Accounts:

NOTES TO THE ACCOUNTS

1 Accounting Policies
(i) Premiums
Premiums are accounted for as and when charged to Members and are allocated to the Policy Year and Class to which they relate. The present Accounts include the Advance Call for 1999/2000.

(ii) Reinsurance Premiums
Reinsurance premiums are dealt with on an accruals basis and allocated to the Policy Year and Class to which they relate.

(iii) Claims Paid
Claims, which include internal and external claims handling costs, are charged to the Income and Expenditure Account when they have been paid and do not include any estimated outstanding claims. Claims are allocated to the Policy Years in which the incidents occurred.

(iv) Technical Provisions - Claims Outstanding
Claims are subject to prolonged delay, both as to notification and settlement. Accordingly, quantification of claims outstanding which include a projection for "claims incurred but not reported" (IBNRs) is based upon experience and judgement and the ultimate costs thereof cannot be ascertained with any degree of certainty at the date of the Balance Sheet. Provision for the cost of claims handling is included within the IBNRs. Reinsurers' share is accounted for on an accruals basis and allocated to the same Policy Year as the claim to which they refer.

(v) Reinsurance Recoveries
Reinsurance recoveries are dealt with on an accruals basis, but do not include estimated recoveries on estimated outstanding claims. They are allocated to the same Policy Year as the claims to which they refer.

(vi) Investment Income and Deposit Interest
Interest on Fixed Interest Investments and Bank Deposits is dealt with on an accruals basis. Investment Income and Deposit Interest are allocated to open Policy Years, or retained as the Directors consider appropriate.

(vii) Administrative Expenses
Administrative expenses, which exclude internal claims handling costs, are dealt with on an accruals basis and allocated to the current Policy Year.

(viii) Exchange Differences
Assets and liabilities in foreign currencies are converted into US Dollars at the rates of exchange ruling on the Balance Sheet date.

Income and Expenditure items are also converted at these rates or the rate prevailing on the date of the relevant transaction.

Exchange differences are allocated to open Policy Years, or retained as the Directors consider appropriate.

(ix) Quoted Investments
Quoted investments are carried at their mid-market value at the Balance Sheet date. This does not comply with the requirements of Luxembourg legislation and therefore a set of statutory financial statements has been produced and are available to be examined at the following address: The Shipowners' Mutual Protection and Indemnity Association (Luxembourg), 99 Grand-Rue, L-1661 Luxembourg.

(x) Debtors
Provision has been made for debts which are thought not to be wholly recoverable.

2 Exchange Differences
Group Assets and Liabilities in foreign currencies have been converted at the rates ruling at 20 February, 2000:

The exchange loss of US$7,056,844 (1998/99 gain US$1,631,704) arises mainly on the holdings of non-Dollar assets at 20 February 2000, when the exchange rates had changed compared with those in force at 20 February 1999 or at subsequent acquisition.

3 Unrealised Gain/(Loss) on Investments

4 Quoted Investments
The cost of quoted investments is as follows:

5 Gross Premiums
The total gross direct insurance premiums result from contracts concluded in the:

6 Reserve Movements

7 Contingency Reserve
In accordance with the Association's Rules, all available funds after making full provision for claims outstanding have been, and will continue to be, transferred to the Contingency Reserve.

8 Wholly-Owned Subsidiaries
The wholly-owned Subsidiary Companies are The Shipowners' Protection Limited, SOP (Bermuda) Limited and Spandilux S.A.

The amounts appearing in the Balance Sheet are made up as follows:

9 Related Party Transactions
International Accounting Standard 24 (IAS 24) requires disclosure of material transactions with related parties. As all mutual members of the Association act as insurer, whilst also being insured, they are, in effect, related parties. No single transaction is of such materiality to require separate disclosure.

10 Average Expense Ratio
In accordance with Schedule 3 of the International Group Agreement 1999 we are required to disclose the Average Expense Ratio for the Association's P&I business for the five years ended 20 February 2000. The ratio of 16% has been calculated in accordance with the Schedule and the guidelines issued by the International Group and is consistent with the relevant Financial Statements.

11 Consolidated Policy Year Statement for Class 1 and the Inland Craft Class - 20 February 2000