The Group’s equity ratio (excluding minority interests) was 81% at the end of 2007 (74%) of total assets. This significant equity ratio should be seen in light of the Company’s future payment obligations in the form of operating lease payments and payments for newbuildings on order.

 

Central to the Group’s efforts to manage capital structure and gearing is NORDEN’s risk model, which ensures that the Group’s net liabilities do not exceed the ceiling fixed by the Board of Directors relative to equity.

 

This is measured by regularly calculating the present value of total net liabilities. Net liabilities are defined as the present value of future payments in respect of, among other things, timecharters excluding daily operating costs, lenders and shipyards, less expected known freight payments received excluding daily operating costs and cash and cash equivalents.

 

 

The unrecognised gross liabilities are disclosed in notes 35 ”Operating lease liabilities” and 36 ”Unrecognised contingent liabilities”.

 

The calculation of net liabilities and their relation to equity is an integral part of the current reporting to the Board of Directors.

 

The Board regularly assesses the Group’s net liabilities and defines upper limits based on market outlook. The limit for 2007 was that the present value of total net liabilities was at no time to be more than double the equity. At the end of 2007, net liabilities equalled 0.4 times equity (1.4 times).

 

The Group’s formal external capital adequacy requirement is limited to the subordinated loan capital of the parent company and the subsidiaries, which are significantly lower than the Group’s equity.

 

Insurance

If an incident involving a vessel causes a spill of environmentally hazardous material, the Company may incur considerable liabilities. The Company minimises this risk by operating a modern fleet and by investing large amounts in the maintenance of the vessels and in the staff’s awareness of both external and internal environments. The Company’s fleet is insured by recognised international insurance companies at competitive premiums and the vessels are always insured for an amount higher than their market values.

 

The IT Department has established a technical emergency capacity with an IT environment distributed on two locations with twinned critical systems. This emergency capacity is consistent with the management’s chosen alert level, which is to be able to ensure emergency operation within 4, 24 or 168 hours, depending on the system.

 

Also, the Company has established an IT Disaster Recovery Plan involving the entire organisation, which supports the IT Department in setting up emergency operations as soon as possible after a disaster.