Annual Report (ESEF) • Mar 29, 2022
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Download Source FileUntitled Annual Report 2021 Table of contents 03 What we do and how we create value 04 ESG 2021 in brief 05 CEO letter 06 Board of Director’s Report 08 Corporate Governance Report 10 Consolidated Financial Statements 28 Financial Statements of the Parent Company 35 Responsibility Statement 36 Auditor’s report 2 Klaveness Combination Carriers ASA – Annual Report 2021 What we do and how we create value Klaveness Combination Carriers ASA (KCC, Company) is the world leader in combination carriers. The eet consists of 16 vessels, eight CABU vessels and eight CLEANBU vessels. The CABU (Caustic Soda-bulk) and CLEANBU (Clean Petroleum Product-bulk) vessels mainly transport Clean Petroleum Products (CPP) or Caustic Soda Solution (CSS) from reneries and production plants located in Middle East/India, Far East or US Gulf to end users or distributors in Australia and South America, the world’s main export hubs of dry bulk commodities. On the return voyage the combination carriers transport dry bulk commodities including alumina, bauxite, grains, salt, iron ore and coal. One of KCC’s trades Note: For the same round voyage, a standard tanker and dry bulk vessel would typically ballast for 10-20 days, while a combination carrier is around 4 days. 1. Lower carbon emissions: Fuel consumption and hence emissions are 30-40% lower than standard tanker and bulk vessels per ton-mile transported cargo 2. Lower earnings volatility: Diversied market exposure as the vessels transport both dry bulk and tanker products and a positive correlation to bunker prices 3. Premium earnings: Higher asset utilization compared to standard vessels due to two laden legs, giving a higher number of revenue days The aluminum/alumina industry through the trans- portation of Caustic Soda Solution (CSS), bauxite and alumina accounted for 46% of KCC’s transported volumes in metric tons (MT) in 2021. Iron ore shipments for mining companies or steel plants accounted for 17% in 2021. KCC had 9 coal shipments in 2021 (7%), and total fossil fuel shipments including coal accounted in total for 17%. KCC strives to solve ineiciencies by consecutively switching between dry and wet cargo shipments with minimum ballast between the laden voyages. Split of cargoes transported by KCC in 2018 –2021 +++++= +++++= +++++= ++++0+= 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2021 2020 2019 2018 Caustic soda Alumina and bauxite Iron ore Fossil fuels Agriculture products Other cargos 31% 37% 36% 41% 15% 21% 18% 29% 17% 17% 18% 13% 17% 18% 17% 9% 10% 5% 8%2% 8% 0% 9% 3% Illustration of KCC’s place in the value chain Fossil fuels include gasoil, coal, gasoline and jet fuel and other CPP. Naphta and condensate to the petrochemical industry included in other cargo 3 Klaveness Combination Carriers ASA – Annual Report 2021 For denition and more information related to ESG, see Sustainability Report 2021. Score: B Low carbon future Decarbonization is the main task of our generation Always safe and secure Safety is priority number one Trusted and responsible partner We set high standards on how we conduct our business We aim to be a driver in the transition towards low carbon shipping through our own eet, new solutions and close co-operations with customers, suppliers and other stakeholders. Area of focus • Emission reductions from our vessels We strive to have a high level of corporate governance securing predictability and transparency for all stakeholders. Area of focus • Anti-corruption and business ethics • Responsible ship recycling Our goal is that no one shall be injured doing work for Klaveness. Everyday we work to improve our safety performance, believing that operational accidents are preventable. Area of focus • Crew health and safety • Vessel safety • Spills to the environment • Human capital development ESG 2021 in brief Environmental performance Sustainability Priorities Social performance Governance performance Carbon intensity EEOI 7.4 0% Y-o-Y CO 2 /vessel 18,800 tons -9% Y-o-Y • Sustainability- linked COA signed • USD 25 million equity issued to fund energy eiciency initiatives • Sustainability- linked bank facility signed LTIF 0.6 -76% Y-o-Y Target < 1 0 COVID-19 infections on-board Average high-risk SIRE observations 1.9 0% Y-o-Y Target < 2 26 Demands for and avoided facilitation payments 0 conrmed incidents of corruption Online whistleblowing channel launched, open for external parties 4 Klaveness Combination Carriers ASA – Annual Report 2021 Engebret Dahm CEO Klaveness Combination Carriers ASA Letter from the CEO 2021 has been a year where Klaveness Combination Carriers ASA (KCC) has passed a number of important milestones while experiencing many operational challenges from increasing port congestions and COVID-19 related restrictions. We took delivery of the eight and last CLEANBU newbuilding, MV Balzani, in May 2021 marking the end of KCC’s newbuilding program where we have taken delivery of in total eleven CABU and CLEANBU newbuldings over the ve years period 2016-2021. With the full eet on water from July 2021, a new chapter has begun for our company. The COVID-19 situation has continued to severely aect the daily lives of our seafarers and the operation of our eet. KCC and its ship manager Klaveness Ship Management (KSM) has spared no eorts to minimize the eects of the COVID-19 situation for our seafarers including securing repatriation of seafarers with minimal delays aer the end of their service period onboard and minimizing risks of COVID19 contamination from shore. We have through frequent vessel deviations carried through a high share of planned crew changes without delays and there have been no COVID-19 cases onboard our vessels in 2021. We are also pleased to have maintained a high quality service to our customers throughout the year with a 92% on-time performance in tanker mode in 2021. Our business model continued to prove its strength in the past year. The exibility of our combination carriers, servicing both tanker and dry bulk trades, and our eicient combination trading, have made it possible to both take benet of the strong dry bulk market from early last spring and limit the worst negative eects of a historical weak tanker market. While maintaining a high proportion of our eet in combi-trading, we temporarily allocated more capacity into the dry bulk market during part of the year when the tanker market was at its most depressed levels. We also used the strong dry bulk market to continue renewing of our CABU eet, by selling our oldest CABU vessel, MV Banasol, built January 2001, as a dry bulk vessel during Q4-2021. 2021 result before tax ended at USD 22.6 million, including a sales gain of USD 6.4 million. The pressure on the shipping industry to decarbonize its business has increased further in 2021. IMO’s short term measures were approved at the MEPC76 meeting in June and the EU Commission presented its proposal for including shipping into its ETS scheme in July. We believe this is just the start of a development with ever stricter international regulations and customer requirements for the shipping industry. In KCC we are scrutinizing every possibility to improve carbon eiciency across our business to prepare for this development and to improve our lead as the lowest carbon shipping provider in the tanker and dry bulk market. In KCC we start to see positive results from our eorts with an around 9% improvement in average CO 2 emission per vessel in 2021 relative to 2020. As part of our energy eiciency improvement program, we raised USD 25 million new equity in November 2021 which will be allocated exclusively for these eorts which are described in more detailed in our 3rd Sustainability report released together with this Annual Report. The rst quarter of 2022 has been marked by the sad and incompre- hensible Russian invasion of Ukraine severely impacting both commodity and shipping markets. While the immediate eect on KCC’s markets is positive, the medium-term outlook for both the tanker and dry bulk market is more uncertain with possible negative demand eects from spiking commodity feeding through the world economy. KCC’s business model remains more resilient to these uncertainties than standard shipping with its eicient trading pattern based, strong customer relations and freight contracts, positive diversication eects from three markets and a strong balance sheet. We are future bound! Future bound Our business model continued to prove its strength in the past year. The exibility of our combination carriers, servicing both tanker and dry bulk trades, and our eicient combination trading, have made it possible to both take benet of the strong dry bulk market from early last spring and limit the worst negative eects of a historical weak tanker market. Board of Directors LasseKristoersen Chair of the Board Winifred Patricia Johansen Board Member Morten Skedsmo Board Member Magne Øvreås Board Member and Member of Audit Committee Rebekka Glasser Herlofsen Board Member and Chair of Audit Committee 5 Klaveness Combination Carriers ASA – Annual Report 2021 Key developments 2021 and future priorities Klaveness Combination Carriers (KCC, Company, Group) delivered a record strong nancial result for 2021 despite a challenging tanker market and continued operational challenges related to COVID-19. 2021 was another year where KCC demonstrated the value of exibility and diversication through its combination carrier concept. The CABU eet delivered the highest TCE earnings since 2015 on the back of high caustic soda volumes and strong dry bulk markets. The 2001-built CABU vessel, MV Banasol, was sold as a dry bulk vessel and delivered to new owners in December 2021, with a positive eect on prot and cash. The CLEANBU eet continued to expand its activities. A milestone was achieved in July 2021 as KCC secured clean petroleum product (CPP) contract of areightment (COA) with one of the main players in the industry. Despite an increase in share of days in combination trading and improved ballast percentage, TCE earnings decreased year-on-year because of the weaker tanker market in 2021. Three CLEANBU newbuilds were delivered in 2021 marking the end of this newbuild program. COVID-19 continued to impact KCC’s operations in 2021 mainly in relation to delivery of newbuilds and crew changes. No vessels experienced any infection cases onboard in 2021. As a result of several initiatives made across KCC’s business over the recent years, KCC made good headway on its environmental performance during 2021. While the carbon intensity (EEOI) for the eet was stable compared to 2020 at 7.4, average CO2 emissions per vessel decreased by 9% to 18,800 mt. KCC in 2021 submitted for the rst time to CDP and received a score B in the category “climate change”. KCC believes that a key challenge and opportunity for the shipping industry going forward is decarbonization. KCC raised USD 25 million in equity in November 2021 to fund energy eiciency measures on the existing eet and the ambition is to deliver sizeable cuts in emissions over the next years. People, health and safety 1 KCC’s main priority is to keep the crew safe and any injury or loss of lives are unacceptable. Despite our eorts, we are not always able to live up to targets and it is with great sadness we report that a deck cadet tragically lost his life aer a fall accident on board one of the CLEANBU vessels in 2021. This has been investigated in full and revealed no breach in safety procedures or systems. However, several actions have been implemented eet-wide based on the accident and the investigation. The Loss Time Incident Frequency (LTIF) on the combination carriers, measured by every 1 million working hours, was reduced from 2.5 in 2020 to 0.6 in 2021, within the target of KCC. The improvement is mainly a result of a comprehensive safety culture program referred to as ‘Klaveness Always Safe and Secure’ (KLASS) 2 . The COVID-19 pandemic had signicant impact in 2021 as in 2020. Priority number one through the COVID-19 pandemic has been to avoid crew from being infected. Due to extensive measures taken, KCC did not experience any infection cases onboard in 2021. The main COVID-19 related challenges were taking delivery of newbuilds in China and limited possibilities for crew changes during operation. Focus during the year was on repatriating crew at the end of their service period without delays. At year-end 2021, 13% of KCC’s crew was on extended contracts but non above 12 months. Crew mental health has been a focus area during the pandemic and the ship manager Klaveness Ship Management AS (KSM) has implemented several initiatives to support the crew in relation to their mental health. In 2021, there were 31 vetting inspections of the CABU and CLEANBU combination carriers. Average number of high-risk observations 3 per inspection for the Ship Inspection Report Programme (SIRE) vettings were 1.9, stable compared to 2021 and better than the target of 2. The eet went through 33 Port State Controls in 2021 without any detentions. Average number of deciencies per inspection was 0.7, a 42% improvement from 2020, but still slightly above the target of 0.5. The piracy risk in the Persian Gulf/Gulf of Oman eased in 2021. The threat for merchant vessels is considered moderate by Den Norske Krigsforsikring for Skib (DNK). No approaches or boarding attempts were reported for KCC vessels in 2021. By the end of 2021, KCC had nine employees located in Oslo and Singapore. The work environment is good. Women represented 33% of the workforce (2020: 33%) and absence due to sick leave was satisfactory, averaging 0.29 % for the Group in 2021 (0.08% in 2020) 4 . COVID-19 and consequent measures have also in 2021 put additional pressure on all employees and on-shore personnel worked from home oice for substantial parts of the year. KCC is dedicated to ensuring equal opportunities for all, irrespective of gender, gender identication, ethnicity, religion, sexual orientation, disability or social status (read more in the Code of Conduct available on www.combinationcarriers.com). Sustainability Decarbonization is the main task of our generation and a central pillar in the KCC strategy. KCC aims at being a shaper in the transition towards low carbon shipping through its eet, being at the forefront of introducing new solutions, and by working in close cooperation with customers, suppliers, and other stakeholders. The regulatory push for shipping decarbonization continued, most notably through the inclusion of shipping in the EU emission trading scheme as of 2023. Progress in the International Maritime Organization (IMO) remains slow, but 2021 produced consensus on the need to strengthen the initial greenhouse gas (GHG) strategy. KCC has been outspoken in support of a strategy that aligns shipping emissions with the 1.5C target in the Paris Agreement, and it is encouraging to see that the shipping industry now starts rallying behind the introduction of a meaningful carbon levy in the IMO. In 2021, the IMO also agreed to start rating vessels on energy eiciency as of 2023 and to require compliance with an energy eiciency index for existing ships. KCC aims at having a carbon neutral operation within 2030 and to reach a zero-emission operation by 2050. In addition, KCC has short-term emission reduction ambitions for 2022, including a reduction of 15% in absolute emissions per vessel compared to actual 2018 and a 25% reduction in carbon intensity Energy Eiciency Operational Indictor (EEOI) compared to actual 2018. This would reach IMO’s 2030 carbon intensity target in 2022. While KCC is well on track to meet its CO2 emission reduction target, the EEOI-target for 2022 will likely not be met for the entire eet. Part of the eet looks, however, likely to have an EEOI in line with or below this target in 2022. In November 2021, KCC raised USD 25 million in equity to fund energy Board of Directors’ report 2021 eiciency initiatives on its existing eet. Initiatives such as the Becker Mewis Ducts, Wartsila EnergoProFins and Shipshave ITCH have been tested and/or implemented on part of the eet during 2021 and additional measures will be implemented over the next years. KCC is committed to full transparency on its environmental strategy, targets, and performance. The Sustainability Report for 2021 is aligned with the Global Reporting Initiative Standards (GRI) Core option and the Task Force on Climate-related Financial Disclosures (TCFD) 5 . In its rst year of submitting to the CDP, KCC achieved a B score in the category “climate change”. KCC adheres to the Hong Kong Convention and the EU Ship Recycling Regulation. No ships were sold for recycling in 2021. Financial results Financial results Prot for the year ended at USD 22.6 million for 2021, up from USD 15.2 million in 2020. The 2021 prot includes gain from sale of MV Banasol and repayment of equity from Den Norske Krigsforsikring, in total USD 7.8 million. Delivery of three newbuilds in the rst half of 2021 was challenging during the pandemic with extra costs and delayed start of trading. Total COVID-19 eects are estimated to be approximately USD 6.3 million in lost earnings and higher than normal costs for 2021, of which approximately 45% of the impact related to delivery of the newbuilds. Net revenues from operation of vessels increased by 27% from USD 91.1 million in 2020 to USD 115.9 million in 2021, mainly driven by a larger eet. Average TCE earnings 6 of $20,961/day for the eet for 2021 ended in line with 2020, however the underlying markets were substantially dierent with a strong dry bulk market and weak tanker market in 2021 and the opposite in 2020. CABU TCE earnings increased by almost $1,700/day in 2021 and ended at $21,571/day in 2021, a multiple of 3.4 to standard spot earnings for MR tankers in 2021 as reported by brokers 7 . The main drivers were a strong dry bulk market and a high contract coverage for caustic soda shipments. Average TCE earnings for the CLEANBU eet for 2021 ended at $20,195/ day for the year, a multiple of 1.9 to standard spot earnings for standard LR1-tankers 8 in 2020 as reported by brokers. Earnings ended approximately $3,650/day lower than in 2020 due to xing of three vessels on tanker time charters at the market peak in second quarter of 2020. Operating expenses increased from USD 37.2 million in 2020 to USD 49.2 million in 2021 mainly due to a larger eet. COVID-19 impacts on operating expenses (crew costs, deviations, forwarding cost for spare parts and supplies) for 2021 was in line with 2020. Administrative costs for 2021 of USD 7.2 million was up by 22% compared to 2020 (USD 5.6 million) mainly due to higher activity and project team costs being accounted for over prot and loss and not capitalized on vessels as in 2020. Based on solid earnings for the eet, 2021 turned out to be a strong year for the Group with an Operating prot before depreciations (EBITDA) of USD 67.1 million (2020: USD 48.1 million). The increase is mainly driven by a larger CLEANBU eet representing an increase of 3.4 vessel-years compared to 2020 and gain from sale of the CABU vessel, MV Banasol. Depreciation increased from USD 19.2 million in 2020 to USD 28.7 million in 2021 and net nancial result in 2021 ended at negative USD 15.8 million compared to negative USD 13.8 million in 2020, both mainly driven by a larger eet. Financial position At year-end 2021, the consolidated book equity was USD 254.4 million (2020: USD 216.5 million), corresponding to a book equity ratio of 40% (2020: 39%). Total interest-bearing debt ended at USD 354.5 million at the end of 2021, up from USD 309.9 million at year-end 2020. Cash and cash equivalents ended at USD 53.9 million against USD 65.7 million as of 31 December 2020 and total assets were up from USD 549.0 million to USD 629.9 million. Delivery of the three last CLEANBUs in 2021 impacts the equity ratio, interest-bearing debt, total assets and cash development. Cashow Net cash ow from operating activities was USD 45.8 million in 2021 (2020: USD 39.5 million) due to positive EBITDA oset by negative changes in working capital and non-cash eect gain on sale of vessels. Net cash ow from investments was negative USD 105.5 million (2020: negative 92.9 million) due to dry dock costs for four CABU vessels and yard installments and other costs related to the newbuilding program partly o-set by cash proceeds from sale of vessels. The cash ow from nancing activities was positive USD 46.3 million (2020: USD 63.8 million) whereof proceeds from equity raise and mortgage debt exceed debt repayment, interests and paid out dividends. Dividends KCC paid USD 7.2 million (2020: USD 4.8 million) in dividends to shareholders in 2021, equal to USD 0.15 per share (2020: USD 0.10 per share). Financing and going concern KCC’s capital commitments are fully funded, and the renancing risk is limited over the next year as the rst mortgage debt facility falls due in December 2023. During the year, the Group renanced a bank facility into a senior secured sustainability linked term loan credit facility to nance the six newest CABU vessels. A 364-days overdra facility was renewed in 2021. The accounts are reported under the assumption of a going concern. The Board considers the nancial position of the Group at year-end 2021 to be solid and the liquidity to be satisfactory. Current cash ow, existing and committed debt and liquidity position for the Group are considered suicient to cover all commitments. There have been no major transactions or events following the closing date that would have a negative impact on the evaluation of the nancial position of Klaveness Combination Carriers. Related parties’ transactions KCC purchases services related to business administration, ship management, project management and commercial operations from related parties in the Torvald Klaveness Group. All services are priced on arm’s length basis and related party transactions and services have during 2021 been included as a recurring item in most of the Audit Committee meetings. The services are benchmarked on an annual basis and the benchmark is presented to the Board of Directors 9 . See note 19 to the Financial Statements for 2021 for more information on related party transactions. The parent company The result for the parent company, Klaveness Combination Carriers ASA, was a prot aer tax of USD 2.8 million for 2021 (2020: prot USD 0.1 million). The prot is proposed transferred to other equity. The Board of Directors has proposed dividends of USD 5.2 million for Q4 2021 which has been booked as a provision in the accounts as per 31 December 2021. Eventsaerthebalancesheetdate KCC has received the news of the Russian invasion of Ukraine with shock and sadness. KCC has no exposure to Russia or Belarus and has decided to not conduct any business with companies owned or controlled by Russian or Belarusian interests. Further, KCC has exempted all Russian ports, in addition to the war zone in the Black Sea. On 17 February 2022, the Board of Directors declared to pay a cash dividend to the Company’s shareholders of USD 5.2 million (USD 0.10 per share). 1 The vessels are on ship management to Klaveness Ship Management AS 2 Please nd more information on Safety Performance in the Sustainability Report for 2021 3 High risk observation is an internal denition of a signicant legislative, safety or pollution risk 4 More employee information in note 7 to the Financial Statements for 2021. 5 Read more in the Sustainability Report for 2021 published on www.combinationcarriers.com. 6 Average TCE earnings is an alternative Performance Measure (APM); see reconciliation in published Q4 2021 report appendix 1 (page 26). 7 Average MR TCE earnings as reported by Clarksons. One month lag due to normal time of xing. 8 Average LR1 TCE earnings as reported by Clarksons. One month lag due to normal time of xing. 9 Detailed information of related party transactions described in note 19 to the Financial Statements for 2021. 6 Klaveness Combination Carriers ASA – Annual Report 2021 The business The objective of Klaveness Combination Carriers is to provide transportation for dry bulk, chemical and product tanker clients, as well as to develop new investment and acquisition opportunities that t with the Group’s existing business platform. The Group had a eet of 16 vessels in operation at year-end 2021. KCC’s registered business address is Drammensveien 260, 0283 Oslo, Norway. The shares are listed on Oslo Stock Exchange with ticker KCC. The ten largest shareholders account for 87.2% of total shares, of which the largest shareholder is Rederiaksjeselskapet Torvald Klaveness with an ownership of 53.8%. CABU By year-end 2021, the CABU combination carrier eet consisted of eight vessels. To optimize earnings in the strong dry bulk market one CABU vessel was reallocated from combination trades to/from Brazil to the dry bulk market and was employed in the MaruKlav Baumarine Panamax dry bulk pool from late August until the end of the year. The CABU service to/from Brazil was terminated from the end of 2021 mainly because of decreasing north bound dry bulk volumes over the last years. Following the sale of MV Banasol and return of one vessel from the MaruKlav Baumarine Panamax dry bulk pool, all eight vessels will from April/May 2022 be employed in trades to/from Australia, where the CABU eet over time has generated the highest earnings. The share of days in main combination trades ended at 69% for 2021, down from 75% in 2020. The CABU’s faced some scheduling challenges through the year with increasing port congestion in the Far East and negative eects of a tight CSS market. To maintain on-time service to the caustic soda customers, CLEANBU vessels lied seven CSS cargoes in 2021. Consequently, CABU eet capacity was reallocated to dry bulk trading, explaining a lower-than-normal share of days in combination trade. Four vessels were dry-docked in 2021 with in total 143 scheduled o-hire days. Unscheduled o-hire ended at 46 days, down from 77 days in 2020, mainly due to less COVID-19 related o-hire from quarantine. The CABU wet capacity is to a high degree based on freight contracts with long-term COA relations. The caustic soda contract booking for 2022 is high with a contract coverage for rst half of 2022 of 88% (71% xed rate coverage), and 88% (58% xed rate coverage) for second half. CLEANBU Following the delivery of the eighth and last CLEANBU vessel in May 2021, the full CLEANBU eet was in operation from the third quarter of 2021. The primary focus for 2021 was to expand the customer base and employ the vessels in eicient combination trades. The number of trades, terminals, cargoes, and customers have increased through 2021 and in July 2021, KCC reached a milestone when signing a new contract of areightment for its CLEANBU eet with a major international charterer in the tanker market. The share of days in main combination trades strengthened through the year and ended at an average of 66% for 2021, up from 59% in 2020. O-hire was 105 days, whereof 85 days related to guarantee repairs for Barramundi and waiting related to a cancelled dry-dock. The delivery and takeover of the CLEANBU vessels from the shipyard in China were impacted by the COVID-19 pandemic in 2021 as in 2020. It was not possible to get KCC’s crew into China, hence Chinese crew were employed to sail the three delivered newbuilds to South Korea for crew change. Phase-in of the three CLEANBUs in rst half of 2021 took in average 40 days from delivery from yard until start of trading. Market developments and outlook Earnings of KCC’s combination carriers are driven by the Panamax dry bulk market, MR and LR1 product tanker markets and fuel markets. Freight rates for global seaborne transportation is highly volatile and cyclical. The demand for global seaborne transportation depends on global economic growth, and in particular the development in the energy and commodities markets. In 2021 the dry bulk market delivered strong earnings driven by solid demand growth and eet ineiciencies, while product tanker earnings remained muted as oil consumption and production is still recovering from the COVID-19 pandemic. The 2022 outlook remains solid for both dry bulk and product tanker rates as demand growth is expected to outpace that of supply. However, the outlook remains uncertain. For example, disruptions of trade and commodities ows and impact on economic growth due to the Russian invasion of Ukraine, the COVID-19 pandemic, rising ination and the global energy crunch can all have material impact on the demand for seaborne transportation. Dry bulk market Dry bulk freight rebounded strongly in 2021 and delivered the highest earnings since 2008 with an average P5TC 10 of $26,735/day. The global dry bulk demand growth accelerated from 2.1% in 2020 to 4.9% in 2021 according to Klaveness Research, while the nominal growth in the dry bulk eet was 3.5% in 2021, down from 3.9% in 2020. Despite volatility, dry bulk freight rates are expected to remain at elevated levels in 2022. The eet is expected to grow by 2.1% in 2022 and eet ineiciency, such as congestion, is expected to continue to reduce the availability of vessels. The order book to eet ratio is low and overall speed reduction for the eet is expected in the coming years due to introduction of new emissions IMO regulations from 2023. This will likely keep the eet growth low for several years. On the demand side the growth in demand for commodities are expected to remain resilient. High commodity prices will incentivize exporters to produce and to ship as much as possible in the seaborne market. Specically, the long-distance Brazilian iron ore trade is expected to grow while minor bulks will remain supported by a continued recovery in global industrial production and strong container rates leading to an inux of cargoes that normally would be containerized. Furthermore, the Bauxite trade is likely to grow driven by production expansion in Guinea. For the coal and grains trade the ongoing invasion of Ukraine by Russia is expected to have signicant impact. The EU will likely reduce Russian coal purchases while other regions will ramp up. The demand eect, although highly uncertain, is expected to be positive as the increase in average sailing distance will oset lower volumes. The loss of grains exports from the Black Sea is expected to have negative eect on demand. The negative eect of lost volumes can only partly be oset by increased exports in other regions and increased sailing distances. Product tanker market 2021 was an overall weak year for product tankers. The 2021 average TC5 TCE 11 ended at around $6,200/day, down from $19,400/day in 2020. Product tanker demand increased by 8% 12 from 2020 to 2021 but is still well below 2019 and 2018 levels. Hence over-capacity in the product tanker market persisted. Product tanker earnings were as well negatively impacted by increased competition from crude tanker newbuilds liing CPP cargos in response to the low rates for crude tankers and destocking of oil inventories. Consumption increased quarter-over-quarter during the year as travel restrictions in Europe and US were relaxed into the summer and autumn and oil consumption in 2021 is estimated to be around 97.5mn bbl/day, while the consumption increased to around 101.6mn bbl/day at the end of 2021 13 . The outlook for the product tanker market remains strong with low eet growth and solid demand growth. On the demand side oil consumption has increased to just shy of pre- COVID levels and is expected to grow further during 2022. Oil production is expected to expand as the Organization of the Petroleum Exporting Countries (OPEC+) is expected to increase production quotas by 400,000 bbl/day per month until September 2022. Commercial crude oil and rened products inventories are at multi-year lows and further renery dislocations will continue to drive ton-mile demand for product tankers. When it comes to the ongoing Russian invasion of Ukraine it is still unknown what the market impact will be for product tankers. Initially arbitrage opportunities have emerged with elevated product prices in Europe causing freight rates to increase. It is highly uncertain if these can persist over time and if they can make up for lost Russian volumes. Clarksons expects product tanker demand to grow 7% in 2022. On the supply side the product tanker orderbook is limited with book-to-eet ratio at around 5% and an expected supply growth of 1% in 2022. Fuel market Oil prices increased by around 50% during 2021 from around USD 52/bbl to around USD 78/bbl. Strong demand growth during the year combined with lagging production and inventory drawdowns have le the oil markets in a tight supply/demand situation. Average VLSFO prices ended at around USD 520/mt in 2021 compared to USD340/mt 2020. Fuel prices have risen signicantly year-to-date, reaching around USD 800m/mt by the middle of March. Risk review and risk management It is important for the Board of Directors that the right risk reward assessment is made and that internal control routines are good. Main risks related to KCC are discussed with the Audit Committee and the Board of Directors on a quarterly basis. Risks are identied and assessed based on a probability and impact matrix and mitigating actions are outlined for the main risks. Risks related to vessel technical operation and crew safety are assessed, monitored and handled by the ship manager, Klaveness Ship Management AS. Below is a list of some of the principal risks identied that may aect business operations, reputation, nancial condition, results of operations and, ultimately share price. A description of the risks can be found in note 16 to the Financial Statements for 2021. Please be reminded that the risk picture will change over time and based on events. • Introduction of new vessel concepts such as the CLEANBUs entails commercial and technical risks, including but not limited to building experience, trades and brand in the clean petroleum market and obtaining acceptance and/or exemptions from clients and terminals to operate in combination trades where the vessels trade consecutively with dry bulk and clean petroleum product (CPP) cargoes • Dependency on a limited number of customers and renewal of key/material contracts of areightment for caustic soda • Volatile freight rates and unfavourable changes in trade ows and volumes, either structurally or due to events such as impact on market of the Russian invasion of Ukraine In a longer-term perspective, the current assessment includes the following risks. A description of the risks can be found in note 16 to the Financial Statements for 2021 and in the climate-related risk chapter in the Sustainability Report for 2021: • Global economic growth and the impact on energy and commodity markets • Impact of a low-carbon future with introduction of emission regulations, zero-emission vessels and lower demand for transportation of fossil fuels Board development The Board of Directors held ten meetings in 2021, whereof four related to quarterly reports only, with an attendance of 100% percent and the Audit Committee held six meetings. The Board of Directors consists of ve members, whereof two women. Winifred Patricia Johansen joined, while Lori Wheeler Næss stepped down during 2021. The Company’s Oicers and Directors are covered by Rederiaksjeselskapet Torvald Klaveness’ Commercial Management Liability Insurance with AXA. The Board of Directors has an annual plan. It includes recurring topics such as strategy review, business planning, risk and compliance oversight, nancial reporting as well as reporting on Health, Safety and Environment. High on the Board’s agenda in 2021 was the delivery and phase-in of CLEANBU vessels, optimizing the CABU business by selling a vessel and focusing trading to Brazil, and pursuing investments in energy eiciency measures to meeting KCC’s ambitious emissions reduction targets. This report contains certain forward-looking statements that involve risks and uncertainties. The forward-looking statements reect current views about future events and are, by their nature, subject to signicant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to dier materially from those expressed or implied by these forward-looking statements. Although we believe that the expectations reected in the forward- looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements aer the date of this report, either to make them conform to actual results or changes in our expectations. You should therefore not place undue reliance on forward looking statements. Oslo, 28 March 2022 Oslo, 31 December 2021 LasseKristoersen Chair of the Board Rebekka Glasser Herlofsen Board member Engebret Dahm CEO Morten Skedsmo Board member Winifred Patricia Johansen Board member Magne Øvreås Board member 10 Kamsarmax Soure: Baltic Exchange 11 LR1 Middle East to Japan as reported by Baltic Exchange 12 Source: Clarksons Shipping Intelligence Network 13 Source: U.S. Energy Information Administration Short-Term Energy Outlook March 2022 7 Klaveness Combination Carriers ASA – Annual Report 2021 1 Annual General Meeting (AGM) Klaveness Combination Carriers ASA (“KCC” or the “Company”) strives to protect and enhance shareholder values through openness, integrity and equal shareholder treatment, and sound corporate governance is a key element in KCC. The corporate governance principles of the Company are adopted by the Board of Directors of Klaveness Combination Carriers ASA (the Board). The principles are based on the Norwegian Code of Practice for Corporate Governance, dated 14 October 2021 (the «Code of Practice»). The below description follows the same structure as the Code of Practice and covers all sections thereof. The corporate governance report follows the “comply and explain” principles. Where KCC does not fully comply with the Code of Practice, an explanation of the reason for the deviation and what solution the Company has selected has been included. Deviations from the Norwegian code of practice for corporate governance In the Board of Directors’ assessment, KCC has two minor deviations from the Code of Practice: Section 3, Equity and dividends KCC has one deviation from this section: “The background to any proposal for the Board of Directors to be given a mandate to approve the distribution of dividends should be explained”: The background for the authorisation to the Board of Directors to approve distribution of dividends was not explained in the AGM 1 in 2021, the reason being that the Company has an established and disclosed dividend policy as basis for the Board of Directors’ dividend assessment. Section 6, General meetings KCC has one deviation from this section: “Ensure that the members of the Board of Directors … attend the General Meeting”: All Board members have historically not been present at the General Meetings. Matters under consideration at the General Meeting of Shareholders have not previously required this. The Chair of the Board of Directors is always present at the meeting. Other board members participate as needed. The Board of Directors considers this to be adequate. 1. Implementation and reporting on Corporate Governance The Board of Directors ensures that appropriate goals and strategies are adopted, that the adopted strategies are implemented in practice, and that the results achieved are subject to measurement and follow-up. The principles also contribute to ensure that the activities of the Company are subject to adequate controls. An appropriate distribution of roles and adequate controls contribute to the largest possible value creation over time, for the benet of the shareholders and other stakeholders. The Company maintains a high ethical standard in its business concept and relations with customers, suppliers, employees and other stakeholders. Klaveness Code of Conduct (published on www.combinationcarriers.com) applies to the Company and all services provided to the Company under service or management agreements between the Company or any of its subsidiaries and Torvald Klaveness companies. No deviations from the Code of Practice. 2. Business According to the Company’s articles of association, its purpose is to invest in- and operate wet- and dry bulk combination carriers and everything associated with such, including by participating in other companies that own or operate wet- and dry bulk combination carriers. The principal objectives and strategies of the Company are presented in the Annual Report, and on the Company’s web site and are subject to annual assessments. Sustainability in general and more specically decarbonization of KCC’s activities are highly integrated in the Company’s strategy and a focus area in everything from daily operations to Board decisions. No deviations from the Code of Practice. 3. Equity and dividends Given the cyclical nature of the shipping industry and to accommodate the business strategy, the Company needs to maintain a solid capital structure at levels which will give suicient assurance to the debt and equity providers that the Company is solid and sustainable. The Board regularly reviews and monitors the Company’s capital structure to ensure it is in line with the Company’s objective, strategy, and risk prole. The Company has prepared a statement of its Finance Policy, providing details of the Company’s handling of nancial risks, hedging, funding policies, etc. A summary of the Finance Policy can be found on www.combinationcarriers.com. The book equity of the Klaveness Combination Carriers Group as per 31 December 2021 was USD 254.4 million, which represents an equity ratio of 40%. Cash and cash equivalents were USD 53.9 million per year-end 2021 and the Group has in addition USD 30 million in available long- term undrawn bank debt and USD 17.6 million available capacity under a 364-days overdra facility. The debt sources are diversied (mortgage bank debt and bond issue) and have a well distributed maturity prole. The Board believes the capital structure is appropriate based on its objectives, strategies, and risk prole. The Board has established a clear dividend policy based on a targeted quarterly dividend distribution. Although there can be no assurance of any such distribution being made, the Company currently intends to distribute a minimum 80% of free cash ow generation to equity aer debt service and maintenance cost as dividends to its shareholders, provided that all known, future capital and debt commitments are accounted for, and the Company’s nancial standing remains acceptable. The Company further intends for any new material investments to be subject to separate funding through equity, debt or otherwise. At the Annual General Meeting (AGM) in April 2021, the Board was granted an authorization to resolve distribution of dividends. The authorization is valid until the Annual General Meeting in 2022, however no longer than 30 June 2022. Dividends of USD 15 cents per share, in total USD 7.2 million, were approved and distributed to shareholders in 2021. The Board’s authorisations to increase the share capital and to buy own shares shall normally not be granted for periods longer than until the next Annual General Meeting of the Company. At the AGM in 2021, the Board was granted an authorisation to acquire own shares, with a total nominal value of up to NOK 4,820,700, which equalled 10% of the share capital at the date of the AGM and equals 9% of the current share capital. The authorisation can be used for investment purposes, to realise the shares, use the shares as consideration in connection with acquisitions, mergers, demergers or other transactions or in connection with incentive programs, or to cancel the shares and consequently decrease the Company’s share capital. The authorisation is valid until the AGM in 2022 but will last no longer than 30 June 2022. No shares have been repurchased during 2021. Furthermore, at the AGM in 2021, the Board was granted an authorisation to increase the share capital by up to NOK 20,000,000. The authorisation may only be used to raise additional capital for future investments or for general corporate purposes, or to issue shares in connection with acquisitions, mergers, demergers or other transactions. The authorisation is valid until the AGM in 2022, but no longer than 30 June 2022. The Company in November 2021 issued 4,345,000 shares in a private placement, each with a nominal value of NOK 1. Corporate Governance Report Deviations from the Code of Practice: See “Deviations from the Norwegian code of practice for corporate governance” section on the rst page of this report. 4. Equal treatment of shareholders The shares of KCC are listed on Oslo Børs (on Euronext Expand until 21 December 2021). All issued shares carry equal shareholder rights in all respects, including the right to participate and vote in general meetings, and there are no restrictions on transfer of shares. The articles of association place no restrictions on voting rights. In an Extraordinary General Meeting held on 24 September 2018, the Company issued 229,088 non-transferable warrants, each of which entitle the holder to subscribe one new share of the Company at a subscription price of NOK 44.38 per share. More information about the warrants is provided in note 18 in Annual Report 2021. No deviations from the Code of Practice. 5. Shares and negotiability KCC’s shares are freely tradable and there are no restrictions on the sale and purchase of the Company’s shares beyond those pursuant to Norwegian law. Each share carries one vote. No deviations from the Code of Practice. 6. General meetings The Annual General Meeting will normally be held before 30 April every year. Notice of the meeting shall be sent to the shareholders no later than 21 days prior to the meeting. The notices for such meetings shall include documents providing the shareholders with suicient detail in order for the shareholders to make an assessment of all the cases to be considered as well as all relevant information regarding procedures of attendance and voting. Notices for General Meetings shall provide information on the procedures shareholders must observe in order to participate in and vote at the General Meeting. The notice should also set out: (i) the procedure for representation at the meeting through a proxy, including a form to appoint a proxy, and (ii) the right for shareholders to propose resolutions in respect of matters to be dealt with by the General Meeting. The cut-o for conrmation of attendance shall be set as short as practically possible and the Board will arrange matters so that shareholders who are unable to attend in person, will be able to vote by proxy. The form of proxy will be distributed with the notice. The Chair of the Board and the CEO are present at the meeting, and the Chair of the Nomination Committee and the auditor are normally present as well. An independent person has historically been elected to chair the Annual General Meeting. Deviations from the Code of Practice: See “Deviations from the Norwegian code of practice for corporate governance” section on the rst page of this report. 7. Nomination Committee According to the articles of association the Company shall have a Nomination Committee which is elected by the General Meeting. The Nomination Committee has the responsibility of proposing members to the Board of Directors and members of the Nomination Committee. The Nomination Committee also proposes fee payable to the members of the Board and the members of the Nomination Committee. The members of the Nomination Committee are selected to take into account the interests of shareholders in general. The current three members of the Nomination Committee are considered independent of the Board and the executive management team. Members of the Board of Directors and the executive management team are not members of the Nomination Committee. Instructions for the Nomination Committee is approved by the Company’s General Meeting. The members of the Nomination Committee’s period of service is two years unless the Annual General Meeting decides otherwise. The Nomination Committee is to maintain contact with shareholder groups, members of the Board of Directors and the Company’s executive personnel in its works with proposing members to the Board of Directors. The Annual General Meeting held on 26 April 2021 elected the current Nomination committee consisting of Trond Harald Klaveness (elected for a period of one year), Espen Galtung Døsvig (elected for a period of two years) and Anne Lise Gryte (elected for a period of two years), hence one member is up for election in the AGM in April 2022. No deviations from the Code of Practice. 8. The Board of Directors: Composition and independence In appointing members to the Board, it is emphasised that the Board shall have the requisite competency to independently evaluate the cases presented by the executive management team as well as the Company’s operation. It is also considered important that the Board can function well as a body of colleagues and that they meet the Company’s need for expertise and diversity. The Directors are elected for a period of two years, with the possibility of re-election. Board Members are encouraged to own shares in the Company. The Board currently consists of ve Board Members. The Board Members work together to exercise proper supervision of the Company’s business, compliance, performance, and work done by the Company’s management. The Chair of the Board is elected by the shareholders. Two out of ve of the Board Members are independent of the Company’s main shareholders and the majority of the Board Members are independent of the Company’s material business contacts and executive management. The Company’s executive management is not represented on the Board. The Board consists of the following members: Lasse Kristoersen (Chair), Magne Øvreås, Winifred Patricia Johansen (independent), Rebekka Glasser Herlofsen (independent) and Morten Skedsmo. An introduction to the members of the Board of Directors and their expertise can be found on www.combinationcarriers.com. No deviations from the Code of Practice. 9. The work of the Board of Directors Instructions have been issued for the Board of Directors, the Audit Committee, and the CEO. The Board prepares an annual plan for its work with special emphasis on goals, strategy and implementation. The Board’s primary responsibility is to (i) participate in the development and approval of the Company’s strategy, (ii) perform necessary monitoring functions and (iii) act as an advisory body for the executive management team. Its duties are not static, and the focus will depend on the Company’s ongoing needs. The Board is also responsible for ensuring that the operation of the Company compliant with the Company’s values and ethical guidelines. The Board shall ensure that the Company has a competent management with clear internal distribution of responsibilities and duties. The Board is regularly briefed on the Company’s nancial situation. The Board performs evaluation of its work aer every Board meeting. For information on how related party transactions are handled, see the Board of Directors Report and note 19 in Annual Report 2021. The Board has established an Audit Committee consisting of Rebekka Glasser Herlofsen (Chair) and Magne Øvreås. The function of the Audit Committee is to prepare matters to be considered by the Board and to support the Board in the exercise of its management and supervisory responsibilities relating to nancial reporting, statutory audit and internal control. The Audit Committee has prepared an annual plan of topics to be covered including internal audit procedures. The Company’s CFO is the secretary of the Committee. The auditor participates in discussions of relevant agenda items in meetings of the Audit Committee and the Committee holds separate meetings with the auditor several times each year. No deviations from the Code of Practice. 8 Klaveness Combination Carriers ASA – Annual Report 2021 10. Risk management and internal control The Board shall ensure that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the Company’s activities. The internal control and the systems shall also encompass the Company’s corporate values and ethical guidelines. The objective of the risk management and internal control is to manage exposure to risks to ensure successful conduct of the Company’s business and to support the quality of its nancial reporting. Governing documents, code of conduct, policies, guidelines, processes, and procedures are documented and available to the Company’s employees and to employees of the main service providers, and shall ensure: – that the Company facilitates targeted and eective operational arrangements and makes it possible to manage commercial risk, operational risk, climate related risks, the risk of breaching applicable legislation and regulations as well as all other forms of risk that may be material for achieving the Company’s commercial objectives – the quality of internal and external reporting – that the Company operates in accordance with the relevant legislation and regulations as well as with its internal guidelines for its activities, including the Company’s ethical guidelines and corporate values The Board on a quarterly basis reviews the Company’s most important areas of exposure to risk. Internal control and risk exposure are regularly tested and evaluated by the Audit Committee. Some of the main risks are presented in the Board of Directors report and note 16 in Annual Report 2021. KCC encourages whistleblowing regarding blameworthy activities or circumstances within its business. The whistleblower shall be protected against retaliation because of such whistleblowing. The Chief Compliance Oicer in Torvald Klaveness is the contact person for whistleblowing for KCC and whistleblowing may be done anonymously. The Chief Compliance Oicer noties the Audit Committee about notications related to KCC. No deviations from the Code of Practice. 11. Remuneration of the Board of Directors Remuneration of Directors is determined by the Annual General Meeting. The fee reects the responsibilities of the board, its expertise, the amount of time devoted to board-related work, and the complexity of the Company’s businesses. To maintain the Board’s independence, the Board’s remuneration is not linked to the Company’s performance, nor does the Company grant share options, similar instruments or retirement benets to board members as consideration for their work. In connection with the sales process of MV Banasol in second half of 2021, Board Member Morten Skedsmo contributed in the work to nd a buyer. Compensation for the work was paid to Klaveness AS (a related party of the Company), Mr. Skedsmo’s employer. For more information, see note 7 and note 19 in Annual Report 2021. None of the other Directors have performed assignments for the Company in addition to their appointment as member of the Board of Directors. More information about the remuneration of the individual directors is provided in note 7 in Annual Report 2021. No deviations from the Code of Practice. 12. Salary and other remuneration for executive personnel The Board determines the salary and other compensation to the CEO. The CEO’s salary, options granted and bonus shall be determined on the basis of an evaluation with emphasis on the following factors: Progress towards and achievement of strategic business goals; Overall protability of the Company; Development of the Company’s shares; and adherence to the Company’s main values. Any fringe benets shall be in line with market practice and should not be substantial in relation to the CEO’s basic salary. The CEO determines the remuneration of executive employees. The remuneration is based on a base salary, bonus and share options. The Board of Directors’ guidelines and the report regarding compensation to key management executives is on the agenda of the Annual General Meeting in April 2022. For information about remuneration of executive personnel see note 7 in Annual Report 2021 and the Remuneration Guidelines approved by the Annual General Meeting in 2021 are available one the Company’s website. No deviations from the Code of Practice. 13. Information and communication The Company has developed Investor Relations Guidelines and the Company aims to keep analysts, investors and other stakeholders continuously updated on the Company’s operations and performance. The Company provides information to the market through quarterly and annual reports; investor- and analyst presentations open to the media and by making operational and nancial information available on the Company’s website. Information of importance is made available to the stock market through notication to the Oslo Stock Exchange in accordance with the Stock Exchange regulations. Information is provided in English. All stock exchange announcements and press releases, including the nancial calendar, are made available on the Company’s website. No deviations from the Code of Practice. 14. Take-overs The Company has established key principles for how to act in the event of a take-over. In the event of a take-over process, the Board has a duty to ensure that the Company’s shareholders are treated equally and that the Company’s activities are not unnecessarily interrupted. The Board will also ensure that the shareholders have suicient information and time to assess the oer. In the event of a take-over bid, the Board will, in addition to complying with relevant legislation and regulations, seek to comply with the recommendations in the Norwegian Code of Practice for Corporate Governance. No deviations from the Code of Practice. 15. Auditor The auditor participates in most Audit Committee meetings. Annually, the auditor submits an audit workplan to the Audit Committee. The auditor is present at Board meetings where the annual accounts are on the agenda. The auditor will assess any important accounting estimates and matters of importance on which there has been disagreement between the auditor and the Company’s executive management and/or the Audit Committee. The auditor shall present to the Board or the Audit Committee a review of the Company’s internal control procedures, including identied weaknesses and proposals for improvement. Further, the Board normally holds a meeting with the auditor at least once a year at which no representative of the executive management is present. The auditor is required to annually conrm his or her independence in writing to the Audit Committee. There were no disagreements between management or the Audit Committee and the auditor, EY, during 2021. For the nancial year 2021, Johan Lid Nordby was the Company’s engagement partner from EY. The auditor’s fee is approved by the Annual General Meeting. Auditor’s fees are disclosed in note 6 in Annual Report 2021. No deviations from the Code of Practice. 9 Klaveness Combination Carriers ASA – Annual Report 2021 Consolidated Financial Statements Klaveness Combination Carriers ASA – Consolidated Group INCOME STATEMENT Year ended 31 December (USD ‘000) Notes 2021 2020 Freight revenue 3 155 564 142 289 Charter hire revenue 3 41 909 20 442 Other revenue 3 482 - Total revenues, vessels 3 197 955 162 731 Voyage expenses 4 (82 087) (71 592) Net revenues from operations of vessels 115 868 91 139 Gain on sale of vessels 3, 9 6 360 - Other income 3 1 422 - Operating expenses, vessels 5 (49 212) (37 193) Group commercial and administrative services 19 (3 709) (3 538) Salaries and social expense 7 (2 374) (1 327) Tonnage tax 21 (221) (180) Other operating and administrative expenses 6, 7 (1 069) (776) Operatingprotbeforedepreciation(EBITDA) 67 064 48 125 Depreciation 9 (28 666) (19 155) Operatingprotaerdepreciation(EBIT) 38 398 28 971 Finance income 8 74 529 Finance costs 8 (15 866) (14 317) Protbeforetax(EBT) 22 606 15 182 Income tax expenses 22 (7) - Protaertax 22 600 15 182 Attributable to: Equity holders of the parent company 22 600 15 182 Total 22 600 15 182 Attributable to: Basic earnings per share 0.46 0.32 Diluted earnings per share 0.46 0.32 STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December (USD ‘000) Notes 2021 2020 Prot/(loss)oftheperiod 22 600 15 182 Other comprehensive income to be reclassied to prot or loss Net movement fair value on cross-currency interest rate swaps (CCIRS) 13 (404) 1 253 Reclassication to prot and loss (CCIRS) 2 773 (3 715) Net movement fair value on interest rate swaps 13 4 500 (2 491) Net movement fair value bunker hedge 13 (69) 87 Net movement fair value FFA hedge 13 (7 730) (1 814) Net changes on cost of hedging FFA hedge 13 (714) - Netothercomprehensiveincometobereclassiedtoprotorloss (1 644) (6 679) Totalcomprehensiveincome/(loss)fortheperiod,netoftax 20 955 8 503 Attributable to: Equity holders of the parent company 20 955 8 503 Total 20 955 8 503 Klaveness Combination Carriers ASA – Consolidated Group 10 Klaveness Combination Carriers ASA – Annual Report 2021 STATEMENT OF FINANCIAL POSITION Assets (USD ‘000) Notes 31 Dec 2021 31 Dec 2020 Non-current assets Vessels 9 536 864 404 258 Newbuilding contracts 10 - 48 441 Right-of-use assets 11 1 553 1 672 Long-term receivables 7 70 70 Long-term nancial assets 13 4 048 3 427 Total non-current assets 542 535 457 868 Current assets Short-term nancial assets 13 678 87 Inventories 12 12 279 6 159 Trade receivables and other current assets 14 18 484 18 501 Short-term receivables from related parties 19 2 018 742 Cash and cash equivalents 15 53 937 65 685 Total current assets 87 396 91 174 Total assets 629 931 549 043 Klaveness Combination Carriers ASA – Consolidated Group STATEMENT OF FINANCIAL POSITION Equity and liabilities (USD ‘000) Notes 31 Dec 2021 31 Dec 2020 Equity Share capital 18 6 235 5 725 Share premium 153 732 130 155 Other reserves (8 154) (6 511) Retained earnings 17 102 605 87 162 Total equity 254 417 216 532 Non-current liabilities Mortgage debt 13 249 993 206 813 Long-term nancial liabilities 13 2 017 5 409 Long-term lease liabilities 1 008 1 239 Bond loan 13 78 205 80 649 Total non-current liabilities 331 223 294 109 Current liabilities Short-term mortgage debt 13 23 936 22 473 Interest bearing liabilities 13 2 409 - Short-term nancial liabilities 13 - 757 Short-term lease liabilities 618 493 Trade and other payables 16 199 13 165 Short-term debt to related parties 19 895 1 339 Tax liabilities 21 233 175 Total current liabilities 44 291 38 401 Total equity and liabilities 629 931 549 043 LasseKristoersen Chair of the Board Rebekka Glasser Herlofsen Board member Engebret Dahm CEO Oslo, 28 March 2022 Oslo, 31 December 2021 Morten Skedsmo Board member Winifred Patricia Johansen Board member Magne Øvreås Board member Klaveness Combination Carriers ASA – Consolidated Group 11 Klaveness Combination Carriers ASA – Annual Report 2021 STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the parent 2021 (USD ‘000) Share capital Other paid in capital Treasury shares Hedging reserve Cost of hedging reserve Retained earnings Total Equity 1 January 2021 5 725 130 155 (147) (6 363) - 87 162 216 532 Prot (loss) for the period - - - - - 22 600 22 600 Other comprehensive income for the period - - - (931) (714) - (1 644) Share option program - - - - - 47 47 Dividends - - - - - (7 204) (7 204) Capital increase (November 4, 2021) 510 23 576 - - - - 24 086 Equity at 31 December 2021 6 235 153 732 (147) (7 294) (714) 102 605 254 417 2020 (USD ‘000) Share capital Other paid in capital Treasury shares Hedging reserve Cost of hedging reserve Retained earnings Total Equity 1 January 2020 5 725 130 155 - 316 - 76 744 212 941 Prot (loss) for the period - - - - - 15 182 15 182 Other comprehensive income for the period - - - (6 679) - - (6 679) Purchase of own shares - - (147) - - - (147) Share option program - - - - - 39 39 Dividends - - - - - (4 803) (4 803) Equity at 31 December 2020 5 725 130 155 (147) (6 363) - 87 162 216 532 Klaveness Combination Carriers ASA – Consolidated Group Klaveness Combination Carriers ASA – Consolidated Group CASH FLOW STATEMENT Year ended 31 December (USD ’000) Notes 2021 2020 Prot before tax 22 606 15 182 Tonnage tax expensed 221 180 Depreciation 9 28 666 19 155 Amortization of upfront fees bank loans 882 693 Financial derivatives unrealised loss / gain (-) 8 82 (342) Gain on sale of vessel 9 (6 360) - Gain /loss on foreign exchange 8 726 (4) Interest income 8 (74) (271) Interest expenses 8 14 175 11 884 Change in current assets (8 797) (3 797) Change in current liabilities 2 038 (3 438) Collateral paid/refunded on FFA (variation margin) (8 390) - Interest received 74 271 A:Netcashowfromoperatingactivities 45 850 39 513 Acquisition of other tangible assets 9 (13 783) (4 271) Installments and other cost on newbuilding contracts 10 (105 322) (88 634) Cash proceeds from sale of vessels 6 13 800 - Transaction costs related to sale of vessels (212) - B:Netcashowfrominvestmentactivities (105 517) (92 905) Proceeds from mortgage debt 13 169 000 60 450 Proceeds from bond loan (KCC04) 13 - 76 390 Buyback of bond loan (KCC03) 13 - (33 861) Transaction costs on issuance of loans 13 (1 944) (1 914) Repayment of mortgage debt 13 (123 041) (17 367) Terminated nancial instruments 13, 8 - (3 101) Interest paid 8 (13 970) (11 276) Repayment of lease liabilities 11 (582) (454) Interest paid leasing 8 (103) (94) Purchase of own shares - (147) Paid in registered capital increase 18 24 977 - Transaction costs on capital increase (878) - Dividends 18 (7 204) (4 802) C:Netcashowfromnancingactivities 46 254 63 822 Net change in liquidity in the period (A+B+C) (13 414) 10 431 Eect of exchange rate changes on cash (742) - Cash and cash equivalents at beginning of period 65 685 55 254 Cash and cash equivalents at end of period 51 529 65 685 Net change in cash and cash equivalents in the period (13 414) 10 431 Cash and cash equivalents 53 937 65 685 Other interest bearing liabilities (overdra facility) 2 409 - Cashandcashequivalents(aspresentedincashowstatement) 51 529 65 685 * Related to delivery of newbuildings MV Baiacu, MV Bass and MV Balzani in 2021. ** Cash and cash equivalents include overdra facility of USD 2.4 million presented as other interest bearing liabilities in the balance sheet. 12 Klaveness Combination Carriers ASA – Annual Report 2021 Notes 01 Accounting policies 02 Segment reporting 03 Revenue from contracts with customers 04 Voyage expenses 05 Operating expenses 06 Other operating and administrative expenses 07 Salary 08 Financial items 09 Vessels 10 Newbuildings 11 Leasing 12 Inventories 13 Financial assets and nancial liabilities 14 Trade receivables and other current assets 15 Cash and cash equivalents 16 Financial risk management 17 Share option program 18 Share capital, shareholders, dividends and reserves 19 Transactions with related parties 20 List of subsidiaries 21 Taxes 22 Events aer the balance sheet date Corporate information These consolidated financial statements of Klaveness Combination Carriers ASA and its subsidiaries (collectively referred to as ”The Group”) for the period ended 31 December 2021 were authorized by the Board of Directors on March 28, 2022. Klaveness Combination Carriers ASA (”The Company”/”The Parent Company”) is a private limited company domiciled and incorporated in Norway. The Parent Company has headquarters and is registered in Drammensveien 260, 0283 Oslo. The share is listed on Oslo Stock Exchange (transferred from Euronext Expand as per 21 December 2021) with ticker KCC. The Parent Company was established on 23 March, 2018, as a 100 % subsidiary of Klaveness Ship Holding AS. The objective of the Group is to provide transportation for drybulk, chemical and petroleum product clients, as well as to develop new investment and acquisition opportunities that fit the Group’s business platform (see note 2 for more information). The ultimate parent of the Company is Rederiaksjeselskapet Torvald Klaveness. The consolidated financial statement for the ultimate parent is available at www.klaveness.com. Basis of preparation The consolidated nancial statements of the Group have been prepared in accordance with International Financial Reporting Standards (”IFRS”) as endorsed by the European Union. The Group’s consolidated nancial statements comprise Klaveness Combination Carriers ASA (KCC) and all subsidiaries over which the Group has control. Control is normally obtained when the Group owns more than 50 % of the shares in the company or through agreements are capable of exercising control over the company. Non-controlling interests are included in the Group’s equity. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and consolidation is continued until the date when such control ceases. The nancial statements of the subsidiaries are prepared for the same accounting period as the Parent Company, using consistent accounting principles for similar transactions and events under otherwise similar circumstances. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated. The consolidated nancial statements are based on historical cost, except for derivative nancial instruments which are measured at fair value. The consolidated nancial statements are prepared under the going concern assumption. ESEF/iXBRL reporting The Company is required to prepare and le the annual report in the European Single Electronic Format (ESEF), and the Annual Report for 2021 is therefore prepared in the XHTML format that can be displayed in a standard browser. The primary statements in the consolidated nancial statements are tagged using inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published by the IFRS Foundation. Where a nancial statement line item is not dened in the ESEF taxonomy, an extension to the taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions which are subtotals. The Annual Report submitted to the Norwegian Financial Supervisory Authority consists of the XHTML document together with certain technical les. Signicant accounting judgements, estimates and assumptions Preparing nancial statements in conformity with IFRS requires the management to make judgments, use of estimates and assumptions which aect the application of the accounting policies and the reported amounts of assets and liabilities, revenues and expenses. Management has made estimates and assumptions which have signicant eect on the amounts recognised in the nancial statements. In general, accounting estimates are considered signicant if: - the estimates require assumptions about matters that are highly uncertain at the time the estimates are made - dierent estimates could have been used - changes in the estimates have a material impact on Klaveness Combination Carriers ASA nancial position The areas in which The Company is particularly exposed to material uncertainty over the carrying amounts as at the end of 2021 are included within the individual notes outlined below: Note 9 – Useful life, residual value, cash-generating units and impairment testing Functional and presentation currency The presentation currency for the Group is US Dollar (USD). The Group companies, including the Parent Company, have USD as their functional currency. Each entity in the Group determines its own functional currency and items included in the nancial statements of each entity are measured using that functional currency. Foreign currency transactions Transactions in foreign currencies are recorded in the functional currency rate at the date of the transaction. Monetary assets and liabilities in foreign currency are translated at the functional currency rate prevailing at the balance sheet date. Exchange dierences arising from translations into functional currency are recorded in the income statement. Non-monetary assets and liabilities measured at historical cost in foreign currency are translated into the functional currency using the historical exchange rate. Non-monetary assets and liabilities recognised at fair value are translated using the exchange rate on the date of the determination of the fair value. Income and expenses in NOK are converted at the rate of exchange on the transaction date. The average exchange rate was 8.5973 USD/NOK in 2021 (2020: 9.4264). At 31 December 2021 an exchange rate of USD/NOK 8.8363 (2020: 8.5375) was used for the valuation of balance sheet items. Financial assets Initial recognition and measurement At initial recognition, nancial assets are classied, in the following categories: at amortised cost, fair value through other comprehensive income (OCI), and fair value through prot or loss. The classication of nancial assets at initial recognition depends on the nancial asset’s contractual cash ow characteristics and the Group’s business model for managing them. Except for those trade receivables that do not contain a signicant nancing component and are measured at the transaction price in accordance with IFRS 15, all nancial assets Accounting policies 01 13 Klaveness Combination Carriers ASA – Annual Report 2021 are initially measured at fair value adjusted for transaction costs. Trade receivables that do not contain a signicant nancing component or for which the Group has applied the practical expedient, are measured at the transaction price determined under IFRS 15. In order for a nancial asset to be classied and measured at amortised cost or fair value through OCI, it needs to give rise to cash ows that are solely payments of principal and interest on the principal amount outstanding. Subsequent measurement For purposes of subsequent measurement, nancial assets are classied in two categories: - Financial assets at amortised cost (debt instruments) - Financial assets at fair value through prot or loss Financial assets at amortised cost This category is the most relevant to the Group. The Group measures nancial assets at amortised cost if both of the following conditions are met: - The nancial asset is held within a business model with the objective to hold nancial assets in order to collect contractual cash ows - The contractual terms of the nancial asset give rise on specied dates to cash ows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the eective interest method and are subject to impairment. Gains and losses are recognised in prot or loss when the asset is derecognised, modied or impaired. The Group’s nancial assets at amortised cost include trade receivables and loan to related parties. Financialassetsatfairvaluethroughprotorloss Financial assets at fair value through prot or loss include nancial assets held for trading, nancial assets designated upon initial recognition at fair value through prot or loss, or nancial assets mandatorily required to be measured at fair value. Financial assets are classied as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classied as held for trading unless they are designated as eective hedging instruments. Financial assets with cash ows that are not solely payments of principal and interest are classied and measured at fair value through prot or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classied at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through prot or loss on initial recognition if doing so eliminates, or signicantly reduces, an accounting mismatch. Financial assets at fair value through prot or loss are carried in the statement of nancial position at fair value with net changes in fair value recognised in the statement of prot or loss. This category includes derivative instruments which the Group had not irrevocably elected to classify at fair value through OCI. Financial liabilities Initial recognition and measurement Financial liabilities are classied, at initial recognition, as nancial liabilities at fair value through prot or loss, amortised cost, or as derivatives designated as hedging instruments in an eective hedge, as appropriate. All nancial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s nancial liabilities include trade and other payables, loans and borrowings including bank overdras, and derivative nancial instruments. Subsequent measurement The measurement of nancial liabilities depends on their classication, as described below: Financialliabilitiesatfairvaluethroughprotorloss Financial liabilities at fair value through prot or loss include nancial liabilities held for trading and nancial liabilities designated upon initial recognition as at fair value through prot or loss. Financial liabilities are classied as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative nancial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as dened by IFRS 9. Separated embedded derivatives are also classied as held for trading unless they are designated as eective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of prot or loss. Financial liabilities designated upon initial recognition at fair value through prot or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satised. The Group has not designated any nancial liability as at fair value through prot or loss. Financial liabilities at amortised cost This is the category most relevant to the Group. Aer initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost. Gains and losses are recognised in prot or loss when the liabilities are derecognised as well as through the EIR amortization process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the eective interest rate (EIR). The EIR amortization is included as nance costs in the statement of prot or loss. This category generally applies to interest-bearing loans and borrowings. For more information, refer to Note 13. Derecognition A nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing nancial liability is replaced by another from the same lender on substantially dierent terms, or the terms of an existing liability are substantially modied, such an exchange or modication is treated as the derecognition of the original liability and the recognition of a new liability. The dierence in the respective carrying amounts is recognised in the statement of prot or loss. Share issuance Share issuance costs related to a share issuance transaction are recognised directly in equity. If share issuance costs, for tax purposes, can be deducted from other taxable income in the same period as they are incurred, the costs are recognised net aer tax. Treasury shares Where KCC has acquired own shares under a share buy-back program, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity and classied as treasury shares. No gain or loss are recognised in prot and loss related to the purchase, sale, issue, reissue or cancellation of KCC’s own equity instruments. Dividends Dividend payments are recognised as a liability in the Group’s nancial statements from the date when the dividend is approved by the General Meeting. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, when it is more likely than not that an outow or resources representing economic benets will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Events aer balance sheet date New information on the Group’s nancial position at the balance sheet date is taken into account in the annual nancial statements. Subsequent events that do not aect the Group’s position at the balance sheet date, but which will aect the Group’s position in the future, are disclosed if signicant. Classication of items in the balance sheet Current assets and short-term liabilities include items due less than one year from the balance sheet date, as well as items due more than one year from the balance sheet date, that are related to the operating cycle. Liabilities with maturity less than one year from the balance sheet date are classied as current. All other debt is classied as long-term debt. The rst year’s repayment of long-term debt is classied as current. Cash ow statements The cash ow statements are based on the indirect method. Standards, amendments and interpretations The nancial statements have been prepared based on standards, amendments and interpretations eective for 2021. There was no material impact of new accounting standards or amendments adopted in the period. The Group has not early adopted the mandatory amendments and interpretations to existing standards that have been published and are relevant to the Group’s annual accounting periods beginning on 1 January 2022 or later periods. 14 Klaveness Combination Carriers ASA – Annual Report 2021 The Group is an owner and operator of combination carriers and operates mainly within the dry bulk shipping industry and the product tanker industry. The Group owns eight CABUs and eight CLEANBUs. The CABUs are from 72,456 dwt to 80,344 dwt and have the capacity to transport caustic soda solution (CSS), oating fertilizer (UAN) and molasses as well as all types of dry bulk commodities. The CLEANBUs have approximately 82,500 dwt carrying capacity. The CLEANBUs are both full-edged LR1 product tankers and Kamsarmax bulk carriers transporting clean petroleum products (CPP), heavy liquid cargoes such as CSS, UAN and molasses as well as all types of dry bulk products. Alternative performance measures (APMs) Average TCE earnings per onhire day is an alternative performance measure. Description and denition can be found on the company’s homepage: https://www.combinationcarriers.com/alternative-performance-measures. Accounting policy The operating segments are reported in a manner consistent with the internal nancial reporting provided to the chief operating decision- maker, who is responsible for allocating resources, making strategic decisions and assessing performance. The chief operating decision- maker has been identied as the Board of the Company. The reporting of the combination carriers results separates the CABUs and CLEANBUs as two segments, to better follow up on the performance of the dierent vessel concepts. CABU vessels are combinations carriers that transport caustic coda solution, oating fertiliser, molasses and all types of dry cargo. The CLEANBUs are combination carriers that transport clean petroleum products, heavy liquid cargoes and all types of dry bulk products like alumina, bauxite. Iron ore, salt and coal. The Group identies and reports its segments based on information provided to the Management and the Board of Directors. Resources are allocated and decisions are made based on this information. Segment reporting 02 Disaggregated revenue information The Group has income from COA contracts, spot voyages and TC contracts. Set out below is the disaggregation of the Group’s revenue from contracts with customers. Other income of USD 1.4 million in 2021 relates to equity distribution from the Norwegian Shipowners’ Mutual War Risks Insurance Association (Den Norske Krigsforsikring for Skib, DNK). The Group had four customers in 2021 that each represented more than ve percent of operating revenue in the Group (USD 44.4 million, USD 18.4 million, USD 11.6 million and USD 11.6 million respectively). Geographical information Revenue for the shipping activities is distributed based on the port of discharge for all vessels operated by the Group, including leased vessels on time charter agreements. The table below presents revenue based on the port of discharge. Revenue from contracts with customers 03 Operating income and operating expenses per segment (USD ‘000) 2021 2020 CABU CLEANBU Total CABU CLEANBU Total Operating revenue, vessels 116 218 81 255 197 473 122 208 40 523 162 730 Other revenue - 482 482 - - - Voyage expenses (50 099) (31 989) (82 087) (60 281) (11 311) (71 592) Net revenue from operations of vessels 66 119 49 749 115 868 61 926 29 212 91 139 Gain on sale of vessels (note 9) 6 360 - 6 360 - - - Other income (note 3) 1 422 - 1 422 - - - Operating expenses, vessels (24 684) (24 537) (49 221) (23 829) (13 364) (37 193) Group commercial and administrative services (1 860) (1 849) (3 709) (2 251) (1 287) (3 538) Salaries and social expense (1 191) (1 184) (2 374) (844) (483) (1 327) Tonnage tax (126) (88) (214) (134) (46) (180) Other operating and administrative expenses (536) (533) (1 069) (503) (272) (776) Operatingprotbeforedepreciation(EBITDA) 45 505 21 559 67 064 34 364 13 760 48 125 Depreciation (13 362) (15 303) (28 665) (11 643) (7 513) (19 155) Operatingprotaerdepreciation(EBIT) 32 142 6 256 38 398 22 722 6 248 28 971 (USD ‘000) 2021 2020 CABU CLEANBU Total CABU CLEANBU Total Net revenue from operations of vessels 66 119 49 749 115 868 61 926 29 212 91 139 Adjustment * 177 213 390 (234) (512) (746) Other revenue - (482) (482) - (134) (134) Net revenue ex adjustment 66 297 49 479 115 776 61 692 28 566 90 259 Onhiredays 3 073 2 450 5 523 3 102 1 198 4 300 AverageTCEearningsperonhireday(USD/d) 21 571 20 195 20 961 19 886 23 851 20 990 Revenue types (USD ’000) Classication 2021 2020 Revenue from COA contracts Freight revenue 83 626 100 659 Revenue from spot voyages Freight revenue 71 938 41 631 Revenue from TC contracts Charter hire revenue 41 909 20 308 Other revenue Other revenue 482 134 Total revenue, vessels 197 955 162 731 Region (USD ’000) 2021 2020 North East Asia North East Asia 69 992 31 584 Middle East 51 669 35 284 Australia / Oceania 41 160 52 258 South America 23 025 23 756 Europe 10 472 1 688 South East Asia 7 341 9 574 North America 6 036 2 194 South asia 5 344 2 301 Africa 2 466 1 233 Total revenue, regions 217 504 159 873 Gain/(loss) on FFAs (19 642) 1 977 Adjustments (390) 746 Other revenue 482 134 Total revenue, vessels 197 955 162 731 Other income (USD ’000) Classication 2021 2020 Gain on sale of vessels (note 9) Gain on sale of vessels 6 360 - Other income Other income 1 422 - Total other income 7 782 - Reconciliation of average TCE earnings per onhire day Adjustment: Net revenue in Income Statement is recognized from load-to-discharge, while revenue basis for average TCE earnings is based on discharge- to-discharge. The dierence/adjustment relates to days in ballast from discharge to loading on next voyage. 15 Klaveness Combination Carriers ASA – Annual Report 2021 Technical expenses are costs related to spare parts, consumables, cargo handling, power supply, navigation and communication. Crew costs include sea personnel expenses such as wages, social costs, travel expenses and training. Costs related to technical management, maintenance and crewing services are recognised as operating expenses, see note 19 for transactions with related parties. The pandemic has impacted operating costs in 2020 and 2021 with higher crew costs, forwarding costs for spare parts and suppliers and bunkers costs during o-hire due to deviations or time in quarantine for crew change. Higher than normal costs due to COVID - 19 are estimated to be approximately USD 3.7 million in 2021 (2020: USD 2.8 million). Operating Expenses 05 Other operating and administrative expenses 06 (USD ‘000) 2021 2020 Salaries and other remuneration 2 006 1 123 Social security tax 185 124 Pension benet 83 66 Other social costs 85 5 Other personel ralated expenses 16 8 Salaries and social expense 2 374 1 327 (USD ‘000) 2021 2020 Technical expenses 14 040 11 753 Crewing expenses 24 760 17 483 Insurance 3 004 2 600 Crewing agency fee to Klaveness Ship Management AS 1 469 1 101 Ship management fee to Klaveness Ship Management AS 3 979 3 100 IT fee to Klaveness Ship Managment AS 81 63 Other operating expenses 1 886 1 093 Total operating expenses 49 219 37 193 Remuneration to the auditor (USD ‘000) 2021 2020 Statutory audit 179 109 Other assurance services 29 30 Total 208 139 Auditor’s fee are stated excluding VAT. Salary 07 (USD ‘000) 2021 2020 Freight expenses 20 210 16 184 TC-hire 1 952 2 001 Voyage expenses 59 009 52 048 Fuel hedge settlement (224) 608 Various expenses 1 140 750 Total voyage costs, vessels 82 087 71 592 Voyage expenses 04 Accounting policy The Group is in the business of transporting cargo at sea. Contractsofareightment The combination carriers are employed on both long and short term contracts of areightments (COAs) as well as in the spot market. The Company’s intention is to own tonnage which will to a larger extent be operated under COAs in the wet product market and to a larger degree in the spot market in the dry bulk market, in order to give the COA customers a high degree of exibility. In addition, the mix of COAs and spot business creates exibility in optimizing the trading of the eet. The COA contracts have duration between 1-6 years. Revenue from the Group’s COA commitments are classied as freight revenue in the Income Statement. Revenue from contracts with customers is recognised when control of the goods is transferred to the customer at an amount that reects the consideration to which the Group expects to be entitled in exchange for those goods. The Group has concluded that the performance obligation under a voyage charter is satised over time, and begins from the point at which cargo is loaded until the point at which a cargo is discharged at the destination port. Other revenue from services, such as demurrage, is recognised when earned and is included in freight revenue. Performance obligations IFRS 15 requires the Group to identify the performance obligations, determine the transaction price, allocate the transaction price to performance obligations for each contract with a customer to the extent that the contract covers more than one performance obligation, determine whether revenue should be recognised over time or at a point in time and recognise revenue when or as performance obligations are recognised. The Groups’ voyage charters and time charter (TC) contracts qualify for recognition over time. The nature of the Group’s revenue from TC contracts with its customers is categorised in two groups, the leasing element of the vessel and the service element related to the leased vessel. Expenses between discharge and load are deferred and amortised over the voyage to the extent it qualies as cost to full under IFRS 15. Time charter (TC) agreements The time charter revenue is generated from xed rate time charter contracts. Revenue from time charters are accounted for as lease in accordance with IFRS 16 and is classied as charter hire revenue in the Income Statement. The Group’s time charter contracts have normally a duration of 1-3 months and a signicant portion of the risks and rewards of ownership are retained by the lessor (KCC), hence the lease is classied as operating lease. In 2020, the Group entered into one TC agreement with 9 months duration with end date early February 2021. Payments received under operating leases are recognised as revenue on a straight line basis over the lease term. Contract assets are accrued income related to ongoing voyages (revenue recognised from load-to-discharge). Total income related to ongoing voyages as per 31 December 2021 to be recognized in 2022 is USD 10.8 million. Contract liabilities are prepaid revenue from customers. For dry bulk cargo lied, payment is generally due within 10 days aer the cargo is loaded, while payment for wet cargo is due immediately upon discharge. Voyage expenses include bunkers cost, port costs and other voyage related expenses. TC-hire is payment for vessels hired in on short-term TCs (1-3 months). Contract balances (USD ‘000) 31 Dec 2021 31 Dec 2020 Trade receivables from charterers (Note 14) 7 421 7 470 Contract assets (Note 14) 3 437 3 204 Contract liabilities 3 477 2 369 Revenue from contracts with customers 03 16 Klaveness Combination Carriers ASA – Annual Report 2021 Salary 07 Remuneration to the Board of Directors (USD ‘000) 2021 2020 Lasse Kristoersen (Chair of the Board) 57 53 Magne Øvreås (Board member and member of Audit Committee) 38 32 Morten Skedsmo (Board member) 34 32 Rebekka G. Herlofsen (Board member and Chair of Audit Committee) 39 21 Winifred Patricia Johansen (Board member from 26 April 2021) 23 - Stephanie S. Wu (Board member until 27 April 2020) - 11 Lori W. Næss (Board member until 26 April 2021) 11 32 Total 203 180 Remuneration paid to Klaveness AS, a wholly owned subsidiary of the main shareholder Rederiaksjeselskapet Torvald Klaveness. The persons are employed by Klaveness AS. Compensation for Board work is thus included in the regular salary since such positions are a part of their regular employment. The Group has nine employees as per year end 2021. As from 1 June 2021, the commercial and operational team of four employees were transferred to the newly established subsidiary Klaveness Combination Carriers Asia Pte Ltd (Singapore). The Company has provided a loan to CEO Engebret Dahm of USD 50k. Interest on the loan is set to the Norwegian tax administration normal interest rate for the taxation of low-cost loans. The Board has drawn up guidelines for determining remuneration to executive personnel. The remuneration is based on a base salary, bonus and option scheme. The Company’s CEO has an agreement of 12-month severance payment including a 6-month period of notice in case of involuntary resignation or by redundancy. Bonus scheme The current bonus scheme is valid for the accounting years 2020 and 2021 and new bonus scheme has been rolled-out for 2022 - 2023. Bonus is distributed on an annual basis and is divided into two: i) Formula bonus based on return on equity for the relevant year, and ii) Discretionary element. The cap payment is set at 12 months xed salary for the CEO and nine months for the CFO. Total bonus, included any discretionary element and holiday allowance, can in no circumstances exceed the individual cap. If not employed for a full year, the cap will be pro-rated according to number of months employed. The cap is reached at 20 % return on equity. The CFO is part of the overall discretionary bonus pool that is distributed among all employees included in the bonus scheme. The discretionary bonus pool is usually capped at 50% of total formula bonus for the employees included in the bonus pool, however, the BOD decided to distribute a discretionary bonus for the pool members of in total 74% of the formula bonus for 2021, to be paid in 2022. Provisions have been made for the main part in the 2021 accounts. The discretionary bonus is based on goal achievements and individual performance. Any discretionary bonus to the CEO to be set by the Board, however, total bonus to CEO should never be above the cap. Share Op tion Program The CFO and the CEO were granted 65,280 options in December 2019, each of one share, in total equal to 0.1 % of the share capital. The options are vested over a period of three years from the grant date, 1/3 per year and rst vesting to take place one year aer the grant date. Vested options may be exercised at any time as long as the option holder acts within all applicable securities legislation and internal guidelines and is still employed by the Company. KCC is entitled to, rather than issuing shares, to settle in cash. Unvested options immediately lapse and expire when an employee becomes a former employee, while the vested options will lapse on the date four months aer the employee becomes a former employee as long as this complies with applicable securities legislation. The exercise price is set in NOK based on the average close trading price of the KCC share the last ten days before the grant date. The option scheme includes provisions related to public oers and mergers, adjustments related to changes in share capital among others. The share option program has been accounted for based on equity- settlement. See note 17 for more information. Pension scheme for all employees The Group has defined contributions plan for all employees in Norway. The contribution plan includes full-time and part- time employees with more than 20 % of a full time position and comprise 5 % of salary up until 7.1G and 20 % of salary between 7.1G and 12G. As of 31.12.2021 there were six members of the dened contribution plan. The expense recognised in the current nancial period in relation to the contribution plan was USD 83k (2020: USD 69k). KCC does not make any pension contributions to employees in Singapore in line with national legal requirements. Board remuneration is proposed by the Nomination Committee and approved by the Annual General meeting. The Directors receive a xed payment for the year based on the Board position, i.e. the Chair receives higher pay than the Board Members, which have an equal pay. The Directors do not receive prot-related remuneration, share options or retirement benets. Board Members participating in committees such as the Audit Committee have received extra payment for these tasks for 2021. In connection with the sales process of MV Banasol in 2021, Board member Morten Skedsmo has contributed in the work to nd a buyer. Compensation for the work, USD 31k, has been paid to Klaveness AS, see note 19. In appointing members to the Board, it is emphasised that the Board shall have the requisite competency to independently evaluate the cases presented by the executive management team as well as the Company’s operation. It is also considered important that the Board can function well as a body of colleagues and that they meet the Company’s need for expertise and diversity. An introduction to the members of the Board of Directors and their expertise can be found on www.combinationcarriers.com. Accounting policy Pension obligations The Group is required to provide a pension plan towards its employees in Norway, and the Group has implemented a dened contribution plan. The plan complies with the requirements in the Man dator y O ccupat i onal Pe nsion a ct i n No r w ay (“Lov o m obl i gator isk tjenestepensjon”). A dened contribution plan is a pension plan under which the Group pays xed contributions into a separate legal entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold suicient assets to pay all employees the benets relating to employee service in the current and prior periods. Employee share options scheme Employee share options are calculated at fair value at the time they are granted and charged to expense over the vesting period as payroll cost with a corresponding increase in equity. The market value of the employee share options are estimated based on the Black-Scholes-Merton model. Remuneration to the management Diversity of employees 2021 2020 Number Percentage Number Percentage Women 3 33 % 2 33 % Men 6 67 % 4 67 % Total employees in KCC 9 100 % 6 100 % Avarage number of employees in KCC 8 - 5 - KCC ASA in Norway 6 67 % 6 100 % KCC Asia in Singapore 3 33 % - - Nationalities 3 - 1 - Sick leave - 0.29 % - 0.08 % Diversity of Board of Directors 2021 2020 Number Percentage Number Percentage Women 2 40 % 2 40 % Men 3 60 % 3 60 % (USD ’000) Base Salary Bonus Pensionbenet Total Engebret Dahm (CEO) 373 79 16 468 Liv Hege Dyrnes (CFO) 259 38 16 312 Total 632 118 31 781 17 Klaveness Combination Carriers ASA – Annual Report 2021 Additions Three CLEANBU vessels MV Baiacu, MV Bass and MV Balzani were delivered from Jiangsu New Yangzi Shipbuilding Co.Ltd respectively 11 January 2021, 25 March 2021 and 25 May 2021. Four CABU vessels have performed scheduled dry-docking in 2021 with a total cost of USD 8.3 million. Technical upgrade of USD 4.0 million is related to general improvement of the technical performance of the vessels and energy eiciency initiatives (USD 3.4 million) and yard repairs of one CLEANBU (MV Barramundi; USD 0.6 million). Pledged vessels All owned vessels except MV Bangor and MV Barcarena are pledged to secure the various loan facilities (refer to note 13 for further information). Disposals MV Banasol was sold and delivered to new owner in December 2021, a gain of USD 6.4 million was recognised in 2021. Gain is calculated as sales price less book value of the vessel at time of sale less any direct costs of sale. Impairment assessment Identication of impairment indicators is based on an asessment of development in market rates (dry bulk, MR tanker, LR1 tanker and fuel), TCE earnings for the eet, vessel opex, operating prot, technological development, change in regulations, interest rates and discount rate. Expected future TCE earnings for both eets of CABUs and CLEANBUs, diversied market exposure, development in secondhand prices and the combination carriers’ trading exibility support the conclusion of no impairment indicators identifed as per 31 December 2021. Reconciliation of depreciations (USD '000) 2021 2020 Depreciation vessels 28 083 18 702 Depreciation right of use assets 582 453 Depreciations for the period 28 666 19 155 Financial items 08 Vessels 09 Finance income (USD ‘000) 2021 2020 Other interest income 74 398 Gain on foreign exchange - 131 Finance income 74 529 Finance cost (USD ‘000) 2021 2020 Interest expenses mortgage debt 9 477 7 729 Interest expenses bond loan 4 371 4 062 Interest expenses lease liabilities 103 94 Amortization capitalized fees on loans 882 693 Other nancial expenses 224 906 Fair value changes in forward freight agreements - 21 Fair value changes and realization eects of interest rate swaps 82 687 Loss on foreign exchange 726 126 Finance cost 15 866 14 317 Vessels (USD '000) 31 Dec 2021 31 Dec 2020 Cost price 1.1 599 826 492 075 Delivery of newbuildings 153 763 103 708 Adjustment acquisition value newbuildings delivered 1 408 (809) Dry-docking 8 342 4 852 Technical upgrade 4 032 - Disposal of vessel (32 416) - Cost price end of period 734 955 599 826 Acc. depreciation 1.1 195 568 176 866 Disposal of vessel (25 560) - Depreciation vessels 28 083 18 702 Acc. Depreciation end of period 198 092 195 568 Carrying amounts end of period 536 864 404 258 ) carrying value of vessels includes dry-docking No. of vessels 16 14 Useful life vessel 25 25 Useful life dry-docking 3-5 3-5 Depreciation schedule Straight-line Straight-line Signicantaccountingestimates Useful life and residual values The carrying amount of vessels is based on management’s assumptions of useful life. Useful life for the combination carrier vessels is reassessed on an annual basis. Useful life may change due to change in technological developments, competition, environmental and legal requirements, freight rates and steel prices. Management has also considered the impact of decarbonisation and climate related risks on the existing assets’ useful lives. Such risks include new climate related legislation restricting the use of certain assets, new technology demanded by climate related legislation and customer requirements (see note 16). KCC commits to perform recycling of its vessels in compliance with the Hong Kong convention and Norwegian Shipowner’s Association’s guidelines. Obtained steel prices for residual value assessment are in line with our strategy. In the assessment of residual value as per 1 January 2022 there is a high degree of uncertainty in current market prices for green recycling. Based on the assessment, the Group concluded to retain a scrap price of USD320/ltd as from 1 January 2022. Impairment testing At the end of each reporting period the Group will assess whether there is any indication of impairment. If any indication exists, the Group will estimate the recoverable amount of the asset. Recoverable amount is set as the highest of fair value less cost to sell and value in use. If carrying value exceeds the estimated recoverable amount, impairment is recognised. Impairments are reversed in a later period if recoverable amount exceeds carrying amount. Identication of impairment indicators is based on an assessment of development in market rates (dry bulk, MR tanker, LR1 tanker and fuel), TCE earnings for the eet, vessel opex, operating prot, technological development, change in regulations, interest rates and discount rate. As per year end 2021 and 2020 no indicators for impairment were identied. Cash-generating units The Group operates combination carrier vessels that can switch between dry and wet cargo. The CABUs have the same characteristics in respect of what cargo to transport, number of cargo holds and size of the vessel. All the CLEANBUs are identical vessels with same characteristics. CLEANBU vessels have higher cargo carrying capacity than the CABUs, and can in addition transport other types of wet commodities. All the CABU vessels are interchangeable, same for all the CLEANBU vessels. Investment, continuance and disposal decisions are made by class of vessels. The CABU and CLEANBU vessels are operated by KCC Chartering AS (KCCC). Contracts (COAs) are not negotiated based on a specic vessel. It is the sum of vessel capacity at any time that determines the optimization of voyages. A portion of the voyages are also executed in the spot market, and KCCC is dependent on operating the vessels as a portfolio according to free vessel capacity and available cargos. The Group has dened the eet of CABUs and the eet of CLEANBUs as two separate cash generating units. Accounting policy Non-current assets such as vessels, the cost of dry-docking and newbuildings are carried at cost less accumulated depreciation and impairment charges. Cost is dened as directly attributable cost plus borrowing cost during the construction period. Depreciation of vessels Depreciation is calculated on a straight-line basis over the estimated useful life of a vessel taking its residual value into consideration. Useful life is estimated to be 25 years for the Group’s eet. Certain capitalized elements like costs related to periodic maintenance/ dry-docking have shorter estimated useful lives and are depreciated until the next planned dry-docking, typically over a three to ve years period. When newbuildings are delivered a portion of the cost is classied as dry-docking. Costs of day-to-day ser vicing, maintenance and repairs are expensed. Impairment of vessels and newbuildings On a quarterly basis the balances are assessed whether there is an indication that vessels and newbuilding contracts may be impaired. If indicators are concluded to be present, an impairment test is performed. If the recoverable amount is lower than the book value, an impairment charge is recorded. Impairment losses are recognised in the prot and loss statement. An impairment loss recognised in prior periods for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. 18 Klaveness Combination Carriers ASA – Annual Report 2021 The Group took delivery of three CLEANBU vessels, MV Baiacu, MV Bass and MV Balzani in January, March and May 2021 (note 9), which completed the newbuilding programme at Jiangsu New Yangzi Shipbuilding Co., Ltd in China. Newbuildings, net carrying amount (USD '000) 31 Dec 2021 31 Dec 2020 Cost 1.1 48 441 62 316 Borrowing cost 84 1 023 Yard installments paid 97 650 80 851 Other capitalized cost 7 586 7 960 Delivery of newbuildings (153 763) (103 708) Net carrying amount - 48 441 Newbuildings 10 Inventories relate to bunkers, spare parts and luboil on board vessels. Inventories 12 Inventories (USD '000) 31 Dec 2021 31 Dec 2020 Bunkers 10 810 5 075 Spare parts 166 166 Luboil 1 302 918 Inventories 12 279 6 159 The Group as a lessee Right-of-use assets The Group has leasing agreements related to satellite communication and IT equipment onboard the vessels. The Group’s right-of-use assets are presented in the table below: The leases do not contain any restrictions on the Group’s dividend policy or nancing. The Group does not have signicant residual value guarantees related to its leases to disclose. As a lessee, the Group leases mainly satellite communication and IT equipment onboard the vessels. Leasing 11 Accounting policy Newbuildings Vessels under construction are classied as non-current assets and recognised at the cost incurred in relation to the non-current asset when paid. Newbuildings are not depreciated until delivery. Borrowing costs directly attributable to the construction of vessels are added to the cost of the vessels, until such time as the vessels are ready for their intended use. Accounting policy Right of use assets The Group applies the recognising exemptions proposed by the standard on lease contracts with a term of less than 12 months, and lease contracts for which are the underlying asset is of low value. Lease payments associated with short-term leases and leases of low- value assets are recognised on a straight-line basis as an expense in prot or loss. Lease contracts which is not part of the exemptions are measured at the present value of remaining lease payments, discounted using the incremental borrowing rate. The right-of-use assets are measured at an amount equal to the lease liability at the date of implementation. The right-of-use asset is depreciated on a straight line basis over the lease term. Accounting policy Bunkers and lubricant oil on board vessels are recorded in the balance sheet at acquisition cost. Acquisition cost is based on FIFO (rst in, rst out principle). Inventories are valued at the lower of cost and net realizable value. Impairment losses are recognised if the net realizable value is lower than the cost price. Right-of-use assets (USD ‘000) 31 Dec 2021 31 Dec 2020 Cost price 1.1 2 510 2 150 Addition of right-of-use assets 538 360 Disposals (75) - Costprice end of period 2 973 2 510 Accumulated depreciation 1.1 838 385 Depreciation right of use assets 582 453 Accumulated depreciation end of period 1 420 838 Carrying amounts end of period 1 553 1 672 Lease liabilities Undiscountedleaseliabilitiesandmaturityofcashoutows (USD ‘000) 31 Dec 2021 31 Dec 2020 Less than 1 year 662 579 1-5 years 1 107 1 300 More than 5 years - - Total undiscounted lease liabilities at 31 December 1 769 1 879 19 Klaveness Combination Carriers ASA – Annual Report 2021 During 2021 the Group made a drawdown of USD 25 million under the SEB/SR- Bank/SPV facility in relation to the delivery of MV Baiacu and USD 60 million under the term loan facility of Nordea/Credit Agricole Sustainability Linked Term loan in relation to delivery of MV Bass and MV Balzani and revolving credit facilities. In addition the Group renanced the USD100 million Nordea/Danske Bank facility into a USD 80 million senior secured sustainability linked term loan credit facility agreement with Nordea and Danske Bank. The interest rate on the new facility will be LIBOR + 210bps. The margin will be adjusted, up or down, based on the Group’s sustainability performance, as dened by the Group’s ability to meet its goal of reducing CO2 emissions per ton of transported cargo per nautical mile (EEOI) and reducing absolute CO2 emissions per vessel. The new facility will renance the CABU vessels MV Bantry, MV Bakkedal, MV Bain, MV Ballard and MV Balboa built 2005-2017. The vessels MV Bangor and MV Barcarena, which were nanced under the USD100 million Nordea/Danske Bank facility, will be le unencumbered. The new facility will mature in December 2026 and has a repayment prole of 9.2 years reecting an age adjusted eighteen to zero repayment prole based on the average age of the vessels. Furthermore, the Group repaid USD 2.7 million in debt prior to the sale of MV Banasol under the USD105 million DNB/SEB facility, and the Group repaid USD 30 million under a revolving credit facility and remaining part of USD 65.4 million under the USD 100 million Nordea/Danske Bank facility. Financial assets and nancial liabilities 13 ThebelowtablespresenttheGroup’snancingarrangementsasper31December2021. Maturityproleofnancialliabilitiesat31December2021ispresentedinnote 16. Bond loan Face value (NOK ’000) Maturity date Carrying amount (USD ’000) KCC04 700 000 11.02.2025 80 649 Exchange rate adjustment (1 430) Capitalized expenses (779) Bond discount (234) Total bond loan 700 000 78 205 Interest bearing liabilities (USD '000) Fair value 31 Dec 2021 Carrying amount 31 Dec 2021 Carrying amount 31 Dec 2020 Mortgage debt 252 547 252 547 208 052 Capitalized loan fees - (2 554) (1 239) Bond loan 75 456 79 219 81 991 Bond premium - (234) (310) Capitalized expenses bond loan - (779) (1 032) Total non-current interest bearing liabilties 328 003 328 198 287 462 Mortgage debt, current 23 936 23 936 22 473 Overdra facility (Secured) 2 409 2 409 - Total interest bearing liabilities 354 347 354 543 309 934 Mortgage debt (USD '000) Description Interest rate Maturity Carrying amount Nordea/Danske facility Term loan, USD 100 mill LIBOR + 2.3 % March 2022 - DNB/SEB facility Term loan, USD 105 mill LIBOR + 2.3 % December 2023 83 344 SEB/SR-Bank/SPV facility Term loan/RCF, 90.675 mill LIBOR + 2.3 % October 2025 85 786 Nordea/Crédit Agricole facility Term loan/RCF, 60 mill LIBOR + 2.75 % March 2025 27 353 Nordea/ Danske facility Term loan, USD 80 mill LIBOR + 2.3 % December 2026 80 000 Capitalized loan fees (2 554) Mortgage debt 31 December 2021 273 929 * Potential margin adjustments up to +/- 10 bps once every year based on sustainability KPIs. ** Potential margin adjustments up to +/- 5 bps once every year based on sustainability KPIs. The Group has available undrawn revolving credit facility capacity of USD 30 million and USD 17.6 million available capacity under a 364-days overdra faciliy. Risk management activities To reduce interest rate risk, the Group has entered into vairous interest rate swaps derivatives, such as interest rate swaps, caps and cross- currency interest rate swap (CCIRS). Interest rate swaps and CCIRS qualify for hedge accounting. These instruments have combined notional value of USD 213 million and duration until 2023-2028. Interest rate swaps qualifying for hedge accounting are recognised at fair value with changes through other comprehensive income. The Group also holds interest rate options recognised at fair value through prot and loss. The Group has entered into bunker fuel swaps and forward freight agreements (FFA) that qualify for hedge accounting. The Group uses bunker fuel swaps to hedge a portion of its oating bunkers cost to a xed cost for bunkers to reduce the Group’s exposure to changes in bunker prices. Similarly, the Group can use FFAs to x freight rates in a future period to reduce its exposure to the dry bulk freight market (via open capacity and index linked COA commitments). Book value of collateral and mortgaged assets (USD ’000) 2021 2020 Vessels 520 063 404 258 Bunkers 10 810 5 075 Accounts receivables 18 484 18 501 Total book value of collateral and mortgaged assets 549 357 427 833 Covenants As per 31 December 2021, the Group is in compliance with all nancial covenants. On Group level nancial covenants relate to minimum equity (USD 125 million), equity ratio (30%), and cash (USD 15 million). Financial covenants on KCC Shipowning AS level relate to minimum cash (the higher of USD 10 million and 5 % of net interest-bearing debt) and net interest-bearing debt to EBITDA (NIBD/EBITDA) of max 7x. The NIBD/EBITDA ratio can be higher than 7x for one reporting period (measured semi-annually) provided that the NIBD/EBITDA was below 7x in the prior reporting period. The loan agreements also include a dividend restriction of 50% of net prot (based on audited annual consolidated accounts) if the equity ratio is below 35%. In addition, all secured loans contain minimum value clauses related to the value of the vessel compared to outstanding loan and a change of control clause. In case of KCC Shipowning AS a change of control event occurs if it ceases to be owned, directly or indirectly, 100% (in issued shares and voting rights) by KCC and in case of KCC, if it ceases to be owned, directly or indirectly, 33.1/3% (in issued shares and voting rights) by Trond Harald Klaveness and/or his direct lineal descendants or if any other person or group of persons acting in concert, other than Trond Harald Klaveness and/or his direct lineal descendants, directly or indirectly, gain control of 33.1/3% or more of the shares and/or voting rights in KCC. Securities As security for the mortgage debt, the Group has included a rst priority security in all vessels except two vessels and earnings accounts, and assignment of the earnings and insurances of the vessels in favour of the creditors. Financial assets (USD '000) 31 Dec 2021 31 Dec 2020 Financial instruments at fair value through OCI Cross-currency interest rate swap 2 556 2 917 Interest rate swaps 1 421 356 Fuel hedge 18 87 Forward freight agreements (FFA) 660 - Financial instruments at fair value through P&L Interest rate swaps 71 154 Financial assets 4 727 3 515 Current 678 87 Non-current 4 048 3 427 Financial liabilities (USD '000) 31 Dec 2021 31 Dec 2020 Financial instruments at fair value through OCI Cross-currency interest rate swap 43 - Interest rate swaps 1 973 5 409 Fuel hedge - - Forward freight agreements (FFA) - 757 Financial liabilities 2 017 6 166 Current - 757 Non-current 2 017 5 409 20 Klaveness Combination Carriers ASA – Annual Report 2021 Financial assets and nancial liabilities 13 The fair value of the nancial assets and liabilities is recognised as the value at which they could be exchanged in a transaction between willing parties other than in forced or liquidation transactions. The following methods and assumptions were used to estimate the fair value of each class of nancial instrument: - Cash and restricted cash, trade receivables, trade payables and other current liabilities are recognised at their carrying amounts largely due to the short term maturities of these instruments. - Fair value of loans from banks and other nancial liabilities is estimated by discounting future cash ows using rates currently available for debt on similar terms, credit risk and remaining maturities. - Fair value of derivatives is based on mark to market reports received from banks. (USD ‘000) Carrying amount 31 Dec 2021 Carrying amount 31 Dec 2020 Fair value 31 Dec 2021 Fair value 31 Dec 2020 Financial assets at fair value through OCI Interest rate swaps 1 421 356 1 421 356 Forward freight agreements 660 - 660 - Fuel hedge 18 87 18 87 Cross-currency interest rate swap 2 556 2 917 2 556 2 917 Financialassetsatfairvaluethroughprotorloss Forward freight agreements - - - - Interest rate swaps 71 154 71 154 Totalnancialassetsatfairvalue 4 727 3 515 4 727 3 515 Financial assets measured at amortised costs Accounts receivable 7 667 7 577 7 667 7 577 Receivables from related parties 2 018 742 2 018 742 Totalnancialassetsmeasuredatamortisedcosts 9 685 8 319 9 685 8 319 Cash and cash equivalents 53 937 65 685 53 937 65 685 Totalnancialassets 68 349 77 518 68 349 77 518 Total current 64 301 74 091 64 301 74 091 Total non-current 4 048 3 427 4 048 3 427 (USD ‘000) Carrying amount 31 Dec 2021 Carrying amount 31 Dec 2020 Fair value 31 Dec 2021 Fair value 31 Dec 2020 Financial liabilities at fair value through OCI Interest rate swaps 1 973 5 409 1 973 5 409 Cross-currency interest rate swap 43 - - - Forward freight agreements - 757 - 757 Totalnancialliabilitiesatfairvalue 2 017 6 166 1 973 6 166 Othernancialliabilitiesatamortisedcost Accounts payable 4 361 937 4 361 937 Interest bearing debt, non-current 249 993 206 813 252 547 208 052 Interest bearing debt, current 23 936 22 473 23 936 22 473 Bond loan 78 205 80 649 75 456 78 097 Overdra facility 2 409 - 2 409 - Current debt to related parties 895 1 339 895 1 339 Totalnancialliabilitiesatamortisedcost 359 799 312 210 359 603 310 896 Totalnancialliabilities 361 815 318 375 361 577 317 062 Total current 31 601 24 748 31 601 24 748 Total non-current 330 215 293 627 329 976 292 314 Set out below is a comparison by class of the carrying amounts and fair value of the Group’s nancial assets included in the nancial statements. Fair value hierarchy The Group uses nancial hierarchy under IFRS 13 for determining and disclosing the fair value of nancial instruments by valuation techniques. Below table presents fair value measurements to the Group’s assets and liabilities at 31 December 2021. Accounting policy Derivativenancialinstrumentsandhedgeaccounting The Group uses derivative nancial instruments, such as forward currency contracts, fuel contracts and interest rate swaps to hedge its foreign currency risks, interest rate risks and to reduce exposure to volatile and potentially rising fuel costs. Such derivative nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as nancial assets when the fair value is positive and as nancial liabilities when the fair value is negative. For the purpose of hedge accounting, hedges are classied as: - Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised rm commitment - Cash ow hedges when hedging the exposure to variability in cash ows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised rm commitment As per 31 December 2021 all the Group hedges are classied as cash ow hedges. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identication of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge eectiveness requirements (including the analysis of sources of hedge ineectiveness and how the hedge ratio is determined). A hedging relationship qualies for hedge accounting if it meets all of the following eectiveness requirements: - There is an economic relationship between the hedged item and the hedging instrument. - The eect of credit risk does not dominate the value changes that result from that economic relationship. - The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. The eective portion of the gain or loss on the hedging instrument is recognised directly as other comprehensive income in the cash ow hedge reserve, while any ineective portion is recognised immediately in prot and loss. Amounts recognised as other comprehensive income are transferred to prot and loss when the hedged transaction aects prot and loss, such as when the hedged nancial income or expense is recognised or when a forecast transaction occurs. Derivative nancial instruments that are designated as, and are eective hedging instruments are separated into a current and non-current portion consistent with the classication of the underlying item. 31 December 2021 Assets (USD ’000) Level 1 Level 2 Level 3 Total Financialassetsatfairvaluethroughprotorloss Interest rate swaps 71 71 Financial assets at fair value through OCI Fuel hedge 18 18 Cross-currency interest rate swap 2 556 2 556 Forward freight agreements 660 660 Interest rate swaps 1 421 1 421 31 December 2021 Liabilities (USD ’000) Level 1 Level 2 Level 3 Total Financialliabilitiesatfairvaluethroughprotorloss Interest rate swaps - - Financial liabilities not measured at fair value, but for which fair value is disclosed Mortgage debt, non-current 252 547 252 547 Mortgage debt, current 23 936 23 936 Overdra facility 2 409 2 409 Bond loan 75 456 75 456 Financial liabilities at fair value through OCI Forward freight agreements - - Interest rate swaps 1 973 1 973 21 Klaveness Combination Carriers ASA – Annual Report 2021 Financial assets and nancial liabilities 13 31 Dec 2020 Assets (USD ’000) Level 1 Level 2 Level 3 Total Financialassetsatfairvaluethroughprotorloss Interest rate swaps 356 356 Financial assets at fair value through OCI Fuel hedge 87 87 Cross-currency interest rate swap 2 917 2 917 Interest rate swaps 154 154 31 Dec 2020 Liabilities (USD ’000) Level 1 Level 2 Level 3 Total Financial liabilities not measured at fair value, but for which fair value is disclosed Mortgage debt, non-current 208 052 208 052 Mortgage debt, current 22 473 22 473 Overdra facility Bond loan 78 097 78 097 Financial liabilities at fair value through OCI Forward freight agreements 757 757 Interest rate swaps 5 409 5 409 Accounting policy Fair value measurement Derivatives are measured at fair value. The fair value of nancial instruments traded in active markets is determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs. The fair value of nancial instruments not traded in active markets is determined using appropriate evaluation techniques. A fair value measurement of a non-nancial asset takes into account a market participant’s ability to generate economic benets by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which suicient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the nancial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is signicant to the fair value measurement as a whole: Level 1 – Quoted (unadjusted) market prices in active markets for identical assets and liabilities Level 2 – Valuation techniques for which the lowest level input that is signicant to the fair value measurement is directly or indirectly observable Level 3 – Valuation techniques for which the lowest level input that is signicant to the fair value measurement is unobservable. The fair value of nancial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specic estimates. If all signicant inputs required to fair value an instrument are observable, the instruments are included in level 2. If one or more of the signicant inputs are not based on observable market data, the instrument is included in level 3. During the reporting periods there were no transfers between any of the levels. Reconciliation of movements of liabilities and equity to cash ow arising from nancing activities. Liabilities Equity Total (USD '000) Interest payable Current lea- se liabilites Interest bearing short-term debt Interest bearing long-term debt Share capital/ premium/ reserve Other equity Total Balance at 1 January 2021 493 22 473 287 462 135 734 80 799 499 456 Repayment of mortgage debt (22 473) (100 568) (123 041) Proceeds from mortgage debt 169 000 169 000 Transaction costs on issuance of loans (1 944) (1 944) Interest paid (13 970) (13 970) Paid in registered capital increase 24 977 Transaction costs on capital increase (878) Repayment of lease (582) (582) Interest paid lease (103) (103) Dividends (7 204) (7 204) Totalchangesfromnancingcashow (13 970) (685) (22 473) 66 488 24 099 (7 204) 46 254 Liability-related Expensed capitalised borrowing costs 882 882 Non-cash movement 811 26 345 (26 633) 522 Total liability-related changes 811 26 345 (25 751) 1 404 Total equity-related other changes (13) 21 002 20 989 Balance at 31 December 2021 - 618 26 345 328 198 159 819 94 597 568 104 Liabilities Equity Total (USD '000) Interest payable Current lea- se liabilites Interest bearing short-term debt Interest bearing long-term debt Share capital/ premium/ reserve Other equity Total Balance at 1 January 2020 407 17 367 203 140 136 197 76 744 417 721 Repayment of mortgage debt (11 370) (17 367) (28 737) Proceeds from mortgage debt 60 450 60 450 Repayment bond loans (33 861) (33 861) Proceeds from bond loan 76 390 76 390 Transaction costs on issuance of loans (1 914) (1 914) Purchase of own shares (147) (147) Repayment of lease (454) (454) Terminated nancial instruments (3 101) (3 101) Dividends (4 802) (4 802) Totalchangesfromnancingcashow (11 370) (454) (17 367) 101 064 (147) (7 903) 63 823 Liability-related Expensed capitalised borrowing costs 693 693 Non-cash movement 540 22 473 (17 435) 5 578 Total liability-related changes 540 22 473 (16 742) 6 271 Total equity-related other changes (316) 11 958 11 642 Balance at 31 December 2020 493 22 473 287 462 135 734 80 799 499 456 22 Klaveness Combination Carriers ASA – Annual Report 2021 Accounts receivable comprise all items that fall due for payment within one year aer the balance sheet date. For dry bulk cargo lied, payment is generally due within 10 days aer the cargo is loaded, while payment for wet cargo is due immediately upon discharge. Trade receivables are non-interest bearing. Claims consist of yard claims for vessels delivered in 2019 and are expected to be settled when all three vessels have completed guarantee repairs. Cash includes cash in hand, bank deposits and other highly liquid investments with original maturities of three months or less. Trade receivables and other current assets 14 The Group has bank deposits in the following currencies: Cash and cash equivalents 15 Capital management The Group intends to maintain an eicient capital structure, provide nancial ability to execute on the strategy and ensure the Group has suicient liquidity to meet liabilities and commitments as they fall due. KCC aims at having an equity ratio above 40% and NIBD/EBITDA adjusted for delivery/sale of vessels below 5x but will be above during certain periods and the ability to withstand 12 months with weak markets/ earnings. The equity ratio as of 31 December 2021 was 40 % (2020: 39 %) and cash was USD 53.9 million (2020: USD 65.7 million). In addition, the Group had USD 47.6 million in undrawn revolving and overdra credit facilities available as of 31 December 2021. The Group's covenants are described in note 13. The capital structure and dividend payments are considered in view of debt service ability, capital commitments and expectations of future cash ows. Available cash, loan covenants and the balance sheet composition are monitored to make sure that the Group has the necessary nancial strength to continue as a going concern. The Group aims to spend free cash ows as follows: - Maintain and/or improve nancial capacity and exibility. To accommodate the business strategy, the Group needs to maintain a solid capital structure at all times and an acceptable level of free liquidity, at levels which will give suicient assurance to the debt and equity providers that the Group’s nancial position is solid and sustainable. - Maintain an attractive dividend policy. KCC targets to distribute a substantial part of the free cash ow to the shareholders. The Group's capital structure consists of mortgage debt (note 13), bond loan (note 13), overdra facility (note 13), cash and cash equivalents and equity attributable to the shareholders. Risk Management The objective for the Company’s risk management and internal control is to manage, rather than eliminate exposure to risks to successfully conduct the Group’s business and to support the quality of its nancial reporting. The risk assessment is a multi-disciplinary process performed on a quarterly basis. The value chain is assessed both upstream and downstream in addition to direct eects on KCC’s business activities. All relevant risks are assessed based on dened impact and probability levels and focus on the next 12 months shown in the table below: Financial risk management 16 (USD '000) 31 Dec 2021 31 Dec 2020 Trade receivables from charterers 7 421 7 470 Contract assets 3 437 3 204 Prepaid expenses 2 467 4 538 Claims 378 167 Other short term receivables 4 780 3 122 Trade receivables and other current assets 18 484 18 501 (USD '000) 31 Dec 2021 31 Dec 2020 Bank deposits, NOK 9 340 653 Bank deposits, USD 44 092 64 670 Bank deposits, SGD 42 - Cash 389 291 Payroll withholding tax account (restricted cash, NOK) 74 70 Total cash and cash equivalents 53 937 65 685 In addition to the specic assessment for the rolling 12 months period, an assessment for the main risks from 12 months – 10 years is included from time to time and at least on an annual basis. The risk management process includes the following: * On a quarterly basis a cross-functional team (nance, commercial, operations, management) discusses the overall risk development with focus on main risks and new risks discovered, including assessing impact and probability for each risk and dene potential mitigating actions for the main risks * The main risks are reported and discussed with the Audit Committee and the Board of Directors on a quarterly basis, or more oen if needed. A main risk is a risk already identied and well understood that could materially impact the nancial results, reputation, business model, or strategy * When the combination of probability and impact is higher than what is accepted, mitigating actions are implemented either based on management decision or if relevant, aer discussions with the Board of Directors Main risks The following table presents the risks considered to be the main risks for KCC over the next 12 months and the main longer-term risks. Time horizon Probability Impact Low < 3% < USD 2 million Medium 3 -30 % USD 2 - 10 million High > 30 % > USD 10 million Risk Description Risk type Main risks next 12 months CLEANBU introduction Introduction of new vessel concepts such as the CLEANBUs entails commercial and technical risks. Acceptance and/or exemptions in relation to the CLEANBU vessels from clients and terminals where policies require clean petroleum products (CPP) as the last two or three cargoes to avoid cargo contamination or where policies excludes use of combination carriers like the CLEANBU vessels. Introduction of new ship types or concepts will normally require technical adjustments and modications, which will take time and may lead to o-hire and delayed deliveries. There are outstanding guarantee items relating to two of the CLEANBU vessels, implying additional o-hire related to the repairs in 2022 and 2023. While the shipyard is obliged to bear the cost of repairs, additional related costs may incur, and o-hire will be borne by KCC unless covered by KCC’s loss of hire insurance. Operational Weak freight rates and changesintradeows Freight rates are the main earnings driver for the Group. A fall in freight rates for dry bulk commodities or clean petroleum products can have a material eect on the nancials of the Group. The eect of lower freight is somewhat oset by low historical correlation between dry bulk and product tankers freight rates. KCC is dependent on certain trade ows in order to obtain eicient combination trading. Production issues at plants and reneries in export regions as well as dierence in regional commodity prices (arbitrage opportunities) may impact these trade ows. Market Caustic soda freight contract renewals The Group is, to a certain degree, dependent on a limited number of key customers and renewal of key/ material contracts with these customers, particularly related to caustic soda transportation. Unfavorable changes in trade ows and volumes may adversely aect the Group’s earnings and nancial position. Market Russian invasion of Ukraine Russian invasion of Ukraine has caused major disruptions in trade ows and nancial markets as, amongst others, European Union, United States and the United Kingdom have imposed strict sanctions on the Russian Federation economy. Example of sanctions imposed are excluding several banks from the SWIFT payment system and imposing an embargo on import of oil and gas (US and UK). Furthermo- re, the war has negatively impacted the trade of commodities from/to Ukraine and Russia for key dry bulk commodities and for the oil and oil products trade as Ukraine ports have been closed and there is a general skepticism among oil companies, traders and shipowners to liing oil. The Group does not have outstanding balances nor contracts with Ukrainan, Belarus or Russian companies and is as such not directly impacted by the war in Ukraine. Counterparty/ credit, Market Operational, Compliance 23 Klaveness Combination Carriers ASA – Annual Report 2021 Risk types The risks have been divided into the following categories Financial risk The Group is exposed to e.g. freight rate risk, bunker fuel price risk, as well as risks relating to foreign currency exchange rates, interest rate, counterparties (including credit), operations, technical, regulations and other risks. The Group’s executive management oversees that the management of these risks are governed by appropriate policies and procedures. The Board of Directors reviews and agrees policies for managing these risks. Risk management activities to reduce interest rate risk, freight rate risk and bunker fuel risk are further described in note 13. Operational risk Operational risks are mainly related to the operation of vessels. The Group’s vessels are on technical management to Klaveness Ship Management AS (ailiated company) which ensures compliance with IMO, ag and port state regulations. Quality and safety audits are performed regularly and the crew and oicers onboard are trained to ensure that regulatory requirements are met. Operational risk is managed through quality assurance procedures and systematic training of crew and land-based employees. All vessels sailing through piracy exposed areas take necessary steps to mitigate the threat of such attacks. Operational risk is also covered by insurance where relevant to cover loss of assets, revenues and contract commitments. The vessels are insured for loss of hire, protection and indemnity (P&I), physical damage to vessel and its equipment (Hull and Machinery) and total loss. The latter is aligned with vessel values and loan agreements. The nancial impact of a total loss of a vessel will not be material for the Group. The COVID-19 pandemic continued to have signicant impact on vessel operations in 2021. The COVID-19 management plan with strict testing, quarantine procedures and routines for crew and visitors onboard the vessels worked as intended in 2021 with no infection cases onboard. Market risk Ownership of vessels involves risks related to vessel values, future vessel employment, freight rates and costs. Over time, vessel values may uctuate, which may result in an impairment of the book value of the Group’s vessels. These risks are to some extent managed through contracts of areightment and forward freight agreements (FFA) covering part of the Group’s future eet capacity for the nearby year and covering part of the exposure for the next 1-2 years. A signicant expense for transport at sea is bunkers. The price of fuel is unpredictable and uctuates based on events outside the Group’s control, including geopolitical developments, supply and demand for oil and gas, actions of OPEC and other energy producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. To reduce the risk of uctuations in bunker fuel prices, the Group may decide to hedge the bunker price exposure by the use of bunker fuel swaps or options to hedge the inherent fuel oil exposure in its freight contracts or include bunker adjustment factors (BAF) in the contracts. Foreign currency risk and interest rate risk The Group’s revenues and costs are denominated primarily in US Dollar (USD) which is the functional currency of all signicant entities in the Group. Fluctuations in USD against NOK may aect the company’s tax payable, which will be calculated and paid in NOK. This eect is considered to be limited. The Group’s interest bearing debt is exposed to oating interest rate, and the Group has some of its costs in other currencies than USD. The Group has bond debt denominated in NOK with NIBOR + 475 bps margin, however, the FX-eect is currently xed to USD and the oating interest rate exposure has been converted to a xed USD interest rate. Long term mortgage debt bears interest at LIBOR plus an applicable margin. In order to hedge the risk, the Group has entered into interest rate swaps. At 31 December 2021, 39 % of the oating interest mortgage debt loans are hedged. The Group evaluates on an ongoing basis the need to adjust interest rate exposure. As of December 31, 2021 the publication of the one-week and two-month US Dollar (USD) London Interbank Oered Rate (LIBOR) ceased to be published on a representative basis. The remaining tenors of US Dollar LIBOR will cease to be published on a representative basis on June 30, 2023. The Group is exposed to LIBOR mainly in US dollar denominated debt and interest rate derivatives with interest rates indexed to LIBOR. The Group expects to initiate negotiations with counterparties to transition from LIBOR to an alternative benchmark within rst half of 2023 for relevant agreements. As recommended by the Alternative Reference Rates Committee (a committee convened by the Federal Reserve), Secured Overnight Financing Rate (SOFR) will likely replace LIBOR as a standard interest rate benchmark. The impact on the Group of the transition from LIBOR to SOFR or any other alternative rates is still uncertain but may potentially lead to increased cost of debt. The table below shows estimated changes in prot before tax for the Group from changes in interest rates in 2021 and 2020, with all other variables held constant. The changes are estimated based on a change in LIBOR given capital structure and hedges as of year-end 2021. Counterparty/creditrisk The performance of the Group depends on its counterparties’ ability to perform their obligations under agreed contracts, a continued client need for the services performed by the combination carriers and KCC’s ability to renew contracts with these clients. Default by a cargo customer counterparty of its obligations under, mainly cargo customers (CoA’s), may have material adverse consequences on the contract portfolio earnings. The counterparty’s nancial strength will thus be very important. If the Group has a legal right to insurance coverage the Group will make provision for the deductible amount. As such, default by an insurance institution may have material nancial consequences. Further, the Group is exposed to credit risk through its deposits. Deposits are currently made with investment grade nancial institutions with A rating or higher from public rating agency. However, there are concentration risk as deposits are held with only a few institutions. Total unrisked credit exposure at 31 December 2021 amounts to USD 72.4 million, 2020: USD 84.2 million (book value of trade receivables, other current assets and bank deposits). Liquidity risk Liquidity risk is the risk that the Group may not be able to full its liabilities when they fall due. The Group has capital commitments relating to borrowings. The Group keeps its liquidity reserves mainly in cash and bank deposits. The liquidity risk is considered to be limited as the deposits, committed bank debt and estimated cash ow are considered suicient for all needs in the foreseeable future. The Group’s bank nancing is subject to nancial and non-nancial covenants. The table below illustrates the timing and magnitude of the Group’s nancial liabilities. Changeinbps(eectinUSD’000) 2021 2020 +100 - 1 680 - 1 220 +50 - 840 - 610 -50 120 180 Financial risk management 16 Main long-term risks Global economic growth and the impact on energy and commo- dity markets Freight rates for global seaborne transportation is highly volatile and cyclical. The demand for global seaborne transportation depends on global economic growth, and in particular the development in the energy and commodities markets. Furthermore, the demand for seaborne transportation is dependent on open economies and low bar- riers to trade, trade restrictions such as taris and embargos can have a negative eect on the demand for seaborne transportation. Market Impact of a low-carbon future with intro- duction of emission regulations, zero-emis- sion vessels and lower demand for transpor- tation of fossil fuels At COP26 in November 2021 it was agreed to secure global net zero by 2050. A move to a low-carbon economy can potentially have material negative impact on the Group through several channels. - Emerging propulsion technologies and fuels might have a material negative impact on the competiti- veness of the Group’s existing eet - New regulations can lead to material cost related to upgrades and retrots to comply with regulations and / or material impairment of operational exibility and / or operational limitations - New regulations, such as the EU taxonomy, can reduce and restrict the access to capital - The demand for transportation of fossil fuels might be materially negatively impacted and hence the demand for dry bulk and product tanker vessels - New customer requirements can have a negative impact on the Group’s competitive position However, KCC’s combination carriers have a substantial carbon eiciency advantage versus existing standard vessels due to two trading legs, minimal ballast and trading exibility, and this advantage will be strengthened further through KCC’s ongoing energy eiciency program. Based on this eiciency advantage, KCC’s combination carriers are likely to remain competitive throughout the next decades during which zero emission vessels are likely to be introduced to the market. Best estimate of the vessel life is expected to be 25 years. Climate-related Maturityproleofnancialliabilities The table below summarises the maturity prole of the Group’s nancial liabilities based on contractual undiscounted payments. Interest bearing debt includes interest payments. Maturityprolenancialliabilities 31 Dec 2021 < 1 year 1-3 years 3-5 years > 5 years Total Mortgage debt (incl interests) 33 815 129 950 178 242 - 342 007 Bond loan (incl interest) 4 757 9 515 77 110 - 91 382 Other interest bearing liabilities 2 409 - - - 2 409 Trade and other payables 16 199 - - - 16 199 Current debt to related parties 895 - - - 895 58 075 139 465 255 352 - 452 892 Loan facilities to be renanced during the next 12 months are included in <1 year. Maturityprolenancialliabilities 31 Dec 2020 < 1 year 1-3 years 3-5 years > 5 years Total Mortgage debt (incl interests) 29 422 167 733 52 920 - 250 075 Bond loan (incl interest) 4 757 9 515 80 678 - 94 950 Trade and other payables 13 165 - - - 13 165 Current debt to related parties 1 339 - - - 1 339 48 683 177 248 133 598 - 359 529 24 Klaveness Combination Carriers ASA – Annual Report 2021 Climate-related risks Climate-related risks includes both transition risks and physical risks with focus on transition risks as this is considered to have a larger impact and probability for KCC. The risk mainly relates to eect of reduced demand for the Group’s services and the risk of stranded assets and new regulations as the eet moves to low-carbon fuel. For 2021, total fossil fuel shipments accounted for 17 % of the Group’s transported volumes in metric tons. Compliance risk The legal and regulatory requirements of the company is increasingly challenging and complex. The Group has established systems and processes to ensure that all relevant laws and regulations are met, such as tax-laws, anti-corruption laws, securities laws, anti-trust laws and international sanctions. Two of the Group’s subsidiaries are subject to the Norwegian tonnage tax regime. Non-compliance with the qualifying rules of this regime will have material negative impact on the Group’s nancial position. Financial risk management 16 In December 2019, the Board approved the adoption of a share option program, and 65,280 share options to senior management (CEO and CFO) were issued at the same date. The share options have an exercise price of NOK 46.14, adjusted for any distribution of dividends made before the relevant options are excercised. The share options have a ve year term and vest over a three year period equally at a rate of 1/3 of the number of share options granted on each annual anniversary of the date of grant, subject to the option holder continuing to be employed by the Company from the grant date through the applicable vesting date. The share options have no voting or other shareholder rights. The following table summarizes the unvested option activity for the year ended December 31, 2021: A capital increase of USD 25 million was completed on 4 November 2021 through a private placement to fund energy eiciency initiatives for the existing eet. The Board approved the allocation of 4 345 000 shares in the private placement at a price of NOK 49.00 per share. Dividends of in total USD 7.2 million were paid to the shareholders in 2021 (in average USD 0.15 per share). Share capital The fair value of the share options granted is calculated to USD 100k, i.e USD 1.542 per share option. The cost incurred in 2021 is USD 42k (2020: USD 39k). The fair value of the share options granted was calculated on the Black-Scholes-Merton method. The signicant assumptions used to estimate the fair value of the share options are set out below: Share options program 17 All shares have equal voting rights and equal rights to dividends. The ordinary shares are listed on Oslo Stock Exchange. KCC owns a total of 40,078 in treasury shares, corresponding to 0.0765 % of the total number of issued shares. Basic earnings per Share (EPS) in Income Statment is calculated based on the weighted average number of ordinary shares for the period, whereas diluted earnings per Share (EPS) is based on all outstanding shares including dilutive shares if all convertible shares were excercised. Management and members of the Board which hold shares in the Company are set out below. In an Extraordinary General Meeting held on 24 September 2018, the Company issued 229,088 non-transferable warrants, each of which entitles the holder to subscribe one new share of the Company at a subscription price of NOK 44.38 per share. Share capital, shareholders, dividends and reserves 18 Date Shares Notional (NOK) Share capital (NOK) Shares and sharecapital at 31 December 2019 48 027 000 48 027 000 Shares and sharecapital at 31 December 2020 48 027 000 48 027 000 Shares issued 4 November 2021 4 345 000 1 4 345 000 Shares and share capital at 31 December 2021 52 372 000 52 372 000 31 Dec 2021 31 Dec 2020 Weighted average number of ordinary shares for basic EPS 48 677 360 47 994 938 Eects of dilution from: Share options 65 280 65 280 Warrants 229 088 229 088 Weightedaveragenumberofordinarysharesfortheeectofdilution 48 971 728 48 289 306 Largest shareholders at 31 December 2021 Ownership Number of shares Ownership In % Rederiaksjeselskapet Torvald Klaveness 28 154 231 53,8 % EGD Shipholding AS 8 805 128 16,8 % Goldman Sachs & Co. LLC (nominee) 2 579 841 4,9 % Hundred Roses Corporation 2 227 250 4,3 % T.D. VEEN AS 1 000 000 1,9 % Verdipapirfondet Nordea Norge Verd 851 873 1,6 % J.P. Morgan Bank Luxembourg S.A. (nominee) 727 066 1,4 % Morgan Stanley & Co.Int. Plc 492 908 0,9 % SIX SIS AG (nominee) 463 933 0,9 % Verdipapirfondet Nordea Norge Kapital 353 900 0,7 % Other 6 715 870 12,8 % TOTAL 52 372 000 100 % Name Position Number of shares Engebret Dahm Chief Executive Oicer 20 532 (held through E Dahm Invest AS) Liv Hege Dyrnes Chief Financial Oicer 6 500 Lasse Kristoersen Chair of the Board 3 000 (held through B7 Invest AS). Owns 0.7% of Rederiaksjeselskapet Torvald Klaveness which holds 28 154 231 shares Morten Skedsmo Board member 225 Magne Øvreås Board member Owns 8.5 % of EGD Shipholding AS which holds 8 805 128 Number of shares Average exercise price 2021 2020 Outstanding at 1 January NOK 46.14 65 280 65 280 Granted during the year - - Exercised during the year - - Forfeited during the year - - Expired during the year - - Outstanding at 31 December 65 280 65 280 Model inputs Dividend yield (%) - Expected volatility (%)* 36 % Risk-free interest rate (%) 2.05 % Expected life of share options (year) 3 Weighted average share price (NOK) 48 The expected volatility reects the assumption that the historical shipping industry average is indicative of future trends, which may not necessarily be the actual outcome. Average ve-year Norwegian Government bond risk-free yield-to-maturity rate of 2.05 % as of 2021 was used as an estimate for the risk-free rate. 25 Klaveness Combination Carriers ASA – Annual Report 2021 The ultimate owner of the Group is Rederiaksjeselskapet Torvald Klaveness (RASTK), which owns 53.8 % of the shares in Klaveness Combination Carriers ASA. Net revenue from operation of vessels Relets of dry bulk cargoes between KCC Chartering AS and AS Klaveness Chartering (related party in the Torvald Klaveness Group) is made at spot pricing without any compensation either way. ** Hire from BAU to KCCC less pool fee from KCCC to BAU. As of 1 June 2021, employment of four key employees in Singapore were transferred from Klaveness Asia Pte. Ltd to the newly established company, Klaveness Combination Carriers Asia Pte Ltd, 100 % owned by KCC ASA (parent company). Prior to the transfer, the services of these employees were purchased through Klaveness AS. All bunkers purchase is done through AS Klaveness Chartering (KC), a related party in the Torvald Klaveness Group, which holds the bunker contracts with the suppliers. The bunker purchase process has been centralized to enhance negotiating and purchasing power towards the suppliers. No prot margin is added to the transactions, but a service fee is charged on a cost-plus basis reecting the time spent by the bunkering team and charged as part of the Business administration services from Klaveness AS. Otherservices/transactions Transactions with related parties 19 KCC Chartering AS sold 105 days P4TC FFAs OTC for November and December 2021 to Baumarine AS, and 180 days P4TC for Q3 and Q4 2022 to AS Klaveness Chartering, related parties in the Torvald Klaveness Group, at screen market pricing. Credit premium has not been included as the companies have the same rating. Market value of portfolio with AS Klaveness Chartering was USD 660k as per 31 December 2021 presented as nancial assets in Statement of Financial Position. Accounting policy Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise signicant inuence over the party in making nancial and operating decisions. Parties are also related if they are subject to common control or common signicant inuence. Related parties transactions are recorded to estimated fair value. Klaveness AS (KAS), Klaveness Ship Management AS (KSM), Klaveness Asia Pte.Ltd (KA Ltd), Klaveness Combination Carrier ASA (KCC), KCC Shipowning AS (KCCS), KCC Chartering AS (KCCC), Klaveness Combination Carriers Asia Pte.Ltd (KCCA Ltd), Baumarine AS (BAU) Typeofservice/transaction (USD ’000) Provider Receiver Price method 2021 2020 Pool Participation BAU KCCC Standard pool agreement 3 735 - Dry bulk KAS KCCC 1.25% of transaction value (255) (199) Total net revenue from related parties 3 480 (199) Typeofservice/transaction (USD ’000) Provider Receiver Price method 2021 2020 Business administration services KAS KCC ASA, on behalf of KCC companies Cost + 5% or overhead per employee 1 457 1 754 Business administration services KA Ltd KCCA Ltd Cost + 5% 119 - Commercial management KSM, KAS KCCC Cost + 7.5% 1 203 1 588 FFA trading KAS KCCC 0.1% of transaction value 49 16 Project management KSM, KAS KCCS, KCC Cost + 7.5% 881 180 Total group commercial and administrative services 3 708 3 538 Typeofservice/transaction (USD ’000) Provider Receiver Price method 2021 2020 Technical management fee (opex) KSM KCCS Fixed fee per vessel 3 979 3 163 Crewing and IT fee (opex) KSM KCCS Fixed fee per vessel 1 550 1 101 Supervision fee and project management fee (newbuilding) KSM, KAS KCCS Partly cost and partly cost + 7.5% 1 333 1 779 Board member fee (administrative expenses) KAS KCC Fixed fee as per annual general meeting 94 91 Sales support, sale of vessel (gain on sale of vessels) (note 7) KAS KCCS Cost for time used + 7.5% 31 - Technical management fee for termination of agreement (gain on sale of vessels) KSM KCCS 3 months temination period 44 - Totalotherservices/transactions 7 031 6 133 Short term assets and debt related parties (USD ’000) 31 Dec 2021 31 Dec 2020 Klaveness Ship Management AS 1 502 - Klaveness AS 12 742 Baumarine AS 505 - Short-term receivables from related parties 2 018 742 AS Klaveness Chartering 660 - Short-termnancialassets 660 - Klaveness AS 212 - Klaveness Ship Management AS 341 1 127 Klaveness Chartering AS 312 212 Klaveness Asia Pte.Ltd 30 - Short-term debt to related parties 895 1 339 The warrants for each subscriber may be exercised with one third from such time as when the Company’s shares on a volume-weighted basis have traded at a price equal to minimum NOK 55.48 for ten consecutive trading days with an aggregate trading volume over such ten days of a minimum of USD 1 million. Another third may be exercised when there has been such trading at a price equal to a minimum of NOK 66.57, and the last third when there has been such trading at a price equal to a minimum of NOK 77.67. The warrants must be exercised no later than 24 September 2023. The exercise price and the threshold trading prices which trigger the right to exercise warrants shall be adjusted for paid dividends or other distributions to the shareholders. Holder No. Of Warrants Subscription price (NOK) Exercise Levels (NOK) * Expiry Klaveness Ship Holding AS 159,377 44,38 55.48/66.57/77.67 September 2023 EGD shipholding AS 55,691 44,38 55.48/66.57/77.67 September 2023 Hundred Roses Corporation 14,020 44,38 55.48/66.57/77.67 September 2023 Total 229,088 * Not adjusted for dividends 26 Klaveness Combination Carriers ASA – Annual Report 2021 Taxes 21 Tonnage tax The vessel owning company (KCC Shipowning AS) and KCC Chartering AS are subject to taxation under the Norwegian tonnage tax regime. For the nancial year 2021 KCC Shipowning AS and KCC Chartering AS have payable tonnage taxes of USD 221k. Ordinary taxation The Parent Company (Klaveness Combination Carriers ASA) and the subsidiary KCC KBA AS are under ordinary taxation rules in Norway. The ordinary rate of corporation tax in Norway is 22 % for 2021 (2020: 22 %). The subsidiary Klaveness Combination Carriers Asia Pte. Ltd is subject to ordinary taxation in Singapore. The ordinary tax rate in Singapore is 17 % for 2021. For the nancial year 2021 KCC Asia Pte. Ltd has a payable tax expense of USD 7k. The subsidiary KCC KBA AS has net taxable prot mainly as a consequence of exchange rate eects following an internal vessel sale within the Group. This is oset against tax losses carried forward in the holding company. MV Barracuda was resold to KCC Shipowning AS in February 2021, and no further taxable prots are expected in the future for this company. Deferred tax assets Deferred tax assets are only recognised to the extent that future utilisation within the Group can be justied as per 31 December 2021. As a consequence, a tax position of USD 9.7 million per 31 December 2021 has not been recognised in the balance sheet. The tax position is mainly due to accumulated nancial costs deductible under the tonnage tax regime as well as a tax loss on the internal vessel sales which will be deductible at a rate of 20 % annually going forward. On 17 February 2022, the Company’s Board of Directors declared to pay a cash dividend to the Company’s shareholders of USD 5.2 million for Q4 2021 (USD 0.1 per share). KCC has no exposure to Russia or Belarus and has decided to not conduct any business with companies owned or controlled by Russian or Belarusian interests. Further, KCC has exempted all Russian ports, in addition to the war zone in the Black Sea. While the eect of the war has been strengthening dry bulk, product tanker and fuels markets, the indirect longer-term eects of the war on KCC’s markets are uncertain. There are no other events aer the balance sheet date that have material eect on the nancial statement as of 31 December 2021. Events aer the balance sheet date 22 Accounting policy Under the tonnage tax regime, prot from operations are tax exempt. Companies within the tonnage tax system pay a tonnage tax based on the deadweight tonnage of the vessels. The tonnage tax is recognised as an operating expense in the prot & loss. Taxable prot is calculated on the basis of nancial income aer deduction of a portion of nancial expenses (based on nancial assets in percent of total assets). For companies subject to ordinary taxation, tax expense comprises tax payable and changes in deferred tax assets. Tax payable corresponds to the amount expected to be paid to authorities while deferred tax assets/liabilities are calculated based on temporary dierences at the reporting date. Deferred tax assets are recognised to the extent that future utilisation is probable. Deferred tax liabilities/deferred tax assets within the same tax system that may be oset are recorded on a net basis. Income tax relating to items recognised directly in equity is included directly in equity and not in the statement of income. Income taxes for the year (USD ‘000) 31 Dec 2021 31 Dec 2020 Income taxes payable 7 - Change in deferred tax - - Totaltaxexpense/income(-)reportedintheincomestatement 7 - Tax on net (gain)/loss on revaluation of cash ow hedges - - Deferred tax charged to OCI - - (USD ‘000) Tax payable Income 31 Dec 2021 Taxeect Income 31 Dec 2020 Taxeect Prot / loss (-) before taxes, incl OCI 20 955 4 610 8 503 1 871 Income from shipping activity, tonnage tax system (35 688) (7 851) (26 779) (5 891) Change in temporary dierences 5 137 1 130 5 787 1 273 Change in tax losses carried forward 1 858 409 9 917 2 182 Exchange rate dierences / Other permanent dierences 7 737 1 702 2 572 566 Tax payable foreign subsidiaries 7 Tax payable in the balance sheet - 7 - - Eective tax rate 0 % 0 % Tonnage tax (included in operating prot) 221 180 Correction prior year tonnage tax 5 (5) Total tax payable in the balance sheet 233 175 (USD ‘000) Temporarydierences-ordinarytaxation Temporary dierence 31 Dec 2021 Taxeect Temporary dierence 31 Dec 2020 Taxeect Temporary dierences (14 899) (3 278) (9 761) (2 148) Tax losses carried forward (29 057) (6 392) (27 199) (5 984) Deferred tax asset not recognised in the balance sheet 43 956 9 670 36 960 8 131 Nettemporarydierences-deferredtaxliability/asset(-) - - - - Deferred tax asset in balance sheet - - - - Deferred tax liability in balance sheet - - - - Klaveness Combination Carriers Asia Pte Ltd (Singapore) was incorporated on 22 March 2021 based on capital injection of USD 300 000 from Klaveness Combination Carriers ASA (100% ownership, 300 000 shares). The commercial and operation team of four employees were transferred from Klaveness Asia Pte Ltd to this company on 1 June 2021. Klaveness Combination Carriers ASA Group comprises of several subsidiaries. Below is a list of subsidiaries within the Group. List of subsidiaries 20 Company name Location Ownership interest per 31 Dec 2021 Ownership interest per 31 Dec 2020 KCC Shipowning AS Oslo, Norway 100 % 100 % KCC KBA AS Oslo, Norway 100 % 100 % KCC Chartering AS Oslo, Norway 100 % 100 % Klaveness Combination Carriers Asia Pte. Ltd Singapore 100 % - 27 Klaveness Combination Carriers ASA – Annual Report 2021 Klaveness Combination Carriers ASA – Parent Company INCOME STATEMENT Year ended 31 December (USD ‘000) Notes 2021 Restated 2020 Service and management fee revenue 5 842 763 Total revenues 842 763 Group administrative services 5 (1 299) (1 232) Salaries and social expenses 6 (1 780) (1 327) Other operating and administrative expenses 2 (650) (647) Operatingprot(EBITDA) (2 886) (2 442) Operatingprotaerdepreciation(EBIT) (2 886) (2 442) Finance income 9 9 652 9 152 Finance expenses 9 (5 828) (8 421) Protbeforetax 939 (1 712) Income tax expenses 7 1 848 1 810 Protaertax 2 787 98 STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December (USD ‘000) Notes 2021 2020 Protaertax 2 787 98 Othercomprehensiveincometobereclassiedtoprotorloss Net movement fair value on cross-currency interest rate swaps (CCIRS) (404) (5 379) Reclassication to prot and loss (CCIRS) 2 773 2 917 Othercomprehensiveincome/(loss)fortheperiod,netoftax 2 368 (2 462) Totalcomprehensiveincome/(loss)fortheperiod,netoftax 5 155 (2 363) Attributable to: Equity holders of the parent company (5 155) (2 363) 2020 is restated due to change from IFRS to simplied IFRS (note 11). Financial statements of the Parent Company 28 Klaveness Combination Carriers ASA – Annual Report 2021 LasseKristoersen Chair of the Board Rebekka Glasser Herlofsen Board member Engebret Dahm CEO Oslo, 28 March 2022 Oslo, 31 December 2021 Morten Skedsmo Board member Winifred Patricia Johansen Board member Magne Øvreås Board member Klaveness Combination Carriers ASA – Parent Company STATEMENT OF FINANCIAL POSITION Assets (USD ‘000) Notes 31 Dec 2021 Restated 31 Dec 2020 Non-current assets Investment in subsidiaries 3 263 357 253 649 Deferred tax asset 7 - - Long-term loan to related parties 5 15 000 6 500 Financial assets 8 2 556 2 917 Other long-term receivables 5 70 70 Total non-current assets 280 982 263 137 Current assets Inventories 166 166 Trade receivables and other current assets 77 179 Cash and cash equivalents 4 21 029 15 004 Short-term loan to related parties 5 6 465 7 510 Short- term receivables from related parties 5 45 3 825 Total current assets 27 782 26 685 TOTAL ASSETS 308 764 289 822 Equity and liabilities (USD ‘000) Notes 31 Dec 2021 Restated 31 Dec 2020 Equity Share capital Group 18 6 234 5 724 Share premium 243 054 219 478 Other reserves (330) (2 699) Retained earnings (26 077) (16 100) Equity attributable to equity holders of the parent 222 880 206 403 Non-current liabilities Bond loan 8 78 205 80 649 Financial liabilities 8 43 - Total non-current liabilities 78 248 80 649 Current liabilities Current debt to related parties 5 1 099 180 Trade and other payables 6 536 2 590 Total current liabilities 7 636 2 770 Total equity and liabilities 308 764 289 822 Klaveness Combination Carriers ASA – Parent Company 2020 is restated due to change from IFRS to simplied IFRS (note 11). CASH FLOW STATEMENT Year ended 31 December (USD ‘000) Notes 2021 Restated 2020 Prot before tax 939 (1 712) Interest income (1 254) (88) Interest expenses 5 050 4 078 Group Contribution 9 (8 398) (8 231) Amortization of transaction cost on issuance on loans 253 373 Financial derivatives loss / gain (-) - 1 632 Gain (-) /loss on foreign exchange 525 791 Change in current assets 102 (25) Change in current liabilities 215 167 Change in other working capital 1 226 (8 806) Interest received 1 089 88 A:Netcashowfromoperatingactivities (253) (11 731) Investment in subsidiaries 3 (300) - Long term loan to related parties 5 (17 790) (19 570) Repayment of loan to related parties 5 10 500 13 000 B:Netcashowfrominvestmentactivities (7 590) (6 570) Proceeds from bond loan 8 - 76 390 Transaction costs on issuance of loans - (1 715) Repayment of bond loan 8 - (33 861) Interest paid (5 041) (4 117) Terminated nancial instruments - (3 101) Purchase of own shares Group 18 - (147) Paid in registered capital increase Group 18 24 977 - Transaction costs on capital increase Group 18 (878) - Group contribution 2 756 - Dividends Group 18 (7 204) (4 802) C:Netcashowfromnancingactivities 14 609 28 646 Net change in liquidity in the period (A + B + C) 6 766 10 346 Net foreign exchange dierence (742) Cash and cash equivalents at beginning of period 15 004 4 659 Cash and cash equivalents at end of period 4 21 029 15 004 Net change in cash and cash equivalents in the period 6 766 10 346 2020 is restated due to change from IFRS to simplied IFRS (note 11). 29 Klaveness Combination Carriers ASA – Annual Report 2021 01 Accounting policies 02 Operating expenses 03 Investment in subsidiaries 04 Cash and cash equivalents 05 Transactions with related parties 06 Salary 07 Tax 08 Financial assets and nancial liabilities 09 Financial items 10 Events aer the balance sheet date 11 Restatement of 2020 Klaveness Combination Carriers ASA – Parent Company STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the parent 2021 (USD ‘000) Share capital Other paid in capital Treasury shares Hedging reserve Retained earnings Total equity Equity at 1 January 2021 5 724 219 478 (147) (2 552) (16 100) 206 403 Prot (loss) for the period 2 787 2 787 Other comprehensive income for the period 2 368 2 368 Dividends (10 964) (10 964) Capital increase (4 November 2021) 510 23 576 24 086 Tax eect of group contribution received (1 848) (1 848) Share option program (Group note 17) 47 47 Equity at 31 December 2021 6 234 243 054 (147) (183) (26 077) 222 880 2020 (USD ‘000) Share capital Other paid in capital Treasury shares Hedging reserve Retained earnings Total equity Equity at 1 January 2020 5 724 219 478 - (91) (8 184) 216 928 Prot (loss) for the period 98 98 Other comprehensive income for the period (2 462) (2 462) Purchase of own shares (Group note 18) (147) (147) Dividends (6 243) (6 243) Tax eect of group contribution received (1 810) (1 810) Share option program (Group note 17) 39 39 Restated Equity at 31 December 2020 5 724 219 478 (147) (2 552) (16 100) 206 403 2020 is restated due to change from IFRS to simplied IFRS (note 11). Notes 30 Klaveness Combination Carriers ASA – Annual Report 2021 Basis of preparation Klaveness Combination Carriers ASA (”Parent Company”) is a public limited company domiciled and incorporated in Norway. The Parent Company is headquartered and registered in Drammensveien 260, 0283 Oslo. Klaveness Combination Carriers ASA was established March 23, 2018. The share is listed on Oslo Stock Exchange with ticker KCC (transferred from Euronext Expand as per 21 December 2021). The nancial statements as per 31 December 2021 of Klaveness Combination Carriers ASA (referred to as the Company/the Parent Company) have been prepared in accordance with simplied IFRS pursuant to the Norwegian Accounting Act §3-9 and regulations regarding simplied application of IFRS issued by the Norwegian Ministry of Finance on 3 November 2014. Accounting principles for the consolidated statement of Klaveness Combination Carriers ASA (the Group) also apply to the Parent Company except treatment of the dividends – see accounting policies related to dividend presented as part of the consolidated Group accounts. The main activity of the Company is to be a holding company in the Group, which owns and operates combination carriers. Dividend income Dividend income and/or Group contribution (for the year ended 31 December 2021) are recognised in Company’s nancial statements as nancial income and current assets per year- end 2021. Dividend distribution/Group contribution Distribution of dividends are approved by the Board of Directors based on authorisation from the Annual General Meeting. Dividend distribution to the Company’s shareholders is recognised as a liability at the reporting date of the nancial year that the proposal of dividend relates to (i.e. dividends for 2021, approved by the Board of Directors 17 February 2022, are recognised as a liability as per 31 December 2021). Accounting policies 01 Klaveness Combination Carriers Asia Pte Ltd (Singapore) was incorporated on 22 March 2021 with a capital injection of USD 300 000 from Klaveness Combination Carriers ASA (100% ownership, 300 000 shares). The Company has bank deposits in the following currencies: Operating expenses Investment in subsidiaries Cash and cash equivalents 02 03 04 Accounting policy Shares in subsidiaries Shares in subsidiaries in the Parent Company accounts are recorded at cost. These investments are reviewed for impairment when there are indicators that carrying amount may not be recoverable. Use of estimates The preparation of nancial statements in conformity with IFRS requires management to exercise its judgment in the process of applying the Company’s accounting policies. It also requires the use of accounting estimates and assumptions that aect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the nancial statements, and the reported amounts of revenues and expenses during the nancial year. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately dier from those estimates. Shares in subsidiaries and intercompany receivables are subject to impairment testing at the end of each reporting period. Valuation is subject to assessment of the recoverability in the underlying investment or receivable. Management’s assessment can aect the level of impairment loss, or reversal of such, that is recognized in prot or loss. (USD '000) 2021 2020 Statutory audit 107 71 Other assurance services from auditor 26 15 Total 133 86 Auditor’s fee are stated excluding VAT. (USD '000) Businessoice, country Votingshare/ ownership 2021 2020 KCC Chartering AS Oslo, Norway 100 % 7 456 7 456 KCC Shipowning AS Oslo, Norway 97 % 240 093 240 093 KCC KBA AS Oslo, Norway 100 % 15 507 6 100 KCC Asia Pte. Ltd Singapore 100 % 300 - Investment in subsidiaries 263 357 253 649 (USD '000) 31 Dec 2021 31 Dec 2020 Bank deposits, USD 12 282 14 804 Bank deposits, NOK 8 672 130 Payroll withholding tax account (restricted cash, NOK) 74 70 Total cash and cash equivalents 21 029 15 004 31 Klaveness Combination Carriers ASA – Annual Report 2021 Typeofservice/transaction Receiver Price method 2021 2020 Business administration services KCCS Cost + 5 % 325 286 Business administration services KCC KBA AS Cost + 5 % 14 32 Business administration services KCCC Cost + 5 % 364 81 Commercial management services KCCC Cost + 7.5 % 139 364 Service and management fee revenue 842 763 Typeofservice/transaction Receiver Price method 2021 2020 Business administration services KAS Cost + 5% or overhead per employee 780 952 Business administration services KSM Cost + 5% or overhead per employee - 71 Project management KSM Cost + 7.5% 424 118 Board member fee KAS Fixed fee as per annual general meeting 94 91 Group administrative services 1 299 1 232 Typeofservice/transaction Receiver 31 Dec 2021 31 Dec 2020 Short- term receivables from related parties KCCS 23 578 Short- term receivables from related parties KCCC 22 458 Short- term receivables from related parties KCC KBA - 96 Net Group Contribution KCC KBA - 2 694 Short- term loan to related parties KCCC - 7 510 Short- term loan to related parties KCCS 6 165 - Short- term loan to related parties KCC KBA 300 - Current assets to related parties 6 510 11 335 (USD ’000) Counterparty * 31 Dec 2021 31 Dec 2020 Long-term receivables to related parties KCCC 15 000 - Long-term receivables to related parties KCC KBA - 6 500 Other long-term receivables (loan to employees) Employees 70 70 Long- term assets to related parties 15 070 6 570 (USD ’000) Counterparty * 31 Dec 2021 31 Dec 2020 Short-term debt to related parties KAS 128 62 Short-term debt to related parties KCCC 57 - Short-term debt to related parties KCCS 25 - Short-term debt to related parties KSM 5 118 Short-term debt to related parties KCC KBA 2 - Net Group Contribution KCC KBA 882 - Current debt to related parties 1 099 180 Typeofservice/transaction Receiver Price method 2021 2020 Interest income loan to related party KCCS 2.2 % 760 250 Interest income loan to related party KCC KBA 4.3 % 50 534 Interest income loan to related party KCCC 3.65 % (3.4 % prior to 29.2.21) 394 49 Interest cost loan agreement KCCS Libor 3M + 2.2 % - (14) Interest cost loan agreement KCC KBA Libor 3M + 6.5 % - (3) Interest income and expenses to related party (note 9) 1 204 817 Klaveness AS and Klaveness Ship Management AS delivers administrative, commercial and project management services such as accounting, legal, IT, project and oice services to Parent Company.The level of fees are based on cost + a margin in accordance with the arm’s length principle and OECD guidelines. Service agreements The Parent Company has six employees as per year end 2021. The Parent Company delivers administrative and business management services and commercial management services to subsidiaries. The level of fees are based on cost + a margin in accordance with the arm’s length principle and OECD guidelines. Intercompany balances Transactions with related parties 05 KCC, as lender, has provided loans to subsidiaries KCC Chartering AS (USD 15 million), KCC Shipowning AS (USD 6.1 million) and KCC KBA AS (USD 300k). Loan to employees (and ailiates to employees) has been made in connection with employees purchase of shares in the company. Interest rate in the loans are set in accordance with “Normal interest rate for the taxation of low-cost loans from an employer”. Klaveness Combination Carriers ASA receives a Group Contribution with tax eect of MNOK 74.2 (USD 8.4 million) for 2021 and provides a Group Contribution without tax eect of MNOK 82 (USD 9.3 million) in 2021, both towards the subsidiary KCC KBA AS. Refer also to Changes in Equity and note 7) Taxes. The Company has six employees as per year end 2021. For more information related to salary expenses - see Group note 7. Salary 06 (USD ‘000) 2021 2020 Salaries and other remuneration 1 679 1 247 Pension benet 83 66 Other social costs 7 5 Other personel ralated expenses 11 8 Salaries and social expense 1 780 1 327 Klaveness AS (KAS), Klaveness Ship Management AS (KSM), KCC Shipowning AS (KCCS), KCC Chartering AS (KCCC), KCC KBA AS (KCC KBA) 32 Klaveness Combination Carriers ASA – Annual Report 2021 The Company holds a bond loan of NOK 700 million (KCC04) which is listed on Oslo Stock Exchange. The bond loan has a bullet structure with no repayment until maturity in February 2025. The bond carries a coupon of 3 months NIBOR plus a margin of 4.75 % p.a with quarterly interest payments. The total bond loan was swapped to USD with xed rate (cross currency interest rate swaps /CCIRS). The CCIRS qualify for hedge accounting and are recognised at fair value with changes through other comprehensive income. Maturityproletonancialliabilitiesat31December2021 The table below summarises the maturity prole of the Company's nancial liabilities based on contractual undiscounted payments including interest payments and interest hedge. Covenants As per 31 December 2021, the Company is in compliance with all nancial covenants. Covenants relate to minimum equity (USD 125 million), equity ratio (30%), and cash (USD 15 million) on a consolidated basis. Financial assets and nancial liabilities 08 Financial assets (USD ‘000) 31 Dec 2021 31 Dec 2020 Financial instruments at fair value through OCI Cross-currency interest rate swap 2 556 2 917 Financial assets 2 556 2 917 Current - - Non-current 2 556 2 917 Financial liabilities (USD ‘000) 31 Dec 2021 31 Dec 2020 Financial instruments at fair value through OCI Cross-currency interest rate swap 43 - Financial liabilities 43 - Current - - Non-current 43 - (USD ‘000) 31 Dec 2021 31 Dec 2020 Loans 273 929 230 524 Net MtM hedging agreements 553 5 053 Accrued unpaid interest 1 355 1 262 Total 275 837 236 839 Bond loan (KCC03) Face value NOK’ 000 Year of maturity Carrying amount USD’ 000 KCC04 700 000 11.02.2025 80 649 Exchange rate adjustment (1 430) Capitalized expenses (779) Bond discount (234) Total bond loan 700 000 78 205 Maturityprole (USD ‘000) < 1 year 1-3 years 3-5 years > 5 years Total Bond loan (incl interests) (4 757) (9 515) (77 110) - (91 382) Temporarydierences-ordinarytaxation (USD ‘000) Temporary dierence 2021 Taxeect Temporary dierence 2020 Taxeect Temporary dierences - - - - Intercepted interest carry forward (1 329) (292) (1 375) (303) Tax losses carried forward (14 047) (3 090) (16 174) (3 558) Unrealised gain/loss nancial instruments 2 513 553 2 917 642 Deferred tax asset not recognised in the balance sheet 12 862 2 830 14 632 3 219 Nettemporarydierences-deferredtaxliability/asset(-) - - - - Deferredtaxasset/liabilityinbalancesheet - - - - Tax payable (USD ‘000) Income 2021 Taxeect Income 2020 Taxeect Prot / loss (-) before taxes, incl OCI 939 207 (1 712) (377) Non-deductible expenses 2 0 7 2 Transaction cost capital increase charged over equity (863) (190) - - Dividends/group contribution from investments covered by the tax exemption model (8 398) (1 848) (8 228) (1 810) Unrealized gain/loss on nancial instruments valued at fair value 305 67 (2 917) (642) Change in tax losses carried forward (1 580) (348) 6 999 1 540 Total tax basis and tax payable before group contribution (9 595) (2 111) (5 851) (1 287) Group contribution from KCC KBA AS 8 398 1 848 8 228 1 810 Exchange rate dierences 1 196 263 (2 377) (523) Tax payable in the balance sheet - - - - Eective tax rate 0 % 0 % KCC guarantees on behalf of KCC Shipowning AS (part of the KCC Group) to the lending banks for the mortgage vessels loans including unpaid interest, costs and hedging agreements. As of 31.12.2021 sum of loans, accrued interest and net mark-to-mark on hedging contracts amounts to USD 276 million. The Company is regulated by ordinary taxation rules in Norway. The ordinary rate of corporation tax in Norway is 22 % for 2021 (22 % in 2020). The Company has a positive result before tax, however a group contribution with tax eect of USD 8.4 million is recognised as nancial income, but tax exempt under the tax exemption method, and therefore not part of taxable income. As a consequence of this contribution, the company has a net positive tax expense of USD 1.8 million. Tax 07 Income taxes for the year (USD ‘000) 2021 2020 Tax payable - - Eect of the Group contribution 1 848 1 810 Totaltaxexpense/income(-)reportedintheincomestatement 1 848 1 810 Tax on net (gain)/loss on cash ow hedges - - Deferred tax charged to OCI - - 33 Klaveness Combination Carriers ASA – Annual Report 2021 Restatement of 2020 11 Klaveness Combination Carriers ASA (Parent Company) changed from IFRS to simplied IFRS reporting as per 31 December 2021 with retrospective eect. Income Statement, Statement of Comprehensive Income, Statement of Financial Position and Statement of Changes in Equity for 2020 have been restated to reect the change in accounting policy for dividends/group contribution. For the Cash Flow Statement, the adjustment results in eects on prot before tax and group contribution with no eects on net cash ow from operation activities for 2020. Income Statement (USD ‘000) 31 Dec 2020 Adjustment Restated 31 Dec 2020 Operatingprotaerdepreciation(EBIT) (2 442) (2 442) Finance income 921 8 231 9 152 Finance costs (8 421) - (8 421) Protbeforetax (9 943) 8 231 (1 712) Income tax expenses 1 810 - 1 810 Protaertax (8 133) 8 231 98 2020 (USD ‘000) Share capital Share premium Treasury Shares Hedging reserve Retained earnings Total equity Equity at 1 January 2020 5 724 219 478 0 (91) (8 184) 216 927 Prot (loss) for the period (8 133) (8 133) Other comprehensive income for the period (2 462) (2 462) Purchase of own shares (Group note 18) (147) (147) Dividends (4 803) (4 803) Share option program (Group note 17) 39 39 Equity at 31 December 2020 5 724 219 478 (147) (2 552) (21 080) 201 423 Adjustments Prot (loss) for the period 8 231 8 231 Net group contribution received/ (paid) with tax eect (2020) (1 810) (1 810) Dividends (1 440) (1 440) Restated* Equity at 31 December 2020 5 724 219 478 (147) (2 552) (16 100) 206 403 Statement of Financial Position (USD ‘000) 31 Dec 2020 Adjustment Restated 31 Dec 2020 Non-current assets Investment in subsidiaries 248 115 5 534 253 649 Deferred tax asset 1 810 (1 810) - Total non-current assets 259 413 3 724 263 137 Current assets Short- term receivables from related parties 1 129 2 696 3 825 Total current assets 23 989 2 696 26 685 TOTAL ASSETS 283 402 6 420 289 822 Equity Share capital 5 724 - 5 724 Share premium 219 478 - 219 478 Other reserves (2 699) - (2 699) Retained earnings (21 080) 4 980 (16 100) Total equity 201 423 4 980 206 403 Total non-current liabilities 80 649 - 80 649 Trade and other payables 1 150 1 440 Total current liabilities 1 330 1 440 2 770 TOTAL EQUITY AND LIABILITIES 283 402 6 420 289 822 Statement of Comprehensive Income (USD ’000) 31 Dec 2020 Adjustment Restated 31 Dec 2020 Totalcomprehensiveincome/(loss)fortheperiod (10 594) 8 231 (2 363) On 17 February 2022, the Company’s Board of Directors declared to pay a cash dividend to the Company’s shareholders of USD 5.2 million for Q4 2021 (USD 0.1 per share). There are no other events aer the balance sheet date that have material eect on the Financial Statement as of 31 December 2021. Events aer the balance sheet date 10 Financial items 09 Finance income (USD ‘000) 2021 2020 Other interest income 50 702 Gain on foreign exchange - - Group contribution (note 5) 8 398 8 231 Other nancial income from related parties (note 5) 1 204 219 Finance income 9 652 9 152 Finance cost (USD ‘000) 2021 2020 Interest paid to related parties - 16 Other interest expenses 589 581 Interest expenses bond loan 4 371 4 062 Amortization capitalized fees on loans 253 373 Other nancial expenses 90 844 Loss on foreign exchange 525 - Fair value changes and interest rate swaps - 2 546 Finance expenses 5 828 8 421 34 Klaveness Combination Carriers ASA – Annual Report 2021 We conrm that, to the best of our knowledge, the consolidated nancial statements for the period 1 January to 31 December 2021 have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union and give a true and fair view of the Company’s assets, liabilities, nancial position and prot. We also conrm, to the best of our knowledge, that the Board of Directors’ Report includes a fair review of important events that have occurred during the nancial year and their impact on the consolidated nancial statements of Klaveness Combination Carriers ASA, and a description of the principal risks and uncertainties for 2022. Responsibility statement The responsibility statement includes the Board of Directors and the CEO’s approval of Annual Report 2021. The CEO and Board of Directors of Klaveness Combination Carriers ASA 35 Klaveness Combination Carriers ASA – Annual Report 2021 2 Independent auditor's report - Klaveness Combination Carriers ASA 2021 A member firm of Ernst & Young Global Limited opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. Accounting estimates related to vessels Basis for the key audit matter The Group has eight CLEANBU vessels and eight CABU vessels in operation as of year-end 2021 after completing the newbuilding program during the year. The accounting estimates for these assets have a material impact for the Group due to their cumulative value and long-lived nature. The key estimates requiring judgment include determination of useful lives and residual values, identification of cash generating units (CGU), evaluation of indicators of impairment, and if present, testing carrying values for impairment based on estimated recoverable amounts. As these estimates have material impact for the Group, this was considered a key audit matter. Management estimated useful lives based on experience as well as industry practice for conventional dry bulk and tanker vessels respectively and considering the risk of assets becoming stranded. The residual value has been based on an average of observable recycling prices, considering the expected impact of the EU Ship Recycling Regulation for safer and greener recycling. We compared the estimates of useful lives and residual values to industry practice, available data for green recycling, experience from prior years and plans for docking and maintenance. We further recalculated depreciations for the year. Management considers the fleet of CLEANBU and the fleet of CABU as separate cash generating units (“CGUs”) in their assessment of impairment indicators. Management did not identify indicators of impairment for the CGUs, and therefore no impairment test was performed. The assessment included an evaluation of external and internal factors, including market rates, changes in technological, economic or legal environment, changes to discount rates, market capitalization, physical damage and actual utilization of the vessels. Our audit response Based on our understanding of the nature of the Group’s business and the economic environment in which its vessels operate, we assessed the determination of the different CGUs that make up the Group. We evaluated the management’s estimation of useful lives and residual value, and compared these to industry practice, experience with similar type of vessels and environmental developments. We reviewed the potential indicators of impairment that would require impairment testing of CGUs and evaluated management’s assessment of indicators. Finally, we read the disclosure regarding these judgments, which are included in note 9 of the Group’s consolidated financial statements. Penneo Dokumentnøkkel: G5T54-4JTZE-O56NA-UVKOU-78ILA-TFYAP Auditors report Statsautoriserte revisorer Ernst & Young AS Dronning Eufemias gate 6a, 0191 Oslo Postboks 1156 Sentrum, 0107 Oslo Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00 www.ey.no Medlemmer av Den norske Revisorforening A member firm of Ernst & Young Global Limited INDEPENDENT AUDITOR'S REPORT To the Annual Shareholders' Meeting of Klaveness Combination Carriers ASA Report on the audit of the financial statements Opinion We have audited the financial statements of Klaveness Combination Carriers ASA (the Company) which comprise the financial statements of the Company and the consolidated financial statements of the Company and its subsidiaries (the Group). The financial statements of the Company comprise the balance sheet as at 31 December 2021 and the income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements of the Group comprise the balance sheet as at 31 December 2021, the income statement, statement of comprehensive income, statement of cash flows and statement of changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable legal requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act, • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2021 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the audit committee. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the requirements of the relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 4 years from the election by the general meeting of the shareholders in 2018 Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2021. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate Penneo Dokumentnøkkel: G5T54-4JTZE-O56NA-UVKOU-78ILA-TFYAP 36 Klaveness Combination Carriers ASA – Annual Report 2021 4 Independent auditor's report - Klaveness Combination Carriers ASA 2021 A member firm of Ernst & Young Global Limited • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirement Report on compliance with regulation on European Single Electronic Format (ESEF) Opinion As part of our audit of the financial statements of Klaveness Combination Carriers ASA we have performed an assurance engagement to obtain reasonable assurance whether the financial statements included in the annual report, with the file name KCCASA-2021-12-31-en, has been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation given with legal basis in Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements included in the annual report have been prepared, in all material respects, in compliance with the ESEF Regulation. Penneo Dokumentnøkkel: G5T54-4JTZE-O56NA-UVKOU-78ILA-TFYAP Auditors Report 3 Independent auditor's report - Klaveness Combination Carriers ASA 2021 A member firm of Ernst & Young Global Limited Other information Other information consists of the information included in the annual report other than the financial statements and our auditor’s report thereon. Management (the board of directors and the Chief Executive Officer) is responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility contain the information required by applicable legal requirements and whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information or that the information required by applicable legal requirements is not included, we are required to report that fact. We have nothing to report in this regard, and in our opinion, the board of directors’ report, the statement on corporate governance and the statement on corporate social responsibility are consistent with the financial statements and contain the information required by applicable legal requirements. Responsibilities of management for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of the Company in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act and of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group, or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Penneo Dokumentnøkkel: G5T54-4JTZE-O56NA-UVKOU-78ILA-TFYAP 37 Klaveness Combination Carriers ASA – Annual Report 2021 Dokumentet er signert digitalt, med Penneo.com. Alle digitale signatur-data i dokumentet er sikret og validert av den datamaskin-utregnede hash-verdien av det opprinnelige dokument. Dokumentet er låst og tids-stemplet med et sertifikat fra en betrodd tredjepart. All kryptografisk bevis er integrert i denne PDF, for fremtidig validering (hvis nødvendig). Hvordan bekrefter at dette dokumentet er orginalen? Dokumentet er beskyttet av ett Adobe CDS sertifikat. Når du åpner dokumentet i Adobe Reader, skal du kunne se at dokumentet er sertifisert av Penneo e- signature service penneo@penneo.com. Dette garanterer at innholdet i dokumentet ikke har blitt endret. Det er lett å kontrollere de kryptografiske beviser som er lokalisert inne i dokumentet, med Penneo validator - https://penneo.com/validate Signaturene i dette dokumentet er juridisk bindende. Dokument signert med "Penneo™ - sikker digital signatur". De signerende parter sin identitet er registrert, og er listet nedenfor. "Med min signatur bekrefter jeg alle datoer og innholdet i dette dokument." J J o o h h a a n n N N o o r r d d b b y y S S t t a a t t s s a a u u t t o o r r i i s s e e r r t t r r e e v v i i s s o o r r På vegne av: Ernst & Young AS Serienummer: 9578-5997-4-729076 IP: 213.52.xxx.xxx 2022-03-29 07:37:17 UTC Penneo Dokumentnøkkel: G5T54-4JTZE-O56NA-UVKOU-78ILA-TFYAP Auditors Report 5 Independent auditor's report - Klaveness Combination Carriers ASA 2021 A member firm of Ernst & Young Global Limited Management’s responsibilities Management is responsible for the preparation of an annual report and iXBRL tagging of the consolidated financial statements that complies with the ESEF Regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary to enable the preparation of an annual report and iXBRL tagging of the consolidated financial statements that is compliant with the ESEF Regulation. Auditor’s responsibilities Our responsibility is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation based on the evidence we have obtained. We conducted our engagement in accordance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. The standard requires us to plan and perform procedures to obtain reasonable assurance that the financial statements included in the annual report have been prepared in accordance with the ESEF Regulation. As part of our work, we performed procedures to obtain an understanding of the company’s processes for preparing its annual report in XHTML format. We evaluated the completeness and accuracy of the iXBRL tagging and assessed management’s use of judgement. Our work comprised reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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