0000919574-15-004610.txt : 20150521 0000919574-15-004610.hdr.sgml : 20150521 20150521160623 ACCESSION NUMBER: 0000919574-15-004610 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20150531 FILED AS OF DATE: 20150521 DATE AS OF CHANGE: 20150521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Golden Ocean Group Ltd CENTRAL INDEX KEY: 0001029145 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29106 FILM NUMBER: 15882852 BUSINESS ADDRESS: STREET 1: PAR LA VILLE PLACE, 4TH FLOOR STREET 2: 14 PAR LA VILLE ROAD CITY: HAMILTON HM 08 STATE: D0 ZIP: 00000 BUSINESS PHONE: 4412956935 MAIL ADDRESS: STREET 1: PAR LA VILLE PLACE, 4TH FLOOR STREET 2: 14 PAR LA VILLE ROAD CITY: HAMILTON HM 08 STATE: D0 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: Knightsbridge Shipping Ltd DATE OF NAME CHANGE: 20140930 FORMER COMPANY: FORMER CONFORMED NAME: KNIGHTSBRIDGE TANKERS LTD DATE OF NAME CHANGE: 19961217 6-K 1 d6540758_6-k.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13A-16 OR 15D-16 UNDER THE SECURITIES
EXCHANGE ACT OF 1934

For the month of May 2015

Commission File Number:  000-29106

Golden Ocean Group Ltd.
(Translation of registrant's name into English)

Par-la-Ville Place
14 Par-la-Ville Road,
Hamilton, HM 08, Bermuda
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ X ]     Form 40-F [   ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ________.

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ________.

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.





INFORMATION CONTAINED IN THIS FORM 6-K REPORT
 
Attached hereto as Exhibit I are the Consolidated Financial Statements for the fiscal year ended December 31, 2014, of Golden Ocean Group Limited (as it existed prior to its merger with Knightsbridge Shipping Limited on March 31, 2015) ("Former Golden Ocean"), and as Exhibit II is the Unaudited Pro Forma Condensed Financial Information for Golden Ocean Group Limited presented to illustrate (i) the combination of Golden Ocean Group Limited (formerly Knightsbridge Shipping Limited) and Former Golden Ocean, which combination was completed on March 31, 2015, and (ii) the purchase by Golden Ocean Group Limited of 12 special purpose companies, each owning one newbuiding contract, from Frontline 2012 Ltd. in March 2015. Attached hereto as Exhibit III is the consent of PricewaterhouseCoopers AS.

This report on Form 6-K is hereby incorporated by reference into Golden Ocean Group Limited's Registration Statement on Form F-3 filed with the SEC on July 2, 2014 (Registration Statement No. 333-197210) and its Registration Statement on Form F-3 filed with the SEC on March 26, 2015 (Registration Statement No. 333-203035).






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
Golden Ocean Group Ltd.
   
   
   
   
 
By:  /s/ Birgitte Vartdal
Date: May 21, 2015
Name:  Birgitte Vartdal
 
Title:    Principal Financial Officer




 
Exhibit I

Golden Ocean Group Limited
Index to the Consolidated Financial Statements 2014




Independent auditor's report
I-1
   
   
Consolidated Comprehensive Income Statement for the three years ended December 31, 2014
I-2
   
   
Consolidated Balance Sheet as at December 31, 2014 and 2013
I-3
   
   
Consolidated Cash Flow Statement for the three years ended December 31, 2014
I-4
   
   
Consolidated Statement of Changes in Equity for the three years ended December 31, 2014
I-5
   
   
Notes to Consolidated Financial Statements
I-6



 

Independent Auditor's Report

 
To the shareholders and Board of Directors of Golden Ocean Group Limited

We have audited the accompanying consolidated financial statements of Golden Ocean Group Limited and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2014 and December 31, 2013, and the related consolidated statements of comprehensive income, of cashflows  and  of changes in equity for each of  the three years in the period ended December 31, 2014.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.  The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.  In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Golden Ocean Group Limited and its subsidiaries at December 31, 2014, and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in accordance with  International Financial Reporting Standards as issued by the International Accounting Standards Board.


/s/ PricewaterhouseCoopers AS


Oslo, Norway
May  20, 2015






I-1
Golden Ocean Group Limited
                
Consolidated Comprehensive Income Statement
                
                 
(in thousands of $, except per share data which are in $)
                
       
2014
    
2013
    
2012
  
   
Notes
              
Operating revenue
                
Time charter and voyage charter revenues
    
3
      
246,005
      
276,457
      
227,137
  
Other operating revenue
    
3
      
7,453
      
32,444
      
2,703
  
Total operating revenue
            
253,458
      
308,901
      
229,840
  
                                 
Operating expenses
                                
Voyage expenses and commission
            
75,971
      
70,448
      
37,054
  
Impairment of trade receivables
            
-
      
-
      
6,199
  
Vessel operating expenses
            
56,404
      
46,012
      
41,468
  
Charter hire expenses
            
43,268
      
57,723
      
29,747
  
Administrative expenses
    
4
      
11,864
      
12,233
      
13,207
  
Depreciation
    
12.13
      
47,475
      
38,664
      
35,792
  
Impairment of vessels and vessels held under finance leases
    
5
      
183,300
      
-
      
30,288
  
Total operating expenses
            
418,282
      
225,079
      
193,755
  
                                 
Other gain (losses) net
                                
Share of income from associates and Joint Ventures
    
15
      
2,017
      
4,149
      
-
  
Adjustment of financial lease obligation
    
25
      
51,454
      
-
      
1,422
  
Other gains (losses) net
    
6
      
9,397
      
7,291
      
(3,142
)
Total other gains (losses) net
            
62,868
      
11,440
      
(1,720
)
                                 
Operating profit (loss)
            
(101,956
)
    
95,262
      
34,365
  
                                 
Interest income
    
7
      
1,134
      
1,096
      
1,372
  
Interest expense
    
8
      
(31,394
)
    
(19,115
)
    
(21,356
)
Other financial items
    
9
      
(3,188
)
    
7,423
      
(2,717
)
Total net financial items
            
(33,448
)
    
(10,596
)
    
(22,701
)
 
                                
Profit (loss)  before income tax
            
(135,404
)
    
84,666
      
11,664
  
Income tax
    
10
      
(197
)
    
(174
)
    
(67
)
Profit (loss)  for the period
            
(135,601
)
    
84,492
      
11,597
  
                                 
Other comprehensive income:
                                
Items that will not be subsequently reclassified to profit or loss
                                
Remeasurements of post employment obligations
    
31
      
(829
)
    
-
      
-
  
 
            
(829
)
    
-
      
-
  
                                 
Items that may be subsequently reclassified to profit or loss
                                
Changes in fair value of available-for-sale financial assets
            
(3,588
)
    
7,255
          
Recycling of changes in fair value of sold available-for-sale financial assets
            
(4,164
)
    
(339
)
        
Currency translation differences
            
-
      
-
          
Total comprehensive income (loss)  for the period
            
(144,182
)
    
91,408
      
11,597
  
                                 
Profit (loss) attributable to:
                                
- Owners of the parent
            
(135,008
)
    
83,875
      
11,602
  
- Non-controlling interests
            
(593
)
    
617
      
(5
)
Profit (loss)  for the period
            
(135,601
)
    
84,492
      
11,597
  
                                 
                                 
Comprehensive income (loss) attributable to:
                                
Owners of the parent
            
(143,589
)
    
90,791
      
11,602
  
Non-controlling interests
            
(593
)
    
617
      
(5
)
Total comprehensive income (loss)  for the period
            
(144,182
)
    
91,408
      
11,597
  
                                 
Basic and diluted earnings (loss) per share
    
11
    
$
(0.30
)
  
$
0.19
    
$
0.03
  
 
See accompanying notes that are an integral part of these financial statements
                                

I-2
Golden Ocean Group Limited
            
Consolidated Balance Sheet
            
       
2014
    
2013
  
(in thousands of $)
  
Notes
          
ASSETS
            
Non current assets
            
Vessels and equipment
    
12
      
698,258
      
667,788
  
Vessels held under finance leases
    
13
      
56,535
      
130,795
  
Vessels under construction
    
14
      
42,398
      
16,144
  
Other long term receivables
    
18
      
9,189
      
8,588
  
Available-for-sale financial assets
    
20
      
9,164
      
16,916
  
Derivative financial instruments
    
19
      
2,093
      
2,735
  
Installments on cancelled newbuildings
            
-
      
192,976
  
Investment in associates and Joint Ventures
    
15
      
10,481
      
17,419
  
Total non-current assets
            
828,118
      
1,053,361
  
Current assets
                        
Inventories
            
8,513
      
10,775
  
Trade and other receivables
    
18
      
21,554
      
25,495
  
Refundable installments on cancelled newbuildings
    
33
      
111,561
      
-
  
Restricted deposit
    
17
      
3,531
      
4,960
  
Cash and cash equivalents
    
17
      
106,147
      
93,881
  
Total current assets
            
251,306
      
135,110
  
Total assets
            
1,079,424
      
1,188,471
  
                         
EQUITY AND LIABILITIES
                        
Equity attributable to equity holders of the parent
                        
Share capital
    
21
      
44,731
      
44,726
  
Additional paid in capital
            
99,187
      
99,156
  
Other reserves
    
22
      
42,999
      
23,466
  
Retained earnings
            
282,059
      
453,434
  
             
468,976
      
620,782
  
Non-controlling interests
            
-
      
1,108
  
Total Equity
            
468,976
      
621,890
  
Non-Current Liabilities
                        
Long term debt
    
23.24
      
396,957
      
362,805
  
Obligations under finance leases
    
25
      
55,288
      
110,416
  
Derivative financial instruments
    
19
      
2,106
      
-
  
Other long term liabilities
            
2,201
      
3,476
  
             
 
      
 
  
Total non-current liabilities
            
456,552
      
476,697
  
Current Liabilities
                        
Long-term debt - current portion
    
23
      
128,435
      
41,214
  
Obligations under finance leases – current portion
    
25
      
4,290
      
7,370
  
Amount due to related parties
    
26
      
1,180
      
1,216
  
Trade payables and other current liabilities
    
27
      
19,991
      
40,084
  
Total current liabilities
            
153,896
      
89,884
  
Total liabilities and shareholders' equity
            
1,079,424
      
1,188,471
  
                         
See accompanying notes that are an integral part of these financial statements
                  
 
 
 
I-3
Golden Ocean Group Limited
                
Consolidated Cash Flow Statement
                
(in thousands of $)
      
2014
    
2013
    
2012
  
                 
                 
   
Notes
              
OPERATING ACTIVITIES
                
                 
Profit (loss) for the period
        
(135,601
)
    
84,492
      
11,597
  
Adjustments for:
                            
Share based payment
        
488
      
1,172
      
989
  
Stock options paid in cash
        
(54
)
    
(40
)
    
-
  
Gain on sale  of available-for-sale financial assets
        
(4,126
)
    
(339
)
    
(505
)
Share of (profit)  loss from associates and Joint Ventures
    
15
      
(2,017
)
    
(4,149
)
    
(1,422
)
Gain from purchase of Shares in Joint Venture
    
6.16
      
(6,198
)
    
-
      
-
  
Gain from refundable instalments for cancelled newbuildings
    
33
      
(19,458
)
    
-
      
-
  
Interest expensed
    
8
      
22,624
      
10,280
      
20,581
  
Interest income
    
7
      
(1,134
)
    
(1,096
)
    
(1,372
)
Depreciation
    
12.13
      
47,475
      
38,664
      
35,791
  
Impairment
    
5
      
183,300
      
-
      
30,288
  
Adjustment of financial lease obligation
            
(51,454
)
    
-
      
-
  
Amortisation of deferred charges
            
1,384
      
638
      
775
  
Foreign currency gain (losses)
            
340
      
(521
)
    
(383
)
Imputed interest on other long term receivables
            
(601
)
    
(562
)
    
(525
)
Net change in:
                                
Other long term receivables and liabilities
            
(302
)
    
(302
)
    
(441
)
Amount due to related parties
            
(35
)
    
(112
)
    
675
  
Derivative financial instrument
    
19
      
9,131
      
(6,562
)
    
5,064
  
Trade and other receivables
    
18
      
3,941
      
(10,818
)
    
8,111
  
Inventories
            
2,262
      
(5,025
)
    
(1,160
)
Trade payables and other current liabilities
    
27
      
(18,642
)
    
(5,005
)
    
19,422
  
Net cash provided by operating activities
            
31,323
      
100,714
      
127,486
  
INVESTING ACTIVITIES
                                
Changes in restricted deposit
            
1,429
      
3,217
      
3,382
  
Interest received
            
1,134
      
1,096
      
1,372
  
Payments on vessels
    
12.14
      
(154,536
)
    
(62,680
)
    
(41,431
)
Payment of business combination
    
12.14
      
(13,600
)
    
-
      
-
  
Capitalised docking and periodic maintenance
            
(13,231
)
    
(1,485
)
    
(3,430
)
Investment in financial assets-available- for sale
            
(136
)
    
(10,000
)
    
-
  
Investment in Joint Venture
    
15
      
-
      
(13,275
)
    
-
  
Dividend received Joint Venture
            
-
      
1,252
      
1,750
  
Proceeds from cancelled newbuildings
            
103,569
      
-
      
14,970
  
Sale of available-for-sale financial assets
            
4,126
      
339
      
33,835
  
Net cash provided by  (used in) investing activities
            
(71,245
)
    
(81,536
)
    
10,448
  
FINANCING ACTIVITIES
                                
Payment of financing charges
            
(3,685
)
    
(1,709
)
    
(2,031
)
Payment of interest
            
(17,880
)
    
(10,103
)
    
(20,522
)
Payment of interest swaps
            
(6,384
)
    
(3,954
)
    
(3,001
)
Purchase of treasury shares
            
-
      
-
      
(4,154
)
Repayment of obligations under finance leases
            
(6,817
)
    
(6,594
)
    
(6,255
)
Repayment of long term debt
            
(71,412
)
    
(36,770
)
    
(127,864
)
Proceeds from long term debt
            
-
      
33,947
      
11,250
  
Repayment of convertible bonds
            
-
      
-
      
(7,700
)
Payment of dividends
            
(41,670
)
    
(4,473
)
    
(22
)
Proceeds from  Convertible bonds
    
32
      
200,000
      
-
      
-
  
Purchase of own shares
            
-
      
-
      
-
  
Net cash (used in)  provided by financing activities
            
52,188
      
(29,656
)
    
(160,298
)
Net  change in cash and cash equivalents
          
12,266
      
(10,478
)
    
(22,364
)
Cash and cash equivalents at beginning of period
            
93,881
      
104,359
      
126,724
  
Cash and cash equivalents at end of period
    
17
      
106,147
      
93,881
      
104,359
  
 
 
 
I-4
Golden Ocean Group Limited
                            
Consolidated Statement of
                            
Changes in Equity
                            
  
Total Attributable to equity holders of the parent         
  
                             
(in thousands of $)
  
Share Capital
    
Additional
paid in
capital
    
Other Reserves
    
Retained
Earnings
              
 
Total
    
Non-
Controlling interests
    
Total Equity
  
 
Balance at January 1, 2012
    
45,699
      
104,801
      
14,085
      
364,803
      
529,388
      
496
      
529,884
  
Comprehensive income for the period
            
-
      
-
      
11,602
      
11,602
      
(5
)
    
11,597
  
Purchase and cancellation of treasury shares
    
(973
)
    
(5,646
)
    
2,465
      
-
      
(4,153
)
    
-
      
(4,153
)
Dividends and related tax
    
-
      
-
      
-
      
(22
)
    
(22
)
    
-
      
(22
)
Value of services under stock options scheme
    
-
      
-
      
-
      
989
      
989
      
-
      
989
  
Balance at December 31, 2012
    
44,726
      
99,156
      
16,550
      
377,372
      
537,805
      
491
      
538,296
  
                                                         
Comprehensive income for the period
    
-
      
-
      
6,916
      
83,875
      
90,791
      
617
      
91,408
  
Dividends and related tax
    
-
      
-
      
-
      
(8,946
)
    
(8,946
)
    
-
      
(8,946
)
Value of services under stock options scheme
    
-
      
-
      
-
      
1,132
      
1,132
      
-
      
1,132
  
Balance at December 31, 2013
    
44,726
      
99,156
      
23,466
      
453,434
      
620,782
      
1,108
      
621,890
  
                                                         
Comprehensive income  (loss) for the period
    
-
      
-
      
(8,581
)
    
(135,008
)
    
(143,589
)
    
(593
)
  
(144,182
 ) 
Equity portion Convertible Bond
    
-
      
-
      
28,114
      
-
      
28,114
      
-
      
28,114
  
Issue of new share capital
    
5
      
31
      
-
      
-
      
36
      
21
      
57
  
Dividends and related tax
    
-
      
-
      
-
      
(36,680
)
    
(36,680
)
    
(520
)
    
(37,200
)
Value of services under stock options scheme
    
-
      
-
      
-
      
488
      
488
      
-
      
488
  
Shares purchased from minority
                            
(121
)
    
(121
)
    
(16
)
    
(137
)
Stock option paid in cash
    
-
      
-
      
-
      
(54
)
    
(54
)
    
-
      
(54
)
Balance at December 31, 2014
    
44,731
      
99,187
      
42,999
      
282,059
      
468,976
      
0
      
468,976
  

I-5


1. GENERAL

Golden Ocean Group Limited (the "Company", "Group" or "Golden Ocean") was incorporated in Bermuda on November 8, 2004 as a limited company.

The Group consists of the parent company, its subsidiary companies and single purpose companies (note 36).  The principal activities of the Group are ship ownership and operation. The Company is also involved in chartering activity, as well as sale and purchase of vessels. The Group operated per year end a fleet of twenty seven owned and leased Panamax and Capesize drybulk vessels and has eight Supramax newbuilding contracts, as well as one Capesize owned in a joint venture. The Group may also trade forward freight agreements for the purpose of managing its exposure to the spot market and for speculating.
 
These financial statements were authorized for issuance on May 20, 2015.
 
2. PRINCIPAL ACCOUNTING POLICIES

The accompanying consolidated financial statements are prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as approved by the IASB. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit of loss.

The preparation of financial statement in conformity with IFRS requires the use of critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group's accounting policies.

The following are significant accounting policies adopted by the Group:

(a) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and all entities (including special purpose entities) over which the Group has control. The Group is considered to control an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and also has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases.

Results from subsidiaries that has been acquired or disposed during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The group applies the acquisition method to account for business combinations. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss as other gains.

The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures (which include any long-term interest that, in substance, form part of the Group's net investment in the joint ventures), the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the joint ventures.

 
I-6
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of impairment of the transferred asset. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. The change in accounting policies did not have any impact on the financial position, comprehensive income or the cash flows of the Group for all comparative periods presented.

Associated companies are entities in which the Group has a significant influence, but no controlling interest, generally ownership between 20% and 50%. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group's share of post–acquisition profits or losses from its associates is recognised in the income statement under other gain/losses net. Total losses from the associates will not exceed the total investment in the Company if no additional guarantees are provided.

All intra-group transactions and balances are eliminated on consolidation.

(b) Revenue and expenditure
Revenues are generated from voyage charter and time charter hire and are measured at fair value of the consideration received or receivable. A voyage charter is defined as starting after unloading at the end of the previous voyage, as long as a contract for the next voyage is in place based upon a discharge to discharge basis. If a new contract is not in place, the voyage is defined as starting when goods are loaded on the vessel. Demurrage revenue consists of additional charges against the customer due to the vessel waiting in harbour or for other reasons regulated in the contract, and is recognised as revenue if it is considered probable that the Group will receive payment.

Voyage expenses and commission, consisting of port expenses, bunkers expenses, broker commissions and other voyage related expenses such as insurance and cleaning for vessels are expensed in the period incurred.

Time charter revenue contracts are accounted for as operating leases under IAS 17 and time charter revenues are recognised on a straight-line basis over the term of the lease.

Operating expenses such as salary, lubricating oil, insurance, spare parts, repair and maintenance are classified as vessel operating expenses and are  expensed in the period incurred.

Charter hire expenses consist of charter hire payments for vessels chartered in on for a short term period.

(c) Pensions
The Company has set up a defined benefit scheme with a life insurance company to provide pension benefits for all its employees in Norway. The scheme provides entitlement to benefits based on future service from the commencement date of the scheme. These benefits are principally dependent on an employee's pension qualifying period, salary at retirement age and the size of benefits from the National Insurance Scheme. Full retirement pension will amount to approximately 70% of the scheme pension-qualifying income (limited to 12G). The scheme also includes entitlement to disability, spouses and children's pensions. The retirement age under the scheme is 67.

The Company may at any time make alterations to the terms and conditions of the pension scheme and undertake that they will inform the employees of any such changes. The benefits accruing under the scheme are funded obligations.

All pension schemes are calculated in accordance with IFRS (IAS 19R). Changes in the pension obligations is based on discounted present value of future estimated pension benefits earned on the balance sheet date, given certain Company premises.


I-7

(d) Borrowing cost
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds directly and indirectly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Borrowing costs are capitalised until the time when assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing cost eligible for capitalisation.

All other borrowing costs are recognised in the income statement during the period in which they are incurred.
 
(e) Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets on the Group's balance sheet at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as expenses in the income statement.

Rentals payable under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease.

Provisions for losses on existing contracts are made when the unavoidable costs of the contract exceed the expected revenue (onerous contracts). These provisions are measured at the best estimate based upon information available at the balance sheet date, hence are subject to change as further information becomes available. Such changes in estimates may affect the earnings of future periods.

(f) Translation of foreign currencies
The Group's functional and presentation currency is the United States Dollar (US dollars, USD or $) as the majority of revenues and expenditures are denominated in US Dollars.

Transactions in currencies other than the functional currency during the year are translated into US dollars at the rate of exchange at the date of the transaction. All monetary items are translated at the rate of exchange in effect at the balance sheet date. Non-monetary items are translated at historical rates, unless such items are carried at fair value, in which case they are translated at the rate of exchange in effect at the balance sheet date.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. Exchange differences of non-monetary items carried at fair value are included in the income statement for the period. Translation differences on non-monetary financial assets, such as equities classified as available-for-sale, are included in other comprehensive income.

The element of obligations under finance leases relating to options to purchase vessels, for which the exercise is reasonably certain and the exercise prices are denominated in foreign currencies, are considered monetary items. If it is considered unlikely that the purchase option will be exercised at some point in time, from then on the foreign currency element is considered a non-monetary liability and translated at the historical exchange rate at the date of the assessment.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are expressed in US dollars using the prevailing exchange rates on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences are presented as a separate component of equity.

I-8
(g) Property plant and equipment and depreciation
Assets are recorded at cost less accumulated depreciation and accumulated impairment losses.   Depreciation is provided on the basis that the book value of the assets, less any estimated residual value, is written off on a straight line basis over the assets remaining useful life. The Group annually reviews the useful life and residual value of assets, in accordance with IAS 16 'Property, Plant and Equipment'.

Newbuilding contracts are treated as Property, Plant and Equipment in a separate category ('vessels under construction'), and accounted for at cost, including capitalised borrowing costs.

Vessels under construction are carried at cost, less any recognised impairment loss. Costs include professional fees and capitalised borrowing costs in accordance with the Group's accounting policy.  Depreciation commences once the vessel is available for its intended use and is depreciated over its useful economic life (25 years). Depreciation is calculated using the straight line method based on the cost of the vessels, less any estimated residual value. The vessels residual value and useful life are reviewed at the end of each year. Residual value is based on broker valuations at the balance sheet date.

Vessels held under finance leases are depreciated over their expected useful life on the same basis as owned vessels (25 years) or, where shorter, the term of the relevant lease.

Fixtures and equipment are included in the category "Vessels and equipment, net"

Dry-docking costs are capitalised and depreciated over the estimated period to the next dry-dock. Unamortised costs are written off on disposal of the vessel.

The gain or loss arising from the disposal or retirement of a vessel is recorded in the income statement as the difference between the sales proceeds and the carrying amount of the asset.

Fixtures and equipment are depreciated over their expected useful lives.

(h) Impairment
At each reporting date, management reviews the carrying amount of its non-current assets to determine if there are any indications that the carrying amount may not be recoverable. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss being the amount the carrying amount exceeds the recoverable amount. Each vessel, newbuilding contract or lease vessel is considered as a Cash Generating Unit for the purpose of the impairment test.

The recoverable amount is the higher of the fair value of the asset less costs to sell, and its value in use.

When an impairment loss is identified the carrying value of the asset is reduced to the recoverable amount and the impairment loss is recorded in the income statement.

At the end of each reporting period the Group assess whether there is any indication that a previously recorded impairment may no longer exist or may have decreased. If such an indication exists, the Group estimates the recoverable amount of that asset. If the recoverable amount exceeds the carrying amount, a reversal of the impairment, up to and not exceeding recoverable amount, is recorded.
 
(i) Inventories
Inventories consist of bunker fuel on the vessels and stores (lubricating oil) and other supplies. Inventories are valued at the lower of cost and net realizable value. Cost is calculated on a first in first out basis. Bunker stock on vessels chartered out is sold and belongs to the charterer.



I-9
(j) Financial assets

Classification of financial assets
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be realized within 12 months after the reporting period.

(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group's loans and receivables comprise 'trade and other receivables' and cash and cash equivalents' in the balance sheet.

(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

Recognition and measurement of financial assets
Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value, and transaction costs are expensed in profit and loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the income statement within 'other (losses)/gains – net' in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit and loss as part of other financial items when the Group's right to receive payments is established. Changes in the fair value of the securities classified as available-for-sale are recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the profit and loss as 'other gains (losses)' and reclassified from other comprehensive income.

Derivatives
Derivative financial instruments are initially measured at fair value on the date a derivative contract is entered into and are subsequently measured at fair value. Movements in the fair value of derivative financial instruments are recognised in the profit and loss statement in other financial items.

Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less appropriate allowances for credit losses. If collection is expected in more than one year, they are presented as non-current assets.

I-10
Refundable installments for cancelled newbuildings
Upon cancellation of a newbuilding, an assessment is made whether the newbulding contract is a financial or a non-financial instrument. The newbuilding contract remains a non-financial instrument until such time as it is virtually certain that the opponent cannot release its obligation under the contract by the delivery of a non-financial asset.

When the refundable installments for cancelled newbuildings are classified as a financial instruments it is initially measured at fair value and subsequently measured at amortized cost.

When the refundable installments for cancelled newbuildings are classified as a non-financial instrument it is measured at the lower of its carrying amount and fair value.

Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, demand deposits with a maturity of less than three months, and other highly liquid investments with a maturity of less than three months when acquired that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets are impaired. For equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost evidence that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is recycled out of other comprehensive income and recognised in profit or loss. Impairment losses recognised in profit or loss are not reversed.
 
(k) Trade and other payables
The trade payables are initially recognised at fair value and are subsequently measured at amortised cost.

(l) Bank borrowings
Interest bearing bank loans and overdrafts are initially measured at fair value net of transaction costs incurred. Borrowings are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement and redemption of borrowings is recognised over the term of the borrowings.

Substantial modifications of the terms of existing borrowings are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Any costs or fees incurred are then recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the liability's carrying amount and are amortised over the modified liability's remaining term.

(m) Convertible bonds
The liability component of the convertible bond is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the convertible bond as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible bonds is measured at amortised cost using the effective interest method. The equity component of the convertible bonds is not re-measured subsequent to initial recognition.
 
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
I-11
When the Company repurchase convertible bonds, the difference between the fair value liability component at the repurchase date and the original fair value is recognised in the income statement under other financial items. Any remaining gains or losses are recognised as a repurchase of the equity component of the convertible bond.

(n) Share based payments
The Group issues equity settled share-based payments to certain directors and employees.  Equity settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant.  The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the shares that will vest and adjusted for the effect of non market-based vesting conditions.
The fair value is measured using a Black-Scholes model.  The inputs used in the model are based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

(o) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board (see note 3).

(p) Share capital
Ordinary shares issued are classified as share capital at par value. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction from the proceeds under additional paid in capital.

Where any Group company purchase the company's equity share capital (treasury shares), the consideration paid including any directly attributable incremental cost is deducted from equity (other reserve) until the shares are cancelled or reissued. When such treasury shares are cancelled, the nominal value is deducted from share capital and excess value is deducted from additional paid in capital.
 
(q) Recent accounting pronouncements
The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014:

Amendment to IAS 32, 'Financial instruments: Presentation' on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the group financial statements.

Amendments to IAS 36, 'Impairment of assets', on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. The amendment did not have a significant effect on the group financial statements.


I-12
New standards and interpretations not yet adopted:

IFRS 9 Financial Instruments addresses the classification, measurement, and recognition of financial assets, financial liabilities and hedge accounting. The final IFRS 9 standard was issued in July 2014. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into three measurement categories: those measured at fair value through profit and loss, those measured at fair value through other comprehensive income and those measured at amortised cost.  The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for a financial liability, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. IFRS 9 also includes a number of changes and simplifications that increase the possibilities for employing hedge accounting and a single, forward-looking "expected loss" impairment model. The Group is yet to assess IFRS 9's full impact.  IFRS 9 is effective on 1 January 2018 with early application permitted.

IFRS 15, 'Revenue from contracts with customers' establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The Group is yet to assess IFRS 15's impact.  IFRS 15 is effective for annual periods beginning on or after 1 January 2017.
 
(r) Critical accounting estimates and judgments
Estimates and judgments are evaluated and based on experience and other factors that are believed to be reasonable under the current circumstances. The following summarizes the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities and the judgments made in applying the Group's accounting policies.

Refundable installments on cancelled newbuildings
During 2014 the value of the financial assets increased by $19.5 million due to the cancellations and refund from Jinhaiwan. During the second quarter the Company received positive arbitration awards and increased the value of the financial assets by $10.5 million. For two contracts interest was not awarded initially, but in the fourth quarter the Company succeeded in their appeal in High Court that Golden Ocean had the right to refund of interest for the two contracts where interest was not initially awarded. The value of the financial assets therefore increased with $8.8 million in the forth quarter of 2014 principally due to this award. At year end the total value of the financial assets is $111.6 million for the six remaining contracts and it is expected that settlement will be mainly within the first quarter of 2015.

Impairment
Management tested all vessels for impairment at the end of 2014 due to identified indicators (decrease in newbuilding prices, second hand values and spot and forward rates). The last time the Company observed indicators for impairment and performed an impairment test was in the first quarter of 2013. Several of the vessels had recoverable amount below the carrying amount. The Company has recorded impairment on Vessels and equipment of $116.6 million in 2014. For Vessels under finance leases the Company recorded an impairment of $66.7 million, mainly due to early redelivery of Golden Heiwa and Ocean Minerva (total impairment of $57.3 million) in addition to impairment on Golden Lyderhorn.

Most of the vessels were impaired down to estimated broker values as per year end. If the broker values had dropped by 10%, ceteris paribus, the Group would have recognised an additional impairment loss of $52.4 million. A few vessels have carrying values supported by the value in use estimates. Based on WACC model described in note 5), the Company calculated a WACC of 7.41% for the end of 2014 (q1 - 2013: 6.92%). The WACC has increased from q1-2013 due to higher levels for interest rates and the higher volatility for dry bulk stocks relative to the overall equity market, increasing the beta for the dry bulk peers. If the estimated cost of capital (WACC) used in the valuation model had been 1% higher, ceteris paribus, than management's estimate above, the Group would have recognised a higher net impairment of $0.4 million in 2014. If the forward market had been 10 % lower, ceteris paribus, the Group would have recognised a higher impairment loss of $4.6 million in 2014. If the WACC had been 8.41%, and the forward market rates and the broker values had decreased by 10%, the impairment would have increased by $59.5 million in 2014.



I-13
Derecognition of finance lease liabilities

The group holds ships as a lessee under finance leases and it determined at inception of these leases that extension options as well as purchase options were reasonably certain to be exercised. As a result the lease term included these extension periods and the assumption to purchase the asset at the end of the lease term, and the minimum lease payments accounted for included the rentals due during these periods and the purchase price of the asset at the end of the lease period. On occasion, despite being reasonably certain at inception that such extension options will be exercised, circumstances change and the group change its expectations as to whether these options will in fact be taken up. IAS 17 does not permit the lease term to be re-evaluated subsequent to inception so the group continues to account for the original liability at amortized cost until such time as derecognition is achieved under IAS 39. The scope of IAS 39 states that its guidance on financial liability derecognition does apply to finance lease liabilities, so the group derecognizes the portion of the liability relating to the extension period when it is legally released from its rights and obligations with respect to the extension. In practice this means that the liability is released to profit or loss when the group returns the ship at the end of the minimum lease term, or earlier if it irrevocably waives its rights in respect of the extension period. During the current year, the group irrevocably waived its rights to exercise extension options on the Ocean Minerva and Golden Heiwa in Q4 and returned the ships to the lessor shortly after year end. The legal release from the obligation achieved in Q4 led to partial derecognition of the finance lease liabilities in respect of these ships in 2014.

 Any impairment triggered on finance lease assets is calculated in accordance with IAS 36.
 
3. SEGMENT INFORMATION

The Group and the chief operating decision maker measure performance based on the overall return to shareholders based on consolidated net income. Net cash flow generated from each vessel is measured and aggregated into a total performance which is considered the reportable segment for the company. The Group's vessels operate worldwide and therefore management does not evaluate performance by geographical region as this information is not meaningful.
 
(in thousands of $)
  
2014
    
2013
    
2012
  
Time Charter
    
129,301
      
165,036
      
169,638
  
Voyage charter
    
116,704
      
111,421
      
57,499
  
Time charter and voyage charter revenues
    
246,005
      
276,457
      
227,137
  
                         
 
    
 
      
 
      
 
  
 
The Group has two counterparts that contribute more than 10% of the total operating revenues. One contributes to $38.6 million (2013:$38.9 million and 2012:$45.9 million) and the other counterpart contributes to $24.0 million (2013:$37.7 million and 2012:$28.8 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands of $)
 
 
2014
 
 
 
2013
 
 
 
2012
 
Non performance settlements
 
 
5,349
 
 
 
31,078
 
 
 
1,402
 
Management fees
 
 
2,104
 
 
 
1,366
 
 
 
1,301
 
Total other operating revenue
 
 
7,453
 
 
 
32,444
 
 
 
2,703
 
 
 
None performance settlement in 2014 is related to a compensation for a default of a charter contract of $5.3 million (2013:$30.0 million and 2012:$1.4 million).

Management fee is mainly related to commercial management agreements with Knightsbridge Shipping Limited and Ship Finance International Ltd.


I-14

4. ADMINISTRATIVE EXPENSES

(in thousands of $)
 
2014
 
 
2013
 
 
2012
 
Employee benefit expense
 
 
5,627
 
 
 
4,691
 
 
 
4,635
 
Share based payment expense - note 30
 
 
590
 
 
 
1,172
 
 
 
989
 
Pension cost - note 31
 
 
647
 
 
 
574
 
 
 
690
 
Auditors' remuneration
 
 
501
 
 
 
213
 
 
 
228
 
Directors fee
 
 
291
 
 
 
271
 
 
 
270
 
Professional fees
 
 
2,217
 
 
 
3,406
 
 
 
4,314
 
Office and travel expenses
 
 
1,991
 
 
 
1,906
 
 
 
2,081
 
Total administrative expenses
 
 
11,864
 
 
 
12,233
 
 
 
13,207
 

 
5. IMPAIRMENT OF VESSELS, FINANCIAL LEASE VESSELS AND VESSELS UNDER CONSTRUCTION

The Group has booked impairment of $183.3 million for the year (2013: nil and 2012:$30.3 million). The Company booked a net impairment expense of $116.6 million for Vessels and $66.7 million for Vessels held under finance lease.

During the fourth quarter of 2014 current spot and forward rates, as well as broker values, dropped, indicating that that the carrying amount of the vessels and vessels under construction may not be recoverable. The recoverable amount of the assets was estimated in order to determine whether any impairment charges would be required in relation to the current book values.

The recoverable amount is the higher of the fair value of the asset less costs to sell, and its value in use. To estimate the fair value of the vessels, valuations from three independent brokers are collected. The broker valuations are prepared on a charter free basis and do not take into account the value of the long-term charters that the Group has entered into for some of the vessels. The mark-to-market value of the charter contract is added to the broker value to find the fair value of the asset. The mark-to-market value of the charter contract is calculated as the net present value of the charter hire rate less the forward market, multiplied by the number of days the charter is running.

When determining the value in use, estimated future cash flow is discounted using a WACC rate over the remaining useful life of the vessels. The estimated cash flows are based on the agreed charter rate for fixed periods for vessels with contracts in place and on the forward market revenues for open periods and vessels without a fixed contract, less an estimate of operating expenses.  Revenue on open periods and for vessels without a fixed contract is estimated by the Group based on the forward freight curve for minimum five next years and then an estimate development  for the remaining life. The underlying assumptions for the estimated revenues are applied consistently for estimating related expense. The Weighted Average Cost of Capital (WACC) is calculated as Debt Ratio * (risk free interest rate + loan margin) + Equity Ratio * (risk free interest rate + Beta * Risk Premium)

The book values exceeded the recoverable amount for most of the vessels. The broker values exceeded the value in use at the measurement date for most of the Vessels and were used as the recoverable amount for all vessels that were impaired. The broker value is considered to be within level 2 of the fair value hierarchy.

During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels will be redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease asset and taken impairment on the asset value of these two assets in the fourth quarter.

I-15
The impairment expenses recognised in 2014 related to the individual vessels are specified in the table below.
 
 
(in thousands of $)
 
2014
 
 
2013
 
 
2012
 
Impairment per CGU
 
  
 
 
  
 
 
  
 
Owned vessels
 
  
 
 
  
 
 
  
 
Golden Feng
 
 
5,900
 
 
 
-
 
 
 
18,700
 
Golden Shui
 
 
7,900
 
 
 
-
 
 
 
8,000
 
Golden Beijing
 
 
8,150
 
 
 
-
 
 
 
-
 
Golden Zhoushan
 
 
5,200
 
 
 
-
 
 
 
-
 
Golden Magnum
 
 
5,750
 
 
 
-
 
 
 
-
 
Golden Eminence
 
 
8,200
 
 
 
-
 
 
 
5,200
 
Golden Enterprise
 
 
8,000
 
 
 
-
 
 
 
-
 
Golden Daisy
 
 
6,450
 
 
 
-
 
 
 
-
 
Golden Ginger
 
 
6,200
 
 
 
-
 
 
 
-
 
Golden Rose
 
 
6,300
 
 
 
-
 
 
 
-
 
Golden Saguenay
 
 
7,700
 
 
 
-
 
 
 
-
 
Golden Opportunity
 
 
9,900
 
 
 
-
 
 
 
-
 
Golden Ice
 
 
11,100
 
 
 
-
 
 
 
-
 
Golden Strenght
 
 
9,800
 
 
 
-
 
 
 
-
 
Golden Suek
 
 
5,750
 
 
 
-
 
 
 
-
 
Golden Brilliant
 
 
3,000
 
 
 
-
 
 
 
-
 
Other Vessel
 
 
1,300
 
 
 
 
 
 
 
8,900
 
Vessels on financial lease
 
 
 
 
 
 
 
 
 
 
 
 
Golden Heiwa
 
 
28,600
 
 
 
-
 
 
 
-
 
Ocean Minerva
 
 
28,700
 
 
 
-
 
 
 
-
 
Golden Lyderhorn
 
 
9,400
 
 
 
-
 
 
 
-
 
Total impairment
 
 
183,300
 
 
 
-
 
 
 
40,800
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reversal of Impairment per CGU
 
 
 
 
 
 
 
 
 
 
 
 
Golden Nantong
 
 
-
 
 
 
 
 
 
 
10,500
 
Total reversal of impairment
 
 
-
 
 
 
 
 
 
 
10,500
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net impairment
 
 
183,300
 
 
 
 
 
 
 
30,300
 
 
 
6. OTHER GAINS (LOSSES) NET
 
 
(in thousands of $)
  
2014
    
2013
     2012  
Gain (loss) on Forward freight agreements
    
(14,170
)
    
7,368
       (2,509 )
Gain (loss) on bunkers derivatives
    
(2,089
)
    
(77
 )     (634 )
Gain  (loss) from refundable installments for cancelled newbuildings
    
19,458
      
-
       -  
Gain from purchase of Shares in Joint Venture - note 16
    
6,198
      
-
       -  
Total other gains (losses) net
    
9,397
      
7,291
       (3,143 )
 
 

I-16
The refundable installments on cancelled newbuildings have been reclassified from a non – financial asset to a financial asset based on the outcome of the arbitration in the second quarter. The asset has been measured at fair value when initially recognised in the second quarter and thereafter measured at amortised cost. The company has received final settlement of three contracts during 2014 resulting in a gain of $5.9 million. Furthermore there has been recognised a total net gain of $13.5 million in 2014 on the remaining refundable installmets.

7. INTEREST INCOME
 
(in thousands of $)
 
2014
 
 
2013
 
 
2012
 
Interest on  bank deposits
 
 
1,134
 
 
 
1,096
 
 
 
1,372
 
Total interest income
 
 
1,134
 
 
 
1,096
 
 
 
1,372
 

 
8. INTEREST EXPENSE
 
(in thousands of $)
 
2014
 
 
2013
 
 
2012
 
 
 
  
 
 
  
 
 
  
 
Interest on bank overdrafts and loans
 
 
25,966
 
 
 
12,440
 
 
 
15,792
 
Interest on obligations under finance leases
 
 
7,386
 
 
 
8,197
 
 
 
8,741
 
Total interest expense
 
 
33,352
 
 
 
20,637
 
 
 
24,533
 
Less amounts included in the cost of qualifying assets
 
 
(1,958
)
 
 
(1,522
)
 
 
(3,177
)
Net interest expense
 
 
31,394
 
 
 
19,115
 
 
 
21,356
 

 
9. OTHER FINANCIAL ITEMS

(in thousands of $)
  
2014
    
2013
    
2012
  
 
  
   
   
 
Interest swap
    
(7,401
)
    
6,187
      
(4,913
)
Dividend received
    
-
      
-
      
1,219
  
Foreign currency gain/ (losses)
    
(340
)
    
521
      
383
  
Other financial items
    
4,553
      
715
      
595
  
Total other financial items
    
(3,188
)
    
7,423
      
(2,717
)

In total the Company has sold 170,042 Korea Line shares and booked a gain of $4.1 million in 2014 under other financial items (2013:$1.1 million and 2012:$nil).
 
10. INCOME TAX

As of December 31, 2014, there is no Bermuda income, corporation, or profits tax, nor is there any withholding tax, capital tax, capital transfer tax, estate duty or inheritance tax payable by the Company.

The Company has obtained, from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966, an assurance that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital assets, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to the Company or to any of its operations, or to the Company's shares, debentures or other obligations, except in so far as such tax applies to persons ordinarily resident in Bermuda and holding the Company's shares, debentures or other obligations, or any property in Bermuda leased or let to the Company.

The Company's subsidiaries Golden Ocean Management AS, Golden Ocean Management Asia Pte Ltd and Golden Ocean (Cyprus) Ltd are subject to taxation in Norway, Singapore and Cyprus respectively. The tax charge for the year for Golden Ocean Management AS was $193,000 (2013: $174,000 and 2012:$62,000) and for Golden Ocean Management Asia Pte. Ltd. was $4,000 (2013: $nil and 2012:$5,000). The tax charge for Golden Ocean (Cyprus) limited was $nil (2013:$nil and 2012:$nil)).

I-17


11. EARNINGS PER SHARE
 
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the parent for continuing operations is based on the following data:
 
(in thousands of $)
2014
  
2013
  
2012
  
Earnings for the purposes of basic earnings per share
      
(profit for the year attributable to equity holders of the parent)
    
(135,008
)
    
83,875
      
11,602
  
Effect of interest expense on convertible debt
    
-
      
-
      
-
  
Earnings for the purposes of diluted earnings per share
    
(135,008
)
    
83,875
      
11,602
  
 
(in thousands of shares)
  
2014
    
2013
    
2012
  
Weighted average number or ordinary shares for the purposes
  
   
   
 
of basic earnings per share
    
447,314
      
447,262
      
453,500
  
Effect of dilutive potential ordinary shares:
                        
Convertible bonds
    
-
      
-
      
-
  
Stock options employees
    
-
      
4,945
      
-
  
Weighted average number or ordinary shares for the purposes
                        
of diluted earnings per share
    
447,314
      
452,207
      
453,500
  
 
                        
 
(in  $)
  
2014
    
2013
    
2012
  
Earnings (loss) per share basic
  
$
(0.30
)
  
$
0.19
    
$
0.03
  
Earnings (loss) per share fully diluted
  
$
(0.30
)
  
$
0.19
    
$
0.03
  
 
The stock options granted during 2012 were anti dilutive at the end of 2014 due to a loss per share for the year 2014.

I-18

12. VESSELS AND EQUIPMENT
 
The Group has the following owned vessels at December 31, 2014.
 
 
 
Vessel
Built
DWT
 
Flag
Channel Alliance
1996
171,978
 
Hong Kong
Channel Navigator
1997
172,058
 
Hong Kong
Golden Saguenay
2008
75,500
 
Hong Kong
Golden Opportunity
2008
75,500
 
Hong Kong
Golden Ice
2008
75,845
 
Hong Kong
Golden Feng
2009
170,500
 
Marshall Island
Golden Strength
2009
75,745
 
Hong Kong
Golden Shui
2009
170,500
 
Marshall Island
Golden Magnum
2009
179,788
 
Hong Kong
Golden Beijing
2010
176,000
 
Hong Kong
Golden Eminence
2010
79,447
 
Hong Kong
Golden Empress
2010
79,600
 
Hong Kong
Golden Endeavour
2010
79,600
 
Hong Kong
Golden Endurer
2011
79,600
 
Hong Kong
Golden Enterprise
2011
79,471
 
Hong Kong
Golden Zhoushan
2011
175,834
 
Hong Kong
Golden Suek
2011
74,500
 
Hong Kong
Golden Bull
2012
74,500
 
Hong Kong
Golden Daisy
2012
81,507
 
Marshall Island
Golden Ginger
2012
81,487
 
Marshall Island
Golden Rose
2012
81,585
 
Marshall Island
Golden Brilliant
2013
74,500
 
Hong Kong
Golden Pearl
2013
74,187
 
Hong Kong
Golden Diamond
2013
74,187
 
Hong Kong
Golden Ruby
2013
74,500
 
Hong Kong
 
 

I-19
(in thousands of $)
  
Vessels
    
Docking and periodic maintenance
    
Fixtures and Equipment
    
Total
  
Cost:
                
At January 1, 2012
    
732,825
      
4,052
      
454
      
737,331
  
Additions
    
1,206
      
3,430
      
7
      
4,643
  
Transferred from vessels under construction (note 10)
    
34,421
      
-
      
25
      
34,446
  
At December 31, 2012
    
768,452
      
7,482
      
486
      
776,420
  
                                 
At January 1, 2013
    
768,452
      
7,482
      
486
      
776,420
  
Additions
    
51,803
      
3,486
      
10
      
55,299
  
Transferred from vessels under construction (note 10)
    
29,214
      
1,000
      
-
      
30,214
  
At December 31, 2013
    
849,469
      
11,968
      
496
      
861,932
  
                                 
At January 1, 2014
    
849,469
      
11,968
      
496
      
861,932
  
Additions
    
128,253
      
11,367
      
29
      
139,649
  
Additions from purchase of business combination
    
45,500
      
-
      
-
      
45,500
  
Disposals
                            
-
  
 Transferred to non-current assets held for sale
    
-
      
-
      
-
      
-
  
At December 31, 2014
    
1,023,222
      
23,335
      
525
      
1,047,081
  
                                 
Accumulated depreciation and impairment:
                                
                                 
At January 1, 2012
    
97,697
      
1,815
      
378
      
99,890
  
Impairment
    
38,600
      
-
      
-
      
38,600
  
Depreciation
    
25,117
      
1,266
      
30
      
26,413
  
At December 31, 2012
    
161,414
      
3,081
      
408
      
164,903
  
                                 
At January 1, 2013
    
161,414
      
3,081
      
408
      
164,903
  
Impairment
    
-
      
-
      
-
      
-
  
Depreciation
    
27,192
      
2,025
      
25
      
29,241
  
At December 31, 2013
    
188,606
      
5,106
      
433
      
194,144
  
                                 
At January 1, 2014
    
188,606
      
5,106
      
433
      
194,144
  
Impairment (note 5)
    
116,573
      
-
      
-
      
116,573
  
Depreciation
    
34,161
      
3,930
      
16
      
38,107
  
At December 31, 2014
    
339,339
      
9,036
      
449
      
348,823
  
                                 
Carrying amount:
                                
At December 31, 2014
    
683,883
      
14,299
      
76
      
698,258
  
At December 31, 2013
    
660,863
      
6,862
      
63
      
667,788
  
At December 31, 2012
    
607,038
      
4,401
      
78
      
611,517
  
                                 
         


The Group has pledged most of its owned vessels to secure various banking facilities (note 23).


 
I-20


13. VESSEL HELD UNDER FINANCE LEASES
 
Vessel
  
Built
    
DWT
    
Flag
  
Golden Lyderhorn
  
1999
      
74,242
    
Hong Kong
  
Golden Eclipse
  
2010
      
79,600
    
Hong Kong
  
Ocean Minerva
  
2007
      
75,698
    
Panama
  
Golden Heiwa
  
2007
      
76,662
    
Panama
  
                 
(in thousands of $)
  
           
 
Cost:
                
At January 1, 2012
    
 
      
 
      
176,159
  
At December  31, 2012
                    
176,159
  
                         
At January 1, 2013
                    
176,159
  
Transferred to non-current assets held for sale
                        
At December  31, 2013
                    
176,159
  
                         
At January 1, 2014
                    
176,159
  
Additions - drydocking
                    
1,835
  
Transferred to non-current assets held for sale
                    
-
  
At December 31, 2014
                    
177,994
  
                         
Accumulated depreciation:
                        
At January 1, 2012
                    
28,168
  
Depreciation
                    
7,774
  
Transferred to non-current assets held for sale
                    
-
  
At December  31, 2012
                    
35,942
  
                         
At January 1, 2013
                    
35,942
  
Depreciation
                    
9,422
  
Transferred to non-current assets held for sale
                    
-
  
At December  31, 2013
                    
45,364
  
                         
At January 1, 2014
                    
45,364
  
Depreciation
                    
9,368
  
Impairment (note 5)
                    
66,727
  
At December 31, 2014
                    
121,459
  
                         
Carrying amount:
                        
At December 31, 2014
                    
56,535
  
At December  31, 2013
                    
130,795
  
At December  31, 2012
                    
140,217
  
 

Vessels held under finance lease are depreciated on the same basis as owned vessels. During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels were redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease asset and taken impairment on the asset value of these two assets in the fourth quarter.


I-21
 

14. VESSELS UNDER CONSTRUCTION

(in thousands of $)
  
 
     
At January 1, 2012
    
216,964
  
Additions
    
40,522
  
Reversal of impairment
    
8,312
  
Transferred to installments on cancelled newbuildings
    
(100,325
)
Disposals
    
(14,970
)
Transferred to vessels and equipment (note 12)
    
(34,421
)
At December 31, 2012
    
116,082
  
         
At January 1, 2013
    
116,082
  
Additions
    
22,288
  
Transferred to  installments on cancelled newbuildings
    
(92,012
)
Transferred to vessels and equipment (note 12)
    
(30,214
)
At December 31, 2013
    
16,144
  
         
At January 1, 2014
    
16,144
  
Additions
    
26,254
  
At December 31, 2014
    
42,398
  
 
 

None of the vessels under construction at December 31, 2014 are pledged as security to any banking facilities (2013:$nil and 2012:$91.7 million), see note 23.

Additions include installments, capitalized interest (note 8) and supervision on newbuildings.


15. INVESTMENT IN ASSOCIATED COMPANIES AND JOINT VENTURES

(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Golden Azalea Inc.
    
Seateam Management
    
Totals
  
Ownership
    
50
%
    
50
%
    
50
%
    
50
%
    
21
%
  
 
At January 1,  2012
    
1576
      
-
      
-
      
-
      
-
      
1,576
  
Additions
    
-
      
-
      
-
      
-
      
-
      
-
  
Dividends
    
(1,750
)
    
-
      
-
      
-
      
-
      
(1,750
)
Share of income
    
1422
      
0
      
0
      
0
      
0
      
1,422
  
                                                 
At  December 31,  2012
    
1248
      
0
      
0
      
0
      
0
      
1248
  
                                                 
At 1 January , 2013
    
1248
      
-
      
-
      
-
      
-
      
1,248
  
Additions
    
-
      
6,350
      
6,924
      
6,400
      
-
      
19,674
  
Disposals/Dividends
    
-
      
-
      
-
      
(7,653
)
    
-
      
(7,653
)
Share of income
    
673
      
834
      
1,276
      
1,253
      
114
      
4,149
  
                                                 
At 31 December, 2013
    
1921
      
7,184
      
8,200
      
-
      
114
      
17418
  
                                                 
At 1 January , 2014
    
1921
      
7,184
      
8,200
      
-
      
114
      
17,418
  
Additions
    
-
      
-
      
-
              
-
      
-
  
Disposals/Dividends
    
(1,500
)
    
-
      
-
      
-
      
(49
)
    
(1,549
)
Transfer to investment in subsidiaries
      
(7,405
)
    
-
      
-
      
-
      
(7,405
)
Share of income
    
954
      
221
      
564
      
-
      
277
      
2,017
  
At 31 December, 2014
    
1,375
      
-
      
8,764
      
-
      
342
      
10,481
  

 
 
I-22

(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Seateam Management
    
Totals
  
Ownership
    
50
%
    
50
%
    
50
%
    
21
%
  
 
At December 31, 2014
                                    
Current assets
                                    
Cash and cash equivalents
    
5,545
      
-
      
4,836
      
-
      
10,381
  
Other current assets
    
3,389
      
-
      
2,778
      
1,605
      
7,772
  
Total current assets
    
8,934
      
-
      
7,614
      
1,605
      
18,153
  
Current liabilities
                                        
Financial liabilities
    
-
      
-
      
1,833
      
-
      
1,833
  
Other current liabilities
    
6,184
      
-
      
2,591
      
-
      
8,775
  
Total current liabilities
    
6,184
      
-
      
4,424
      
-
      
10,608
  
                                         
Non-current assets
                                        
Assets
    
-
      
-
      
32,412
      
-
      
32,412
  
Total non-current assets
    
-
      
-
      
32,412
      
-
      
32,412
  
Non-current liabilities
                                        
Financial liabilities
    
-
      
-
      
18,073
      
-
      
18,073
  
Other liabilities
    
-
      
-
      
-
      
-
      
-
  
Total non-current liabilites
    
-
      
-
      
18,073
      
-
      
18,073
  
                                         
Net total assets
    
2,750
      
-
      
17,529
      
1,605
      
21,884
  
 
 
 
(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Seateam Management
    
Totals
  
Ownership
    
50
%
    
50
%
    
50
%
    
25
%
  
 
At December 31, 2013
                                    
Current assets
                                    
Cash and cash equivalents
    
3,606
      
804
      
-
      
-
      
4,410
  
Other current assets
    
1,848
      
4,586
      
4,845
      
456
      
11,735
  
Total current assets
    
5,454
      
5,390
      
4,845
      
456
      
16,145
  
Current liabilities
                                        
Financial liabilities
    
-
      
952
      
458
      
-
      
1,410
  
Other current liabilities
    
1,612
      
1,077
      
295
      
-
      
2,984
  
Total current liabilities
    
1,612
      
2,029
      
753
      
-
      
4,394
  
                                         
Non-current assets
                                        
Assets
    
-
      
33,310
      
33,630
      
-
      
66,940
  
Total non-current assets
    
-
      
33,310
      
33,630
      
-
          
Non-current liabilities
                                        
Financial liabilities
    
-
      
22,303
      
21,322
      
-
      
43,625
  
Other liabilities
    
-
      
-
      
-
      
-
      
-
  
Total non-current liabilites
    
-
      
22,303
      
21,322
      
-
      
43,625
  
                                         
Net total assets
    
3,842
      
14,368
      
16,400
      
456
      
35,066
  

The tables above reflect the total assets and liability for the Group's JV/associated companies.
 
The Group bought the remaining 50% of Golden Magnum Inc. in the first quarter of 2014 and it is now considered as a fully owned subsidiary where all assets and liability are consolidated into the Group's financial statement.


I-23
(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Golden Azalea Inc.
    
Seateam
    
2014
  
 
    
50
%
    
50
%
    
50
%
    
50
%
    
21
%
  
 
Revenue
    
31,204
      
1,613
      
13,044
      
-
      
6,710
      
52,571
  
                                                 
Depreciation
    
-
      
229
      
1,218
      
-
      
-
      
1,447
  
interest expense
    
-
      
(163
)
    
(678
)
    
-
      
-
      
(841
)
                                                 
Profit or loss from continuing operations
    
1,909
      
442
      
1,128
      
-
      
1,399
      
4,878
  
                                                 
Total comprehensive income
    
1,909
      
442
      
1,128
      
-
      
1,399
      
4,878
  
                                                 
Dividend received from joint venture or associate
    
1,500
      
-
      
-
      
-
      
-
      
1,500
  

 
(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Golden Azalea Inc.
    
Seateam
    
2013
  
 
    
50
%
    
50
%
    
50
%
    
50
%
    
25
%
  
 
Revenue
    
17,453
      
7,655
      
5,424
      
566
      
5,468
      
36,566
  
                                                 
Depreciation
    
-
      
676
      
376
      
-
              
1,052
  
interest expense
    
-
      
(204
)
    
-
      
-
      
-
      
(204
)
                                                 
Profit or loss from continuing operations
    
1,345
      
1,667
      
2,551
      
2,505
      
930
      
8,998
  
                                                 
Total comprehensive income
    
1,345
      
1,667
      
2,551
      
2,505
      
930
      
8,998
  
                                                 
Dividend received from joint venture or associate
    
-
      
-
      
-
      
1,253
      
-
      
1,253
  
 
 
(in thousands of $)
  
UFC
    
Golden Magnum Inc.
    
Golden Opus Inc.
    
Golden Azalea Inc.
    
Seateam
    
2012
  
 
    
50
%
    
50
%
    
50
%
    
50
%
    
25
%
  
 
Revenue
    
17,019
      
-
      
-
      
-
      
4,300
      
21,319
  
                                                 
Depreciation
    
-
      
-
      
-
      
-
              
-
  
interest expense
    
-
      
-
      
-
      
-
      
-
      
-
  
                                                 
Profit or loss from continuing operations
    
2,845
      
-
      
-
      
-
      
(440
)
    
2,405
  
                                                 
Total comprehensive income
    
2,845
      
-
      
-
      
-
      
(440
)
    
2,405
  
                                                 
Dividend received from joint venture or associate
    
1,750
      
-
      
-
      
-
      
-
      
1,750
  
 
 
I-24
 

16. ACQUISITION

During March 2014, the Company acquired the 50% outstanding shares in Golden Magnum Inc. for $13.6 million from the other joint venture partner. The acquisition resulted in a holding gain on the existing 50% share of 6.2 million, which has been included in other gains in profit and loss in the first quarter of 2014. The purpose of the acquisition was that the Company looked at it as a very good prospect in an expected increasing cape market.

The shares were acquired by $13.6 million in cash which is also considered to be the fair value of the consideration.

The fair value of the assets and liabilities in Golden Magnum Inc. were as follows at the acquisition date.
 
(in thousands of $)
  
2014
  
   
March 12
  
Non current assets
    
Vessel and equipment
    
45,500
  
Total non-curremt assets
    
45,500
  
Current assets
        
Cash and cash equivalents
    
1,512
  
other current assets
    
4,014
  
Total current assets
    
5,526
  
Tota assets
    
51,026
  
Non current liabilities
        
Long term debt
    
22,326
  
Total non-current liabilities
    
22,326
  
Current liabilities
        
Long term debt - current portion
    
952
  
other current liabilities
    
548
  
Total current liabilities
    
1,500
  
Total liabilities
    
23,826
  
         
Total identifiable net assets
    
27,200
  

The investment was transferred from investment in joint ventures to investments in subsidiaries as a wholly owned subsidiary and consolidated from the same date.

Since the acquisition date the Group has included $8.0 million in revenues and $0.7 million in profit and loss for the period ended December 31, 2014.  Had the acquisition occurred as of the beginning of the year, the revenue reported for the combined entity would have been $1.3 million higher with a $0.4 million decrease in loss.


17. CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSIT

(in thousands of $)
  
2014
    
2013
  
 
  
   
 
Cash at bank and in hand
    
76,147
      
81,381
  
Short-term deposits
    
30,000
      
12,500
  
Cash and cash equivalents
    
106,147
      
93,881
  
Restricted deposit
    
3,531
      
4,960
  
Cash and cash equivalents and restricted deposit
    
109,678
      
98,841
  
 

Deposit of $3.5 million (2013:$5.0 million) is restricted. Of this, $2.8 million is related to deposits on trading in financial instruments (2013:$3.2 million), $0.2 million for employee taxes (2013:$0.2 million) and $0.5 million is a deposit for a tender bid (2013:$0.5 million).


 


I-25

 
18. TRADE AND OTHER RECEIVABLES

 
(in thousands of $)
  
2014
    
2013
  
         
Trade receivables, net
    
2,555
      
7,343
  
Other receivables
    
20,511
      
15,867
  
Prepayments
    
7,677
      
10,873
  
Accrued income
            
-
  
     
30,743
      
34,083
  
                 
Less non-current portion: other receivables
    
(9,189
)
    
(8,588
)
Current portion
    
21,554
      
25,495
  

 
The current portion of other receivables consists at December 31, 2014 mainly of prepayment to managers and agents of $5.7 million (2013:$3.6 million) and reclassification of bunkers inventory of $3.7 million (2013:$1.8 million) as the charterer have deducted bunkers before redelivery of the vessel.

The non-current portion of other receivables relates to the sale of MV Bellflower in 2009 and falls due within three years. The non-current amount due is $10.0 million and the discounted amount per December 31, 2014 is $9.2 million (based on a 7% discount rate) and $8.6 million at December 31, 2013. The non-current receivables are secured with a mortgage on the sold vessel.

The fair value of trade and other receivables are as follows:

 
  
Carrying amount
    
Fair value
  
(in thousands of $)
  
2014
    
2013
    
2014
    
2013
  
Trade receivables
    
2,555
      
7,343
      
2,555
      
7,343
  
Other receivables
    
20,511
      
15,867
      
20,511
      
15,867
  
 
    
23,066
      
23,210
      
23,066
      
23,210
  

The fair values of the non-current portion of the other receivables are based on the discounted cash flows of the assets. The discount rate equals LIBOR plus a margin for an appropriate credit rating (7% have been used for 2014 and 6% for 2013). The fair values of trade receivables and other receivables are within level 3 of the fair value hierarchy.

Out of total outstanding trade receivables of $2.6 million, $1.2 million was overdue but not impaired as of December 31, 2014. These receivables relate to a number of independent customers for whom there is no recent history of default. At December 31, the ageing analysis of these trade receivables is as follows.
 
 
(in thousands of $)
  
2014
    
2013
  
Up to 3 months
    
825
      
2,538
  
3 to 6 months
    
225
      
559
  
More than 6 months
    
110
      
556
  
     
1,160
      
3,653
  
 
 

 
I-26



19. DERIVATIVE FINANCIAL INSTRUMENTS

(in thousands of $)
  
2014
    
2013
  
 
  
December
    
December
  
Assets
        
Interest derivatives
    
2,093
      
2,566
  
Bunkers derivatives
            
169
  
Forward freight agreements
    
-
      
-
  
Total assets
    
2,093
      
2,735
  
                 
Liabilities
                
Interest derivatives
    
545
      
-
  
Bunkers derivatives
    
1,561
      
-
  
Total liabilities
    
2,106
      
-
  
 

20. AVAILABLE-FOR-SALE FINANCIAL ASSETS

(in thousands of $)
  
2014
    
2013
  
         
At 1 January, 2014
    
16,916
      
-
  
Additions
    
-
      
10,000
  
Changes in fair value of available-for-sale financial assets
    
(3,588
)
    
7,255
  
Disposals
    
(4,164
)
    
(339
)
             
-
  
At December 31, 2014
    
9,164
      
16,916
  
                 

(in thousands of $)
  
2014
    
2013
  
 
  
   
 
Listed Equity securities:
        
Korea Line Corporation - Asia
    
-
      
4,166
  
Knightsbridge Shipping Limited - US
    
109
      
107
  
Unlisted Equity securities:
                
Greenship Bulk Trust - Europe
    
9,055
      
12,644
  
 
            
-
  
Total available for sale-financial assets
    
9,164
      
16,916
  

(in thousands of $)
  
2014
    
2013
  
 
  
   
 
Currencies:
        
NOK (Norwegian kroner)
    
9,055
      
12,644
  
KRW (Korean Won)
    
-
      
4,166
  
US dollar
    
109
      
107
  
 
            
-
  
Total available for sale-financial assets
    
9,164
      
16,916
  


I-27


 
21. SHARE CAPITAL


(in thousands of $)
  
2014
    
2013
  
5,000,000,000 ordinary shares of $0.10 par value each
    
500,000
      
500,000
  
                 
Issued and fully paid share capital is as follows:
                
(in number of shares)
    
2014
      
2013
  
At January 1
    
447,261,796
      
447,261,796
  
Issued during the year
    
52,500
      
-
  
Shares cancelled
    
-
      
-
  
At December 31, 2014
    
447,314,296
      
447,261,796
  
                 
(in thousands of $)
    
2014
      
2013
  
At January 1
    
44,726
      
44,726
  
Issued for cash
    
5
      
-
  
Shares cancelled
    
-
      
-
  
At December 31, 2014
    
44,731
      
44,726
  
 
 

The Company's ordinary shares were listed on the Oslo Stock Exchange ("OSE") and Singapore Stock Exchange ("SGX") as per year end 2014. The issued shares are fully paid. All issued shares in the Company are of the same class and have the same rights in the Company. Each share in the Company carries one vote.

The outstanding issued shares in Golden Ocean Group Limited are 447,314,296 at December 31, 2014 and 447,261,796 in 2013.
 
The twenty largest shareholders as at December 31, 2014 are as follows:

         
Name
  
Number of Shares
    
Outstanding shares
  
Hemen Holding Limited
    
183,666,158
      
41.06
%
Skagen Kon-Tiki
    
22,086,808
      
4.94
%
Folketrygdfondet
    
18,252,277
      
4.08
%
Clearstream Banking S.A.
    
9,360,894
      
2.09
%
Carling
    
4,000,000
      
0.89
%
EGD Capital AS
    
3,000,000
      
0.67
%
Danske Bank A/S
    
2,928,208
      
0.65
%
DNB Nor Bank ASA
    
2,810,936
      
0.63
%
Euroclear Bank S.A/N.V. ('BA')
    
2,766,341
      
0.62
%
DZ Privatbank S.A.
    
2,668,500
      
0.60
%
The Bank of New York Mellon
    
2,644,098
      
0.59
%
Odin Maritim
    
2,500,000
      
0.56
%
KLP Aksje Norge Indeks VPS
    
2,455,906
      
0.55
%
Nordnet Bank AB
    
2,428,909
      
0.54
%
Credit Suisse Securities
    
2,319,742
      
0.52
%
Tofte
    
2,000,000
      
0.45
%
Guggenheim Shipping Etf
    
1,910,293
      
0.43
%
J.P. Morgan Chase N.A. London
    
1,873,489
      
0.42
%
J.P. Morgan Chase N.A. London
    
1,793,318
      
0.40
%
KLP Aksje Norge VPF
    
1,789,599
      
0.40
%
Total 20 largest shareholders
    
273,255,476
      
61.09
%
Other shareholders
    
174,058,820
      
38.91
%
Total
    
447,314,296
      
100.00
%
 
 
I-28

Our principal shareholders are Hemen Holding Ltd. and Farahead Investment Inc., which we refer to jointly as Hemen, are indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family. Farahead Investments Inc. has borrowed 70,000,000 shares from Hemen Holding Ltd. For the purpose of this overview these shares are consolidated and presented as ownership of Hemen Holding Ltd.


22. OTHER RESERVES

Other reserves come from gain or loss arising from the change in the fair value of available-for-sale financial assets (note 20), the equity component of convertible bonds issued (note 24), f/x translation and re-measurement of post- employment obligations. Other reserves are broken down between the four categories as follows:

(in thousands of $)
  
Available for sale financial assets
    
Convertible Bond
    
Re-measurement of post-employment obligations
    
Translation
    
Total
  
                     
At January 1, 2013
        
16,635
      
-
      
(85
)
    
16,550
  
Other comprehensive income
    
6,916
      
-
      
-
      
-
      
6,916
  
At December 31, 2013
    
6,916
      
16,635
      
-
      
(85
)
    
23,466
  
Equity portion Convertible bond
    
-
      
28,114
      
-
      
-
      
28,114
  
Re-measurement of post-employment obligations
    
-
      
-
      
(829
)
    
-
      
(829
)
Other comprehensive income
    
(7,752
)
    
-
      
-
      
-
      
(7,752
)
At December 31, 2014
    
(836
)
    
44,749
      
(829
)
    
(85
)
    
42,999
  


 
23. LONG-TERM DEBT

(in thousands of $)
  
2014
    
2013
  
 
  
   
 
Within one year
    
128,435
      
41,214
  
Between one and two years
    
67,749
      
120,651
  
Between two and five years
    
334,762
      
180,172
  
After five years
    
-
      
67,373
  
Total debt
    
530,946
      
409,410
  
Current portion
    
(128,435
)
    
(41,214
)
Long-term debt, nominal value
    
402,511
      
368,196
  
Value of sellers credit
    
(520
)
    
(1,029
)
Deferred transaction costs
    
(5,034
)
    
(4,362
)
Long-term debt, net
    
396,957
      
362,805
  
 

All debt, $530.9 million (2013:$409.4 million) is secured by mortgages over sailing vessels except the Convertible bond with a book value of $178.2 million (2013:$nil).

All debt related to the cancelled newbuildings has been classified as short term debt as it falls due following the final arbitration award. Furthermore, two facilities expire within one year from the balance sheet date and the total loan amount ($83.6 million) is classified as short term debt. These loans are refinanced in the first quarter of 2015 and will be classified as long term debt going forward.

Each of the Company's loan agreements contains a loan-to-value clause, which could require the Company to post collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings decrease below a required level. In addition, the loan agreements contain certain financial covenants including the requirement to maintain $40 million of free cash, a certain level of minimum equity and a minimum equity ratio as well as a minimum level of the ratio between EBITDA to Interest. Failure to comply with any of the covenants in each loan agreements could result in a default, which would permit the lender to accelerate the maturity of the debt and to foreclose upon any collateral securing the debt.

For one loan agreement ($34.0 million outstanding) the aggregate values of the vessels were below the required threshold in the loan-to-value clause. However this loan was repaid in full first half of January in connection with the refinancing and was also classified as short term debt due to its expiry within a year from December 31, 2014.


I-29

The value of sellers' credit relates to an interest component on the purchase price with three years down-payment after delivery of the vessels Golden Pearl and Golden Diamond.
 
Long-term debt and obligations under finance lease liabilities

(in thousands of $)
  
2014
    
2013
  
 
  
   
 
Non-current
        
Bank borrowings and sellers credit
    
218,781
      
362,805
  
Convertible Bond
    
178,176
      
-
  
Finance lease liabilities
    
55,288
      
110,416
  
 
    
452,245
      
473,221
  
                 
Current
                
Bank borrowings and sellers credit
    
128,435
      
41,214
  
Finance lease liabilities
    
4,290
      
7,370
  
 
    
132,725
      
48,584
  
Total borrowings
    
584,970
      
521,805
  

All debt is denominated in US Dollars and the bank debt has an interest rate at LIBOR plus a fixed margin of an average of 2.70 percent. The interest rate is mainly reprised on a monthly basis, while some facilities are reprised on a quarterly basis. The nominal Convertible bond debt ($ 200 million) has a fixed coupon of 3.07% p.a.

 
24. CONVERTIBLE BOND

During January 2014 the company issued a $ 200 million 3.07% senior unsecured convertible bonds due 2019, with a conversion price of $2.86.  The bond was separated into a liability and equity component upon initial recognition of the instrument. The estimated fair value of the liability component at the time the bond was issued is $171.4 million and is recorded as the initial carrying amount of the liability. The residual value of $28.1 million is recognised as an equity component.

(in thousands of $)
  
Carrying value
    
Fair Value
  
   
December
    
December
  
Convertible bond
    
178,176
      
158,500
  

The fair value of the convertible bonds is based on market prices on OTC market in Oslo at December 31, 2014. The fair value for the bond is observed in the market and thereby includes both the value of the liability component and equity component. The fair values are within level 2 of the fair value hierarchy.
 
 
25. OBLIGATIONS UNDER FINANCE LEASES
 
 
  
Within one year
    
2-5 years
    
6-10 years
    
Total
  
(in thousands of $)
  
12/31/2014
    
12/31/2013
    
12/31/2014
    
12/31/2013
    
12/31/2014
    
12/31/2013
    
12/31/2014
    
12/31/2013
  
Minimum Lease Payments
  
   
   
   
   
   
   
   
 
Interest
    
5,664
      
7,501
      
17,305
      
28,652
      
125
      
4,609
      
23,094
      
40,762
  
Purchase option
    
-
      
-
      
11,500
      
55,017
      
33,550
      
33,550
      
45,050
      
88,567
  
Instalments
    
4,290
      
7,370
      
10,183
      
18,852
      
55
      
2,996
      
14,528
      
29,218
  
Total Minimum Lease Payments
    
9,954
      
14,871
      
38,988
      
102,521
      
33,730
      
41,155
      
82,672
      
158,547
  
                                                                 
Less interest
                                                    
(23,094
)
    
(40,762
)
Present Value of Lease Obligations
                                              
59,578
      
117,785
  
                                                                 
Current portion
                                                    
4,290
      
7,370
  
Non-current portion
                                                    
55,288
      
110,416
  
 
 
I-30
 
 

The Group has recorded finance leases on four vessels at December 31, 2014 (2013: four).The Group has purchase options and the exercise price of the option changes based upon the date the option is exercised.

During the fourth quarter of 2014 the Company decided not to extend the optional periods on the vessels Ocean Minerva and Golden Heiwa and the vessels will be redelivered to owners during January and February 2015 respectively. As a consequence the Company has revalued the finance lease obligation and removed the future liability $51.5 million on these two assets in the fourth quarter.

The table below lays out the approximate latest exercisable dates and purchase option amounts based on the date the purchase options are calculated to be exercisable.
 
(in thousands of $)
Purchase option  exercisable  date
  
Purchase option amount
  
Golden Lyderhorn
September 2016
    
11,500
  
Golden Eclipse
April 2020
    
33,550
  

All lease payments are denominated in US Dollars. The Group's finance lease obligations are secured by the lessor's title to the leased assets.
 
 
26. RELATED PARTY TRANSACTIONS

Frontline Ltd and its subsidiaries, Ship Finance International Limited and its subsidiaries and Knightsbridge Shipping Limited and its subsidiaries, are related parties due to the significant influence of a single shareholder.

Frontline Ltd provides the Group with certain administrative services under the terms of an administrative management contract relating to the Bermuda office and the London office. The Group has administrative expenses related this of $339,000 (2013:$143,000 and 2012:$149,000).

Frontline Ltd reimbursed the Group a fixed fee of $150 per day per owned vessel for technical management. In the year ended December 31, 2014, the Group was charged $1,379,000 under this arrangement (2013:$1,177,000 and 2012:$473,000). The Group pays also a fee to Frontline Ltd for supervision of vessels under construction amounting to $1.8 million in 2014 (2013:$0.1 million and 2012:$3.0 million). Supervision activity in 2013 only relates to a short period with the Supramax newbuildings.

In September 2010, the Company entered into a commercial agreement with Ship Finance International Limited, to both operate and financial report for the company's dry-bulk vessels and container vessels. During the year the Company has received $761 000 in respect of this agreement (2013: $714,000 and 2012:$866,000).

In 2013 United Freight Carriers, the joint venture owned 50% by the Company, entered into charter contracts with Ship Finance International Limited for four of their drybulk carriers. The charter contracts include profit sharing and the joint venture paid $1.1 million to Ship Finance International Limited related to these vessels in 2014 (2013:$0.8 million).

In 2014 Frontline 2012 and Hemen Holding Ltd acquired shares in Knightsbridge Shipping Limited and this company is therefore considered as a related party from 2014. Golden Ocean provides Knightsbridge Shipping Limited with commercial management services for the dry bulk vessel in the company. In 2014 Golden Ocean received $1,190,000 in management fee (2013: $408,000 and 2012: $533,000).
 
The Group has the following year end balances with related parties:
 
 
  
 
(in thousands of $)
  
2014
    
2013
  
Frontline Ltd and subsidiaries
    
787
      
1,216
  
Knightsbridge Shipping Limited
    
393
      
158
  
Total liability
    
1,180
      
1,374
  

The amounts outstanding are unsecured, bear no interest, and will be settled in cash. No guarantees have been given or received.

No expense has been recognised in the period for any allowances for credit losses in respect of the amounts owed by related parties.
 
 
I-31
 

Remuneration of key management personnel and directors
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
 
The remuneration of directors and CEO of Golden Ocean Management AS during the year was as follows:

(in thousands of $)
  
2014
    
2013
    
2012
  
Managing director
    
787
      
671
      
730
  
Director fees
    
291
      
270
      
270
  
Share based payments
    
60
      
143
      
91
  
Total
    
1,138
      
1,084
      
1,091
  

The table below shows the total number of shares owned directly or indirectly by the CEO of Golden Ocean Management AS and Directors as at December 31, 2014.
 
 
Number of
shares
Percentage of
 outstanding
shares
John Fedriksen (Chairman, CEO, President and Director)
*
*
Kate Blankenship (Director)
206,000
0.05%
Hans Christian Børresen (Director)
106,000
0.02%
Georgina Sousa
-
0.00%
Harald Thorstein
-
0.00%
Herman Billung (CEO)
100,000
0.02%
 
412,000
0.09%

* Hemen is indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family. Mr. Fredriksen disclaims beneficial ownership of the 183,666,158 ordinary shares held by Hemen. This is equivalent to 41.06 per cent of the outstanding shares.


27. TRADE PAYABLES AND OTHER CURRENT LIABILITIES

(in thousands of $)
  
2014
    
2013
  
 
  
December
    
December
  
Trade payables
    
1,865
      
1,512
  
Accruals
    
11,311
      
6,273
  
Deferred revenue
    
4,462
      
27,540
  
Other current liabilities
    
2,353
      
4,759
  
Total
    
19,991
      
40,084
  

Deferred revenue relates to time charter revenue received in advance for future periods.

28. CAPITAL COMMITMENT

 
(in thousands of $)
  
Within one year
    
2-5 years
    
Total
  
 
  
12/31/2014
    
12/31/2013
    
12/31/2014
    
12/31/2013
    
12/31/2014
    
12/31/2013
  
Vessels and equipment
    
-
      
-
      
-
      
-
      
-
      
-
  
Vessels under construction
    
114,839
      
23,511
      
56,925
      
171,764
      
171,764
      
195,275
  
Total
    
114,839
      
23,511
      
56,925
      
171,764
      
171,764
      
195,275
  

The Company has a newbuilding program of eight Supramax vessels. Five of the vessels are expected to be delivered during first half of 2015 while the remaining three are expected to be delivered during first half of 2016.
 
 
 
I-32

29. OPERATING LEASES

Rental expense
The future minimum rental payments under the Group's non-cancellable operating leases as of December 31 are as follows:

(in thousands of $)
  
2014
    
2013
  
   
December
    
December
  
Within one year
    
2,045
      
25,099
  
In the second to fifth years
    
-
      
17,351
  
Later than five years
    
-
      
-
  
Total minimum lease payments
    
2,045
      
42,450
  

Total rental expense for 2014 was $43.3 million (2013: $57.7 million and 2012:$29.7 million).
Rental income
The minimum future revenue payments (including owned vessels) to be received under the Group's non-cancellable operating leases as of December 31, 2014 are as follows:
 
(in thousands of $)
  
2014
    
2013
  
 
  
December
    
December
  
Within one year
    
73,883
      
67,251
  
In the second to fifth years
    
152,873
      
164,207
  
Later than five years
    
18,239
      
55,918
  
Total minimum lease revenue
    
244,995
      
287,376
  
 

Total rental income for 2014 was $246.0 million (2013: $276.5 million and 2012:$227.1 million).



30. SHARE BASED PAYMENTS

On March 21, 2005 the Company approved a share option plan under which share options may be granted to directors and eligible employees. The plan has a limited term of ten years.

During the term of the plan the Board may grant options to acquire the Company's shares at a subscription price that the Board shall resolve, provided that such price is not lower than the average of the middle market quotations of the shares as derived from the Oslo Stock Exchange (or any stock exchange on which the Company's shares are traded) for the three immediately subsequent dealing days on that Exchange, and the nominal value of $0.10. In the share option plan, the Company has reserved the right upon receipt on a notice of exercise of an option to make cash payment in lieu of issuing shares that would be due on the exercise of the option.
 

 
I-33
The Company issued 500,000 share options in November 2009 to the Company's Directors with a five year term. These options expired in November 2014 and were out of the money at the time of expiry.

The Company issued 4,500,000 share options in October 2012 to certain of the Company's Directors and employees. At the same time the share option program issued in July 2010 for 2,750,000 options was cancelled. The share options have been granted on the terms set forth in the Company's above approved share option plan. The new share options will have a five year term and will vest equally one quarter each year over a four year vesting period with the first quarter vesting in October 2013. The cancellation and reissue of share options discussed above is treated as modification of share options.

For the new options granted in 2012 the fair value for the options was calculated to NOK 2.79 per share at the date of grant. The stock options were valued based on the Black-Scholes option pricing model. The options were granted at NOK 4.60 per share and the stock price at the day of grant was NOK 4.16. The duration of the options is five years and the Company therefore used a five year NOK risk free interest rate, at 1.45%. There is no trading of options in the Golden Ocean share so the volatility was based on the last five year history on the share price, and a volatility of 88% was applied to the calculations.  The strike price will be adjusted for dividends going forward. The employees must still be employed in the Company when exercising the options and based on the historically low turnover rate in the Company the model assumes that all employees will remain employed at the Company when the options are exercisable. For the options that were cancelled the remaining life was four years and the Company therefore applied a four year risk free interest rate at 1.46% and four years history to calculate the historic volatility at 92.2%. For these options the additional cost was calculated as the value of new options less the current value of the cancelled options. The incremental fair value of the modified options was at NOK 0.61 per option.

 
  
2014
    
   
2013
    
 
 
  
December
    
   
December
    
 
 
  
Number of share options
    
Weighted average
exercise price
    
Number of share options
    
Weighted average
exercise price
  
 
  
   
USD
    
   
USD
  
At the beginning of the year
    
4,945,000
      
0.74
      
5,000,000
      
1.60
  
Exercised year to date
    
(90,000
)
            
(55,000
)
        
Expired
    
(700,000
)
            
-
      
-
  
Outstanding
    
4,155,000
      
0.53
      
4,945,000
      
0.74
  
Exercisable
    
2,030,000
      
0.53
      
1,570,000
      
0.74
  

The outstanding options at the end of 2014 have a weighted average remaining contractual life of 2.7 years (2013: 3.5 years). There were 90,000 options exercised in 2014 (2013: 55,000) and 700,000 options expired (2013: 0). The Company's shares are traded on the Oslo Stock Exchange in Norwegian Kroner (NOK).  All share option calculations have been made in NOK and converted at the exchange rate prevailing at the balance sheet date.

The Group recognised total expenses of $580,000 (2013:$1,172,000 and 2012:$989,000) relating to the equity settled share-based option scheme during the year.

The share option scheme is the only share based payments granted to Directors and employees of the Company.

31. POST – EMPLOYMENT BENEFITS

The Group has a defined benefit pension plan in NOK that covers 13 of a total of 20 employees, as of December 31, 2014. The majority of the plan administration is handled by a third party insurance company.

The primary beneficiaries are residents of Norway and they are entitled to approximately 70% of their last year's salary at a retirement age of 67 years. The pension is transferable on death of the employee to the spouse or children up to a maximum of 60% of the employee's original benefit. The actuarial report is performed on assumptions in line with IAS 19(R) and insurance broker's recommendations as per December 31, 2014 and 2013 respectively.

The recorded pension expense in 2014 is $0.6 million (2013: $0.6 million and 2012:$0.7 million). The net obligations of $2.2 million (asset $2.3 million and obligation $4.5 million) (2013:$1.6 million (asset $2.2 million and obligation $3.8 million)) are included under other long term liabilities.  In addition the Group has an increase in obligation of 0.8 million expensed under other comprehensive income due to re-measurements.




I-34

 
32.    FINANCIAL INSTRUMENTS
 
(in thousands of $)
 
  
Loans and
receivables
    
Derivative
financial instruments
    
Available-
for-sale
    
Total
  
At December 31, 2014
                
Assets as per balance sheet
                
Trade and other receivables excluding pre-payments (note 18)
    
23,066
      
-
      
-
      
23,066
  
Derivative financial instruments
    
-
      
2,093
      
-
      
2,093
  
Available-for-sale financial assets
    
-
      
-
      
9,164
      
9,164
  
Cash and cash equivalents
    
109,678
      
-
      
-
      
109,678
  
Total
    
132,744
      
2,093
      
9,164
      
144,001
  

 
(in thousands of $)
 
  
Loans and
receivables
    
Derivative
financial instruments
    
Available-
for-sale
    
Total
  
At December 31, 2013
                
Assets as per balance sheet
                
Trade and other receivables excluding pre-payments (note 18)
    
23,210
      
-
      
-
      
23,210
  
Derivative financial instruments
    
-
      
2,735
      
-
      
2,735
  
Available-for-sale financial assets
    
-
      
-
      
16,916
      
16,916
  
Cash and cash equivalents
    
98,841
      
-
      
-
      
98,841
  
Total
    
122,051
      
2,735
      
16,916
      
141,702
  

(in thousands of $)
  
Derivative financial instruments
    
Other financial liabilities at amortised cost
    
Total
  
At December 31, 2014
            
Liabilities as per balance sheet
            
Borrowings incl. deferred charges (excl. finance lease liabilities) (note 23)
    
-
      
525,392
      
525,392
  
Finance lease liabilities (note 23)
    
-
      
59,578
      
59,578
  
Derivative financial instruments
    
2,106
      
-
      
2,106
  
Trade and other payables excluding non-financial liabilities (note 26,27)
    
-
      
16,709
      
16,709
  
Total
    
2,106
      
601,679
      
603,785
  

I-35
(in thousands of $)
  
Derivative financial instruments
    
Other financial liabilities at amortised cost
    
Total
  
At December 31, 2013
            
Liabilities as per balance sheet
            
Borrowings incl. deferred charges (excl. finance lease liabilities) (note 23)
    
-
      
404,019
      
404,019
  
Finance lease liabilities (note 23)
    
-
      
117,786
      
117,786
  
Derivative financial instruments
    
-
      
-
      
-
  
Trade and other payables excluding non-financial liabilities (note 26,27)
    
-
      
13,762
      
13,762
  
Total
    
-
      
535,567
      
535,567
  
 
Financial Risk Management
 
Through its activities the Group is exposed to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group makes use of derivative financial instruments such as foreign exchange forward contracts and interest rate swaps to moderate certain risk exposures.
 
Market Risk

Interest Rate Risk
The Group's interest-bearing financial assets and liabilities make the Company exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial positions and cash flows.

Breakdown of long-term debt with average effective interest rates:
 
2014
        
2013
      
 
(In thousands of $)
  
Loan amount
    
Average interest rate
    
Loan amount
    
Average interest rate
  
Loan on vessels
    
337,606
      
3.37
%
    
360,827
      
3.46
%
Loans on vessels under construction
    
-
      
-
      
-
      
-
  
Loans on cancelled vessels under construction
    
9,610
      
2.98
%
    
43,192
      
3.26
%
Convertible bond
    
178,176
      
6.57
%
    
-
          
Total
    
525,392
              
404,019
          

Breakdown of cash and cash equivalents with average effective interest rates:
 
2014
        
2013
      
 
(In thousands of $)
  
Amount
    
Average interest rate
    
Amount
    
Average interest rate
  
Current accounts
    
76,147
      
0.04
%
    
81,381
      
0.04
%
Short-term deposits
    
30,000
      
0.33
%
    
12,500
      
0.79
%
Restricted cash
    
3,531
      
0.00
%
    
4,960
      
0.00
%
Other
    
-
              
-
          
Total
    
109,678
              
98,841
          

Cash and cash equivalents and long-term debt (excluding convertible bonds) bear interest at LIBOR plus a fixed margin. The LIBOR is fixed mostly for one month periods. Debt issued at variable rates expose the Group to cash flow interest rate risks which is partially offset by the cash held at variable rates.

The Group's debt at variable rate was denominated in US Dollars for both 2014 and 2013.
I-36
 
The convertible bonds recognized in the balance sheet are calculated as follows:
(in thousands of $)
  
2014
    
2013
  
At January 1
    
-
      
-
  
Loan amount
    
200,000
      
-
  
Equity component
    
(28,114
)
    
-
  
Interest expense
    
9,360
      
-
  
Interest paid
    
(3,070
)
    
-
  
Liability component at December 31
    
178,176
      
-
  

If interest rates as of December 31, 2014 and 2013 had increased or decreased by 1% with all other variables remaining constant, the decrease or increase in profit would have been $5.0 million (2013:$4.0 million and 2012:$4.0 million) mainly as a result of higher or lower interest expense on floating rate long-term debt. Interest directly attributable to the construction of vessels is capitalised. If interest rates had increased or decreased by 1% the effect on the amount capitalised would be $96 000 (2013:$432,000 and 2012:$556,000).

The Group's chief financial officer monitors the sensitivity to the interest rates on a regular basis as a part of her responsibilities.

Currency Risk
The value of monetary assets and liabilities denominated in foreign currencies will fluctuate due to changes in foreign exchange rates. The Group's financial assets and liabilities are denominated in US dollars.

The Group monitors its exposure to currency risk on a regular basis. The Group can use forward foreign exchange contracts to mitigate currency risk for expenses in Norwegian kroner when it finds it beneficial.

At December 31, 2014, had the exchange rate between the US dollar and the Norwegian Krone increased or decreased by 10% with all other variables held constant, the decrease or increase respectively in net assets would not be material.
Equity Price Risk
All marketable securities present a risk of loss of capital. The Group moderates this risk through a careful selection of securities. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Group's overall market positions are monitored on a quarterly basis. The Group's maximum exposure to risk at the balance sheet date is $9.2 million (2013:$16.9 million).

At December 31, 2014, had the stock exchange decreased or increased with 20% with all other variables held constant, the decrease or increase in net assets would have been $1.8 million respectively (2013:$ 3.4 million).

Commodity Price Risk
The Group is exposed to commodity price risk through derivative contracts on freight and bunkers. The Group takes positions from time to time in the freight forward market, either as a hedge to a physical contract or as a speculative position. The value of the freight forward agreements is booked mark to market through the income statement. The Company enters into cargo contracts from time to time. The Company is then exposed to fluctuations in bunker prices, as the cargo contract price is based on an assumed bunker price for the trade. The Group has a policy to hedge all bunker exposure and uses bunker derivatives to hedge this risk. There is no guarantee that the hedge removes all the risk from the bunker exposure, due to possible differences in location and timing of the bunkering between the physical and financial position. The value of the bunker contracts is booked mark to market over the income statement.

I-37
Credit Risk
The Group is exposed to credit risk, inherent in the risk that a counterparty will be unable to perform under the time and voyage charter contracts and unable to pay amounts in full when due. Allowances are made for credit losses that have been incurred by the balance sheet date, if any. The maximum exposure to credit risk on cash and cash equivalents and trade and other receivables (ignoring collateral and credit quality) at December 31, 2014 was $140.4 million (2013:$132.9 million).
Concentration of credit risk exists to the extent that at December 31, 2014 approximately 95% of cash and cash equivalents were held with four financial institutions with credit ratings according to Standard & Poor's of A+ or better (2013: 88%):
 
The Group has the following cash and cash equivalents:
 
Counterparty
  
Rating
  
Geographical segment
  
2014
    
2013
  
Cash and cash equivalents
              
Nordea Bank Norge ASA
  
AA
 -
Norway
    
42,150
      
22,414
  
Skandinaviska Enskilda Banken (SEB)
    
A
+
Norway
    
24,912
      
40,713
  
DnB Bank ASA
    
A
+
Norway
    
34,978
      
12,500
  
ABN Amro Bank N.V
    
A
+
Netherland
    
1,762
      
11,170
  
Ing Bank N.V
     A
 
Netherland
    
2,911
      
306
  
Danske Bank A/S
     A
 
Norway
    
710
      
3,834
  
Other
        
Norway
    
2,255
      
7,903
  
 
        
 
    
109,678
      
98,841
  
 
If there is no independent rating on the customers, the credit control department assesses the credit quality of the counterparty taking into account its financial position, past experience and other factors.

Exposure on derivatives (Interest rate swaps, FFA and Bunkers swaps) are with either the same banks as in the table above or cleared through Nasdaq OMX Commodities (FFA positions only). For this reason the Group consider the credit risk on these positions to be negligible.

Given the current economic crisis and the number of counterparty defaults worldwide, the Group monitors the exposure to credit risk and manages risk by concentrating on chartering activities with a number of major shipping companies and financially strong counterparties and placing bank deposits with blue-chip financial institutions.
 
Liquidity Risk
The table below analyses the Group's long-term debt into relevant group of maturity based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table are the contractual principal repayments.
 
The table below analyses the Group's contractual undiscounted cash flows
 
(in thousands of $)
At 31 December 2014
  
Within three monts
    
Between three month and one year
    
Between one and two years
    
Between two and five years
    
After five years
    
Total
  
         
-
      
-
      
-
          
-
  
Borrowings (ex financial lease obligations)
    
25,037
      
117,641
      
80,201
      
376,418
          
599,298
  
Financial lease liabilities
    
2,489
      
7,466
      
18,372
      
20,616
      
33,730
      
82,672
  
Trade and other payables
    
16,709
      
-
      
-
      
-
      
-
      
16,709
  
Total
    
44,235
      
125,107
      
98,573
      
397,034
      
33,730
      
698,679
  

I-38
The table below analyses the Group's contractual undiscounted cash flows
 
(in thousands of $)
At 31 December 2013
  
Within three months
    
Between three month and one year
    
Between one and two years
    
Between two and five years
    
After five years
    
Total
  
         
-
      
-
      
-
          
-
  
Borrowings (ex financial lease obligations)
    
12,216
      
49,015
      
137,394
      
217,423
      
73,244
      
489,292
  
Financial lease liabilities
    
3,718
      
11,153
      
58,367
      
44,154
      
41,155
      
158,547
  
Trade and other payables
    
13,762
      
-
      
-
      
-
      
-
      
13,762
  
Total
    
32,633
      
80,185
      
212,504
      
298,828
      
120,270
      
741,483
  
 
The Group's finance department monitors the liquidity position of the Group on a regular basis between each loan drawdown and repayment period, to ensure sufficient funds are available. Total financial lease liabilities includes purchase options of $45.0M (2013:$88.6M)

The Group is considered to be able to cover all the short term liabilities and other cash requirements.
Fair value estimation
The following table presents the Group's assets and liabilities that are measured at fair value at December 31, 2014:

(in thousands of $)
  
Level 1
    
Level 2
    
Total
  
At December 31, 2014
            
Assets
            
Available-for-sale financial assets
    
109
      
9,055
      
9,164
  
Derivative financial instruments (interest swap)
    
-
      
2,093
      
2,093
  
Total assets
    
109
      
11,148
      
11,257
  
                         
Liabilities
                        
Derivative financial instruments (interest swap and bunker hedge)
    
-
      
2,106
      
2,106
  
Total liabilities
    
-
      
2,106
      
2,106
  

(in thousands of $)
  
Level 1
    
Level 2
    
Total
  
At December 31, 2013
            
Assets
            
Available-for-sale financial assets
    
4,272
      
12,644
      
16,916
  
Derivative financial instruments (interest swap)
    
-
      
2,735
      
2,735
  
Total assets
    
4,272
      
15,379
      
19,651
  
                         
Liabilities
                        
Derivative financial instruments (interest swap)
    
-
      
-
      
-
  
Total liabilities
    
-
      
-
      
-
  

Level 1 is the fair value of financial instruments traded in active markets based on quoted market prices at the balance sheet date. Level 2 is defined as inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The fair value of financial instruments that are not traded in an active (for example, over the counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Valuation techniques used to derive Level 2 fair values.
Level 2 trading and hedging derivatives comprise forward foreign exchange contracts and interest rate swaps. Fair value of interest rates are set by the bank by using the discounted value of each contract where they use the forward curve for the relevant remaining period as benchmark towards the fixed rates.
I-39
The values of the units in available-for-sale financial assets are set to market value at the end of the relevant period when the company is listed on the OTC market in Oslo (less liquid than in level 1 requirement).

All open positions on Fuel Derivatives are benchmarked by the banks (our counterpart) against the relevant forward curve for the relevant products and periods that are open.

Fair value of financial assets and liabilities measured at amortised cost.
The fair value of borrowings except the convertible bond,, trade and other receivables, other current financial assets, cash and cash equivalents (excluding bank overdrafts), and trade and other payables approximate their carrying amount.
 
 
33. REFUNDABLE INSTALMENTS

The Company has cancelled nine newbuilding contracts from Zhoushan Jinhaiwan Shipyard Co. Ltd. Five newbuilding contracts were cancelled in 2013 and four in 2012. The yard initiated arbitration proceedings against the cancellation for all nine contracts.

 In the second quarter of 2014 the Company received arbitration awards for all cancelled newbuildings and also received repayment with interest on two contracts during the second quarter of 2014. The newbuilding contracts were from that point considered to be a receivable. During the third quarter the Company received refund for a third contract. For two out of nine contracts the Company was not initially awarded interest in the arbitration award. The Company appealed to High Court in London, and in the fourth quarter the Company obtained a favorable award on the interest. The receivables due as per year end therefore include interest on all remaining contracts. All the outstanding receivables have been collected within first half of April 2015 (see note 36).
 
(in thousands of $)
    
At January 1, 2014
    
-
  
Transferred from instalments on cancelled newbuildings
    
192,976
  
Amount received from refundable instalmemts on cancelled newbuildings
    
(100,873
)
Gain from refundable instalments on cancelled newbuildings
    
19,458
  
At December 31, 2014
    
111,561
  

34. CAPITAL RISK MANAGEMENT

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages the equity versus debt ratio and combines bank debt, bonds, some capital leases and equity in order to obtain the optimal structure. Revenues in dry bulk is volatile and the Company therefore aim at a modest gearing level and low cash break even levels on the vessel investments in order to manage the fluctuations in earnings and asset values.

 The Board intends to return capital to shareholders either through dividends or share buyback. Golden Ocean operates in a cyclical industry, and the Boards' decision to pay out dividend or repurchase shares is therefore always considered in view of the Companies debt service requirements due in the short term, future capital expenditure requirements and management's expectation about the future cash inflows.
 
The Group monitors the debt to equity ratio as well as available cash and projected cash flow based on various scenarios for vessel revenues going forward. Subsequently, the Group focuses on being in compliance with covenants in relation to the various loan facilities. These facilities require that the Company maintain various financial ratios, including: a minimum percentage of 125% of aggregate vessel value to loans secured a minimum book equity ratio of 30% and $325 million, a minimum EBITDA coverage ratio and minimum liquidity. The Group monitors how the Company will perform in relation to these covenants based on the projections for future profit and loss, balance sheet values and cash flows.

The amount paid out in dividends is also a function of the general market environment and view on counterparty issues. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

I-40
35. SUBSIDIARY COMPANIES
 
The following are the Company's active subsidiaries as at December 31, 2014:
 
 
Country of residence
Ownership interest
Golden Aries Inc
Liberia
100%
Golden Arima Inc
Liberia
100%
Golden Beijing Inc
Liberia
100%
Golden Beppu Inc
Liberia
100%
Golden Brilliant Inc
Liberia
100%
Golden Crystal Inc
Liberia
100%
Golden Diamond Inc
Liberia
100%
Golden Eclipse Inc
Liberia
100%
Golden Effort Inc
Liberia
100%
Golden Emerald Inc
Liberia
100%
Golden Eminence Inc
Liberia
100%
Golden Empress Inc
Liberia
100%
Golden Endeavour Inc
Liberia
100%
Golden Endurer Inc
Liberia
100%
Golden Enterprise Inc
Liberia
100%
Golden Excalibur
Liberia
100%
Golden Excellence Inc
Liberia
100%
Golden Explorer Inc
Liberia
100%
Golden Express
Liberia
100%
Golden Exquisite
Liberia
100%
Golden Extreme Inc
Liberia
100%
Golden Eye Inc
Liberia
100%
Golden Feng Inc
Liberia
100%
Golden Gemini Inc
Liberia
100%
Golden Gunn Corporation
Liberia
100%
Golden Hilton Shipping Corporation
Liberia
100%
Golden Ice Inc
Liberia
100%
Golden Leo Inc
Liberia
100%
Golden Libra Inc
Liberia
100%
Golden Magnum Inc
Liberia
100%
Golden Nantong Inc
Liberia
100%
Golden Nassim Inc
Liberia
100%
Golden Opportunity Inc
Liberia
100%
Golden Pearl Inc
Liberia
100%
Golden President Shipping Corporation
Liberia
100%
Golden Saguenay Inc
Liberia
100%
Golden Sapphire Inc
Liberia
100%
Golden Shui Inc
Liberia
100%
Golden Strength Inc
Liberia
100%
Golden Taurus Inc
Liberia
100%
Golden Virgo Inc
Liberia
100%
Golden Zhoushan Inc
Liberia
100%
Golden Ocean Management Asia Pte Ltd
Singapore
100%
Golden Ocean Management AS
Norway
100%
Golden Ocean Group Management (Bermuda) Limited
Bermuda
100%
Golden Ocean (Cyprus) Limited
Cyprus
100%
Golden Ocean Trading Limited
Bermuda
100%
 
I-41
36. SUBSEQUENT EVENTS

The Company took in the first quarter of 2015 delivery of the four first Supramax vessels to the fleet; two Supramax vessels from Japan Marine United Corporation ("JMU"), named Golden Cecilie and Golden Cathrine, and two Supramax vessels from Chengxi, named Golden Aries and Golden Gemini.

The Company has received refund on all of the remaining six contracts during the first quarter and beginning of second quarter of 2015. In total the Company has received $112 million, covering instalments and interest and has paid down debt of $9.6 million.

In December 2014, Golden Ocean signed a loan agreement with six banks for $284 million, for the financing of 19 vessels. As of the date of this report, financing has been drawn on 18 of these 19 vessels and the outstanding commitment is $15 million.

In March 2015, Golden Ocean delisted from the Singapore Stock Exchange for its secondary listing.

On March 26, 2015, shareholders of Golden Ocean approved the merger with Knightsbridge Shipping Limited in a special general meeting. On March 31, 2015, Golden Ocean merged with and into Knightsbridge Shipping Limited, and the new company changed its name back to Golden Ocean Group Limited. The company is listed on NASDAQ and with a secondary listing on the Oslo Stock Exchange.
In April 2015 the Company entered into agreements to sell the vessels Channel Alliance and Channel Navigator to a third party, as part of the Company's fleet renewal. These vessels will be delivered to new owners within the end of June 2015.

In April 2015 the merged company agreed with Ship Finance International Ltd ("Ship Finance") a sale leaseback transaction of eight Capesize vessels, of which three vessels were owned by the Company at year end. The three Golden Ocean vessels are named Golden Beijing, Golden Zhoushan and Golden Magnum. The total acquisition price for all eight vessels  will be $272 million, or $34 million average per vessel. The vessels are expected to be delivered to Ship Finance within July 2015, subject to customary closing conditions. The vessels will be chartered on time-charter basis to a subsidiary of Golden Ocean for a period of 10 years. The daily base charter rate will be $17,600 during the first seven years, and $14,900 thereafter. In addition, there will be a 33% profit share for revenues above the base rate, calculated and paid on a quarterly basis. The charters will also have an adjustment factor whereby Golden Ocean will compensate Ship Finance for volatility in the interest rate environment. It has been agreed a fixed-price technical management agreement. Golden Ocean will have a purchase option after year 10 of $112 million enbloc, and if such option is not exercised, Ship Finance will have the option to extend the charters by 3 years at $14,900 per day.
 
In May 2015, the merged company took delivery of the Supramax dry bulk newbuilding, Golden Taurus. The final installment of $18.6 million was paid at this time and $13.75 million was drawn down from the $284.0 million term loan facility.

 
 
 
 
 
 
 
 
I-42
Exhibit II
 
 
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Amounts presented in thousands of U.S. dollars unless otherwise stated, except per share amounts)
Introduction
The following unaudited pro forma condensed combined financial information is presented to (i) illustrate the combination of Golden Ocean Group Limited (formerly Knightsbridge Shipping Limited), or Knightsbridge or the Company, and Golden Ocean Group Limited, or the Former Golden Ocean, together the Combined Company, which was completed on March 31, 2015, or the Combination, and (ii) the Company's purchase of 12 special purpose companies, or SPCs, each owning one newbuilding contract, from Frontline 2012 Ltd, or Frontline 2012, in March 2015, or the Frontline 2012 Transaction. The unaudited pro forma condensed combined balance sheet as of December 31, 2014 and the unaudited pro forma condensed combined statement of income for the year ended December 31, 2014 are based upon, derived from, and should be read in conjunction with the audited financial statements of Knightsbridge, which are available in Knightsbridge's Annual Report on Form 20-F for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission, or the Commission, on April 29, 2015, and the audited financial statements of the Former Golden Ocean for the year ended December 31, 2014, which are included in this Form 6-K. Knightsbridge's audited financial statements were prepared in accordance with U.S. GAAP and presented in thousands of U.S. dollars. The Former Golden Ocean's audited financial statements were prepared in accordance with IFRS as issued by the IASB and presented in thousands of U.S. dollars. For purposes of preparing the unaudited pro forma condensed combined financial information, the Former Golden Ocean's audited financial statements prepared under IFRS as issued by the IASB were reconciled to U.S. GAAP, as applicable, and as further described in Notes 2 and 3 and other accompanying notes to the unaudited pro forma condensed combined financial information based on a preliminary U.S. GAAP analysis. This reconciliation has not been audited.
The accompanying unaudited pro forma condensed combined financial information give effect to adjustments that are (i) directly attributable to the Combination, (ii) factually supportable, and (iii) with respect to the unaudited condensed combined statements of income, are expected to have a continuing impact on the consolidated results. The unaudited condensed combined balance sheet gives effect to the combination as if it occurred on December 31, 2014 and the unaudited condensed combined statement of income gives effect to the combination as if it happened on January 1, 2014. The accompanying unaudited pro forma condensed combinded financial information give also effect to the adjustments that are directly attributable to the purchase of 12 SPCs from Frontline 2012 described above as if the purchase occurred on December 31, 2014. This transaction did not have any effect on the pro forma unaudited condensed combined statement of income except for the calculated effect on the pro forma basic and diluted earnings per share.
The combination of Knightsbridge and the Former Golden Ocean will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification ("ASC") 805, "Business Combinations" ("ASC 805"), with Knightsbridge selected as the accounting acquirer under this guidance. The Frontline 2012 Transaction will be accounted for as an asset acquisition. As of March 2015 and before considering this transaction, Frontline 2012 owned 58% of the shares in Knightsbridge. This transaction is, therefore, to be accounted for as a common control transaction and the assets purchased from Frontline 2012 are recorded at Frontline 2012's historical carrying value.
The pro forma adjustments are preliminary and are based upon available information and certain assumptions which management believes are reasonable under the circumstances and which are described in the accompanying notes to the unaudited pro forma condensed combined financial information. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their acquisition date fair value. For pro forma purposes, the fair value of the Former Golden Ocean's identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value. Occasionally, an acquirer will make a bargain purchase, which is a business combination in which the consideration amount is less than the aggregate fair value of the assets acquired and the liabilities assumed. Before recognizing a gain on a bargain purchase, the acquirer shall reassess whether it has correctly identified all of the assets acquired and all of the liabilities assumed and shall recognize any additional assets or liabilities that are identified in that review. If that shortfall remains, the acquirer shall recognize the resulting gain in earnings on the acquisition date. The gain shall be attributed to the acquirer. Certain preliminary estimates were used which will be updated upon finalization of the purchase accounting in our historical financial statements for periods reflecting the acquisition. Management believes the estimated fair values utilized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available and such changes could be material, as certain valuations and other studies have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. In addition, a preliminary review of IFRS to U.S. GAAP differences and related accounting policies has been completed based on a preliminary analysis.
The unaudited pro forma condensed combined financial information has been prepared by management in accordance with the regulations of the SEC and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the combination occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the Combined Company will experience after the combination. In addition, the accompanying unaudited pro forma condensed combined statement of income does not include any expected cost savings or operating synergies, which may be realized subsequent to the combination or the impact of any non-recurring activity and one-time transaction-related or integration-related items.
This unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions as well as the above referenced audited financial statements of both Knightsbridge and the Former Golden Ocean.
II-1

Unaudited Pro Forma Condensed Combined Balance Sheet
 As of December 31, 2014
     
Knightsbridge
      
Former
Golden
Ocean,
 IFRS IASB
      
US GAAP
Selected
Adjustments
      
Notes-
4(A)
    
Pro Forma
Adjustments
    
Notes-
4(B)
    
Pro
Forma
Combined
ASSETS
                                                
Current Assets
                                                
Cash and equivalents
  
$
42,221
      
106,147
      
(40,000
)
    
(1)
    
108,645
    
(1)
    
217,013
Restricted cash
    
—
      
3,531
      
—
            
—
          
3,531
Trade receivables, net
    
2,770
      
21,554
      
—
            
(18,999
)
    
(2)
    
5,325
Related party receivables
    
449
      
—
      
—
            
—
            
449
Other receivables, net
    
3,430
      
—
      
—
            
10,966
      
(2)(3)
    
14,396
Inventories
    
13,243
      
8,513
      
—
            
—
            
21,756
Refundable instalments for cancelled newbuilding contracts
    
—
      
111,561
      
(9,610
)
    
(2)
    
—
            
101,951
Voyages in progress
    
1,322
      
—
      
—
            
—
            
1,322
Prepaid expenses and accrued income
    
844
      
—
      
—
            
7,677
      
(2)
    
8,521
Total Current Assets
    
64,279
      
251,306
      
(49,610
)
          
108,289
            
374,264
Restricted cash
    
18,923
      
—
      
40,000
      
(1)
    
—
            
58,923
Vessels, net
    
852,665
      
698,258
      
—
            
(166,054
)
    
(1)
    
1,384,869
Vessels held under capital lease, net
    
—
      
56,535
      
—
            
(41,295
)
    
(1)
    
15,240
Newbuildings
    
323,340
      
42,398
      
—
            
73,840
      
(1)
    
439,578
Refundable instalments for cancelled newbuilding contracts
    
—
      
—
      
9,610
      
(2)
    
—
            
9,610
Investments in associated companies
    
—
      
10,481
      
—
            
4,919
      
(1)
    
15,400
Derivative financial assets
    
—
      
2,093
      
—
            
—
            
2,093
Available for sale financial assets
    
—
      
9,164
      
—
            
—
            
9,164
Other long term receivables
    
—
      
9,189
      
—
            
—
            
9,189
Value of long term charter parties
    
—
      
—
      
—
            
119,635
      
(1)
    
119,635
Deferred charges
    
3,533
      
—
      
—
            
—
            
3,533
Total Assets
  
$
1,262,740
      
1,079,424
      
—
            
99,334
            
2,441,498
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                  
Current Liabilities
                                                  
Current portion of long-term debt
  
$
19,812
      
128,435
      
(9,610
)
    
(3)
    
—
            
138,637
Current portion of obligations under finance lease
    
—
      
4,290
      
—
            
3,600
      
(1)
    
7,890
Accounts payable
    
4,937
      
19,991
      
—
            
(15,773
)
    
(2)
    
9,155
Accrued expenses
    
4,190
      
—
      
—
            
11,311
      
(2)
    
15,501
Due to related parties
    
2,555
      
1,180
      
—
            
(356
)
    
(3)
    
3,379
Deferred charter revenue
    
3,285
      
—
      
—
            
4,462
      
(2)
    
7,747
Total Current Liabilities
    
34,779
      
153,896
      
(9,610
)
          
3,244
            
182,309
Long-term debt
    
343,688
      
396,957
      
9,610
      
(3)
    
(14,083
)
    
(1)
    
736,172
Obligations under finance lease
    
—
      
55,288
      
—
            
(22,127
)
    
(1)
    
33,161
Derivative financial instruments
    
—
      
2,106
      
—
            
—
            
2,106
Other liabilities
    
—
      
2,201
      
—
            
(1,601
)
    
(1)
    
600
Total Liabilities
    
378,467
      
610,448
      
—
            
(34,567
)
          
954,348
Shareholders' Equity
                                                  
Common stock
    
801
      
44,731
      
—
            
(43,807
)
    
(1)
    
1,725
Other stockholders' equity
    
883,472
      
424,245
      
—
            
177,708
      
(1)
    
1,485,425
Total Shareholders' Equity
    
884,273
      
468,976
      
—
            
133,901
            
1,487,150
Total liabilities and shareholders' equity
  
$
1,262,740
      
1,079,424
      
—
            
99,334
            
2,441,498
 
II-2

Unaudited Pro Forma Condensed Combined Statement of Operations
 For the year ended December 31, 2014
 
(in thousands, except per share data)
  
 
Knightsbridge
    
Former Golden
Ocean,
IFRS IASB
    
US GAAP
Selected
Adjustments
    
Notes –
 5(A)
  
Pro Forma
Adjustments
    
Notes –
 5(B)
  
Pro Forma
Combined
  
Operating revenue
                                      
Time charter revenue
  
$
22,656
      
129,301
      
—
          
(19,939
)
    
(1)
    
132,018
  
Voyage charter revenue
    
53,706
      
116,704
      
—
          
—
            
170,410
  
Other income
    
20,353
      
7,453
      
—
          
(1,034
)
    
(2)
    
26,772
  
Total operating revenue
    
96,715
      
253,458
      
—
          
(20,973
)
          
329,200
  
Gain on cancellation of newbuilding contracts and termination of leases
    
—
      
—
      
57,414
    
(1)  and (2)
    
—
            
57,414
  
Operating expenses
                                                  
Voyage expenses and commissions
    
33,955
      
75,971
      
—
          
(1,034
)
    
(2)
    
108,892
  
Ship operating expenses
    
18,676
      
56,404
      
11,367
      
(2)
    
—
            
86,447
  
Charter hire expenses
    
—
      
43,268
      
—
            
—
            
43,268
  
Administrative expenses
    
5,037
      
11,864
      
—
            
—
            
16,901
  
Depreciation
    
19,561
      
47,475
      
(3,930
)
    
(2)
    
(27,362
)
    
(3)
    
35,744
  
Loss on freight forward agreements
    
—
      
—
      
16,259
      
(1
    
—
            
16,259
  
Impairment loss
    
—
      
183,300
      
(116,600
)
    
(2)
    
—
            
66,700
  
Total operating expenses
    
77,229
      
418,282
      
(92,904
)
          
(28,396
)
          
374,211
  
Other gains, net
    
—
      
62,868
      
(62,868
)
    
(1)
    
—
            
—
  
Net operating income (loss)
    
19,486
      
(101,956
)
    
87,450
            
7,423
            
12,403
  
Interest income
    
29
      
1,134
      
—
            
—
            
1,163
  
Interest expense
    
(2,525
)
    
(31,394
)
    
6,425
      
(2)
    
1,608
      
(4)
    
(25,886
)
Loss on interest rate swaps
    
—
      
—
      
(7,401
)
    
(1)
    
—
            
(7,401
)
Income from associated companies
    
—
      
—
      
8,215
      
(1)
    
(190
)
    
(5)
    
8,025
  
Profit on sale of securities
    
—
      
—
      
4,165
      
(1)
    
—
            
4,165
  
Other financial items (737 ) (3,188 ) 3,236 (1) (300 ) (6)
(989
 )
Income (loss) from continuing operations before income taxes
    
16,253
      
(135,404
)
    
102,090
            
8,541
            
(8,520
)
Income taxes
    
—
      
(197
)
    
—
            
—
            
(197
)
Income (loss) from continuing operations after income taxes
    
16,253
      
(135,601
)
    
102,090
            
8,541
            
(8,717
)
Net loss attributable to noncontrolling interest
    
—
      
593
      
—
            
—
            
593
  
Net earnings (loss) from continuing operations attributable to common shareholders
  
$
16,253
      
(135,008
)
    
102,090
            
8,541
            
(8,124
)
Weighted-average number of common shares outstanding
                                                    
Basic
    
52,445
      
447,314
                                  
144,889
  
Diluted
    
52,557
      
447,314
                                  
144,889
  
Net earnings (loss) attributable to common shareholders, per common share
                                                    
Basic
  
$
0.31
      
(0.30
)
                                
(0.06
)
Diluted
  
$
0.31
      
(0.30
)
                                
(0.06
)
 
 
 

II-3

1.  Description of Transaction
 On October 7, 2014, Knightsbridge and the Former Golden Ocean entered into a merger agreement pursuant to which the two companies agreed to merge, with Knightsbridge as the surviving legal entity, or the Combined Company. The Combined Company was renamed Golden Ocean Group Limited upon completion of the merger on March 31, 2015. Shareholders in the Former Golden Ocean at the time the merger was completed received shares in Knightsbridge as merger consideration. One share in the Former Golden Ocean gave the right to receive 0.13749 shares in Knightsbridge, and Knightsbridge issued 61.4 million shares to shareholders in the Former Golden Ocean. Upon completion of the merger, existing shareholders in Knightsbridge and Golden Ocean owned approximately 57% and 43%, respectively, of the Combined Company.

Upon completion of the merger, the Convertible Bond Issue 2014/2019 that was issued by the Former Golden Ocean in January 2014 was converted into a convertible bond of the Combined Company pursuant to the terms of the bond agreement.

Hemen Holding Limited, or Hemen, a company indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family, and certain of its affiliates, owned approximately 41% and 59%, respectively, of the issued and outstanding common shares of Golden Ocean and Frontline 2012 Ltd, or Frontline 2012, at the time of the merger announcement.

In connection with the special general meetings that were held by Knightsbridge and the Former Golden Ocean to approve the merger, Hemen, and certain of its affiliates, (including Frontline 2012) entered into voting agreements to vote all of their respective shares in favor of the merger. Approval of the merger by the shareholders of each Company required the affirmative vote of those shareholders, as of the record date, representing 75% of the ordinary shares of that company which are voted at its special general meeting.

Upon completion of the merger, Hemen and such affiliates, collectively, own approximately 61% of the shares and votes in the Combined Company, which includes Hemen's indirect ownership in the shares owned by Frontline 2012.

The merger valued the entire issued share capital of the Former Golden Ocean at $307.2 million based on the closing share price of $5.00 on March 31, 2015, the completion date of the merger.

2.  Accounting Policies
During the preparation of this unaudited pro forma condensed combined financial information, management has performed a preliminary review and comparison of the Former Golden Ocean's IFRS accounting policies with Knightsbridge's U.S. GAAP accounting policies and has identified certain preliminary adjustments for purposes of preparing the unaudited pro forma condensed combined financial information. Following completion of the merger on March 31, 2015, management will conduct a final review of the Former Golden Ocean's accounting policies in an effort to determine if differences in accounting policies require further adjustment or reclassification of the Former Golden Ocean's statement of income or reclassification of assets or liabilities to conform to Knightsbridge's accounting policies and classifications or are required by acquisition accounting rules. As a result of that review, management may identify differences that, when conformed, could have a material impact on this unaudited pro forma condensed combined financial information.
3.  Accounting for the Combination
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Knightsbridge and the Former Golden Ocean. The acquisition method of accounting, based on ASC 805, uses the fair value concepts defined in ASC 820, "Fair Value Measurement" ("ASC 820"). Acquisition accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the purchase price allocation included herein is preliminary and has been presented solely for the purpose of providing pro forma financial information and will be revised as additional information becomes available and as additional analyses are performed. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of judgment in determining the appropriate assumptions and estimates. Differences between preliminary estimates in the unaudited pro forma condensed combined financial information and the final acquisition accounting will occur and could have a material impact on the accompanying pro forma condensed combined financial information and the combined company's future consolidated financial statements.
II-4


The combination of Knightsbridge and the Former Golden Ocean will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification 805, "Business Combinations" ("ASC 805"), with Knightsbridge selected as the accounting acquirer under this guidance. The factors that were considered in determining that Knightsbridge should be treated as the accounting acquirer in the merger transaction were the relative voting rights in the Combined Company, the composition of the board of directors in the Combined Company, the relative sizes of Knightsbridge and the Former Golden Ocean, the composition of senior management of the Combined Company and the name of the Combined Company. Management believes that the relative voting rights in the Combined Company and the composition of the board of directors in the Combined Company were the most significant factors in determining Knightsbridge as the accounting acquirer.

With respect to the relative voting rights in the Combined Company, it is noted that after the completion of the Merger, the Knightsbridge shareholders and the shareholders of the Former Golden Ocean own approximately 64.4% and 35.6% of the Combined Company, respectively. The Former Golden Ocean also currently has 4.9 million stock options outstanding, which have been converted into 0.7 million stock options in the Combined Company after the completion of the merger based on the agreed exchange ratio and the Former Golden Ocean had a $200.0 million convertible bond outstanding, which was assumed by the Combined Company and is convertible into 9.6 million shares of the Combined Company. Assuming that all options and bonds are converted into shares of the Combined Company then the shareholdings in the Combined Company would be as follows: (i) Knightsbridge shareholders 60.7%, (ii) shareholders of the Former Golden Ocean 33.6%, (iii) option holders 0.4% and (iv) bondholders 5.3%. It should be noted that the convertible bond conversion price is significantly "out of money" and conversion of the debt is currently not expected. The Hemen Shareholder was a common shareholder of both Knightsbridge and the Former Golden Ocean and the effect of this common ownership was considered. The analysis of the relative voting rights in a business combination involving entities with common shareholders should consider the former shareholder groups of the combining entities and not the individual owners that are common to the combining entities. The former shareholder group that retains or receives the largest portion of the voting rights in the combined entity would be the accounting acquirer, absent the consideration of any of the other factors provided in ACS 805. In this transaction, the Knightsbridge shareholders, including the Hemen Shareholder, own 64.4% of the Combined Company and shareholders of the Former Golden Ocean, including the Hemen Shareholder, own 35.6% of the Combined Company and so the Knightsbridge shareholder group received the largest voting percentage in the Combined Company. This points to Knightsbridge as the accounting acquirer.

With respect to the composition of the board of directors in the Combined Company, the bye-laws of Knightsbridge as well as the Amended and Restated Bye-Laws, which became the bye-laws of the Combined Company, require a simple majority of the votes cast at the shareholders meeting for the re-election or election of new directors. The Knightsbridge Board was expanded to eight directors and five of those directors were re-elected at the recent annual general meeting in September 2014. As a result, three directors are still to be appointed to the Knightsbridge Board. Knightsbridge has agreed to appoint John Fredriksen, Kate Blankenship and Gert-Jan van der Akker to fill the vacant director seats. The composition of the Combined Company's Board consists of five Knightsbridge appointed directors, two directors who were directors in both the Former Golden Ocean and Frontline 2012, which has a controlling interest in Knightsbridge, and one independent director. It should be noted that one of the directors of Knightsbridge is also the Chief Executive Officer of Golden Ocean Management AS. The composition of the board of directors points to Knightsbridge as the accounting acquirer.

The relative sizes of Knightsbridge and the Former Golden Ocean were also considered to be factors that supported that conclusion that Knightsbridge will be the accounting acquirer. While the Former Golden Ocean had higher revenues and assets than Knightsbridge, Knightsbridge is currently in a growth phase. In addition, the market capitalizations of Knightsbridge and the Former Golden Ocean at September 30, 2014, a date close to the announcement of the merger, were approximately $629 million and $441 million, respectively. It should also be noted that the net book value of the Knightsbridge equity was significantly higher than the equity of the Former Golden Ocean.

The composition of the senior management of the Combined Company, the use of the Former Golden Ocean's name for the Combined Company and the party that initiated the transaction were also considered but were not considered as important factors in the determination of the accounting acquirer.

Knightsbridge had a Chief Executive Officer while the remainder of management was provided under management agreements with ICB Shipping (Bermuda) Limited, a wholly owned subsidiary of Frontline Ltd. (this is not the same company as Frontline 2012 discussed above, which is also managed by Frontline Ltd.) and Golden Ocean Management Bermuda Ltd. Management services provided by Frontline Ltd are mainly related to administrative services and technical operations as well as newbuilding supervision services. It is also noted that the current Chief Executive Officer and Chief Financial Officer of Golden Ocean Management AS assumed those roles in the Combined Company and it is expected that the Combined Company will continue to outsource technical operations, newbuilding supervision and other administrative services (corporate secretarial and accounting) to Frontline Ltd. As such, the management of the Combined Company is changing to some extent in favor of the Former Golden Ocean, but this is not considered to be a determining factor in the consideration of acquirer based on the analysis of the composition of the board of the Combined Company and its ability to determine the composition of management.
II-5


Due to the recent transformation of Knightsbridge from an oil tanker business to a dry bulk business and the Former Golden Ocean's long history in the dry bulk sector, management believes that the Former Golden Ocean name is more widely known in the dry bulk market and decided to take advantage of this when choosing the name of the Combined Company. Management did not consider this to be an important factor, however, in the determination of the accounting acquirer compared with the various factors discussed above.

 
The valuation of consideration transferred is based on the number of common shares issued by Knightsbridge and Knightsbridge's closing share price of $5.00 on March 31, 2015, the completion date of the merger.

The following represents the preliminary purchase price calculation (in thousands, total amounts may not recalculate due to rounding):
 
(number of shares in thousands)    
Golden Ocean outstanding shares
    
447,314
  
Exchange Ratio
    
0.13749
  
Knightsbridge common stock issued to the Former Golden Ocean shareholders
    
61,444
  
Closing price per share on March 31, 2015
  
$
5.00
  
Total estimated purchase price consideration
  
$
307,220
  

The Former Golden Ocean stock options and the Knightsbridge restricted stock units held by the Former Golden Ocean are not considered to have a material impact on the purchase price consideration and are not included in the estimated purchase price consideration for purposes of these proforma financial statements.
The following represents the calculation of the bargain purchase gain and the allocation of the total purchase price based on management's preliminary valuation (in thousands, total amounts may not recalculate due to rounding):
Total estimated purchase price consideration
  
$
307,220
  
Fair value of net assets acquired and liabilities assumed
    
416,155
  
Bargain purchase gain
  
$
(108,935
)
         
Current assets
    
211,306
  
Restricted cash
    
40,000
  
Vessels, net
    
532,204
  
Vessels held under capital lease
    
15,240
  
Newbuildings
    
38,161
  
Derivative financial assets
    
2,093
  
Investments in associated companies
    
15,400
  
Available for sale financial assets
    
9,164
  
Value of long term time charters
    
119,635
  
Long term receivables
    
9,189
  
Current liabilities
    
(157,496
)
Non-current liabilities
    
(418,741
)
Fair value of net assets acquired and liabilities assumed
    
416,155
  

For pro forma purposes, the fair value of the Former Golden Ocean's identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value and this is in excess of the consideration amount. Management has reassessed whether it has correctly identified all of the assets acquired and all of the liabilities assumed and this excess remains. Consequently, Knightsbridge shall recognize the resulting gain in earnings on the acquisition date.
4.  Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments as of December 31, 2014

(A)  Adjustments and reclassifications from IFRS to U.S. GAAP
The Former Golden Ocean's audited financial statements were prepared in accordance with IFRS as issued by the IASB and presented in thousands of U.S. dollars. For purpose of preparing the unaudited pro forma condensed combined financial information, the Former Golden Ocean's audited financial statements prepared under IFRS as issued by the IASB were reconciled to U.S. GAAP, as applicable, based on a preliminary U.S. GAAP analysis. This is not intended to be a complete reconciliation from IFRS to U.S. GAAP as certain differences are adjusted for as part of the fair value adjustments included in the preliminary pro forma purchase price allocation.  The applicable adjustments following from the IFRS to U.S. GAAP reconciliation have been included in the "U.S. GAAP Selected Adjustments" column to the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2014 as further explained below.
1. The Former Golden Ocean's loan agreements contain a financial covenant, which requires the company to maintain a minimum cash balance of $40.0 million throughout the term of the loan and so this balance has been reclassified from cash in order to conform with Knightsbridge's accounting policy under U.S. GAAP. The restricted cash is classified as non-current as it relates to long term debt.
 
II-6
2. Refundable installments for cancelled newbuilding contracts in the amount of $9.6 million have been reclassified as long term under U.S. GAAP for consistency with the presentation of the related debt (see 3. below).
3. Loan balances in the aggregate amount of $9.6 million relating to cancelled newbuilding contracts have been classified by the Former Golden Ocean under IFRS as short term under the assumption that these loan balances will be repaid in the short term upon the receipt of the claims for re-imbursement of instalments paid and accrued interest. These loan balances have been reclassified as long term debt under U.S. GAAP as the repayment profile in the related loan agreements has not been amended.
(B)  Pro Forma Adjustments
The following table and subsequent notes describe the purchase accounting fair value adjustments, other pro forma adjustments and reclassifications made to the Former Golden Ocean's audited financial statements to conform to Knightsbridge's classification and presentation. The table also includes the elimination of historical transactions between Knightsbridge and the Former Golden Ocean and gives effect to the Frontline 2012 Transaction.
(amounts in thousands US$)
Adjustments(1)
    
Reclassifications(2)
    
Pro Forma Eliminations(3)
    
Total
  
ASSETS
                      
Current Assets
                      
Cash and cash equivalents
$
108,645
 (k)
  
$
—
    
$
—
    
$
108,645
  
Trade receivables, net
  
—
      
(18,999
)
    
—
      
(18,999
)
Other receivables, net
  
—
      
11,322
      
(356
)
    
10,966
  
Prepaid expenses and accrued income
  
—
      
7,677
      
—
      
7,677
  
Total Current Assets
  
108,645
      
—
      
(356
)
    
108,289
  
Vessels, net
  
(166,054
)(a)
    
—
      
—
      
(166,054
)
Vessels held under capital lease, net
  
(41,295
)(b)
    
—
      
—
      
(41,295
)
Newbuildings
  
73,840
(c)(k)
    
—
      
—
      
73,840
  
Investments in associated companies
  
4,919
(d)
    
—
      
—
      
4,919
  
Value of long term time charters
  
119,635
(e)
            
—
      
119,635
  
Total Assets
$
 99,690
    
$
—
    
$
(356
)
  
$
 99,334
  
LIABILITIES AND SHAREHOLDERS' EQUITY
                              
Current Liabilities
                              
Obligations under finance lease
  
3,600
(f)
    
—
      
—
      
3,600
  
Related party payables
  
—
      
—
      
(356
)
    
(356
)
Accounts payable
  
—
      
(15,773
)
    
—
      
(15,773
)
Accrued expenses
  
—
      
11,311
      
—
      
11,311
  
Deferred charter revenue
  
—
      
4,462
      
—
      
4,462
  
Total Current Liabilities
  
3,600
      
—
      
(356
)
    
3,244
  
Long term debt
  
(14,083
)(g)
    
—
      
—
      
(14,083
)
Obligations under finance lease
  
(22,127
)(f)
    
—
      
—
      
(22,127
)
Other long term liabilities
  
(1,601
)(h)
    
—
      
—
      
(1,601
)
Total Liabilities
  
(34,211
)
    
—
      
(356
)
    
(34,567
)
Shareholders' Equity
                              
Common stock
  
(43,807
)(i)(k)
    
—
      
—
      
(43,807
)
Other shareholders' equity
  
177,708
(i)(k)
    
—
      
 —
      
177,708
  
Total Shareholders' Equity
  
133,901
      
—
      
—
      
133,901
  
 Total Liabilities and Shareholders' Equity
$
 99,690
    
$
—
    
$
(356
)
  
$
 99,334
  
(1) Pro Forma Adjustments
a) Vessels, net – The book value of the Former Golden Ocean's vessels as of December 31, 2014 has been reduced by $166.1 million based on a preliminary estimate of the fair value. The estimated fair value is based on management's estimates after considering market values obtained from independent ship brokers, which are inherently uncertain, and based on charter free vessels. In addition, vessel values are highly volatile; as such, these estimates may not be indicative of the current or future basic market value of the vessels or prices that could be achieved if the vessels were sold.
 
II-7
b) Vessels held under capital lease, net – The preliminary purchase price allocation has been made on the basis of the fair value attributed to the four vessels held under capital leased, which were valued based on a preliminary assessment of fair value.  In estimating the fair value of the capital lease assets, management has assumed it will take ownership of one of the vessels after the termination of the lease term. The estimated fair value of this capital lease asset is based on management's estimate after considering the market value of a similar vessel obtained from independent ship brokers, which is inherently uncertain, and based on a charter free vessel. For the other three capital lease assets, it is not expected that the Former Golden Ocean will obtain ownership of the capital lease assets. The estimated value of these capital lease assets has been determined based on a preliminary assessment of fair value of the leasehold interests.
c) Newbuildings – A negative fair value adjustment of $4.2 million is based on management's estimate utilizing the estimated market values for equivalent newbuilding vessels received from independent ship brokers less the outstanding instalments. See also k) below.
d) Investments in associated companies – This fair value adjustment is based on the estimated excess value of a vessel owned by an associated company. The valuation of this vessel is based on estimated market values received from independent ship brokers.
e) Value of long term time charters – The fair value of long term time charter contracts of $119.6 million applies to seven vessels on fixed long term charters and is calculated as the net present value of the difference between the net charter hires expected to be received from these contracts and management's estimates for similar contracts.
The significant assumptions used to derive the value of the long term time charters are the charter rates currently available for similar contracts, the vessel's historical performance and the interest rate used for discounting. Management's estimates of the charter rates currently available for similar contracts are based on the forward curve for freight forward agreements traded on the Baltic Exchange for the relevant vessel type and period and are adjusted for estimated broker commissions. These estimates are then adjusted for the historical performance of the vessel compared to the Baltic Exchange index for that vessel based on management's best estimates. The difference in cash flows between the net charter hires expected to be received from the fixed long term contracts and management's estimates for similar contracts had they been entered into are then discounted at 7% in order to calculate the estimated fair value. Management has used this interest rate as it believes that it is a reasonable estimate of the required rate of return in the market based on calculated implied rates in recent finance lease proposals that have been observed in the market. This discount rate is consistent with the rate that the managements of Knightsbridge and Golden Ocean applied in the calculation of NAVs at September 30, 2014. It should be noted that index-linked time charter contracts are considered by management to be market neutral since the index rates are based on spot market performance and that no value has been allocated to these contracts.
f) Obligations under capital lease – The fair value of obligations under capital lease relates to four vessels chartered in by the Company (see b) above), each of which may be purchased by the Company at the end of the lease term, and is calculated as the net present value of the estimated payments that will be made under these lease contracts.
The significant assumptions used to derive the fair value of obligations under capital leases are the probability of the Company purchasing the vessel at the end of the lease and the interest rate used for discounting. In order to calculate the fair value of obligations under capital lease, the Company first considered the probability of it acquiring the vessel at the end of the lease and it concluded that three of the vessels would be redelivered and only one vessel would be acquired. For the three vessels to be redelivered, the Company included all periodic lease payments and excluded the purchase option from its calculations and for the vessel to be acquired, the Company included all periodic lease payments and also included the purchase option in its calculations. The estimated cash outflows were then discounted using a 7% interest rate.
In the fourth quarter of 2014, Golden Ocean decided not to exercise purchase options on two of these four vessels, the Ocean Minerva and the Golden Heiwa, and redelivered the vessels during January 2015. This is consistent with the assumptions used to calculate the fair value of obligations under capital leases. The Company still expects to re-deliver the third vessel referred to above.
g) Long term debt – The estimated fair value of the Former Golden Ocean's convertible bond has been assessed to be 79.25% of notional principal balance based on the quoted trading price for the bond. Other long term debt has not been subject to fair value adjustments based on management estimates.
h) Other long term liabilities – This adjustment relates to the unamortized gain resulting from a sale-leaseback transaction and was assessed to have a fair value of $0.
i) Equity – The following adjustments have been made to equity;
 
 
(amounts in thousands US$)
  
Share
Capital
    
Other
Shareholders'
Equity
    
Shareholders'
Equity
  
Issuance by Knightsbridge of 61.4 million shares at $5.00 per share being the closing share price on March 31, 2015
    
614
      
306,606
      
307,220
  
Elimination of the Former Golden Ocean's historic balances
    
(44,731
)
    
(424,245
)
    
(468,976
)
Bargain purchase gain arising on the combination
    
—
      
108,935
      
108,935
  
   
$
(44,117
)
  
$
(8,704
)
  
$
(52,821
)

k) In March 2015, Knightsbridge purchased 12 SPCs, each owning a fuel efficient Capesize dry bulk newbuilding, from Frontline 2012. The consideration for the 12 SPCs was settled by the issuance of 31.0 million shares and the assumption of newbuilding commitments of $404.0 million in respect of these newbuilding contracts, net of a cash payment from Frontline 2012 of $108.6 million. No other working capital balances were acquired. As of March 2015 and before considering this transaction, Frontline 2012 owned 58% of the shares in Knightsbridge. This transaction is therefore to be accounted for as a common control transaction. The assets purchased from Frontline 2012 are therefore recorded at Frontline 2012 historical carrying value. Frontline 2012 historical carrying value for cash was $108.6 million and the historical carrying value of the newbuildings was $78.1 million at the effective transaction date. Assuming that this transaction had occurred on December 31, 2014, this would have the following effect on the unaudited pro forma condensed combined balance sheet:

(amounts in thousands US$)
  
Cash and cash equivalents  
    
108,645
  
Newbuildings  
    
78,077
  
Common stock (par value $0.01)  
    
310
  
Other stockholders' equity  
    
186,412
  
 
 
II-8

(2)  Pro Forma Reclassifications
 
Certain balances within the Former Golden Ocean's total trade and other receivables were reclassified to other receivables and prepaid expenses and accrued income to conform to Knightsbridge's classification and presentation.
Certain balances within the Former Golden Ocean's total trade payable and other current liabilities were reclassified to accrued expenses and deferred charter revenue to conform to Knightsbridge's classification and presentation.
(3)  Pro Forma Eliminations
 
Relates to transactions between Knightsbridge and the Former Golden Ocean and will be considered intercompany transactions once the combination is consummated.
5.  Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Year Ended December 31, 2014

(A)  Adjustments from IFRS to U.S. GAAP
The Former Golden Ocean's audited financial statements were prepared in accordance with IFRS as issued by the IASB and presented in thousands of U.S dollars. For purpose of preparing the unaudited pro forma condensed combined financial information, the Former Golden Ocean's audited financial statements prepared under IFRS as issued by the IASB were reconciled to U.S. GAAP, as applicable, based on a preliminary U.S. GAAP analysis. The applicable adjustments following from this reconciliation have been included in the "U.S. GAAP Selected Adjustments" column to the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2014.
(amounts in thousands US$)
  
Reclassifications(1)
    
Adjustments(2)
    
Total
  
Gain on cancellation of newbuilding contracts and termination of leases
    
70,912
      
(13,498
)
    
57,414
  
Ship operating costs
    
—
      
(11,367
)
    
(11,367
)
Depreciation
    
—
      
3,930
      
3,930
  
Loss on freight forward agreements
    
(16,259
)
    
—
      
(16,259
)
Impairment loss
    
—
      
116,600
      
116,600
  
Other gains, net
    
(62,868
)
    
—
      
(62,868
)
Net operating income
    
(8,215
)
    
95,665
      
87,450
  
Interest expense
    
—
      
6,425
      
6,425
  
Loss on interest rate swaps
    
(7,401
)
    
—
      
(7,401
)
Income from associated companies
    
8,215
      
—
      
8,215
  
Profit on sale of securities
    
4,165
      
—
      
4,165
  
Other financial items
    
3,236
      
—
      
3,236
  
Net earnings attributable to common shareholders
    
—
      
102,090
      
102,090
  

(1)  IFRS to U.S. GAAP Reclassifications
In order to conform IFRS income statement classifications to U.S GAAP classifications,  the Former Golden Ocean's other gains, net of $62.9 million have been reclassified to separate line items (as shown in the table above) in conformity with U.S. GAAP and Knightsbridge's classifications.
(2)  IFRS to U.S. GAAP Adjustments
· Gain on cancellation of newbuilding contracts and termination of leases – Gains of $13.5 million relating to refundable installments and interest for cancelled newbuilding contracts as of December 31, 2014, have been recognized under IFRS upon reclassification of the newbuilding installment payments as a financial asset measured at fair value upon conclusion of the arbitration proceedings. However, this gain has not been recognized under U.S. GAAP since gain contingencies regarding the receipt of cash have not been fully resolved as of December 31, 2014.
· Ship operating costs and depreciation – The Former Golden Ocean capitalizes dry docking costs as a separate component of the carrying value of its vessels and amortizes this cost over its estimated useful life. Such costs are expensed as incurred by Knightsbridge and so dry docking costs, which have been capitalized in the period have been expensed and the amortization relating to dry docking costs has been reversed.
· Impairment loss – Impairment loss has been adjusted for the amount that has been recorded under IFRS, which is not required under U.S. GAAP, because the carrying amount of the vessels was not in excess of future estimated undiscounted cash flows.
· Interest expense - Interest expense has been adjusted to reflect the fact that the Former Golden Ocean bi-furcated the convertible loan and the conversion option and recorded an equity element under IFRS whereas there would be no bifurcation of this equity element under U.S. GAAP. This resulted in the IFRS interest expense being $6.4 million higher that it would have been under U.S. GAAP. The Company has applied a straight-line amortization method for this element since this approximates the effective interest rate method.
 
II-9
 (B)  Pro Forma Adjustments
The following notes describe the pro forma adjustments made to the Former Golden Ocean's audited financial statements and the elimination of historical transactions between Knightsbridge and the Former Golden Ocean.
1. Time charter revenue – The fair value of time charter contracts recognized as part of the preliminary purchase price allocation will be amortized on a straight line basis over the length of those contracts, for which the remaining contract lengths range from 10 months to 7.5 years, and estimated amortization of $19.9 million has been recorded in the year ended December 31, 2014.
2. Other income and voyage expenses and commissions – the Former Golden Ocean is currently the manager of Knightsbridge's dry bulk vessels and receives a management fee equal to 1.25% of the gross freights earned by these vessels. This management fee has been eliminated from the combined pro forma statement of operations.
3. Depreciation – This adjustment comprises two elements:
i. The depreciation expense for owned vessels for the period has been reduced by $19.5 million as a consequence of the fair value adjustment to the carrying balance of vessels, for which the remaining estimated useful lives range from 8.5 years to 25 years, as part of the preliminary purchase price allocation, and
ii. The depreciation expense related to four vessels held under capital lease has been reduced by $7.9 million as a consequence of the fair value adjustment to the carrying balance of vessels held under capital lease as part of the preliminary purchase price allocation. The estimated useful lives of the capital lease assets were reconsidered in connection with the purchase price allocation adjustment since the lease term has been reassessed as of December 31, 2014. The estimated useful lives of the capital lease assets range up to 6 years.
4. Interest expense – This adjustment comprises four elements;
i. The interest expense related to the convertible bond has been increased by $4.4 million to reflect the effective interest based on an assessment of the fair value of the convertible bond. Management determined that the fair value of the $200.0 million convertible loan was $177.9 million based on the quoted trading price for the bond on December 31, 2014. The Company does not believe that the nominal interest rate on the convertible loan changed in its fair valuation and has calculated the additional interest expense in the year ended December 31, 2014 to be $4.4 million based on the amortization of the difference in the fair valuation of the principal amount. This was calculated as $22.1 million multiplied by 335 (the number of days the loan was outstanding in the period) divided by 1,674 (the total number of days the bond is expected to be outstanding for). The Company has applied a straight-line amortization method for this element since this approximates the effective interest rate method.
ii. Deferred charges relating to the convertible bond were eliminated and reflected in the fair value assessment of the bond. The Former Golden Ocean has recognized $0.6 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense.
iii. The interest expense related to four vessels held under capital lease has been reduced by $4.8 million as a consequence of the fair value adjustment related to the lease obligations as part of the preliminary purchase price allocation. The average implicit rate in these four leases has been reduced from approximately 8.5% to 7% based on management's best estimate for effective cost of financing that could be obtained in the market as of December 31, 2014.
iv. Deferred charges relating to the Former Golden Ocean's long-term debt, excluding the convertible bond, were eliminated and reflected in the fair value assessment of the debt. Golden Ocean has recognized $0.6 million as amortization expense in connection with these deferred charges and so this amount is included as a reduction to interest expense.
5. Income from associated companies – The share of results from associated companies has been adjusted as a consequence of the purchase price allocation to investment in associated companies.
6. Other financial items – This adjustment comprises the amortization of a deferred gain arising on the sale-leaseback of a vessel which has been valued as $0.
6.  Earnings per Share
The unaudited pro forma condensed combined basic and diluted earnings per share calculations are based on the consolidated basic and diluted weighted average shares of the Combined Company. The pro forma basic and diluted weighted average shares outstanding are a combination of historic Knightsbridge shares and the shares issued as part of the combination to the Former Golden Ocean shareholders at an exchange ratio of 0.13749 Knightsbridge share per the Former Golden Ocean and the 31.0 million shares issued to Frontline 2012 in connection with the Frontline 2012 Transaction.
The Combined Company unaudited pro forma condensed combined statement of income shows a net loss for the year ended December 31, 2014. Since the effect of the 112,000 restricted stock units ("RSUs") and the 668,000 stock options for the year ended December 31, 2014 will be anti-dilutive, diluted number of shares are equal to basic number of shares on a combined pro forma basis.
The weighted average numbers of common shares outstanding for the year ended December 31, 2014 was calculated as follows:
 (number of shares in thousands)
  
Knightsbridge
    
Former
Golden Ocean
    
Frontline 2012
    
Pro Forma
Combined
  
Weighted-average number of common shares outstanding:
                
Basic
    
52,445
      
61,444
      
31,000
      
144,889
  
Dilutive effect of RSUs
    
112
      
—
      
—
      
—
  
Dilutive effect of stock options
    
—
      
668
      
—
      
—
  
Diluted
    
52,557
      
62,112
      
31,000
      
144,889
  

 
II-10
 
 
 
 
 
 
Exhibit III

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-197210) and on Form F-3 (No. 333-203035) of Golden Ocean Group Limited (formerly Knightsbridge Shipping Ltd and Knightsbridge Tankers Ltd) of our report dated May 20, 2015 relating to the financial statements of Golden Ocean Group Limited, which appears in this Current Report on Form 6-K of Golden Ocean Group Limited (formerly Knightsbridge Shipping Ltd and Knightsbridge Tankers Ltd).
 

 
/s/PricewaterhouseCoopers AS

PricewaterhouseCoopers AS
Oslo, Norway
 May 21, 2015