel Skagen AS 22 773 22 480

Total 4 204 234 2 621 347

2007 2006

2 621 347Total 4 204 234

M/V Color Harald and M/V Color Skagen are to be incorporated in Color Line AS

3 005 764Consolidated total investments 2 659 050 95 423

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

50 51

In connection with the newbuildings, fi nancing

costs during the building period have been capi-

talized. Capitalization during the year totals TNOK

31 340. An interest rate of 5% has been applied.

Facilities on leased land are depreciated over the

lease period.

Assets retained for sale

As a result of the implementation of the adopted

Depreciation method: All property plant and equipment is depreciated according to the straight-line method over the estimated lifetime.

Depreciation rates: 2.85-20%, 10-20%, 5-20%

Borrowing expenses are capitalized on the appurtenant item and depreciated over the estimated lifetime of the assets.

investment programme for new tonnage, the sale

of M/S Peter Wessel and M/S Color Festival was

agreed in October and November 2007. Book value

of these ships totals TNOK 476 184 which has been

withdrawn from property plant and equipment.

Anticipated gain is approx. NOK 95 million. Ordinary

depreciation of the ships ceased on the same date.

Assets designated for sale are shown as current

assets.

Amounts in TNOK

Amounts in TNOK

Amounts in TNOK

Note 7: INCOME AND EXPENSES

Total operating income comprises the following items:

Note 11: INVENTORIES

Inventories comprise the following types of goods

Total operating expenses comprises the following items:

Passenger revenues 4 128 4 025

Freight revenues 392 398

Other 242 162

Total 4 762 4 585

Inventories for onward sale 147 611 141 608

Consumer goods 27 056 19 882

Bunkers 10 365 7 121

Total 185 032 168 611

Cost of technical operation 319 284

Other operating expenses on board 239 203

Other operating expenses ashore etc. 444 363

Total 1 002 850

2007 2006

2007 2006

2007 2006

4 585

168 611

850

Total

Total

Total

4 762

185 032

1 002

Amounts in TNOKNOTE 8: PROPERTY, PLANT AND EQUIPMENT, ASSETS FOR SALE

Procurement cost

Procurement cost as at 1 Jan. 2006 7 027 362 433 088 607 436 12 655 8 080 541

Additions 39 258 27 337 42 956 31 308 140 859

Disposals -23 822 -23 822

Reclassifi ed as retained for sale 0

Procurement cost as at 31 Dec. 2006 7 066 620 436 603 650 392 43 963 8 197 578

Procurement cost as at 1 Jan. 2007 7 066 620 436 603 650 392 43 963 8 197 578

Additions 2 740 466 12 589 25 044 227 665 3 005 764

Disposals -556 590 -8 178 -2 409 -41 124 -608 301

Reclassifi ed as retained for sale -830 721 -830 721

Procurement cost as at 31 Dec. 2007 8 419 775 441 014 673 027 230 504 9 764 320

Accumulated depreciation and write downs

Depreciations and write-downs as at. 1 Jan 2006 2 910 883 372 922 280 905 3 564 710

Depreciations for the year 340 915 24 024 32 138 397 077

Disposals -23 822 -23 822

Depreciations and write-downs as at 31 Dec. 2006 3 251 798 373 124 313 043 0 3 937 965

Depreciations and write-downs as at 1 Jan 2007 3 251 798 373 124 313 043 3 937 965

Depreciations for the year 329 506 25 877 43 171 398 554

Disposals -506 187 -7 501 -277 -513 965

Depreciations and write-downs as at 31 Dec. 2007 3 075 117 391 500 355 937 0 3 822 554

Balance sheet values

As at Dec. 2006 3 814 822 63 479 337 349 43 963 4 259 613

As at Dec. 2007 5 344 658 49 514 317 090 230 504 5 941 766

8 197 578

9 764 320

3 937 965

3 822 554

5 941 766

Land, buildings Buildings under Ships F.F. & E real estate construction Total

Procurement cost as at 31 Dec. 2006

Procurement cost as at 31 Dec. 2007

Depreciations and write-downs as at 31 Dec. 2006

Depreciations and write-downs as at 31 Dec. 2007

As at Dec. 2007

7 066 620

8 419 775

3 251 798

3 075 117

5 344 658

436 603

441 014

373 124

391 500

49 514

650 392

673 027

313 043

355 937

317 090

43 963

230 504

0

0

230 504

Note 9: GOODWILL/INTANGIBLE ASSETS

The book value of goodwill as at 31 December 2007

is TNOK 671 301. The equivalent value as at 31 Decem-

ber 2006 was also TNOK 671 301.

All goodwill is acquired by takeovers and has been

of strategic importance in retaining and strengt-

hening the market positions of the Group. Goodwill is

recorded in the transport segment.

Goodwill is not depreciated in the income state-

ment. Annual tests are carried out based on future

cash fl ows which can be referred to each individual

goodwill element. A long-term forecast of 5 years

is applied as well as extensions that exceed 5 years.

Tests implemented in 2007 did not show any require-

ment for writing down goodwill.

Goodwill is related to the acquisition of ferry business. Goodwill is depreciated over the estimated fi nancial lifetime. A depreciation period of

20 years is in line with the conditions that formed the basis for evaluation upon acquisition of the business.

Amounts in TNOKNOTE 10: PLANT, PROPERTY AND EQUIPMENT, COLOR GROUP ASA

Cost price 1 Jan. 891 444 677 445 568

Additions in the year 0

Disposals in the year 0

Cost price 31 Dec. 891 444 677 445 568

Acc. depreciation 1 Jan. 297 225 780

Ordinary depreciation in year 178 22 034 22 212

Disposals in the year 0

Acc. depreciation 31 Dec. 475 247 814 248 289

Book value 31 Dec. 416 196 863 197 279

Depreciation rate 20 % 5 %

445 568

248 289

197 279

Machines, F.F. & E Goodwill, intangible assets Total

Cost price 31 Dec.

Acc. depreciation 31 Dec.

Book value 31 Dec.

891

475

416

444 677

247 814

196 863

Amounts in TNOK

NOTE 12: LONG TERM INTEREST BEARING DEBT, MORTGAGES AND GUARANTEES

Long term loans

Mortgage loans 3 602 572 1 694 672 3 451 119 1 646 228

Bond loans (registered on Oslo Stock Exchange) 1 411 500 1 394 000 1 411 500 1 282 000

Total interest bearing long term commitments 5 014 072 3 088 672 4 862 619 2 928 228

Current Commitments

Short-term part of mortgage 0 0 336 000 174 000

Redeemable bond loan 0 0 0 112 000

Total interest bearing current commitments 0 0 336 000 286 000

Total interest bearing commitments 5 014 072 3 088 672 5 198 619 3 214 190

5 014 072 Total interest bearing long term commitments

Parent Company Group 2007 2006 2007 2006

3 088 672 2 928 2284 862 619

0Total interest bearing current commitments 0 286 000336 000

5 014 072 Total interest bearing commitments 3 088 672 3 214 1905 198 619

In its loan agreements the Group has commitments linked to liquidity, shareholders’ equity and degree of debt servicing. All commitments are

fulfi lled as at 31 December 2007.

Charter hire for 2007 refers to M/S Kronprins Harald. This ship was sold on 1 January 2007 and leased back on a bare boat charter up to

September 2007.

The Group has current leases with the local port authorities in regular ports of call. These contracts comprise lease of land, buildings, area and

berths for the ships. Terms of the leases are partially fi xed or are variable based on number of calls, passengers and vehicles. The company owns

the terminal buildings in Oslo, Hirtshals and Strømstad.

In 2001 an agreement was concluded concerning the right to use the brand name Color Line on the new multi-purpose arena in Hamburg, Germany

up to November 2013. In 2007, TEUR 743 was paid in rent compared with TEUR 729 for 2006.

Operational framework conditions have been concluded for the leasing of IT equipment, vehicles and other movables.

Mortgage loans (fi nance institutions) are secured by mortgages in ships and other assets. Leases for terminal areas are also mortgaged

as well as negative mortgage in ships. Color Group ASA has concluded a framework agreement for guarantee of the Group’s tax withholdings of

NOK 60 million. In addition the Group has pledged approx. NOK 60 million to the travel guarantee fund in addition to other pledges for subsidiary

companies totalling approx. 52 million.

Book value of assets pledged as security (ships,buildings, accounts payable) 6 218 814 4 246 146

Group 2007 2006

4 246 1466 218 814

Interest conditions on all loans and credits are fi xed in accordance with NIBOR with the addition of an agreed margin.

At yearend 2007, interest rates were on average:

Mortgage loans: 6.20%

Bond debt: 7.05%

The following table shows the total cash fl ows in the years ahead for coverage of instalments and interest

on current long term fi nancing agreements in the form of long term bank loans and bond loans. Amounts in TNOK

Less than 1 year 545 175 99 449 570 811 99 449

1-2 years 492 252 376 449 517 009 376 449

2-3 years 474 344 414 433 498 220 414 433

3-4 years 456 435 56 365 479 431 56 365

5 years and more 2 935 389 856 365 3 126 537 856 365

Total 4 903 595 1 803 061 5 192 008 1 803 0614 903 595 Total

Parent Company Group2007 Mortgage loans Bond dept Mortgage loans Bond dept

1 803 061 1 803 0615 192 008

Balance sheet value and actual value of long-term loans Amounts in TNOK

Mortgage loans 3 451 119 1 646 228 3 451 119 1 646 228

Bond loans 1 411 500 1 282 000 1 411 500 1 282 000

Total 4 862 619 2 928 228 4 862 619 2 928 2284 862 619Total

Balance sheet value Actual value 2007 2006 2007 2006

2 928 228 2 928 2284 862 619

Balance sheet value of the Group’s mortgage loans in different currencies are as follows: Amounts in TNOK

NOK 5 014 072 3 019 247 5 056 764 3 137 340

DKK 0 69 425 141 855 76 888

Total 5 014 072 3 088 672 5 198 619 3 214 2285 014 072Total

Parent Company Group 2007 2006 2007 2006

3 088 672 3 214 2285 198 619

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

52 53

Note 16: FINANCIAL RISK AND USE

OF FINANCIAL INSTRUMENTS

The Group’s risk management policy

The main fi nancial risks in the Group concern bun-

kers, foreign exchange, interest and liquidity risk. It

is the Group’s policy to avoid active speculation in

fi nancial risks, but to use fi nancial derivates as a buf-

fer against risks connected with fi nancial exposure in

operation and fi nancing of the Group’s business.

Currency risk

Currency risk arises when there are differences

between income and expenses in each type of cur-

rency, particularly USD, EUR and DKK and in relation

to investments/purchase of fi xed assets and repay-

Amounts in TNOK

Amounts in TNOK

Amounts in TNOK

Note 13: TRADE CREDITORS AND OTHER CURRENT COMMITMENTS

NOTE 14: LEASES

NOTE 15: NET FINANCIAL EXPENSES

Trade creditors 217 876 181 371

Debt to credit institutions 36 720 38 176

1 year’s instalment long-term debt 336 000 286 000

Other current commitments (fi nancial instruments) 33 469 17 386

Unpaid government charges and special taxes 99 199 81 512

Pre-paid income 79 383 64 510

Sundry current debt 205 403 173 515

Total 1 008 050 842 470

Charter hire 27 149 34 883

Hire of internal communications equipment 35 052 29 114

Other 2 455 2 353

Total charter hire, leasing commitments 64 656 66 350

Lease of terminals and queuing areas 18 341 21 341

Total lease commitments 82 997 87 691

Interest earned 32 987 17 577

Net gain/loss on fi nancial instruments at actual value

in income statement 69 932 82 601

Interest costs -211 531 -165 438

Foreign exchange gain/loss -15 582 34 087

Total -124 194 -31 173

2007 2006

2007 2006

2007 2006

842 470

66 350

21 341

87 691

-31 173

Total

Total charter hire, leasing commitments

Lease of terminals and queuing areas

Total lease commitments

Total

1 008 050

64 656

18 341

82 997

-124 194

ment of loans in foreign currency. The Group has

an active policy to reduce currency risk through the

hedging of currencies and the use of multi currency

loans. In a normal situation it is the Group’s policy

to cover a material part of the current currency risk

6 to 12 months ahead by means of hedging contracts,

options and swaps. Taking into account concluded

currency contracts and currency on hand as at

31 Dec. 2007, the Group has good exchange rate

cover and fl uctuations in exchange rates, primarily

in USD, EUR and DKK against NOK will have limited

effect on the result.

Interest risk

The Group is primarily exposed to interest risk through

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

54 55

its loan portfolio. The object of interest risk manage-

ment is that changes in the interest level can have

a negative effect on the result. The Group has con-

cluded interest swap agreements in order to achieve

the desired ratio between fi xed and fl oating rates of

interest. At yearend 2007, the Company had 3 swap

agreements at a nominal value of NOK 750 million

with a remaining term of approx. 18 months at an av-

erage interest rate of 5.34 percent. CIRR-fi xed inte-

rest contracts have also been concluded with Finnish

Export Credit in connection with the delivery of M/S

Color Magic amounting to NOK 2 107 mill, of which 50

percent is at a fi xed interest rate of 4.2 percent plus

margin and 50 percent is swapped to a six month

fl oating rate of interest, NIBOR less 1.315 percent p.a.

for 12 years. Total interest bearing debt is NOK 5 198

million. Fixed interest derivates have been concluded

for a total of NOK 1 803 million representing approx.

35 percent of total interest bearing debt as at 31 Dec.

2007. A change in the interest level of +/- 1 percent,

taking into account the concluded interest hedging

agreements, will affect the result by approx. +/- NOK

29 million before tax.

The table below quantifi es the future interest risk

taking into account cash in hand/bank deposits,

structure of maturity for mortgages, bond loans and

interest swap agreements. The fi gures are based on

existing balance sheet commitments as at 31 Dec.

2007.

Bunkers risk

The cost of bunkers represented approx. 10 percent

of the Group’s operating expenses in 2007 and re-

presents an operational risk resulting from the fl uc-

tuations in the price of oil. As at 31 December 2007,

the Group had no future hedging agreements for

bunkers. It has been calculated that a change in the

price of bunkers of +/- 10 percent in 2008 will have

an effect on the result of approx. +/- NOK 40 million

before tax.

Amounts in TNOKInterest sensibility, Group

Mortgage loans 3 451 119 3 148 089 2 845 059 2 542 029

Unsecured bond loans 1 411 500 1 134 500 800 000 800 000

Total debt to credit institutions 4 862 619 4 282 589 3 645 059 3 342 029

Cash in hand/bank 243 605 243 605 243 605 243 605

Interest swaps 1 715 965 878 150 790 335 614 705

Net interest bearing debt after interest swaps 2 903 049 3 160 834 2 611 119 2 483 719

Interest sensitivity at +/- 1% change 29 030 31 608 26 111 24 837

3 342 0293 645 059

Less than 1 year 1-2 years 3-4 years 5 years and over

4 862 619 4 282 589 Total debt to credit institutions

There is no difference between balance sheet value and actual value in respect of fi nancial assets.

Liquidity risk

Liquidity risk is linked to the risk of the Group

being unable to fulfi l its fi nancial commitments as and

when they fall due. The Group focuses on maintaining

a level of liquidity preparedness which, as a minimum

will cover a peak period of charges against income.

Liquidity preparedness is managed at Group level

and 12 monthly budgets are prepared and monitored

on a weekly basis. Liquidity available as at 31 Decem-

ber 2007 is NOK 1 307 million (including undrawn

credit lines). Surplus liquidity is placed primarily on

the short term money market. Reference is also made

to note 12 concerning maturity analysis and future

instalments and interest on interest bearing debt.

Capital management

An important objective is to secure fi nancial free-

dom of action both in the short and long term and

to maintain a good credit rating, thereby achieving

favourable loan conditions which bear a reasonable

relationship to the Group’s operations. The Company

manages its capital structure and makes any chan-

ges that are necessary based on current evalua-

tions of the fi nancial situation for the operation. The

Company’s capital structure is followed up by calcu-

lating the debt-equity ratio.

Credit risk

The Group’s fi nancial assets are mainly comprised of

receivables for sales, other receivables, liquid resour-

ces and fi nancial instruments. These receivables re-

present the Group’s maximum exposure and credit

risk related to fi nancial assets.

The fi gure for trade debtors in the balance sheet

is net after any allocations for potential loss, based

on previous experience and evaluation of the present

day situation. The largest part of the company’s trade

debtors fall due for payment within 3 months. The

credit risk for fi nancial derivates is considered to be

low as agreements on these assets have been con-

cluded with banks of high creditworthiness, thereby

reducing the risk that the other party will be unable

to fulfi l its commitments.

See the table on the next page concerning exposu-

re to credit risk: trade creditors/other current assets.

Determining actual value of fi nancial assets and

commitments.

The actual value of hedging contracts is determi-

ned by applying the futures rate on balance sheet

date. Actual value of currency swap agreement is

calculated by determining the present day value of

future cash fl ows. Actual value of interest swap con-

tracts is calculated by discounting the cash fl ows in

the contracts at nil coupon rates in the yield curve in

the relevant currency. Actual value of the above men-

tioned instruments is calculated by the company’s ex-

ternal bankers.

The balance sheet value of cash in hand and credit

lines is equal to actual value. Similarly, balance sheet

value of trade debtors and accounts payable is practi-

cally equal to actual value as these are concluded on

normal terms at short maturity. Actual value of long-

term bank loans is practically equal to book value as

it is assumed that the company could have achieved

approximately the same conditions if the loans had

been raised on balance sheet day. Bond loans are re-

gistered on the stock exchange and are subject to a

fl oating rate of interest falling due quarterly. Actual

value is evaluated at book value as in the opinion of

the company the loans may be bought back in their

entirety at par.

Amounts in TNOK

Amounts in TNOK

Exposure to credit risk: trade debtors/other current assets

Overview of balance sheet values and actual values for the company’s fi nancial assets and commitments.

Trade debtors 84 944 97 856

Write-downs for anticipated loss -4 062 -3 881

Net trade debtors 80 882 93 975

Pre-paid property, plant and equipment 307 289 540 994

Project costs, property, plant and equipment 70 664 0

Inter-company receivables 190 524 279 442

Sundry current receivables 188 376 136 223

Trade debtors and other receivables 837 735 1 050 634

Other fi nancial receivables 136 850 50 835

Financial assets

Loans and receivables:

Bank Deposits/cash in hand 243 605 264 299

Net trade debtors 80 882 93 975

Sundry current receivables 188 376 136 223

Actual value in income statement:

Interest swaps 136 850 43 732

Bunkers derivates 1 945

Currency derivates contracts 5 198

Financial commitments

Financial commitments at amortized cost:

Accounts payable and other current debt 638 581 539 084

Bank loans 3 787 119 1 820 190

Bond loans 1 411 500 1 394 000

Actual value in income statement:

Currency derivates contract 33 469

Interest swaps 17 386

2007 2006

2007 2006

93 975

1 050 634

Net trade debtors

Trade debtors and other receivables

80 882

837 735

2 483 7192 611 119 2 903 049 3 160 834 Net interest bearing debt after interest swaps

24 83726 111 29 030 31 608 Interest sensitivity at +/- 1% change

50 835Other fi nancial receivables 136 850

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

56 57

Amounts in TNOK

Amounts in TNOK

Amounts in TNOK

Note 18: REMUNERATION TO SENIOR EXECUTIVES

Auditors’ fees – Deloitte

Pension costs for the year (yield) are as follows:

Remuneration to senior executives etc.

Olav Nils Sunde, Group President Color Group ASA 80 137 2 219

Trond Kleivdal, Group President Color Line AS 2 669 750 192 233 3 844

Knut Hals, Senior Group Executive Color Line Cruises AS 1 919 500 233 211 2 863

Laila Valdal, Senior Group Executive Color Line Transport AS 1 625 500 175 169 2 469

Total senior executives 6 213 80 1 750 737 615 9 395

Director’s fees

Total Directors fees* 560 560

Statutory auditing services 245 1 410

Fees for other certifi cation services 204 556

Fees for tax advice etc. 21 79

Fees for other services unrelated to audit 444 1 030

Total audit and advisory fees 914 3 075

Financial assumptions

Discount rate 4,50% 4,35%

Expected annual wage adjustment 4,50% 4,50%

Expected annual adjustment of pensions 2,25% 1,60%

Expected annual G-adjustment 4,25% 4,25%

Estimated yield 5,40% 5,40%

Pension costs for the year are as follows:

Pension yield for the year 44 401 31 322

Interest cost on pension commitments 19 700 15 800

Anticipated yield pension funds -15 910 -13 866

Administration 1 040 1 091

Employers’ tax 4 640 4 132

Changes in estimates and estimate deviation in income statement -9 233 0

Cost of pensions 44 638 38 479

Reconciling of pension commitments and pension funds against balance sheet

Present value of pension commitments incurred 501 968 456 281

Value of pension funds -311 625 -308 300

Employers’ tax 21 276 21 262

Unrecognized deviation in estimate -40 425 -5 234

Pension commitments in balance sheet 171 000 164 000

9 395

560

44 638

171 000

38 479

164 000

Pension Other Total Salary Fees Bonus costs remuneration remuneration

Parent Company Group

2007 2006

Total senior executives

Total Directors fees*

Total audit and advisory fees 914 3 075

6 213 80

560

1 750

737

615

Cost of pensions

Pension commitments in balance sheet

Reconciling of pension commitments and pension funds against balance sheet

Pension costs for the year are as follows:

Financial assumptions

*Fees to Chairman of the Board, Morten Garman NOK 160 000 and to each Director NOK 80 000

A premium of TNOK 37 365 was paid in 2007. Next years premium is expected to total TNOK 38 224.

The scheme is managed by an insurance company and the composition of funds is based on the statutory management performed by this company.

In the calculation for 2007, disability table IR 02 and mortality table K05 are applied. In 2006 table K63 was applied.

Amounts in TNOK

Amounts in TNOK

NOTE 17: COST OF WAGES

Parent company (Color Group)

Cost of wages 966 674 873 618

Employers tax 190 880 173 633

Pension costs (note 19) 73 815 73 734

Other benefi ts 177 626 175 108

Total 1 408 995 1 296 093

Average man-years 2 865 3 004

Cost of wages 6 202 5 827

Employer’s tax 1 063 900

Pension costs (note 19) -764 1 478

Other benefi ts 40 39

Total 6 541 8 244

Average man-years 6 6

2007 2006

2007 2006

1 296 093

8 244

3 004

6

Total

Total

Average man-years

Average man-years

1 408 995

6 541

2 865

6

Guidelines for remuneration to

senior executives 2008

Remuneration to senior executives in the Group is to be

based on the following main principles:

The principle for basic salary

Those in executive positions shall receive a competitive

basic salary based on position, responsibility, competence

and performance of the individual executive.

The principle for variable benefi ts,

incentive schemes etc

Executives may receive a variable salary in order to

contribute towards profi t orientation. A variable salary is

based on achievement of targets for the Group, Division

or Company in which the executive is employed.

The principle of non-cash benefi ts.

Executives may be offered different schemes, such as

company car schemes, insurance, pensions and similar.

Benefi ts in kind shall be primarily in the form of home te-

lephone, mobile phone and newspaper – items that can

improve the availability of the executive for the company.

Executives are entitled to participate in a defi ned benefi ts

pension scheme.

Post termination salary scheme

The Group president of Color Line, Trond Kleivdal will, in

the case of a possible termination that is not covered by

the provisions of the Working Environment Act receive

three years salary equivalent to NOK 8.1 million. The

Group Director of Color Line Cruises AS, Knut Hals will in

a similar situation receive 1 year’s salary, the equivalent of

NOK 1.9 million. Laila Valdal, Group Director of Color Line

Transport AS would receive 1 years salary, the equivalent

of NOK 1 575 million.

Information on the preparation and

decision-making process

Remuneration to the Group President is dealt with by the

Board on an annual basis. The Board prepares annual

guidelines and a statement is submitted to the General

Meeting for discussion pursuant to the provisions of Sec-

tion 5-6 of the Public Limited Company’s Act (Norway).

Report concerning the policy for remuneration

to executives in 2007.

Guidelines for executive salaries were in accordance

with the above policy during the previous fi nancial year.

Remuneration to executives is charged to the company

as an expense and has otherwise no direct consequence

for the company’s shareholders.

Note 19: PENSIONS

As at 31 December there were 464 members in the group

pension scheme for shore-based personnel in Norway, 5

of these members being employed in the parent com-

pany. The group pension scheme for seamen comprises

2 011 members. In addition, the Group pays the shipow-

ners part of pension benefi ts for seamen which in 2007

amounted to NOK 31.4 million and in 2006 NOK 29.1 mil-

lion.

In addition to pension commitments covered by the

insurance scheme, the Group has unfunded pension

commitments that are directly covered by the Company.

These commitments apply to 19 members and are inclu-

ded in net pension commitments in the amount of TNOK

4 264. Estimated values are applied in the evaluation of

pension funds and commitments incurred. These estima-

tes are adjusted annually in accordance with a statement

of the transfer value of the pension funds and an actuarial

calculation of the commitments.

Group

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

58 59

Amounts in TNOK

Amounts in TNOK

Amounts in TNOK

Note 20: SHARE CAPITAL

The share capital comprises 71 800 000 shares of NOK 2.00 each. All shares carry equal rights.

All shares are owned indirectly by Director and Group President Olav Nils Sunde and his family.

NOTE 22: DEFERRED TAX

Specifi cation of the taxation effect of temporary differences and carry-forward loss

Note 23: COST OF TAXES

01.01.1998 48 273 700 2 96 547

1999 6 726 300 2 13 453

31.12.1999 55 000 000 2 110 000

2003 15 600 000 2 31 200

31.12.2003 70 600 000 2 141 200

2004 1 200 000 2 2 400

31.12.2004 71 800 000 2 143 600

31.12.2007 71 800 000 2 143 600

Plant, property and equipment 1 891 296 1 752 629

Intangible assets 174 811 214 527

Financial assets 112 403 4 061

Profi t and loss account 326 882 36 275

Current assets -3 942 43 439

Liabilities -193 819 88 001

Carry-forward loss -258 911 -360

Total 2 048 720 2 138 572

Deferred tax commitment as at 31 Dec. 573 641 598 800

Tax cost for the year:

Tax payable 376

Tax, Group contribution 75 340 74 341

Changes in deferred tax -25 159 28 866

Cost of taxes, ordinary result 50 181 103 583

Reconciling from nominal to actual tax rate:

Pre-tax result including extraordinary result

Ordinary result 171 425 364 801

Estimated income tax at nominal tax rate 47 999 102 144

Tax effect of following items:

Non-deductable expenses 2 182 1 545

Non-taxable income -106

Cost of taxes ordinary result 50 181 103 583

Effective tax rate 29,3 % 28,4 %

Tax cost for the year:

Tax, Group contribution 11 440 74 341

Changes in deferred tax -3 231 -7 104

Cost of taxes, ordinary result 8 209 67 237

Reconciling from nominal to actual tax rate:

Pre-tax result including extraordinary result

Ordinary result 28 919 240 071

Estimated income tax at nominal tax rate 8 097 67 220

Tax effect of following items:

Non-deductable expenses 112 17

Cost of taxes ordinary result 8 209 67 237

Effective tax rate 28,4 % 28,0 %

Plant property and equipment 174 686 193 594

Profi t and loss account 26 882 33 601

Current assets 9 022 -1 676

Liabilities -868 -4 258

Total 209 722 221 261

Deferred tax commitment as at 31 Dec. 58 721 61 953

110 000

141 200

143 600

143 600

96 547

No. shares Nom. value NOK Total

Group: Benefi t/Commitments 2007 2006

Group 2007 2006

Parent company 2007 2006

Parent company: Benefi t/Commitments 2007 2006

31.12.1999

31.12.2003

31.12.2004

31.12.2007

01.01.1998

55 000 000

70 600 000

71 800 000

71 800 000

48 273 700

2

2

2

2

2

Amounts in TNOKNOTE 21: SHAREHOLDERS’ EQUITY, PARENT COMPANY

Equity 1 Jan. 2006 143 600 1 478 436 792 395 2 414 431

Result for the year 172 834 172 834

Translation adjustment 0 0

Total income and expenses for the period 143 600 1 478 436 965 229 2 587 265

Group contribution received/contributed, owner -191 162 -191 162

Shareholders’ equity 31 Dec. 2006 143 600 1 478 436 774 065 2 396 101

Equity 1 Jan. 2007 143 600 1 478 436 774 065 2 396 101

Result for the year 20 710 20 710

Translation adjustment 0 0

Total income and expenses for the period 143 600 1 478 436 794 775 2 416 811

Group contribution received/contributed, owner 16 291 16 291

Shareholders’ equity 31 Dec. 2007 143 600 1 494 727 794 775 2 433 102

2 587 265

2 396 101

2 433 102

2 138 572

103 583

67 237

221 261

598 800

102 144

67 220

103 583

67 237

61 953

2 416 811

Share Premium Other capital fund equity Total

Total income and expenses for the period

Shareholders’ equity 31 Dec. 2006

Shareholders’ equity 31 Dec. 2007

Total

Cost of taxes, ordinary result

Cost of taxes, ordinary result

Total

Deferred tax commitment as at 31 Dec.

Estimated income tax at nominal tax rate

Estimated income tax at nominal tax rate

Cost of taxes ordinary result

Cost of taxes ordinary result

Deferred tax commitment as at 31 Dec.

Total income and expenses for the period

143 600

143 600

143 600

2 048 720

50 181

8 209

209 722

573 641

47 999

8 097

50 181

8 209

58 721

143 600

1 478 436

1 478 436

1 494 727

1 478 436

965 229

774 065

794 775

794 775

Amounts in TNOKPension costs for the year (yield) in Color Group ASA are as follows:

Present value of pension earnings for the year 939 1 643

Interest costs on pension commitments 344 617

Expected yield on pension funds -260 -495

Expensed Employers’ tax 171 244

Book estimate deviation -2 081 417

Pension costs -887 2 426

Pension commitments and pension funds

Estimated commitments 8 666 19 640

Estimated value of pension funds 4 836 11 135

Estimated net pension commitments 3 830 8 505

Calculated Employers’ tax 107 1 199

Calculated pension commitments 3 937 9 704

Unrecognized change in estimate (corridor) -3 069 -7 395

Calculated pension commitments in balance sheet 868 2 309

In the actuarial calculation carried out by an independent specialist,

the following assumptions are taken as a basis:

Discount rate 4,50% 4,40%

Expected return 5,40% 5,40%

Expected wage adjustments 4,50% 4,50%

Expected increase in pensions 2,30% 1,60%

Increase in infl ation 4,30% 4,30%

868

3 830

3 937

-887

2 309

8 505

9 704

2 426

2007 2006

Calculated pension commitments in balance sheet

Estimated net pension commitments

Calculated pension commitments

Pension costs

28,0 %Effective tax rate 28,4 %

28,4 %Effective tax rate 29,3 %

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

60 61

Amounts in TNOKReconciling of balance sheet and shareholders’ equity

Assets

Fixed assets

Intangible assets 671 301 671 301 600 571 70 730 671 301

Total intangible assets 671 301 0 671 301 600 571 70 730 671 301

Plants under construction 12 655 12 655 43 963 43 963

Land, buildings and other real estate 326 531 326 531 337 349 337 349

Machines and F.F&E 60 166 60 166 63 479 63 479

Ships 4 105 638 10 841 4 116 479 3 789 278 25 544 3 814 822

Total tangible fi xed assets 4 504 990 10 841 4 515 831 4 234 069 25 544 4 259 613

Shares and other participations 25 429 25 429 25 429

Other receivables 496 891 119 077 615 968 680 898 -538 674 116 795

Total fi xed asset investments 522 320 119 077 641 397 680 898 -538 674 142 224

Total fi xed assets

Current assets

Other fi nancial assets 262 262 50 835 50 385

Inventories 163 870 163 870 168 611 168 611

Trade debtors 92 785 92 785 93 975 93 975

Other receivables 224 109 19 806 243 915 691 153 265 505 956 658

Liquid assets 134 238 134 238 264 299 264 299

Total current assets 615 002 20 068 635 070 1 218 038 316 340 1 534 378

Total assets 6 313 613 149 986 6 463 599 6 733 576 -126 060 6 607 516

Liabilities and shareholders’ equity

Contributed equity 1 622 036 1 622 036 1 622 036 1 622 036

Other equity 350 484 -51 117 299 367 266 717 185 257 451 974

Total equity 1 972 520 -51 117 1 921 403 1 888 753 185 257 2 074 010

Liabilities

Deferred tax 557 425 -19 879 537 546 545 693 53 107 598 800

Pension commitments, other commitments 1 880 151 762 153 642 4 825 159 184 164 009

Total allocations and commitments 559 305 131 883 691 188 550 518 212 291 762 809

Mortgage debt 2 035 568 -174 000 1 861 568 1 820 228 -174 000 1 646 228

Bond debt 1 180 000 1 180 000 1 394 000 -112 000 1 282 000

Total long-term debt 3 215 568 -174 000 3 041 568 3 214 228 -286 000 2 928 228

Current debt 566 220 243 220 809 440 539 083 303 386 842 469

Total current debt 566 220 243 220 809 440 539 083 303 386 842 469

Total debt 6 313 613 149 986 6 463 599 6 192 582 414 934 6 607 517

671 301

4 259 613

142 224

6 607 516

2 074 010

762 809

2 928 228

6 607 517

1 534 378

Effect of Effect og switch to IFRS switch to IFRS NAS 1 Jan. 2006 IFRS NAS 31 Dec. 2006 IFRS

Total intangible assets

Total tangible fi xed assets

Total fi xed asset investments

Total assets

Total equity

Total allocations and commitments

Total long-term debt

Total debt

Total current assets

671 301

4 504 990

522 320

6 313 613

1 972 520

559 305

3 215 568

6 313 613

615 002

0

10 841

119 077

149 986

-51 117

131 883

-174 000

149 986

20 068

671 301

4 515 831

641 397

6 463 599

1 921 403

691 188

3 041 568

6 463 599

635 070

600 571

4 234 069

680 898

6 733 576

1 888 753

550 518

3 214 228

6 192 582

1 218 038

70 730

25 544

-538 674

-126 060

185 257

212 291

-286 000

414 934

316 340

Note 25: DEVELOPMENTS AFTER

BALANCE SHEET DATE

Delivery of SuperSpeed 1 and 2 was originally planned

for December 2007 and during the fi rst six months

of 2008 respectively. Delivery had not taken place

by balance sheet date due to delays at the ship-

yard. SuperSpeed 1 was delivered on 27 February

2008. The fi nancial consequences for Color Line are

limited and the company has received contractual

fi nes from Aker Finnyards during the entire period.

Color Line has not exercised its rights with regard to

SuperSpeed 1 as described in Note 2. According to the

contract, SuperSpeed 2 was due for delivery end April

2008. The shipyard has given notice that the ship will

be delayed in relation to the planned delivery.

The Company will receive contractual daily fi nes

from Aker Finnyards for the period between con-

tractual delivery and actual delivery date.

In 2007 the Group concluded agreements on the

sale of the ships M/S Color Festival and M/S Petter

Wessel, delivery to take place in January and April

2008 respectively.

Note 26: EXPLANATION CONCERNING

THE SWITCH TO IFRS

As mentioned in Note 1, this is Color Group’s fi rst

consolidated fi nancial statement presented accor-

ding to IFRS. The accounting principles in Note 1

have been applied in the preparation of the fi nancial

accounts as at 31 Dec. 2007 and the comparison in-

formation for 2006. Moreover, in preparing the IFRS

opening balance as at 1 January 2006 which is the

Group’s switchover date to IFRS, the fi gures in the

accounts, previously presented in accordance with

the Norwegian accounting standard have been revi-

sed to correspond to IFRS.

Amounts in TNOK

NOTE 24: RESULT PER SHARE

The result per share is calculated as an annual result providing an average

of the number of outstanding shares throughout the year.

Result for the year after tax 121 244 261 218

Weighed average no. shares 71 800 000 71 800 000

Result per share 1,69 3,64

2007 2006

261 218

71 800 000

3,64

Result for the year after tax

Weighed average no. shares

Result per share

121 244

71 800 000

1,69

Reconciling of the balance sheet and shareholders’ equityCOLOR GROUP ASA

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

62 63

4) Pensions

Pension commitments in the accounts according to

NAS at 1 Jan. 2006 are lower than the actual pension

commitments. This has an effect on shareholders’

equity as at 1 Jan. 2006 of NOK 132 million after tax

and as at 31 Dec. 2006, NOK 123 million after tax. The

effect on the result in the revised income statement

for 2006 is improved by NOK 12.3 million before tax.

5) Group contribution

Calculated allocation for Group contribution is clas-

sifi ed in NAS as a current liability on balance sheet

date. According to IFRS, dividend and Group contri-

bution shall be included in shareholders’ equity until

declaration of dividend has been fi nally decided by

the company’s general meeting. This change effects

shareholders’ equity positively as at 1 Jan. 2006 in

the amount of NOK 108.6 million and in the amount

of NOK 191.2 million as at 31 Dec. 2006.

6) Reclassifi cation of the fi rst year’s

instalment on long-term debt

In accordance with NAS the Group chose to classify

the fi rst year’s instalment as long-term debt. Accor-

ding to IFRS, the fi rst year’s instalment of long-term

debt shall be classifi ed as a current liability. Reclassifi -

cation as at 1 Jan. 2006 amounted to NOK 174 million

and as at 31 Dec. 2006, NOK 286 million.

Amounts in TNOK

Amounts in TNOK

7) Deferred tax

The changes referred to above have had the following effect on deferred tax.

The taxation rate is 28 percent.

8) Reconciling of shareholders’ equity

The changes mentioned above have had the following effect on the Group’s shareholders’ equity

Deferred tax at start of period NAS 557 425 545 693 561 004

Other 0 0 1 400

Goodwill 0 6 169 12 339

Property plant and equipment 2 934 7 152 19 194

Pensions -51 382 -47 938 -42 908

Group contribution 42 230 74 342 -6 335

Financial instruments -13 661 13 382 28 947

Deferred tax at end of period in IFRS 537 546 598 800 573 641

Shareholders’ equity at start of period NAS 1 972 520 1 888 753 1 874 832

Other 0 0 3 600

Goodwill 0 64 560 129 122

Property plant and equipment 7 805 18 392 49 357

Pensions -132 126 -123 270 -110 335

Group contribution 108 593 191 164 -16 290

Financial instruments -35 389 34 411 74 434

Shareholders’ equity at end of period IFRS 1 921 403 2 074 010 2 004 720

573 641

2 004 720

1 Jan. 2006 31 Dec. 2006 31 Dec. 2007

1 Jan. 2006 31 Dec. 2006 31 Dec. 2007

Deferred tax at end of period in IFRS

Shareholders’ equity at end of period IFRS

537 546

1 921 403

598 800

2 074 010

NOTES ON THE RECONCILING

OF SHAREHOLDERS’ EQUITY

1) Goodwill

Goodwill related to the ferry business has in NAS

been subject to planned depreciation over a period

of 15 years for day time services and 20 years for

night-time services. According to IFRS, goodwill shall

no longer be depreciated but tested annually to see

if there is a basis for write-down. The test for any

drop in value is performed on the basis of estimates

for the Group’s discounted cash fl ows. The effect of

income is positive in the amount of approx. NOK 70

million before tax.

2) Tangible fi xed assets

According to NAS tangible fi xed assets are entered

at historical cost and depreciated according to the

straight line method at a calculated residual value.

In IFRS scrap value is also applied and at the same

time the depreciation period refl ects to a greater

extent the useful life of ships and other tangible as-

sets. IFRS also requires that the company’s tangible

assets (ships) are decomposed and that the diffe-

rent components (groups) are depreciated over es-

timated useful life. The Group has decided to break

down its ships into three main groups, hull, engines

and equipment, and hotel/restaurants. Based on the

decomposed procurement costs and residual values

for the Group’s ships, a recalculation of accumulated

depreciation and book values has been carried out as

at 1 Jan. 2006. The implementation effect on share-

holders’ equity after tax as at 1 Jan. 2006 is NOK 7.8

million and NOK 18.4 million as at 31 Dec. 2006. In re-

spect of other tangible assets, the historical cost from

NAS has been carried forward. The changes involve a

reduction in ordinary depreciation of 14.7 million.

3) Other receivables/commitments

According to IFRS, fi nancial contracts shall be inclu-

ded at actual value. In the accounts, the value of ne-

gotiable interest contracts is included in connection

with the new buildings of ships. As at 31 Dec. 2007

these contracts had a value of TNOK 133 040, compa-

red with TNOK 89 308 in the preceding year, thereby

reducing net fi nancial items. The value as at 31 Dec.

2006 was TNOK 43 732 giving a result in 2006 of

TNOK 23 926.

In connection with the newbuilding of ships, the

cost of borrowing on ships upon completion has been

capitalized. During the building period these expen-

ses that relate to pre-payments are included under

other receivables. As at 31 Dec. 2007 these expen-

ses amounted TNOK 28 501 incurred in 2007. The

amount is included as a deduction in net fi nancial

items. Capitalized borrowing expenses as at 31 Dec.

2006 totalled TNOK 14 344 providing a result in 2006

of TNOK 14 344.

Other hedging contracts have been concluded. As

at 31 Dec. 2007 these contracts had a value of – TNOK

29 659. The change in 2007 was – TNOK 19 376.

The amount is included as a reduction of net fi nan-

cial items. The value as at 31 Dec. 2006 was – TNOK

10 283. The effect on the result for 2006 was TNOK

58 675.

Amounts in TNOKReconciling of income statement for 2006

Operating income

Operating income 4 584 922 4 584 922

Operating expenses

Cost of sales -1 579 060 -1 579 060

Cost of wages -1 308 394 12 301 -1 296 093

Other operating expenses -849 861 -849 861

Losses on accounts receivables -507 -507

Ordinary depreciation and charter hire -548 860 85 433 -463 427

Gain/loss on sales and write-downs 0 0

Operating result (EBIT) 298 240 97 734 395 974

Financial income and expenses

Financial income 51 664 82 601 134 265

Financial expenses -179 782 14 344 -165 438

Share of result, associated companies 0 0

Pre-tax result for the year 170 122 96 945 364 801

Cost of taxes NAS -62 708 -40 875 -103 583

Result for the year 107 414 261 218

395 974

261 218

364 801

4 584 922

NAS Effect of conversion to IFRS IFRS

Operating result (EBIT)

Result for the year

Pre-tax result for the year

Operating income

298 240

107 414

170 122

4 584 922

97 734

96 945

COLOR GROUP ANNUAL REPORT 2007 // DIRECTORS REPORT AND FINANCIAL STATEMENT

64