Annual report Grieg Maturitas 2017

2017

ANNUAL REPORT

Content Directors’ report .....................Page 3-6 Profit and loss statement .Page 7 Balance sheet .........................Page 8-9 Cashflow statement ............Page 10 Notes ..........................................Page 11-30

3 9 10 12 13 32

DIRECTORS’ REPORT 2017 GRIEG MATURITAS

2017 was a good year for the Grieg Group overall, mainly due to a strong market in the salmon industry and the positive results from Grieg Seafood. Grieg Star is still facing tough markets, while several of the other companies within the Grieg Group delivered good results. Group turnover was NOK 9 bill., the operating profit NOK 815 mill. and the profit before tax was NOK 671 mill. The Group is well positioned for the future.

The Grieg Group continues to develop within all our business areas. Last year was influenced by large investments now becoming operational through G2 Ocean, Grieg Strategic Services, new brokerage offices, expanded hatcheries and the completion of our headquarter Grieg-Gaarden in Bergen.

In addition, Grieg Investor continued to deliver good results.

Highlights

Grieg Seafood celebrated its 25th anniversary with solid results. Salmon prices were down compared to 2016, but the demand for salmon continued to increase. Production in Norway fell due to low sea temperatures, but was still at a satisfactory level.

Actions taken in British Columbia impacted positively on production in 2017, but Shetland had another year with biological challenges. The company has focus on increasing the number of smolt in the sea, and met its goals set for 2017 with 26 million smolt.

The extension of the hatchery in Rogaland was completed and the work of extending the hatchery in Finnmark has started. The production of salmon in 2017 stood at 62 600 tons, and the company now has considerable unused growth capacity after sustainable investment in new farming capacity both on land and at sea.

Grieg Group KEY FIGURES (NOK mill.)

Turnover EBIT Profit before tax Profit after tax

2017

2016

9 058 815 671 464

10 985 1280 870 654

Grieg Group

For Grieg Star a new chapter was started with the establishment of G2 Ocean together with Gearbulk. All of Grieg Star’s ships are now part of the G2 Ocean Pool, which is the world’s largest within the Open Hatch segment. This joint venture positions us for future cost benefits and streamlined ship operations. With a large part of the revenues related to long-term contracts, the recovery in freight rates in 2017 is not immediately reflected in the results for G2 Ocean and Grieg Star. This will first become apparent as the contracts are renewed in the coming years. Grieg Star recorded another deficit in 2017 due to depressed market and substantial reorganisation costs. As a result of establishing G2 Ocean, Grieg Star is now reporting net operating revenues, effectively down NOK 2 bill.

Grieg Logistics increased its earnings in 2017, and most of the subsidiaries delivered positive results. Grieg Strategic Services was established in order to enter into a strategic cooperation agreement with the Norwegian Armed Forces for the delivery of logistics services to military operations. The company is implementing new technology for seamless operations between harbours, terminals, ships and shipowners.

Grieg Shipbrokers had a positive year with good results in most of its business segments, while at the same time carrying out major investments. The company expanded with the establishment of offices in Singapore and Shanghai focusing on chartering of Capesize and Kamsarmax, in addition to a new department in Norway to handle the purchase and sale of offshore and service vessels for the fish farming industry.

The Grieg Group is a global group of companies.

Through our flexibility and international culture, we gather experience and know-how globally, which we share within the Group, and in the societies in which we operate. The business is based on long-term partnerships, creating value in our various activities – shipping, shipbroking, maritime services & port operations, seafood, investments and financial advisory services. The headquarter is located at Grieg-Gaarden, Bergen, Norway, and the Group is represented in 15 countries all over the world. Grieg Maturitas AS owns 75% of the shares and Grieg Foundation the remaining 25%.

Grieg Maturitas AS Grieg Maturitas is the parent company of the Grieg Group and is owned by the Grieg family. The company is responsible for organizing and facilitating a good corporate structure and branding, as well as challenging the companies within the Group to develop strategically and profitably in a sustainable manner, and in accordance with our principles.

Grieg Investor made another year of profit and growth, and is well positioned for further expansions.

The investment companies Grieg Holdings and Grieg International delivered a good result mainly due to high return on the investment portfolio.

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Rensefiskgruppen, producing cleanerfish for the salmon farming industry, had its 5th year of consecutive growth, and is now the largest company in this segment.

The Group’s headquarter, Grieg-Gaarden in Bergen, has undergone expansion and upgrading in recent years. This has now been completed, and the building is the location of modern and functional office premises in the heart of Bergen.

We are in the process of establishing the UN’s sustainability goals as an active part of and a framework for the Group and the companies’ strategy, innovation and entrepreneurship.

For more information on financial results per segment, see note 2.

Balance sheet, financial situation and cash flow

The Grieg Group has a strong financial position. Total current assets amount to NOK 5 424 mill., of which NOK 1 865 mill. is made up of bank deposits, market based financial investments and other current assets. Current liabilities total NOK 2 382 mill., which gives positive working capital of NOK 3 042 mill. The Group’s fixed assets total NOK 10 445 mill., of which NOK 6 027 mill. is financed through loans in financial institutions.

Total long-term interest-bearing debt is NOK 600 mill. less than in 2016.

Cash flow In total, the Group had a positive cash flow of NOK 742 mill. from operations. Due to investments in fixed assets, mainly Grieg Seafood’s expansion of fish hatcheries in Finnmark and Rogaland, the net cash flow from investing activities is negative at NOK 72 mill. The net cash flow from financing activities is negative at NOK 927 mill., mainly due to loan repayment and dividends paid. In total, the Group had a negative cash flow of NOK 257 mill. in 2017.

Grieg Group KEY FIGURES (NOK mill.)

Equity Total assets Equity ratio

2017

2016

6 980 15 869 44%

7 640 16 926 45%

Financial risk and risk management

When operating in a global market and across different business areas, the companies of the Grieg Group are exposed to different types and degrees of risk, ranging from market operations and financial risk to compliance and the regulatory framework. Risk management is a continuous process and an integrated part of the Group’s governing model. Thus, we are constantly focusing on how to identify and monitor the risk areas in the Group companies as well as developing strategies to mitigate such risks.

For further information concerning financial risk, see note 17 to the Group accounts.

Organization and working environment

15

The companies of the Grieg Group are to a large extent based on expert-knowledge, and the employees’ qualifications constitute a substantial part of the business capital.

Our aim is to be an attractive employer where people can develop and enjoy working.

The Board is of the opinion that job satisfaction is generally high and that the working environment is good. Throughout the organization there are ongoing training and learning activities.

COUNTRIES REPRESENTED IN Equal opportunities The Grieg Group seeks at all times to ensure equal opportunities and rights for all its employees. We do not accept discrimination on the basis of gender, religion, cultural background or race, or in any other form.

Health and safety There is continuous focus on training, and the quality of work processes in the Grieg Group companies aims at reducing the risk of serious incidents. The workforce in general is stable, and both the absence and injury rates are low. Besides organizing medical follow-ups, the Group encourages and facilitates participation in physical activities.

Corporate Social Responsibility The Grieg Group emphasizes the creation of economic and social values in a longterm perspective, recognizing the environmental and social impacts of our business activities. As well as complying with both national and international environmental

Sick-leave Long-term sick-leave Major injuries

2017

2016

2,5% 1,9% -

2,2% 1,4% -

1881 EMPLOYEES 31.12.2017

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regulations, laws and rules, the Group’s companies strive to play an active role in implementing as well as developing environmental procedures and technology in order to reduce the risk of environmental damage.

The Grieg Group is in the process of establishing the UN’s sustainability goals as an active part of and a framework for the Group and the companies’ strategy, innovation and entrepreneurship. This involves all employees and strengthens our focus on sustainability, building it into our established values, while taking account of the environment, society and profitable growth.

Shipping operations entail the discharge of harmful emissions. The Grieg Star Group works continuously to be a visible and distinct contributor to environmental awareness and development. In 2017, the organization worked on short and medium-term plans for the execution of the environmental strategy towards end-2020. The Group’s environmental vision: “No harmful emissions to air, sea and land” remains as a basis.

The focus going forward is on how to achieve efficient and smart initiatives under extremely challenging market conditions. A plan has been established setting out how to achieve the 2020 emission reduction target of 35% compared to 2007 levels. The new strategy and action plan constitute the Group’s road map for achieving environmental responsibility in the conduct of its business going forward. Grieg Star is committed to the UN Global Compact and transparent reporting on progress. For more information, please visit www.griegstar.com.

As demand for seafood continues to grow, intense pressure has been put on the industry in aquaculture to meet this demand in a sustainable manner. The salmon industry is currently favoured as a long-term solution to global animal protein shortages, which gives it a competitive advantage compared to other industries. Grieg Seafood’s main cost drivers, risks and opportunities are increasingly connected to managing the impact on the environment. Systematic efforts to secure balanced sustainability are therefore fundamental in order to facilitate long-term profitable growth and are also increasingly becoming a premise for the public licence of the industry.

In 2017 Grieg Seafood continued its work on common sustainability goals through the Global Salmon Initiative (GSI) and has made great progress to improve its impact on society and the local community, ensuring that it produces a healthy and nutritious product in a sustainable way. For further information about Grieg Seafood’s work on sustainability goals, please find the sustainability report published on www.griegseafood.com.

The Grieg Group’s head office at Grieg-Gaarden is certified as an eco-lighthouse.

Grieg Foundation

Grieg Foundation owns 25% of the Grieg Group. The Foundation supports global projects for the education of children and youth, medical research and environmental projects, as well as art and cultural projects. In 2017 Grieg Foundation’s contributions amounted to NOK 32 mill. Since its establishment in 2002 the Foundation’s total distributions amount to approx. NOK 546 mill.

Corporate Governance

In order to ensure that the division of responsibility for tasks and roles between the administration, the Board of Directors and the General Meeting is based on sound practice, the Norwegian Recommendation on Corporate Governance is applied. Deviations may arise given the fact that the Group is privately owned.

Grieg Foundation - distributions (Amounts in NOK mill.)

2017

2002-2017

Education of children & youth

10,8

207,5

Musical art

6,5

78,8

Cultural projects

3,6

103,2

Medical research and projects

4,1

68,3

Other projects

6,8

88,7

31,8

546,5

Total

Most of Grieg Group’s companies are doing business globally. The companies within the Group operate independently, but close cooperation across company borders is encouraged. This contributes to a higher knowledge level and a shared culture. In order to ensure an ethical foundation for our business as well as a solid company culture, we have four common core values; Solid, Proud, Open and Committed. These values define the compass by which we navigate when doing business across the world.

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Going concern

The Board of Directors confirms that the annual accounts have been prepared on a going concern basis and that this assumption is valid, based on the Group’s solid financial position and expectations of future profits. The Board believes that the submitted annual accounts give a correct picture of the result, cash flow and economic situation. No events have taken place after the balance sheet date that could materially affect the accounts.

Outlook

Although many of our business areas are still being tested by challenging markets, tough competition and economic difficulties, we are continuously developing in an innovative way, making us better prepared for the future. Globalized and exponential technology trends represents opportunities for growth and profitability.

Within the seafood segment we believe in increased demand for salmon and relative good market prices in the future. Grieg Seafood works hard to bring the cost level down to the industry average and lower, and to shorten the production time. Other initiatives within the aquaculture segments also further strengthens the Group’s presence in this industry. After strong investment in new capacity the recent years, the salmon farming group expects a substantial lift in production and turnover during the next 2-3 years both on land and in sea.

Through Grieg Star’s joint venture with G2 Ocean, we are steadily moving towards our vision of «pioneering sustainable shipping». In the shipping segment, a gradual normalization of rates and values is expected to materialize over the next few years. This, combined with further synergies from G2 Ocean corporation, and further improvement and innovation from the operation in Grieg Star is expected to increase earnings.

Going forward, we will focus on adapting to changing markets and pursue opportunities as they arise. Supporting new business ideas and facilitating innovation initiatives within the Group are highly focused. In 2018 we are also establishing a new investment entity to coordinate investing activities and further strengthen the Group’s asset management activities.

The Board of Directors would like to express our thanks to the employees of the Grieg Group for their hard work and efforts throughout the year.

Bergen, 5th of April 2018 The Board of Directors of Grieg Maturitas AS

Elna-Kathrine Grieg Board Member

Elisabeth Grieg Chair

Per Grieg jr.

Board Member

Camilla Grieg Board Member

Stig Grimsgaard Andersen Board Member

Wenche Kjølås Managing Director

2017

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6

PROFIT AND LOSS STATEMENT GRIEG MATURITAS AS

GRIEG GROUP

(Amounts in NOK 1000)

(Amounts in NOK 1000)

2016

2017 Note

3 421

3 431

2

Operating Revenue

2017

2016

9 058 834

10 984 508

-872 703

-952 516

Operating Costs -3 340

-3 858

-

-

Profit (loss) sale of tangible assets

-

-

6,7

Depreciation

-

-

6

Reversal (write-down) fixed assets

-

-

3

-

-

-916

- 1 306

-4 256

- 5 164

-835

- 1 733

2

74 525

416 014

8

Income from investments in subsidiaries

1 216

932

Other Financial income

-

-

10 14

-

-

-1

4

Payroll and social security costs

-

-4 470

-596 761

-560 550

-2 974

6 033

Operating costs - shipping

-864 608

-2 974 948

3

Cost of sales - fish farming

- 3 754 704

-3 327 298

3,23

Other operating expenses

-2 151 641

-1 890 355

Total operating expenses

- 8 243 391

-9 704 105

Operating profit - EBIT

815 444

1 280 403

-

-

156 217

89 940

Change in value of market based assets

34 309

22 441

9

Results of investments in associated companies

-55 013

12 637

-2

10

Other Financial expenses

-279 951

-535 845

75 741

416 944

2

Net financial items

-144 439

-410 827

74 906

415 211

2

Profit before tax

671 005

869 576

-107

- 177

19

Tax

-207 362

-215 705

74 799

415 387

20

Profit for the year

463 643

653 871

To minority interests

394 415

484 871

Majority proportion

69 228

169 000

Financial items

2017

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BALANCE SHEET GRIEG MATURITAS AS

GRIEG GROUP

(Amounts in NOK 1000)

(Amounts in NOK 1000)

2016

2017 Note

2017

2016

28 480

22 163

Assets Fixed assets Intangible assets -

-

Research and development

-

149

-

-

-

-

Contracts

39 867

41 018

-

-

Goodwill

19 283

23 993

-

-

Licenses

1 087 834

1 078 272

-

149

Total intangible assets

1 175 464

1 165 446

1 091 720

1 018 142

-

90 684

19

7

Deferred tax assets

Tangible assets -

-

Land and real estate

-

-

Loading and discharge equipment

-

-

Vessels

6 463 659

7 099 523

-

-

Vehicles, machinery and equipment

1 535 086

1 222 741

-

-

9 090 465

9 431 090

-

-

6

Total tangible assets

Long-term financial assets 4 021 796

4 021 796

8

Investments in subsidiaries

-

-

9

Investments in associated companies

78 834

4 407

-

-

13

Loans to associated companies

28 033

20 524

-

-

Shareholding and other investments

51 774

27 976

-

-

11 13

Other receivables

20 230

281 196

4 021 796

4 021 796

Total long-term financial assets

178 872

334 103

4 021 796

4 021 995

Total fixed assets

10 444 801

10 930 639

2 150 716

1 869 267

862 455

984 131

-

-

545 847

523 815

1 408 302

1 507 946

Current assets -

-

12

-

Stocks Accounts receivable

74 525

292 500

Receivables from subsidiaries

12

93

74 537

292 593

-

-

11

Shareholding and other investments

148 330

132 887

-

-

14

Market based financial investments

802 891

1 313 997

144 515

43 660

16

Cash and bank deposits

914 140

1 171 006

219 052

336 253

5 424 379

5 995 103

4 240 848

4 358 198

15 869 180

16 925 742

Other receivables Total receivables

Total current assets

Total assets

2017

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BALANCE SHEET

GRIEG MATURITAS AS (Amounts in NOK 1 000)

2016

2017 Note

GRIEG GROUP (Amounts in NOK 1000)

2017

2016

1 124

1 124

Equity and liabilities Equity Paid-up equity 1 124

1 124

21

Share capital (1 123 530 shares of NOK 1 )

702 263

409 763

Share premium

409 763

702 263

703 387

410 887

Total

410 887

703 387

3 461 825

3 653 699

Other equity/group reserves

3 833 459

4 111 162

-

-

Minority interests

2 735 613

2 824 977

3 461 825

3 653 699

Total retained earnings

6 569 070

6 936 139

4 165 212

4 064 585

Total equity

6 979 957

7 639 526

60 191

74 610

408 960

360 019

Retained earnings

20

Liabilities Provisions -

-

5

Pension liabilities

28

-

19

Deferred tax

-

-

Other provisions

10 276

12 424

28

-

Total provisions

479 427

447 053

5 959 416

6 623 751

67 952

3 329

6 027 368

6 627 080

Bank overdrafts

541 848

512 535

Accounts payable

673 691

612 075

-

-

165 587

177 956

58 118

91 239

Dividend

398 233

102 117

Other current liabilities

544 952

715 262

2 382 428

2 212 084

Other long-term liabilities -

- 15,16 Liabilities to financial institutions

-

-

-

-

-

-

15

Other long-term liabilities Total long-term liabilities

Current liabilities 16

25

138

22

14

115

-

271

289

74 525

292 500

650

672

75 608

293 613

Total current liabilities

75 636

293 613

Total liabilities

8 889 224

9 286 216

4 240 848

4 358 198

Total equity and liabilities

15 869 180

16 925 742

Accounts payable group companies

19

Taxes payable Public duties payable

20

Bergen, 5th of April 2018 The Board of Directors of Grieg Maturitas AS

Elna-Kathrine Grieg Board Member

Elisabeth Grieg Chair

Per Grieg jr.

Board Member

Camilla Grieg Board Member

Stig Grimsgaard Andersen Board Member

Wenche Kjølüs Managing Director

2017

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9

CASHFLOW STATEMENT GRIEG MATURITAS AS

GRIEG GROUP

(Amounts in NOK 1 000)

2016

(Amounts in NOK 1000)

2017

2017

2016

671 005

869 576

-177 956

-23 289

-

4 470

Cashflow from operations 74 906 -212 -74 525

415 211 Profit before tax -115 Taxes paid - Gain/loss from sale of fixed assets -416 014 Dividends receivable taken to income

-

- Ordinary depreciation

-

- Write-down (reversal) of fixed assets

-

- Unrealised gain/loss market based investments

-

- Unrealised gain/loss investments in shares

-

- Change in inventory

-

-81 Change in accounts receivable

635 506

560 551

-273

-6 033

-34 309

-22 441

-

129 676

-281 449

-22 819

121 676

-162 730

-21

105 Change in accounts payable

61 616

-177 776

35

40 Change in accruals

- 2 148

-129 730

-

- Difference in expenses pensions and payment in/out

-2 862

-2 073

-

- Effect of change in exchange rate

8 468

99 160

-

- Share of profit from associated companies and joint ventures

55 013

-12 637

-

- Gain/loss on sales of shares without cash effect

-134 827

-35 674

-

- Change in other provisions

-176 987

-

-855 Net cashflow from operations

742 473

1 068 230

10 908

382 668

-777 512

-615 560

-31 467

-18 908

-

-

183

Cashflow from investing activities -

- Sale of fixed assets

-

- Purchase of fixed assets/newbuilding contracts

67 500

- Purchase of intangible assets 198 039 Payments from other group companies

-

- Payments from other claims (short/long term)

-

17 911

-

- Sale of shares

963 700

496 056

-

- Purchase of shares and securities

-237 618

-671 893

-71 989

-409 727

67 500

198 039 Net cashflow from investing activities

Cashflow from financing activities -

- Net change in bank overdraft

27 465

174 304

-

- Loan repayment (short/long-term)

-705 058

-3 526 560

-

- Loan proceeds

400 759

2 853 697

-67 500

-298 039 Dividends paid

-650 515

-198 026

-67 500

-298 039 Net cashflow from financing activities

-927 349

-696 585

- 256 866

-38 082

1 171 006

1 209 088

914 140

1 171 006

183

-100 855 Net cashflow for the period

144 332

144 515 Opening balance of cash and cash equivalents

144 515

43 660 Cash and equivalents 31.12

2017

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NOTES NOTE 1 Accounting principles 12 NOTE 2 Segment information 14 NOTE 3 Other operating expenses 14 NOTE 4 Payroll costs, number of employees, remuneration etc. 15 NOTE 5 Pensions and pension commitments 16 NOTE 6 Fixed assets 17 NOTE 7 Intangible assets 18 NOTE 8 Investments in subsidiaries 18 NOTE 9 Investments in associated companies and joint ventures 21 NOTE 10 Financial items 21 NOTE 11 Shareholdings and other investments 22 NOTE 12 Stock and bunkers 23 NOTE 13 Receivables due in more than one year 23 NOTE 14 Marketbased financial investments 23 NOTE 15 Debt payable in more than 5 year 23 NOTE 16 Mortgages/guarantee liability/restricted funds 24 NOTE 17 Financial risk 25 NOTE 18 Contingencies and subsequent events 26 NOTE 19 Taxes 26 NOTE 20 Equity 28 NOTE 21 Share capital and share information 28 NOTE 22 Related parties 29 NOTE 23 Remuneration to auditor 29 NOTE 24 Discontinued operations 30

Note 1 Accounting principles

Foreign exchange rates (NOK)

01.01.2017

31.12.2017

Average 2017

The Annual Accounts for Grieg Maturitas AS have been prepared in accordance with Norwegian Accounting Act and generally accepted accounting principles.

CAD

6,4042

6,5432

6,3696

GBP

10,6130

11,0910

10,6386

Group Accounts

EUR

9,0863

9,8403

9,3271

USD

8,6200

8,2050

8,2630

The consolidated accounts include the subsidiaries specified in note 8 and shows the accounts of the parent company and the subsidiaries as a single economic unit. Shareholdings and investments in sub-sidiaries are eliminated on the basis of the acquisition method. The cost of shareholdings and investments in subsidiaries is eliminated against the book equity of the shares/investments at the date of acquisition. Any difference arising is posted to the identifiable assets. Any surplus value that cannot be attributed to specific assets, or the company’s own intangible assets, is described as goodwill and is depreciated over its estimated lifetime. Intra-group transactions and internal balances are eliminated.

Companies that are bought or sold during the year, is included in the group accounts from the time of control arises or ceases.

Changed owner share in subsidiaries, where the company after the transaction still is a subsidiary, is an equity transaction for the Group.The income statements and balance sheets of the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities are converted at the closing rate on the date of the balance sheet, (ii) income and expense items in the income statement are converted at average exchange rates for the period (unless this average is not a reasonable estimate of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated on the dates of the transactions). (iii) translation differences are recorded against equity and specified separately.

Operating Revenue

Operating revenues are entered as income at the time of delivery. The time of delivery is understood as the time of transfer of risk and control related to the delivery. Freight revenues from voyages are recognised on the basis of the number of days the voyage lasts. Revenue is shown, net of value added tax, returns and discounts.

Classification of assets and liabilities – main rule

Assets intended for long-term ownership or use are classified as fixed assets. Other assets are classified as current assets. Receivables due within one year are classified as current assets. The corresponding criteria are applied to classify liabilities. Certain items are stated on the basis of special valuation rules, in accordance with accounting legislation, as detailed below.

Other assets and liabilities are classified as fixed assets and long-term liabilities, respectively.

Inventories

Inventories are recognised at the lower of cost and fair value. Goods in progress, and finished goods are recognised at the lower of full cost and net sales value. The net sales value of finished goods is calculated as sales value less sales costs. The stock of bunkers consists of fuel and diesel and are recognised at cost on the basis of the FIFO method.

Foreign currency

Assets and liabilities denominated in foreign currencies are stated at the year-end exchange rate. Agio, or disagio, on settlements or conversion of monetary items in foreign currency on the day of balance is allocated.

Transactions in foreign currencies is recalculated to transaction rate.

Foreign exchange hedging derivatives purchased in order to reduce the currency risk for the sub-group Grieg Star Group are recognised as hedging transactions. Gains/losses of foreign exchange contracts are therefore recorded in the same period as the hedged transactions. Please refer to note 17. Unrealized gain/loss on the hedging contracts is not posted on the balance sheet.

Interest rate hedging

Interest rate hedging contracts are recognised and classified in the same way as the related mortgage loan. The interest received/paid under the contract is therefore recognised in the interest period in question, and is included in interest cost/income for the period. Unrealized gain/loss on the hedging contracts is not posted on the balance sheet.

Accounts receivable

Accounts receivable are stated at nominal value less provisions for expected losses. The loss provision is based on an individual assessment of each accounts receivable.

Investments in subsidiaries

A company is defined as a subsidiary if the Group has a decisive influence on its operations. This is normally the case where the Group holds more than 50% of the voting share capital. Subsidiaries are posted in the company accounts applying the cost method. The investment is stated at historical cost of the shares unless a write-down has been necessary. The investment is written down to fair value when the reduced value is due to causes which are not deemed to be temporary. Write-downs are reversed when the grounds for the write-down no longer exist. Dividends and other distributions are recognised in the year in which they are provided for in the accounts of the subsidiary. If the dividend exceeds the profit after the acquisition, the surplus amount represents repayment of the capital investment and the distributions are deducted from the amount of the investment in the balance sheet.

Investments in limited partnerships

Investments in limited partnerships are recorded on the basis of the cost method whereby the investment is stated at cost in the balance sheet. The distribution of profits/contribution to cover losses from investments in limited partnerships is taken to income/charged against profits under financial items. Profits from investments in limited partnerships are taxable in the hands of the respective participants.

Investements in portfolio and private equity companies

A portfolio of investments are recorded as a current asset, and is valued at the lower of cost price and estimated fair value for the portfolio as a whole when the intention behind the portfolio is to diversify the risk through a balanced portfolio with respect to time, branches and geography. For unlisted investments, with no observable price, the fair value are determined by recently third-party-trades, or with a reference to the fair value of similar investments.

Investments in associated companies and joint ventures

An associated company is a company where the Group has significant influence, but not control. Significant influence is deemed to exist for investments where the Group has between 20% to 50% of voting capital. Investments in associated companies and joint ventures are recorded on the basis of the equity method in the consolidated accounts, unless the investment value is immaterial. The share of the results in associated companies is posted separately under financial items. The investments in associated companies are posted as a financial asset. The Group’s share of a loss is not posted in the income statements if this means that value of the investment in the balance sheet becomes negative. Provisions will be made if the Group has undertaken an obligation on behalf of the associate.

Fixed assets

Fixed assets are valued at acquisition cost, but are written down to fair market value where the decline in value is not expected to be temporary. Fixed assets with a limited economic lifetime are depreciated on a straight-line basis over the expected lifetime of the asset. Long-term liabilities are stated in the balance sheet at the nominal amount on the establishment date. Current assets are valued at the lower of acquisition cost and fair market value.

Current liabilities are stated in the balance sheet at the nominal amount on the establishment date. Periodic classification and maintenance costs are posted in the balance sheet and depreciated on a straight-line basis until

2017

ANNUAL REPORT

12

the next planned docking. The docking costs are included in the balance sheet along with the value of the ship. The depreciation of docking costs is included in operating costs.

Intangible assets

Goodwill is depreciated over its economic lifetime. The surplus value attached to the fleet’s contracts of employment and the company’s right to renominate Grieg Star tonnage is defined as ”contracts” in the balance sheet and is depreciated over 20 years. Licenses with unlimited economic lifespan is subject to an annual impairment test. Licenses with limited economic lifespan is depreciated annually. Expenses related to the company’s own development are recorded in the balance sheet from the point when it is likely that the development work will result in an identifiable intangible asset.

Asset impairments

Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cashflows (cash-generating units).

The Group’s open hatch vessels have been sailing in a pool which has been marketed and operated by Grieg Star Shipping AS until 1st of May 2017.

2nd of May 2017 Grieg Star Shipping AS established a joint venture with Gearbulk AS called G2 Ocean Holding AS, which now markets and operates the Group’s vessels in a pool.

Having the vessels sail in a pool means that the operational use of the vessels, including optimization of routes, is combined for the fleet. Earnings of each individual vessel is therefore affected by the earnings of other vessels in the pool. The open hatch fleet and the bulk fleet are therefore considered to be the respective cash-earnings of other vessels in the pool.

The open hatch fleet and the bulk fleet are therefore considered to be the respective cash-generating units.

Newbuilding contracts are included in the fleet impairment and unpaid installments are deducted.

Estimates

When preparing the annual accounts in accordance with good accounting practice, the management make estimates and assumptions which affect the profit and loss account and the valuation of assets and liabilities as well as information about contingent assets and liabilities at year-end. Contingent losses which are likely and quantifiable are charged against income on an ongoing basis.

Leasing

The companies differentiates between financial leasing and operational leasing based on an evaluation of the lease contract at the time of inception. A lease contract is classified as a financial lease when the terms of the lease transfer substantially all the risk and reward of ownership to the lessee. All other leases are classified as operational leases. When a lease contract is classified as a financial lease where the company is the lessee, the rights and obligations relating to the leasing contracts are recognised in the balance sheet as assets and liabilities. The interest element in the lease payment included in the interest costs and the capital amount of the lease payment is recorded as repayment of debt. The lease liability is the remaining part of the principal. For operational leases, the rental amount is recorded as an operating cost.

Taxation

The tax charge in the profit and loss account consists of the tax payable and the change in net deferred tax. Taxes are charged when they arise.

Deferred tax in the balance sheet is calculated on the basis of timing differences between values for taxation and accounting purposes. Taxable and tax-deductible timing differences which are reversed or can be reversed within the same period are netted against each other and entered net.

Some of the companies of the Group are subject to shipping taxation under the Norwegian tonnage tax system pursuant to chapter 8 of the Taxation Act.

Cash flow statement

The statement of cashflows is prepared on the basis of the indirect method.

Accordingly, the cashflows from investment and financing activities are reported gross, while the accounting result is reconciled against the net cashflow from operations. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments that can immediately and with no major exchange rate risk be converted into a known amount and maturing less than three months from the transaction date.

Non-financial assets other than goodwill which have been impaired are reviewed for possible reversal of the impairment at each date.

Pension commitments Defined contribution plans

The Group’s main pension scheme is a defined contribution plan, for which the companies pay contributions to an insurance company. The companies have no further payment obligations once the contributions have been paid. Contributions are recorded as payroll expenses.

Defined benefit plan

Some companies have defined benefit plans, including AFP. A defined benefit plan is a pension scheme that defines the pension payment an employee will receive on reaching retirement age. The pension payment normally depends on one or more factors, such as age, period of service with the company and salary level. The pension commitment under defined benefit schemes posted in the balance sheet is the present value of the defined benefit schemes at year-end less the fair value of the pension fund assets, adjusted for unposted deviations from estimate. The pension commitment is calculated annually by an independent actuary based on a linear accrual of pension entitlements. Changes in benefits under the pension plan are posted in the profit and loss account on an ongoing basis. The pension schemes are funded through payments to insurance companies or financed through operations. Post-employment benefit obligations associated with the early retirement pension (AFP), under the LO/NHO arrangement, are a multi-employer defined benefit plan, but the plan is recorded as defined contribution, as it is not measurable.

Market based financial assets

Short-term investments in shares and mutual funds are regarded as part of the trading portfolio and are stated at fair value at year-end. Dividends received and other distributions are entered as income under other financial income.

2017

ANNUAL REPORT

13

Note 2 Segment information GROUP (Amounts in NOK mill.)

Operating revenue 2017 2016

Operating profit 2017 2016

Net financial Items 2017 2016

Profit before tax 2017 2016

Grieg Seafood (NGAAP)

7 038

6 598

904

1 160

-15

-122

889

1 038

Grieg Star 1

1 335

3 850

-121

104

-132

-167

-253

-64

Grieg Logistics

397

330

-6

-14

-44

13

-50

-2

Grieg Investor

75

69

12

15

0

0

12

16

Grieg Shipbrokers

115

105

9

6

1

-5

10

1

Ryfylke Rensefisk

101

54

23

9

-2

-2

21

7

39

36

16

14

-7

-2

9

12

3

3

-24

-19

392

30

368

11

-43

-59

3

5

-337

-156

-334

-150

9 059

10 985

815

1 280

-144

-411

671

870

Grieg Property Finance/Investment companies Other 2 Sum Grieg Group ‘ 1

On May 2nd, 2017, Grieg Star and Gearbulk established their new joint venture G2 Ocean. Although the establishment of G2 Ocean took place well into the financial year 2017, Grieg Star’s annual accounts have been restated for the entire 2017, in order to reflect the actual situation going forward, where Grieg Star’s freight income is made up of an equivalent to net time charter hire received on its open hatch and dry bulk fleet. The 2017 figures are concequently not comparable to previous years accounts.

2

Other includes the Groups’s holding company, management service company and eliminations.

Note 3 Other operating expenses GROUP (Amounts in NOK 1000)

2017

2016

77 633

2 067 761

240 847

335 217

Operating costs - shipping Voyage costs - shipping Timecharter costs - shipping Ship operating costs Operating costs - shipping

546 128

571 970

864 608

2 974 948

2017

2016

Cost of sales - fish farming Cost of sales - fish farming

3 756 423

3 671 731

-1 719

-344 433

3 574 704

3 327 298

2017

2016

Change in inventories Cost of sales - fish farming

Other operating expenses Freight and cost of services

285 997

240 739

Other operating expenses

1 865 644

1 649 615

Other operating expenses

2 151 641

1 890 355

The Group has the following long term operating lease agreements related to chartering of vessels, offices, plant and machinery.

2017

Duration

Number of vessels

Operating lease expense

Long-term time charter

0-4 years

5

185 918

Bare-boat hire

1-14 years

4

106 593

Other lease amount charged in the year

2-10 years

177 775 470 285

Total lease amount charged

2017

ANNUAL REPORT

14

2016

Duration

Number of vessels

Operating lease expense

Long-term time charter

0 - 5 years

6

220 949

Bare-boat hire

2-12 years

4

105 854

Other lease amount charged in the year

3-10 years

62 036

Total lease amount charged

388 839

Note 4 Payroll costs, number of employees, remuneration etc.

PARENT COMPANY (Amounts in NOK 1000)

Total payments for salary, pension premium and other remuneration to Managing Director: Payroll and social security costs

2017

2016

Salaries and other benefits

3 093

2 706

Social security costs

463

399

Pension costs

163

96

Other benefits

139

139

3 858

3 340

Total

The Managing Director is the only employee in the company. There has been no renumeration to the Board of Directors in Grieg Maturitas. Total remuneration to Managing Director is specified under renumeration to executives below.

GROUP (Amounts in NOK 1000)

Payroll and social security costs Salaries Social security costs

2017

2016

656 585

736 401

69 451

66 562

Pension costs

47 662

49 443

Other benefits

99 005

100 109

Total

872 703

952 516

1 138

1 155

Number of employees Number of sailing personnel

1

Total 1

743

755

1 881

1 910

Salary costs are recognised in the P&L as operating costs - shipping.

Remuneration to executives In 2017 total payments to salary, pension premium and other remuneration to Managing Director was NOK 3,7 mill. and to Board members NOK 13,3 mill.

(14,6 mill. last year). Remuneration to the Board members and Group Managing Director is paid from the companies where the Director is employed or a member of the Board.

2017

ANNUAL REPORT

15

Note 5 Pensions and pension commitments PARENT COMPANY Defined contribution based pension scheme The defined contribution based pension scheme covers all full-time and part-time employees and amounts to between 7% and 20% of salary. At year-end 2017 one person was covered by the scheme. The contribution charged in the accounts for 2017 amounted to TNOK 163 (excluding National Insurance Contributions).

GROUP (Amounts in NOK 1000)

The Group companies in Norway have pension schemes which meet the requirements of the Act relating to compulsory occupational pension schemes.

Most of existing employees in Group companies in Norway are now transferred from having a defined benefit based pension scheme to having a defined contribution based pension scheme. All new employees are offered a contribution based pension scheme. Most of the Group companies abroad have a defined contribution based pension scheme.

2017

2016

35 238

38 299

Defined benefit pension, incl. AFP

6 083

11 144

Pension costs - discontinued operations

6 361

-

47 662

49 443

Total pension costs distributes as follows Defined contribution pension

Total

Defined contribution based pension scheme The defined contribution based pension scheme covers full-time and part-time employees and amounts to between 7% and 20% of salary. The contribution charged in the accounts in 2017 amounted to NOK 35,3 mill. (excluding National Insurance Contributions).

Defined benefit based pension scheme Some companies in the Group have defined benefit pension scheme. The Group pension scheme is funded through the accumulation of pension fund assets in an insurance company or through operations. The scheme gives an entitlement to defined future benefits.

In 2017 a total of 132 persons (including pensioners and persons on early retirement) were covered by the benefits based scheme.

Net pension costs, including National Insurance Contribution

2017

2016

Present value of pension entitlements

3 410

8 184

Interest expenses on pension entitlements

2 006

4 030

Return on pension fund assets

-2 137

-3 583

Accounting effect of estimate divergences and plan changes

1 858

891

-

635

This years change, provision for undercoverage CPA Administration expenses

926

987

Pension costs for the year

6 083

11 144

Pension fund assets/liabilities

2017

2016

Calculated pension commitments

- 153 492

-182 401

93 127

99 324

Pension fund assets (at market value) Unposted effect of estimate divergences Net pension fund assets/(liabilities) of which unfunded obligations

2017 Financial assumptions:

175

8 470

-60 190

-74 610

- 28 685

-44 493

2016

Norway

Norway

Canada

Discount rate

2,40%

2,10%

3,60%

Anticipated rise in salaries

2,50%

2,25%

2,40%

Anticipated return on pension fund assets

4,10%

3,00%

Anticipated increase of pensions

2,25%

2,00%

Anticipated rise in pensions, regulation of National Insurance Base rate

2,25%

2,00%

2017

ANNUAL REPORT

16

Note 6 Fixed assets GROUP (Amounts in NOK 1000)

Purchase cost at 01.01.

Currency translations differences

Land and real estate

Vehicles, machinery and equipment

Loading and discharging equipment

Vessels

Total

1 506 071

2 770 306

300 985

11 406 332

15 983 694

-16 532

13 981

-14 491

-549 192

-566 233

Additions

156 628

547 941

-

72 942

777 512

Disposals

-121 154

-85 422

-286 494

-

-493 069

Purchase cost at 31.12.

1 525 013

3 246 808

-

10 930 082

15 701 903

Accumulated depreciation

-432 895

- 1 669 750

-

-4 231 163

-6 333 808

-399

-41 972

-

-235 259

-277 630

1 091 720

1 535 086

-

6 463 659

9 090 465

64 975

189 756

-

317 253

571 983

-

273

-

-

273

Economic lifetime

20-50 years

3-20 years

10 years

25-30 years

Depreciation plan

Linear

Linear

Linear

Linear

Accumulated write-down Balance sheet value at 31.12.

Depreciation Write-down (reversal)

Land & Realestate: Investments is mainly related to Grieg Seafood ASA and expansion of fish hatcheries in Finnmark and Rogaland, Ryfylke Rensefisk Group investing in production facilities at Talgje and Grieg Property refurnishing the Grieg Group head quarters in Bergen.

Vehicles, machinery and equipment: Additions is mainly related to equipment for Grieg Seafood ASA`s expansion of fish hatcheries in Finnmark and Rogaland and Ryfylke Rensefisk Group`s facilities at Talgje.

Loading and discharghing equipment: All loading and discharghing equipment is demerged to G2Ocean AS when Grieg Star enteried into the joint venture.

Vessels/Newbuildings: The newbuilding contract for Star Iris was cancelled in april 2017 and for Star Nike in September 2017. Paid in instalments have been refunded including interests. In addition, there is a realized loss of NOK 1.3 mill. regarding the two vessels in 2017.

Financial lease agreements: Grieg Seafood ASA has financial lease agreements on real estate, vehicles, machinery and other equipment. with book value of NOK 306 mill. per 31.12. Total depreciation on financial lease agreements in Grieg Seafood ASA in 2017 is NOK 37 mill. Estimated total lease amount on financial lease agreements for Grieg Seafood ASA is NOK 312 mill, with NPV of NOK 260 mill.

2017

ANNUAL REPORT

17

Note 7 Intangible assets GROUP (Amounts in NOK 1000)

Purchase cost at 01.01

Goodwill

Contracts

Research and development

Licenses

Total

174 730

151 097

27 065

1 123 697

1 476 589

-2 786

-7 254

-

9 290

-750

1 977

9 010

15 244

5 236

31 467

Currency translations differences Additions Disposals

-

-

-

-36

-36

173 921

152 852

42 309

1 138 187

1 507 270

Accumulated depreciation

-65 036

-112 984

-11 129

-50 353

-239 503

Accumulated write-down

-89 603

-

-2 700

-

-92 303

19 283

39 867

28 480

1 087 834

1 175 464

5 379

8 243

6 227

4 929

24 778

-

-

2 700

-

2 700

Economic lifetime

3-20 years

10 years

Depreciation plan

Linear

Linear

Purchase cost at 31.12

Balance sheet value at 31.12.

Depreciation Write-down (reversal)

3-10 years 5-25 years/unlimited Linear

Linear/none

Contracts: represent excess values related to the vessels’ contracts of affreightment through the participation in the G2 Ocean pool and purchased dividend rights in the Grieg Shipbrokers Group.

Research and development: relates to logistic systems in Grieg Logistics Group and new digital software solutions in Grieg Investor AS. Licenses relates to fish-farming licenses in Grieg Seafood ASA and Ryfylke Rensefisk Group. Most licenses have an unlimited economic lifetime, but is subject to a yearly valueassessment to determine if write-downs are required.

Note 8 Investments in subsidiaries COMPANY (Amounts in NOK 1000)

Subsidiary Grieg Maturitas II AS

Registered office

Ownership

Proportion of voting shares, %

Bergen

75%

100%

Book equity 100%

Book value

Dividend

5 109 851

4 021 796

416 014

Grieg Maturitas II AS, which is owned 75% by Grieg Maturitas AS and 25% by Grieg Foundation, is the common holding company of the Group.

GROUP The consolidated financial statements comprise the company Grieg Maturitas AS and Grieg Maturitas II AS with the following subsidiaries: Directly ownership %

Directly and indirectly ownership %

45,5%

100%

Grieg Maturitas II AS owns the following companies:

Registered office

Grieg Star Group AS

Bergen

Grieg Logistics AS

Bergen

100%

100%

Grieg Holdings AS

Bergen

83,7%

100%

Grieg Property AS

Bergen

58,99%

100%

Grieg International AS

Oslo

100%

100%

Grieg Ltd AS

Bergen

100%

100%

Grieg Group Resources AS

Bergen

100%

100%

2017

ANNUAL REPORT

18

Ownership %

Proportion of voting shares, %

49,97%

49,97%

Grieg Holdings AS owns the following companies:

Registered office

Grieg Seafood ASA

Bergen

AS Joachim Grieg & Co

Bergen

100%

100%

Grieg Shipbrokers KS

Bergen

55,45%

55,45%

Bergen

59,91%

59,91%

Joachim Grieg Star KS Grieg Shipbrokers Ltd.

London, UK

55%

55%

Grieg Shipbrokers Asia AS

Bergen

100%

100%

Grieg Shipbrokers Asia Ltd

Shanghai

100%

100%

Grieg Shipbrokers Asia Pte. Ltd

Singapore

100%

100%

Bergen

100%

100%

Finnøy

60%

60%

Portugal

90%

90%

Ownership %

Proportion of voting shares, %

Grieg Holdings II AS Rensefisk Holding AS Silves Odissey Inv. and Techn. Lda.

Grieg Property AS owns the following companies

Registered office

Grieg Gaarden AS

Bergen

100%

100%

AS Nestun Uldvarefabrik

Bergen

100%

100%

CSG15 AS

Bergen

100%

100%

Grieghallen Parkering II AS

Bergen

36,25%

36,25%

Bergen

36,25%

36,25%

Grieghallen Parkering AS

Grieg Star Group AS owns the following companies:

Registered office

Ownership %

Proportion of voting shares, %

Grieg Shipowning AS

Bergen

100%

100%

Grieg Shipping II AS

Bergen

100%

100%

Grieg International II AS

Oslo

100%

100%

Grieg Star 2017 AS

Bergen

100%

100%

Grieg Star AS

Bergen

100%

100%

Grieg Star Bulk AS

Bergen

100%

100%

Grieg Green AS

Oslo

100%

100%

Shanghai, China

100%

100%

Bergen

100%

100%

Vancouver B.C., Canada

100%

100%

Squamish BC, Canada

100%

100%

Grieg Consulting and Advisory Company Ltd. Grieg Star Shipping AS Grieg Star Shipping (Canada) Ltd. Squamish Terminals Ltd.

Grieg Ltd AS owns the following companies:

Registered office

Ownership %

Proportion of voting shares, %

Grieg Star Group AS

Bergen

30,09%

39,80%

Grieg Property AS

Bergen

41,01%

55,70%

Grieg Holdings AS

Bergen

16,13%

21,50%

Grieghallen Parkering II AS

Bergen

11,27%

11,27%

Bergen

11,27%

11,27%

Grieghallen Parkering AS Grieg Investor Holding AS

Oslo

15,00%

26,67%

Grieg Investor AS

Oslo

15,00%

26,67%

0,19%

0,19%

Grieg Seafood ASA

Bergen

2017

ANNUAL REPORT

19

Grieg International AS owns the following companies:

Registered office

Ownership %

Proportion of voting shares, %

Grieg Star Group AS

Bergen

24,38%

32,25%

Grieg Investor Holding AS

Oslo

30,00%

53,33%

Grieg Investor AS

Oslo

30,00%

53,33%

Ownership %

Proportion of voting shares, %

Tønsberg

100%

100%

Mosjøen

100%

100%

Kristiansand

70%

70%

Kristiansund

51%

51%

Bergen

100%

100%

Bergen

100%

100%

Ownership %

Proportion of voting shares, %

Grieg Logistics AS owns the following companies:

Registered office

Scandinavian Harbour Service AS Mosjøen Industriterminal AS Seamless AS Shiplog AS Grieg Strategic Services AS Grieg Port Security AS

Grieg Seafood ASA owns the following companies:

Registered office

Grieg Seafood Rogaland AS

Bergen

100%

100%

Grieg Seafood Finnmark AS

Alta

100%

100%

Grieg Seafood Canada AS

Bergen

100%

100%

Grieg Seafood BC Ltd.

Canada

100%

100%

Grieg Seafood Hjaltland UK Ltd.

UK

100%

100%

Grieg Seafood Shetland Ltd.

UK

100%

100%

Ocean Quality AS

Bergen

60%

50%

Ocean Quality UK Ltd.

UK

60%

50%

Ocean Quality North America Inc.

Canada

60%

50%

Rensefisk Holding AS owns the following companies:

Registered office

Ownership %

Proportion of voting shares, %

Ryfylke Rensefisk AS

Finnøy

100%

100%

Finnmark Rensefisk AS

Alta

100%

100%

Marin Innovasjon AS (former Sea Urchin Farm AS)

Finnøy

100%

100%

Lønningdal Rensefisk AS

Os

60%

60%

Austevoll Rensefisk AS

Austevoll

72%

72%

2017

ANNUAL REPORT

20

Note 9 Investments in associated companies and joint ventures GROUP (Amounts in NOK 1000)

Ownership %

Registered office

Book value 01.01

25%

Oslo

2 281

16,67%

Bergen

-

Grieg Newfoundland AS

50%

Bergen

-

Gulen Base AS2

51%

Bergen

-

Fram Marine AS1 Tytlandsvik Aqua AS

G2 Ocean Holding AS

5

Addition

Share of profit/loss for the year

Other changes

Book value 31.12

Excess value incl. in book value 31.12.

-

-

-

2 281

219

10 000

-550

-

9 450

-

-

-

-

-

-

40 204

-40 204

-

-

35%

Bergen

-

81 412

-14 259

-565

66 588

-

Rogaland Havbrukspark Eiendom AS

50%

Finnøy

500

-

-

-

500

-

Rogaland Havbrukspark AS

30%

Finnøy

15

-

-

-

15

-

Grieg Strategic Services AS

100%

Bergen

1 478

-

-

- 1 478

-

-

100%

Bergen

133

-

-

- 133

-

-

4 407

131 616

-55 013

-2 176

78 834

219

3

Grieg Port Security AS4 Sum

Booked according to the cost method.

Gulen Base has been consolidated as a subsidiary until 2017. There has not been any acitivty in 2017 and the company is now for sale. Based on this process, it is assessed that Grieg Logistics AS no longer have controlling influence and as a consequence the investment in Gulen Base should be considered as an associated company, and booked according to the equity method.

3 In 2017, Norwind AS changed name to Grieg Strategic Services and is now a 100% owned subsidiary in the Grieg Group 4 In 2017, Norwind Installer AS changed name in to Grieg Port Security AS and is now a 100% owned subsidiary in the Grieg Group 5 In May 2017, Grieg Star and Gearbulk established their new joint venture G2 Ocean Holding AS. � 2

Tytlandsvik Aqua AS Grieg Seafood invested MNOK 10 in Tytlandsvik Aqua AS in 2017, which corresponds to 16.67% of the shares in the company Remaining shares are owned by Bremnes Seashore AS (16.67%) and Vest Havbruk AS (66.67%). Tytlandsvik Aqua AS will contribute to increased access to postmolt During 2018, Grieg Seafood and Bremnes Seashore AS will increase their ownershare by capital increase, so that all the owners have the same amount of shares in Tytlandsvik Aqua AS. The parties have agreed that Grieg Seafood and Bremnes Seashore AS will be guarantueed organizational rights as if they own 1/3 of the shares, already from the first payment of MNOK 10 in 2017, including the right to appoint board members and voting rights at the general meeting. Therefore, the Group has included share of the consolidated financial statements although the owner share is 16,67%. In the agreement, the Group has the right and obligation to purchase the remaining shares in 2018 , in three transactions of respectively MNOK 10, a total of MNOK 30. The share of income included corresponds to ownership interest (16.67%) in the ownership period in 2017.

Note 10 Financial items (Amounts in NOK 1000)

Other Financial Income Interest income Gain on sale of investments Other financial income Total financial income

Other Financial Expenses

Parent company 2017 2016

Group 2017

2016

932

1 216

25 700

24 070

-

-

80 773

34 938

-

-

49 745

30 932

932

1 216

156 217

89 940

Parent company 2017 2016

2017

Group 2016

Interest expenses

-

-

257 857

264 161

Write-down of financial fixed assets

-

-

-

129 676

Other financial expenses

2

1

22 094

142 008

Total financial expenses

2

1

279 951

535 485

2017

ANNUAL REPORT

21

Note 11 Shareholdings and other investments GROUP (Amounts in NOK 1000)

Shareholdings and other investments - classified as current assets

Company

Ownership

Purchase cost

Maris Reinvest AS

93,15%

60 913

KS Brage Supplier

12,50%

29 625

Argentum Investment Partners I

7,62%

27 674

Holmen Industri Invest I AS

26,66%

23 378

Utleiebolig AS

17,49%

9 418

1,32%

6 764

DNB private equity III IS)

1,41%

5 704

Union Real Estate Fund

1,53%

5 678

Voxtra East Africa Agribusiness Fund

5,44%

5 326

F14 Invest AS

1,73%

2 500

Karihaugveien 22 Holding AS

6,70%

1 456

Blomster Norge AS

4,86%

1 301

Sahara Forest Project AS

1,34%

750

0,74%

500

25,00%

110

FSN Capital Ltd. P.ship II

Hordaland Maritime Miljøselskap AS EUP AG Total - classified as current assets

Acc. write-down 1.1.

Change in value Book value 31.12.

2017

181 097

-48 417

Ownership

Purchase cost

Acc. write-down 1.1.

15,34%

18 958

-

-

18 958

1

15 651

148 330

Shareholdings and other investments - classified as fixed assets

Company Mercell Holding AS F 14 Invest AS Stochasto Holding AS

Change in value Book value 31.12.

2017

2,10%

2 761

-

-

2 761

17,60%

5 222

-5 222

-

-

Grieg Star Phillippines Inc.

100%

1 641

-

-

1 641

Nye Bolshoy AS

7,30%

21 742

-

-

21 742

10,0%

2 500

-

-

2500

15%

55 743

-45 618

-10 125

-

3 850

-23

346

4 172

112 416

-50 862

-9 779

51 774

Proximar Seafood AS Stril Offshore DIS

3

Other investments Total - classified as fixed assets 2

Portfolio investments: the portfolio of investments on the list is valued at the lower of cost price and estimated fair value (market value). The investments are treated as a portfolio where gains and losses are off-set, and the cost price are measured against the estimated fair value on the total portfolio.

2 Direct share investments: the shares are valued on the basis of the cost method at an individual basis,and written down if fair value is lower than the cost price. Writedowns are reversed when the grounds for the write-down no longer exist.

1

3

Investment in Stril Offshore DIS is in 2017 classified as fixed assets and written down to 0 in book value.

2017

ANNUAL REPORT

22

Note 12 Stock and bunkers GROUP (Amounts in NOK 1000)

Stocks raw materials - fish farming Stocks goods in progress - fish farming Stocks of finished goods Stocks of bunkers and lub oil Total stocks and bunkers

2017

2016

94 619

91 448

2 025 593

1 635 138

50

7 821

30 454

134 860

2 150 717

1 869 267

Note 13 Receivables due in more than one year GROUP (Amounts in NOK 1000)

Loan to associated companies Spoolbase project (Gulen Base AS)

2017

2016

28 033

20 524

-

219 629

Other receivables

20 230

61 567

Total

48 263

301 720

Purchase cost

Market value

Note 14 Market based financial investments GROUP (Amounts in NOK 1000)

Individual shareholdings Mutual funds Bonds Money market funds Total

11 884

8 728

247 354

367 949

231 233

236 353

188 950

189 861

679 421

802 891

Unrealised gain this year of market based financial investments

34 309

Note 15 Debt payable after 5 years GROUP (Amounts in NOK 1000)

Long-term debt - maturity more than 5 years

2017

2016

736 761

843 147

2017

ANNUAL REPORT

23

Note 16 Mortgages/guarantee liability/restricted funds PARENT COMPANY (Amounts in NOK 1000)

Restricted deposits related to employees’ tax deduction

2017

2016

188

173

2017

2016

GROUP (Amounts in NOK 1000)

Restricted deposits related to employees’ tax deduction Short term fixed interest restricted deposits Total Debt secured by mortgage (including overdraft facilities) Mortgaged debt - long term Other long term liabilities Factoring and short term debt Total mortgaged debt

32 188

26 732

-

160 000

32 188

186 732

2017

2016

5 922 420

6 623 751

-

3 328

509 849

502 535

6 432 269

7 129 614

Group assets have been given as mortgage security Balance sheet value of mortgaged assets Receivables Vessels and newbuildings

2017

2016

783 146

945 373

6 388 909

7 099 523

Other assets

2 134 746

2 292 432

Licences

1 068 552

1 060 622

Stocks

2 117 908

1 734 228

Total

12 493 260

13 132 179

2017

2016

Total guarantee liability

489 553

543 060

Undrawn borrowing facilities

609 650

826 200

Pledges include shares in subsidiaries. The book value of these shares is 0 in the consolidated accounts.

Loan covenants Grieg Star Group (GSG) is per year end 2017 required to have minimum liquid funds of USD 35 mill. A common covenant for all mortgage loans is that GSG must continue to be controlled by the Grieg familiy. GSG has met its loan covenant commitments throughout the year.

The covenants of Grieg Seafood’s credit facility is an equity ratio in excess of 35%, without consolidation of Ocean Quality Group, and a revolving NIBD/ EBITDA ratio of 5.0 if the equity ratio is higher than 40% and 4.5 if the equity ratio is between 35% and 40%. As at 31 December 2017, the equity share exclusive of Ocean Quality was 52% and NIBD/EBITDA 1.2 Grieg Seafood has met its loan covenant commitments throughout the year. In 2018, Grieg Seafood has signed a term sheet regarding refinancing the credit facilities. See note Note 18 for further information.

2017

ANNUAL REPORT

24

Note 17 Financial risk Group is exposed to a range of financial risks; market risk (including currency risk, cashflow interest rate risk, fair value interest rate risk and price The risk), credit risk and liquidity risk. The Group uses various financial derivatives to manage its financial risk.

Market risk Several of the Group’s companies have considerable financial investment portfolios, and changes in the value of international securities and interest rates directly affect their results. The portfolios are managed in accordance with long-term strategies and within defined mandates, also reflecting the Group’s business principles.

Foreign exchange risk A large proportion of the Group’s revenues, assets and liabilities are in foreign currencies, mainly USD and EUR. Changes in foreign exchange rates therefore affect the accounts, which are prepared in NOK. The Group companies have strategies and procedures to reduce both the exchange rate and interest rate Grieg Star Group hedges expenditures in currencies other than USD through forward contracts. At 31.12.17 the company had entered into hedging through the use of currency swaps for USD 1.9m. Total unrealised MTM value, not recognised in the balance sheet, at 31.12.17 was USD 0.009m.

Grieg Shipbrokers had 31.12.17 forward contracts to hedge a total of USD 17,4 m, of which USD 9,3 m applies to hedging of reasonably secure transactions, ref NRS 18. As of 31.12.17, the contracts had an unrealized, not recognised gain of TNOK 899.

Credit and counterparty risk The Group’s credit risk that counterparties do not have financial ability to meet their obligations is considered to be relatively low, due to solid customers, a diversified portfolio, and historically there has been small losses on receivables. The Group works hard to mitigate the counterparty risk by building good procedures and systems. In some parts of the Group with a large customer portfolio, the risk is reduced by maintaining good procedures for assessing counterparty risk and credit rating.

Liquidity risk The Group constantly monitors liquidity reserves and needs. The Group’s liquidity risk has increased, but strong liquidity and a focus on cash management ensure that there is sufficient liquidity to meet the Group’s obligations when they mature.

Interest rate risk Interest rate risk arises in the short and long term as most parts of the Group’s debt are at a floating rate of interest. A change in interest rates will result in either an increase or a reduction of the financing cost. If certain interest rate derivatives are applied then the predictability of the financing cost will increase due to a limitation of the net effect of a change in interest rates. In addition a change in interest rates will affect the returns on the investment portfolio and the rates on cash deposits. The Group’s strategy is to employ a certain level of hedging using interest rate swap agreements to establish greater stability for the Group’s loan interest expenses.

Gains and losses rising from interest rate swaps in the Grieg Star Group are recognised in the same period as the related interest expense.

At 31.12.17 the Grieg Star Group held interest rate swap agreements of USD 224m. Total unrealised MTM value, not recognised in the balance sheet, was USD -5.1m.

Gains and losses rising from interest rate swaps in Grieg Seafood are not subject to hedge accounting and are recognised as the gains or losses arise.

Grieg Seafood had interest swap agreement totalling NOK 660 mill. at 31.12.17. Unrealized loss attached to this agreement, recognised in the balance sheet, amounts to NOK -4,1 mill. Interest rate swap agreements have a horizon of 4 years and whether these periods are to be rolled over is a matter of constant evaluation.

Freight rate risk The Group’s ship earnings are to a large extent related to cargo transportation contracts as a considerable share of the shipping activities are of an industrial character. The open hatch fleet’s earnings are to a large extent related to long term cargo contracts. This implies that revenues are less volatile than in the spot market, and that changing market conditions generally have a delayed effect on the results. The group’s dry bulk activity is on the other hand more exposed to general spot market movements.

Salmon prices The Group is also exposed to fluctuations in the spot prices for salmon, which is mainly determined by global supply. Although the effect of changing prices is somewhat reduced through Grieg Seafood’s geographical diversification, the long production cycles makes it challenging to respond rapidly to changing market prices. Salmon is primarily traded at spot prices. The price risk is partly hedged through financial purchase contracts. At year end 2017 unrealized gains of TNOK 42.914 related to these contracts is not recognized in the balance sheet, the Group had no financial price contracts or physical delivery contracts that would give a loss at year end.

2017

ANNUAL REPORT

25

Note 18 Contingencies and subsequent events The Grieg Group is neither a party to any court case nor the subject of any other litigation beyond what is normally associated with ordinary operations.

Grieg Seafood’s growth targets comprise increased smolt capacity and new sites. The planned investments are higher than what is considered to be a normal maintenance investment which requires increased working capital. Grieg Seafood has renegotiated the Group’s credit facilities before agreed maturity in 2019. Total credit facilities are increased from MNOK 1 910 to MNOK 1 700 in addition to MEUR 60. The revolving loan facility is extended from MNOK 700 to MNOK 1000. In addition, a bank overdraft of MNOK 100 is granted. Term loans of MNOK 600 and MEUR 60 will be repaid in semiannually installments of respectively MNOK 50 and MEUR 5. The financing has a maturity of 5 years, with due date 28 February 2023.

31 January 2018 Ocean Quality AS received a decision from the Norwegian Food Safety Authority (the “NFSA”) to suspend all export of Norwegian salmon from the company to China. Quality AS is suspended from exporting Norwegian Salmon to China on the basis that NFSA has received incorrect documentation regarding shipments of salmon exported to China. From what Ocean Quality knows, individuals in the company has, in violation of the internal guidelines, deliberately re-used earlier declarations. Neither, any individual employee nor the Company have had any gain from these alleged actions. After the NFSA’s control, Ocean Quality has conducted a complete review of its internal routines and export systems to find out how this could occur. New controls and improved routines have been implemented. Furthermore, two employees have been suspended with immediate effect. Grieg Seafood has a zero tolerance for the above-mentioned violation.

In February 2018 it was discovered a hole in a net on Shetland. The fish in the relevant cage has been counted. There was a deviation of 21 700 fish.

Write-down related to this incident is assessed to GBP 200 101, equivalent to approx. MNOK 2,2.

Note 19 Taxes PARENT COMPANY (Amounts in NOK 1000)

Tax expense consists of: Ordinary result before tax Permanent differences Change in temporary differences Basis of tax payable in profit and loss account

2017

2016

415 211

74 905

-415 974

-74 472

73

29

-690

462

Tax losses carried forward

-

-

Basis for payable taxes in the income statement

0

462

Components of the income tax expense Payable tax on this years result

0

116

Change in deferred tax

-177

-8

Tax expense (-income)

-177

108

2017

2016

93

116

Tax-deductible differences

-50

-

Tax credit carried forward

-690

-

Basis for deferred tax

-647

116

Deferred tax in the balance sheet

-149

28

Deferred tax Taxable differences

2017

ANNUAL REPORT

26

GROUP (Amounts in NOK 1000)

Tax expense consists of:

2017

2016

Profit before tax

671 005

869 577

Profit before tax, companies subject to shipping tax

-425 414

-394 173

Profit before tax, companies not subject to shipping tax

1 096 419

1 263 750

Permanent differences

-183 034

-193 307

Change in temporary differences

-225 102

-140 372

31 302

-242 582

-

55 883

Basis of tax payable, companies not subject to shipping tax

719 586

743 372

Tax payable, companies not subject to shipping tax

174 017

184 557

Change in tax loss carried forward Group contribution

Tax charge in profit and loss account

-

37 153

Tax payable

174 017

221 710

Increase / (decrease) in deferred tax

33 344

30 589

-

-36 594

207 362

215 705

Adjustment prior year Tax charge for the year on ordinary result Tax payable in balance sheet Tax payable, companies not subject to shipping tax

2017

2016

164 743

178 592

Tonnage tax

3 757

4 680

Tax prepaid

-4 491

-3 402

Other adjustments (treasure trove) Total tax payable in balance sheet Deferred tax Taxable timing differences Tax-deductible timing differences

1 577

-1 914

165 586

177 956

2017

2016

2 009 784

1 565 981

-13 615

-48 834

Tax loss to be carried forward

-748 643

-448 622

Net timing differences

1 247 526

1 068 525

322 883

268 315

86 077

91 704

408 960

360 019

Deferred tax on net timing differences Unposted deferred tax assets Net deferred tax in balance sheet Loss carried forward Norway, companies not subject to shipping tax UK

2017

2016

-305 870

-128 102

-92 427

-33 027

Companies subject to shipping tax

-350 346

-287 492

Total

-748 643

-448 622

2017

ANNUAL REPORT

27

Note 20 Equity PARENT COMPANY (Amounts in NOK 1000)

Equity - Opening Balance

Share capital

Share premium

Other equity

Total

1 124

702 263

3 461 825

4 165 212

Profit of the year

-

-

415 387

415 387

Dividend paid during the year

-

-

-223 514

-223 514

Provision for dividend

-

-292 500

-

-292 500

1 124

409 763

3 653 699

4 064 585

Share capital

Share premium

Group reserves

Minority interests

Total

Equity - Closing Balance

GROUP (Amounts in NOK 1000)

Equity - Opening Balance

1 124

702 263

4 111 162

2 824 977

7 639 526

Profit for the year

-

-

69 228

394 415

463 643

Provision for dividend at year end

-

-292 500

0

-105 733

-398 233

Dividend paid during the year

-

-

-223 514

-324 884

-548 398

Effect of changed ownership in subsidiaries 1

-

-

-28 633

-9 276

-37 909

Currency translation differences 2

-

-

-120 681

-40 389

-161 071

Equity transactions

-

-

9 432

4 923

14 355

-

-

16 464

-8 420

8 044

1 124

409 763

3 833 459

2 735 613

6 979 957

3

Other changes Equity - Closing Balance 1

Please see note 9 for further information

2

Currency translation differences: this is primarily the effect of converting subsidiaries from local currencies into NOK, and the major effect is from Grieg Star Group.

Equity transactions: the total amount is similar to the OCI (other comprehensive income) from Grieg Seafood ASA in their IFRS financial statements, which is transformed into NGAAP for consolidation purposes in Grieg Maturitas Group.

3

Note 21 Share capital and share information At 31 December 2017 the share capital of Grieg Maturitas AS consisted of 1 123 530 shares of nominal value NOK 1.

The share capital consists of the following share classes: Class

Number of shares

Nominal

Book value

A-shares

201 600

1,-

201 600

B-shares

921 930

1,-

Total

921 930

1 123 530

1 123 530

The A class shares carry both voting and dividend rights. The B class shares carry no voting rights, but are entitled to dividends.

2017

ANNUAL REPORT

28

The company’s shareholders are as follows:

A-shares

B-shares

Total

40 420

101 480

141 900

5,89 %

-

66 144

66 144

3,85 %

9 980

33 323

43 303

15,64 %

35 224

140 440

175 664

6,74 %

15 176

60 507

75 683

GMC Invest AS

22,37 %

50 400

200 947

251 347

Suletind AS

22,37 %

50 400

200 947

251 347

Capelka AS

10,52 %

-

118 142

118 142

100 %

201 600

921 930

1 123 530

Kvasshøgdi AS

12,63 %

Nye Ystholmen AS Nina WG. AS Salthavn AS Salthavn Invest AS

Total

Through the companies specified above, the shareholders and their families have control of 100% of the shares in Grieg Maturitas AS.

Note 22 Related parties PARENT (Amounts in NOK 1000)

Transactions

Operating revenue

Operating cost

Financial income*

Financial expenses

Accounts payable

Current receivables*

3 100

183

416 014

-

14

292 500

* Dividend from subsidiaries

GROUP (Amounts in NOK 1000)

Members of the board and managing director of the parent company, including their related parties, are with companies in the Group considered as closely related parties. Transactions and intercompany balances with group companies are eliminated in the Group accounts, and is not mentioned below. Remuneration to directors and managing director, see Note 4.

Transactions

Operating revenue

Operating cost

Financial income

Financial expenses

Long-term receivables

Current receivables

1 227

19 275

171

0

785

1 466

Note 23 Remuneration to auditor Specification of Group auditor’s fee (Amounts in NOK 1000)

Auditor

Parent company 2017 2016

Group 2017

2016

6 424

5 803

Statutory audit

16

30

Taxation advice

-

-

578

1 140

Other assurance services

-

-

1 297

257

Other assistance

-

-

940

2 026

16

30

9 239

9 226

1 364

1 999

Total (exluding VAT) The amount above includes remuneration to other auditors with:

2017

ANNUAL REPORT

29

Note 24 Discontinued operations When establishing the joint venture G2 Ocean, it was agreed that certain assets and liabilities held by Grieg Star Group’s subsidiary Grieg Star Shipping AS should be demerged and sold to G2 Ocean. The demerger was carried out with accounting effect 1 January 2017. Profit/(loss), cash flows, assets and liabilities related to the discontinued operations are included in the consolidated financial statements for 2016 and 2017. Below is a summary of financial information for the discontinued operations:

(Amounts in NOK 1000)

2017

2016

Operating revenue

0

3 168 038

Voyage related expenses

0

-2 005 944

Operating expenses

0

-114 337

Net TC

0

1 047 757

Hire chartered vessels

0

-77 019

Distributed TC hire to participating vessels

0

-960 312

0

10 426

- 1 958

4 726

Tax

12 226

- 2 309

Profit/(loss) for the period

10 267

2 417

Gain disposal discontinued operations

57 263

-

Operating profit Profit/(loss) before tax

G2 Ocean is recorded on the basis of the equity method in the consolidated accounts.

2017

ANNUAL REPORT

30

grieg.no