ANNUAL REPORT 2016

We are excited about our journey over the coming years

DEAR READER

I am proud to present the annual report for Belships ASA, and to introduce you to a company with a long history, extensive experience, strong expertise and a promising future.

From its origin in 1918 and focus on specialized heavy liá ships, the company made a valuable contribution for the Allied forces during World War II and during the Korean War. Later on, the company also entered both the tanker- and the energy sector.

Today, Belships ASA has developed into a pure dry bulk player with full concentration on one non-specialized asset type. The company has been stock listed on the Oslo Stock Exchange since 1937.

Our subsidiary, Belships Management (Singapore) Pte Ltd, has made its mark on one of the world's most challenging industries for close to 35 years – an industry where clients manage valuable assets and demand the highest level of expertise and ability from their partners. We focus without compromise on strict risk management to minimize the hazards to both people and the environment and we appreciate the demands and challenges made by our esteemed clients.

Belships ASA outlined in 2013 a bold newbuilding program for eco-design Ultramax bulk carriers to be constructed by Imabari Shipbuilding Group in Japan. This strategic move has transformed the business area into a state-of-the-art dry bulk service provider with high focus on quality, fuel eÚciency and emission control. The Company took delivery of one 61,000 dwt Ultramax in September 2015 and a sister ship in March 2016. A 63,000 dwt Ultramax, owned by a sister company of the shipbuilder and scheduled for delivery in January 2018, will be chartered by the Company with purchase options. The Ørst ship, Belforest, is Øxed for a 12 months period to Cargill, wheras the second ship, Belisland, is Øxed to Canpotex for a 5 year period from delivery in March 2016.

Our corporate strategy is to provide our reputable clients a reliable transportation solution based on long-term charters and partnership. We will have focus on growth in Ùeet size and diversiØcation of our customer base through a careful selection of counterparts.

We are excited about our journey over the coming years.

Bernt Ulrich Müller Chief Executive O៝cer Belships ASA

KEY FINANCIAL FIGURES

USD 1 000		2016	2015
Operating income		25 415	21 984
Operating result		-8 907	-26 660
Net result for the year		-14 593	-30 150
EBITDA		11 280	9 873
Total assets		105 612	103 248
Equity		20 144	34 831
Equity per share	NOK	3.71	6.56
Interest coverage ratio		-1.84	-12.20
Current ratio	%	97.16	115.31
Equity ratio	%	19.07	33.74
Earnings per share	US cent	-31.18	-64.42

FLEET LIST

SHIP		OWNER SHIP	BUILT YEAR	DWT	EMPLOYMENT	T/C-RATE (NET USD/DAY)
Supramax
M/S Belstar		100 %	2009	58 018	T/C to 08/19	16 000
M/S Belnor		100 %	2010	58 018	T/C to 05/20	16 000
M/S Belocean		100 %	2011	58 018	T/C to 05/17	4 000
Ultramax
M/S Belforest		BBC	2015	61 320	T/C to 05/17 +4mo	5 775
M/S Belisland		BBC	2016	61 252	T/C to 03/21	17 300
Imabari newbuilding	1	TC	2018	63 000

1) Delivery during 1st quarter of 2018 for long‐term charter with purchase option. Charter period is eight years with three annual renewal options. Purchase option may be exercised at the end of year 4 to JPY 3.01 billion, with an annual decrease of JPY 110 million.

CHARTER COVERAGE

DIRECTORS' REPORT 2016

THE DRY BULK MARKET

While 2016 began on a negative note with dry bulk rates and prices collapsing to 30-year lows, the market rebounded from Q1. The key drivers behind the increasing freight rates were higher Chinese imports of iron ore, coal and grain products including increasing trade of steel products. According to Marsoá, Chinese imports rose by 6.2%, in tonne-mile terms, in 2016. It was a further decline in domestic Chinese iron ore production, which led to a 7.5% increase in Chinese iron ore imports for the year as a whole. Aáer a shortening of the workweek at Chinese mines, causing a shortage of coal in the second half of the year, Chinese imports of coal went up again in 2016 to an annualized pace of 245 million tons.

Turning to the supply-side, the dry bulk Ùeet expanded by 2.2% in 2016, down from 2.6% growth in 2015. Scrapping activity was record high during the Ørst half of the year, but the activity fell sharply in the second half due to a combination of rising freight rates and the onset of the monsoon season.

The Baltic Exchange Capesize Index ended the fourth quarter at USD 10 978 per day, whereas the Panamax-index ended at USD 6 826 per day. The Supramax-index ended the quarter at USD 9 445 per day. As per today, the Cape index stands at USD 9 425 per day, Panamax-index at USD 8 982 per day and Supramax-index at USD 8 848 per day.

The Baltic S&P Assessment values today a 5 year old Supramax at USD 14.4 million, which is up from USD 9.9 million one year ago.

OPERATIONS

M/S Belstar, M/S Belnor and M/S Belocean continued into 2016 on their long-term charter parties to Canpotex Shipping Services Ltd., Canada. Canpotex is one of the world's largest exporters of potash, a fertilizer product imported in large volumes by countries such as China, India and Brazil. The net time charter rate is USD 16 000 per day. The newbuilding M/S Belisland delivered ex yard to Canpotex in March by substituting M/S Belocean for the remaining 5-year period of the c/p. The net charter rate is USD 17 300 per day. In February M/S Belocean was Øxed for 10-15 months to Cargill at around USD 4 000 per day. In July M/S Belforest was extended to Cargill for 10-14 months at around USD 6 000 per day, which is below market level as at today.

The company's tonnage is modern, and all ships operated satisfactorily without signiØcant o×-hire. The operating expenses were close to budgeted levels.

Belships' newbuilding program with Imabari Shipbuilding Group in Japan for 2 x 61 000 dwt eco-design Ultramax bulk carriers is completed. In addition, Belships will take delivery of a 63 000 dwt Ultramax bulk carrier from Imabari in January 2018 for long term charter including purchase option.

The subsidiary Belships Management (Singapore) Pte Ltd made a positive contribution from technical management services. The company expanded its customer base, and currently provides technical management for 10 ships, including Belships' own ships.

RESULTS

The Group had an operating income of USD 25 415 000 in 2016 (USD 21 984 000), giving a EBITDA of USD 11 280 000 (USD 9 873 000) and a consolidated operating result of USD -8 970 000 (USD -26 660 000).

Improvement in operating result by USD 17.7 million is mainly explained by reduced impairment of ships. The pre-tax result was USD -14 419 000 (USD -29 973 000), while net result for the Group was USD -14 593 000 (USD -30 150 000).

The parent company's net result for the year was NOK -143 824 000 (NOK -36 111 000). The Board proposes the result for the year to be allocated as follows:

AMOUNTS IN NOK
PROVISION FOR DIVIDEND	0
TRANSFER FROM OTHER RETAINED EARNINGS	-143 824 000
TOTAL ALLOCATIONS	-143 824 000

GOING CONCERN

The annual accounts are presented on a going concern basis in accordance with § 3 – 3 of the Norwegian Accounting Act. Belships has three long-term T/C agreements with Canpotex. The sale & leaseback of M/S Belforest (Q3 2015) and M/S Belisland (Q1 2016) provided additional liquidity to the Group.

The main shareholder has provided an on demand guarantee of USD 5 million. Current activity will also generate suÚcient liquidity to cover current debt and operating expenses throughout 2017. Based on this, the Board considers that the conditions for a going concern are in place.

The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The information in the accounts gives a true and accurate representation of the company's and the Group's assets, liabilities, Ønancial position and results as a whole. The annual accounts give a fair view of the development, proØt and overall Ønancial position of Belships ASA and the Group, and describe the most signiØcant risks and uncertainties facing the Group and the parent company.

SAFETY AND THE ENVIRONMENT

Belships aims to minimize environmental impact from its activity, and strives to improve safety. Measures are taken to prevent the business polluting the environment. Belships works consciously to improve standards, on board and ashore. Pollution from ships is governed by a number of national and international environmental standards and certiØcations. Belships meets oÚcial requirements in terms of safety and the environment.

The newbuildings from Imabari Shipbuilding have low emissions of pollutants and have ballast water treatment systems.

ORGANISATION

Belships is headquartered in Oslo, from where most of its commercial and Ønancial business including insurance is handled. Technical management is handled from Singapore. There has been no change within the senior management in 2016. Management activities in Singapore were stable over the year. The Group employed 62 oÚce sta× at the end of 2016. Ships under management had 210 crew members on board. The sick leave was less than 2% in 2016. The Group was not subject to any serious accidents in 2016.

Belships aims to treat women and men equally. No discrimination on the grounds of gender is tolerated. Of the Group's oÚce sta×, 34 are women. The working environment at the various companies within the Group is considered to be satisfactory.

FINANCIAL AND OTHER MATTERS

The Group's solvency and Ønancial position is satisfactory. By end of 2016 the book equity of the Belships share was NOK 3.71, while the book equity ratio was 19.1 % (33.7%). Added value related to the long-term charter for M/S Belisland is not included in the balance sheet.

Consolidated liquidity was USD 7.9 million (of which USD 3,5 million in deposit) as at 31 December 2016, against USD 8.0 million at the beginning of the year. Total mortgage debt had a balance of USD 36.3 million at year-end and was reduced by USD 5.0 million during 2016. Down payment of lease commitments amounted to USD 1.7 million.

In Q1 2016 Belships entered into a sale and leaseback agreement for M/S Belisland, which was sold and leased back for a period of 15 years with purchase options from year 5 onwards. Sales price was USD 24 million and this transaction improved Belships cash position with USD 7 million. In March 2016, M/S Belisland replaced M/S Belocean for the remaining 5 years of the charterparty with Canpotex. In connection with the sale and leaseback a new costprice of M/S Belsiland was established. The value of the favorable Charter party with Canpotex is not reÙected in the ship value/book value of M/S Belisland.

The leases of M/S Belforest and M/S Belisland are considered to be Ønancial leases.

The Group has conducted impairment tests in line with IAS 36, valuing the ships based on observable market values of equivalent ships today, and including the discounted added value of the charter parties entered into. These internal valuations indicated that there was a need for impairment of the company's ship investments with a total of USD 13.8 million in 2016, compared to USD 31.8 million in 2015.

Belships aims to provide its shareholders with a competitive dividend yield, but the current market do not allow any payment of dividend.

At the end of 2016 Belships held 548 000 treasury shares in total at an average cost of NOK 9.91 per share. In August 2016, the employees were granted options to purchase 200 000 shares at a strike price of NOK 3.11. These options can be exercised from the annual general meeting 2017 until the annual general meeting in 2018.

The Belships' share value has increased by 65 per cent in the course of 2016. By comparison, the OSEBX increased by 12%. A total of 5 501 000 shares were traded in 183 of 253 trading days. In 2015 a total of 2 112 000 shares were traded in 124 of the 251 trading days. The Group is exposed to market risks due to changes in FX rates, interest rates, freight rates and oil prices.

The Group's income and costs are mainly in USD. Belships' foreign exchange exposure is linked to administrative costs in Norway and in Singapore. Compared to the Group's cash Ùows, however, this exposure is limited. Hedging of the Group's interest exposure on bank loan is considered on an ongoing basis. The hedging level of interest rate exposure is currently around 85% (leases excluded).

Fluctuating bunker prices will not a×ect the Group as the ships are Øxed on long-term time charters where the charterers cover the fuel cost.

Belships aims to minimize counterpart risk by entering into long term time charter contracts with reputable charterers. The Group's limited tax cost is expected to continue. Three ships are owned by a Singaporean subsidiary within the local tonnage tax regime.

The Group's Norwegian entities have considerable tax loss carried forward.

CORPORATE GOVERNANCE

Belships' corporate governance is based on the company's goals and strategy. The Company is listed on the Oslo Stock Exchange, and is subject to the Norwegian Accounting Act, the Securities Trading Act and the Public Limited Company Act. With exception of establishing election committee, Belships follows the Norwegian code of good corporate governance of 30 October 2014. Please see the separate statement of corporate governance that appears as a section of the annual report in its own right.

CORPORATE SOCIAL RESPONSIBILITY

Belships is a shipping company with global reach and close to a hundred years history. The Board is well aware of the direct and indirect impact Belships' activities have on the outside world as well as the company's shareholders. Belships is determined to create long-term shareholder values and at the same time act as a responsible participant in the society. The most important issues for our business and our shareholders in respect of Corporate Social Responsibility (CSR) are considered to be:

Environment
Human and labour rights

– Anti-corruption

It is our policy to follow the standards, laws and regulations set by the national and international maritime regulatory authorities, but also the moral and ethical behavior as set by our culture. Belships reports on safety and environment in the annual report. Belships does not tolerate any corrupt practices with our suppliers, customers or government entities a×ecting our business.

Belships do pay attention to the working conditions and safety within our own operations. Please see the separate statement of corporate social responsibility that appears as a section of the annual report in its own right.

OUTLOOK

Not surprisingly, seasonal factor led to a dip in spot rates during the Ørst six weeks of 2017, but it is worth noting that rates in all sectors were well above their year-earlier levels. Last few weeks the spot rates have strengthened and the period activity is picking up.

New ships ordering is now down to almost zero and the order book is shrinking. Scrapping, cancellations and slippage together with little new ordering activity are helping to mitigate the net supply growth, which until 2019 could in fact be negative according to Fearnleys.

Belships' ships are chartered out on Øxed rates to reputable counterparts, representing a future nominal gross hire of USD 63 million.

Focus will be to further develop Belships as an owner and operator of modern bulk carriers to reputable counterparts. Our ambition is to build a portfolio of quality ships and robust charter parties that will generate distributable cash Ùows.

OSLO, 16 MARCH 2017 BELSHIPS ASA

Sverre J. Tidemand Chairman of the Board Christian Rytter Board member

Kjersti Ringdal Board member

Sissel Grefsrud Board member

Carl Erik Steen Board member

Bernt Ulrich Müller Chief Executive Oኜcer

The annual report provides a true and fair overview

DIRECTORS' RESPONSIBILITY STATEMENT

The Board and Chief Executive OÚcer have today considered and approved the annual report and Ønancial statements for the Belships group and its parent company Belships ASA for 2016.

The Board has based this declaration on reports and statements from the Group's chairman and Chief Executive OÚcer, on the results of the Group's activities and on other information that is essential to assess the Group's position, provided to the Board of the parent company under obligation by the Group's administration and subsidiaries.

To the best of our knowledge:

the 2016 Ønancial statements for the Group and parent company have been prepared in accordance with all applicable accounting standards

the information provided in the Ønancial statements gives a true and fair representation of the Group and parent company's assets, liabilities, proØt and overall Ønancial position as of 31 December 2016

the annual report provides a true and fair overview of:
the development, proØt and Ønancial position of the Group and parent company
the most signiØcant risks and uncertainties facing the Group and the parent company

OSLO, 16 MARCH 2017 BELSHIPS ASA

Sverre J. Tidemand Chairman of the Board Christian Rytter Board member

Kjersti Ringdal Board member

Sissel Grefsrud Board member

Carl Erik Steen Board member

Bernt Ulrich Müller Chief Executive Ocer

Consolidated Statements of Comprehensive Income

1 JANUARY – 31 DECEMBER / USD 1 000	NOTE	2016	2015
Operating income
Freight income		21 338	17 570
Other operating income		4 077	4 414
Total operating income	4	25 415	21 984
Operating expenses
Ship operating expenses	8	-8 197	-5 717

Operating expenses ship management	8	-3 405	-3 694
Payroll expenses	9	-1 659	-1 933
Other general administrative expenses	6	-874	-767
Total operating expenses		-14 135	-12 111
Operating result (EBITDA)		11 280	9 873
Depreciations on ២�xed assets	7	-4 901	-4 686
Impairment of ships	7	-13 823	-31 847
Loss on sale of ship/e៌�ect on onerous contracts	7	-1 463	0
Operating result (EBIT)		-8 907	-26 660
Financial income and expenses
Interest income		13	29
Interest expenses	13	-4 833	-2 185
Currency exchange gain/(loss)		69	-483
Other ២�nancial items	8	-761	-674
Net זnancial items		-5 512	-3 313

Net result before tax		-14 419	-29 973
Tax	12	-174	-177
Net result for the year		-14 593	-30 150
Hereof non-controlling interests		53	109
Hereof majority interests		-14 646	-30 259
Other comprehensive income
Other comprehensive income not to be reclassiזed to proזt or loss in subsequent periods:
Actuarial gain/(loss) on de២�ned bene២�t plan		-39	-23
Total comprehensive income		-14 632	-30 173

Hereof non-controlling interests		53	109
Hereof majority interests		-14 685	-30 282
Earnings per share (US cent)	11	-31.18	-64.42
Diluted earnings per share (US cent)	11	-31.18	-64.42

Consolidated balance sheets

PER 31 DECEMBER / USD 1 000	NOTE	2016	2015
FIXED ASSETS
Tangible ៯�xed assets
Ships	7	93 009	87 730
Newbuilding instalments	7	0	4 225
Prepaid timecharter hire		1 500	0
Other 韈�xed assets	7	1 683	1 676
Total ៯�xed assets		96 192	93 631
Financial ៯�xed assets
Financial investments		108	151
Other long-term receivables	13	183	200
Total ៯�nancial assets		292	351
Total ៯�xed assets		96 483	93 982
CURRENT ASSETS
Trade debtors	13	91	4
Other receivables	13	1 120	1 269
Cash and cash equivalents (restricted)	15	3 203	1 996
Cash and cash equivalents	15	4 715	5 997
Total current assets		9 129	9 266
TOTAL ASSETS		105 612	103 248
EQUITY
Paid-in capital		43 620	43 588
Retained earnings		-23 887	-9 202
Non-controlling interests		411	445
Total equity	20	20 144	34 831
LIABILITIES
Provision for liabilities
Pension obligations	17	648	796
Other long-term liabilities
Mortgage debt	13	30 883	35 767
Obligation under 韈�nance leases	13	42 811	21 809
Financial instruments	22	323	602
Other long-term liabilities		1 407	1 407
Total other long-term liabilities		75 424	59 585
Short-term liabilities
Current portion of mortgage debt/lease liability	13	6 778	5 688
Tax payable	12	131	121
Public taxes and duties payable		284	301
Trade creditors		256	380
Other short-term liabilities	13	1 948	1 546
Total short-term liabilities		9 396	8 036
Total liabilities		85 468	68 417

OSLO, 16 MARCH 2017 BELSHIPS ASA

Sverre J. Tidemand Chairman of the Board Christian Rytter Board member

Kjersti Ringdal Board member

Sissel Grefsrud Board member

Carl Erik Steen Board member

Bernt Ulrich Müller Chief Executive O韂cer

Consolidated cash Ùow statements

1 JANUARY – 31 DECEMBER/USD 1 000	NOTE	2016	2015
CASH FLOW FROM OPERATIONS
Net result before tax		-14 419	-29 973
Adjustments to reconcile result before tax to net cash 韈�ows:
Loss on sale of ship/e音�ect on onerous contracts	7	1 463	0
Depreciations on 韈�xed assets	7	4 901	4 686
Impairment of ships	7	13 823	31 847
Share-based compensation expense	16	31	25
Di音�erence between pension expenses and paid pension premium	17	-210	-205
Net 韈�nance costs		5 512	3 313
Working capital adjustments:
Change in trade debitors and trade creditors		-212	39
Change in other short-term items		-241	-213
Interest received		13	29
Interest paid		-4 833	-2 185
Income tax paid		-118	-41
Net cash 䍹ow from operating activities		5 710	7 322
CASH FLOW FROM INVESTING ACTIVITIES
Payment on newbuilding	7	-20 531	-22 615
Sale of ship (net sales amount)	7	23 637	27 634
Prepayment bareboat hire		0	-6 000
Payment of other investments		-1 923	-1 732
Net cash 䍹ow from investing activities		1 183	-2 713
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of long-term debt	13	-6 491	-5 187
Proceeds from new loan	7	0	1 423
Paid costs related to 韈�nancing		-484	-559
Net cash 䍹ow from ⼒nancing activities		-6 975	-4 323
Net change in cash and cash equivalents during the period		-82	286
Cash and cash equivalents at 1 January		7 993	8 064
Change currency NOK deposits		7	-357
Cash and cash equivalents at 31 December *		7 918	7 993

*) Includes certain restricted cash. See note 15.

Consolidated statements of changes in equity

				Majority interests
			Paid-in				Non controlling interest
USD 1000	Note	Share capital	Treasury shares	Share premium reserves	Other equity	Other equity		Total equity
As at 31 December 2016
Equity as at 31 December 2015		14 272	-166	13 751	15 732	-9 203	445	34 831
Net result for the year		0	0	0	0	-14 646	53	-14 593
Other comprehensive income	17	0	0	0	0	-39	0	-39
Total comprehensive income		0	0	0	0	-14 685	53	-14 632
Share-based payment expense	16	0	0	0	31	0	0	31
Non-controll. interests transact.		0	0	0	0	0	-86	-86
Equity as at 31 December 2016		14 272	-166	13 751	15 763	-23 888	412	20 144
As at 31 December 2015
Equity as at 31 December 2014		14 272	-166	13 751	15 707	21 079	408	65 051
Net result for the year		0	0	0	0	-30 259	109	-30 150
Other comprehensive income		0	0	0	0	-23	0	-23
Total comprehensive income		0	0	0	0	-30 282	109	-30 173
Share-based payments expense		0	0	0	25	0	0	25
Non-controll. interests transact.		0	0	0	0	0	-72	-72
Equity as at 31 December 2015		14 272	-166	13 751	15 732	-9 203	445	34 831

NOTE 1 GENERAL INFORMATION

Belships is an owner and operator of dry bulk ships, presently operating a Ùeet of Øve ships. The company is also providing ship management services.

Belships ASA is a public limited liability company incorporated and domiciled in Norway and listed on Oslo Stock Exchange. The head oÚce is located in Lilleakerveien 4 in Oslo, Norway.

Copies of the consolidated Ønancial statements may be downloaded from belships.staging.wpengine.com, or by inquiry to the company's head oÚce.

The consolidated Ønancial statements have been approved by the Board on 16 March 2017.

Belships has obtained approval from Oslo Stock Exchange and Norwegian tax authorities to publish its Ønancial statements only in English.

All amounts in the notes are in USD 1 000 unless otherwise stated.

NOTE 2 SUMMARY OF THE MOST IMPORTANT ACCOUNTING PRINCIPLES USED

A) BASIS OF PREPARATION

The consolidated Ønancial statements of Belships ASA (the "Parent Company"), and all its subsidiaries (the "Group"), have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). The Group accounts have been prepared on a historical cost basis, except for derivatives and shares, which are measured at fair value.

The Group accounts are presented with uniform accounting principles for identical transactions and events under otherwise identical conditions.

The annual accounts are presented on a going concern basis in accordance with § 3 – 3 of the Norwegian Accounting Act. Belships has three long-term T/C agreements with Canpotex, which is favourable in the current market. Further the sale & leaseback agreements for M/S Belforest and M/S Belisland have contributed with additional liquidity to the Group. The main shareholder has provided an on demand guarantee of USD 5 million. Based on this, the Board considers that the conditions for a going concern are in place.

B) CONSOLIDATION PRINCIPLES

The consolidated Ønancial statements comprise the Ønancial statements of Belships ASA and its subsidiaries as at 31 December 2016. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to a×ect those returns through its power over the investee.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

Unrealised gains from transactions with aÚliated companies are eliminated with the Group's share of the company/enterprise. Unrealised losses are likewise eliminated, but only to the degree that there is no indication of loss of value on the asset being sold internally.

C) CURRENCY TRANSACTIONS

Functional currency and reporting currency

Accounting transactions undertaken by respective Group companies use the currency ordinarily used by the Ønancial environment in which they operate (functional currency). The Group accounts are presented in USD.

The accounts for the units in the Group which have a functional currency di×erent from the Group's reporting currency, convert their accounts into the reporting currency according to the following guidelines:

Assets and debts are converted according to conversion rates on the balance sheet date
Income and costs are converted according to monthly average conversion rates

Transactions in foreign currency

Transactions in foreign currency are converted to the functional currency at the rate at time of the transaction. Monetary items in foreign currency are converted into functional currency using the rate at the balance sheet date. Non-monetary items which are measured at historical cost expressed in foreign currency, are converted into functional currency using the currency rate at the time of the transaction.

Non-monetary items, which are measured at fair value expressed in foreign currency, are converted at the currency rate on the date of measurement. Currency rate changes are recognised continuously against proØt and loss during the accounting period. Currency rates at year end was USD 8.6200 (2015: USD 8.8090) and SGD 5.9645 (2015: SGD 6.2386).

D) ACCOUNTS RECEIVABLE

Trade receivables are recognised at face value less any impairment. Provision for impairment is made when there is objective evidence of impairment that a×ects the estimated future cash-Ùow.

E) TANGIBLE FIXED ASSETS

Tangible Øxed assets are measured at acquisition cost, net of accumulated depreciation and impairments losses. When assets are sold or divested, the carrying amount is deducted and any gains or losses are recognised in the proØt and loss account. Acquisition cost for tangible Øxed assets is the purchase price, including taxes and charges and expenses directly related to preparing the asset for use. Expenses incurred aáer the asset has been put to use, are recognised in the proØt and loss account, whereas other expenses which are expected to create future Ønancial gains are capitalised. An estimated docking element is recognised as a separate component of the ship for depreciation purposes on the Ørst occasion a ship is booked in the accounts. The amount corresponds to the estimated docking costs for the period. The docking component is depreciated on a straight-line basis the over the period to the next planned drydocking. Residual value has been taken into account, and this is estimated based on steel value of the ship at the balance sheet date less estimated cost to demolish the ship. Book value is compared to market value and value in use to assess the need for any further impairment compared to the ordinary depreciation plan. The depreciation period and method are assessed annually and are based on the management's estimates of the ships' future useful life. The same applies to residual value.

In accordance with IFRS, the ships have been separated into components for depreciation purposes. The ships are depreciated as one unit, as the value of any part of the ship with a useful lifetime other than 25 years is considered to be insigniØcant.

Newbuilding contracts

Newbuilding contracts are recognised as a Øxed asset based on instalments paid to the yard. Building supervision costs and project costs related to the newbuilding contracts are capitalised.

See section L) regarding treatment of borrowing costs.

F) LEASING

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date. Leases are classiØed as Ønancial leases if the terms of the lease agreement transfers substantially all the risks and rewards incidental to ownership of an asset. All other leases are classiØed as operating lease.

Assets Ønanced under Ønancial leases are capitalized at inception of the lease at the fair value of the leased vessel or, if lower, at the present value of the minimum lease payments. The corresponding lease obligation is recognized as a liability in the balance sheet. Lease payments are split between interest cost and reduction of the lease liability. Interest cost is recognized in the income statement.

Financial leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term. For operating leases, the payments (time charter hire or bareboat hire) are recognized as an expense on a straight line basis over the term for the lease.

G) FINANCIAL INSTRUMENTS

Financial instruments under the scope of IAS 39 are classiØed in the following categories:

• Ønancial assets at market value through proØt or loss (held for trading purposes)

available for sale
loans and receivables
held to maturity investments
other obligations

Financial assets with Øxed or determinable cash Ùow which are not listed in an active market are classiØed as loans and receivables. Investments held to maturity, loans and receivables and other liabilities are measured at amortised cost.

H) PROVISIONS

A provision is recognised when the company has a liability (legal or constructive) as a result of a previous event and where it is probable (more probable than not) that there will be a Ønancial settlement as a result of this liability and that the size of the sum can be reliably determined. If the e×ect is material, the provision is estimated by discounting the expected future cash Ùow with a discount rate before tax which reÙects the market's evaluation of the time value of money and, if relevant, risks speciØcally connected to the liability.

A provision is recognised for any unavoidable net loss arising from the contract, the unavoidable cost under a contract reÙect the least net cost of exiting from the contract, i.e. the lower of the cost of fulØlling the contract; and any compensation of penalties arising from failure to fulØll the contract.

I) EQUITY

(i) Debt and equity

Financial instruments are classiØed as debt or equity according to the underlying substance of the contractual agreement. Interest, dividend, gains and losses related to a Ønancial instrument classiØed as debt, is presented as income or expense.

(ii) Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in proØt or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any di×erence between the carrying amount and the consideration, if reissued, is recognised in share premium. Share options exercised during the reporting period are fulØlled with treasury shares.

(iii) Costs related to equity transactions

Transaction costs directly related to equity transactions are charged directly against the equity aáer tax deductions.

J) REVENUE RECOGNITION

Revenue is recognised when it is likely that the economic beneØts which will Ùow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenues from time charter accounted for as operational leases are recognized on a straight line basis over the rental periods of such charters, as service is performed.

K) EMPLOYEE BENEFITS

De×ned contribution pension scheme

All employees are member of the company's deØned contribution scheme. The premium is charged as incurred by operations. Social security tax expense is recognized based on the pension plan payments.

De×ned bene×t pension scheme

Actuarial gains and losses arising from changes in actuarial assumptions are recognised as other comprehensive income in the period in which they arise. The cost of providing beneØts under the deØned beneØt plan is determined using the projected unit credit method.

The company has unfunded pension liabilities. These relate to early retirement and pension to persons, that have not been included in the service pension scheme. Pension obligations are estimated by an independent actuary.

L) BORROWING COSTS

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

M) CONTINGENT ASSETS AND OBLIGATIONS

Contingent liabilities are not recognised in the annual accounts. SigniØcant contingent liabilities are disclosed, with the exception of contingent liabilities in which the possibility of loss is considered distant.

Contingent assets are not recognised in the annual accounts but are disclosed if there is a certain probability that a signiØcant beneØt will be added to the Group.

N) TAXES ON INCOME

Tax expenses consist of tax payable and changes in deferred tax. Deferred tax/tax assets are calculated on all di×erences between accounting values and tax values of assets and liabilities, with the exception of temporary di×erences related to investments in subsidiaries, aÚliated companies or jointly controlled enterprises when the Group controls when the temporary di×erences will be reversed, and that is not expected to occur in the foreseeable future.

Deferred tax assets are recognised when it is likely that the company will have suÚcient proØt for tax purposes in subsequent periods that will enable the company to utilise the tax asset. Similarly, the company will reduce the deferred tax asset to the extent the company no longer regards it as being likely that it can utilize the deferred tax asset.

Deferred tax liabilities and deferred tax assets are measured on the basis of prevailing tax rates for the companies in the Group where temporary di×erences have occurred, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax liabilities and deferred tax assets are entered at nominal value calculated with the tax rate in the actual tax regime and are classiØed as long-term liability or intangible Øxed asset in the balance sheet. Tax payable and deferred tax are entered directly against equity to the extent the tax items relate to equity transactions.

In addition to companies subject to ordinary taxation in Norway, Singapore and China, the Group consists of one company within the shipping taxation scheme in Singapore. The deferred tax positions associated with the di×erent tax regimes cannot be o×set. A corresponding situation also applies to tax positions between jointly controlled operations and the rest of the Group. These cannot be o×set.

O) IMPAIRMENT OF ASSETS

At the end of each quarter, every ship is assessed for impairment indicators. The same applies when events or changes occur that may entail that the asset's carrying amount may not be recovered. In assessing the need for impairments, assets are grouped at the lowest level at which there is identiØable and predominantly independent cash inÙows, which means per ship. Impairment is calculated as the di×erence between the asset's carrying amount and the value considered as recoverable. The recoverable amount is the higher of the asset's fair value less cost to sell and its value in use to the Group. Value in use is calculated by discounting anticipated future cash Ùows from the asset. When it is assumed that the asset's value is lower than its carrying amount, an impairment loss is recognised.

Financial assets classiØed as being available for sale are written down when there are objective indications that the asset has declined in value. An accumulated loss (the di×erence between acquisition cost and current market value, with deduction of impairments previously included in the result and any amortisation amounts) is included in the proØt and loss account. If the market value of a debt instrument classiØed as available for sale increases in a subsequent period, and the increase can objectively be linked to an event that took place aáer the impairment was included in the proØt and loss, the impairment loss will be reversed over the proØt and loss account.

Impairment loss for an investment in an equity instrument classiØed as held for sale, will not be reversed over the income statement.

P) EVENTS AFTER THE BALANCE SHEET DATE

New information aáer the balance sheet date regarding the company's Ønancial position as of the balance sheet date is taken into consideration in the annual accounts. Events aáer the balance sheet date that do not a×ect the company's Ønancial position as of the balance sheet date, but which will have an impact on the company's Ønancial position in the future are disclosed if signiØcant.

Q) SHARE-BASED PAYMENTS

Employees and management in Belships ASA received options to purchase company shares. Market value of the awarded options is measured at time of the award and charged to expense over the vesting period as a payroll cost with corresponding increase in other paid-in equity. The market value of the options granted is estimated using the Black and Scholes option pricing model.

R) CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, bank deposits and other short-term and in particular liquid investments to be redeemed within 3 months. Cash and cash equivalents are recognised at nominal values in the balance sheet.

S) RESTRICTED DEPOSITS

Restricted cash include all deposits in separate accounts, which will be used to cover accrued taxes withheld for employees and deposits provided as security for certain guarantees.

T) REPORTING BY SEGMENTS

Operating segments are components of a business that are evaluated regularly by the chief operating decision maker for the purpose of assessing performance and allocating resources. The Groups chief operating decision maker is the CEO. The operating segments consist in dry cargo and technical operations, which is how the information is presented to the Management and the Board. Transactions between the business units are based on market conditions. Segment turnover, segment costs and segment results include transactions between segments.

U) RELATED PARTY TRANSACTIONS

Transactions with related parties are carried out at market terms. See note 10 for further information.

V) CASH FLOW STATEMENT

The cash Ùow statement has been prepared using the indirect method. Liquid assets include cash, bank deposits (restricted and unrestricted) and other short-term investments which can be converted to cash within 3 months. For restricted deposits, see note 15.

W) CLASSIFICATION BALANCE SHEET

The Group presents assets and liabilities in statement of Ønancial position based on current/non-current classiØcation.

An asset is considered current when it is:

• expected to be realised or intended to sold or consumed in normal operating cycle

held primarily for the purpose of trading
expected to be realised within twelve months aáer the reporting period
or
cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months aáer the reporting period

All other assets are classiØed as non-current.

A liability is considered current when it is:

expected to be settled in normal operating cycle
held primarily for the purpose of trading
due to be settled within twelve months aáer the reporting period
or

• there is no unconditional right to defer the settlement of the liability for at least twelve months aáer the reporting period

The Group classiØes all other liabilities as non-current. Deferred tax assets and liabilities are classiØed as non-current assets and liabilities.

X) CHANGES IN ACCOUNTING POLICES

The accounting policies adopted are consistent with those of the previous Ønancial year. Adoption of new standards e×ective from 2016 did not have any impact on the Group. Standards issued but not yet e×ective are as follows:

IFRS 9 Financial Instruments

IFRS 9 will eventually replace IAS 39 Financial Instruments: Recognition and Measurement. In order to expedite the replacement of IAS 39, the IASB divided the project into phases: classiØcation and measurement, hedge accounting and impairment. New principles for impairment were published in July 2014 and the standard is now completed. The parts of IAS 39 that have not been amended as part of this project have been transferred into IFRS 9. If not early adopted, the standard becomes e×ective 1 January 2018. The group has made a preliminary assessment of the e×ect of the standard, and not identiØed any material impact on the group Ønancial position of performance.

IFRS 15 Revenue from Contracts with Customers

The IASB and the FASB have issued their joint revenue recognition standard, IFRS 15. The standard replaces existing IFRS revenue requirements. The core principle of IFRS 15 is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reÙects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard applies to all revenue contracts and provides a model for the recognition and measurement of sales of some non-Ønancial assets (e.g., disposals of property, plant and equipment).

Based on the current activity of the Group, implementation of IFRS 15 is not expedted to have any signiØcant impact. The standard is e×ective from 1 January 2018.

IFRS 16 Leases

IFRS 16 replaces existing IFRS lease requirements in IAS 17 Leases. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e., the customer ("lessee") and the supplier ("lessor"). The new lease standard requires lessees to recognize assets and liabilities for most leases, which is a signiØcant change from current requirements. For lessor, IFRS 16 substantially carries forward the accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or Ønance leases, and to account for those two types of leases di×erently. Based on the current activity of the Group, implementation of IFRS 16 is not expected to have any signiØcant impact. The new standards is e×ective from 1 January 2019.

NOTE 3 USE OF ESTIMATES AND JUDGEMENT IN PREPARATION OF THE ANNUAL ACCOUNTS

Preparing the annual accounts in accordance with IFRS as adopted by EU requires the management to use estimates and assumptions a×ecting the amounts reported in the accounts with notes. The management assumptions and valuations are based on past experience and on miscellaneous other factors assumed to be reasonable and appropriate. This applies in particular to impairment assessment of ships and lease classiØcation assessment. Future events can entail a change in these estimates. Estimates and the underlying assumptions are evaluated on an ongoing basis.

Changes in accounting estimates are entered in the period when the changes occur. If the changes also apply to future periods, the e×ect is distributed over the current and future periods and appears in the current note.

SHIPS – IMPAIRMENT ASSESSMENT

The Group assess, at each reporting date, whether there are any indications that the ships may be impaired. Impairment is only made if carrying amount is higher than the asset's recoverable amount. Each ship is deØned as a separate cash generating unit. The recoverable amount is based on the average of two independent broker estimates (charterfree), in addition to the net present value of the estimated fair value of the belonging charters for ships under contract with Canpotex. The key assumptions used for impairment testing of the ships are described in note 7.

The impairment calculation demands some degree of estimation. Management makes estimates and judgement of the estimated fair value of the belonging charters and the discount rate. For the broker values, management compares the value with comparable external non-distressed transactions of bulk ships, adjusted for size, yard and construction year.

Further, management also assess external available sources for the expected development in the world wide Ùeet, parity between newbuilding prices versus second-hand transactions and assumptions regarding future freight rates and implied capital cost to assess if the broker values used as basis is reliable. The dry bulk sector has several sources for second-hand prices and assumptions regarding future market development (rates and estimated Ùeet growth). Changes to these estimates could have signiØcant impact on impairment/reversal of impairments.

Remaining useful life is estimated on the date of the presentation of accounts. The useful life of the assets and the method of depreciation are evaluated yearly. See note 7 for additional details.

OPERATING VERSUS FINANCIAL LEASE AGREEMENTS

Based on the content of a leasing agreement, the Company determines whether the agreement is considered as an operating or a Ønancial lease agreement. In this determination, assumptions are made and if the same assumptions were judged di×erently, it could have an e×ect on the income statement and the statement of Ønancial position. One of the most signiØcant judgements is the forecasted future market value of the leased ship at the dates when the purchase option is expected to be declared.

In 2016 the Company entered into a sale and leaseback agreement on the ship M/S Belisland with a Japanese counterpart, and leased back for a period of 15 years, with annual purchase options from year 5. Based on an assessment of the terms of the lease contracts, including the levels of purchase options from year 5 and onwards, the Management has assessed that the leaseback is a Ønancial lease.

The ship was at the inception of the lease measured at the lower of the fair value and the present value of minimum lease payments and expected timing of declaration of the purchase option. For the purpose of calculating the net present value, the interest rate implicit in the lease or the Company's current incremental borrowing rate is used as a discount factor.

NOTE 4 SEGMENT INFORMATION

The Belships Group is divided into the operating segments dry bulk and technical management and is in accordance with the reporting to the Chief Operating Decision Maker (CEO).

Segment performance is evaluated based on proØt or loss and is measured consistently with proØt or loss in the consolidated Ønancial statements. The Group's Ønancing (including Ønance costs and Ønance income) and income taxes are managed on a Group basis but are allocated to applicable operating segments.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

The dry bulk segment consists of ships chartered to Canpotex Shipping Services Ltd and Cargill International, and revenues from those charterers are representing 69% and 14% of total turnover respectively. The Group had no other single customers in any segment neither in 2016 nor 2015 where revenue accounted for more than 10% of the total turnover.

The operating segments have worldwide activities. The shipping market in general o×ers a global service covering major global trade routes. This is also the matter for the Group. Due to this, Ønancial position is not allocated to geographical segments.

1 JANUARY – 31 DECEMBER 2016	DRY CARGO	TECHNICAL MANAGEMENT	ADMINI STRATION	GROUP TRANSACTIONS	TOTAL
Freight revenue	20 903	0	0	435	21 338
Management fees – external	0	3 798	279	0	4 077
Management fees – internal	0	699	437	-1 136	0
Operating income	20 903	4 497	716	-701	25 415
Operating expenses	-8 896	-3 405	0	699	-11 602
General administrative exps.	-47	0	-2 488	2	-2 533
Operating expenses	-8 943	-3 405	-2 488	701	-14 135
Operating result (EBITDA)	11 960	1 092	-1 772	0	11 280
Loss sale ship/e൐ect onerous contr.	-1 463	0	0	0	-1 463
Depreciations on 棣xed assets	-4 779	-53	-69	0	-4 901
Impairment of ships	-13 823	0	0	0	-13 823
Operating result	-8 105	1 039	-1 841	0	-8 907
Financial income	0	5	8	0	13
Financial expenses	-5 019	-68	-438	0	-5 525
Result before tax	-13 124	976	-2 271	0	-14 419
Tax	0	-174	0	0	-174
Net result	-13 124	802	-2 271	0	-14 593
Hereof non-controlling interests	0	53	0	0	53
Hereof majority interests	-13 124	749	-2 271	0	-14 646
Assets	99 749	3 866	1 998	0	105 612
Liabilities	82 317	1 880	1 270	0	85 467
Cash 卨�ow from operating activities	6 942	979	-2 211	0	5 710
Cash 卨�ow from investing activities	1 366	0	-183	0	1 183
Cash 卨�ow from 棣nancing activities	-6 975	0	0	0	-6 975

1 JANUARY – 31 DECEMBER 2015	DRY CARGO	TECHNICAL MANAGEMENT	ADMINI STRATION	GROUP TRANSACTIONS	TOTAL
Freight revenue	17 273	0	0	297	17 570
Management fees – external	0	4 151	263	0	4 414
Management fees – internal	0	476	300	-776	0
Operating income	17 273	4 627	563	-479	21 984
Operating expenses	-6 193	-3 694	0	476	-9 411
General administrative exps.	-46	0	-2 657	3	-2 700
Operating expenses	-6 239	-3 694	-2 657	479	-12 111
Operating result (EBITDA)	11 034	933	-2 094	0	9 873
Depreciations on 棣xed assets	-4 582	-45	-59	0	-4 686
Impairment of ships	-31 847	0	0	0	-31 847
Operating result	-25 395	888	-2 153	0	-26 660
Financial income	0	14	15	0	29
Financial expenses	-2 403	-66	-873	0	-3 342
Result before tax	-27 798	836	-3 011	0	-29 973
Tax	0	-177	0	0	-177
Net result	-27 798	659	-3 011	0	-30 150
Hereof non-controlling interests	0	109	0	0	109
Hereof majority interests	-27 798	550	-3 011	0	-30 259
Assets	94 149	3 570	5 529	0	103 249
Liabilities	65 364	1 866	1 186	0	68 417
Cash 卨�ow from operating activities	8 675	906	-2 259	0	7 322
Cash 卨�ow from investing activities	-2 703	0	-10	0	-2 713
Cash 卨�ow from 棣nancing activities	-5 730	1 407	0	0	-4 323

NOTE 5 LEASE AGREEMENTS

LEASE OBLIGATIONS

Belships ASA entered on 25 September 2015 into a sale and lease back agreement for M/S Belforest. The bareboat period is 12 years with purchase options from year 3 onwards.

M/S Belisland, a 61 000 dwt Ultramax bulk carrier, was constructed at Imabari Shipbuilding in Japan and delivered 15 March 2016. The ship was at time of delivery sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards.

Both leases are considered as Ønancial leases.

In January 2018 Belships will take delivery of a newbuilding on time charter for 8 years incl. purchase option. The newbuilding is an 63 000 dwt eco‐design Ultramax bulk carrier from Imabari Shipbuilding in Japan.

Payment if options on ×nancial leased ships is exercised

If the Company has an option to purchase a ship at a price, which at the inception of the lease is expected to be signiØcant lower than the fair value at the date the option becomes exercisable, the lease payments comprise the payment required to exercise the option. Hence, the lease liabilities recorded in the balance sheet consist of one part which is deemed hire payments and one part which is the payment required if the option to purchase the ship should be exercised. The table below provides an overview of the split between hire payments and payments required if the option is exercised.

NET PRESENT VALUE OF LEASE LIABILITY	< 1 YR	1-5 YR	> 5 YR	TOTAL
Maturity of 棣nancial lease liability	2 435	14 788	11 174	28 397
Whereof payments of purchase option	0	0	16 250	16 250
Hire obligation under 棣nancial lease	2 435	14 788	27 424	44 647

CONTRACTED TIME CHARTER REVENUE

M/S Belstar, M/S Belnor and M/S Belocean has been on 10-years time charters to Canpotex Shipping Services Ltd from time of delivery from yard in 2009, 2010 and 2011 respectively, at a net rate of USD 16 000 per day. There is no option to charter beyond this period.

On 25 February 2016, M/S Belocean ended her contract with Canpotex. The ship was replaced by the newbuilding M/S Belisland at a net rate of USD 17 300 per day with e×ect from time of delivery 15 March 2016 until the expiry of the remaining 5 year period. Cargill chartered from end of February 2016 M/S Belocean for 10-15 months at an average net rate of USD 3 750 per day.

M/S Belforest is chartered to Cargill unto May 2017 with charterers option for additional 4 months at a net rate of USD 5 775 per day.

AS AT 31 DECEMBER 2016	< 1 YR	1-5 YR	> 5 YR	TOTAL
Contracted timecharter revenue	19 446	43 316	0	62 762
Commitments related to long-term leased ships	4 909	19 650	37 210	100 486
AS AT 31 DECEMBER 2015	< 1 YR	1-5 YR	> 5 YR	TOTAL
Contracted timecharter revenue	21 199	60 461	1 070	82 730
Commitments related to long-term leased ships	2 306	23 726	39 680	65 712

Lease obligations are nominal amounts.

NOTE 6 OTHER GENERAL ADMINISTRATIVE EXPENSES

OTHER GENERAL ADMINISTRATIVE EXPENSES	2016	2015
OÕce expenses	204	197
Furniture, oÕce supplies	66	82
Travelling, entertainment costs	117	86
Other services	217	228
Other general administrative expenses	271	174
Total administrative expenses Norwegian companies	874	767

NOTE 7 SHIPS AND OTHER FIXED ASSETS

		2016		2015
		Ships			Ships		Other xedۄ assets
	New buildings	Ships excl. dry dock	Capital. costs dry dock	Total	Other xedۄ assets	New buildings	Ships excl. dry dock	Capital. costs dry dock	Total
Cost per 1 January	8 475	145 490	3 709	149 199	4 920	14 125	118 756	954	119 710	4 896
Additions	20 531	22 740	1 140	23 880	183	22 600	26 734	2 755	29 489	71
Disposals	-29 006	0	0	0	-140	-28 250	0	0	0	-47
Cost per 31 Desember	0	168 230	4 849	173 079	4 963	8 475	145 490	3 709	149 199	4 920
Depreciations per 1 Jan.	4 250	60 381	1 088	61 469	3 565	0	30 467	324	30 791	3 490
Depreciation for the year	0	3 701	1 077	4 778	123	0	3 817	764	4 581	105
Impairment	0	13 823	0	13 823	0	5 750	26 097	0	26 097	0
Disposals	-4 250	0	0	0	-131	-1 500	0	0	0	-30
Deprec. as at 31 Dec.	0	77 905	2 165	80 070	3 556	4 250	60 381	1 088	61 469	3 565
Book value per 31 Dec.	0	90 325	2 684	93 009	1 407	4 225	85 109	2 621	87 730	1 355
Other ፄxed assets	0	0	0	0	276	0	0	0	0	320
Book value at 31 Dec.	0	90 325	2 684	93 009	1 683	4 225	85 109	2 621	87 730	1 675

SPESIFICATION OF THE GROUP'S SHIPS

SHIP	BUILT YEAR	OWNERSHIP	COST PRICE	ORDINARY DEPRECIATIONS	IMPAIRMENTS	CAPITALISED DRYDOCK EXPS.	BOOK VALUE
M/S Belstar	2009	100 %	40 542	-9 795	-13 135	185	17 797
M/S Belnor	2010	100 %	39 891	-8 874	-10 643	325	20 699
M/S Belocean	2011	100 %	38 317	-6 918	-20 387	741	11 753
M/S Belforest	2015	BBC	26 734	-918	-6 609	675	19 882
M/S Belisland	2016	BBC	22 740	-620	0	758	22 878
Total ۄeet			168 224	-27 125	-50 774	2 684	93 009

M/S Belstar, M/S Belnor and M/S Belocean (until mid February 2016) have continued the long-term contracts to Canpotex Shipping Services Ltd of Canada. In February 2016 M/S Belocean was Øxed to Cargill International S.A of Switzerland for 10-15 month period. The ships have operated satisfactorily over the year. The three supramaxes are owned by the Group and reference is made to note 13 regarding Ønancing.

M/S Belisland was delivered 15 March 2016. The remaining newbuilding commitment amounting to USD 19.8 million was paid at time of delivery. The ship was at time of delivery sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards. The sale generated a loss amounting to USD 1.1 million. The lease transaction is considered as a Ønancial lease. The ship was chartered to Canpotex for 5 years from delivery.

M/S Belforest is leased for a period of 12 years with purchase options from year 3 onwards. The ship is chartered to Cargill unto mid of May 2017 with charterers option of further 4 months.

The counterparty risk with the charterers is considered to be low. The operating result is impacted by a provision of USD 0.4 million for unfavourable timecharter contracts for M/S Belocean and M/S Belforest.

IMPAIRMENT TESTS

Impairment tests for the company's assets are performed in accordance with IAS 36. Due to the declining dry bulk market (charter rates/ship values), Belships has had several impairment indicators in 2016, accordingly impairment tests have been performed every quarter. The impairment tests led to an impairment charge of USD 13.8 (31.8) million in 2016. The method and estimates applied in the impairment test is described in note 3.

For calculations of the net present value of the estimated fair value of the remaining 3-5 years charter, the Group has calculated the variance between the contractual rate and the current observable market rate for similar ships and a weighted average cost of capital ratio (WACC) of 8%. In the calculation of the required rate of return, the risk-free interest rate was set at the 5-year LIBOR at 1.75%, and the margin was Øxed at 4% which is approximately equal to margin on external loan and implicit interest on the lease agreement. The equity risk premium was set at 6%, which is the estimated additional return required by investors in order to invest in a market portfolio above a risk-free interest rate.

For ships where the Group has entered into sale & leaseback agreements, the implied price in the agreement has also been taken into consideration in the impairment test.

The Company's impairment model has taken into consideration market expectations of future development in the dry bulk market. If the market continue to further detoriate, or the period until recovery is prolonged, additional impairment can be expected.

The table below shows sensitivity in the impairment tests of the ships.

SENSITIVITY ANALYSIS	BELSTAR	BELNOR	BELOCEAN	BELFOREST	BELISLAND	TOTAL
Change in market value of the ships (incl. c/p agreements) when:
WACC increase with 1%	-98	-149	0	0	-207	-454
WACC decrease with 1%	99	154	0	0	213	466
Market rate increase 5% and ship values increase 2.5%	-52	-97	297	500	-29	619
Market rate decrease 5% and ship values decrease 2.5%	52	97	-297	-500	29	-619

If the general charter rate increase more than expected in the company's impairment model, this will have a negative impact on the net present value on ships currently trading on long favorable charters, but partly o×set by an increase in underlying broker values on the Company's ships. For ships without a long favorable charter, an increase in market value will have positive e×ect. If the general charter rate decrease more than expected, this will have a negative impact and additional impairment based on underlying broker values.

CALCULATION OF DEPRECIATIONS

Depreciation is calculated on a straight line basis over the estimated useful life of the ships taking its residual value into consideration. The useful life, which is also considered as the economic life of the ships, has been estimated to 25 years. Residual value is estimated based on steel prices of the ships less cost to demolish and is reassessed every year-end. Dry docking expenses are depreciated until next planned dry docking, typically 30-60 months.

Other assets have a useful life of 3-5 years, except for the oÚce premises in Singapore in which the useful life is estimated at 57 years.

Reference is made to note 5 regarding contracted time charter incomes for the ships.

NOTE 8 SPECIFICATIONS OPERATING EXPENSES AND OTHER FINANCIAL ITEMS

	2016	2015
Ship operating expenses
Crew expenses	4 568	3 121
Maintenance and spare parts	1 968	1 426
Insurance	872	675
Other ship operating expenses	789	495
Total ship operating expenses	8 197	5 717
The increase from 2015 to 2016 is due to delivery of M/S Belisland in March 2016.
Operating expenses ship management
Administration costs	2 302	2 448
General & selling expenses	612	622
Fixed costs	492	624
Total operating expenses ship management	3 405	3 694
Other nancial items
Net unrealised gain/(loss) on interest swaps	278	-87
Borrowing costs	-740	-426
Other nancial items	-299	-161
Total other nancial items	-761	-674

NOTE 9 SALARIES, NUMBER OF EMPLOYEES

	2016	2015
Salaries	1 204	1 303
Social security tax	217	260
Pension expenses	140	142
Other allowances	98	228
Total payroll expenses Norwegian companies	1 659	1 933

Average number of oÚce sta× in 2016 was 63 (2015: 63) of which 8 in the Norwegian companies.

Loans to employees are speciØed in note 13. Loans to members of the management amounted to 64 (62) at yearend.

REMUNERATION	CHIEF EXECUTIVE OFFICER	FINANCIAL DIRECTOR	COMMERCIAL DIRECTOR
2016
Salaries	367	175	206
Pension expenses (de韈�ned contribution)	19	19	19
Other remuneration	49	21	23
2015
Salaries	362	178	209
Pension expenses (de韈�ned contribution)	19	19	19
Other remuneration	64	23	24

Remuneration in accordance with the Accounting Act § 7-31b is presented in note 10 in the parent company accounts.

BONUS

No bonus scheme was adopted for 2016. Nor for 2017.

SHARE OPTIONS

The Chief Executive OÚcer has a separate option scheme. For details see note 16.

For share options to the employees, see note 16. The Board members have not been awarded share options.

ALLOWANCE TO THE BOARD

The Board has received 77 in remuneration in 2016, divided into 19 to the Chairman and 14 to each of the other members. Additional, 3 of the board members represent an audit committee and have received 11 in remuneration in 2016, divided into 5 to the Chairman and 3 to each of the other members. The remunerations are paid in NOK and was unchanged from 2015.

THE GROUP'S FEES TO THE AUDITOR (EXCLUDING VAT)	2016	2015
Remuneration for audit services	58	65
Other assurance services	22	0
Assistance related to tax	9	11
Other audit related assistance	10	14
Total	99	89

NOTE 10 RELATED PARTIES

The subsidiary Belships Management AS provides accounting services to Sonata AS, which is owned by the chairman and his family. Fees amounted to 126 (128) in 2016.

Sonata AS issued in 2016 an on-demand guarantee amounting to USD 5 million to the lender. The guarantee carries a commission of 5% which amounted to 252 in 2016.

All fees are in line with prevailing market rates.

No loans were issued or security provided with respect to the company's shareholders or associated parties. Certain members of the management have loans from the company. These amounted to 64 (62) as at 31 December 2016.

NOTE 11 EARNINGS PER SHARE

Basic earnings per share is the ratio between net result of the year attributable to ordinary equity holders (i.e. net proØt with dividend deducted) and the issued average number of shares outstanding during the period.

When calculating diluted earnings per share, net result attributable to ordinary equity holders and the number of issued average outstanding shares are adjusted for share options. In "the denominator" all share options (see note 16) which are "in-the-money" and exercisable are taken into consideration. In the calculations, share options are considered as having been converted at the time they were awarded.

The diluted earnings per share is equal to the basic earnings per share, as the Group's result before tax are negative.

AVERAGE NUMBER OF SHARES (EXCLUDING TREASURY SHARES)	2016	2015
Average number of issued shares	46 804 000	46 804 000
Average number of options outstanding	400 000	400 000
Diluted average issued number of shares	47 204 000	47 204 000
EARNINGS PER SHARE
Net result for the year	-14 593	-30 150
Earnings per share (US cent)	-31.18	-64.42
Diluted earnings per share (US cent)	-31.18	-64.42

NOTE 12 TAXES

	2016	2015
Income tax expense	174	177

In accordance with IAS 12 for treatment of taxes, tax reducing temporary di×erences and tax increasing temporary di×erences that are reversed, or can be reversed in the same period and jurisdiction are assessed and the amount recorded net.

RECONCILIATION OF THE YEAR'S INCOME TAX EXPENSE	2016	2015
Result for the year before tax	-14 419	-29 973
Statutory tax rate (Norway)	25 %	25 %
Estimated tax expense at statutory rate	-3 605	-7 493
Non tax deductible expenses	107	7 960
Change in temporary di燙�erences	313	355
Non taxed shipping income in Singapore	1 969	-1 113
Di燙�erence between Norwegian and Singapore regional national tax	-70	-32
Tax e燙�ect of deferred tax asset not recorded in the balance sheet including exchange rate e燙�ect	1 460	500
Total income tax expense/(income)	174	177

TAX LOSS CARRIED FORWARD

The Group had a tax loss carried forward of USD 58.5 million as at 31 December 2016 (2015: USD 46.7 million) in Norway. No deferred tax beneØts are recognised in the balance sheet. The Group's revenue is generated mainly by companies in Singapore that are either within the national tonnage tax regime or are subject to regular national taxation. Dividends from these companies are nontaxable to the recipients. Taxable income subject to ordinary Norwegian taxation does not indicate any reporting of deferred tax beneØts.

Future tax payable in the Group is expected to be low, due to AIS registration in Singapore and tax losses in Norway.

DEFERRED TAX PER 31 DECEMBER	2016	2015
Temporary di៳�erences
Deferred sales gain/(loss)	-829	0
Accruals	2 116	1 010
Pensions	-648	-796
Total temporary di៳�erences	639	214
Tax loss carried forward	-58 469	-46 688
Net temporary di៳�erences	-57 830	-47 964
Nominal tax rate on deferred tax	24 %	25 %
Deferred tax assets	-13 879	-11 618
Deferred tax assets recognised in the Balance sheet	0	0
Deferred tax assets not recognised in the Balance sheet	-13 879	-11 618

Calculation of deferred taxes is based on temporary di×erences between statutory books and tax values which exist at the end of the year.

NOTE 13 RECEIVABLES AND LIABILITIES

RECEIVABLES DUE LATER THAN 12 MONTHS	2016	2015
Loans to employees 1)	178	195
Other long-term receivables	5	5
Total long-term receivables	183	200

1) The average interest rate used for loans to employees was 2.28% (2.72%) in 2016. The repayment period is 瀌ve years.

MORTGAGE DEBT

In 2014 Belships entered into a long-term Ønancing agreement for M/S Belstar, M/S Belnor and M/S Belocean. The loan facility of USD 50 million is secured for a period of 6 years. The following principal conditions applies to the loan: agreed interest rate is LIBOR pluss margin of 2.75%, minimum market value of the ships is 110% of the outstanding loan balance, minimum value adjusted equity on a consolidated basis is 25% and the Group shall at all times have available liquidity of at least USD 5 million or 6% of total interest bearing debt.

The ship values have dropped signiØcantly during the last two years. In order to avoid breach of loan covenants, Belships received a revised waiver from ship mortgage lender in November 2016. Main terms in the waiver period until 1 January 2018 are as follows: Minimum cash USD 5.0 million including restricted cash of USD 3.0 mill, minimum value 100% incl. restricted cash, minimum value adjusted equity of 20% and on‐demand guarantee from main shareholder of USD 5 million. All the covenants were fulØlled as at 31 December 2016. The market value of the ships were 101% of the outstanding loan balance at year-end.

BAREBOAT COMMITMENT

Belships ASA entered in 2015 into a lease agreement for M/S Belforest. The bareboat period is 12 years with purchase options from year 3 onwards.

M/S Belisland was delivered 15 March 2016. Remaining newbuilding commitment amounting to USD 19.8 million was paid upon delivery. At time of delivery the ship was sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards.

Both leases are considered as Ønancial leases.

REPAYMENT SCHEDULE	2017	2018	2019	2020	SUBSEQ	TOTAL
Mortgage debt	5 000	5 000	5 000	5 000	16 250	36 250
Obligation under 瀌�nance leases	1 836	1 994	2 163	2 350	36 304	44 647
Total	6 836	6 994	7 163	7 350	52 554	80 897

INTEREST SWAP AGREEMENTS

Belships has an interest swap agreement with a Øxed interest rate at 2.2% with a remaining duration of 1.5 years covering USD 10 million, reducing by USD 5 million per year. Another interest swap agreement started in September 2015 at a rate of 1.9% and with a duration of 5 years covering USD 19 million, reducing by USD 2 million per year.

Hedging the Group's interest exposure is considered on an ongoing basis. Hedge accounting is not used.

CURRENT RECEIVABLES AND SHORT-TERM LIABILITIES

Current receivables consist mainly of accrued revenues, and receivables related to operation of the ships. Other short term liabilities mainly include short term liability related to the ordinary operation of the ships. All current receivables and liabilities are due within 12 months.

NOTE 14 INVESTMENTS AND GROUP COMPANIES

THE FOLLOWING COMPANIES ARE INCLUDED IN THE CONSOLIDATED ACCOUNTS:	BUSINESS LOCATION	MAIN ACTIVITY	OWNERSHIP/ VOTING PERCENTAGE
Belships Management AS	Oslo	Management	100 %
Belships Management (Singapore) Pte Ltd	Singapore	Technical management	100 %
Belships Supramax Singapore Pte Ltd	Singapore	Shipping	100 %
Belships Chartering AS	Oslo	Shipping	100 %
Belships Management (Singapore) Pte Ltd
Belships (Tianjin) Ship Management & Consultancy Co Ltd	China	Crewing	75 %
Belships (Shanghai) Shipmanagement Co Ltd	China	Crewing	60 %

INVESTMENT IN ASSOCIATED COMPANIES	BUSINESS LOCATION	OWNERSHIP/ VOTING PERCENTAGE
Belships (Myanmar) Shipmanagement Limited	Myanmar	40 %
Belchem Philippine Incorporation	Philippine	24 %
CST Belchem Singapore Pte Ltd	Singapore	20 %

NOTE 15 BANK DEPOSITS

The Group's bank balance amounted to 7 918 (7 993) at year-end. Restricted cash amounted to 3 203 (1 996), of which 3 000 (1 450) were related to deposit to external loan, 125 (458) to swap clearing account and 77 (88) to withholding tax employees.

NOTE 16 OPTIONS TO EMPLOYEES

At the Annual general meeting (AGM) in 2015, the Board was authorised to issue up to 200 000 share options to employees. The option price was 105% of closing share price on the day of the AGM. The authorization is valid for two years. In accordance with this authorisation, options to buy 200 000 shares at NOK 3.89 was awarded in August 2015. No options have been exercised. At the AGM in 2016, the Board was authorised to issue up to 200 000 share options to employees. The option price is 105% of closing share price on the day of the AGM. The authorization is valid for two years. In accordance with this authorisation, options to buy 200 000 shares at NOK 3.11 was awarded in August 2016.

Both option programs require a service period of 12 months before they can be exercised. The option can be exercised aáer one year from the date of the AGM which approved the option program and runs unto the date of the next AGM. The option programs include all employees in the parent company. The employees must be employed in the company at the time when the options can be exercised in order to have a right to exercise them.

SUMMARY OF OUTSTANDING OPTIONS	2016	2015
Outstanding 1 January	400 000	200 000
Awarded	200 000	200 000
Exercised	0	0
Not exercised	-200 000	0
Outstanding 31 December	400 000	400 000

Market value of options estimated using the Black and Scholes options pricing model. For the options awarded in 2015 and 2016 the market value per share was NOK 0.75 and NOK 0.60 respectively. The market value of outstanding share options are calculated at time of award and charged against proØt and loss over the period until they can be exercised. In 2016 the calculated costs amounted to 9 and 7 for the 2015- and 2016-options respectively.

The following forms the basis for the calculation:

Share price at the time the option was awarded: The share price is set as equal to the stock exchange share price when the option was awarded.

Exercise price per option: The exercise price was 105 % of the stock exchange market price when the option was awarded. Volatility: Historic volatility set as indication of future volatility. Expected volatility equals a historic volatility of 39.0%. Duration of options: It is assumed that all employees will exercise their options when the service period has been completed. The term of the options is estimated at two years.

Dividend: Estimated dividend per share is NOK 0 per year.

Risk free interest rate: Interest rate used as a basis for calculating options is equal to the interest rate on government bonds over the duration of the options, i.e. 0.53% for 2016.

Decrease in the number of employees: Expected reduction is 0.

SHARE OPTION PLAN CHIEF EXECUTIVE OFFICER

In addition to the above share option plan the CEO has a separate share option plan with the following conditions: The right to subscribe for up to 2 million shares in Belships ASA at a subscription price of NOK 5.00, of which:

500 000 shares may be subscribed for if the company's market value exceeds NOK 300 million (Sub-option A).
The remaining 1.5 million shares may be subscribed for if the company's market value exceeds NOK 750 million (Sub-option B). Sub-option B is for 2 million shares if Sub-option A is not exercised within the time allowed for Sub-option A.

The market value is the product of the volume-weighted closing price of the company's shares on the Oslo stock exchange in a 15-day period and the number of outstanding shares less treasury shares and/or shares Belships issues aáer the option agreement date. Sub-option A expires 30 June 2018, while sub-option B expires 30 June 2020. In 2016 the calculated cost for this option amounted to 15.

NOTE 17 PENSIONS

DEFINED CONTRIBUTION SCHEME

All the employees are member of the company's deØned contribution scheme, which is in line with the occupational pension scheme for employees in Norway in accordance with the Act on Mandatory occupational pensions. Annual payable cost is reÙected in the income statements and the company does not have any future liabilities related to this scheme. Total costs related to these schemes amounted to 121 (120) in 2016. Pension costs in Singapore is reclassiØed as operating expenses ship management and amounted to 210 (227) in 2016.

DEFINED BENEFIT SCHEME

In addition to deØned contribution scheme, the company has unfunded pension liabilities which are covered through the daily operations. These relate to early retirement and pension to persons, that have not been included in the deØned contribution scheme. There are 7 retired persons included in this scheme.

Pension commitments are calculated by an independent actuary. The basis for the calculation is shown below. The new mortality table (K2013) for Norway is used in the calculations.

Social security costs are recorded based on net pension obligation in the balance sheet included estimate discrepancy.

ASSUMPTIONS	2016	2015
Discount rate	2.60 %	2.70 %
Future wage adjustment	2.50 %	2.50 %
Pension adjustment/G-adjustment	2.50 %	2.50 %
Return on pension plan assets	2.60 %	2.70 %

CHANGES IN THE PRESENT VALUE OF THE DEFINED BENEFIT OBLIGATION

1 January	796	1 138
Interest cost	19	21
Bene၄ts paid	-229	-226
Actuarial (gains)/losses on obligation	39	23
Currency exchange gain/(loss)	23	-160
31 December	648	796
PENSION EXPENSES IN CONSOLIDATED ACCOUNTS	2016	2015
Pension expenses de၄ned bene၄t scheme	19	21
Pension expenses de၄ned contribution scheme	121	120

Net pension expenses in consolidated accounts 140 141

No material events have taken place aáer 31 December 2016.

NOTE 19 ENVIRONMENTAL ISSUES

The company has not been charged any penalties due to breach of environmental rules and regulations, and is not committed to implement any speciØc actions in that respect. For further information see the Directors' report.

SHARE CAPITAL

Belships ASA's 47 352 000 shares, each with a face value of NOK 2.00, was as of 31 December 2016 distributed among 481 shareholders (2015: 451). Each share has one vote.

TREASURY SHARES

The company holds 548 000 treasury shares in total with an average cost price of NOK 9.91 as of 31 December 2016. Belships ASA has lent 50 000 of the treasury shares to ABG Sundal Collier Norge ASA (ASC) in connection with ASC' role as liquidity provider for the company's shares on Oslo Stock Exchange.

AUTHORISATION TO ISSUE NEW SHARES

At the Annual general meeting in 2016 the Board received authorisation to issue up to 4.7 million new shares. The authorisation has not been used and is valid to the next ordinary Annual general meeting.

DIVIDEND

The Board of Directors of Belships ASA will at the general meeting on 25 April 2017 propose no payment of dividend (2016: 0).

	THE 20 LARGEST SHAREHOLDERS IN BELSHIPS ASA AT 31 DECEMBER 2016	NUMBER OF SHARES	PERCENTAGE
1	Sonata AS	31 747 492	67.05 %
2	Tidships AS	6 041 336	12.76 %
3	Skandinaviska Enskilda Banken AB	987 419	2.09 %
4	Belships ASA	498 000	1.05 %
5	Carlings AS	400 000	0.84 %
6	Colorado Eiendom AS	355 000	0.75 %
7	Tidinvest II AS	315 414	0.67 %
8	Jenssen & Co A/S	302 816	0.64 %
9	Chrem Capital AS	270 000	0.57 %
10	Jovoko AS	250 000	0.53 %
11	Toru Nagatsuka	250 000	0.53 %
12	Liv Søland	240 000	0.51 %
13	ASL Holding AS	225 000	0.48 %
14	AR Vekst AS	218 995	0.46 %
15	HKG Holding AS	212 779	0.45 %
16	JSL AS	211 000	0.45 %
17	Carl Erik Steen	207 203	0.44 %
18	Bernhard Kielland	200 000	0.42 %
19	Arne Risøy	138 651	0.29 %
20	Torstein Søland	130 000	0.27 %
	Total 20 largest shareholders	43 201 105	91.23 %
	Other shareholders	4 150 895	8.77 %
	Total number of shares	47 352 000	100.00 %

NUMBER OF SHARES OWNED BY BOARD MEMBERS IN BELSHIPS ASA	OWNED SHARES	OUTSTANDING OPTIONS
Sverre J. Tidemand *	31 747 492	0
Christian Rytter	270 000	0
Carl Erik Steen	207 203	0
Other members	0	0

*) Includes shares held by Sonata AS, a company in which Sverre J. Tidemand controls the only share with voting rights.

NUMBER OF SHARES OWNED BY THE MANAGEMENT IN BELSHIPS ASA	OWNED SHARES	OUTSTANDING OPTIONS
Ulrich Müller, Chief Executive O៝�cer *	0	120 000
Stein H. Runsbech, Commercial Director	40 000	66 000
Osvald Fossholm, Financial Director	0	66 000

*) See note 16 for more information about separate share option plan.

For changes in equity, see separate statement.

The Board is not aware of any material disputes the company may be in involved in at 31 December 2016.

NOTE 22 FINANCIAL MARKET RISK

Financial market risk is considered to be the risk of changes in foreign exchange rates and interest rates that may a×ect the value of the Group's assets, obligations and future cash Ùows.

Belships has a continuing focus on its risk exposure. Derivatives may be used to reduce Ønancial market risk, but are only used to hedge speciØc exposures. When use of derivatives are considered appropriate, only well-known conventional derivative instruments are considered, i.e. OTC agreements such as swaps, options and forward rate agreements. Derivative transactions are only made with renowned Ønancial institutions. Credit risk relating to these derivatives is therefore limited.

Belships is only using derivatives to reduce or limit risk related to Ùuctuations in interest and foreign exchange rates. Financial derivatives are not used to obtain Ønancial revenues through Ùuctuating interest rates, nor are Ønancial derivatives used when there is no underlying exposure.

See note 8 for the speciØcation of other Ønancial items.

INTEREST RATE RISK

The long-term interest rate is at a historical low level. Belships strategy is to manage interest risk. Hedging the Group's interest exposure is considered on an ongoing basis. Entering into interest rate hedging agreements are based on developments in the interest rate market and internal analysis.

In August 2011 Belships entered into an interest rate swap agreement with 2 years forward start at 2.2%. Remaining duration is 1.5 years covering USD 10 million, reducing by USD 5 million per year. The market value of the agreement amounts to -123 at yearend (2015: -295). Another interest swap agreement with forward start was entered into in June 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Market value of this agreement amounts to -200 (-307) at yearend. The hedging level of interest rate exposure is currently around 85% (leases excluded). The market value of the agreements are recorded as long-term liability.

The Group has during the two last years entered into two Ønancial lease agreements, which also limit the interest rate exposure as the interest rate is Øxed throughout the period.

The table below shows the sensitivity related to changes in interest rate levels. The calculation includes total interest-bearing debt.

SENSITIVITY TO CHANGES IN INTEREST RATE LEVELS	2016	2015
Change in the interest rate level in basis points	-100/+100	-100/+100
E╍�ect on result before tax	388/-388	438/-438
AVERAGE EFFECTIVE INTEREST RATE ON DEBT (%)
Mortgage debt	3.72	3.10

CAPITAL STRUCTURE AND EQUITY CAPITAL

The primary objective of the Group's capital management is to achieve best possible credit rating, and to maximize the shareholders values. The company's goal is to maintain an equity capital ratio of at least 35%. Added value related to the long-term charter party for M/S Belisland is not included in the balance sheet. In addition an improved market is expected to increase the equity capital ratio up to 35%. The equity ratio is calculated by dividing the book equity to total assets as shown below:

	2016	2015
Total equity as at 31 December	20 144	34 831
Total assets	105 612	103 248
Equity ratio as at 31 December	19 %	34 %

Net debt is deØned as interest-bearing debt (short and long-term) and accounts payable less cash. Equity comprises paid-in share capital and retained earnings.

	2016	2015
Interest-bearing debt	80 472	63 264
Trade creditors	256	380
Cash reserves	-7 918	-7 993
Net debt	72 810	55 651
Equity	20 144	34 831
Total equity and net debt	92 954	90 482
Net debt ratio	78 %	62 %

LIQUIDITY RISK

The Group's solvency and Ønancial position is considered to be satisfactory. The debt ratio increased in 2016 mainly due to delivery of new ship. Total current assets cover 97% of total short-term liabilities as at 31 December.

CREDIT RISK

There will always be a credit risk related to the Group's business. Belships monitors this risk and the strategy is to carefully select counterparts. Historical losses have been small. The Group's ships are employed on long-term charter to Canpotex Shipping Services Ltd and to Cargill, which is considered to be solid and reputable counterparts.

There is no class of Ønancial assets that is past due and/or impaired except for trade receivables. All accounts receivable in the balance sheet are due within 30 days from the balance sheet date.

CURRENCY RISK

The functional currency of all the consolidated companies is USD since the major part of revenues and costs are in USD. Belships currency exposure is related to administrative expenses in Norway, Singapore and China. This exposure is considered to be limited. At year end the Group had a cash balance of NOK 2.9 million, SGD 0.7 million and CNY 9.9 million. Belships has no currency hedge agreements as at 31 December 2016.

The company does not use hedge accounting.

FAIR VALUE MEASUREMENTS

The valuation has the following classiØcation of levels for measuring fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Valuation based on other observable factors, either directly (prices) or indirectly (derived from prices) than quoted prices included within level 1 of the asset or obligation.

Level 3: Valuation based on factors not taken from observable markets (not observable assumptions).

There was no change in levels in 2016. Interest swap agreements are valued in accordance with the principles described as level 2. Fair value is deØned as present value of future cash Ùows. For the above derivatives, fair value is conØrmed by the Ønancial institution, which is counterpart. The fair values of current Ønancial assets and liabilities carried at amortised cost approximate their carrying amounts. The long-term liabilities have Ùoating interest rate with a Øxed margin. The margin is considered not to have signiØcantly changed since drawing date, thus carrying amount is considered a reasonable estimate of fair value.

	LOANS AND RECEIVABLES		CHANGE IN FAIR VALUE THROUGH PROFIT AND LOSS		AVAILABLE FOR SALE		TOTAL
SUMMARY OF FINANCIAL ASSETS AND OBLIGATIONS *	2016	2015	2016	2015	2016	2015	2016	2015
Financial assets
Investments					108	152	108	152
Other long-term receivables	183	200					183	200
Trade debtors	91	4					91	4
Other receivables	1 120	1 269					1 120	1 269
Bank deposits	7 918	7 993					7 918	7 993
Financial obligations
Mortgage debt	-36 250	-41 250					-36 250	-41 250
B/B commitment	-44 647	-22 497					-44 647	-22 497
Financial instruments			-323	-602			-323	-602
Trade creditors	-256	-380					-256	-380
Other short-term liabilities	-2 231	-1 847					-2 231	-1 847
Total	-74 071	-56 508	-323	-602	108	152	-74 286	-56 958

*) The ㊜gures express both book value and fair value as these are identical. BELSHIPS ANNUAL REPORT 2016 Side 40 av 74

	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
ASSETS AND OBLIGATIONS MEASURED AT FAIR VALUE	2016	2015	2016	2015	2016	2015	2016	2015
Financial investments					108	152	108	152
Interest agreements			-323	-602			-323	-602
Total			-323	-602	108	152	-215	-450
FINANCIAL LIABILITIES MEASURED AT AMORTIZED COST						2016		2015
Mortgage debt						-36 250		-41 250
B/B commitment						-44 647		-22 497
Total						-80 897		-63 747

The fair value of credit facilities and obligations under Øancial leases is estimated by discounting future cash Ùows using rates currently available for debt on similar items. The obligations under Ønancial leases as of 31 December 2016 reÙects best timing estimate of declaring purchase options. Further, the lease agreements are newly entered into, and there has not been any signiØcant changes in the credit risk of the Group. Fair value of the obligations under Ønancial leases are therefore not considered to be materially di×erent from book value as of the reporting date. Based on the discussions Belships have had with its lender over the last year related to amendment of the loan agreement, the Group has not made observations indicating that there has been any signiØcant di×erence between the fair value and carrying amount except for un-amortised loan transaction costs.

Belships ASA income statements

1 JANUARY – 31 DECEMBER/ NOK 1 000	NOTE	2016	2015
Operating income
Freight income	2	73 550	6 457
Other operating income	10	4 773	3 986
Total operating income		78 323	10 443
Operating expenses
T/C hire	2	-42 529	0
Ship operating expenses	9	-24 257	-3 922
Payroll expenses	10	-13 933	-14 612
Other general administrative expenses	11	-6 793	-6 641
Depreciation of 猝�xed assets	2	-14 065	-2 914
Impairment of 猝�xed assets	2	-34 717	-48 357
Total operating expenses		-136 295	-76 446
Operating result before sale of ship a.o.		-57 971	-66 003
Loss on sale of ship/e⏍�ect on onerous contracts	2	-31 108	0
Operating result		-89 079	-66 003
Financial income and expenses
Share dividend	8	3 113	17 496
Interest income		71	120
Interest expenses	12	-26 758	-6 223
Interest expense on loan to subsidiary	4	-131	-150
Write-down on shares in subsidiary	8	-34 382	0
Other 猝�nancial items	9	3 646	7 842
Currency exchange gain/-loss	9	-303	10 806
Net ២�nancial items		-54 744	29 891
Net result before tax		-143 824	-36 111
Income tax expense	16	0	0
Net result for the year		-143 824	-36 111
Appropriations of net result:
Transfer from/(to) other retained earnings		143 824	36 111
Total		143 824	36 111

Belships ASA balance sheets

AS AT 31 DECEMBER/ NOK 1 000	NOTE	2016	2015
FIXED ASSETS
Tangible ២�xed assets
Ships	2	368 567	215 036
Instalments newbuildings	2	0	37 218
Prepaid time charter hire	2	12 930	0
Other ᚐxed assets	2	5 745	5 329
Total tangible ២�xed assets		387 242	257 583
Financial ២�xed assets
Shares in subsidiaries	8	207 136	241 518
Other shares		141	141
Other long-term receivables	12	1 581	1 764
Total ២�nancial assets		208 858	243 423
Total ២�xed assets		596 100	501 006
CURRENT ASSETS
Other receivables		4 702	4 904
Cash and cash equivalents	5	4 962	35 922
Total current assets		9 664	40 826
Total assets		605 764	541 832
EQUITY
Paid-in capital
Share capital		94 704	94 704
Treasury shares		-1 096	-1 096
Share premium reserve		93 333	93 333
Other paid-in capital		106 727	106 463
Total paid-in capital		293 668	293 404
Retained earnings
Other equity		-117 116	27 044
Total equity	6	176 551	320 448
LIABILITIES
Long-term liabilities
Bareboat commitment	12	369 032	190 586
Provision for losses on contracts	2	17 612	0
Pension obligations	7	5 583	7 008
Financial instruments	14	1 480	2 400
Intercompany balances	4	5 848	5 764
Total long-term liabilities		399 556	205 758
Short-term liabilities
Bareboat commitment, current portion	12	15 326	6 060
Public taxes and duties payable		2 447	1 392
Trade creditors		281	788
Intercompany balances	4	4 546	6 126
Other short-term liabilities		7 056	1 260
Total short-term liabilities		29 657	15 626
Total liabilities		429 213	221 384

Total equity and liabilities 605 764 541 832 BELSHIPS ANNUAL REPORT 2016 Side 43 av 74 OSLO, 16 MARCH 2017 BELSHIPS ASA

Sverre J. Tidemand Chairman of the Board Christian Rytter Board member

Kjersti Ringdal Board member

Sissel Grefsrud Board member

Carl Erik Steen Board member

Bernt Ulrich Müller Chief Executive Oᚨcer

Belships ASA cash Ùow statements

1 JANUARY – 31 DECEMBER/ NOK 1 000	NOTE	2016	2015
CASH GENERATED FROM OPERATIONS
Net result before tax		-143 824	-36 111
Adjustments to reconcile result before tax to net cash ២�ows:
Depreciation of ២�xed assets	2	14 065	2 914
Impairment of tangible ២�xed assets	2	34 717	48 357
Gain/loss from sale of ២�xed assets	2	31 108	0
Share-based payment transaction expense	3	263	223
Di៌�erence between pension expenses and paid pension premium	7	-1 761	-1 654
Change in pension contribution and premium fund		0	24
Net ២�nancial items		54 744	-29 891
Working capital adjustments:
Change in trade debitors and trade creditors		-507	89
Change in intercompany balances		-1 495	-23 594
Change in other short-term items		2 656	-2 585
Interest received		71	120
Interest paid		-26 889	-3 803
Net other ២�nancial items		3 852	-8 355
Net cash 韈�ow from operations		-33 000	-54 266

CASH FLOW FROM INVESTING ACTIVITIES
Investment newbuildings		-174 043	-45 568
Investments in ២�xed assets	2	-1 426	-88
Sale proceeds from ២�xed asset disposals	2	202 204	51 235
Dividends/Group contribution received	8	3 113	17 496
Repayment share capital subsidiary	8	0	40 284
Change in other investments		-12 747	397
Net cash 韈�ow from investing activities		17 101	63 756

CASH FLOW FROM FINANCING ACTIVITIES
Instalments b/b commitments		-15 061	-1 427
Net cash 韈�ow from 韈�nancing activities		-15 061	-1 427
Net change in cash and cash equivalens		-30 960	8 063
Cash and cash equivalents at 1 January		35 922	27 859
Cash and cash equivalents at 31 December	5	4 962	35 922
Restricted bank deposits	5	1 749	4 812

NOTE 1 ACCOUNTING POLICIES

Belships is owner and operator of dry bulk ships on long-term charter to reputable customers. Belships ASA is registered in Norway and listed on the Oslo Stock Exchange. The head oÚce is located in Lilleakerveien 4 in Oslo, Norway.

The Ønancial statements have been approved by the Board on 16 March 2017.

The accounts are prepared in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP). The accounts form part of the consolidated accounts of Belships ASA. The consolidated Ønancial statements have been prepared in accordance with IFRS as adopted by EU.

All amounts in the notes are in NOK 1 000 unless otherwise stated.

Belships has obtained approval from Oslo Stock Exchange and Norwegian tax authorities to only publish its Ønancial statements in English.

A) CLASSIFICATION OF BALANCE SHEET ITEMS

Assets intended for long-term ownership or use are classiØed as Øxed assets. Other assets inclusive accounts receivable within 12 months are classiØed as current assets. Liabilities due within 12 months, are classiØed as short-term liabilities. Current assets are reported at the lower of cost and net realisable value, while current liabilities are carried at the nominal value at drawdown date.

B) TAXES ON INCOME

Tax expenses consist of tax payable and changes in deferred tax. Deferred tax/tax assets are calculated on all di×erences between accounting values and tax values of assets and liabilities.

Deferred tax assets are included in the balance sheets when it is likely that the company will have suÚcient proØt for tax purposes in subsequent periods that will enable the company to utilise the tax asset. The company records previously unrecorded deferred tax assets to the extent it has become likely that the company can utilise the deferred tax asset. Similarly, the company will reduce the deferred tax asset to the extent the company no longer regards it as being likely that it can utilize the deferred tax asset. Deferred tax and deferred tax asset are measured on the basis of expected future tax rates for the companies in the group where temporary di×erences have occurred.

Deferred tax and deferred tax assets are entered at nominal value and are classiØed as Ønancial Øxed assets (long-term liability) on the balance sheet.

Tax payable and deferred tax are booked directly against equity to the extent the tax items relate to equity transactions.

C) TANGIBLE FIXED ASSETS

An estimated docking element is recognised as a separate component of the ship for depreciation purposes on the Ørst occasion a ship is booked in the accounts. The amount corresponds to the estimated docking costs for the period. The docking component is depreciated on a straight-line basis the over the period to the next planned drydocking.

Residual value has been taken into account, and this is estimated based on steel value of the ship at the balance sheet date less estimated cost to demolish the ship.

Book value is compared to market value and value in use to assess the need for any further impairment compared to the ordinary depreciation plan. The depreciation period and method are assessed annually and are based on the management's estimates of the ships' future useful life. The same applies to residual value.

The ships are depreciated as one unit, as the value of any part of the ship with a useful lifetime other than 25 years is considered to be insigniØcant.

Newbuilding contracts

Newbuilding contracts are recognised as a Øxed asset based on instalments paid to the yard. Building supervision costs and project costs related to the newbuilding contracts are capitalised.

D) IMPAIRMENT OF ASSETS

anticipated future cash Ùows from the asset. When it is assumed that the asset's value is lower than its carrying amount, an impairment loss is recognised.

Impairment loss recognised in earlier periods is reversed only in case of changes to the estimates used to determine the recoverable amount. However, the reversal amount may only be so high that book value aáer reversal at most corresponds to the value at which the asset would have been registered if it had not been impaired earlier. Such reversals are recorded in the income statement. Financial assets classiØed as being available for sale are written down when there are objective indications that the asset has declined in value. An accumulated loss (the di×erence between acquisition cost and current market value, with deduction of impairments previously included in the result and any amortisation amounts) is included in the income statement. If the market value of a debt instrument classiØed as available for sale increases in a subsequent period, and the increase can objectively be linked to an event that took place aáer the impairment was included in the income statement, the impairment loss will be reversed over the income statement.

Impairment loss for an investment in an equity instrument classiØed as held for sale, will not be reversed over the income statement.

E) LEASING

F) INVESTMENTS IN OTHER COMPANIES

Investments in subsidiaries and jointly controlled companies are accounted for in the parent company using the cost method.

G) ACCOUNTS RECEIVABLE

Accounts receivable are booked at nominal amount less expected loss.

H) CASH FLOW STATEMENT

The cash Ùow statement has been prepared using the indirect method. Liquid assets includes cash, bank deposits (restricted and unrestricted) and other short-term investments, which can be converted to cash within 3 months. For restricted deposits, see note 5.

I) EQUITY

(i) Treasury shares

(ii) Costs related to equity transactions

Transaction costs directly related to equity transactions are charged directly against the equity aáer tax deductions.

J) EMPLOYEE BENEFITS

De×ned contribution pension scheme

All employees are member of the company's deØned contribution scheme. The premium is charged as incurred by operations. Social security tax expense is recognized based on the pension plan payments.

De×ned bene×t pension scheme

Actuarial gains and losses arising from changes in actuarial assumptions are charged and credited to equity through other comprehensive income in the period in which they arise.

K) PROVISIONS

A provision is recorded when the company has a liability (legal or constructive) as a result of a previous event, where it is likely (more likely than not) that there will be a Ønancial settlement as a result of this liability and that the size of the sum can be reliably determined. If the e×ect is considerable, the provision is calculated by discounting the expected future cash Ùow with a discount rate before tax, which reÙects the market's evaluation of the time value of money and, if relevant, risks speciØcally connected to the liability.

Provisions for loss-creating contracts are included when the group's expected income from a contract is lower than the inevitable costs which were incurred in discharging the obligations of the contract.

L) REVENUE RECOGNITION

Gains will be taken to income when it is likely that transactions will generate future Ønancial gains which will be attributable to the company and the sum can be reliably estimated. Interest rate income is taken to income based on e×ective interest method according to when it is earned.

Dividend received from subsidiaries is accounted for in the same year as dividend has been accrued for in the subsidiary. If such dividend exceeds the prorata share of retained earnings aáer the acquisition of the shares, such excess portion represents repayment of capital and reduces the acquisition cost accordingly.

M) TRANSACTIONS IN FOREIGN CURRENCY

Transactions in foreign currency are converted at the rate at the time of the transaction. Monetary items in foreign currency are converted into Norwegian kroner using the rate on the balance sheet date. Non-monetary items which are measured at historical rates expressed in foreign currencies, are converted into Norwegian kroner using the currency rate at the time of the transaction. Non-monetary items which are measured at market value expressed in foreign currency are converted at the currency rate on the balance sheet date. Currency rate changes are charged against income during the accounting period.

N) CONTINGENT GAINS AND LOSSES

Provisions are made for contingent losses deemed probable and quantiØable. Contingent gains are not recognised.

O) RELATED PARTY TRANSACTIONS

Transactions with related parties are carried out at market terms. See note 15 for further information.

P) EVENTS AFTER THE BALANCE SHEET DATE

Q) USE OF ESTIMATES IN PREPARATION OF THE ANNUAL ACCOUNTS

The management has used estimates and assumptions that have a×ected assets, debt, income, costs and information on potential liabilities. This applies particularly to pension liabilities and share-based remuneration. Future events can entail a change in these estimates. Estimates and the underlying assumptions are evaluated on an ongoing basis. Changes in accounting estimates are entered in the period when the changes occur. If the changes also apply to future periods, the e×ect is distributed over the current and future periods.

R) EARNINGS PER SHARE

Earnings per share are calculated by dividing the net result by a weighted, average number of shares in the reporting period. Diluted earnings per share are calculated on the basis the dilution e×ect of issued options and convertible loans, if any.

S) SHARE-BASED REMUNERATION

The employees in Belships ASA have received options to purchase shares in the company. The market value of the awarded options is measured at the time of the award and charged to expense over the vesting period as a wage cost with corresponding increase in other paid-in equity. The market value of the options granted is estimated using the Black and Scholes option pricing model.

T) FINANCIAL INSTRUMENTS

Financial instruments are valued at lowest of cost and estimated fair value.

NOTE 2 FIXED ASSETS

2016		Newbuilding	Ships				Other ࣬xed assets
		Ship excl. dry docking costs	Capitalised dry dock.costs	Total ships	Depreciable assets	Non depreciable assets	Total other ២�xed assets
Cost price
As at 1 January	55 521	228 067	7 678	235 745	16 867	4 113	20 980
Additions	174 043	194 055	7 680	201 735	1 426	0	1 426
Disposals	-229 564	0	0	0	-1 209	0	-1 209
As at 31 December	0	422 122	15 358	437 480	17 084	4 113	21 197
Depreciations
As at 1 January	18 303	20 325	384	20 709	15 151	500	15 651
Depreciation for the year	0	10 798	2 689	13 487	579	0	579
Impairment	0	34 717	0	34 717	0	0	0
Disposals	-18 303	0	0	0	-778	0	-778
As at 31 December	0	65 840	3 073	68 913	14 952	500	15 452
Book value at 31 December	0	356 282	12 285	368 567	2 132	3 613	5 745

2015	Newbuilding		Ships			Other ࣬xed assets
		Ship excl. dry docking costs	Capitalised dry dock.costs	Total ships	Depreciable assets	Non depreciable assets	Total other ២�xed assets
Cost price
As at 1 January	84 880	0	0	0	16 799	4 093	20 892
Additions	190 169	228 067	7 678	235 745	68	20	88
Disposals	-219 528	0	0	0	0	0	0
As at 31 December	55 521	228 067	7 678	235 745	16 867	4 113	20 980
Depreciations
As at 1 January	0	0	0	0	14 676	0	14 676
Depreciation for the year	0	2 056	384	2 440	475	0	475
Impairment	30 088	18 269	0	18 269	0	500	500
Disposals	-11 785	0	0	0	0	0	0
As at 31 December	18 303	20 325	384	20 709	15 151	500	15 651
Book value at 31 December	37 218	207 742	7 294	215 036	1 716	3 613	5 329

M/S BELISLAND

M/S Belisland, a 61 000 dwt Ultramax bulk carrier, was constructed at Imabari Shipbuilding in Japan and delivered 15 March 2016. Remaining newbuilding commitment amounting to USD 19.8 million (NOK 174 million) was paid upon delivery. The ship was at time of delivery sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards. The sale generated a loss amounting to NOK 9.1 million. The lease transaction is considered as a Ønancial lease. The ship is chartered to Canpotex for 5 years.

M/S BELFOREST

M/S Belforest, a 61,000 dwt Ultramax bulk carrier was delivered on 25 September 2015 and is leased for a period of 12 years with purchase options from year 3 onwards. The transaction is considered as a Ønancial lease. The ship is chartered to Cargill unto late of May 2017 with charterers option of further 4 months, at charter rate of around USD 6,000 per day. A provision of NOK 0.7 million are entered for the timecharter agreement with Cargill.

Net impairment for M/S Belisland and M/S Belforest amounting to NOK 34.7 million in 2016. See note 7 in the consolidated accounts regarding impairment.

M/S BELOCEAN

M/S Belocean, owned by Belships Supramax Singapore (BSS), ended her charter with Canpotex on 25 February 2016 and was further chartered by Cargill for 10-15 months at an average net rate of USD 3,750 per day. The charter agreement with Cargill was done with Belships ASA which at same time entered into a timecharter agreement with BSS. The timecharter rate on the agreement with BSS amounts to USD 16,000 per day.

A provision of NOK 21.3 million is recorded as estimated net loss on the timecharter agreements for M/S Belocean and M/S Belisland.

PREPAYMENT OF TIMECHARTER HIRE

Prepayment of timecharter hire amounting to USD 1.5 million is related to the newbuilding with delivery in January 2018.

OTHER FIXED ASSETS

Depreciable assets include vehicles, oÚce furniture and oÚce equipment. Depreciation period is 3-5 years. Non-depreciable assets include apartment and art, which is being tested for impairment annually.

NOTE 3 OPTIONS TO EMPLOYEES

SUMMARY OF OUTSTANDING OPTIONS	2016	2015
Outstanding 1 January	400 000	200 000
Awarded	200 000	200 000
Exercised	0	0
Not exercised	-200 000	0
Outstanding 31 December	400 000	400 000

Market value of options estimated using the Black and Scholes options pricing model. For the options awarded in 2015 and 2016 the market value per share was NOK 0.75 and NOK 0.60 respectively. The market value of outstanding share options are calculated at time of award and charged against proØt and loss over the period until they can be exercised. In 2016 the calculated costs amounted to 74 and 64 for the 2015- and 2016-options respectively.

The following forms the basis for the calculation:

Share price at the time the option was awarded: The share price is set as equal to the stock exchange share price when the option was awarded.

Dividend: Estimated dividend per share is NOK 0 per year.

Risk free interest rate: Interest rate used as a basis for calculating options is equal to the interest rate on government bonds over the duration of the options, i.e. 0.53% for 2016.

Decrease in the number of employees: Expected reduction is 0.

SHARE OPTION PLAN CHIEF EXECUTIVE OFFICER

500 000 shares may be subscribed for if the company's market value exceeds NOK 300 million (Sub-option A).
The remaining 1.5 million shares may be subscribed for if the company's market value exceeds NOK 750 million (Sub-option B). Sub-option B is for 2 million shares if Sub-option A is not exercised within the time allowed for Sub-option A.

The market value is the product of the volume-weighted closing price of the company's shares on the Oslo stock exchange in a 15-day period and the number of outstanding shares less treasury shares and/or shares Belships issues aáer the option agreement date. Sub-option A expires 30 June 2018, while sub-option B expires 30 June 2020. The calculated cost for this option amounted to 125 in 2016.

NOTE 4 INTERCOMPANY BALANCES

No interest is calculated on short-term intercompany accounts as these items are only considered as ordinary operating balances. 131 (2015: 150) are paid to a subsidiary related to long-term intercompany accounts of 5 848 (5 764) at yearend.

Interest at market terms is calculated on long-term intercompany balances, and the balance fall due when the cash position allows it.

NOTE 5 BANK DEPOSITS

Total bank deposit amounted to 4 962 (35 922) at year-end. Restricted funds for withholding tax for employees amounted to 668 (773) and other restricted deposits amounted to 1 081 (4 039) as at 31 December 2016.

NOTE 6 EQUITY

		PAID-IN	RETAINED
	SHARE CAPITAL	TREASURY SHARES	SHARE PREMIUM RESERVES	OTHER EQUITY	OTHER EQUITY	TOTAL
Equity per 31 December 2015	94 704	-1 096	93 333	106 463	27 044	320 448
Actuarial (gains)/losses on obligation	0	0	0	0	-336	-336
Share-based payments	0	0	0	263	0	263
Result for the year	0	0	0	0	-143 824	-143 824
Equity per 31 December 2016	94 704	-1 096	93 333	106 726	-117 116	176 551

SHARE CAPITAL

Belships ASA's 47 352 000 shares, each with a face value of NOK 2.00, was as of 31 December 2016 distributed among 481 shareholders (2015: 451). Each share has one vote.

TREASURY SHARES

AUTHORISATION TO ISSUE NEW SHARES

DIVIDEND

The Board of Directors of Belships ASA will at the general meeting on 25 April 2017 propose no payment of dividend (2016: 0).

	THE 20 LARGEST SHAREHOLDERS IN BELSHIPS ASA AT 31 DECEMBER 2016	NUMBER OF SHARES	PERCENTAGE
1	Sonata AS	31 747 492	67.05 %
2	Tidships AS	6 041 336	12.76 %
3	Skandinaviska Enskilda Banken AB	987 419	2.09 %
4	Belships ASA	498 000	1.05 %
5	Carlings AS	400 000	0.84 %
6	Colorado Eiendom AS	355 000	0.75 %
7	Tidinvest II AS	315 414	0.67 %
8	Jenssen & Co A/S	302 816	0.64 %
9	Chrem Capital AS	270 000	0.57 %
10	Jovoko AS	250 000	0.53 %
11	Toru Nagatsuka	250 000	0.53 %
12	Liv Søland	240 000	0.51 %
13	ASL Holding AS	225 000	0.48 %
14	AR Vekst AS	218 995	0.46 %
15	HKG Holding AS	212 779	0.45 %
16	JSL AS	211 000	0.45 %
17	Carl Erik Steen	207 203	0.44 %
18	Bernhard Kielland	200 000	0.42 %
19	Arne Risøy	138 651	0.29 %
20	Torstein Søland	130 000	0.27 %
	Total 20 largest shareholders	43 201 105	91.23 %
	Other shareholders	4 150 895	8.77 %
	Total number of shares	47 352 000	100.00 %

NUMBER OF SHARES OWNED BY BOARD MEMBERS IN BELSHIPS ASA	OWNED SHARES	OUTSTANDING OPTIONS
Sverre J. Tidemand *	31 747 492	0
Christian Rytter	270 000	0
Carl Erik Steen	207 203	0
Other members	0	0

*) Includes shares held by Sonata AS, a company in which Sverre J. Tidemand controls the only share with voting rights.

NUMBER OF SHARES OWNED BY THE MANAGEMENT IN BELSHIPS ASA	OWNED SHARES	OUTSTANDING OPTIONS
Ulrich Müller, Chief Executive O�cer *	0	120 000
Stein H. Runsbech, Commercial Director	40 000	66 000
Osvald Fossholm, Financial Director	0	66 000

*) See note 3 for more information about separate share option plan.

NOTE 7 PENSIONS

DEFINED CONTRIBUTION SCHEME

DEFINED BENEFIT SCHEME

Pension commitments are calculated by an independent actuary. The basis for the calculation is shown below. The new mortality table (K2013) for Norway is used in the calculations.

Social security costs are recorded based on net pension obligation in the balance sheet included estimate discrepancy.

	2016	2015
Assumptions
Discount rate	2.60 %	2.70 %
Future wage adjustment	2.50 %	2.50 %
Pension adjustment/G-adjustment	2.50 %	2.50 %
Return on pension plan assets	2.60 %	2.70 %
Composition of the net pension obligations per 31 December
Net pension obligations as at 1 January	7 008	8 458
Interest on accrued pension obligations	163	174
Employer bene韈�ts paid	-1 925	-1 827
Actuarial (gains)/losses on obligation	337	203
Net pension obligations as at 31 December	5 583	7 008
NET PENSION EXPENSES	2016	2015
Pension expenses de韈�ned bene韈�t scheme	163	174
Pension expenses de韈�ned contribution scheme	1 011	968
Total pension expenses	1 174	1 142

NOTE 8 SHARES

	BUSINESS OFFICE	TIME OF PURCHASE	COST PRICE	OWNER SHIP/ VOTING SHARE	COMPANY'S SHARE CAPITAL	NUMBER OF SHARES OWNED	PAR VALUE	BOOK VALUE
Shares in subsidiaries
Belships Management AS	Oslo	09.12.85	7 493	100 %	100	2	TNOK 50	657
Belships Management (Singapore) Pte Ltd 1)	Singapore	31.12.83	12 075	100 %	TSGD 60	60 000	SGD 1	12 076
Belships Supramax Singapore Pte Ltd 2)	Singapore	18.06.09	253 782		100 % MSGD 58.5	58.5 mill.	SGD 1	189 000
Belships Chartering AS	Oslo	27.01.93	221 181	100 %	5 403	2 700	TNOK 2	5 403
Total								207 136

1) The company has provided dividend of 3 113 (17 496) in 2016

2) Book value of the shares is written-down with 34 382 in 2016, to be in line with booked equity in the subsidiary.

NOTE 9 SPECIFICATIONS

SHIP OPERATING EXPENSES	2016	2015
Crew expenses	14 725	2 071
Maintenance and spare parts	3 977	129
Insurance	2 307	397
Management fee	2 039	482
Other ship operating expenses	1 209	844
Total ship operating expenses	24 257	3 922
OTHER FINANCIAL ITEMS	2016	2015
Net guarantee commissions 1)	-7 388	-10 901
Financing costs	3 270	1 951
Other nancial items	473	1 108
Net other ᓔnancial items	-3 646	-7 842

1) The company is acting as a guarantor for the mortgage debt in the subsidiary Belships Supramax Singapore. A guarantee fee equal to 3% of loan balance amounting to 9 491 (10 901) has being charged in 2016.

Sonata AS issued in December 2015 an on-demand guarantee amounting to USD 5 million to the lender of the Group's mortgage debt. The guarantee carries an interest of 5% which amounted to 2 103 in 2016.

CURRENCY GAIN/(LOSS) IN INCOME STATEMENT	2016	2015
Realised currency exchange gain	-37 184	-26 598
Unrealised currency exchange gain	-1 890	0
Realised currency exchange loss	35 868	15 792
Unrealised currency exchange loss	3 508	0
Total	303	-10 806

NOTE 10 SALARIES, NUMBER OF EMPLOYEES

SALARY EXPENSES	2016	2015
Salaries	10 113	10 505
Social security tax	1 826	2 096
Pension expenses	1 174	1 142
Other allowances	819	869
Total	13 933	14 612

Belships was charging the subsidiary Belships Management AS with a management fee amounting to 4 773 in 2016 (2015: 3 986).

The average number of employees in 2016 was 8 (2015: 8).

REMUNERATION TO THE MANAGEMENT	CHIEF EXECUTIVE OFFICER	FINANCIAL DIRECTOR	COMMERCIAL DIRECTOR
Salary	3 086	1 474	1 730
Share-based payment transaction expense	19	11	11
Pension expenses (dened contribution)	162	162	162
Other allowances	391	165	178

There exist no severance pay agreement.

SHARE OPTIONS

For information about share options, see note 3. The CEO has a separate option scheme that was approved in an extraordinary general meeting in June 2016. See note 3 for details.

BOARD REMUNERATION

Board members are not awarded share options. The Board has received 643 in remuneration in 2016 (2015: 643), divided into 161 to the Chairman and 120 to each of the other members. Additional, 3 of the board members represent an audit committee and have received 90 in remuneration in 2016 (2015: 90), divided into 34 to the Chairman and 28 to each of the other members.

GUIDELINES FOR THE REMUNERATION OF THE EXECUTIVE MANAGEMENT OF BELSHIPS ASA

In conformity with the provisions of section 6-16a of the Norwegian Public Limited Liability Companies Act, the Board has prepared the following statement on the company's guidelines for the remuneration of the executive management:

Belships will have a competitive bonus scheme to ensure that the company will have the necessary capacity and competence.
Belships will seek to have Øxed salaries at market terms. There will also be a variable part (bonuses and share options), which will be evaluated annually.

FEES TO THE AUDITOR (EXCLUDING VAT)	2016	2015
Remuneration for audit services	220	220
Other assurance services	38	0
Assistance related to tax matters	41	51
Other audit related assistance	0	111

LOANS TO EMPLOYEES

Loans to employees amounted to 1 536 (1 719) as at 31 December 2016. Of this, 550 (548) to the management. See note 12 for further details regarding the loans.

NOTE 11 OTHER GENERAL ADMINISTRATIVE EXPENSES

	2016	2015
O韂�ce expenses	1 712	1 584
Other services	1 692	1 702
Data, o韂�ce equipment a.o.	552	661
Communication, advertising	301	346
Travel expenses	954	691
Other general administrative expenses	1 582	1 657
Total	6 793	6 641

NOTE 12 RECEIVABLES AND LIABILITIES

BAREBOAT COMMITMENT

Belships ASA entered in 2015 into a lease agreement for M/S Belforest. The bareboat period is 12 years with purchase options from year 3 onwards.

M/S Belisland, a 61 000 dwt Ultramax bulk carrier, was constructed at Imabari Shipbuilding in Japan and delivered 15 March 2016. The remaining newbuilding commitment amounting to USD 19.8 million (NOK 174 million) was paid upon delivery. The ship was at time of delivery sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards.

Both leases are considered as Ønancial leases. See note 13 in the consolidated accounts for repayment schedule.

INTEREST SWAP AGREEMENT

In 2015 Belships entered into an interest swap agreement at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year.

LOANS TO EMPLOYEES

Loans to employees amounted to 1 536 (1 719) as at 31 December 2016. The average interest rate used for the loans was 2.28% (2.72%) in 2016. The repayment period is Øve years.

All short-term receivables and liabilities are due within 12 months.

NOTE 13 SUBSEQUENT EVENTS

No material events have taken place aáer 31 December 2016.

NOTE 14 FINANCIAL MARKET RISK

CURRENCY RISK

The functional currency of the company is USD and the presentation currency is NOK. Balance sheet items in USD have been converted to NOK at currency rate 8.6200 (8.8090), which was Norges Bank's exchange rate at 31 December 2016. Income and expenses related to the ships occurs in USD. The company makes ongoing currency exchanges to cover the administrative expenses in NOK. At year end the company had a cash balance of NOK 2.9 (3.8) million.

No hedging agreement towards NOK are concluded.

The company does not use hedge accounting.

INTEREST SWAP AGREEMENT

An interest swap agreement was entered into in 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Market value of this agreement amounts to -1 480 (-2 400) at year end and is recorded as longterm liability.

CREDIT RISK

There will always exist a credit risk related to the company's business. Belships monitors this risk and the strategy is to carefully select counterparts. Historical losses have been limited.

NOTE 15 RELATED PARTIES

The company performs management services for a subsidiary and receives fee for this. The fee amounted to 4 773 (3 986) in 2016.

The company receives a commission for acting as guarantor for mortgage debt in the subsidiary Belships Supramax Singapore Pte Ltd. The fee amounted to 9 491 (10 901) in 2016. See note 9 for further details.

All intercompany transactions have been conducted to market terms.

Sonata AS, the main shareholder in Belships ASA, issued in December 2015 an on-demand guarantee amounting to USD 5 million to the lender of the Group's mortgage debt. The guarantee carries a commission of 5% which amounting to 2 103. Except for this, it has not been issued loans or provided security to or from shareholders or related parties.

Members of the management have loans from the company. These amounts to 550 (548) per 31 December 2016.

NOTE 16 TAX

TAX RESULT FOR THE YEAR FOR BELSHIPS ASA	2016	2015
Result for the year before tax	-143 824	-36 111
Change in temporary di៛�erences	52 772	-11 323
Permanent di៛�erences / other	-2 852	-17 555
Tax basis for the year	-93 904	-64 989
Taxes payable (25%)	0	0
Total income tax expense	0	0

In accordance with NGAAP, tax reducing temporary di×erences and tax increasing temporary di×erences that are reversed, or can be reversed in the same period are assessed and the amount recorded net.

RECONCILIATION OF TAX EXPENSE	2016	2015
Result for the year before tax	-143 824	-36 111
Statutory tax rate	25 %	25 %
Estimated tax expense at statutory rate	-35 956	-9 028
Permanent di៛�erences / other	-713	-4 389
Expected tax expense	-36 669	-13 417
Change in deferred tax assets	36 669	13 417
Actual tax expense	0	0
E៛�ective tax percentage	0 %	0 %
DEFERRED TAX PER 31 DECEMBER	2016	2015
Deferred sale ៯�xed asset gain/(loss)	-7 142	0
Provision for loss on contracts	-22 015
Pension obligations	-5 583	-7 008
Interest swap	-1 481	-2 400
Temporary di៛�erences ៯�xed assets	20 218	11 795
Impairment loss on shares in subsidiaries abroad	-64 782	-30 400
Tax loss carried forward	-398 955	-305 051
Net temporary di៌�erences	-479 740	-333 064
Statutory tax rate	24 %	25 %
Deferred tax assets	-115 138	-83 266
Deferred tax assets in Balance sheets	0	0
Deferred tax assets not in Balance sheets	-115 138	-83 266

Calculation of deferred taxes is based on temporary di×erences between statutory books and tax values which exist at the end of the year. Deferred tax assets are not recorded in the balance sheet, as future utilization of tax losses cannot be reasonably assured.

BELSHIPS ANNUAL REPORT 2016 Side 65 av 74

Belships' values and ethical guidelines are intended to safeguard good corporate ethics

CORPORATE GOVERNANCE

Good corporate governance is a prerequisite for cooperation based on trust between the company's owners, its Board and management, with a view to achieving the objective of long-term growth.

All relevant parties must be conØdent that the company is soundly operated and that the corporate governance is well deØned, Øt for purpose and carried out with integrity and independence.

Belships competitiveness hinges on stakeholders and prospective customers trust in the company's integrity and ethical behavior. Board members, management and employees will therefore always strive to uphold and develop trust in the company. Belships' values and ethical guidelines are intended to safeguard good corporate ethics.

Operations

The company's business is operation, purchase and sale of ships as well as participation in companies with similar objectives. The company is listed on the Oslo Stock Exchange and is for the time being engaged in dry bulk and technical management of ships.

Share capital and dividends

Belships aims to maximize the value for the company's share through an eÚcient and proØtable management of the company's resources. A competitive return is to be obtained through growth in the value of the company's shares and the payment of competitive dividends. When increasing share capital through the issue of new shares for cash payment, the company's shareholders have normally a pre-emptive right of subscription.

The Board will propose private placements or the issue of shares as consideration in connection with investments only when this will safeguard the long-term interests of existing shareholders.

Until the coming General Meeting (GM), the Board is entitled to acquire on behalf of the company 200 000 own shares and to issue 4 700 000 new shares under conditions determined by the GM.

Equal rights for shareholders and transactions with related parties

The company has only one class of shares and the company's articles of association contain no limitations on voting rights. All shares carry equal rights and can be transferred freely.

In situations where the Board proposes that existing shareholders should waive their right to subscribe for shares, this will only be done where justiØed in light of the company's and the shareholders' interests. The justiØcation shall be published in connection with the announcement of the increase in capital.

Belships provides limited management services to the company's principal shareholder. These services are provided at market terms. Any material transactions with closely related parties follow from sections 3-8 and 3-9 of the Norwegian Limited Liability Companies Act, and the agreements are adopted by the GM on the basis of a report submitted to the GM beforehand. The option programs are adopted by special authorization from the GM.

General Meeting

The GM is the company's supreme authority. The GM elects the Board and the auditor. Pursuant to the Limited Liability Companies Act, notice of GM must be sent to the shareholders no later than 21 days before the GM is to be held. The GM must be held by 30 June. Shareholders are registered in the Shareholders' Register with address. All shareholders are entitled to attend the GM and must give notice of attendance two days before the meeting is held. The Board, the company's management and the auditor attend GMs.

Election committee and audit committee

Considering the scope of the company's operations, the Board considers it reasonable and appropriate that the company should only have one board committee: the audit committee. The committee is made up of Christian Rytter (Chairman), Kjersti Ringdal and Sissel Grefsrud.

Members of the Board represent, directly and indirectly, more than 50 per cent of the shareholdings in Belships ASA. For this reason, no election committee has been established. The Board fulØlls this role itself, and the work to review candidates for the Board is handled by ad hoc committees of the Board and chaired by the Chairman.

Board – composition and independence

The Board shall consist of 3-7 members. The Board elects its chairman. Members may be re-elected every two years. Board appointments are communicated through the notice of GM and the members are elected by majority vote.

The Board is made up of directors with broad experience and knowledge of the sector. Four directors are independent of day-to-day management, the majority shareholder and major business connections. Three directors own shares in the company.

The duties of the Board, risk management and internal control

The Board supervise the work of the administration. This means that the Board must review and approve strategies and follow up the implementation of the resolutions adopted.

Strategic decisions or decisions of material importance must be approved by the Board. The Board also appoints the Chief Executive OÚcer and determines his/her remuneration and the general framework for the Group's wage level.

The Board has prepared rules of procedure for the Chief Executive OÚcer, which specify his responsibilities and the decisions that have to be approved by the Board. The Board's duties comprise the review and supervision of the Group's internal control procedures and risk management. The same applies to ensuring that the company's integrity is safeguarded.

Focus is on ensuring that the Board functions as a team of independent members. The Board has also prepared rules of procedure for the Board's audit committee, which is to support the Board in performing its duties relating to reporting, audit, internal control and overall risk management.

The Board has an overall responsibility for safety, security and the environment. Our subsidiary in Singapore, which is responsible for the technical operation of Belships own and other ships, concentrates in particular on these matters.

The Board meets at least six times a year and receives a monthly report on the company's operations. In addition, the Board is consulted on or informed about matters of special importance.

Remuneration of directors

Remuneration of directors is approved by the company's GM. The remuneration is granted at the end of the year of service. Directors have no options to buy shares in the company, nor do they receive compensation other than the Board fees. The company endeavors to grant directors a remuneration based on market terms.

Remuneration to o韂cers

The Board prepares guidelines for the remuneration of oÚcers, pursuant to the law, which are submitted to the GM. Remuneration to the Chief Executive OÚcer is approved by the Board on the Chairman's recommendations.

The company has a share option scheme that applies to all employees in Norway. In addition the Chief Executive OÚcer has a separate share option agreement with the company. Details concerning the remuneration of the company's oÚcers are provided in a separate note to the accounts.

Information and communication

The company keeps Oslo Stock Exchange, the stock market and shareholders fully updated through interim reports, annual reports and press releases on important events. The company also has a website, which is regularly updated. Belships regards timely and accurate information as essential for obtaining a price for the share that will reÙect the company's underlying value and prospects.

Company takeover

The Board has not prepared any principles for how to act in the event of a take-over bid. If such a bid should be made, the Board considers it important that shareholders are treated equally and that the company's operations are not unnecessarily disturbed. The Board's actions will take this into account in such a situation.

Auditor

The company's auditor attends at least one Board meeting a year, normally in connection with the presentation of the annual accounts. In its meeting with the auditor, the Board focuses in particular on procedures relating to the company's internal control as well as current accounting issues.

The Board and the auditor meet at least once a year without the Chief Executive OÚcer or other executives being present. The auditor also attends the company's GM and has access to the company's minutes of board and GMs. The Board reviews the auditor's engagement on an annual basis.

The company's auditor is Ernst & Young. Besides ordinary audits, Belships receives assistance from Ernst & Young in connection with accounting and tax issues within the Øeld in which the auditor can assist under the rules of independence. The auditing and counseling fees appear from the notes to the accounts.

The company's management meets the auditor regularly to discuss current tax and accounting issues.

The Board makes a running assessment of whether the audit is performed in a satisfactory manner.

Strong commitment to customers and quality creates value

CORPORATE SOCIAL RESPONSIBILITY

Belships main contribution to society is to grow a long-term, sustainable value-creating business for our stakeholders. Our aim is to ensure that our business practices as well as investments are sustainable, and contribute to long-term economic, environmental and social development.

Belships has a clearly deØned vision and mission statement and a set of core values, which we believe will ensure that the Company grows a value-creating and sustainable business.

Vision

Strong commitment to customers and quality creates value.

Mission

We are an ambitious global organization with focus on:
Safety & environment
Customers
Quality
People

Core values

Respect
Commitment
Sincerety & Honesty

Our core values are reÙected in everything we do. They are an integrated part of how we conduct our business.

Belships has identiØed the Company's material sustainability issues and their potential impact on our business. With reference to the Norwegian Accounting Act section 3-3c, the following chapters present how Belships integrates the most material sustainability issues into its business strategies and processes.

1. Environment

International shipping contributes signiØcantly to global emissions of greenhouse gases (GHG) through consumption of bunkers. Although international shipping is a signiØcant contributor to global emissions, it produces substantially less emissions per unit distance when carrying a shipment than other methods of transportation.

Belships recognizes its environmental responsibility and strive to comply with and maintain high standards in order to reduce the environmental impact from its operations. The Company is focusing on reducing bunkers consumption, which is the main source of the shipping sector's emissions of CO2, NOX and SOX.

Belships ambition is to optimize bunker consumption and the company conducts improvement projects and testing aimed at reducing its environmental impact, including hull cleaning and propeller polishing in addition to testing of fuel additives for improved combustion, both aimed at reducing fuel consumption and air pollution.

Belships are further certiØed with Environmental Management Systems CertiØcate ISO 14001 as well as ISO 9001:2000. The certiØcates are issued by the classiØcation society and establish environmental standards and implementation routines. Continuous e×orts are made in order to reduce the general waste produced by the ships and to dispose of waste onshore in a controlled manner at approved port waste reception facilities. The Ùeet complies with the IMO recommendations on waste management.

Pollution by invasive species carried with ballast water has become an important issue. M/S Belforest and M/S Belisland have ballast water treatment systems in place. Belships is actively preparing for the expected implementation of regulations on ballast water treatment entering into force. In fact, some of our third party managed ships have already started to use ballast water treatment system.

Belships is closely monitoring the development of all environmental regulation. The Company will continue to comply with all legislation and follow best practices to minimize the Company's impact on the environment.

2. Human and Labour rights

It is Belships policy to integrate attention to human and labor rights into its existing business processes. In practice, a large part of the human and labor rights agenda is covered by the Company's health and safety e×orts. The health and safety of our employees is a key priority for Belships. As an international and multi-local industrial employer, the Company respects international and local legislation, including the provision of the International Labor Organization's Maritime Labor Convention of 2006 (the "MLC"). The MLC is widely known as the "seafarers' bill of rights", and sets out seafarers' right to decent working conditions, including elements such as minimum age of seafarers, payment of wages, hours of work or rest, onboard medical care, paid annual leave and freedom of association.

Belships values its employees as a key resource. The Company will continue to focus on attracting and keeping the best qualiØed and motivated employees. As a global organization, Belships has a diversiØed working environment in which employment, promotions, responsibility and job enrichment are based on qualiØcations and abilities and not on gender, age, race and political or religious views The Company does not tolerate discrimination in any form.

Belships aims to continuously provide and enhance healthy, high-quality working conditions, both onshore and onboard vessels. Crewing and technical management are handled by Belships' subsidiaries in Singapore and China. These companies also have external customers and o×er ship management-services to ship owners worldwide. A dedicated and well-trained ship- and onshore team is monitoring the health, safety, environment and quality performance.

Belships' goal is to run the operations of the Company with zero fatal accidents. This goal was achieved in 2016.

Attracting and retaining qualiØed seafarers remains an area of strategic importance for Belships. The objective is to strengthen Belships' brand and image. To ensure a continued recruitment of dedicated and qualiØed oÚcers, Belships is engaged in training of seafarers and education of cadets and has 140 cadet positions onboard the Company's vessels. The Company will further develop the crewing strategy and the implementation of crew welfare initiatives in order to meet the Company's ambition of maintaining the oÚcers' retention rate at a high level and maintaining a challenging and motivating work place, thus creating top performing vessels.

Belships faces same challenges as other shipping companies when it comes to piracy. Piracy is still a challenge for the shipping industry and cannot be solved by the Company or the shipping industry alone. It must be dealt with by the international community and relevant authorities of UN working together. To create a secure environment in which our crew feels safe, the company has adopted a best management-practice consistent with the industry standards and under suggestion by Intertanko and Oil Companies International Marine Forum to deter piracy. All of our ships are registered with the EU Naval Force (Maritime security centre) which co-ordinates ship's transit schedules with the appropriate naval ships in the Gulf of Aden and Somali basin. Depending on the present conditions and individual risk factors for the particular ship, preventive measures are evaluated for each transit in accordance with Belships' piracy policy. There were no incidents of attempted hijackings of Belships-vessels in 2016.

3. Anti-corruption

Belships has deØned a set of core values being reÙected in everything the Company does, and are an integrated part of how the Company does its business.

Belships believes that corruption prevents well-functioning business processes and curbs economic development. Corruption or corrupt behavior is not accepted by the Company. Belships focuses on transparency in its business practices, supports free enterprise and competes in a fair and ethical manner.

Appendix

De韈nition of Non-IFRS 韈nancial measures

CURRENT RATIO

is deØned as total current assets, divided by total current liabilities

EBITDA

is deØned as operating result adjusted for depreciation and amortization, other gains/(losses), interest income, interest expenses and other Ønancial items

EBIT

is deØned as operating result adjusted for interest income, interest expenses and other Ønancial items

EQUITY RATIO

is equal to shareholders' equity including non-controlling interest, divided by total assets

INTEREST COVERAGE RATIO

is equal to earnings before interest and taxes (EBIT), divided by interest expenses

AI Terminal

Belships

3553_10-k_2017-03-23_583b2694-855e-404b-87d3-0b8479e67c64.pdf

ANNUAL REPORT 2016

We are excited about our journey over the coming years

DEAR READER

KEY FINANCIAL FIGURES

FLEET LIST

CHARTER COVERAGE

DIRECTORS' REPORT 2016

THE DRY BULK MARKET

OPERATIONS

RESULTS

GOING CONCERN

SAFETY AND THE ENVIRONMENT

ORGANISATION

FINANCIAL AND OTHER MATTERS

CORPORATE GOVERNANCE

CORPORATE SOCIAL RESPONSIBILITY

OUTLOOK

The annual report provides a true and fair overview

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of our knowledge:

OSLO, 16 MARCH 2017 BELSHIPS ASA

Consolidated Statements of Comprehensive Income

Consolidated balance sheets

Consolidated cash Ùow statements

Consolidated statements of changes in equity

NOTE 1 GENERAL INFORMATION

NOTE 2 SUMMARY OF THE MOST IMPORTANT ACCOUNTING PRINCIPLES USED

A) BASIS OF PREPARATION

B) CONSOLIDATION PRINCIPLES

C) CURRENCY TRANSACTIONS

Transactions in foreign currency

D) ACCOUNTS RECEIVABLE

E) TANGIBLE FIXED ASSETS

Newbuilding contracts

F) LEASING

G) FINANCIAL INSTRUMENTS

H) PROVISIONS

I) EQUITY

(i) Debt and equity

(ii) Treasury shares

(iii) Costs related to equity transactions

J) REVENUE RECOGNITION

K) EMPLOYEE BENEFITS

De×ned contribution pension scheme

De×ned bene×t pension scheme

L) BORROWING COSTS

M) CONTINGENT ASSETS AND OBLIGATIONS

N) TAXES ON INCOME

O) IMPAIRMENT OF ASSETS

P) EVENTS AFTER THE BALANCE SHEET DATE

Q) SHARE-BASED PAYMENTS

R) CASH AND CASH EQUIVALENTS

S) RESTRICTED DEPOSITS

T) REPORTING BY SEGMENTS

U) RELATED PARTY TRANSACTIONS

V) CASH FLOW STATEMENT

W) CLASSIFICATION BALANCE SHEET

X) CHANGES IN ACCOUNTING POLICES

IFRS 9 Financial Instruments

IFRS 15 Revenue from Contracts with Customers

IFRS 16 Leases

NOTE 3 USE OF ESTIMATES AND JUDGEMENT IN PREPARATION OF THE ANNUAL ACCOUNTS

SHIPS – IMPAIRMENT ASSESSMENT

OPERATING VERSUS FINANCIAL LEASE AGREEMENTS

NOTE 4 SEGMENT INFORMATION

NOTE 5 LEASE AGREEMENTS

LEASE OBLIGATIONS

Payment if options on ×nancial leased ships is exercised

CONTRACTED TIME CHARTER REVENUE

NOTE 6 OTHER GENERAL ADMINISTRATIVE EXPENSES

NOTE 7 SHIPS AND OTHER FIXED ASSETS

SPESIFICATION OF THE GROUP'S SHIPS

IMPAIRMENT TESTS

CALCULATION OF DEPRECIATIONS

NOTE 8 SPECIFICATIONS OPERATING EXPENSES AND OTHER FINANCIAL ITEMS

NOTE 9 SALARIES, NUMBER OF EMPLOYEES

BONUS