Newsmagazine for Leif Höegh & Co ASA (LHC) No 4 - 2001

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CONTENTS

Höegh vesselsacknowledged

ISO 14001

Opinions

Höegh Lines– Open Hatch

ManagementSeminar

eClair

HFS Billboard

Market Outlook

QuarterlyReport

HUAL news

On Friday 29 June we finally received the above certificatestating that the ENVIRONMENTAL MANAGEMENTSYSTEM of Höegh Fleet Services has been found toconform with the Environment Standard NS – EN ISO14001 : 1996. The certificate is valid for the followingproduct or service ranges: Technical Operation,Newbuildings and Manning of Vessels Trading WorldWide. The certificate was issued at DNV on 27 June and isvalid from 19 June 2001 to 19 June 2004.

We successfully reached our first goal by achieving the ISO 14001certificate, but everyone should know that maintaining thecertificate in the future will need funding, manpower and not theleast commitment from all parties involved.

HFS shall yearly evaluate its existing environmentalaspects to verify the achievements of the objectives.The evaluation includes identifying and evaluatingactivities, products or services for possible newenvironmental aspects.

As part of the company’s environmental work, ameeting took place 11 June where 24 people fromvarious departments participated. The agenda of themeeting was evaluation of existing environmentalaspects and planning for new goals for thecompany’s environmental work.

Jan Høgmo, HFS, has been working extensivelywith the implementation of ISO 14001 procedures,and he is happy to have obtained the certificate atlast. -Yes, we see this as an important milestone inour environmental efforts, but as ISO 14001 alsoforces us to, we will keep on trying to improve,Høgmo says. -At the meeting on 11 June wedecided on the aspects for the coming period, andthey were basically the same as before, but withhigher goals and thereby better performance. Theaspects are as follows for the ships: ballast water,CFC-emissions, exhaust emissions, garbagehandling. For the office: paper consumption,consumption of one time use articles and improvedrecycling procedures.

-I believe the issue which affects most of our sailorsis the garbage handling onboard the ships, Høgmocontinues. -Some of them remember the somewhatodd fact that they had to count cans and bottles last

year. Now we can reveal that the purpose of the counting was tomap the result in order to arrange with recycling plants in ports ofcall to receive this waste. Another matter we have focused on is themagnitude of packing materials used when receiving suppliesduring port calls. We have now agreements that shore suppliershave to take back all the packing materials the sailors can unpackduring the shore stay.

-I would also like to mention our objective: from 2002 no HFS-managed vessels will dump anything but food waste in the ocean.This is actually even stricter than the MARPOL procedures whichallow some things to be dumped in certain ocean areas.

-These are the environmental aspects which our sailors must relateto, Høgmo concludes. -But HFS is of course working to reach newgoals for all the other aspects as well.

The United States Coast Guard designated LHC´sLNG carrier Norman Lady and Höegh Minerva(now Max Oldendorff) QUALSHIP 21 vessels.QUALSHIP 21 is an USCG programme to rewardhigh-quality ships and operators.

QUALSHIP 21 is an initiative implemented on 1 January2001 and the criteria have developed from closelyexamining Port State Control data for the previous 3years. A quality vessel is associated with a well-runcompany, classed by an organisation with a quality trackrecord, registered with a Flag State with superior PortState Control record and has an outstanding Port StateControl history in US waters.

Less than ten percent of all foreign-flagged ships, whichoperate in the United States, have earned thisdesignation, putting the vessels in an elite class. Theefforts of the company and the ships’ masters and crewsfor setting such a high standard of excellence, have beenapplauded by the USCG in the award letters as "a remarkable accomplishment" and an "exceptionalcommitment to quality". More information about QUALSHIP21 is found on: www.uscg.mil/hq/g-m/psc/psc.htm.

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Published by: Leif Höegh & Co ASAEditorial staff: Charles Jensen, John S. Vestby and Mot Vandenberghe. Tel. 22 86 99 56, fax 22 86 99 45,

e-mail: mav@hoegh.no Journalist/editing: Stian Aakre, e-mail: saakre@online.noLayout/graphic design: BRAVE Reklamebyrå asCirculation: 2,800

HöEGH DIALOGUE:

Newsmagazine for Leif Höegh & Co ASA No 4- 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

Leif Höegh & Co obtained strong results for the3rd quarter, with operating profit increasing toUSD 28 million from USD 27 million in the 2ndquarter. The main contributor to the 3rd quarterresults was the RO/RO division. HUAL’sflexibility and strong position in used cars - andhigh & heavy trades proved once again theirvalue.

This year’s significant cash flow has improvedthe Company’s financial situation. We have beenable to repay USD 113 million of debt and torepurchase LHC shares for USD 20 million, whileat the same time the holding of cash and themarketable securities have been stable. This isimportant as we are heading for an uncertaineconomic development next year. A possibledownturn in world economy will, as history hasshown, also create opportunities for companieswith sufficient financial strength. We believe LHCwill be in a position to take advantage of suchopportunities.

At the time of writing, results look promising alsofor the last part of 2001, although somewhatweaker than the 3rd quarter. For next year,however, the uncertainty has increased and, untila clearer picture of the situation following theterrorist attacks on the US and the currentsituation in the Middle East emerges, it is difficultto predict the market development.

I would like to take this opportunity to thankeveryone, who during this year has contributedto our success. I am certain that our continueddedication and hard work will take us safelythrough tough times ahead.

T.J. GuttormsenPresident Leif Höegh & Co ASA

A strong 3rd quarter

ISO 14001 - Det Norske Veritas EnvironmentManagement System Certificate

Norman Lady and HöeghMinerva acknowledged

Jan Høgmo, HFS, isworking with the ISO14001 process

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

In this coloumn we intend to let the readers speak freely their opinions.(Opinions may be edited due to shortage of column space.) OP!N!ONS

Höegh Lines – Open Hatch (HLOH) received on 28 June,2001, Quality System Certificate from Det NorskeVeritas. The Certificate conforms to the Quality SystemStandard NS-EN ISO 9002, 1994 and covers all thecommercial and operational tasks handled by the HLOHorganization in Oslo.

It has been a very useful process for the organization to gothrough and analyze all functions, tasks and responsibilitieswithin HLOH. The work processes within each department arenow described in the Quality Manual. In order to facilitate the useof the manual it will soon be made available electronically.Although everyone in HLOH has been busy with the ordinary dayto day work, they have all taken part in the certification processwith the substantial extra burden of work involved. It has beeninspiring to observe the enthusiasm shown by all over a longperiod to achieve the goal – the Certificate. Erling Andersson(Senior Marketing & Quality Manager) and Ellen Walberg (Claims& Quality Document Manager) have been in charge of theprocess.

The Certificate was officially handed over to HLOH by GeirThorseng, Lead Auditor of Det Norske Veritas, during a lunch on 27 August.

HLOH has reached an important milestone, but we cannot restbecause fulfillment of conditions and continuous improvement lieahead.

HLOH’s main goal is to deliver a continuously better product toour valued customers. If we are able to do that, then we canconclude that the main purpose of the Quality System Certificateis obtained.

Jostein Bomstad

The world has now experienced how science fictionhas become reality. Things, which we foundentertaining a few weeks ago through numerousdisaster movies, have become real life today with theWTC attack. What happened is already affecting uson board in many ways.

A few of my immediate thoughts are:

1. Bridging the different cultures on board and ashoreHigh tolerance and team spirit in a multi-cultural society is ofcourse one of the main aims for the leader(s) on board. A positive attitude and a common goal. Hard work pays offand an active spare time normally fills the expectations wehave of seaman life. That is the basis for a peaceful life onboard. Regarding people on shore, we cannot do anythingelse but try to control their access by using gangway log, bychecking their purpose to board and by receiving them withan open attitude.

2. Handling of refugees/stowawaysWith Tampa story fresh in memory, where the Captain pickedup more than 400 refugees in distress, I have given thissituation a lot of thought. The refugees were mostly fromAfghanistan. I believe the Afghan people are not lessdesperate these days. For a while the refugees took over thecommand of Tampa, according to the papers. Then you arein a dilemma: To what extent are you willing to risk the crewand ship in order to save the people in distress? Even if theweather is good. The answer is not given. But it is obviousthat 20 - 30 crewmembers can not guarantee the safety ofship/crew with a large number of desperate refugees onboard. It might be wiser to lower food and water, to make alee, if necessary and to wait for backup.

3. Future seaman lifeWhat will be the further developments and how will theseaffect our life on board. Where is the risk area - Middle East,USA or Europe? So far no commercial ship has beenattacked, but some of us are still concerned. Will theeconomy collapse further, will we have shortage of fuel etc,will we be totally out of business? The fantasy is nowbecoming reality and the row of questions is endless. Is thereanything we on board should be prepared for? Couldsomething happen to the GPS-system as this is a vital part ofthe American striking power and a strategic target for theextremists? It is enough that one of the earth control stationsloses its power.

Yes, our standing orders say that the celestial bodies shouldbe used whenever possible to determine the position. Butwith the correct answer in front of you on the GPS, it hasbeen just a game. Now this game could be more than aserious training.

Disturbances of the communication, security checks in ports,limited ports in which to sign on/off, more paperwork andlimited shore leave while alongside, are things we experiencealready now.

Let us hope that people come to their senses and make abetter world. In the meantime – let us do our best in oursmall society on board. We have to start somewhere!

The Ship Community after 11 September 2001

HLOH is operating a total of 11 open hatch gantrycraned bulk vessels whereof 10 are fully owned by LHC.These vessels are specially designed to carry forestproducts, containers and other unitized cargo as well asregular bulk parcels.

As reported in the last issue of Höegh Dialogue, HLOH hasrenewed the contract with Arauco – the largest forest productscompany in Chile – until end of 2004. This implies that HLOH willbe carrying wood-pulp, lumber and panels from Chile tocountries in the Mediterranean region (including Casablanca)and North Europe in the coming years. The vessels carry a widemixture of break-bulk and bulk cargoes on the return leg. 3vessels have been employed in this trade since the start up in1999. However, we are currently evaluating whether we shouldadd a 4th vessel as from 2002.

HLOH operates through its subsidiary Pacific Commerce Line(PCL) in Vancouver, B.C. 3 vessels in the lumber trade from theWest Coast of North America to the Far East. On the return legthese vessels are loading mainly steel products.

Two of the vessels are employed in a joint Pool between HLOHand Compania Navegacao Norsul, Rio de Janeiro (ownedprincipallly by the Erling Lorentzen family) carrying mainly forestproducts and frozen orange juice from Brazil and Argentina toNorth Europe, and various break-bulk and bulk cargoes on thereturn leg. The daily management of the Pool is handled byNorsul.

3 of the vessels are currently chartered out to other operators.

Jostein Bomstad

Höegh Lines - Open Hatch (HLOH) activities in a nutshell

From left to right: JosteinBomstad, Geir Thorseng(DNV), Erling Anderssonand Ellen Walberg.

Höegh Lines - Open Hatch received quality system certificate

Brgds Knut Bentzrød

Many will recognise the owner of the previousfishing community Håholmen as the man behindthe Viking ship replicas Saga Siglar, Gaia andOseberg, and remember his round-the-worldexpedition, which nearly ended in tragedy off thecoast of Spain. While Håholmen’s history datesback to the 17th century, the idyllic located islandin Hustadvika, one of the roughest stretches alongthe entire Norwegian coast, is now a modern hoteland conference centre.

The purpose of the Management seminar was todiscuss and act on the guidelines given by theBoard.

To execute a unified strategy, it is important tobring Managers from all business units together forformal and informal discussions to exchange viewsand experiences. Time was also found for a‘teambuilding’ fishing trip. The fishing was poorthough and resulted in nothing more than a fewmackerels and one or two cases of seasickness….

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

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Management seminar at Håholmen RO/RO in focus at this year’s Board strategy seminar

With the RO/RO activities representing a growing majority ofLHC’s business volume, it is natural for the Board to devotemuch of its time to discuss the best way to improve HUAL’sposition for continued growth and profitability.

Although the used car- and high & heavy segments are moreimportant to HUAL than to most ro/ro operators, main focusthis time was on the new-car industry. The strongconsolidation among the car manufacturers over the pastyears, has so far led to limited changes in the requirements onthe RO/RO operators. However, this may change when thedifferent groups of manufacturers start integrating theirorganisations and systems to co-ordinate their logisticsfunctions.

For the RO/RO operators, who traditionally have focused onsea transportation only, this may result in opportunities to alsoparticipate in other parts of the chain. Studies have revealedinefficiencies in the links between the different modes oftransportation and a significant saving potential may beavailable through better co-ordination of the cargo andinformation flow. HUAL comes from a position with excellent

relations to its customers and will take an active part inidentifying and exploiting such benefits. Some initiatives havealready been taken to tie closer knots with logistical partnersand more will follow suit.

The Board will continue to follow closely HUAL’s futurestrategy development, but obviously not at the expense of ourother important business areas, which will receive their shareof the Board’s attention.

A week after the Board’s strategy seminar at Losby Gods, Managers from all LHC’s business units as well asfrom the corporate headquarters left the office for a two-day seminar at Ragnar Thorseth’s Håholmen on theWest Coast of Norway.

The LHC Board of Directors focused on the strategic challenges facing HUAL at this year’s strategy seminar, whichwas held in August at Losby Gods outside Oslo. The beautifully restored estate provided an ideal environment forundisturbed discussions, and gave the Board an opportunity to review relevant issues in more depth than ispossible in the ordinary Board meetings.

Top picture, left to right: Per Øyvind Rosmo - Roar Flom - Erik Norman - Charles Jensen - Johannes Tvedte -Tor Løchsen - Erik Grinnes -Niels Ronald Bugge - Stephan Tschudi-Madsen - Steinar Løvdal sitting: Erik Falkenberg - Olav SollieBottom picture, left to right: Erik Grinnes - Erik Norman - Tor Løchsen

Losby Gods wherethe Board seminarwas held

extranet will simplify the manuals and procedures. And byelectronic reporting, data will quicker reach the systems andtherefore give better estimates and analyses. This system willalso give less data entry and leave more capacity tocontrolling the transactions.

-The client extranet will enhance information flow to theclients and make them closer connected to HUAL. We arethinking somewhat along the lines of the functionalism ofinternet banking, just applied in a different industry. Our goalis to let our clients do simpler and better business with us.

The safety issueSafety is of course a vital topic when it comes to e-business,and safety is hence a vital part of the project development. -Safety is important and we are doing everything we can toreduce the risks connected to internet and extranets, CecilieRagner emphasises. -But by nature you will leave yourselfsomewhat vulnerable by using virtual spaces and unless youwant to drop behind in the competition, you will have to facethis challenge. We are constantly working with safety and wewill gradually develop solutions, as we become connected tosystems constituting vital functions in HUAL.

New internet pagesCecilie Ragner is the project manager for eClair and sheexplains that www.hual.no soon will appear in a brand newcostume.

-Our web pages will of course still contain a lot of staticinformation - needed for presentation and informationpurposes - but we will also include a dynamic componentwhich will be updated daily. Here we will include all pertinentinformation about our trades, cargo and schedules, Ragnersays. -We are trying to focus on the people in our organisationin these pages, not only our vessels. The pages should besimple and self-explanatory, we have kept in mind who theusers of this information are, and how it is suitable for them toreceive our message.

-Our new internet presentation is the first part of the eClair dueto be made public, hopefully in the beginning of December. Wehave included people from our entire organisation in thedevelopment, to ensure that content from all business areasincluded our affiliates is found in the final product. Experiencegained by HUAL USA in their internet development has alsobeen particularly important in our process.

Extranet for agents-Parallel to the internet pages we have developed an extranetfor our agents. The release of this system is also scheduledfor December 2001, Ragner continues. -The extranet is in itsnature different from the internet by being a closed "room"with access restricted to relevant departments in ourorganisation and selected agents world-wide.

The extranet will allow agents and HUAL to move closer toeach other and the agent will be an active part of thebusiness processes. To some extent this is of course alreadythe case for a few agents, but now several hundred agentswill have equal and improved links to HUAL. The extranet willalso work together with other computerised systems in HUAL,such as Shipnet and Chain (see HD # 4-2000).

-Today we don’t have any online processes, Cecilie Ragnersays. -Now we will be able to include booking, reports andother procedures. All relevant manuals and handbooks willalso be available in the extranet and thereby all agents canrelate to updated versions at all times.

Extranet for clientsThis system will be launched sometime during the first half of2002 and is developed primarily for the contract clients, i.e.car manufacturers as well as large forwarders. -These are theclients who are responsible for most of our assignments. The business we do with them will be more standardised andeasier to put into predetermined systems, Ragner explains. -However, the spot-market will probably still cause usextensive paperwork in the years to come.

-Generally, the container trade has come further in e-business than the RO-RO trade due to their morestandardised products, but we believe that we are catchingup some lost ground with the eClair project. Both ourextranets are meant to be useful tools for involved parties.They will be equipped with level-headed interfaces, aimed atfunctionalism and user-friendliness and at the same time beeasily downloadable.

e-business environmentThe new systems and the fact that more and more businessis being computerised will form a new working environmentfor the employees of both HUAL, agents and clients. -We willhave to carry out extensive training and supervising in orderto obtain the inherent potentials in these systems, the projectmanager carries on.

-We see that these systems will reduce the sources of errorsand it will reduce the need for double entry of data.Combined with the online advantages of internet andextranets, these factors will help us gain efficiency andaccuracy in our trades.

-The gain of the new internet pages is primarily bettermarketing through a clearer profile and more comprehensiveinformation to potential and existing clients. The agent

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

eClaireClair is the somewhat cryptic name of HUAL's new cyber-development. Comprising three modules; newinternet pages, an extranet for the agents and an extranet for the clients, the project has been going on forabout a year. The first visible results are scheduled to appear in December 2001.

Business relations (agents, customers etc.)Business relations (agents, customers etc.)

eClair

CHAIN

VesselTracking Shipnet

P3

Examples of the new HUAL internet pages

-The only certain thing is that nothing is certain! You have to give something to gain something.Project manager Cecilie Ragner on e-commerce safety.

Cecilie Ragner,project managerfor the eClairproject.

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

HUAL goes kiwi! A peek at the past

OBO - oil/bulk/ore carriers

HUAL signs agreement with COSCO

Photo competition 2001

Leif Höegh & Co. ASA has signed a Memorandum of Understanding with the owners of Kiwi Car Carriers Limitedand Kiwi Terminal Services Limited (KIWI), acquiring KIWI’s business with effect from mid December 2001.

The era of these vessels in Leif Höegh & Co started in the mid 60’s, when the company in spite of the hightanker profitability at the time, altered the strategy from participating in the race for larger tankers into takingadvantage of the flexibility and potential offered by the combined oil/bulk/ore carrier. This focus gave thecompany in general and the chartering department in particular, challenges including both success and troublethroughout almost three decades.

Participate in our annual photo competition. Submission deadline is 31December. Send your contributions to Mot Vandenberghe at LHC in Oslo.

KIWI is a leading operator in the Japan-New Zealand cartrade, providing terminal and logistics services in bothJapan and New Zealand in addition to sea transportation.

Through this acquisition LHC/HUAL will add another tradefrom the Far East, the most important export area in the carcarrying market. KIWI will continue to operate as anindependent company under the present name and with thepresent organisation, but its service is complementary toother trade routes in the existing HUAL system andsubstantial synergies can be developed. The parties furtherbelieve that under the ownership of an established carcarrier operator, KIWI is well positioned to strengthen itsalready premier position.

HUAL has signed an agreement with the leading Chineseshipping company, COSCO, for co-operation in the field ofro/ro/car operations to and from the People’s Republic of China(PRC). The agreement covers joint marketing, tonnage co-operation and exchange of staff.

The parties recognise that PRC holds a great potential for importand export of ro/ro cargo. By teaming up with COSCO, HUALaims to be an important player in this market in the years to

come. The combination of COSCO and HUAL offers a highquality ro/ro/car logistics partnership for the future. To learn moreabout the new business partner, go to www.cosco.com.cn

"Kiwi Car Carriers is a dedicated used car carrier service calling direct into Brisbane from four major ports in Japan (Osaka, Nagoya,Kawasaki and Funabashi). We have several years of experience already in the New Zealand market which has earned us the respectof the industry and established Kiwi Car Carriers as the market leader. Customer service and satisfaction is our priority. With fourdedicated RO/RO vessels calling every 10 days we are committed to servicing the Australian trade."

Kiwi Car Carriers web presentation - january 2001

The OBO carriers really proved their potential already in 1974,when the markets stagnated and economical growth declined.The fleet comprised at the time six OBO carriers and twoVLOO vessels (very large oil/ore carriers). Thanks to long termchartering agreements and the built-in flexibility of this fleet,service could continue nearly unaffected by the turbulence.

Typical activities for the OBO carriers in the 70’s were tocombine oil contracts with grain or coal, and due to thispossibility, business expanded steadily. Regular scheduling ofcontract voyages and combinations enabled ballast voyagesto be cut to 10 % of available trading time, which wasimpressive by any standards.

In the autumn of 1978, the market started to pick up again, agreat relief for the chartering department now facing the endof long term contracts. But still marked by the recession, oilmajors were reluctant to commit to long term agreements,resulting in an unstable chartering situation and a boiling spotmarket. LHC staff had to build up round voyages in the spotmarket, not having contract voyages to rely on. Succeeding inthis complex task in combination with the growing optimism,made LHC decide to build a new generation of advancedOBO carriers. This design process ended up with thePanamax OBO of about 80,000 tdw. The vessels weredesigned to carry a wide range of cargo, crude oil and cleanproducts, as well as the ordinary variety of ore and bulkcommodities. In fact, nine new vessels were contracted in1979 and 1980: two from Howaldtswerke Deutsche Werft, andseven from Hyundai Heavy Industries, due for delivery from1981 through 1983.

But during the building period, markets started to fail again,and in 1981 the new vessels were delivered into a depressedmarket. The F-series was led by Höegh Falcon fromHowaldtswerke followed by Favour and five of the Hyundaisisters: Foam, Fountain, Fortuna, Forum and Fulmar. The firsttwo from Hyundai had been sold shortly after contracting.However - the OBO carriers again showed their potentialthrough flexibility in a difficult market. The new vessels werewell received by the market, and the main trading areabecame crude oil and oil products from the Mediterranean tothe United States, returning with dry cargoes like coal,phosphate or grain to Europe. The F-class kept activethroughout some difficult years, and being advanced vessels,they were able to sail into the improved markets in 1986. TheLHC OBO-era ended finally in 1992 when the carriers weresold to Bona Shipholding Ltd.

The OBO carrier Höegh Rainbow loading iron ore.

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

Höegh Fleet Services’ China Senior Officers’ in-house training at HFSP LNG Officers’ conference II

Project Alpha, 2001-08-16105 Project Alpha cadets of class '02 - '04 posing at the quadrangle of

the University of Cebu Maritime Education Center - Dormitory Complex.

In order to familiarize themselves with the company’sonboard systems, Chief Officer Zhan Wen Bin, Chief OfficerWang Hang, Chief Engineer Hong Jin, Chief Engineer QinJing Lu and 1st Engineer Huang Cheng Jia from HFSC tooktheir in-house training at HFSP from 27 August to 12September 2001.

They are assigned to join HUAL Tracer and HUAL Trapperand underwent the following courses:

• Amos for Windows• Basic PC with Amos Mail• QA introduction for officers• Diesel Doctor course (engineers only)

They were treated to a tour of Manila on 8 September,guided by the new SQT Assistant-Organization and BasicPC Instructor Ms Aleli M. Quinson and, as shown in thepicture, visited Intramuros, the former fortress in the centreof Manila, built during the Spanish colonial era.

Picture top, from left: C/O Zhan Wen Bin, C/E Hong Jin, RufinaV. Benoman, C/E Qin Jing Lu, Aleli M. Quinson, C/O WangHang, 2/E Huang Cheng Jia and Jess Belgrado

Picture left, from left (standing): Eng4 Nante Vergara, C/E HongJin, Eng2 Salvador Salarda and C/O Wang Hangfrom left (sitting): 2/E Huang Cheng Jia, C/E Qin Jing Lu, AleliM. Quinson and C/O Zhan Wen Bin

In the period 16 - 18 September 2001, thisyear’s second LNG Conference was held atSundvolden Hotel outside Oslo.

A total of 33 Officers from Höegh Gandria,Höegh Galleon, Matthew and Norman Ladyparticipated and from the HFS / LHC anadditional 17 employees from the office.

The picture is from the formal dinner onMonday evening which was arranged atGildehuset, dating back to the year 1648.

22 September 2000 marked the launching of the BuildingExpansion Project with a simple ground breaking ceremony. Theproject was officially awarded the Embrocal Builders Inc. asgeneral contractors after a two-month bidding-process.However, actual construction works started 30 October aftersome delays in the acquisition of city building permits. For thenext six months construction work went smoothly andsystematically without any disruption in HFSP´s operations.Finally, in May 2001, the first visual and physical contact with theongoing project was reached when the old walls of the existingbuilding were knocked down in conjunction with theinterconnection process of the two buildings. This was the timewhen employees, seafarers and visitors were greatlyinconvenienced by noise and dust from all the ongoing activities.While all of HFSP went on with business as usual, interior workincluding renovation of the old building coincided with thefinishing touch to the new building. A building committee was

formed to ensure continuous operations and to take care of thetransition process of relocating staff, equipment and files to newworkstations and sites.

For almost two months everybody had to cope with crampedwork spaces and disorganised files in the midst of spaghetti-likecables and wires running all over. It was really a challenge for allparties involved as the process was quite complicated. Weemphasised the importance that no detrimental downtimeoccurred in telephone and e-mail systems.

By the end of July 2001, all office staff were in their respectivenew workstations while the ground floor and the fourth floorwere undergoing the final phase of interior work. The buildersformally handed over the new building annex on 31 August 2001,while renovation and interior details were completed somemonth later.

After almost two years of operation it becameapparent that the increase of manning andtraining activities within HFS Philippines Inc.necessitated the need for more office space toaccommodate the various requirements of itscustomers. During the Board meeting in March2000 it was decided to build an annex to theexisting Höegh Building.

Höegh Building in Manila expands

A post-embarkation seminar among the Project Alpha cadets class'03 was conducted at the University of Cebu-METC on 16 August2001. They had just completed their cadetship on board varioustypes of ships. The fifty participants were divided between Teekay

(20 cadets) and HFS (30 cadets as part of a previous agreement.They are further divided equally between deck and enginedepartments. This would mark the start of their third year asmaritime students and scholars under the Alpha project.

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Newsmagazine for Leif Höegh & Co ASA No 4 - 2001 Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

World Economy And World TradeFollowing the terrorist attack against the USA, theoutlook for the world economy in 2002 is currentlyextremely uncertain. The US economy is expected to gointo recession during the remainder of this year and into2002, which will have a far-reaching impact on the rest ofthe world. The typical forecast for global economicgrowth in 2002 has been reduced to 2 – 2.5% from theprevious forecast 3.4% (see graph 1). Although it is futileto speculate about the timing of a recovery at this stage,most economists expect that the US government willauthorize further interest rates cuts and other stimulativemeasures, so that when a recovery in the USA finallytakes place it will be quite rapid.

The Car Carrier MarketJapanese exports to USA fell by 10% and to W. Europe by asmuch as 23% during the first eight months of the year, and salesof Korean cars in the W. European market also fell by 23% duringthe same period. Although shipments of used cars haveincreased in several trades and shipments of high/heavy rollingstock continue at a high level particularly to oil-exportingcountries, it is estimated that the total demand for car carryingtonnage has declined somewhat this year. At the same time thecar carrier fleet is growing at annual rate of 5% due to thedelivery of 15 newbuildings and only five small vessels havingbeen sold for demolition. Due to the uncertain economicsituation, new vehicle sales and production are forecast to beweak during the remaining part of this year and into 2002.

The Reefer MarketAfter the disappointing high season this year, the activities in thereefer market picked up in early summer, primarily due toincreased imports by Russia and the Baltic region. The good flowof citrus volumes form Argentina, Brazil and South Africa has alsocontributed to the firmness in the spot market. Only eight reefervessels have been scrapped so far in 2001, but with fewnewbuildings entering the market, the conventional reefer fleethas declined also this year. A negative factor continues to be thesurge of new reefer container capacity coming onto the marketduring the remaining part of this year and in 2002 in the midst ofextremely uncertain market conditions.

The Open Hatch MarketThe North American lumber and newsprint markets in 2001 havebeen influenced by excess supply, falling consumption, fallingexports, increasing imports and falling prices. In Japan, housingstarts are currently running at an annual rate of only 1.15 millionunits, a 6.5% decline from 2000. There has been an increase inforest product shipments from new plantations in South Americato the Asian and European markets. It is estimated that the globaltrade in forest products this year will remain around last year’slevel. The global demand for forest products in 2002 is currentlyprojected to remain weak.

The LNG MarketSo far this year 24 new LNG carriers have been ordered. The current orderbook totals 49 vessels, representing 48% of theexisting fleet. In addition there are options for around 27+vessels. It is estimated that some 10-15 vessels in the orderbooklack cargo commitments. However, several of these orders havebeen placed by large multinational oil and gas companies, whichhave interests in several export and import projects. LNG plantsare currently under construction in Malaysia, Nigeria, Trinidad,Australia and Qatar with a total production capacity of some 33million tons per annum.

The Dry Bulk MarketThe dry bulk market has moved sharply lower over the pastmonths, due to deteriorating fundamentals combined with theusual seasonal weakness. Global steel production has declinedboth in North America, Japan, Europe and South Korea. Chinaappears to buck the trend, with output growing at a 10% annualpace. Rapid fleet growth has also been a major problem for thedry bulk market. The fleet is expanding at an annual rate of 4%,with the largest growth in the Panamax segment. Dry bulkdemand is expected to remain weak for most of 2002. Scrappinghas picked up, however, setting the stage for a recovery whendemand picks up again (see graph 2).

The Tanker MarketOPEC has decided not to cut production further and it is believedthat the organization will engineer a modestly lower oil price forsome months out of recognition of the economic hardship aroundthe world. Freight rates for large tankers have increased after theterrorist attacks and are expected to remain at a relatively high levelduring most of the fourth quarter. However, a projected decline inoil demand in 2002, combined with a larger number ofnewbuildings, could lead to a falling-off in rates.

By Mona Boug Kristiansen

Market outlook Report per 3rd quarter 2001Strong results for the Ro/Ro segment

Operating profit before sales gain and depreciation for three quarters increasedfrom last year by 29% to USD 125 million

Net profit increased by 128% to USD 74 million

Net profit per share increased by 133% to USD 2.28

LEIF HÖEGH & CO. CONSOLIDATED - key figures

Segment information

(USD 1 000)

Freight revenues, net Operating costsOperating profit Net financial items TaxNET PROFITProf./share(USD)Total fixed assets Total current assets TOTAL ASSETSTot. shareh. capTotal long term liabilitiesTotal current liabilities

(USD 1 000)

HUAL:

Kontr. Ship:

H.Lines:

Kjøleskip:

3.qu

168 206(140 046)

28 160(6 309)(1 817)

20 0340,64

Freight rev:Oper.profit:

Freight rev:Oper.profit:

Freight rev:Oper.profit:

Freight rev:Oper.profit:

1/1-30/9

508 519(426 380)

82 139(6 317)(1 859)

73 963 2,28

1 096 750223 104

1 319 854472 701804 84638 059

1/7-30/9

362 95046 639 38 14913 10372 4808 896

30 21818 251

3.qu

126 48322 81512 4304 654

18 3783 0088 427

(93)

3.qu

204 832(188 550)

16 282(4 918)

(834)10 530

0,29

1/1-30/9

572 990(520 662)

52 328(17 471)(2 461)

32 3960,98

1 120 539309 833

1 430 372459 870870 17895 873

Total

773 646(718 069)

55 577(32 592)(3 499)

19 4860.60

1 170 334258 025

1 428 359419 682919 27085 232

3.qu

104 43210 92115 2774 869

34 7851 152

49 402(313)

1/7-30/9

287 65335 55441 36311 942

104 8062 067

137 1647003

2001 2000

2001 2000

2000

Newsmagazine for Leif Höegh & Co ASA No 4 - 2001

HFSVESSEL MASTER CHIEF ENGINEER CHIEF OFFICERSG ENTERPRISE NG, CHOR KUEN TANG, HING KONG JERRY CHUNG, FUI TSANGSG PROSPERITY CHOW, LAM YUEN TSUI, MAN FAT MAK, CHU POONSG PROSPERITY HSING, NAN YENHÖEGH GALLEON BENTZRØD, KNUT MALMØ, BJØRN HØYDALSVIK, HALLVARD ANDREHÖEGH GANDRIA SPARRE KNUDSEN, SIMEN PAULSEN, TARJEI BERG, JOHNNORMAN LADY VISTNÆS, JENSEN KJELL HAVEN, JAN MØRK, HELGE ROGERMATTHEW HANSEN, ØIVIND HANSEN, PER HANS THUNEM, BÅRDAUGUST OLDENDORFF SORIANO, FRANCO LAPIDARIO ARAGOZA, CRISOSTOMO ASPER ASTILLO, FELIX LUENGOHÖEGH MORUS MACADAGDAG, ROMULO MIEDES CASAMA, FIDEL HERNANDEZ ENGCOY, ETCHEL PEREZHÖEGH MARLIN CHIONG, HENRY ALVAREZ DIAZ, THOMAS FRENCH FERNANDEZ, FERDINAND MANALOHÖEGH MERCHANT AGUILA, ALBERTO BRIONE RABARIA, PERICLES JR MALBAS LACANLALI, ROBERTO ROWANHÖEGH MERIT SIBYA, RAFAEL DIANSEN TERAZONA, FRANK PENAFIEL JARAMILLO, MARIO DELLA CUADRAHÖEGH MUSKETEER BOLOTAOLO, ALEJANDRO ESTANO CRISTINO, MANUELO BERDOS FLORESCA, LUCINO TIUHØEGH MISTRAL DAROY, ADOLFO SUEZO PABULAYAN, DELFIN SAQUIBAL DESABILLE, DENNIS PASTORMASCOT GARFIN, AGUSTIN RODOLFO GONZ VENTULA, REYNALDO GANIRON BERTUMEN, ROGELIO ROSTROLLOMAX OLDENDORFF AMANO, AUTONOMO ABELLAR HUFALAR, CARLITO OFIAZA ASI, RANILO DE CHAVEZSAGA CHALLENGER GALVE, ISMAEL SELAUSO OCBINA, ISAGANI JALLORINA CARO, BERTRAND MCRYSTAL PRIDE ORACION, OSCAR MARQUEZ RABAYA, NORMANDO C DIZON, JAMES IBANEZCRYSTAL PRIMADONNA TIMTIMAN, ROBERTO LAPUS ROBIN, ALEXANDER SANCHEZ KIERULF, MANUEL LUIS MENCIASCRYSTAL PRIMADONNA PUNAY, FERNANDO MONTERDECRYSTAL PRINCE BALAN, JOSE JR TABUDLONG UMEREZ, GABRIEL VILISANO DEMEGILLO, BENHUR ABERDECRYSTAL PRINCE PASADILLA, DIONE PELEGRINOCRYSTAL PRIVILEGE RAMBOANGA, DAVID CORPUZ IGNACIO, ALDEN GALANG BAGUIO, ULYSSES UYIVORY DAWN OYALES, GEORGE GESULGA SANTOS, LAMBERTO ISTOMEN BATAYOLA, JESSIE NECESARIOSUMMER MEADOW HARE, JESSEL CADEA JIMENEZ, ALEX PEREZ PASAPORTE, HARLEY ZAYCOSUMMER WIND VIOLANGO, ADRIAN DALIT BELTRAN, ALBERTO GOCOTANO ARCAY, VERONICO FUDOTANSUMMER WIND NOLOS, MARCELO MAGAHISSPRING BRIDE PALCES , NEFTALI JR CORRO ALON, ROY YAP CORTES, KIM PADORSUMMER BAY PARAGUYA, MIGUEL SILVA PORRAS, ROBERTO PEDROSO DAYMIEL JR, BIENVENIDO MUITSUMMER FLOWER DEQUITO, GENEROSO PALOMO ABARINTOS JR, ALIPIO DOLOR BATOON, ELMER RICO M.CARIB STAR LORENZO, JESSIE MAGDAUG MORALINA, ROMEO QUIROZ ENCLONA , MARIO JR AGAOHUAL ASIA LACSON, PACIFICO JR. DAGUIA YANGCO, TEODULFO JR LIM DELA PENA, NICANOR SOMUDIOHUAL TRICORN MANALAYSAY, CESAR DUQUE PAJARILLO, JESUS SALES MARTIN, MANUEL PILAPILHUAL TRACER MAPA, ODNESOR CRUZ OZARAGA, MARIO GOMEZ ESTOLAS, BENJAMIN MABUTASHUAL TRAPPER MANGOHIG, QUINTIN ABANGAN ALOJADO, VICTORIANO AMILANGAN TALAMAN, DANILO CRUZHUAL TRAVELLER DELIARTE, BENITO ARROJADO CONCEPCION, LEO QUIJANO CUETO, INGEMAR P.HUAL TRIBUTE GULLIAB, BENEDICTO CASIGURAN.. LUMOCSO, ELEUTERIO BENDANILLO ATIAN, SALVADOR NOHUAL TRIDENT SOMOSOT, JEREMIAS CORBITA MAHINAY, VICTORINO JR GENTAPA CASIANO, DANILO NAVARROHUAL TROOPER JONOS, DIONISIO COMPANERO BALIDOY, JOSE BALANE GOMEZ, JOEY BARRIOSHUAL TROTTER LICUDAN, EUSEBIO JULATON PAJATIN, JOVENCIO JR CALPO CONCEPCION, ROLANDO VALEROSOHUAL TRANSIT MACABABBAD, GIL G. . CIRERA, LEOPOLDO AGPAW ENRIQUEZ, ELIGIO EMPENOHUAL TRADER NIEDO, JULIUS VINCA MASOCOL, EDWIN DENUM ELPEDES, DANTE MORADAHUAL TRANSPORTER TINIO, MANUEL JR FRANCISCO LEDESMA, REDEMTOR PUNZALAN SULIBET, MANUEL NOEL SOLLORANHUAL TRANSPORTER REYES, JOSELITO DOLAR

IUM VESSEL MASTER CHIEF ENGINEER CHIEF OFFICERHUAL TRAILER ANDUJARE, DANTE DEVERATURDA ALTURA, RUBEN MORALES MAQUIRAN, NOE GREGORIO RAMOSHUAL TRAPEZE LUMACANG, FELIPE JR AGRIAM LOZANO, CAMILO JR ORBES REFUERZO, GODOFREDO RABARAHUAL TRINITY BALDOMAR, AVELINO GUBAN ARCE, RAFAEL JR. MOLINA YANEZ, HENRY CAPAHUAL TRITON IBRAHIM, ZAIDE DELA CRUZ PERALTA, ISAGANI DAMASCO RODRIGUEZ, EDUARDO PEREZHUAL TRIUMPH ALCARAZ, REYNALDO LOPEZ TRASPORTE, ARNULFO MANZANO PLANTINOS, EDGAR MACAHILOHUAL TROPHY ACUNA, PONCIANO JR. PARAGAS CAWICAAN, LUIS DINOZO LAGLEVA, ERWIN ROMEROHUAL TROPICANA CANDAVA, ROGELIO ILAGAN LEGASPI, DANI FAVILA ALISEN, NESTOR ALBAYHUAL TREASURE BEREZECKI, PIOTR KANIA, ANDRZEJ KIERONSKI, GRZEGORZHUAL TRAMPER CABAK, JERZY MORDARSKI, RYSZARD FRANCZAK, KRZYSZTOFHUAL TREKKER STARK, JACEK ZURAWSKI, MIECZYSLAW RABUS, ARTURHUAL TROVE KULIK, MAREK OBST, ARKADIUSZ TROCHA, KRZYSZTOFHUAL EUROPE WENCEL, WLODZIMIERZ LUKASIK, ANDRZEJ SZAGA, KRZYSZTOFHUAL TRUBADOUR WILGOWSKI, MAREK RUZICKA, KAREL NIEWINSKI, JERZY

HFS and IUM fleet personnel onboard 15 October 2001